Wednesday, January 25, 2012

SOTU Reactions

News                                                                                                                             
National Journal | ECONOMY: State of the (Occupied) Union
There are two planks of President Obama’s State of the Union speech that could stand a reasonable chance at pumping more life into the economy sometime soon, albeit probably not before the November election: a $200 billion infrastructure program--classic Keynesian spending--and an effort to soothe the housing market by helping underwater homeowners refinance their mortgages.
Bloomberg | Obama Calls for Higher Taxes on Wealthy
President Barack Obama, offering an election-year prescription to spur the economy, said the wealthiest Americans should pay more taxes in the name of fairness, to bring down the deficit and ensure those trying to make ends meet don’t have to “make up the difference.”
National Journal | Obama Announces New Unit To Investigate Unfair Trade Practices
President Obama announced Tuesday the creation of a Trade Enforcement Unit, singling out China as a country that has had an unfair advantage over American competitors and requires more scrutiny. “I will not stand by when our competitors don’t play by the rules,” the president said in his State of the Union address.
CNN Money | Obama focuses State of the Union on income inequality
President Obama delivered a State of the Union address Tuesday that was deeply saturated with the message of income inequality, a populist idea that the White House hopes will resonate on the campaign trail.
National Journal | Obama Touts Bin Laden Killing, End Of Iraq War In Speech
Calling for a post-war era of unity and selflessness reportedly not seen since the wake of World War II, President Obama led and closed his State of the Union address with an invocation of the impressive list of national security accomplishments under his watch in the past year.
NY Times | A Tax Proposal Is Brought Out Again
President Obama, stymied for three years on his promise to end tax incentives that move jobs overseas, went back to the well on Tuesday night with tax proposals that he said would promote domestic corporate growth.

Econ Comments & Analysis                                                                                            
WSJ | How Green Became Obama's Albatross
Barack Obama may believe a lot of things, but he probably doesn't believe the Sierra Club is key to his re-election. His decision to nix the Keystone XL pipeline will cost him votes but he did it anyway.
CATO | A Redistributive State of the Union
The president’s address — more campaign speech than policy platform — was long on calls for “fairness” and “opportunity,” but it really boiled down to the president’s vision of a society where government does everything for everyone — financed, of course, by higher taxes on “the rich,” who need to pay “their fair share.”
WSJ | The State of His Policies
President Obama delivered a State of the Union address Tuesday night that by the account of his own advisers is more campaign document than a plan for governing. He's running against Republicans in Congress, Reaganomics, wealthy bankers and inequality.
Forbes | President Obama's State of the Union? Hyper-Regulated
The 2012 State of the Union Address ought to address the Mistakes of the Union when it comes to over-regulation of competitive free enterprise.

Blogs                                                                                                                             
The American | Does public opinion support Obama’s SOTU agenda?
There was a lot in President Obama’s address last night that will satisfy his polling team. Many of the president’s proposals rest on solid ground when it comes to public opinion.
The American | SOTU: Nothing new on education
President Obama (like President Bush before him) has used education to signal to centrists and moderates that he’s no ideologue. Where Bush used No Child Left Behind to demonstrate his “compassionate conservatism,” Obama has used education reform to make the case that his calls for higher taxes and more federal activity are about “transformation.”
CATO | Fact Checking the SOTU: Corporate Taxes
Let’s do some fact checking on President Obama’s corporate tax comments in last night’s State of the Union.
Heritage Foundation | State of the Union 2012: Heritage Reaction Roundup
The President must not understand that an economy based on free-enterprise with limited government involvement will, in fact, work for and benefit more than just the wealthy.
The American | Obama pulls trigger on January Surprise: a mass refinancing plan for U.S. mortgages
This SOTU shocker may well be the talk of the markets today.
Greg Mankiw | Two Reactions to the SOTU
Last night President Obama continued his misleading claims about Warren Buffett's tax rate. Also, I was disappointed, and even a bit surprised, that the President adopted the xenophobic approach to outsourcing and international trade. 
The American | 11 things Obama didn’t tell you about tax fairness last night
Are wealthier Americans really not paying their fair share? Here are some numbers on income inequality:
Political Calculations | The President's Failing Focus on Jobs
In his 2012 State of the Union Address, President Obama sought to "embrace manufacturing". Since the President has been in office for three years now, we thought we would take a look at how well he's done so far in embracing manufacturing, by his own terms.
Tax Foundation | Tax Policy References in the State of the Union
Tax policy is a hot topic and featured prominently in tonight's State of the Union address given by President Obama, and in the Republican response delivered by Indiana Gov. Mitch Daniels. Here are the references.

General Economics

News                                                                                                                             
CNN Money | The shrinking private equity world
The notoriously private private equity industry can't escape the glare of the spotlight these days, but the more immediate issue facing the industry is a lack of funding.
Bloomberg | Business Confidence in Germany Rises More Than Forecast to Five-Month High
German business confidence jumped more than economists forecast in January to a five-month high, signaling Europe’s largest economy may avoid a recession.
Market Watch | British economy shrinks, stirs QE speculation
The British economy staggered toward recession in the final three months of 2011, official data showed Wednesday, with gross domestic product shrinking 0.2% compared to the third quarter and boosting expectations for an expanded dose of quantitative easing by the Bank of England.
CNN Money | Freddie Mac: What it did, what went wrong
What the firm did, and the role it and larger rival Fannie Mae played in the housing crisis of the last decade, remain a source of confusion for many Americans.
Daily Finance | Why Gasoline Could Hit $5 a Gallon This Summer
If you think you're paying a lot at the gas pump now, just wait until summer hits. Stronger summer demand could lead to record-high gas prices as an economic recovery takes hold and turmoil in the Middle East sends the price of oil higher.

Econ Comments & Analysis                                                                                            
CRS | Definitions of "Inherently Governmental Functions" in Federal Procurement Law and Guidance
An "inherently governmental function" is one that, as a matter of federal law and policy, must be performed by government employees and cannot be contracted out. Two main definitions of inherently governmental functions currently exist within federal law and agency directives.
Washington Times | Drawing a pipeline in the sand
Sometimes “no” is not an acceptable answer. Last week, President Obama rejected the Keystone XL pipeline, apparently dooming the 20,000 meaningful private-sector jobs the energy project would have created.
WSJ | Economics for the Long Run
As this election year begins, a lot of people are wondering what we can do to restore America's prosperity and create more jobs. I believe the fundamental answer is simple: Government policies must adhere more closely to the principles of economic freedom upon which the country was founded.
Washington Times | A state of class warfare
Whenever President Obama is in the same room as his teleprompter, expect to hear the class warrior emerge. Mr. Obama’s words Tuesday were no exception.
Real Clear Markets | Underestimating the Horrors of Dodd-Frank
Tuesday's GOP debate moderator was shocked by the front-runners' broadside against Dodd-Frank banking rules. He seemed to think they were hyping their damage. They weren't.
The American | Dining with Vultures: Rent-to-Own, the Feds, and the Housing Sector
The Federal Reserve estimates in a white paper that there were about 500,000 real-estate-owned properties for sale in the second quarter of 2011 (REO is the term for properties where mortgage lenders have taken ownership after default, usually by foreclosure), and that there will be potentially 1 million more foreclosures in each of 2012 and 2013.

Blogs                                                                                                                             
Heritage Foundation | Chinese Statistics: Start with Skepticism
To be clear, it is not true that Chinese numbers are wrong all the time. Also, China does not always overstate its economic performance. GDP growth was slower in 2011 than Beijing claims, but it was faster in 2010. In fact, the economy is likely larger than the government reports.
Economist | The zero-sum president
For a president whose hallmark has been soaring orations promising hope, however, Mr Obama's take on the global economy is strikingly bleak and depressing.
Reason Foundation | FHFA Says Principal Reductions Would Cost Taxpayers $100 Billion
There have been a number of calls for forced principal reduction as a means of addressing trouble in the housing market. Even the Fed earlier this month suggested serious consideration be given to breaking MBS contracts and forcibly reducing the principal on mortgages that are underwater.
The American | IMF to America (and Obama): Slow growth ahead in 2012
Total output is predicted to increase by 3.3. percent, including 1.8 percent in the U.S.  and a 0.5 percent contraction in the Eurozone.
WSJ | When Downside Scenarios for the Economy Play Out
The economists at the International Monetary Fund can take some credit today for making one good projection on Europe — though it’s not a pretty one.

Monetary

News                                                                                                                             
Bloomberg | Fed Likely to Focus on Housing-Debt Purchases in Any Move to Spur Economy
Federal Reserve policy makers will probably buy mortgage bonds should the economy warrant more easing, with purchases of all debt totaling $500 billion, according to economists in a Bloomberg News survey.
FOX Business | Fed Likely to Leave Interest Rates Unchanged
The Federal Reserve is widely expected to provide Wall Street with more of the same Wednesday – that is cautious maintenance of the same monetary policy in place now for over three years.

Econ Comments & Analysis                                                                                            
WSJ | Lagarde for $1 Trillion
The IMF's Christine Lagarde delivered a speech in Berlin Monday warning that, without dramatic action, the world risked another Great Depression. The next day the Fund followed up by cutting its global growth estimate for 2012 to 3.3% and warned that Europe's debt crisis could sink the world economy.
AEI | Why are interest rates presently so low?
Despite frequent, dire warnings about the unsustainability of government budget deficits in the United States, Europe and Japan, investors are lining up to lend to some governments at very low interest rates.
MSN Money | Is it time to fight the Fed?
The axiom says when central banks provide stimulus, markets will rise, so investors should follow along. But this year, counting on central banks could cost you.

Blogs                                                                                                                             
Daily Capitalist | Where Gold Comes From And Where It Goes
This great graphic on gold production and usage came from Trustable Gold, a company that provides information on purchasing gold by comparing the different investment opportunities.
Minyanville | Central Banks' Cash Helping Investors Look the Other Way
The Central Banks are printing and loaning and lending and swapping that mean, oh mean, mean green. And so far it’s working as the NASDAQ (QQQ) is on a tear, along with the S&P 500 (SPY), the Dow (^DJI), the Euro STOXX (FEZ), China (FXI) and most every index on the globe.

Taxes

News                                                                                                                             
Roll Call | Division Over Payroll Tax Widens
Top Senate Democrats on Tuesday called for a package of tax extenders to be included in payroll tax cut conference committee discussions, adding yet another hurdle to the already arduous path to a bipartisan deal.
NY Times | Two Sides Far Apart on Payroll Tax Cut
Presidential politics and a push by both sides to include pet measures could turn negotiations over the extension of President Obama’s payroll tax cut into the next partisan donnybrook on Capitol Hill, lawmakers made clear on Tuesday.

Econ Comments & Analysis                                                                                            
Heritage Foundation | Tax To-Do List for 2012 for the President and Congress: Focus on Growth
As more government spending has failed to create that growth, the President and Congress should turn to removing the obstacles that Washington policies are placing in the way of economic expansion. They should start with taxes.
WSJ | Romney's Fair Share
If Mitt Romney's 2010 tax bill were merely his pretax income, he'd still be a member of the 1%—in other words, the government takes more of his wealth every year than 99% of Americans earn. But what the world really learned from the tax returns the GOP candidate released yesterday is that he is a walking argument for pro-growth tax reform.

Blogs                                                                                                                             
CATO | U.S. Dividend Taxes Too High
The release of Mitt Romney’s tax returns is generating debate about the federal tax rates on capital gains and dividends of 15 percent. Great, let’s have a debate about why it’s both fair and good policy that these rates were cut in 2003.
Tax Foundation | Even at 14%, Romney Pays a Higher Rate than 97% of His Fellow Americans
The release of Mitt Romney's tax returns, which indicate that he paid an average tax rate of 14 percent after deductions, has once again prompted a great deal of confusion over marginal and average tax rates.
The American | Actually, the capital gains tax is heading to a de facto rate of 60 percent!
One widely cited study estimates a 6.4 percent gain in long‐run output from the adoption of an X tax, which could result in a full percentage point gain—as a share of GDP—to government revenue.
Tax Foundation | State Sales Taxes on Clothing
sales tax that best minimizes economic distortions is one that taxes all final retail sales once and only once. However, most states depart from this by not taxing services while taxing business inputs
Neighborhood Effects | Why Are Cell Phone Taxes So High?
Nationwide, combined federal, state, and local taxes on cell phone services average more than 16 percent. That makes a cell phone one of the highest taxed goods around.

Employment

News                                                                                                                             
CNBC | US Post Office Needs to Cut 260,000 Jobs: Rep. Issa
The U.S. Postal Service needs to slash 260,000 jobs and end weekend delivery if it is to climb out of its "financially insolvent" condition, Rep. Darrell Issa said.

Blogs                                                                                                                             
Calculated Risk | State Unemployment Rates "slightly lower" in December
Thirty-seven states and the District of Columbia recorded unemployment rate decreases, 3 states posted rate increases, and 10 states had no rate change, the U.S. Bureau of Labor Statistics reported today.

Budget

Econ Comments & Analysis                                                                                            
Heritage Foundation | Spending Goals for Congress and the President
After a year of unproductive brinksmanship, Congress and the President enter 2012 facing the same intractable budget problems as before: a fourth consecutive deficit expected to be $1 trillion or higher, spending that consumes nearly one-fourth of the economy’s total output, and an entitlement-driven fiscal disaster that has drawn one year of inaction closer.  
CNN Money | U.S. inches closer to 'Europe moment'
Bond yields are slowly creeping up in the United States as the economy improves. But with a yield barely above 2%, the 10-year Treasury is still not that far above its all-time lows.

Blogs                                                                                                                             
WSJ | EU Crisis Road Map: Key Milestones Ahead
European Union finance ministers piled pressure on Greece and its private-sector creditors to do more to ensure that a proposed deal to restructure Greece’s private-sector debt will be enough to put the country back on a firm fiscal footing.
Heritage Foundation | Mr. President: “We Can’t Wait” for the FY 2013 Budget
Right now, when the economy is struggling, annual deficits consistently exceed $1 trillion, and Americans are demanding that Washington govern responsibly, this delay is beyond frustrating.
Marginal Revolution | The pending Greek default
It boils down to what kind of focality the Greek resolution will have.  I’ll stick with my longer-run view that the Eurocrisis can be solved if a) the 17 countries act in a roughly unified way, and b) Italy shows reasonable prospects of growing at about two percent a year or more.
Neighborhood Effects | Pension costs rising in local governments
Long Island villages are contending with increasing contributions to the state pension system. They expect to be billed $1.2 billion this fiscal year for school district employees, public workers, police and firefighters.