Friday, January 14, 2011

Budget News Jan. 10 -14

GOP lawmaker: I can cut $153 billion
Rep. Kevin Brady has incorporated two dozen commission proposals into legislation he has introduced in the House.
House GOP Mulls Retroactive Spending Cuts
With House Republican leaders looking to slash about $60 billion from the budget this year, they are considering retroactively cutting money out of the temporary spending measure that is funding the government through March 4.

AIG to fully repay U.S. government
When the transaction is complete, the Treasury will own approximately 92% of AIG's common shares.
The State of Our States' Budget Crises
A sampling of the 2011 State of the State addresses.
Auto bailout's estimated cost to taxpayers: $19 billion
The previous estimate from the panel was that taxpayers would lose $40 billion of the $81.3 billion given to the automakers and their finance arms from the Troubled Asset Relief Program.

GOP Bill Lists Over $150 Billion In Budget Cuts
Rep. Kevin Brady, R-Texas, introduced legislation Tuesday that would cut more than $150 billion over five years from a host of government programs, a list that incorporated several proposals from the presidential deficit commission.

Brown's California Budget Must Shun Gimmicks, Bond Investors Say
California Governor Jerry Brown will be judged on how he avoids gimmicks, cuts spending and raises more money when he presents a budget to close a $28 billion deficit for the biggest U.S. state borrower, according to bondholders such as Nuveen Asset Management.
Texas Confronts Budget Travails as Revenue Slows
Texas is heading into its next two-year budget cycle, which begins Sept. 1, with about $5 billion less in tax revenue than the state had in 2009, State Comptroller Susan Combs forecast on Monday.

California budget: $25 billion dilemma for Jerry Brown
After years of cutting billions and billions in spending, California has to do it again.

Economist Comments
Another Day Older and Deeper in Debt…
If lawmakers are going to vote in favor of raising the debt ceiling, they should do it only in exchange for a change in the country’s direction.
The Triple-A Debt Threat
The crisis is moving inexorably toward the core of the global financial system, leading to speculation that others may be hit, too. Can the Big Four, the U.S., U.K., France and Germany, be sure of their ratings?
To save the planet and the budget, cut energy off the dole
s long as current energy subsidies stay in place, and K Street lobbyists have sway over what interests deserve congressional favoritism, American tax dollars will continue to retard the market forces that are pushing the United States toward energy independence and a greener future
New Hit to Strapped States
Borrowing Costs Up as Bond Flops; Refinancing Crunch Nears.
Can We Trust Republicans on Spending?
GOP’s fiscal track record and campaign promises should give us pause.

Extreme Budget Illogic At the CBO
With such logic, we could cut the deficit by passing a new entitlement program. Indeed, we could solve the whole budget problem by passing new entitlement programs every day of the year.
State Budget Bunk
A taxonomy of fiscal gimmicks, evasions, and ploys.
A Price for Raising the Debt Ceiling
Republicans should attach provisions repealing the worst aspects of ObamaCare and financial reform to spending that the president absolutely needs.

Budgetary Delusions: Federal Deficit Charts From CBO Budget Projections
Can the budget deficit be solved by cutting earmarks? How about cutting 100% of all federal non-defense discretionary expenditures?
Revenues Are Rising
Individual receipts are up 23% in three months.
The Politics of State Budget Cuts
The governors' report described "new austere realities" that require reform of how states and cities spend their money, and the laws governing that spending.

U.S. overspending: the Portugal parallel
Portugal last week paid 3.7% for debt that matures in just six months. That's 18 times what the U.S. government pays to borrow for that length of time.

4 Ways to Think About the Debt Ceiling Frenzy
Treasury Secretary Tim Geithner's letter to Congress on the debt ceiling warns that if Washington doesn't raise the government's borrowing limit, the economy will face catastrophe.
How to Cut $100 Billion Without Really Crying
The 2011 U.S. fiscal year began on Oct. 1, 2010, without a budget in effect, and with Democrats in charge. Since that time, the government has been funded by passage of continuing resolutions, maintaining expenditures at 2010 levels. When the current one expires on March 4, Republicans will have just seven months to make their mark on the 2011 budget.
Should the US Raise Its Debt Ceiling... or Default?
The Obama administration and emboldened Republicans in Congress are locked in a game of economic chicken over raising the national debt ceiling or facing default on US government obligations.

Secondary Sources: U.S. Default, Structural Unemployment, Fed on Autopilot
Greg Ip notes that a failure to raise the debt ceiling wouldn’t automatically result in a U.S. Default.
States’ Fiscal Woes Far From Over
Goodman points out that while tax revenue is rebounding over the past three quarters, it is from such a diminished base that it will take several years to return to pre-Great Recession levels.
The Wrong Line in the Sand
To treat the real disease, I believe we need to get serious about addressing the spending problem.
Moody’s Warns U.S. On Sovereign Debt Ratings
By cutting back on benefits, making people work longer, and repealing Obamacare we could do it without large tax increases. These things may be the third rail of politics but it is the same in other countries and they are seeing the light by resorting to more market-based solutions to things like medical care.

Why Public Sector Union Compensation Matters
Close analysis of the relevant data make three points abundantly clear: (1) state and local government spending has doubled as a share of the economy over the past 50 years; (2) this spending is increasingly directed away from traditional state and local responsibilities, like roads and local infrastructure; and (3) the recent decline in state and local tax revenue is actually quite modest and not the key driver of the current pension crisis.
House Republicans ready push for balanced-budget amendment
It's essentially the same bill that passed the House in 1995 and came within one vote of getting through the Senate.
Rep. Brady’s CUTS Act
Rep. Kevin Brady (R-TX) has introduced the Cut Unsustainable and Top-heavy Spending Act, which would cut spending by $44 billion annually.
Morning Bell: No Debt Ceiling Raise Without Spending Cuts
On March 16, 2006, when our national debt stood at $8.27 trillion, a young Senator from Illinois announced his intention to vote against raising our nation’s debt ceiling to $9 trillion…

Portugal Bailout Denial: Sure Sign One Is Coming Soon?
Portugal’s prime minister said Tuesday that the country won’t need a bailout. If history does in fact repeat itself, this means Portugal’s probably going to be asking for help in a matter of days.
Governor to disconnect 48,000 cellphones in hands of state workers
Requiring 48,000 cellphones to be turned in by June 1 will save the state about $20 million a year.

Gates’s ‘Cuts’ and the Neocons’ Lament
The Secretary would ideally like to see the $78 billion over five years in savings filtered elsewhere into the budget; meanwhile, the 2012 budget will actually grow.
Would Washington, Fed Be Able to Say No to Strapped States?
The problem — for state governors, at least — is that Washington itself is out of money and the newly elected Congress wants to focus on cutting federal spending, not expanding it.
A Libertarian's Guide to Cutting Spending
...any reliance interest rationale for increasing taxes in order to pay for programs must take account of reliance interests on the other side.

Thoughts on the Debt Limit Debate
Congress has voted to increase the limit numerous times over the decades, including 10 times since 2001.
Congress Needs to Be More Budget-Minded
Complexity is the enemy of good regulation: it makes regulations hard to enforce, and hard to comply with. The more regulations you have, the less likely it is that you will be enforcing any of them well.
The Fiscal Condition of States and Cities
Nobel Prize Winner Gary Becker reminds us that it is not pretty.

Maryland's Fiscal Slide
These tactics are not part of a one-time strategy prompted by the recession. Maryland has struggled to balance its budget for much of the last decade.

The Debt Ceiling: Time, Options, and Action
Holding the current debt ceiling in place would require eliminating all deficit spending. For the remainder of the fiscal year, this would entail immediate spending cuts of approximately $150 billion per month; the 2012 budget would have to eliminate the projected $1 trillion deficit.
Enough Is Enough: Why General Welfare Limits Spending
Although the Spending Clause is the source of congressional authority to levy taxes, it permits the levying of taxes for two purposes only: to pay the debts of the United States, and to provide for the common defense and general welfare of the United States.

Britain’s Coalition Government: A Preliminary Verdict
Action is being taken in Britain, but in the U.S., there is continuing pressure either to take no serious action at all or to take the wrong action, most notably by repairing the deficit with tax increases or—to make matters worse—by increasing spending even further.

How to Save Money, Reform Processes, and Increase Efficiency in the Defense Department
Making defense operations more efficient will not automatically produce savings, allowing further reductions in defense budgets.

Employment News Jan. 10 - 14

Job Hunting? Hiring Is Up In These 5 Cities
Portland, Ore., Houston and Minneapolis Lead in Employment Opportunities
Major Indexes End Lower After Jobless Claims Climb
Stock indexes were lower for the first time in three days, as jobless claims climbed more than economists estimated and concern about a slowdown in Chinese demand dragged down commodity producers.

Jobless claims climb by 35,000
The number of Americans filing for their first week of unemployment benefits jumped sharply last week, two weeks after hitting a 2-1/2 year low below 400,000.
New jobless claims rise to two-month high
Claims rose as retailers shed temporary holiday employees.
Tense time for workers, as career paths fade away
Although most economists expect the U.S. job market to register at least small gains this year, many Americans who have a job still fear losing it. Many who don't have a job fear they never will find one. And many in both camps worry that the recession, which officially ended a year and a half ago, speeded up inevitable changes in the workplace.

5 states shrinking unemployment
Some states have been better than others at chipping away at their high unemployment rates. Here are five that have helped put their residents back to work.
The Trade Deficit and the Jobs Drought
The economy added 103,000 jobs in December but that was disappointing after recent surges in retail sales and business spending. Simply too many dollars Americans spend go to imports but don't return to buy U.S. exports, leaving too many Americans jobless, wages stagnant, and Federal and state governments with budget woes.
Job Openings Fall in Tough Market
There were fewer job openings in the U.S. in November as employers continued to hire only modestly, creating a fiercely competitive labor market for those searching for work.
Want to find a job? Nonprofit '.jobs' service seeks to revolutionize the search.
Hundreds of companies are teaming up with Monster founder Bill Warren to create the nonprofit '.jobs' job listing system. It aims to eliminate the middlemen for people who want to find a job.
Get ready for (slightly) fatter paychecks
The most obvious sign of the economic recovery may be in your paycheck.

Business group: Regulation thwarts job growth
The head of one of the nation's top business organizations said Tuesday that the U.S. economy is "improving," but "regulatory roadblocks" stand in the way of job creation.
Ford Adds Jobs, Stokes Hope
7,500 hires could signal upward swing for U.S. auto industry.
Job Openings in U.S. Decrease for Third Time in Four Months
Job openings in the U.S. fell in November from the highest level in two years, signaling a sustained labor market recovery will take time to develop.
Job Bias Claims Set New Record on Disability Surge
The Equal Employment Opportunity Commission says charges of disability discrimination rose by about 17 percent to 25,165 claims. Overall, the agency received nearly 100,000 claims during the 2010 fiscal year, a 7 percent increase and the highest number in its 45-year history.

Economist Comments
Downturn's Ugly Trademark: Steep, Lasting Drop in Wages
Part of the wage adjustment after a downturn rests on how much workers are willing to give up.

Weak Hiring Casts a Cloud
Unemployment Rate Drops Sharply to 9.4%, but Pace of Hiring Too Slow for Sustained Improvement.
False Positive, Unemployment Falls to 19-Month Low
At first glance, the drop in the unemployment rate from 9.8 percent to a 19-month low of 9.4 percent in December is encouraging. But additional economic indicators suggest the numbers, announced on Friday by the Bureau of Labor Statistics, are neither sustainable nor particularly good news for the economy.

The Plight of the Marginal College Grad
More than one-third of current working graduates are in jobs that do not require a degree, and the proportion appears to be rising rapidly. I have reported on this research before, but this links to a longer paper on the subject.

Secondary Sources: Dollar Dominance, 19.2% Unemployment, Forecasting
A roundup of economic news from around the Web.
Technological Unemployment: A Partial Equilibrium Example
One story of the 1930's, which I discussed recently, is that agricultural workers were displaced by tractors and other forms of mechanization. I find this an interesting story, and I went on to I post Who Will Write This Paper? to suggest that it could be formalized.
What’s the Unemployment Rate for Your Profession?
The U.S. unemployment rate averaged 9.6% in 2010, but there was a wide variation among occupations. Telemarketers, for example, had a 34.8% jobless rate, while locomotive engineers were in high demand with a 0.4% rate.
Sticky Wages and Long-Term Unemployment
There was an interesting article in the Wall Street Journal Tuesday by Sudeep Reddy on long-term unemployment that I thought did a good job of painting a picture of what happens during the bust phase of a business cycle. The article, “Downturn’s Ugly Trademark: Steep, Lasting Drop in Wages” deals with the problem of long-term structural unemployment I discussed in last week’s article, “What The Job Reports Mean.” My point is that there is insufficient “real” capital available for new growth, and thus unemployment is likely to remain high.
Thank You Mr. Graduate, I Will Have Fries with That!
The United States is facing a gigantic debt problem, as we all know. Governments at all levels have simply been spending too much, which most Republicans and Democrats now seem willing to concede. But don’t expect to hear the following from many members of either party: We need to stop spending taxpayer money on sending so many people to college! Indeed, President Obama has already said he’ll support spending cuts but not to education, and few Republicans have ever shown the willingness to flatly declare student aid a costly waste. And maybe they’re right. After all, doesn’t more college education necessarily translate into more productivity and prosperity?

The Effect of Unemployment Insurance on Unemployment
This is from Rob Valletta and Katherine Kuang, "Is Structural Unemployment on the Rise?", FRBSF Economic Letter, November 8, 2010. The article also addresses the effect of unemployment insurance on the unemployment rate, which I've discussed here
What The Job Reports Mean
Here is the wrap. The employment situation is still very bad. It brings up the specter of long-term structural employment in our economy. Job growth is still weak, buoyed by temp and health care workers. There are some positives in this report but job growth is still insufficient to overcome layoffs and a growing labor force. Some of the gains are technical in nature, and I expect unemployment to go up again in the next few months.

Heritage Employment Report: December Jobs Increases Slow but Steady
The Bureau of Labor Statistics reported that the number of jobs increased by 103,000 in December and the unemployment rate fell sharply by 0.4 percent to 9.4 percent. While the payroll’s reported job growth was disappointing, the decline in the unemployment rate is a pleasant surprise. The sharp drop in the unemployment rate was due to a combination of workers exiting the labor force and strong job growth in the household survey.

Monetary News Jan. 10 - 14

Bite the bullet
In the first of three articles on the euro zone’s sovereign-debt woes, we present our estimate of the burdens on the currency club’s four most troubled members.
U.S. prices rise as global inflation heats up
American consumers saw prices rise on everything from rent to food to gas last month, as inflation pressures around the world creep higher. The U.S. Consumer Price Index, a key measure of inflation, increased 1.5% over the past 12 months ending in December, up from 1.1% in November.
China hikes reserve requirements again
The People's Bank of China continued to put the brakes on economic growth in an attempt to tame high inflation.
Unquantifiable Easing
Is the Federal Reserve's policy working? No hard evidence either way.
Time for Plan B
The euro area’s bail-out strategy is not working. It is time for insolvent countries to restructure their debts.

E.U. seeks to expand bailout fund to calm markets
European Union leaders pushed Wednesday to expand the scope of the euro-zone bailout fund, saying more support is necessary as investors worry about the financial prospects of Portugal and Spain.
Economy ended 2010 on a strong note
Optimistic outlook sees bright spots in production, consumer spending, employment.
EU's Broader Debt Plan May Fail to Win Investors After $1 Trillion Bailout
After committing almost $1 trillion, bailing out Greece and Ireland and asserting their determination to save the euro over the past 11 months, policy makers are returning to the drawing board after those previous efforts failed to pacify investors.

The yuan problem isn't going away
Obama may rightfully point out that U.S. manufacturers will be at an unfair competitive disadvantage to China as long as the yuan is not trading more freely. A lower yuan makes goods exported by China cheaper.
Attack of the inflation hawks
This year, three of the four voting positions go to so-called inflation hawks who have been outspoken with their criticism of the Fed's latest stimulus plan. The big concern is that the Fed is essentially "printing money" with the bond purchases, which could devalue the dollar.
China takes steps to flex its currency muscles
State-owned Bank of China Ltd has offered yuan trading to its U.S. customers, a sign that Beijing this year may increasingly promote the use of the Chinese currency in major financial centers.
Merkel Says Germany Ready to Do `Whatever Needed' to Save Euro
Chancellor Angela Merkel indicated that Germany is ready to revise the terms of a 750 billion-euro ($973 billion) rescue fund for indebted states, saying Europe’s biggest economy will do whatever is necessary to protect the euro.
Geithner Says China Must Lift `Substantially Undervalued' Yuan
U.S. Treasury Secretary Timothy F. Geithner said China needs to strengthen the “substantially undervalued” yuan because it puts other countries at a competitive disadvantage.

Could U.S. Central Bank Go Broke?
The U.S. Federal Reserve's journey to the outer limits of monetary policy is raising concerns about how hard it will be to withdraw trillions of dollars in stimulus from the banking system when the time is right.
Fed official: $600B bond program could backfire
 A member of the Federal Reserve's policymaking committee suggested Tuesday that the Fed may need to scale back its $600 billion Treasury bond-buying program if the economy grows more quickly than expected.
Fed profit hits $81 billion
The money-printing business has never been better.

Economist Comments
Has The Fed Lit Inflation Fuse?
Our government is spending too much, racking up deficits of over $1 trillion a year. The Fed is encouraging this by printing more money. Eventually this will end — and not necessarily in a gentle way.

There Is No Getting Around Gold
Money has lacked a golden anchor for 40 years. It has proved a stupendous failure.

The New Financial World Order Evolves Further
Japan supports the euro while China loosens controls on the renminbi. Another step away from the dollar.

How Congress makes the Fed look sane
Calm down, there's no rush to make reservations for QE3.
Don't Forget the Fed Banks Are Still Banks
The Fed banks collectively own about $1 trillion in mortgage assets, all funded short.
"Illusory Prosperity" - Ludwig von Mises on Monetary Policy
Among the most zealous articles of economic faith here is the idea that additional "liquidity" provided by the Federal Reserve has to ultimately either "find its way" into the asset markets or produce an increase in economic activity, as if the economy and financial markets are simply a set of vessels to be filled.

Bernanke: US Economic Recovery 5 Years Away
While Bernanke says there is evidence that a "self sustaining recovery in consumer and business spending may be taking hold," he believes it may take "four to five more years for the job market to normalize fully."

Federal Reserve turns profit for taxpayers
Federal Reserve will give Treasury $78 billion of its fiscal 2010 profits, up from $47 billion the year before.
New Fed may see more dissent — at least privately
Are hawks with votes more likely to get their way? This year’s voting members of the U.S. Federal Open Market Committee include a trio forming a stronger hawkish group than last year’s lonely Thomas Hoenig. Rocking the boat on the current round of quantitative easing is unlikely. But their differences with Ben Bernanke, the Federal Reserve chairman, may emerge on interest rates.
Spreading infection
THE fear that Greece's sovereign-debt crisis might presage similar episodes elsewhere in the euro zone has been borne out. In November, Ireland joined Greece in intensive care, becoming the first euro-zone country to apply for funds from the rescue scheme agreed in May 2010 in concert with the IMF.
Inflation is Here
Global output of key crops such as corn, soybeans and wheat is down, and their prices are up, respectively, 94%, 51% and 80% from June lows. Today’s PPI report has wholesale prices up 1.1% in December after rising 0.8% in November.
Is Inflation Finally Here?
There were a number of articles Thursday commenting on the producer price index (PPI) numbers saying that “inflation” is upon us because prices are rising. I think we are on the verge of experiencing true inflation, but the PPI is mostly revealing supply and demand factors rather than price inflation.

China's Foreign Exchange Reserves Jump by Record $199 Billion
Inflation is officially running in China at 5%. Unofficially, estimates are 10% or more. Is it just a matter of time before these costs get passed through?

Former ECB Official Warns About Euro Crisis
Former European Central Bank board member Otmar Issing, a German economist who is one of the ECB’s founding members, had issued a stern warning that the “seemingly unstoppable” movement toward financial transfers from the bloc’s strongest to its weakest members raises economic and political tensions that put monetary union and the single currency at risk.

Can China save the euro?
Just as Europe is desperate for a new source of ready cash, Li has offered up some of China's vast hoard of reserves to support the struggling euro zone through its debt crisis.
Yellen Bluffs
Janet Yellen (Vice-Chair FRB) gave a speech in Denver on Saturday. She did her level best at defending QE.


Tax News Jan. 10 - 14

Corporate tax reform: Talk grows louder
Many business leaders and tax experts say the corporate tax code discourages foreign investment in the United States and hinders the ability of U.S. companies to compete internationally.
Tax reform on deck in the House
Chairman Rep. Dave Camp (R-Mich.) announced late Thursday that he will hold the first in a set of hearings on “fundamental” tax reform next Thursday.

Tax Refunds Move to Debit Cards
The U.S. Treasury Department plans to launch a pilot program Thursday to deliver tax refunds through prepaid debit cards, an effort to cut the expense of paper checks and aid lower-income taxpayers who don't have bank accounts.

Illinois House Passes Tax Increase
The Illinois House passed a massive income-tax increase Tuesday to help the state dig out of a $13 billion deficit, despite opposition from Republicans and business groups.
D.C. considers ticketing for uncleared sidewalks
The D.C. Council is considering a bill that would empower the city to write tickets of at least $25 for residential property owners and at least $250 for businesses if they don't clear their sidewalks.

Economist Comments
Wisconsin 1, Illinois 0
With Springfield raising taxes amidst its fiscal disaster, the new Republican governor of the Badger State is telling Illinoisans, "Escape to Wisconsin."

Illinois tax hikes will hurt companies
Companies will now have to pay a 7% corporate tax rate for the next four years, up from the previous 4.8%. And Illinois businesses are already subject to a 2.5% surcharge.
Why the Bush tax cuts overpromised and underdelivered
For many of the people whom President Obama calls "rich," the Bush tax cuts didn't make much difference. That's largely because of the Alternative Minimum Tax.
Illinois Exit Fee
Late Tuesday night, Democrats in the Illinois house and senate rammed through Governor Pat Quinn's 67% hike in the state income tax and a nearly 50% jump in the state corporate tax.

Raise My Company's Taxes
A union pension fund tries to lower returns on its investment.

Defund Organizations That Destroy Freedom
Some Republicans are already introducing bills to either partially or fully take away the taxpayer funding to National Public Radio (NPR).
Better To Cut Payroll Tax For Employers
The rationale for cutting the payroll tax on employers relies on basic economics: If the government makes it less expensive for businesses to hire workers, businesses will tend to hire more workers.
Simplify! Dump the Current Tax Code and Start Over
Want to reduce the deficit and at the same time get Republicans and Democrats to agree on major legislation? Try tax reform—a winning bipartisan platform that can finally rid us of the 60,000 pages in the current tax code.

Idaho politics: Death to the 'death tax?' Crapo pushes repeal
In a guest opinion sent to Idaho newspapers today, Sen. Mike Crapo calls for a repeal of the so-called "death tax."
Disastrous U.K. Tax Hike Unleashes a Steroid-Pumped Version of the Laffer Curve
...this is one of those rare cases where a tax increase is so punitive that the government winds up losing money.
Lessons from the Top 1%: Fixing Tax Revenues
How much money will the U.S. federal government expect to collect from the Top 1% of American taxpayers if it changes their income tax rates?
How the Term ‘Tax Expenditure’ Leads to Bigger Government
Targeted tax breaks are bad because, on balance, they expand government’s control over the people. But they are not “expenditures” or “subsidies.”
Federal Tax Revenues Rising: 23% for Individuals
"Individual tax receipts continued to fall in 2010 even as corporate receipts rose, so the current increase is a sign that wages and bonuses are rising again for workers who have a job."
Secondary Sources: Tax Reform, Oil Shocks, Keynesian Experiment
Howard Gleckman says that if President Obama ignores tax reform in his State of the Union, the issue is likely dead for the next two years.

Will the Last Person to Leave Illinois Please Turn Off the Lights?
Moving across state lines is generally not something that happens overnight. But this giant tax hike is sure to be the tipping point for a few investors, entrepreneurs, rich people, and employers.
Outside the Beltway: Pepsi Cans Baltimore Plant in Face of Sin Tax
This week, Pepsi decided to cease manufacturing at its Baltimore plant and lay off 77 workers while continuing production in the rest of the state. The Baltimore Sun reports that the city’s tax is partially to blame…


Health Care News Jan. 10 - 14

Cancer costs could increase 66% by 2020
The predicted rise in cost is due in part to the nation's growing population of elderly, who are aging into a period of their lives when they are at increased risk of developing common cancers.

Tragedy may soften health debate
The House is expected to return to Washington next week to a more subdued debate on repealing the health care reform law than it probably would have had a few weeks ago.

Oklahoma to challenge health care law
The state of Oklahoma will file a lawsuit within the next few weeks challenging the constitutionality of President Barack Obama's health care overhaul, according to the state's incoming attorney general.
Montana to Vote on Joining Health Care Suit
Montana may join the ranks of 20 other states that have filed suit against the federal government, questioning the constitutionality of the new health care law.
Democrats’ Hope for Unity Rests in Health Care Fight
Democrats quickly set aside their internal problems last week and launched a successful, coordinated attack on the GOP’s effort to push through a health care repeal bill with little debate and no amendments.
Health debate delayed, toned down
Lawmakers on Sunday said they still expect to have a spirited but delayed and toned-down debate to repeal the health care reform law after Saturday’s shooting in Arizona.

Economist Comments
A New "Definition" for Health Care Reform
The new health care law would make matters worse by moving millions of new enrollees into heavily subsidized, third-party insurance arrangements.

Supreme Court: Did it just hint at stance on a health-care law challenge?
The Supreme Court refused to take up a case examining Congress's authority under the commerce clause, a key issue in a legal challenge to Obama's health-care law. Two justices dissented.

ObamaCare's Reality Deficit
If you believe that a new entitlement saves money, you'll believe anything.

Kansas Seeks to Join Anti-Obamacare Lawsuit, Bringing the Number of States Challenging the Law to 26
The state of Kansas recently asked to join the lawsuit challenging the constitutionality of the Obama health care plan filed by 20 state governments and the National Federation of Independent Business. Ohio, Wisconsin, and Wyoming are also seeking to join the multistate lawsuit, while Virginia and Oklahoma have filed separate challenges to the law. That brings the total number of state governments litigating against the plan to twenty-six.

Six more states to join fight against ObamaCare
Attorneys general in Kansas, Ohio, Wyoming, and Wisconsin have requested to join the lawsuit filed by 20 other state attorneys general led by Florida attorney general (AG) Bill McCollum against the Patient Protection and Affordable Care Act (PPACA). The new Republican attorney general for Maine says he is also getting ready to have the state join the Florida-led lawsuit.
Half of All States Now Suing to Stop Obamacare
While Obamacare will pay for all of the benefit expansion for the first three years of the law, and 90% of it after that, Obamacare never pays for any of the state administrative costs for adding those 18 million Americans to their welfare rolls.

It's Hard to Put a Price on Obamacare
Democrats are pointing to the CBO score on repeal, which estimates that repealing the law would cost over $200 billion.  Republicans are pointing out that the score is highly contingent on actually implementing the law as passed--something that even the bill's proponents recognize will be a political challenge.
States Cry to Washington: Remove Obamacare’s Medicaid Handcuffs
The big news out of a majority of state capitols is that Obamacare’s Medicaid mandates will exacerbate state budget problems and drive many states to the brink of insolvency.

The Doctor Might See You Now
In other words, whether you favor ACA or not, the supply side constraints are starting to bite.
The Impact of Obamacare: From the Frontlines of Our Health Care Crisis
The negative impact of the health law will be felt by every American citizen. For example:
A month’s rent for a night at the pet hospital
As long as people will pay exorbitant fees to care for loved ones – even loved pets – health care costs won't react the way economists think they will. Too much is at stake.
Hold up: Repealing health reform costs $230 billion??
When the health care law was enacted, the CBO said it would save $145 billion. Now, the CBO says it will cost $230 billion to repeal. Why?

PAYGO, the CBO, and Repealing ObamaCare
One could argue that exempting ObamaCare from the PAYGO requirement is appropriate given the defects in current budget rules.


General Economic News Jan. 10 - 14

Best holiday shopping gain in 6 years
Retail sales in the 2010 holiday season showed the biggest percentage gain in six years, an industry group said Friday, while a separate government report showed a December sales increase on strength in e-commerce.
S&P, Moody's Warn On U.S. Credit Rating
With attention focused on sovereign-debt worries in Europe, two major credit-rating firms reminded investors again that the U.S. has debt problems of its own.
Global food chain stretched to the limit
Soaring prices spark fears of social unrest in developing world
Younger Workers Have Most to Lose In Social Security Breakdown
Ten thousand baby boomers will retire every day for the next 19 years, which will double the number of those collecting benefits instead of paying taxes.
Inflation rate headed up? The impact of higher food, energy prices.
Higher food and energy prices helped propel the Producer Price Index up by 1.1 percent in December. But the outlook on the inflation rate is not entirely bleak, some say.
Foreclosures at All-Time High—May Rise in 2011
Home foreclosures hit an all-time high in 2010, according to the latest report from RealtyTrac—and experts expect similar activity in 2011.
Still scary
Portugal has looked increasingly in need of a bail-out. Firm demand for a bond auction this week cannot mask deep problems with its public finances
Rising gasoline prices sour U.S. consumer mood
Rising gasoline prices beat down U.S. consumer sentiment in early January, overshadowing an improved job outlook and passage of temporary federal tax breaks, a survey released on Friday showed.
OPEC ministers say world can handle $100 oil
Other exporters indicate that cartel may not increase crude production
Economists Optimistic on Growth
Economists surveyed by The Wall Street Journal are increasingly optimistic about the pace of the recovery, predicting the U.S. will grow at better than a 3.2% annual rate in each quarter this year.
Under siege
Quantifying the difficulties of a country’s banking system

Hong Kong ranked world's freest economy: report
Hong Kong remained the world's freest place to do business for the 17th year in a row in an annual US league table published Wednesday.
1 million homes repossessed in 2010
Foreclosures were at a record high in 2010, and more than 1 million people lost their homes, even as notices started leveling off during the end year.
Economy grows at moderate pace
Economic growth continued to expand moderately over the past few weeks, the Federal Reserve said Wednesday.
Banks repossessed 1 million homes in 2010
The bleakest year in foreclosure crisis has only just begun.
Trade Deficit Dips to $38.3 Billion in November
November's deficit was the lowest since January 2010.
Producer Prices in U.S. Increased 1.1% in December on Fuel
Wholesale costs in the U.S. rose in December by the most in 11 months, led by higher prices for commodities such as fuel and food.
Banking Law Hung Up On Down Payments
Banks are sparring over looming U.S. mortgage-lending rules that could raise costs for millions of borrowers.
Moody's warns stimulus could trample Treasuries
Moody's warned Thursday that the tax cuts enacted last month could push up U.S. borrowing costs and erode some of the dollar's global appeal.

Floods to slash $13bn from economy as inflation becomes a danger
The Queensland floods may end up costing the economy $13 billion through lost productivity and damage to key infrastructure.
Housing Market Slips Into Depression Territory
As the economy revs back to life, with signs of hiring on the horizon, the housing market is being left behind like Macaulay Culkin in “Home Alone.”
Get ready for (slightly) fatter paychecks
The most obvious sign of the economic recovery may be in your paycheck.
Personal bankruptcies rose 8 percent in 2010
Personal bankruptcy filings slowed theirprecipitous climb, rising 8 percent in 2010. While it's a far cry from the 32percent jump from 2008 to 2009, many experts believe filings are far fromreaching level ground.
Wealthy treated themselves during the holidays
The rich treated themselves like royalty this holiday season. That spun the holidays into gold for Tiffany and other high-end retailers.
Import Prices in U.S. Rise 1.1% in December, Led by Fuels, Food
The cost of goods imported into the U.S. rose in December, led by higher prices for commodities such as fuels and food.
Chamber chief: State of business 'improving'
The head of the U.S. Chamber of Commerce Tuesday praised what he called a "new tone" in the Obama administration's dealings with the business community but warned that rising energy prices, the new health care law and a "regulatory tsunami" continue to hurt businesses and slow the drive to create more jobs.

NJ casinos end 4th straight bad year, down 9.6 pct
In just four years, the nation's second-largest gambling market has lost nearly a third of its business.
Small business sales pick up
Entrepreneurs trying to sell their businesses seem to have had an easier time of it last year, although they may not have gotten the price they wanted.
Portugal Says Economy Will Shrink
However, Europe's Short-Term Debt Sales Smooth
10 States Where Poverty Rates Are Soaring
During 2010 6.8 million more Americans had to resort to the federal food stamp program. The rate of increase is very dramatic in several states. The two states with the lowest increase in food stamp participation are also among the top ten poorest states. This implies that other relatively well-off states are getting worse and catching up with chronically poor states such as West Virginia and Kentucky.

Economists foretell of U.S. decline, China's ascension
To hear a number of prominent economists tell it, it doesn't look good for the U.S. economy, not this year, not in 10 years.
China trade gap narrows, easing tensions
In what has become a sore point for other major world economies, China still exports far more goods and services than it imports.
Pressure on Portugal Heightens Amid Bailout Fears
Europe's debt crisis looked increasingly likely to claim another victim on Monday, as Portugal's borrowing rates spiked to euro-era highs amid reports Germany and France are pushing it to accept outside help and prevent contagion to other countries.
Economic Reports for the Week of Jan. 10
Scheduled for this week are wholesale inventories for November (Tuesday); import prices for December and the Federal Reserve beige book (Wednesday); weekly jobless claims; Producer Price Index for December and trade deficit for November (Thursday); Consumer Price Index for December; retail sales for December; industrial production and capacity utilization for December; Thomson Reuters/University of Michigan consumer confidence index for January; and business inventories for November (Friday).
Nations Seek Success Beyond GDP
Money isn't everything. But in measuring the success of nations, it isn't easy to find a substitute

Economist Comments
After Billions of Dollars in Aid, Little Progress in Haiti
It's sure as hell clear international aid has done nothing to make Haiti rich
The Congressional Accountability Act
A proposal to ban regulation without representation.
Foreclosure Situation to Worsen in 2011
The worse part? There is no solution coming from the government, the legal folks sorting through the mess, or the financial marketplace.

Baby Boomers Could Force Economic Catastrophe
Lawmakers will look back on 2011 as the year the U.S. started down into a financial Grand Canyon, because the first baby boomers turn 65 this year -- the front edge of a tidal wave of baby boomer retirements.
Haiti one year later: Got trash? Make thread.
One year after Haiti's devastating earthquake, Pittsburgh entrepreneurs aim to help Haitians turn garbage into high-performance fabric.
Small Businesses and Big Unintended Consequences
No matter how benevolent, intelligent, and farsighted policy makers might be, they cannot anticipate how markets will react to laws and regulation.
The rights stuff
The "Coasean" wisdom advises these officials to do their best to determine how the environmental asset would be used if people could bargain. While such officials will often err in attempting to make these determinations, at least their guideposts will be the results that would be produced by markets rather than by special-interest groups

Chamber head cautiously optimistic about economy
The president of the U.S. Chamber of Commerce straddled the Democratic and Republican divide Tuesday, endorsing the GOP drive to repeal President Barack Obama's signature health care law, yet supporting the White House on immigration and new spending to spur the economy.
Only a united, federal Europe can end its financial turmoil
The global financial crisis continues, threatening countries across the European continent. A united Europe requires a united solution. To survive this and future economic storms, the European Union needs the capacity to coordinate economic and fiscal policies on the federal level.

Who Failed on Haiti's Recovery?
What went wrong? How did such a huge outpouring of foreign assistance — donor countries have pledged some $11 billion — manage to accomplish so little?
Why Teacher Pensions Don't Work
Defined-benefit systems aren't merely Ponzi schemes. They discourage talented teachers who would prefer front-loaded compensation.
Some Manure, Please, to `Grow the Economy:' Commentary by Caroline Baum
“Grow the economy?” The phrase is painful to the ears -- and only one reason it makes me wince. We grow old, we grow up, we grow out of our bad habits (hopefully). But grow the economy?
Grading the Ivory Towers
Texas A&M shocks the professoriate with cost-benefit analysis.

Future shock: inflation. But maybe not quite yet.
Flooding economies with money hasn't boosted inflation much – yet. But nations have trouble turning off the spigot.
Race and Homeownership: Historical Trends
A common rationale for federal policies to expand homeownership is the desire to reduce observed racial differences in homeownership.  Receiving the most attention has been the gap in homeownership rates between white households and African-American.  The current homeownership rate for whites is 76.5%  (2007), while that for African-Americans is 54%, leaving a gap of 22.5%.
Economic Freedom Is Foundation Of All Other Freedoms
We cannot adequately protect ourselves without a modernized military. A modernized military depends on a strong U.S. economy. That is why economic freedom is not just a pocketbook issue: It is fundamental to American security.
States Where Housing Will Rebound First
Housing will rebound moderately in 2011, economists at the International Building Show here are predicting and should gain even more steam in 2012.
Ronald Coase interview
Interview with Ronald Coase, on the occasion of the establishment of the Coase China Society, an effort to stimulate study and application of Coase’s ideas in China. Interview conducted by Wang Ning, a student of Coase’s now teaching at Arizona State University and co-author with Coase of the book How China Became Capitalist.
AARP reaches out to a new kind of senior: Is 17 the new 50?
Readers who've reached the age of 49 or so will know how it feels to get that first unsolicited AARP card in the mail.
Some Economics of Trade
As I pondered the issue of Americans trading with low-wage nations, Miles Stevenson e-mailed me to say that he’d just discovered Paul Krugman’s superb 1996 essay “Ricardo’s Difficult Idea.”  I couldn’t recall if I’d posted that essay here at the Cafe, so I searched.  Turns out that I did indeed post it, three years ago.

Boomtime prices without boomtime conditions
THE Economist's commodities index has notched up an all-time high in early 2011, and most analysts attribute the surge to demand strength. Our index excludes oil, but crude is now causing concern, briefly pushing past $98 a barrel yesterday. Throw in the recent strength of equities, and things would seem to be pointing to a very robust recovery.
A surplus, but for oil and China
EARLIER this week we learned that China's trade surplus fell sharply in November, to just $13.1 billion. A look at the latest American data would indicate that trade between the two big economies didn't have that much to do with the tumbling Chinese surplus.
PSST vs. the Aggregate Production Function
Regular readers know that I am trying to nudge them toward a different paradigm in macroeconomics. I want to get away from thinking of economic activity as spending, and instead move toward thinking of it as patterns of sustainable specialization and trade. Even if there is only a small chance that this alternative paradigm is useful, I think it is a worthwhile exercise.
Entrepreneurialism Under the Law
I don't think that tax rates are the reason that a clear majority of Americans have thought about striking out on their own, while the number in Europe is more like a third.
Foreclosure Mess
My solution going forward would be to modernize the land-title system. My hope is that would achieve a libertarian's goal of clarifying property rights and reducing the costs involved with the transfer of property.
Foreclosure Options
I don't think that we should seek legal remedies against those who walk away from underwater mortgages.  But I still think it's wrong if you have the means to pay, just as it would be wrong for banks to seize the house you'd been faithfully making payments on, even if they could get a judge to sign off.
Reflections on Freedom in New York
When I think of New York city abstractly, I think of a city that doesn't work. Taxes are high, there are too many crowds, people are pushy and unfriendly, etc. Then, when I actually experience New York, I see how well it works. People are trying to give me what I want, at a fairly low price. The immigrants I run into--and there have been many over the last two days--don't seem to have come here for welfare but for opportunity to get wealthier. And people are friendly.
CR Index: Consumers face fewer financial woes at start of 2011
Consumers are more optimistic, with sentiment numbers climbing to their highest level in more than two years, according to the Consumer Reports Index for January.

Happy Meal ban didn't go far enough. Ban Popsicles!
Guest blogger Art Carden looks at the logical implications of the recent ban on Happy Meals.
Will home prices fall back below 2009 low?
An index of home prices, more current than the Case-Shiller index, suggests they will.
The secret to a libertarian state
Without taxes, there's no security net. So who takes care of the poor in a libertarian state? Guest blogger and libertarian PJ Byrne has some ideas.
This little piggy went to market
Portugal's successful bond auction comes at a price
Surprise, Surprise
Last year I wrote about the intriguing proposal by the North Dakota Farm Bureau to do away with federal farm subsidies. I expressed at the time my doubt that the proposal would find much traction with the national American Farm Bureau Federation and, indeed, the group voted yesterday (at their annual conference in Atlanta) against the milder proposition to cut direct payments — the approximately $5.2 billion per year of your money that flows to farmers regardless of what, or even whether, they farm.
Where Profit Comes From
Labor unions like to argue that the payment of higher wages is to the self-interest of employers because the wage earners will use their higher wages to make additional purchases from business firms, thereby increasing the sales revenues and profits of business firms. However, wrong and foolish it may be, this is an argument worth analyzing in some detail, because it can provide a gateway to a discussion of the actual sources of profit in the economic system.
Energy Fact of the Week: ‘Brown’ Energy Brings Prosperity
The biggest story in domestic oil production is . . . North Dakota.
Facts about European banks
The problem, of course, is this: if the government stops payment on some of the debt, they then will have to bail out their domestic banks.
In the long run it's all microeconomics
Most of us are familiar with JM Keynes quip that in the long run we are all dead. To change this slightly, I want to point out that in the long run, it's all microeconomics.
The Half-Full Glass of Economic Mobility
When people look at data on economic mobility, they see different things.  For example, it is well known that if your father had high income, you are more likely to have high income than if you father had low income.  According to this study (which I found thanks to a pointer by Paul Krugman), the elasticity of son's income with respect to father's income is about 0.5 in the United States.  How do you interpret this fact?

F.H. Knight Reviews J.M. Keynes
Here’s one of the 20th-century’s premier economists,’ Frank Knight’s, review of Keynes’s General Theory. It is a classic.
Texas is different, a continuing series
The blogosphere continues to debate whether or not Texas' economy is special, and today the Bureau of Labour Statistics has provided us with another piece of evidence
The Southwest is parched. Would pricier water help?
If the price of water were allowed to rise naturally, you'd see fewer green lawns in Arizona and fewer pools in L.A.
A "Relatively Modest" Income
It occurs to us that we have the ideal tool to determine where, by President Obama's standards, the annual income needed to be considered "rich" begins. Or perhaps more appropriately, the annual income the President believes to be where "relatively modest" ends!

Fuzzy Thinking by Famous Economists
It is not just California. There are lots of places where housing is abundant and inexpensive and economic activity is dismal, Michigan for example. Maybe bringing up Michigan is a little unfair, Glaeser does mention demand for housing in the essay, and there is clearly little demand for Michigan housing. Still, it brings up the question of where demand for housing comes from. It’s a question Glaeser does not address.
Economists React: Explaining the Rise in Imports to China
China Customs data released Monday showed the country’s trade surplus fell to $13.08 billion last month, a nine-month low, from $22.9 billion in November. The full year surplus also declined for the second straight year. Analysts weigh in:
On the worthlessness of Japanese government debt
Japan's national debt is twice their GDP. What does that mean for investors?
Americans Boost Student Loan Debt, Cut Credit-Card Borrowing
Americans kept their credit cards at bay in November, subdued by high joblessness and fallen home values.
The race ahead
The world's biggest economies are changing fast
Economists Say Europe Faces Low Growth for a Decade
Europe’s currency project will probably survive, but the price paid by the euro zone area is likely to be dismal economic growth for the next decade.
Census Data Illustrated
This graphic was in the NYT this morning. It illustrates recent data pulled together from the Census Bureau from the 2010 census.
Texas Triumphant
Actually what is triumphant is the economic model of low taxes, light regulation and economic liberty.
Unofficial Problem Bank list at 932 Institutions
Here is the unofficial problem bank list for Jan 7, 2011.
The Case for Social Security Personal Accounts
There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely caused by demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform.


Economic Freedom Advanced in 2010
Though faced with continuing fiscal challenges, more countries embraced greater economic freedom than shied away from it last year, according to the latest Index of Economic Freedom, released today by The Heritage Foundation and The Wall Street Journal
Import Prices Rose Further in December
Registering a third consecutive monthly gain above one percent, import prices increased 1.1 percent in December. Once again, higher food and fuel prices proved to be the primary drivers.
Three Policy Changes to Help with Gasoline Prices
Must it always be opposite day in Washington? Petroleum and gasoline prices are surging while the Obama Administration and its allies seem intent on making things worse. Instead of taking actions to increase supplies of petroleum and gasoline, the Administration pursues policies to restrict U.S. access to its own petroleum, ban imports of vast quantities of Canadian oil, and drive up costs of refining.

Strong Sales and Declining Wholesale Inventories
Wholesale inventories unexpectedly declined 0.2 percent in November. Sales at wholesalers jumped 1.9 percent following a strong 2.6 percent increase in October.
The Impact of Regulation on Investment and the U.S. Economy
From an economic perspective, however, it is important to note that the total number of jobs can be a misleading measure of the costs and benefits of regulation. Bad policies can increase total jobs, and good policies can decrease total jobs.

Liftoff or Cold Shower? The Economy in 2011
The extra fiscal stimulus from the tax cuts late in 2010 could produce a 4 percent growth rate for the first half of 2011—a sharp turnaround from December’s gloomy news on US employment. However, China’s overheating and Europe’s sovereign-debt crisis continue to threaten the global recovery. In addition, four risks could make liftoff difficult for the US economy: hostility in the new Congress to additional fiscal stimulus; higher energy costs, which could offset the boost from the payroll tax cut; a housing sector under heavy stress; and fiscal drag from state and local governments as the federal stimulus wears off. We have already fired the economic and monetary stimulus guns for the second time. If these measures fail to provide liftoff, we could face a cold shower in 2012.

Weekly Economic & Financial Commentary
Disappointing Jobs Report, but Labor Market Improving.