Monday, July 18, 2011

General Economics

Market Watch | Bank stress tests weren’t that testing
After a weekend of number-crunching, analysts began to offer their own assessments of Europe’s bank stress tests Monday, with many identifying a much bigger capital shortfall than the official results.
CNN: Money | Boosting oil production with bacteria
After a well is drilled its natural pressure gradually subsides, eventually making it too costly to pump out the remaining crude. Although a well may seem dry, up to two-thirds of its oil remains underground.
CNBC | Global Consumer Confidence at Lowest Since Late 2009
Global consumer confidence fell in the second quarter to its lowest level in a year and a half as an uncertain economic outlook, a deepening euro zone debt crisis and rising inflation made people more cautious, a survey showed on Sunday.
Fox Business | U.S. Downgrade Would Ripple Into Every Home
After all, who can really comprehend the numbers involved? A national debt that stands at $14.5 trillion. A $14.3 trillion debt limit that apparently needs to be increased. A projected $1.4 trillion federal deficit for 2011.
But the ripple effect from such a downgrade would be widespread and potentially severe, impacting everything from local municipalities and the neighborhood bank to home mortgages and student loans.
National Journal | World Bank's Zoellick Criticizes U.S. over Trade Policy
World Bank President Robert Zoellick on Monday criticized the United States, among a number of major trading nations, for “dumbing down” on Doha trade talks.
National Journal | House Passes $31 Billion Energy-Water Bill
The legislation would provide $30.6 billion -- $5.9 billion below President Obama’s request, and $1 billion below current levels -- to fund the Energy Department, including the National Nuclear Security Administration and the Army Corps of Engineers, the Bureau of Reclamation, the Nuclear Regulatory Commission, and regional water and power authorities. The cuts would bring the bill's total cost close to fiscal 2006 levels.
USA Today | S&P warns it may downgrade Fannie, Freddie credit
Standard & Poor's warned mortgage giants Fannie Mae and Freddie Mac on Friday that they may lose their top credit ratings if lawmakers don't raise the U.S. government's borrowing limit in time to avoid a default.

Econ Comments                                                                                                             
Washington Post | What we can learn from Latvia’s economic recovery
What distinguished Latvia’s experience from our own is that, once people recognized the gravity of the crisis, they came together to support the necessary, if harsh, policies to stop the free-fall and restore stability.
Market Watch | Business economists see softer U.S. growth
Business economists have scaled back projections for U.S. growth this year, citing slower company sales and global uncertainty, a quarterly survey found.
Barron's | A Diminished Forecast for GDP Growth
Economists expect real GDP growth to reaccelerate in coming quarters, but have cut their growth forecast to 3.2% from a prior 3.5%.

Cato @ Liberty | Two Pictures that Perfectly Capture the Rise and Fall of the Welfare State
To be more specific, if more than 50 percent of the population is dependent on government, it becomes difficult for taxpayers to form a majority coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.
Café Hayek | Fletcher’s Zero-Sum Presumptions Shove Him Into Unmistakable Error
There is no reason to conclude that the net worth of Americans is reduced by any amount. It is not a “fact” that an increase in FDI in the U.S. increases the net wealth of the foreign investor by some $$ amount and decreases that of some American by the same $$ amount. Any number of examples might suffice to show why Fletcher is utterly off-base to make such an assertion.
NRO: The Corner | From Asset-Backed-Security Bubble to Sovereign-Debt Bubble
The financial crisis had a lot to do with triple-A ratings being slapped on to subprime securities which didn’t warrant them, we know that. The report says between 1990 and 2006 ABS accounted for 64 per cent of the total growth in the amount of AAA-rated fixed income, compared with 27 per cent attributable to the growth in public debt, 2 per cent to corporate and 8 per cent to other products.
Calculated Risk | Schedule for Week of July 17th
Three key housing reports will be released this week: July homebuilder confidence on Monday, June housing starts on Tuesday, and June existing home sales on Wednesday.
Source | A Decline In U.S. Startups Through the Eyes of Bruce Bartlett
To make simple what already is, the nature of startup companies means they account for a great deal of innovation that improves our lives, all the while creating jobs and great wealth. Sadly, company formation today is at the lowest point since the BLS began measuring it.
Source | Unofficial Problem Bank list declines to 995 Institutions
List with 11 removals and two additions. The net result of the changes leave the list at 995 institutions with assets of $416.2 billion, down from 1,004 institutions and assets of $418.8 billion last week.
Econlog | Narrating the Financial Crisis
The original narrative of the financial crisis was that the run on the shadow banking system caused risk spreads to rise tremendously. Remember all the talk about using the TED spread (Treasury vs. Eurodollar) as the "thermometer" showing the "fever" from which the financial system was suffering?
Think Markets | Resource Allocation Distortions in the Great Recession: Empirical Evidence
The recent annual report of the Bank for International Settlements (BIS) has focused attention on the sectoral imbalances in the previous boom that resulted in the Great Recession. This is a refreshing change from the excessively aggregative analyses of the Keynesian-stimulus crowd.

RCM: Wells Fargo | Weekly Economic & Financial Commentary
Retail sales came in slightly higher than expected in June as higher sales at automobile dealers offset reduced spending at gasoline stations. With household budgets stretched thin, discretionary spending in most major categories remained weak.


WSJ | Fall in Property-Tax Revenue Squeezes Cities
Local governments have endured the first back-to-back declines in quarterly property-tax revenue on record, Census Bureau data show, in part because some have been unable or unwilling to raise tax rates fast enough to offset drops in home prices.

Econ Comments                                                                                                             
WSJ | Get Ready for a 70% Marginal Tax Rate
Some argue the U.S. economy can bear higher pre-Reagan tax rates. But those rates applied to a much smaller fraction of taxpayers than what we're headed for without spending cuts.
Washington Times | WOODALL: FairTax means jobs
Eliminating hidden taxes would make America competitive again.
RCM | The Astronomical Cost of Not Taxing Everything
You say too many members of Congress made a No New Taxes pledge? Recent polls show that three out of five Constitutional scholars agree that the Fourteenth Amendment has always empowered the president to set tax rates at 100% on everything, as long as he deems it necessary to avoid default. Any new tax bill that sets rates lower than 100% would then technically qualify as a tax cut. Boom, pledge problem solved.
Washington Times | EDITORIAL: Read Obama’s lips: More new taxes
The 1990 budget deal shows compromising on taxes leads to political disaster.

Health Care

Politico | A grand health bargain that cuts debt
Arguing about the scale of Medicare cuts or size of tax increases on unrelated industries pushes both parties into their respective ideological trenches. They should focus instead on a “grand bargain” for health care finance, which could allow both sides to declare victory well before the debt bomb explodes.
Fox News | Administration Slow to Set Up New Health Care Law's Payment Advisory Board
An independent panel authorized by President Barack Obama's health care law to control excessive Medicare cost increases is drawing heavy fire from Republicans. Nearly every health industry lobbying group is pushing for its repeal, as are some consumer advocates. GOP lawmakers call it a rationing panel, and at least one has suggested seniors will die from its decisions.
National Journal | House Passes $31 Billion Energy-Water Bill
The final 219-196 vote fell largely along party lines. The bill is unlikely to become law in its entirety, but parts of it could make their way into an omnibus spending bill. Once the government agrees on a deal to raise the debt ceiling, Congress must get to work on passing a budget for fiscal 2012 by the end of September.

Mercatus: Neighborhood Effects | New Study of Medicaid, Focusing on Kentucky
For one thing, I learned that the latest estimates suggest that Medicaid crowds-out private insurance at the rate of 50 to 60 percent (i.e., 5 to 6 out of every 10 new entrants to the program would have obtained private insurance). The latest estimate, which looks at crowd-out in long-term care insurance, was obtained by Jeffrey Brown and Amy Finkelstein.


WSJ | Consumer Prices Drop as Gasoline Costs Less
Type the sentence(s) summarizing the link here.U.S. inflation fell in June as gasoline prices retreated from early summer highs, but rising costs for a host of items including clothes and rent are keeping pressure on households and could complicate any efforts by policy makers to boost the economy.

Daily Capitalist | Inflationistas vs. Deflationistas: What Does CPI and PPI Tell Us?
Inflationistas are probably confounded by Friday’s Consumer Price Index report that showed a decline of 0.2% in June. The report pins the decline, the first since June 2010, on falling energy costs. As a large component of CPI it:

AEI | The Limits of Monetary and Fiscal Policy
Monetary policy has reached its limits. The significant risk of deflation that prompted last year's second round of quantitative easing has passed, and with inflation rising, monetary stimulus is no longer an option.


WSJ | Wireless Jobs Vanish
The U.S. wireless industry is booming as more consumers and businesses snap up smartphones, tablet computers and billions of wireless applications. But for the industry's workers, the story is less rosy.
WSJ | Dearth of Demand Seen Behind Weak Hiring
The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.

Econ Comments                                                                                                             
Bloomberg | Why Employers Are Slow to Fill Jobs: Business Class
Yet skill mismatch is by no means the whole story. Recent research points to a shift in recruiting behaviour by employers as another important factor.

Political Calculations | How Much Are Geezers Displacing Teens from the U.S. Workforce?
So in terms of geezers competing directly with teens for minimum wage earning jobs, we find that there is some of that going on, however young adults are more likely to have displaced teens from the U.S. federal minimum wage earning workforce that are older workers, but it's nearly 50-50.

NBER | Immigration, Jobs and Employment Protection: Evidence from Europe
In this paper we analyze the effect of immigrants on native jobs in fourteen Western European countries. We test whether the inflow of immigrants in the period 1996-2007 decreased employment rates and/or if it altered the occupational distribution of natives with similar education and age.


MarketWatch | Obama calls for compromise in debt crisis
President Barack Obama called Saturday on both parties in Congress to compromise to pass legislation needed by Aug. 2 to prevent the U.S. government from defaulting on its loan obligations.
Politico | Minnesota shutdown drags on
Now in its 18th day, Minnesota’s state government shutdown continues as Democratic Gov. Mark Dayton has yet to formalize his announced deal with GOP legislative and a special session planned for Monday is likely to be delayed.
CNN Money | Moody's warns again on U.S. debt
Credit rating agency Moody's dinged a key backup plan to raise the debt ceiling Monday, and said the United States would be better off if the ceiling was eliminated entirely.
Fox News | Farmers worry about effect of $30B in cuts
Farm groups are rushing to save government subsidies they've long received.
WSJ | Senate Debt Plan Promises Months of Budget Wrangling
With few signs of movement over the weekend on negotiations to raise the federal borrowing limit, Senate leaders are planning this week to unveil a back-up plan that would force more budget wrangling before the end of the year.
WSJ | Federal Land Up for Budget Grabs
White House and congressional negotiators, hunting for savings in the federal budget, recently came upon a juicy target: a 387-acre tract of land in the heart of ritzy West Los Angeles. It could be worth billions.

Econ Comments                                                                                                             
Daily Caller | Two trillion isn’t enough
The president doesn’t want to have to rehash this debate before the November 2012 election. That means that the debt ceiling will have to be increased by $2 trillion in order to create enough space through the end of next year.
Bloomberg | Republicans’ Budget Balance Plan Lacks Details
A balanced-budget amendment would require cuts even deeper than those in the budget proposed by Representative Paul Ryan of Wisconsin, which was approved by the Republican-controlled House in April. Ryan’s plan doesn’t balance the budget until 2040 and would leave a $338 billion deficit in 10 years.
Barron's | The Whole World's Watching
The battle over the debt ceiling, warns Michel Darda, isn't the only thing for investors to worry about. Stephanie Pomboy discusses how the Treasury can entice buyers of U.S. debt.

Heritage Foundation | President Obama Is Against A Balanced Budget
Obama said that a BBA is not needed for Congress and the President to balance the budget. The facts contradict the President’s statement and tell a different story.
Cato@Liberty | Debt-Limit Deal: $500 Billion Cut Option
Charles Krauthammer is absolutely right that Republicans must call President Obama’s bluff on the debt-limit vote. I suggested that the House GOP pass $2 trillion in cuts tied to a $2 trillion debt increase, thus handing the matter over to the Senate and the president and refusing to budge.
FT: The A-List | US faces economic suicide if spending isn’t restrained
The row in Washington over the US federal debt ceiling raises the question of whether we are observing political theatre or a serious struggle with a large and complicated problem. The answer is a bit of both.
Mercatus Center: Neighborhood Effects | Do Politicians Regulate When They Can’t Spend?
Relying on data from 48 states covering the years 1970 through 2009, we look at the relationship between fiscal rules, fiscal outcomes, and regulatory outcomes.
Café Hayek | Smoke and mirrors
The focus on the size of the spending cuts is a red herring. What matters is spending.