Monday, September 10, 2012

General Economics

WSJ | Japan Revises Down GDP Growth Figures
Japan's economy is still struggling against headwinds from a slowdown in key export markets, government data released Monday showed, casting doubt over the viability of the nation's economic recovery going forward.
Bloomberg | Stagnant Incomes Signal Restraint in Spending by U.S. Consumers
Wages are stagnating as the job market cools, restraining the consumer spending that is needed to sustain the U.S. economic recovery.
CNBC | Returning US Congress Faces a Crush of Big Tasks
One of the most unpopular and unproductive U.S. Congresses in modern history returns on Monday from a five-week recess, facing a crush of big tasks, few of which will likely get done.
WSJ | China Economy Shows More Frailty
China reported falling imports and lackluster growth in exports for August, the latest set of worrying data to come out of the world's second-largest economy.

Econ Comments & Analysis                                                                                            
WSJ | Corporate Cronyism Harms America
So reads a sign outside a small roadside craft store in Utah. The message is clearly tongue-in-cheek. But if it hung next to the corporate offices of some of our nation's big financial institutions or auto makers, there would be no irony in the message at all.
Fortune | Forget four years ago: We're worse off than in 2011
There's a lot of debate about whether or not we are better off than we were four years ago. But here's one thing that we can say for sure after this month's weak jobs report: Compared to a year ago, we are most certainly worse off.
WSJ | Wait, Who Saved the Financial System?
From Bill Clinton to Joe Biden to Michelle Obama, Democrats tried to get mileage from jobs not lost because the economy did not succumb to a total meltdown, thanks to President Obama's timely rescue of the banking system.
Project Syndicate | Ending the Financial Arms Race
People often ask if regulators and legislators have fixed the flaws in the financial system that took the world to the brink of a second Great Depression. The short answer is no.
Market Watch | Economy ‘highly mediocre,’ top forecaster says
The most important number to remember about the U.S. economy is 2%, says Avery Shenfeld, chief economist for CIBC in Toronto and the winner of the August Forecaster of the Month contest sponsored by MarketWatch.
Washington Times | Obama’s broken record
President Obama says he needs four more years to finish the job he started. That’s his way of admitting he’d rather Americans not look too closely at his poor job performance so far. The Obama campaign slogan “Forward” is apt because Barack doesn’t want voters to look backward at the wreckage in his wake.

Economist | Was that it?
Earlier this week, the American Bureau of Labor Statistics said that labour productivity (output divided by hours worked) grew faster in the second quarter than previously believed. However, despite the seeming good news, the overall trend has been deeply underwhelming.
Library of Economics | Garett Jones on Krugman
I want to highlight his recent review of Paul Krugman's book, End This Depression Now! It's strong evidence for Bryan's statement about "[h]is rare blend of courage and courtesy."
Heritage Foundation | The Culture of Over-Regulation Must Stop
Retired General Arnold Punaro, Chairman of the Department of Defense’s (DoD) Defense Business Board task force was recently quoted saying that he would “put a match” to the entire set of regulations governing the acquisition of weapons and military equipment and start over. This is a colorful comment by such a senior advisor to the Department, but it is also prescient.
Calculated Risk | Schedule for Week of Sept 9th
The key event this week is the two day FOMC meeting on Wednesday and Thursday. There is a very strong possibility that the Fed will provide additional accommodation.
Library of Economics | Blahous on Social Security
Social Security's future, at least in the form it has existed dating back to FDR, is now greatly imperiled. The last few years of legislative neglect -- due to a failure of national policy leadership coming just as the baby boomers have begun to retire -- have drastically harmed the program's future financial prospects.
The Volokh Conspiracy | Baby Boomers and Strategic Defaults
Interesting survey here.  88% of respondents self-classify themselves as “strategic defaulters” and 68% say the walked away because the property fell in value (in contrast to hardship and being unable to make their payments, at least as I read the survey).  97% say they would recommend the same course of action to others.

Health Care

National Journal | Obama More Flexible on Medicare Than Rhetoric Suggests
In his convention speech in Charlotte, President Obama vowed to block the Republican Medicare reform plan because “no American should ever have to spend their golden years at the mercy of insurance companies.”

Econ Comments & Analysis                                                                                            
Heritage Foundation | Why Traditional Medicare Must (and Will) Be Reformed
Medicare must undergo structural reform. Its deficiencies undercut patients’ comprehensive and integrated care while increasing costs and generating debt.


Bloomberg | Fed Stuck at Zero Into 2015 Seen in Swaps, QE Odds Reach 99%
Just six months ago, money market traders expected the Federal Reserve to raise interest rates by the end of 2013. Now, they see borrowing costs staying at record lows for about three more years as the economic outlook worsens.
Bloomberg | Central Bankers Meet in Basel as King Leads Libor Talks
Bank of England Governor Mervyn King said global central bankers agreed to set up an inquiry into Libor after confidence collapsed in the benchmark rate for more than $500 trillion of securities.
CNN Money | China: Inflation jumps as economy slows
Chinese consumers paid 2% more in August than they did a year ago, the government's National Bureau of Statistics reported Sunday. That's up from a 1.8% increase in July -- a two-and-a-half year low.
USA Today | Economists see Fed action as likely, but with little benefit
Many economists say last week's disappointing report on job growth in August means the Fed will likely announce Thursday that it will buy more Treasury or government-backed mortgage bonds to lower long-term interest rates and stimulate economic activity.
Bloomberg | Bernanke Options to Boost Growth Include Open-Ended QE
Federal Reserve Chairman Ben S. Bernanke, who last month defended his unorthodox monetary policies, has a new tool at hand should he seek one to a revive a flagging economy and labor market: open-ended bond buying.

Econ Comments & Analysis                                                                                            
Forbes | Bernanke Channels Nixon, Revives "We're All Keynesians Now!"
Last week at the famous Federal Reserve confab at Jackson Hole, Wyoming, Chairman Ben Bernanke laid the groundwork for Quantitative Easing III. He couldn’t contain himself about how well the first two versions of the big Fed asset-purchase program had turned out over the last few years—unemployment is down from the peak and all that. Bernanke even suggested that had we tried QE in the 1930s, it might have solved the Great Depression.
Forbes | Bernanke Plus Obama Equals $5 Gas Post Election
Once there was an unwritten rule that the Federal Reserve would refrain from significant policy adjustments before an election. Few things are as encompassing to culture as our currency, or as vital that they be thought free of intrigues. With public confidence in the dollar diminished, or perturbed by politics, society suffers this dearth of trust in more than just finance.

Daily Capitalist | Draghi Acts: Is It Inflationary?
The European Central Bank (ECB) has decided to bailout its bankrupt members, mainly Italy and Spain, by buying their shorter-term bonds ( 1 to 3 years) with newly created money. The idea is to drive down their interest rates to alleviate their debt cost burden, and to send a message to the world (the financial markets) that they stand ready to back the euro.


Econ Comments & Analysis                                                                                            
Daily Caller | Why raising taxes on energy companies is an awful idea
The 2012 presidential campaign is heating up, and so is the debate around energy taxes. There may be little political cost to advocating for higher taxes on oil and gas producers, but slamming American energy companies with tax hikes is simply bad policy.
NBER | As Certain as Debt and Taxes: Estimating the Tax Sensitivity of Leverage from Exogenous State Tax Changes
We use a natural experiment in the form of staggered changes in corporate income tax rates across U.S. states and time to show that tax considerations are a first-order determinant of firms’ capital structure choices.

Tax Foundation | Federal Tax Burden Under Clinton Higher on All, Not Just the Rich
Ezra Klein of the Washington Post’s Wonkblog posted a blog post this week titled “Democrats don’t want to go back to Clinton-era rates” which pointed out that middle income and low income taxpayers had a substantially higher burden under Clinton.
Tax Foundation | Tax Increase on High Earners Is Not the Solution
Sluggish growth continues, unemployment remains above 8 percent, the debt recently topped $16 trillion, and the president’s solution – to increase taxes on the “wealthiest” Americans – isn’t a solution at all.


CNN Money | Young adults drop out of the job market
The drop in the unemployment rate in August isn't particularly good news for the economy -- it's driven mostly by nearly 400,000 people dropping out of the labor force, rather than more people finding jobs.
WSJ | Jobs Data Weigh on Obama, Fed
America's employers added jobs at a tepid pace in August, posing a re-election challenge for President Barack Obama and raising the likelihood the Federal Reserve will step in to spur growth when it meets in the coming week.
CNN Money | Manufacturing jobs boom is for real
The number of job openings for skilled factory workers has increased 38% since 2005, according to numbers from the Conference Board that measure labor demand across industries.
FOX Business | Hewlett-Packard Raises Layoff Target to 29,000
Hewlett-Packard increased its job-cut estimate to 29,000 positions on Monday as the struggling technology behemoth continues to slash costs under CEO Meg Whitman.

Econ Comments & Analysis                                                                                            
WSJ | Those Jobless Numbers Are Even Worse Than They Look
Don't be fooled by the headline unemployment number of 8.1% announced on Friday. The reason the number dropped to 8.1% from 8.3% in July was not because more jobs were created, but because more people quit looking for work.
Investors | Obama's Four Years Of Failure On Jobs Must End
Jobs: A top White House economics spokesman cautions against reading too much into a single month of employment data — and we concur: One month isn't enough. So how about 44 months instead?
WSJ | The Jobs Deficit
Everyone is reporting that President Obama knew about the August jobs report when he took the Charlotte stage Thursday night, so no wonder he tried to soar above America's jobs deficit in his speech. There isn't much good to say about a report that shows job creation well below what is needed even to meet new entrants to the labor market.
Washington Times | Losing hope: 12.8% unemployed
The Democratic National Convention in Charlotte, N.C., ended in a big whimper, much like President Obama’s term in office. In his keynote address on Thursday, the president struggled unsuccessfully to give the public a compelling reason to vote for him. The message of hope that worked in 2008 no longer holds up in light of the economic despair of 2012.

AEI | Missing: 13 million private-sector jobs from this recovery
Unfortunately, there is still a long way to go if we look at broad-based measures of the labor market. Although private payrolls are “only” 4.2 million below the pre-crisis peak, they are 10% or 12.6 million below their trend level.
WSJ | Jobs Report: Taking a Step Back to View the Big Picture
Today’s jobs report — due out at 8:30 a.m. — will get plenty of attention, and with good reason: It’s one of the most important measures of the state of the economy.
AEI | The awful, awful August jobs report
This was not the employment report either American workers or the Obama campaign were hoping for. A huge miss. It shows the U.S. labor market remains in a deep depression, generating few jobs and little if no income growth.
WSJ | Five Key Takeaways From Jobs Report
The unemployment rate fell to 8.1% from 8.3%, but only because 368,000 Americans dropped out of the labor force, not because more people found work. Economists are still digesting the report, but five things jump out right away
AEI | A big (and updated) version of the biggest, most important chart in American politics
Here is an embiggened version of the infamous jobs chart prepared by Obama administration economists Jared Bernstein and Christina Romer back in January 2009 (and now updated again by me with data from the August jobs report).
Political Calculations | President Obama's "Cash for Clunkers" Summer Jobs Program for Teens
The vast majority of the teens who were given summer jobs as part of the program have now gone back to school, and because they have done so, are no longer considered to be part the U.S. civilian labor force.


WSJ | Inspectors Reject Some Cuts by Greece
Visiting international inspectors on Sunday rejected parts of Greece's proposed austerity plan, forcing the country's coalition government to seek fresh spending cuts to meet creditors' demands.
FOX Business | Selling $18B of AIG Shares, U.S. Stake to Fall Below 50%
The milestone is impressive considering the U.S. owned as much as 92% of AIG following a very unpopular government rescue worth up to $182.3 billion that was aimed at preventing a collapse of the financial markets.
WSJ | Portugal Adds New Austerity Measures
Prime Minister Pedro Passos Coelho said he would cut public employees' salaries, requires that all workers to pay more for social security, and raise taxes on the rich—the latest belt-tightening steps aimed at meeting Portugal's obligations under an international bailout program.

Econ Comments & Analysis                                                                                            
WSJ | The True History of Simpson-Bowles
One of the many ways Paul Ryan scandalized the media-political class in his Tampa convention speech was to criticize President Obama for walking away from the report of his own 2010 deficit commission co-chaired by Democrat Erskine Bowles and Republican Alan Simpson.
NY Times | Cutting the Deficit, With Compassion
Aside from the empty chair that Clint Eastwood debated, the main prop at the Republican convention was a debt clock, highlighting the federal deficit and the growing national debt. The importance of dealing with the deficit will clearly be a major Republican theme this fall.

Neighborhood Effects | Fort Lauderdale issues a Pension Obligation Bond and adds to its debts
To fully fund its city pensions the City Council of Fort Lauderdale has voted to issue a $340 million pension bond. One problem with this plan is the city’s pension plans are underfunded to a far larger extent than the accounting recognizes.