Tuesday, September 4, 2012

General Economics

CNN Money | Moody's puts European Union on notice
Moody's put the European Union on notice Monday that its top-notch Aaa rating is at risk of downgrade, cutting the outlook on the EU's creditworthiness to "negative" from "stable" because of the continent's ongoing debt crisis.
Market Watch | ISM factory index weakens to 49.6% in August
Activity for the nation's manufacturers showed contraction for the third straight month in August, the Institute for Supply Management reported Tuesday.
FOX News | Drought putting a drain on Midwest economy
A monthly survey suggests that the continuing drought and lessening export demand for U.S. products are among the drains on the economy in nine Midwest and Plains states.
Bloomberg | Manufacturing in U.S. Probably Stagnated Amid Global Slowdown
Manufacturing probably teetered between growth and contraction in August, a sign the pillar of the recovery is now struggling, according economists surveyed before a report today.

Econ Comments & Analysis                                                                                            
WSJ | Spain's Bad Banks
Government ministers from Madrid to Brussels cheered Spain's much-anticipated bank-reform law, unveiled Friday, which creates new procedures for winding down failing institutions.
NBER | Carry-Along Trade
Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models.
Economist | Democracies and debt
Almost half the world’s population now lives in a democracy, according to the Economist Intelligence Unit, a sister organisation of this newspaper. And the number of democracies has increased pretty steadily since the second world war.
WSJ | AIG, Surprise Moneymaker
AIG's bailout is getting the revisionist treatment. The rescue hasn't been the dismal federal experience that, say, GM's has been. Taxpayers are showing a $5 billion profit on their 53% stake in the insurer, as of yesterday's closing price.
Forbes | Obama's Accelerating Downward Spiral For America
New income data from the Census Bureau reveal what a great job Barack Obama has done for the middle class as President.  During his entire tenure in the oval office, median household income has declined by 7.3%.
The American | ‘Top-Down’ vs. ‘Bottom-Up’
“Top-down economics” is a hijacked phrase. Objectively, it should be the label assigned to rule-of-czar capitalism steered by government officials. Instead, campaign rhetoric has been assigning it to rule-of-law capitalism driven by consumers and entrepreneurs—supposedly a system steered by the already-rich, in which money gradually trickles down to the middle class.
Fortune | Listen up, biz leaders: It's time to rethink everything
We're not living in ordinary economic times. Every company needs to determine if its strategy requires an overhaul or just thoughtful tweaks. Here's how to start.
AEI | Are entitlements corrupting us? Yes, the American character is at stake
The American republic has endured for well over two centuries, but over the past 50 years, the apparatus of American governance has undergone a radical transformation. In some basic respects—its scale, its preoccupations, even many of its purposes—the U.S. government today would be scarcely recognizable to Franklin D. Roosevelt, much less to Abraham Lincoln or Thomas Jefferson.

Calculated Risk | Schedule for Week of Sept 2nd
The key report for this week will be the August employment report to be released on Friday, Sept 7th. Other key reports include the ISM manufacturing index on Tuesday, vehicle sales also on Tuesday, and the ISM non-manufacturing (service) index on Thursday.
AEI | Gas prices around the world: Relative to income, U.S. has some of the cheapest gas in the world
A few weeks ago Bloomberg featured the “Highest & Cheapest Gas Prices by Country, where they ranked 60 countries by the average retail gas price at the pump and by the “pain at the pump,” which is measured by the percentage of average daily income needed to buy a gallon of gas.  Here are some of the findings
Calculated Risk | Unofficial Problem Bank list declines to 891 Institutions
The FDIC released its actions for July 2012 as anticipated. This week there were 10 removals and three additions leaving the Unofficial Problem Bank List with 891 institutions with assets of $331.5 billion, down from 898 institutions with assets of $346.7 billion.
AEI | Thomas Sowell quotations on why comparing income brackets over time is comparing abstractions, not people
“Sports statistics are kept in a much more rational way than statistics about political issues. Have you ever seen statistics on what percentage of the home runs over the years have been hit by batters hitting in the .320s versus batters hitting in the .280s or the .340s? Not very likely.”
Political Calculations | Are Americans Better Off Than They Were Four Years Ago?
"Are Americans better off than they were four years ago?" The various responses that Democratic Party politicians offered to that question dominated the political news headlines this past Labor Day weekend, so we thought we'd take a stab at answering the question today.

Health Care

Heritage Foundation | Chart of the Week: Medicare Spending Is Main Cause of Runaway Deficits
Out-of-control entitlement spending contributes directly to long-term federal deficits, which will accelerate over the course of the next few decades, according to Heritage’s Federal Budget in Pictures and figures provided by the Congressional Budget Office.
Marginal Revolution | How high are Medicare overhead costs?
…many of Medicare’s most significant administrative costs are just covered by other federal agencies, and so don’t appear on Medicare’s particular budget, but are still huge costs of the program.
National Review | To Protect Medicare, Reform It
I am mostly concerned with the way the Medicare debate is being framed during this election. My fear is that by making the $700 billion “cuts” from Medicare the centerpiece of their attack on Obama’s health-care law, Republicans are implicitly putting Medicare out of the reach of reformers after the elections.


Market Watch | OECD inflation rate falls for fifth month
The annual rate of inflation across developed economies fell for the fifth straight month in July and to its lowest level since November 2010, a development that opens the way for leading central banks to shore up faltering growth through additional stimulus measures.
CNN Money | Jackson Hole paper calls for more potent tool than QE3
Just hours after Federal Reserve Chairman Ben Bernanke seemed to make the case in favor of more large bond purchases, a Columbia University professor argued that the Fed has an even more potent tool in its arsenal.

Econ Comments & Analysis                                                                                            
Bloomberg | Ben Bernanke Takes Us on a Stroll Down Memory Lane
Federal Reserve Chairman Ben Bernanke didn't unveil any new initiatives in his opening remarks to the annual Jackson Hole economic symposium today. Nor did he put the kibosh on future Fed actions to goose the economy and reduce unemployment.
CNN Money | Martin Feldstein: What worries me about QE
We don't have a clear idea of how far they would have to raise rates to deal with banks that have more than a trillion dollars of excess reserves deposited at the Fed. When the time comes, they may have to raise rates a lot, and at that time unemployment may be higher than it normally is when the Fed normally wants to raise rates -- that's because of this big amount of long-term unemployment.

Bloomberg | The Federal Reserve as Central Planner
A revealing example of where we are going emerged last spring, admirably documented on the Fed's website. Using its bank-regulation authority, the Fed declared that the banks that had robo-signed foreclosure documents were guilty of "unsafe and unsound processes and practices"--though robo-signing has nothing to do with the banks taking too much risk.
WSJ | WSJ ANALYSIS: Fed Still Lukewarm About Cutting Reserve Rate
There was much ado in Jackson Hole, Wyo., this weekend about a 0.25% interest rate that the Federal Reserve pays to banks on money they deposit with the central bank.
Marginal Revolution | A short note on the gold standard
I do not favor a gold standard, nor do I for that matter favor price stability, nor do I think a gold standard brings short-run price stability.  I think a gold standard today would be much worse than the 19th century gold standard, in part because commodity prices are currently more volatile and may be for some time.
Daily Capitalist | The Fed, QE 3, and the Worsening European Economic Crisis
While the market reaction Friday and many of the media headlines suggest that this is virtually a foregone conclusion, caution in assuming such makes sense to me.  A much-ignored part of Ben Bernanke’s address at Jackson Hole two days ago, discussed below, offers support for an agnostic approach.


Tax Foundation | To Eliminate Income Tax Fraud, Simplify the Tax Code
The New York Times, CNBC, and numerous other publications have reported that the IRS is paying out nearly $5 billion a year in fraudulent income tax refunds. Though the impulse may be to throw more money and more people at the problem, the solution is actually far easier: simplify the income tax code.


CNN Money | The low-wage jobs explosion
Some 58% of the jobs created during the recovery have been low-wage positions, according to a new report by the National Employment Law Project. Only 22% have been mid-wage jobs and 20% higher-wage positions. These low-wage jobs pay $13.83 an hour or less.

Econ Comments & Analysis                                                                                            
WSJ | There Is No 'Structural' Unemployment Problem
The unemployment rate has exceeded 8% for more than three years. This has led some commentators and policy makers to speculate that there has been a fundamental change in the labor market.
Washington Times | GHEI: No jobs: The kids aren’t all right
Consider the effect of President Obama’s economic policies: Middle-class income has shrunk; consumer confidence is at a 10-month low; corporate-profit growth is well below last year’s level; investment is down; and the employment rate climbed to 8.3 percent, with the largest-ever proportion of the long-term unemployed in their ranks.

Calculated rIsk | GDP and Employment drag from State and Local Governments
Two of the key U.S. economic trends I expected this year were 1) a recovery in residential investment, and 2) that most of the drag from state and local governments would be over by mid-year 2012.
WSJ | Five Questions About Today’s Job Market
It’s Labor Day, a good day for an update on the state of America workers. Here’s a Q&A with The Wall Street Journal’s economics editor and Capital columnist, David Wessel.


Market Watch | Moody's warns on European Union debt rating
Moody's Investors Service on Monday warned of a possible cut to the European Union's Aaa debt rating, changing its outlook to negative in line with concerns about the core members of the bloc. Moody's said the negative outlook was due to similar action against the four largest contributors to the EU's budget: Germany, France, the U.K. and the Netherlands.

Econ Comments & Analysis                                                                                            
Washington Times | The real fiscal cliff
As we head toward the end of the year, the media’s fixation with the congressionally imposed “fiscal cliff” will reach a fever pitch and no doubt become a major factor in the presidential campaign.

Tax Foundation | CBO: Federal Healthcare Spending Will Exceed Discretionary Spending by 2016
Romney and Ryan are receiving the usual Mediscare treatment for their plans to reform healthcare entitlements.  Paul Krugman, for instance, refers to their proposal to allow private companies to compete for Medicare dollars as “VoucherCare.”  So what would happen in the absence of reform?