Friday, December 14, 2012

General Economics

Washington Times | Rate on U.S. 30-year mortgage dips to 3.32 pct.
Average U.S. rates on fixed mortgages fell this week near record lows, providing more incentive for Americans to buy homes and refinance.
USA Today | Mortgage rates fall near record lows
Average rates on fixed mortgages fell this week near record lows.
Bloomberg | Industrial Production in U.S. Jumps on Rebound From Sandy
Industrial production in the U.S. rose in November by the most in two years as manufacturers recovered from superstorm Sandy.
Washington Times | Senate fails to extend account insurance
A federal program giving unlimited insurance guarantees to some no-interest bank accounts, enacted at the height of the financial meltdown, will die out at the end of the year after the defeat of a Senate plan to extend it.
Market Watch | Will deficit reduction crush stocks?
The stock market goes up whenever John Boehner or Barack Obama says something vaguely positive about fiscal cliff negotiations. It goes down when they say something negative.
Bloomberg | ECB Says Risks Remain as Financial Tensions Ease Tangibly
The European Central Bank said there are still risks to financial stability in the euro area, even after tensions abated “tangibly” in the last half year.

Econ Comments & Analysis                                                                                            
TIME | Why Your 401(k) Match Will Get Cut
Employee benefits are constantly evolving, and the trend line isn’t great for most workers. Last week, IBM—an often copied benefits leader—delivered another blow. The business services giant revamped its 401(k) plan in a way that will transfer millions of dollars to shareholders at the expense of employees.

AEI | New study shows devastating foreclosures on the rise
My new groundbreaking study out this morning –noted by Gretchen Morgenson of the New York Times– reveals never-before-available data at the zip-code level on projected foreclosure rates for families getting FHA loans nationwide.
Daily Capitalist | Small Business Surveys Suggest New Downtrend Despite Incomplete Recovery From the Great Recession
The National Federation of Small Business and Gallup have recently published results of small business surveys, which are consistent with other data which are presented below.
AEI | Why the worst may be over for income inequality
When the extent of offshoring becomes sufficiently large, further increases in offshoring induce technical change now biased in favor of unskilled labor because offshoring closes the gap between unskilled wages in the West and the East, thus limiting the power of the price effect fueling skill-biased technical change. The unequalizing impact of offshoring is thus greatest at the beginning.
Neighborhood Effects | Government-Granted Privilege is not Capitalism
A quick lesson for Mr. Schmidt: genuine capitalism is about competing on a level playing field for customer dollars. If you offer a superior product or service, customers will reward you by voluntarily parting with their money in exchange for what you offer.

Health Care

Politico | Democrats split on Medicare concessions in cliff talks
A growing number of Democrats in the Senate are ready to offer up a key concession on Medicare to try to reach a deal on the fiscal cliff: higher premium payments for wealthy seniors.
National Journal | 'Obamacare' Is the Law of the Land, but 3 Enormous Challenges Loom
How quickly the politics of health care has changed. Just over a month ago, the country was debating whether President Obama’s health reform law, aka “Obamacare,” should be saved or scrapped. Now, with the president’s reelection, that’s all settled, and regulators, states, employers, and health care providers are rushing to get ready for a transformed system that is coming in 2014.

Econ Comments & Analysis                                                                                            
WSJ | It's a Mad, Mad, Mad, Mad ObamaCare
For sheer political farce, not much can compete with ObamaCare's passage, which included slipping the bill through the Senate before dawn three Christmas eves ago. But the madcap dash to get ready for the entitlement's October 2013 start-up date is a pretty close second.

Heritage Foundation | Medicare Cuts vs. Medicare Reform
As the discussions over the fiscal cliff continue, the debate over entitlement reform is getting confused. The issue is not only how much savings constitutes reform, but also the underlying policies that get you there. Thus far in the fiscal cliff negotiations, Republicans have pushed for greater spending cuts, namely in Medicare.
AEI | How to fix Medicare in 100 words
If we expect to bend the Medicare cost curve, we must change the financial incentives that promote the use of services. The federal subsidy cannot grow without limit, and Medicare’s payment arrangements must make that clear to both consumers and providers.


Washington Times | Central banks to miss accord deadline
Global policymakers insist that the Federal Reserve’s failure to implement new banking rules on time is nothing to worry about, but critics of the international plan to strengthen the financial system say this is evidence it’s falling apart.
Market Watch | U.S. consumer prices decline in November
U.S. consumers paid less for goods and services in November, mainly because of the falling cost of gas.

Econ Comments & Analysis                                                                                            
Market Watch | Fed's Lacker: Jobless rate not good policy target
The Federal Reserve should not use the unemployment rate to guide markets about when it will eventually hike interest rates, said Richmond Federal Reserve Bank President Jeffrey Lacker on Friday.
Minyanville | When Will Expected Inflation Hit 2.5%?
Just when most people were getting used to the idea of QE3, yesterday the Fed announced QE4. When will the madness stop?  In the Fed’s latest announcement it mentioned the “projected” inflation rate.  This article will take a look at the TIPS expected inflation indicator to determine how long the Fed can remain accommodative under the new guidelines.
Market Watch | Fed's Fisher worried about new inflation threshold
Dallas Federal Reserve Bank President Richard Fisher said he argued against the Fed's decision earlier this week to set new thresholds on the level of unemployment and inflation that must be in place before it would contemplate higher interest rates.
Real Clear Markets | The Fed Subsidizes The Wrong Behavior
On May 18, 2007, Fitch Ratings affirmed its ratings regime for Merrill Lynch's Bernoulli High Grade CDO I, Ltd. Fitch assigned AAA ratings using its proprietary VECTOR model to all the class A tranches, amounting to about $1.37 billion in par value, and investment grades all the way down to the D class or "equity" tranche. The structure was initiated in March 2006, with a total par of about $1.5 billion, as a static hybrid cash and synthetic CDO.
FOX Business | The Federal Reserve's Zombie Economy
Deutsche Bank is out with a new warning that says the Federal Reserve’s latest round of an estimated $1.02 trillion in total annual purchases of U.S. Treasuries and mortgage-backed securities is creating lemon socialism, a U.S. economy filled with the financially undead.

Economist | Bernanke's two-footed driving
I am cautiously enthusiastic about the Fed's recent policy evolution. Enthusiastic, because it represents a significant move toward better management of expectations, which is a critical policy tool in a world where the policy interest rate can't be reduced any lower. But cautiously so because, frankly, I'm not sure it will work.
John Taylor | More Monetary Policy Uncertainty
The Fed’s announcements yesterday increase monetary policy uncertainty in two fundamental ways.


Econ Comments & Analysis                                                                                            
Daily Finance | Muni Bonds: How Killing a Tax Break for the Rich Could Hit Everytown, U.S.A.
Republicans in Congress and President Obama remain locked in their seemingly interminable debate over how to avoid the fiscal cliff of tax increases and spending cuts set to befall us at the end of the year. As they've tried to break the stalemate, lawmakers have looked at a variety of proposals to raise revenue, among them, ending certain tax breaks and exemptions.
AEI | The GOP case for higher taxes on the rich
Republicans should unequivocally accept rate increases -- immediately. It would reduce the deficit and suddenly turn the spotlight on Democrats' steadfast refusal to reform entitlements.

Library of Economics | The Folly of Obsessing over Marginal Tax Rates
It's often wise to pay more attention to marginal tax rates than to average tax rates.  If you can make your first $100 tax free but the 101st dollar is taxed at a marginal rate of 99% you'll probably decide to earn $100 at most.  


CNN Money | How to get to 6.5% unemployment
The Federal Reserve predicts it will keep stimulative policies in place until the unemployment rate falls to 6.5%. But just how many jobs will it take to get there?

Econ Comments & Analysis                                                                                            
Market Watch | Right-to-work comes just in time for Michigan
Democrats tend to be pro-choice on abortion, but they don’t want to give workers any choice about union membership.
NBER | The U.S. Employment-Population Reversal in the 2000s: Facts and Explanations
The decline in the employment-population ratios for men and women over the period 2000-2007 prior to the Great Recession represents an historic turnaround in the evolution of U.S. employment.
Politico | The way forward for American unions
It’s almost too easy. “Big Labor” or “the unions” are now political epithets for conservatives, and a dismissive shorthand among the political class for an moribund movement whose death has seemed destined for decades.


CNN Money | Fiscal cliff: Years of self-made messes
Democrats blame the Republicans; Republicans blame the Democrats. President Obama gives speeches on the hustings. House Speaker Boehner holds press conferences. Interest groups launch ad campaigns with one of two messages: "Don't you dare raise taxes!" or " Don't you dare cut Medicare and Social Security!"
Bloomberg | State Tax Revenue Rebounds as Post-Recession Spending Rises
U.S. state governments are recovering from the recession as tax collections increase, allowing them to spend more on schools and transportation, according to a report.
CNN Money | Fiscal cliff imperils Asian economies, U.N. says
A failure by politicians in the United States to avoid the fiscal cliff could drag down economies on the other side of the globe, according to a new analysis by a United Nations agency.

Econ Comments & Analysis                                                                                            
Washington Times | By the numbers, it’s past time to start cutting back
Well, folks, unless you’ve been living under a rock since Cyber Monday, you know that the politicians in Washington have not gotten very far in terms of solving the “fiscal cliff” before the end of 2012. When you read this, we’ll have 10 business days left before we ring in the New Year. The crux of the dispute seems to be raising revenue – code for “higher taxes” – versus cutting spending.
Forbes | Don't Cave GOP, This Time Deficits DO Matter
Do deficits matter? Conservatives have sometimes claimed that they don’t. Dick Cheney has said on more than one occasion that, “Reagan taught us that deficits don’t matter.” In fact, he said that to me personally once.
Washington Times | Clock is ticking for fiscal cliff
We all know the clock is ticking on the “fiscal cliff.” In a few weeks, tax increases of more than $500 billion will take effect alongside the first of $1.2 trillion in automatic spending cuts unless President Obama and congressional leaders are able to strike a compromise during the lame-duck session.

AEI | Does Social Security increase the budget deficit?
There are two main measures of the budget deficit and the federal debt: The “on-budget” deficit shows the balance of programs other than Social Security (and the postal service), while the “unified budget” deficit combines Social Security with the rest of the budget.
WSJ | Fiscal Cliff Deal Necessary, but Rushing Makes Bad Policy
The U.S. tax code is about 73,000 pages. Congress and the White House seem to want to rewrite it in little over a week. Good luck with that.
National Review | ‘Debt Default and Government Shutdown Avoidance Act’?
My friend and George Washington Law School professor Michael Abramowicz recently sent me this suggestion about how to deal with the upcoming “debt ceiling” crisis. He suggests passing a bill called something like the “Debt Default and Government Shutdown Avoidance Act.”
AEI | What do we make of this chart?
To paraphrase Soren Kierkegaard, ”We are like spectators in a theater who applaud the announcement — and repeated announcement — that the building is on fire.” Time to fix the debt.