Wednesday, October 5, 2011

JEC Hearing "The Economic Situation" October 4, 2011




"Ominous clouds are gathering. Economic growth is nearly stagnant. We have 6.8 million fewer payroll jobs today than when the recession began in December 2007, according to the Bureau of Labor Statistics. At the comparable point during the Reagan recovery, there were 5.4 million more payroll jobs.

According to economists Carmen Reinhart and Kenneth Rogoff, recoveries from financial crises are weak and vulnerable to external shocks that may trigger double-dip recessions. Republican members of Congress recognize this. We are critical of the President’s expensive economic policies because not only they have failed to spur job growth and business confidence, but also, as we feared, they have left America susceptible to a double-dip recession.

Today as we meet, America faces a growing risk from the European debt crisis.

The United States and the European Union are major trading partners. I am very concerned about the effects of contagion from the euro crisis on American financial institutions and markets, as well as the broader economy. I am anxious to hear your assessment of the euro crisis and any steps that the Federal Reserve may take to quarantine any contagion...."


Opening Statement
Rep. Kevin Brady
Vice Chairman
Joint Economic Committee

See Vice Chairman Brady's full opening statement HERE

Also see Federal Reserve Chairman Ben Bernanke's Testimony HERE

General Economics

News                                                                                                                             
WSJ | Euro-Zone Edges Toward Recession
The euro-zone economy is edging closer to a renewed bout of recession, with manufacturers and service providers reporting a decline in activity as consumers cut back spending.
Bloomberg | European Services, Manufacturing Contract
Euro-area services and manufacturing output contracted more than estimated in September, adding to signs of a deepening slowdown as governments struggle to contain the region’s debt crisis.
WSJ | Bernanke Issues Warning, Urges Action on Economy
Federal Reserve Chairman Ben Bernanke warned the U.S. economic recovery was "close to faltering," and said Congress and the White House had a "shared responsibility" with the central bank to respond.
NY Times | As Economies Slow, Price of Gas Falls
The sharp slump in oil prices over the last few months is finally beginning to bring relief at the gasoline pump, with the price of a gallon of regular gasoline dropping nearly a penny a day over the last four weeks.
Market Watch | Mortgage rates plunge beyond expectations
Economists and bankers who follow mortgage rates religiously think that rates don’t have much farther to drop from record lows. They expect that rates can only go up.
Washington Times | Banking official slams swipe fee cap, regulatory ‘overkill’
What the Congress did by price-fixing was make a decision that was not theirs to make.

Econ Comments                                                                                                             
Washington Times | GHEI: Reliving the Great Depression
Congress considers reviving disastrous anti-trade policies.
TribLive | Don't bank on infrastructure bank
President Obama wants Uncle Sam to (force taxpayers to) "invest" $10 billion in an infrastructure bank. These funds would be used to "leverage" spending by state and local governments on the likes of roads and bridges into larger and better projects.
Washington Times | GRAY: Regulatory overreach hurting recovery
In June 2010, the Obama administration announced the start of “Recovery Summer.” Sixteen months later, not even the most shameless Democratic partisans can pretend that America is not mired in economic malaise.

Blogs                                                                                                                             
Marginal Revolution | The You Have Two Cows Challenge
Socialism: You have two cows. The government takes one and gives it to your neighbor. Communism: You have two cows. You give them to the Government, and the Government then sells you some milk. Capitalism: You have two cows. You sell one and buy a bull.
Calculated Risk | Consumer Bankruptcy filings down 10 percent through Q3
U.S. consumer bankruptcy filings totaled 1,044,722 nationwide during the first nine months of 2011 (Jan. 1-Sept. 30), a 10 percent decrease from the 1,165,172 total consumer filings during the same period a year ago.
Cato @ Liberty | Finally, a Vote on the Three Trade Agreements
Almost a thousand days into his term, President Obama has at last submitted the trade agreements with South Korea, Colombia, and Panama for an up or down vote in Congress.
Econlog | Miscellaneous
The only thing that would surprise me more than the Fed breaking up the big banks would be the Fed abolishing itself. Only an act of Congress could force the breakup of the big banks.
WSJ: Real Time Economics | We Can’t Ignore Housing Anymore
The U.S. recession and financial crisis of the late aughts began with housing and the scourge of subprime mortgages, which were so messily dispensed. It spread to Europe and its banks.

Reports                                                                                                                         
CRS | Social Security Primer
Specifically, the report covers the origins and a brief history of the program; Social Security financing and the status of the trust funds; how Social Security benefits are computed; the types of Social Security benefits available to workers and their family members; the basic eligibility requirements for each type of benefit; the scheduled increase in the Social Security retirement age enacted in 1983; and the federal income taxation of Social Security benefits.
RCM: Wells Fargo | Factory Orders Slip in August
Factory orders fell 0.2 percent in August, which was below expectations. The decline was led by a 4.6 percent drop in transportation. Nondefense capital goods excluding aircraft was revised downward to 0.9 percent.

Monetary

News                                                                                                                             
NY Times | As Euro Crisis Deepens, Calls for Central Bank to Act
Euro zone governments are struggling to approve a bailout fund in a politically charged process that has focused an improbable amount of international attention on the parliamentary debates in Finland and Slovakia.

Econ Comments                                                                                                             
Market Watch | Bernanke says Twist equals half-point rate cut
Federal Reserve Chairman Ben Bernanke Tuesday said the central bank’s new policy of swapping bonds is not a “game-changer” but should help the economy avoid a new downturn.

Blogs                                                                                                                             
MoneyIllusion | Krugman’s peculiar views on American nationalism and the Chinese yuan
The most distressing aspect of Krugman’s post is its nationalistic tone. The worst mistake the world could make right now is to descend into nationalistic posturing. We can all see what’s going on in Europe, and we all know how nationalism can end up hurting everyone.
Minyanville | Inflation Expectations Are Still Declining
Are these lower inflation expectations good news? Not necessarily. Here's why.

Reports                                                                                                                         
NBER | Leverage Across Firms, Banks, and Countries
The main result is that there was very little buildup in leverage for the average non-financial firm and commercial bank before the crisis, but the picture was quite different for large commercial banks in the United States and for investment banks worldwide.

Health Care

News                                                                                                                             
National Journal | GAO Report Finds Medicare Pays For Prescription Drug Abuse
Medicare may be helping thousands of patients abuse painkillers by “doctor-shopping” to get multiple prescriptions, the Government Accountability Office reports, as a Senate Homeland Security and Governmental Affairs subcommittee looks into the issue on Tuesday.
National Journal | BlueCross BlueShield Association Wants Faster Health Reform
One of the nation’s largest health insurance plans wants the federal government to move faster when it comes to changing how Americans pay for health care, and released a plan Tuesday that shows how to do it -- by adopting pilot programs that are working.

Blogs                                                                                                                             
Atlantic: Megan McArdle | Confronting the Cost of Health Care
One of the major factors contributing to the general feeling that people aren't as well off as they used to be is that they are consuming more and more of their income as health benefits.
Incidental Economist | Back to the future: today’s 1990s-like health spending
Since 2004, we’ve been in an era of remarkably low health spending growth. Relative to the prior period (1993-2004), the only type of spending that has grown faster since 2004 is for hospital services, but still at a rate low compared to periods before 1993.
Volokh Conspiracy | Healthier and Wealthier
For many years, it’s been clear that there is a positive correlation between health and wealth, but it was most commonly thought that wealth creates health. While it is certainly true that the rich can afford to take better care of themselves, it is now known that health also begets wealth.

Taxes

News                                                                                                                             
Politico | Reid considers surtax on millionaires
Senate Majority Leader Harry Reid is eyeing a tax on the nation’s highest earners as a way to defray some of the $447 billion price tag for the White House-written jobs package-a move that would shift attention away from its underlying policies and more towards party politics.

Econ Comments                                                                                                             
CNN Money | Taxes and debt: Left and right dare to agree
...the inexorable arithmetic of ever-rising health care costs implies that, without reform, even modestly higher taxes won't be enough -- and no one wants the tax share to keep rising without limit.

Blogs                                                                                                                             
Mercatus Center: Neighborhood Effects | Tax breaks in the eye of the beholder
While lawmakers may often favor elimination of tax breaks, in general, they tend to protect the ones they helped create.
Heritage Foundation | In Pictures: How Much the Top Earners Already Pay in Taxes
…if [Obama] wants to talk about “fairness,” he should look at how much top income earners already pay in taxes...

Employment

News                                                                                                                             
WSJ | Auto Makers Now Import Jobs
Labor Deals at Ford, GM to Shed Veterans for New Hires, Returning Some Production From Abroad.
Market Watch | Private payrolls up 91,000 in September, ADP says
Job growth in the private sector continued at a modest pace in September, led by the service-producing sector and small businesses, according to a report released Wednesday.
WSJ | Housing's Job Engine Falters
Employment Lost in Property Crash Weighs on the Economy's Chance of Recovery.
Bloomberg | Announced U.S. Job Cuts Rise 212% From Year Ago, Challenger Says
Announced firings jumped 212 percent, the largest increase since January 2009, to 115,730 last month from 37,151 in September 2010, according to Chicago-based Challenger, Gray & Christmas Inc.

Econ Comments                                                                                                             
WSJ | Shovelling for Labor
California tries to raise the cost of construction projects.
Washington Post | We need to stop America’s brain drain
...immigrants have founded 52 percent of Silicon Valley’s companies and created millions of American jobs. This won’t be the case in the future.
Washington Times | STRONACH: Formula for American job growth
Flat tax that rewards domestic hiring would reignite productivity.

Blogs                                                                                                                             
Political Calculations | The Ebb and Flow of the Baby Boom Generation
Today, we'll look at the history of the baby boom generation in the U.S. workforce, in five year intervals from 1960 through 2010.
Daily Capitalist | Job Creation Down Again: Gallup
You don’t have to wait for Friday’s Employment Situation report from the BLS to know what is going on with employment. Gallup’s September survey on job creation continues to decline as it has for the past three months…
WSJ: Real Time Economics | Average Salary Up for Class of 2011
The average salary offer for the most recent crop of graduates was up 6% compared to salaries offered to 2010 graduates, according to a survey by the National Association of Colleges and Employers released Tuesday.

Budget

News                                                                                                                             
National Journal | House Approves Government Funding Through Nov. 18
In bipartisan fashion, the House on Tuesday voted 352 to 66 to adopt a measure that will keep government running for another six weeks and avert what, theoretically, could have been a midnight shutdown. 
Washington Times | Greece has weeks left before bankruptcy
Greece has enough money to pay pensions, salaries and bondholders through mid-November, the finance minister said Tuesday, as global markets sank on worries that a messy default could bring down European banks and trigger another global recession.
Politico | Tax, entitlement deal still in play
The $1.2 trillion target can be broken down any number of ways, but one option would be a 3-1 split between 10-year spending reductions and new revenues.

Econ Comments                                                                                                             
WSJ | Junking the Junk Mail Office
The United States Postal Service (USPS) lost $9 billion last year and is facing default if it doesn't soon make a $5.5 billion payment into its bloated retiree medical plan. This is a moment when bankruptcy can be a blessing.

Blogs                                                                                                                             
Mercatus Center: Neighborhood Effects | States’ budgets now in the hands of Supreme Court
At stake is whether or not patients and practitioners have the right to sue to enforce spending levels, or whether enforcement must be carried out through the federal government.

Reports                                                                                                                         
Mercatus Center | A Balanced Budget Amendment to the Constitution
Matthew Mitchell testified before the House Committee on the Judiciary about state governments' experiences with Balanced Budget Amendments.