Tuesday, May 15, 2012

General Economics

News                                                                                                                             
Market Watch | Retail sales in the U.S. cool off in April
Retail spending in the U.S. fizzled out in April after sharp gains in the first three months of the year, the government reported Tuesday.
Bloomberg | Euro-Area Economy Avoids Second Recession on German GDP (Update 2)
Germany helped the euro area avoid its second recession in three years as growth in the region’s largest economy offset contractions in peripheral countries.
Market Watch | Regulators eye stress scenarios for new tests
Bank regulators on Monday released stress test guidance for big banks, asking institutions to conduct an analysis of whether the institutions would survive based on a variety of scenarios such as the failure of a major counterparty or a natural disaster.
USA Today | New online tool helps you estimate Social Security benefits
If you're feeling nostalgic about the days when you drank Pabst Blue Ribbon beer because it was cheap, not trendy, a new online tool from the Social Security Administration will take you on a walk down memory lane.
WSJ | Economists Forecast Subdued Growth in 2012
Forecasters surveyed by The Wall Street Journal expect the economy to grow at such a subdued pace this year that unemployment will barely budge.

Econ Comments & Analysis                                                                                            
WSJ | The Union Pension Bomb
Imagine the panic if investors discovered that many of the nation's biggest public companies had hidden liabilities so large as to make them worth a fraction of their value. That's something akin to the shock created by the recent Credit Suisse report on multi-employer pension plans.
City Journal | Schumpeter in the White House
The 2012 presidential race will be, in part, a showdown between two different models of economic growth.
Washington Times | Killers of banks and jobs
Last week, Jamie Dimon, CEO of the nation’s largest bank, JPMorgan Chase, revealed that the bank had made a $2 billion-plus trading mistake. The bank has more than $2 trillion in assets and made a profit of about $20 billion last year. So it lost one-tenth of 1 percent of its assets and an amount equal to about 10 percent of its income for last year. No big deal
Forbes | Rep. Paul Ryan Schools Georgetown On How to Help the Poor
On April 26, House Budget Committee Chairman Paul Ryan delivered the 2012 Whittington Lecture at Georgetown University focused on his 2013 budget and its implications for poverty programs and the poor. That budget has now passed the House of Representatives.
WSJ | Losing Money Isn't a Crime
Regulators, politicians and news reporters are hysterical at the news of J.P. Morgan's recent $2 billion trading loss. The Securities and Exchange Commission is investigating to see whether laws were broken.

Blogs                                                                                                                             
Atlantic | The 1% Conundrum: How Much Income Inequality Is There, Really?
My last post provided an initial look at the inequality figures focusing on "the top one percent," which show sharply rising income concentration over the past 30 years.  But those figures rely entirely or heavily on tax return data from the IRS.  This creates some issues that warrant skepticism about the magnitude of the increase I described.
Calculated Risk | Schedule for Week of May 13th
This will be a busy week. There are two key housing reports to be released this week: May homebuilder confidence on Tuesday, and April housing starts on Wednesday.
Atlantic | What Really Happened to Income Inequality in the 20th Century?
I promised that this was the last post I would write this week dwelling on rising inequality at the top, and I do want to shift to the comparatively under-appreciated lack of rising inequality in the bottom half of incomes.  But bear with me, as this turned into two separate posts. 
Calculated Risk | Unofficial Problem Bank list declines to 924 Institutions
Here is the unofficial problem bank list for May 11, 2012.
WSJ | Companies Aim to Start Spending Trillions They’re Hoarding
Corporations around the globe are finally planning to spend some of the nearly $8 trillion in emergency cash they’ve amassed.
John Taylor | More Evidence on What Is Holding the Economy Back
Milton Friedman’s “plucking model” should be back in fashion now because it reminds us of the historical fact that throughout American history—until now—the deeper the recession, the faster the recovery.

Health Care

News                                                                                                                             
National Journal | Businesses Offer Health Benefits To Same-Sex Couples Ahead Of Laws
President Obama's pronouncement last week in favor of same-sex marriage has no legal effect on employers’ decisions on whether to offer benefits to workers’ domestic partners, but some advocates believe it could reinforce a decade-long trend toward coverage.
National Journal | HHS Announces New Alzheimer's Plan Tuesday
Health and Human Services Kathleen Sebelius releases the administration’s plan for fighting Alzheimer’s disease later on Tuesday at the National Institutes of Health.

Monetary

News                                                                                                                             
Market Watch | Gasoline drop keeps consumer prices flat in April
Consumer prices were unchanged in April as a drop in gasoline offset rising food, apparel and car prices, according to data released Tuesday.
Market Watch | Euro hits lowest level since Jan. on Greece worry
The euro fell sharply against the dollar on Tuesday following reports that Greek politicians failed to form a coalition government, making it more likely that new elections will be called for next month and adding to traders’ uncertainty until then.

Econ Comments & Analysis                                                                                            
Real Clear Markets | Deflation: The Most Misunderstood Word In Economics
Rarely does a week go by without some financial or economic commentator proclaiming what is impossible; specifically that we're experiencing or that we're going to experience both inflation and deflation together. MarketWatch columnist Robert Powell is the latest to make such an odd statement.
Market Watch | Fed governor: Rule uncertainty impedes lending
Lenders are being overly conservative when they decide on what loans to make -- a situation that is being driven largely by regulatory uncertainty, Federal Reserve Governor Elizabeth Duke said in a speech Tuesday.

Blogs                                                                                                                             
Free Banking | Krugman's Misreading of US Banking History
In his NY Times column Sunday, Paul Krugman tries, in vain, to construct a case for bank regulation in light of the problems at JP Morgan. As usual with Krugman, there’s much to disagree with, but I want to focus on his utterly ham-handed version of the history of US banking, which bears shockingly little resemblance to reality.

Taxes

News                                                                                                                             
CNN Money | California wants to tax rich to solve budget woes
Tax the rich! That's how California Governor Jerry Brown wants to solve the state's growing budget crisis that now nears $16 billion.

Econ Comments & Analysis                                                                                            
WSJ | 'Taxmaggedon' Is a Real Threat
Nine years ago this month Congress passed President George W. Bush's Jobs and Growth Tax Relief Reconciliation Act. That bill's lower rates on capital, as well as the continuity in tax policy it established, have helped make our economy far more resilient.
WSJ | California Ugly
It looks like that Facebook IPO may not be enough to save California's fisc after all. Facebook co-founder Eduardo Saverin has renounced his U.S. citizenship to move to Singapore, which has no capital gains tax. And now we learn the Golden State's budget deficit will come in at $16 billion, up from a merely awful $9.2 billion estimate in January.

Blogs                                                                                                                             
The American | New report suggests it’s high taxes, not spending cuts, killing Europe
A new budget and economic forecast from the European Commission shows pretty clearly what has gone wrong in Europe. The above chart shows the composition of EU austerity. In 2011-2012, 1.3 percentage points of GDP retrenchment comes from taxes, while 2.0 points comes from spending cuts.
Tax Foundation | Maryland Income Tax Proposal Raises Rates Above $100,000
Maryland's tax special session began today; expect more analysis on it from us tomorrow. However, we just received detail on S.B. 1302, the "State and Local Revenue and Financing Act of 2012." The bill would raise income tax rates for high-income earners, defined as those making at least $100,000. The proposal also more aggressively phases out exemptions for those filers.

Employment

News                                                                                                                             
CNN Money | Bye bye unemployment benefits
More than 200,000 long-term jobless Americans will lose their unemployment checks this week, when eight states roll off the federal extended benefits program.

Econ Comments & Analysis                                                                                            
Minyanville | Why Unemployment Ex-Government Cuts Are Just Silly
Justin Lahart over at the Wall Street Journal's "Real Time Economics" blog wrote a piece recently in which he looked at what unemployment would be if state and local governments didn't cut jobs as aggressively as they did. His conclusion was that unemployment would be a full percentage point lower, from 8.1% to 7.1%. I disagree with that assessment.

Blogs                                                                                                                             
Marginal Revolution | How much structural unemployment was there during the Great Depression?
By 1933, the appearance of a large, new, structural/hard-core element raised the natural level of unemployment from the 5 to 6 percent range to 12 to 15 percent. If a Keynesian stimulus had been tried and it had eliminated cyclical unemployment, the remaining unemployment still would have been io to 15 percent. Further fiscal or monetary stimuli would have resulted in inflation.
The American | Paul Krugman, wrong about structural unemployment
I believe that the process of creating employment is explained not by the theories of Keynes, but rather by the theories of Adam Smith and David Ricardo. … From the perspective of Smith and Ricardo, real jobs emerge in the context of patterns of sustainable specialization and trade.
WSJ | Fed’s Kocherlakota: Economy Closer to Max Employment Than Data Suggest
A top Federal Reserve official said Thursday he is paying close attention to inflation and that recent elevated readings signal that the economy is closer to maximum employment than labor-market reports alone might suggest.

Budget

Econ Comments & Analysis                                                                                            
Washington Times | Budget plan that adds up
It has been more than three years (1,112 days, to be precise) since the U.S. Senate last passed a budget. The last time Senate Majority Leader Harry Reid fulfilled his legal responsibility, Conan O'Brien was still on NBC, Tea Parties hadn’t come together, and the iPad hadn’t yet been introduced.
Minyanville | Debt Contagion Is Real, and It Doesn't End With Spain
For quite some time in this letter I have been making the case that for the eurozone to survive, the European Central Bank would have to print more money than any of us can now imagine. That the sentiment among European leaders was that they were prepared for such a move was clear – except for Germany, which is haunted by fears of a return to the days of the Weimar Republic and hyperinflation.
Bloomberg | As European Austerity Ends, So Could the Euro
The euro currency is a malady that condemns at least a generation of Greeks, Italians, Spaniards, Portuguese and Irish to the economic infirmary.
WSJ | Saying No to State Bailouts
Right now, the world is wondering if European leaders have the political will to save their economies from fiscal collapse. Defaulting on their debts would trigger a domino effect that threatens the continued existence of the European Union itself.

Blogs                                                                                                                             
Calculated Risk | Gov. Brown: California Deficit increases to $16 Billion
Gov. Jerry Brown announced on Saturday that the state's deficit has ballooned to $16 billion, a huge increase over his $9.2-billion estimate in January.
The American | When the U.S. really did try austerity, it worked!
Now, we all all know “austerity” from deep spending cuts (not the tax hikes, of course) is killing Europe’s economy and would do the same here in America, right?
National Review | Some Austerity is Good Austerity
Harvard University professor Robert Barro has a piece in the Wall Street Journal this morning reminding us that some countries in Europe have successfully implemented austerity measures.
Café Hayek | The Austerity Fairy
Just a few days ago, Krugman was arguing that Europe had tried slashing spending and that we now know that that didn’t work. Now he’s admitting that spending wasn’t slashed but that it really was, even though you can’t see it.
Neighborhood Effects | Government Spending Has Shrunk…When You Ignore 44 Percent of Government Spending
Floyd Norris has made an astounding discovery. When you don’t count 44 percent of government spending, it appears that government spending has shrunk in recent years.