Friday, February 4, 2011

Budget News Jan. 31 - Feb. 4

Bernanke urges Congress to act on debt
In a rare on-the-record appearance before reporters, Federal Reserve Chairman Ben Bernanke gave a dire warning to lawmakers: Raise the debt limit now.
Democrats warn of US shutdown over debt
Senate Democrats warned Thursday of dire economic consequences if Congress fails to raise the US debt ceiling, saying it could prompt a shutdown of the federal government.
$32 Billion in Budget Cuts Proposed
Republicans said that their cuts, prorated for the balance of the fiscal year, still fulfilled their campaign pledge to reduce to 2008 levels the government’s discretionary spending on everything other than national security.
Economists Disagree on Debt Risk Solutions
Testifying before the Senate Budget Committee on Thursday, a panel of economists and budget experts agreed that the risks of an eventual U.S. debt crisis are high in the absence of any major federal policy overhauls, but differed sharply about the right time frame for aggressive action to curb spending.
Weather Pressures Strained Budgets
Several big cities, including New York and Kansas City, Mo., have already exhausted their snow-removal budgets and are scrambling for additional funds, and many other cities and towns aren't far behind.
SPIN METER: Not much savings from stimulus money
It's not that all the stimulus money has been spent; it has been committed for specific projects and programs.

Ore. governor budget: No tax increases, some cuts
Gov. John Kitzhaber on Tuesday proposed cutting nearly half the beds in juvenile prisons along with steep cuts to funding for education, health care and other programs.
Treasury close to profit on TARP bank loans
But that's just the loans made to banks. Taxpayers are still holding the bag on bailouts for the auto industry and AIG through TARP.
Ryan Budget to Fall Short of ‘Pledge’
Budget committee chairman's proposal will cut $55-60 billion from President Obama's budget.

Pressure builds for debt reduction
Three lawmakers who sat on President Obama's bipartisan debt commission -- Sens. Kent Conrad, Tom Coburn and Mike Crapo -- convened a meeting of more than 30 senators from both parties "to make sure everyone comes to consensus on how big the problem is and how real it is," Coburn told CNN.
Governor Cuomo wants to slash funds for schools, Medicaid
New York Gov. Andrew Cuomo wants to cut funding for state operations by 10% to close a $10 billion budget gap.
Senate Democrats ban earmarks
Spending bills will not include pork requests.
Hey, Congress: We need more money!
Defense Secretary Robert Gates is warning that if Congress passes another stop-gap spending bill, instead of a full budget, the military will suffer.
N.Y., California sing blue-state budget blues
The two new Democratic chief executives, presiding over the nation’s two pre-eminent blue states, confronted the realities of weak economies, falling revenues and rising debts in outlining their — very different — governing visions this week.
Interest on national debt: 'Skyrocketing' costs ahead
Interest payments on the national debt could total $5.5 trillion over the next decade, or about 79% of the new debt estimated to accrue between 2012 and 2021.
What Could You Do with the U.S. Debt of $14 Trillion?
The U.S. Has Racked Up Its Highest Public Debt Ever, Enough to Buy Tickets to 53,122 Super Bowls.
CR Votes to Test GOP on Spending
House Republicans are hoping the upcoming debate over the continuing resolution will indicate how hard-line their Members will be during future fights on the budget and the debt ceiling.

Can Republicans cut defense spending?
Republicans are divided over what to do about the defense budget. Secretary of Defense Robert Gates wants to reduce it by $78 billion over the next five years.
Udall to Call for Balanced Budget Amendment
Udall would be the first Democratic senator to support what has long been a favorite idea among Republicans.
Bernanke set to testify before House Budget Committee
Federal Reserve Chairman Ben Bernanke will make his first appearance in the Republican-controlled House next Wednesday, testifying before the House Budget Committee.
Lawmakers wary of touching entitlements
Proposals for drastic budget cuts come from all directions.

For Governors, Medicaid Looks Ripe for Slashing
...the election of tough-minded governors, the evaporation of federal aid, the relentless growth of Medicaid rolls and the exhaustion of alternatives have made the program, which primarily covers low-income children and disabled adults, an outsize target.
Greece loses Mediterranean Games over budget cuts
...Greece lost the 2013 Mediterranean Games hosting rights on Friday after seeking to slash the budget due to its acute financial troubles.
Lawmakers say Idaho's budget gap balloons to $185M
Less than a month ago, Otter based his proposed fiscal year 2012 spending plan on a deficit of just $35 million.
Playing chicken with the debt ceiling experts say Congress is engaged in risky business. They say lawmakers should not use the debt ceiling as an artificial deadline for deficit reduction. Instead, lawmakers should focus on crafting a comprehensive long-term plan for fiscal responsibility.
Nassau County Budget Figures Under Dispute
Nassau County says it has a balanced budget. The state of New York, which seized control of the county's finances earlier this week, says the budget is tens of millions in the red.
Snow blows city budgets
In some places, all it took was one storm to drain the budget. New York City, for instance, ran through its entire $38.8 million snow removal account just to handle the 20 inches of snow that fell in late December.
U.S. Default Would Be Finance `Disaster,' Not on Table, House Speaker Says
Treasury Secretary Timothy Geithner said in a Jan. 6 letter to congressional leaders that the U.S. government’s $14.29 trillion debt limit may be reached as soon as March 31 and “most likely” by May 16.

Economist Comments
Education Cost Top Problem for Local Gov't
Education spending as a share of tax revenue jumped 90% from 1992 to 2011 at the state level and 73% at the local level.

I Can Balance the Budget cuts still total only $246 billion. If we're going to get rid of the rest of the CBO's projected deficit, we must attack the "untouchable" parts of the budget, starting with Social Security.
Nobody Is Proposing to 'Slash' Social Security Benefits
Under the current formula, retirees in 2050 will receive $11,000 more in today's dollars than current retirees get. Everyone knows that is unaffordable.

REHBERG: Hello, I’m a congressional earmarkaholic
Here’s how we need to change, now that we’re off the sauce.
Cutting Billions From Defense Won’t Save Medicare: David Pauly
Eighteen years from now, the fund that pays for hospitalization expenses -- Part A benefits, if you’re up on the jargon -- will be exhausted, according to estimates in the 2010 report from Medicare’s trustees.

More Budget Cuts for Education in Colorado
Nationally, forty states currently project budget gaps totaling over $140 billion for the next fiscal year. Even worse, states will have to try to fill the gaps with nearly $40 billion less in federal stimulus funds than they had last year…
EDITORIAL: Obama’s freeze
President Obama‘s pledge to freeze domestic discretionary spending for five years was a diversionary tactic. A look at the numbers shows how ineffectual his supposed fiscal discipline would be.
Mr. Duncan’s Smart Lesson Plan
Budget crises have their benefits.

Time for new rules to limit Washington spending
...such reductions aren’t unreasonable, says the CBO, if Medicare was to be turned into a subsidized voucher program for seniors, as some Republicans propose.
Interest Rates and Failure to Raise the Debt Ceiling
While the market may react to a failure to raise the debt limit, it would react also if we raise the debt ceiling. I find it interesting that those out there who are worried about default don’t realize that our ability to stave off default depends not on our willingness to raise the debt ceiling but on our continued ability to pay the interest on our debt.
Dissecting the House Budget Committee’s 2011 Budget Cuts
Lawmakers should continue to rein in spending by quickly and decisively paring spending back for 2011 and turning next to 2012.

Enough Is Enough On Raising The Federal Debt Limit
Refuse to raise the debt limit and avoid default on the national debt by requiring interest on the debt to be paid first out of revenues before money is spent on any other programs.
More Stimulus Spending To Balance The Budget?
We all know what has to be done: everything must be cut across the board. That means all discretionary programs and non-discretionary programs.

CAP Act: Baby Steps Towards Fiscal Responsibility – Tentative and Toothless
Procedurally, the Act only institutes a new budgetary point of order, which can be overridden with super-majority votes in both houses. That is, the Act doesn’t compel anyone to act fiscally responsibly unless they’re inclined to do so.
How Should the U.S. Break Its Promises?
...if we can't borrow money, no one's going to bail us out--or the states. And you can expect a default to be followed by a pretty ugly recession in an economy as credit-driven as ours.

Sen. Rand Paul Proposes Serious Cuts
Paul’s bill would target $500 billion in cuts for fiscal 2011 alone. While audacious by Washington standards, cutting federal spending by that amount would still leave us with a projected $1 trillion deficit this year.
Should States Be Able to File for Bankruptcy?
The bankruptcy idea is definitely appealing, but after reviewing arguments from both sides, I think that state bankruptcy could create more problems that it would solve.

What Would a U.S. Debt Downgrade Mean?
I agree that a US debt downgrade wouldn't be a surprise. But it would certainly have an effect, particularly on the portfolio of institutional investors who have regulatory or contractual mandates to only hold top-rated, ultra safe bonds.
Is State Bankruptcy a Good Idea?
In other words, it’s not clear bankruptcy is the only way for states to fix their structural deficits and in fact it may come with many unintended consequences.
What it will take to balance the budget
As we consider fundamental tax reform, we should seek a system that not only can raise revenue efficiently, but also is flexible enough to adapt to changing spending priorities that our democratic process will ultimately determine.

Taking a Scalpel to the Defense Budget
Members would be wise to carefully review the House and Senate versions of the pending FY 2011 defense appropriations bills. This would help Congress gain valuable insight into what defense funding may be supported by another federal agency and what defense projects may not warrant funding in a military bill or any federal agency at all.

Running for Cover
The BRAC Commission as a Model for Federal Spending Reform.

Can We Trust the Social Security Trust Funds?
Lawmakers will consider different options for Social Security reform in the coming year; do they have all the necessary facts to do this?

Employment News Jan. 31 - Feb. 4

Canada Adds 69,200 Jobs, Four Times More Than Forecast
Canada’s job creation in January was more than four times the median forecast, pushing the Canadian dollar to its strongest level since May 2008 and adding to evidence the country’s economic recovery may be accelerating.
Bernanke: More jobs needed for real recovery
In uncommon move, Fed chairman fields questions from financial journalists

First-time unemployment claims fall
The number of Americans filing for first-time unemployment benefits eased more than expected last week, setting the stage for the government's closely-watched jobs report due Friday.
Washington among nation’s best cities in hiring
Jobs are hard to come by in every U.S. city, but you stand a better chance of getting hired if you live in Washington, Dallas or Boston.
Unemployment rate drops in most metro areas
The unemployment rate fell or stayed the same in December in two-thirds of the nation's largest metro areas, fresh evidence that employers are slowly adding jobs.
Productivity up strongly while labor costs drop
The work force was more efficient last year with productivity rising at the fastest pace in eight years. Labor costs fell for a second straight year, something that hasn't happened in nearly five decades.

Private employers added 187,000 jobs in January
ADP figures come ahead of U.S. government’s big monthly jobs report
Job market looks stronger ahead of Friday report
The job market started 2011 on solid footing, according to two separate reports released Wednesday.
On Street, Pay Vaults to Record Altitude
When it comes to paychecks, Wall Street's law of gravity is back in full force: What goes down must come back up.

Jobs are back! But the pay stinks
There are two problems with the jobs recovery to date. Employers haven't added enough jobs. And those they have added aren't particularly good ones.

Economist Comments
Giving Workers a Union Choice
More states consider right-to-work laws.

So this is the new year?
Look almost anywhere in the recent economic data and the signs point to an accelerating recovery. A solid fourth quarter GDP report contained a truly blockbuster increase in real final sales. Manufacturing activity is soaring. Consumer spending is up and the trade deficit is down. Markets are trading at their highest level in over two years. And so economists anxiously awaited the first employment figures for 2011, hoping that in January firms would finally react to better conditions by taking on lots of new help.
Employment Summary and Part Time Workers, Unemployed over 26 Weeks
Here are a few more graphs based on the employment report ...
1.2 Million Americans Quit Seeking Work Since November 2010
The February 2011 Employment Situation report indicates that 228,000 young adults (Age 20-24) found work in January 2011, but that 154,000 older individuals (Age 25+) were no longer counted as being part of the U.S. work force. Meanwhile, teens (Age 16-19) saw a mild improvement, with 43,000 more counted as having jobs in January than in December 2010.
Unemployment by degrees
So if we look at the unemployment rate for high school graduates we see that it's much higher than for college grads—9.4% compared to 4.2%. But both rates have doubled from before the recession, from 4.7% and 2.1%, respectively.

The Educated and the Unemployed
Does more education equal lower unemployment?

Obamacare Does No Favors for the Nation’s Fiscal Outlook
Last week served up another dose of reality for Obamacare supporters.
No Recovery for the American Worker
The present U.S. economic recovery will be difficult to sustain without a meaningful increase in labor incomes, yet scant attention is being paid to how little this recovery is benefiting the average worker.

Statement: Chad Stone, Chief Economist, on the January Employment Report
Today’s jobs report is another in the recent string of such monthly reports showing modest job creation. The unemployment rate dropped surprisingly to 9 percent, but it remains very high. While labor market conditions are brighter than two years ago when the economy was hemorrhaging jobs, the job market remains in a deep slump for people who want to work but can’t find jobs. It would not be helped by the drag on both the economy and job creation from House Republican efforts to cut domestic spending immediately.

Monetary News Jan. 31 - Feb. 4

Bernanke Denies That Fed Is Stoking Inflation
Federal Reserve Chairman Ben Bernanke rejected complaints by China and other developing economies that U.S. policies are driving up global food and energy prices, and instead pinned the blame on accelerating growth in emerging markets and their inadequate response.
Merkel, Sarkozy Call Euro Summit in March on Economy
German Chancellor Angela Merkel and French President Nicolas Sarkozy called a summit of euro-area leaders next month on economic competitiveness as they sought to bridge differences over how to end the region’s debt crisis.
The currency that just won't quit
The Swiss franc, one of the world's strongest currencies, has been on a tear in recent months, and is now flirting with a new all time high against the U.S. dollar.
Greater expectations?
Inflation is rising, but worries are overstated.
Parsing prices
Rising inflation is not as worrisome as it appears, at least for now.
ECB's Nowotny Lets `Cat Out of Bag' With 2012 Inflation Forecast
European Central Bank council member Ewald Nowotny may have explained why President Jean-Claude Trichet has pushed back expectations for higher interest rates -- by revealing the bank’s latest inflation forecast for 2012.
World Economic Forum at Davos: Still Standing
In the high-speed world, growing confidence has led to a striking willingness to admit to shortcomings in economic governance — the sort of admissions that only those who are optimistic about their long-term future make.

Yuan must appreciate to curb inflation
It's been a remarkable recovery for China, but now the fast-growing economy is fighting runaway inflation, and experts say the country must allow its currency to appreciate to stay on course.

Egypt and the growing problem of global inflation
When prices rise faster than economic growth, the outcome is damaging for any population, but especially for a young one like Egypt's. Unfortunately, there are worrying signs that stagflation is spreading around the world.

Bernanke's biggest blunders
Tuesday marks the fifth anniversary of Ben Bernanke's taking the reins at the Federal Reserve, not that anyone's counting.
Currency War Emerges at Davos
A fight is looming between rich and poor countries over the value of the dollar and other key currencies, as governments use monetary tricks to boost their national recovery at the expense of other nations, political and business leaders warned Saturday.

Inflation in China May Limit U.S. Trade Deficit
Inflation is starting to slow China’s mighty export machine, as buyers from Western multinational companies balk at higher prices and have cut back their planned spring shipments across the Pacific.
Fed Hoards a Trillion in Treasurys
The Federal Reserve has passed yet another milestone on its journey into uncharted territory: Its average holdings of longer-term Treasurys have passed the $1 trillion mark.
Loneliest Man in Davos Foresees 2015 Bank Crisis While Global Elites Party
As politicians, executives and financiers networked at parties and panels last week in Davos, Switzerland, Barrie Wilkinson was in a nearby hotel, warning that a 2015 financial catastrophe may be looming.
China Is No White Knight in Europe's Debt Crisis: Iana Dreyer
China’s pledges to purchase Greek and Spanish bonds as well as statements of financial support for Portugal show trade and investment are at stake. After all, Europe is China’s premier export destination.
European Inflation Quickens to Two-Year High of 2.4%
Inflation in the euro region quickened to 2.4 percent from 2.2 percent in December, the European Union’s statistics office in Luxembourg said today in a preliminary estimate without providing a breakdown. That’s the fastest since October 2008 and exceeded the 2.3 percent median estimate of 37 economists in a Bloomberg News survey.
What bonds are saying about inflation
Like a dripping faucet filling up a sink, yields on U.S. Treasuries have been slowly rising for several months now -- raising concerns that inflation may be on the horizon.
Egypt Crisis Spurs Jump in Developing Money-Market Rates
Money-market rates in developing nations are increasing at the fastest pace since 2008 as central banks from China to Brazil lift borrowing costs and banks hoard cash on concern unrest in Egypt may destabilize the Middle East.

Economist Comments
Fed Chairman Says Economy Closer to Self-sustaining Recovery
Federal Reserve Chairman Ben Bernanke defended the bank's controversial quantitative easing program on Thursday afternoon, saying it was delivering on its promise to shore up the nascent economic recovery.
Ben Benanke's Fatal Flaw and Our Modern-Day Currency War
When currency becomes more of a foreign policy tool than a monetary policy tool, this is when one can correctly characterize the movements as a currency war.
Fed's Dollar Press Triggering Massive Commodity Inflation
Listen to the podcast to see how money printing will impact US markets in months ahead.

Lower Short Term Interest Rates Won't Solve Economic, Financial Market Problems
Here, an illustration of this with the history of one- and 10-year Treasury yields and the forward rate ratio between them.

"Low" U.S. Inflation Is a Function of Clever Calculation
A frequent question posed to those who tilt toward the inflation side of the alleged inflation/deflation debate is that if inflation is such a problem, why isn't it registering in the consumer price index? The answer to this question lies in reports of pricing pressures around the world.

AAA Rating Tough to Defend as US Debt Soars
The failure of the ratings companies to identify the riskiness of real estate loans clearly contributed to the financial crisis.
Inflation and the Return of Rising Borrowing Costs in Europe
Inflation in PIIGS countries rose even faster than in core economies in Europe, and this may actually push business costs in PIIGS countries even higher.
Regression to the Mean: Economy Heading Toward Even Worse Recession
In its ill-fated attempt to get something for nothing the Fed is going to cause a currency crisis and a massive surge in global inflation.

Misunderstanding Inflation through the Years
In fact, of course, price inflation was the natural result of a substantial increase in the money supply.
The Next Big Move for Precious Metals and the Dollar, Part 2
Gold and silver are nearing a short term resistance level and will find selling pressure in the coming days. The dollar on the other hand broke out of its falling wedge and could have a strong rally for two or three days.

Can China’s Currency Go Global?
Concerns that the yuan could replace the dollar as an international reserve currency are premature, however. To become a global financial superpower, China would have to relinquish control over capital outflows and the exchange rate Between the yuan and other major currencies. Chinese officials are unlikely to undertake such liberalization anytime soon.

Tax News Jan. 31 - Feb. 4

What's Next for Tax Code? Geithner Discusses Overhaul with Wide Range of Groups
From D.C. to Davos, the Treasury secretary has chatted up chief executives and academics, bankers and labor groups, Republicans and Democrats, all in the name of fixing a tax code that most everyone agrees could use a major overhaul.

States Bleed Red Ink Despite Tax Revenue Jump
...the preliminary figures are only about 3 percent above revenue levels from 2009, suggesting state fiscal conditions remain fragile and years away from receiving a clean bill of economic health.

Taxes Boost State Coffers
Rising Revenue in 2010 Reflects Economic Gains but Won't Bridge Budget Gaps.
California Gov. Jerry Brown pushes tax hikes
Californians should decide whether they want to pay $12 billion more in taxes to help plug the state's massive budget shortfall, Gov. Jerry Brown said on Monday.

California Weighs Vote to Renew Tax Increase
California Gov. Jerry Brown on Monday will launch the opening salvo in his campaign to ask voters to help plug the state's $25.4 billion budget hole by extending temporary increases on income and sales taxes.
The $5 Million Tax Break
Congress has set sweet new terms for the gift tax, and families are tearing up their estate plans to take advantage. Here's what you need to know.

Economist Comments
Debt, Tax Burdens Holding Back Growth
Taxpayers know that their tax liability is simply postponed. Knowing that, taxpayers may act to increase their savings by that amount.

What's So Special About the 30-Year Mortgage?
There's nothing wrong with these loans, but there's no good policy reason why taxpayers should subsidize them.

Corporate taxes: Cut rate? Sure. But loopholes?
Corporate taxes should be simplified and rate lowered, Obama says. But many loopholes have a powerful constituency.

Oh 'holey' tax system
The federal income tax base is full of holes, like special exemptions, deductions, and credits. Filling them in would broaden the tax base and help the deficit.

HUD ‘Failing the Taxpayers’
That’s what the Department of Housing and Urban Development’s recently retired inspector general had to say in response to rampant malfeasance and mismanagement at public housing authorities uncovered by a joint investigation by ABC News and The Center for Public Integrity.

We need tax cuts, and we need them now
Government spending programs take time, but cutting taxes would help the economy right away.

The Future of Corporate Tax
The government cannot assume that a dog-walking business is the same as an aluminum smelter. That means that there will still be deductions for legitimate expenses--and wrangling over what constitutes a legitimate expense.

The Value Added Tax: Impacts on Florida
A VAT would lower overall economic growth, decreasing both federal and state tax revenue, and would compete for a tax base already tapped by existing state sales taxes. This would particularly harm states like Florida that rely disproportionately on state sales tax revenues.
Cutting Tax Preferences Is Key to Tax Reform and Deficit Reduction
America’s tax system is broken. It’s needlessly complex, economically harmful, and often unfair.

Health Care News Jan. 31 - Feb. 4

Virginia to seek expedited Supreme Court review of suit over health-care law
Virginia will ask that the U.S. Supreme Court immediately review the state's constitutional challenge to the federal health-care overhaul, a rare legal request to bypass appeals and ask for early intervention from the nation's highest court, Attorney General Ken T. Cuccinelli II said Thursday.
Dead or alive?
Another blow for Barack Obama’s health reforms is struck by the courts.
Alaska Gov: Enacting Health Care Law May Violate Oath
Parnell told reporters that he took an oath to support and defend the constitutions of the United States and Alaska. While the Republican governor concedes the issue is expected to be decided by the U.S. Supreme Court, he said he has a duty to uphold the law and wants Attorney General John J. Burns to advise on what that duty is after the Florida ruling.
Medical device makers want tax repealed
The CEOs of 16 medical device companies descended on Capitol Hill to make the case for their industry. Asking for the repeal of the medical device tax in the health care law and continued improvements to the FDA’s 510(k) regulatory process, they said they worried the booming industry would lose its competitive edge in the economy.

Senate Democrats block GOP bid to repeal health care law
The party-line vote, with all 47 Republicans in favor and 51 Democrats opposed, meant the procedural motion failed to get the necessary 60 votes to pass. Two Democrats didn't vote.
Despite Hurdles, GOP Still Intent on Repealing Health Care Law
Senate Republicans, unfazed by their inability to advance a repeal of the health care law Wednesday, say they plan to offer repeated amendments to bring it down and to strike specific provisions such as the individual mandate.

Not many House Republicans rejecting health benefits on principle
It's now official. Starting Tuesday, members of Congress may receive generous health care benefits -- subsidized by Uncle Sam.
Senate to Vote on Health-Law Repeal
GOP Seizes on Ruling Calling the Measure Unconstitutional; Democrats Downplay Judge's Decision.
Graham, Barrasso Introduce 'Third Front' With Opt-Out Bill
Sens. Lindsey Graham, R-S.C., and John Barrasso, R-Wyo., introduced legislation Tuesday that would allow states to opt out of certain provisions of the health care bill.

Federal judge tosses out sweeping health care reform act
A federal judge in Florida has tossed out the sweeping health care reform law championed by President Barack Obama, setting up what is likely to be a contentious Supreme Court challenge over the legislation in coming months.
White House vows to implement health care reform, despite judge’s ruling
The Justice Department says it will appeal US District Judge Roger Vinson’s decision, which declared the health care reform law unconstitutional and void in its entirety.
All Senate Republicans appear ready to repeal health care law
Every Republican in the Senate now appears ready to revoke President Obama's signature health care law. This comes as a federal judge, in Florida, strikes down key parts of the law as unconstitutional.

Health Care Costs in Question as Obama Administration Grants Waivers
The law now forces all plans to offer at least 750,000 dollars in annual benefits, but the administration has already granted waivers to McDonald's and other low wage firms.
Obama Defends Health Care, but Says He's Open to New Ideas
Speaking to allies, the president says he doesn't want to relitigate the last two years.
CHIP Enrollments are Up, but Barriers Remain
A policy brief from the journal Health Affairs and the Robert Wood Johnson Foundation reports that while children’s enrollment in Medicaid and the Children’s Health Insurance Program is up, states are still struggling to find ways of reducing barriers to enrollment.

Economist Comments
The States Can't Afford ObamaCare
Their budgets will be crushed by the Medicaid expansions that the feds are forcing on them.

House GOP Weighs Medicare Limits
The Political Gamble Facing Republicans Is Whether Voters Are Willing To Give Up Benefits to Trim the Federal Deficit.
The Nuts and Bolts of the ObamaCare Ruling
The Obama administration attempted to cloak an unprecedented and unsupportable exercise of federal power in the guise of a run-of-the-mill Commerce Clause regulation.
The Politics of Saving 'Granny'
Alice Rivlin and Paul Ryan have a bipartisan plan.
What Now, After Health Care Ruling?
After appeals to the circuit courts, these cases will go to the Supreme Court for consolidated resolution.
States of Resistance
Governors are fleeing ObamaCare after the Florida ruling.
Obamacare As Sin Tax?
The Congressional Research Service already commented on the tax vs. penalty issue in detail last October, finding that though "the power to tax and spend for the general welfare is one of the broadest powers in the Constitution," it doesn't authorize the government to institute any regulation it wants under the guise of taxation.

Why Small Business Wants Repeal of ObamaCare
The law is unpopular among small business owners because it is not making employee health insurance more affordable.
Death Panel for Obamacare Would Look Like This: Ann Woolner
With two federal judges now saying it’s unconstitutional to force Americans to buy health insurance, and two others saying it’s fine, you’ve got to wonder if there isn’t a better way.
Defending the flex spending accounts
Some of the largest of the 500 companies that administer FSAs, as well as drugmakers and business groups, are organizing and funding the drive to change the law, which they say may reduce the number of people using these accounts.

Health-Care Reform: Separating Fact From Fiction
According to Politico, the health and human services department says the law could save families around 23 hundred dollars in premiums in 2014.

WOLF: Tawdry details of Obamacare
White House quietly exempts pampered politicos.

Anthony Kennedy, a nation turns its angry eyes to you
Liberals basically have their fingers crossed that the Supreme Court will continue to rule that the commerce clause allows Congress to do more or less anything it wants since more or less anything anyone does or doesn't do has some effect or other on interstate commerce.

Good Riddance 1099 Mandate
Senate Democrats deserve credit for this much: in voting to repeal the so-called "1099 reporting mandate," they have acknowledged that this small part of Obamacare will be a disaster.
Obamacare In Serious Condition
Any way you look at the issue, ObamaCare is in serious condition with the American people, the federal judiciary and Congress.  If President Obama does not take the many legal and political challenges to his unconstitutional health care law seriously, he may force the federal Courts and the Congress to take extraordinary measures to erase ObamaCare from the Federal Code.

The Rule of Law, Obama-Style Part Deux
Here is a threat from our government to America’s Insurance Plans for discussing the impact of ObamaCare on their premiums:

Florida Ruling Requires Government to Stop Implementing Obamacare
As I continue digesting Judge Vinson’s ruling, I notice two key things beyond the facts that the “individual mandate is unconstitutional”:
Ways and Means Hearing: Obamacare Is Bad for Business
Small businesses currently face an uphill battle to offer insurance to their employees, and the climb is becoming progressively steeper as insurance costs continue to rise. Obamacare will make these obstacles even more daunting.
ObamaCare Goes Down
How badly does today’s ruling hurt the Obama administration’s health reform efforts?
Another Victory on the Road to Repeal
If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be ‘difficult to perceive any limitation on federal power’ and we would have a Constitution in name only.

Obamacare Does No Favors for the Nation’s Fiscal Outlook
The United States faces severe economic consequences if skyrocketing federal spending on health care is not addressed. Rather than acknowledge this, Obamacare left in place an unsustainable policy that adds billions to the deficit each year.


General Economic News Jan. 31 - Feb. 4

Cubans warily become entrepreneurs
'Cuba is falling apart ... We could help rebuild it,' struggling carpenter says
Consumers aren't snowed in
So much for bad weather keeping consumers out of the shopping malls.
Japan's economy in deep trouble? Look again.
Standard & Poor’s cut its rating on Japanese sovereign debt one notch last week, strengthening the naysayers. But with falling unemployment, large reserves, and rising corporate profits, 'Japan is punching well above its weight,' says one analyst.
Suspended animation
Falling prices and rising foreclosures cause a policy quagmire
Protecting the middle class
China’s leaders nod to the left, but look anxiously to the right
Democrats eager to talk of government shutdown
Senate Democratic leaders held a news conference Thursday to warn about the dangers of a Republican-forced government shutdown.
Private Equity Boosting the Economy
The economy isn't yet out of the doldrums, but there is some good news to report for job seekers right now.
Angela in Wunderland
What Germany’s got right, and what it hasn’t
A machine running smoothly
German companies great and small are making the most of globalisation. Their success owes more to judgment than to luck
Protests and the pump
The Egypt effect may be more pronounced for food than oil

World food prices hit record high: UN agency
World food prices reached their highest level ever recorded in January and are set to keep rising for months, the UN food agency said on Thursday, warning that the hardest-hit countries could face turmoil.
New Zealand Aims to Avoid Downgrade
New Zealand's finance minister on Thursday stressed a need to rein in borrowing, keep interest rates on hold and maintain a competitive exchange rate as the government seeks to boost exports after ratings agencies have criticized the Pacific nation for its deficit.
Factory Orders Rose Unexpectedly in December
New orders received by U.S. factories edged up in December and shipments of finished products were stronger, signaling a continuing pickup in activity for the nation's manufacturing sector.
Congress to rewrite rules on emissions
GOP seeks to strip EPA’s power.

50% Now Oppose President’s New Spending Proposals
Rasmussen Reports asked voters the same three questions about the president’s economic proposals on the two nights prior to the speech and then again on Tuesday and Wednesday nights.
S&P Cuts Ireland Credit Grade over Bank Debt Fears
Ratings agency Standard & Poor's cut its credit grade for Ireland on Wednesday and warned it could fall further because of doubts about the true scale of defaulting loans yet to surface in the country's largely state-owned banks.
Help Fund a Project, and Get a Green Card
Once-Obscure U.S. Program Provides Alternative Financing for Developers, but New Flood of Interest Raises Concerns
Cotton Rises to Record as Adverse Weather Cuts World Supply
Cotton futures surged to a record on mounting supply concerns after flooding in Pakistan and Australia slashed crops.
Sugar Rises to 30-Year High as Storm Heads for Australian Crop
Sugar rose to a 30-year high in New York and reached the highest price since 1989 in London on speculation Cyclone Yasi will damage the crop in Australia, the world’s third-largest exporter.

Egypt Turmoil Threatens U.S. Economy
Rising prices for food and fuel helped drive the uprisings racking the Middle East, now those uprisings are pushing prices higher still and threatening America’s economic recovery.
Construction Spending Lowest in 10-1/2 Years
U.S. construction spending unexpectedly fell in December to touch its lowest level in nearly 10-1/2 years as investment in both public and private projects declined, suggesting the sector would continue to struggle this year as federal stimulus spending tapers off.
Manufacturing revs up in January
The manufacturing sector started off 2011 with a bang, growing at its fastest pace in more than six years, a purchasing managers' group said Tuesday.
Whose house is being saved by Obama?
So who are these homeowners?
Cost Inflation Puts a Wrench Into the Works
Good news in the manufacturing sector has come with a sting in its tail.
Lawmakers not likely to evict Fannie, Freddie
Many members of Congress say they want to end the shotgun marriage between the federal government and mortgage giants Fannie Mae and Freddie Mac, which was arranged in the heat of the 2008 financial crisis. But breaking up could be hard to do.

TSA shuts door on private airport screening program
TSA chief John Pistole said Friday he has decided not to expand the program beyond the current 16 airports, saying he does not see any advantage to it.
Tensions rise on surging food prices
Food prices have been rising worldwide, as the cost of raw materials and agricultural products surge, contributing to political unrest around the globe.
Driven by the Recession, a Baby Bust Hits the U.S.
This is the first piece in a series that will examine the impact of a potential baby dearth in America. The recession is pushing the birth rate down, women are waiting longer to have children and the cost of raising a child is skyrocketing. Fewer babies means fewer young people to support an aging population , threatening already-strained social programs. Has America’s baby bubble burst?
Economic Reports for the Week of Jan. 31
Reports will include I.S.M. manufacturing index for January and construction spending for December (Tuesday); ADP employment for December (Wednesday); weekly jobless claims; I.S.M. service index for January; fourth-quarter productivity; and factory orders for December (Thursday); unemployment for January (Friday).
U.S. Corporate Profits Surge
With about 50% of companies already reporting, fourth-quarter profits for the biggest U.S. corporations have been exceptionally strong and 2010 is poised to deliver the third-best full-year gain since 1998—with sharp advances in the telecommunications and energy sectors and a rebound in financial services.
Americans earn and spend more, save less
As incomes slowly creep back up, Americans are spending more freely and saving less.
Fannie and Freddie's biggest deadbeats
Leaning on the megabanks can pay off, if you've got a little muscle and a lot of patience.
Despite China's might, US factories maintain edge
U.S. factories are closing. American manufacturing jobs are reappearing overseas. China's industrial might is growing each year.

Economist Comments
The flip side of the pension crisis
Those pension recipients we eye with scorn as our state and local budgets are crushed under the burden of their generous benefits? They're being crippled too. Sort of.
Our standard of living Is it better than ever?
Absolutely, but tough times have us thinking otherwise.
Crony Capitalism Or Raw Corruption?
It's good to have friends in high places. Last month, the White House issued tough new rules on CO2 emissions. This month, its biggest corporate supporter wins an exemption. Something smells here.

Yes, 80% of our electricity can be 'clean' by 2035
While Obama's 80% by 2035 is admirable and even reachable, it doesn't address the bigger need: to find a substitute for petroleum in transportation that works at massive scale. Ostensibly, we can get off coal over the next 30 years, but oil is a whole other, probably more significant, problem to address as a nation.
How a second euro could save Europe
The European sovereign debt crisis may be off the front pages while all eyes are on Egypt, but that doesn't mean its problems are any closer to being solved.
School choice is remedy for destitute states
Private schools offer better education for a lot less money.
How the SEC Stifles Investment—and Speech
Facebook, Playboy and regulatory uncertainty.

IMF: Global rebound 'not the recovery we wanted'
Growing economic imbalances on a global scale and greater income inequality could fuel the next crisis, the head of the International Monetary Fund warned Tuesday.
Peter Foster: IMF chief twists Adam Smith’s view of inequality
The IMF’s Dominique Strauss-Kahn to the contrary, Adam Smith believed ­admiration of the rich was a market driver
From This Crisis Good May Come
The Greece/Ireland-like crisis battering local U.S. governments ranging from Illinois to California to New York, as well as who knows how many counties and municipalities, offers the opportunity for profound reforms.
Bond `Sensation' Should Make Investors Nervous: Matthew Lynn
The phrase “overnight sensation” isn’t usually applicable to the bond market. But if financiers had charts the way the music industry does, the debut bonds issued by the European Financial Stability Facility last week would be in the top slot.
Obama's Antique Vision of Technological Progress
Barack Obama, like all American politicians, likes to portray himself as future-oriented and open to technological progress. Yet the vision he set out in his State of the Union address is oddly antique and disturbingly static.

Government against the People
Want more evidence that many government officials could not care less about protecting our person, property and liberty — which the American Founding Fathers saw as the basic purpose of government? Reports released this past week provided a bumper crop of evidence.
Spilled Milk
Despite the old saying, “Don’t cry over spilled milk,” the Environmental Protection Agency is doing just that.
Banking Insight Comes From Pitcher’s Sore Arm: Amity Shlaes
Can this economy go the distance? The U.S. expanded by 3.2 percent in the last quarter. Americans long for an economy that grows at 4 percent, quarter after quarter, strong enough to shrug off revolution in Egypt, central bank machinations in China and Steve Jobs’s health.
Don't Just Cut Government, Reinvent It
Across-the-board reductions will not improve efficiency.
4 reasons why Ireland's roar will return
Ireland's stringent austerity measures will almost certainly slow its growth in the coming years. But the country is better positioned than most troubled European nations to grow its way out of the crisis.

Washington's Financial Disaster
There is still hope. Few people remember that the early investigations of the 1929 crash also failed due to political battles and ambiguous missions. Ferdinand Pecora was Congress’s fourth chief counsel, not its first, and he did not complete his work until five years after the crisis. Congress should try again.
Egypt isn't facing a financial crisis, short-term
Country flush with reserve cash, but extended violence could change that quickly
An Unserious Speech Misses the Mark
The audience found it tiresome. Here's why it was irksome as well.
Successful Innovation Requires Failure Too
No one knows which of the President's technology picks will be winners and which will be losers. The important question, however, is what happens after we find out?
The Business of Restoring Trust
Corporate execs close to politics put their companies' reputations at risk.
Crisis Report Pins Blame on U.S. for Global Bust
Housing also crashed in Europe, Down Under. How's that U.S. institutions' fault?
Oliver Twist at the SEC
The agency's staff always wants 'more'—this time to regulate investment advisers.
Follow the Weak Mortgages
The Financial Crisis Inquiry Commission was impaneled to describe to Congress, the president and the American people what caused the financial crisis. What it produced was a story about the financial crisis, but not what caused the financial crisis.
Innovation Is Doing Little for Incomes
My grandmother, who was born in 1905, spoke often about the immense changes she had seen, including the widespread adoption of electricity, the automobile, flush toilets, antibiotics and convenient household appliances. Since my birth in 1962, it seems to me, there have not been comparable improvements.
High-Speed Rail, Budget Buster
Virtually everywhere it has been constructed, taxpayers have lost out.
Evil-Man Economics
Chairman Phil Angelides and the Democratic majority on the Financial Crisis Inquiry Commission have released their report, a textbook-worthy example of the “Evil Man School of Economics.” Something went wrong, and a villain must be identified. This is tediously familiar territory for those who have followed the political establishment’s years-long attempt to evade responsibility for the crisis of which it was a cause.
Money for Math Dummies Won’t Guarantee Einsteins: Caroline Baum
Better education for our kids is a goal, not a policy.

Food stamp usage up 14 percent from last year
In November, an additional 394,957 new recipients were added to the food stamps program.
Trains need a new conductor: the market
Railways usage is up, but fares and schedules don't meet the demand of passengers.
TSA: We’re the Best
Gee, I bet McDonalds would like to say there’s no “clear or substantial advantage” to allow Wendy’s to exist.  Fortunately, McDonald’s doesn’t have that power.  Unfortunately, the TSA bureaucrats do.
Household size and stagnant median income
The underlying question is whether figures for the median household are underrating the true growth in average living standards.  A few points are in order.
Ten Arguments Against a Government Guarantee for Housing Finance
Why there should not be a government role—explicit or implicit—in guaranteeing housing finance
Morning Bell: The Reagan Recovery vs The Obama Recovery
This Sunday is President Ronald Reagan’s 100th birthday. It’s hard to comprehend the debt of gratitude our nation owes the 40th President of these United States. As Heritage Foundation Distinguished Fellow in Conservative Thought Lee Edwards details, Reagan embodied many of the classical virtues that the best political leaders possess: courage, prudence, justice, and wisdom. And he used each of these virtues to create an environment where the U.S. economy could strongly recover from our last great recession. The current occupant of the White House ought to take some better notes.

Daily Color: D-List Data
Not all data are created equal.
Some 43 Million Use Food Stamps
Nearly a year and a half into the economic recovery, some 43.6 million Americans continued to rely on food stamps in November.
Comparing Reaganomics and Obamanomics
Ronald Reagan would have been 100 years old on February 6, so let's celebrate his life by comparing the success of his pro-market policies with the failure of Barack Obama's policies
A Look in the GDP Crystal Ball
How much will real GDP for the last quarter of 2010 be after the U.S. Bureau of Economic Analysis finishes beating the still incoming raw data for the quarter into submission at the end of March 2011?
Real Adjustment Costs
I am disappointed by some of the reactions to my macro play. People are not being deliberately obtuse, but they are being obtuse. That is what happens when you are committed to one paradigm and someone tries to suggest something different.
Can Exports Save the Economy?
President Obama and several policy wonks think they have come up with a solution to America's jobs crisis: Exports.
What's wrong with Greece
We have read plenty about Greece's dismal public finances and risible public book-keeping. But if the country is to have any chance of recovering in the long-term it needs to rethink its approach to entrepreneurialism, which is one of the most hostile in the world.
Social Security’s Bleak Future Has Arrived
For the last couple of decades, Social Security analysts, public trustees, and even both Republican and Democratic Presidents have warned that unless the program is fixed, it faces perpetual cash-flow deficits. And now, the Congressional Budget Office (CBO) says that those perpetual deficits have arrived.

Private Construction Spending decreases in December
Catching up ... the Census Bureau reported this morning that overall construction spending decreased in December compared to November.
FT’s Clive Crook on ‘Competitiveness’
A little belatedly, I want to refer everyone to Clive Crook’s column in yesterday’s Financial Times, “Economic growth is not a race to the moon.” As a critique of President Obama’s SOTU speech, it is a model of brevity and clarity.
Clarification on Consumer Surplus
Commenters on my previous post on consumer surplus (CS) raised some questions that I want to respond to.
Robert Samuelson misunderstands
Rescuing creditors 100 cents on the dollar creates the most moral hazard. Wiping out equity holders gives the illusion of punishing risk-takers. It’s an illusion. The creditors are the key.
The Tiger Mother versus Cost-Benefit Analysis
Even amazingly talented classical musicians have low earnings, high unemployment, and - if they tour - stressful, lonely personal lives.  Unless you love music from the bottom of your heart, a career in music is folly.  And since classical music is a declining industry, job prospects are only going to get worse.
The new housing boom, brought to you by Fannie Mae
Apartments are going up, and Fannie Mae is providing funding.
World-Wide Factory Activity, by Country
Global manufacturing started 2011 on a strong note with most countries in expansionary territory and strong gains in the U.S., U.K. and euro zone.
Construction spending: residential at four-month low
The US Census Bureau's December report shows small drops in residential and non-residential construction spending since November.
Personal Bankruptcies Declined in January
The number of personal bankruptcy filings dropped in January to its lowest level since in two years, according to a report Tuesday.
Recovery versus "recovery"
News on the employment front improved toward the end of last year, but increases were still lacklustre relative to the stronger recovery in output. This week, we'll receive the first set of jobs numbers for January, and all will be watching closely to see if the trend in the above chart will continue, and output will rise and rise and rise, leaving the unemployed behind.

Trade is Mutually Advantageous – and Its Advantages, for All Parties, are Measured in Imports
Dan Ikenson and Scott Lincicome urge that the case for free trade be made on its strongest grounds – and not on grounds that implicitly concede the ‘us-vs.-them’ assumption of protectionists.  Here are key paragraphs:
The Economics of Kitchens
I'm not disputing that the improvements from 1900 to 1953 were large, probably even larger than those from 1953 to now.  I'm just saying that to know the magnitude of the change, we should specify what we mean.  Are we referring to the invention of labor-saving devices, or their diffusion? Major appliances or smaller gadgets? Do ingredients count? How about broader developments such as air conditioning? Shouldn't it count for something that our coffee no longer tastes disgusting?
Taking Consumer Surplus Seriously
Consumer surplus is the difference between the maximum amount the consumer is willing to pay and the amount he actually pays. As such, it's simply a measure of the consumer's gain from trade. That's what it is.
Fannie Mae reports slower decline of seriously delinquent loans
December's monthly report shows total serious single family delinquency is still falling, but at a slower rate.
Is Turkey bracing for a crisis?
Turkey has an emerging market, but it also has a history of financial crises and turbulence.
Hu's counting
DURING his state visit to America last week, President Hu Jintao of China offered some familiar banalities and worthy pieties, as this week’s Banyan remarks. But he also made a couple of hard, quantitative claims.
Hu's counting II
It's fine to carry out calculations on the back of the envelope, but be careful what lies on the other side of the ledger.

The TSA Blocks Private Screeners
CNN reports that the Transportation Security Administration has decided it will no longer approve applications from airports seeking to replace TSA screeners with private contractors. This is an abrupt reversal from the agency’s alleged “neutral” stance it announced just several weeks ago.
A Proposal in the Public Interest
One of the marks of a good economist is to recognize that money is not at all all that matters.  Incentives come in lots of different forms – often in monetary forms, but often (perhaps even more often) in non-monetary forms.
Credit Card Rates At “Record High”
Wow, who could have possibly predicted that the Credit CARD Act’s rules that limit non-interest fees and the ability to raise interest rates when a borrower’s risk changes would result in “record high” interest rates?
Schedule for Week of January 30th
The key report for this week will be the January employment report to be released on Friday, Feb 4th.
Economists Urge U.S. to Rethink Capital-Control Restrictions
In a letter delivered today to Treasury Secretary Timothy Geithner, Secretary of State Hilary Clinton and U.S. Trade Representative Ron Kirk, more than 250 economists urged the Obama administration to reform U.S. trade rules that restrict the use of capital controls. The letter argues that there is a growing consensus among economists that capital controls, while no panacea, are legitimate policy tools for preventing and mitigating financial crises. The full text of the letter follows.
Post Mortems on the Financial Crisis
Read more about the dissents. It is worth your time.
Economists React: ‘The U.S. Economy Is Back’
Economists and others weigh in on the acceleration in GDP growth.
The State Of the Union: An Excessive Amount of State
In the near week since President Obama’s State of the Union speech, commentators from all sides of the political spectrum have weighed in on the good, bad and innocuous of Obama’s vision for the country’s future. What’s perhaps not been commented on enough is how unfortunate it is that Obama’s policies – or those of any President for that matter – concern us so much such that we’re compelled to watch, comment, and worry about the implications of State of the Union speeches at all.
Number of the Week: Banks Should Hold More Capital
52%: Optimal bank capital-to-assets ratio, according to a new study.
That Old Competitiveness
President Barack Obama’s State of the Union address framed what he called a competitiveness agenda. GE CEO Jeffrey Immelt was tapped by the president to lead a successor to the President’s Economic Recovery Advisory Board called the Council on Jobs and Competitiveness. The competitiveness meme isn’t new. The following article by our colleague Bob Davis was originally published in the Journal in July 1992. We thought Real Time Economics readers might find it timely.
Egypt and Energy Policy
Energy policy will be an early test of whether the new House majority is serious about reducing the role of government in our lives.
GDP report shows economy is expanding
The first estimate shows a 3.2 percent increase from the third to fourth quarter.
Q4 2010: Homeownership Rate Falls to 1998 Levels
The Census Bureau reported the homeownership and vacancy rates for Q4 2010 this morning.

ISM Non-Manufacturing Rises Again In January
The ISM non-manufacturing index came in at 59.4 for the month of January, which continues to signal strong growth in the services sector. Prices paid continue to trend upwards while new orders reached a new high.
Trade Adjustment Assistance: Let the Ineffective and Costly Program Expire
Under the Trade Adjustment Assistance (TAA) program, workers who lost their jobs due to foreign trade are eligible for job training, relocation allowances, and income maintenance while they attempt to shift into new occupations. TAA provides overly generous benefits for only a small fraction of laid-off workers. However, is there any evidence that this assistance and training improves earnings based on newly acquired job skills? Program evaluations of TAA say no.

Ten (Mostly) Hayekian Insights for Trying Economic Times
The economist Friedrich Hayek attempted in his writings to spotlight the interlocking set of ideas­—constructivist rationalism, scientism, socialism, “the engineering mentality”—that was leading the West down what he famously called the road to serfdom and to propose in its place a return to a revitalized form of classical liberalism. In this essay, Professor Bruce Caldwell draws upon the writings of Hayek, other Austrian economists, and public choice theorists to distill 10 fundamental insights that not only apply to the current crisis, but also can help us to think more clearly about the nature and limits of economics more generally. His conclusion: We usually do not have the necessary knowledge to intervene effectively in the economy, and the political process is such that, even if we did, we still likely would get bad policy, coupled with an ever-growing government sector. Hence the preference for smaller government among Austrian economists and public choice theorists.
ISM: Still a Growth Story—Prices Signal Input Cost Pressures
January’s ISM reading of 60.8 signals continued growth from production, orders and employment. The ISM has served us well as a signal of the turnaround and now of sustained expansion. Prices paid are a concern.

Economics Group
Weekly Economic & Financial Commentary
Beyond Exports: A Better Case for Free Trade
After four years of stasis on the trade front, the new environment is a welcome change. Removing barriers to trade — in both directions — is essential to sustained economic recovery and long-term growth.