8/6/10 Post

BUZZ: U.S. Employers Shed 131,000 Jobs in July

News
State aid bill a gamble for Dems
Even though party leaders expect that approval will be a slam-dunk, some early responses from rank-and-file Democrats have raised red flags about the optics of returning to a special session to vote on more spending.
New Medicare Report: Is It Based on a Rosy Scenario?
New report also confirms Medicare and Social Security headed for insolvency in the long term.
Senate passes $4.5B nutrition bill
The Senate voted to approve a $4.5 billion childhood nutrition bill on Thursday, which funds food programs in public schools.
US healthcare reform faces fresh challenge
One month before the first benefits of the Obama administration’s healthcare reforms start to kick in, nearly half of all US states are challenging key parts of the new law, with many seeking to have it ruled unconstitutional.
Senate Democrats' small-business deal
Senate Democrats set in motion a new plan Thursday night to free up their small business relief bill: guarantee votes first next month on small businesses relief from tax reporting rules in the Democrats’ own healthcare reform law.
Homeowner Bailout: States with High Unemployment Get Help
In order to avoid more foreclosures, states with the highest unemployment will receive $600 million in government aid.
Senators Break for August Recess
Senate Democrats ran for the exits armed with a few legislative victories and a handful of defeats going into the five-week summer recess.
Fannie Mae asks for less money from gov't and says it can cover most mortgage losses
The government-controlled mortgage buyer said Thursday it has now set aside enough money to cover the majority of losses stemming from bad loans made from 2005 through 2008.
U.S. Ends Private Talks on Web Rules
U.S. officials called off closed-door talks with lobbyists aimed at reaching a compromise on ways to regulate Internet traffic, saying they couldn't reach a solution.
China looks to US, others for more corn to feed livestock; food prices could rise worldwide
China could be about to increase its corn imports, offering American farmers a chance for greater profits but making it likely U.S. meat producers who use the grain for feed would have to raise their prices.
Romer resigns as chief of Obama's economic council
Christina Romer, head of President Barack Obama's Council of Economic Advisers, will step down and return to her teaching post at the University of California, White House officials said on Thursday. The resignation will take effect on September 3.
Dollar, Euro Weaken on Yen After Weak Jobs Report
The dollar broke below 86 yen to as low as 85.72 yen in the wake of the disappointing jobs report.
Wheat prices soar. Are bread prices next?
The price of wheat has surged more than 80% from its seven-month low in June. Prices continued to rally Thursday, surging to their highest level since August 2008.
Healthy profits, few jobs: How long can corporate America’s profit rebound continue?
The quarterly results show that American profits are already back to 11% of GDP.
Defying gravity and history: Despite dire predictions of a repeat of the 1930s, trade is bouncing back
There is even some evidence that activity has rebalanced from the lopsided trade pattern that existed just before the crisis.
U.S. Stocks Tumble After Weaker-Than-Estimated Jobs Report
U.S. stocks tumbled, paring a weekly advance for the Standard & Poor’s 500 Index, after weaker-than- forecast growth in company payrolls added to evidence the economic recovery is slowing.
Treasurys gain on payrolls; Fed action seen as more likely
Treasury prices rose Friday, pushing yields on 2-year notes to a record low, after a weak report on the labor market raised expectations that the Federal Reserve may take steps next week toward using monetary policy to support the faltering U.S. economy.
2 Top Economists Differ Sharply on Risk of Deflation
The split between the chief economists, whose work helps inform trading strategies recommended to investors by their firms, echoes a broader and sometimes fiercer debate among academic economists and commentators about the threat posed by deflation and what the government’s response should be.
Industrial production slip unlikely to dent German growth: Italian second-quarter GDP grows 0.4%; Spanish GDP growth seen at 0.2%
Industrial production in Germany fell in June, but the unexpected decline isn't likely to have put a major dent in second-quarter growth for Europe's largest economy, economists said Friday.

Blogs
Private Enterprise Does It Better
Why freedom and responsibility triumph over regulation and central planning.
Romer Steps Down from Council of Economic Advisors
While working for Obama, she was a chief architect of the stimulus program, a strong advocate for more government spending, and a believer that government should be in the driver's seat of the economy.
We Aren’t Exaggerating When We Rail Against Threats to Economic Liberty
Oregon officials told a 7-year-old with a lemonade stand that she needed to obtain a temporary restaurant license or incur a fine.
Rethinking Birthright Citizenship
Washington has apparently rediscovered a legitimate part of the immigration debate, one often treated as the untouchable third rail of the issue—birthright citizenship for children of illegal aliens and foreign visitors.
Energy Subsidies Prove Unsustainable
When faced with a need for drastic budget cuts and job creation, countries such as Spain, the United Kingdom, Germany, France, and the Czech Republic have all made the decision to reduce subsidies for green energy programs such as wind and solar energy.
It’s Official: Medicare’s Finances Shadowed by Uncertainty
The 2010 report shows that Medicare has a $30.8 trillion shortfall. Last year it was $38 trillion. Big improvement, right? Not so fast.
The Obama Tax Hikes, Another Step Toward a European Welfare State
The message to the U.S. economy’s job creators from this Administration and Congress is clear: You can expect higher spending, higher taxes and higher deficits for years to come.
What Recovery Summer?
The Obama Administration announced “Recovery Summer” in June to highlight the expected gains in jobs and economic strength resulting from Obama’s stimulus. Well, maybe next summer.
Summertime Blues for the Taxpayer
Sens. Tom Coburn (R-OK) and John McCain (R-AZ) have put out an excellent report on the 100 most wasteful projects funded in President Obama’s $862 Stimulus plan.
The High Cost of Over regulating Food
Intelligent food safety regulation is necessary. But unnecessary food safety regulation hurts everyone.
Payroll Data and a Deeper Dive into Checking Out
The weekly finale of the world’s wildest reality show is upon us and the plot thickens as our pulse quickens. The top story is the jobs report.
Economists React: ‘The Great Stall’ Takes Hold
Economists and others weigh in on the decline in U.S. jobs.
Maybe We Should Prohibit the Wheel, Too
Never mind that until the current downturn U.S. manufacturing output was at an all-time high and still growing. Even now it remains the largest in the world. The lie of U.S. manufacturing decline – repeated ad nauseam – conveniently paves the path for greater government control over the economy.
State/Local Job Cuts Accelerate
State and local governments shed 48,000 jobs in July, the biggest drop in a year and almost double last month’s drop, according to today’s employment report.
President Obama's Pro-Union Stance
"The real threat to a robust recovery on the labor side has come from employer and entrepreneurial fears that once the economic environment improves, a Democratic Congress and administration will pass pro-union and other pro-worker legislation that will raise the cost of doing business and cut profits. In this way the obvious pro-union-pro-worker bias of the present government has contributed to a slower recovery, especially in labor markets."
Broader U-6 Jobless Rate at 16.5%: May Be Headed Higher
The comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs.
Housing Insanity
It's true that this particular program is small--I don't think the economy is going to be brought to its knees by several hundred houses. The important thing, however, is that this is how the government thinks about housing.

Research, Reports & Studies
Need for Moratorium Mitigated by New Oil Spill Response Capacities
In the wake of the Deepwater Horizon disaster, the Obama Administration initiated a moratorium on deepwater oil exploration that impacted approximately 33 ongoing operations.
2010 Social Security Trustees Report Continues to Show the Urgency of Reform
The debate about whether Social Security faces a problem and needs to be fixed is over. The 2010 Trustees Report shows that the program faces massive permanent annual deficits starting in just five years.
Transitional Dynamics of Dividend and Capital Gains Tax Cuts
… studies the impact of the 2003 dividend and capital gains tax cuts.
Kauffman Economic Outlook: A Quarterly Survey of Leading Economics Bloggers
This paper reports the results of a survey of top economics bloggers. The survey was conducted in mid-July 2010 by soliciting input from among the top 200 economics bloggers as ranked by Palgrave’s Econolog.net.

Economists’ Comments & Opinions
When Labor Is Capital: The Limits of Keynesian Policy
The economic mystery of 2010 is the persistence of high unemployment, in spite of stimulus that follows the prescription of the prevailing Keynesian orthodoxy. Here’s an alternative to that orthodoxy.
Education jobs bill is motivated by politics
As of last school year, the money for 5.5 percent of the 6 million K-12 jobs nationwide came from Washington through the 2009 stimulus; the new money reinforces this dangerous dependency.
Washington Wages War On Investment
Will higher tax penalties on investment really spur jobs and faster economic growth? Most commentators would say no. It's really a matter of economic common sense. But Tim Geithner says, Yes!
Rewriting The History Of The '30s To Justify More Spending In 2010
Liberal economist Paul Krugman is beating the debt drum to ward off recession relapse. Little wonder. He finds himself trapped between the economics and politics of a still-struggling economy. To extricate himself, he is rewriting the history of the 1930s. The problem is that what he is not telling us is far more important than what he is.
McCollum v. ObamaCare
The federal Medicaid program, he notes, could soon be eating up 36% of Florida's budget—and that's before ObamaCare's new costs. Federal health, education, environmental and labor mandates are chipping away at the states' ability to keep their taxes low, to grow jobs, and to devote money to their own priorities.
Not So Golden
Massive debts, bickering politicians, a confusing and inept legislative process: Welcome to California.
SALTSMAN: Refresher course in personal finance
Congress is spending us toward national default.

July 2010 Employment Situation Hearing

"Unfortunately, today we received more bad news for American workers and their families. The unemployment rate remained elevated at 9.5 percent. Total non-farm payroll employment decreased by 131,000. After excluding the layoffs of 143,000 temporary Census workers, private sector payroll job growth remains anemic at 71,000. At this slow pace it will take much of the decade to return to normal employment levels.

The University of Michigan's July Index of Consumer Sentiment fell dramatically by 10.8 percent to 67.8, the lowest level in a year. The index of Consumer Expectations fell even further to 62.3, the lowest level since March of last year.

Along with the failure of the massive Democratic stimulus to put people back to work, families and businesses fear the dangerous levels of debt incurred by this Congress and a host of job-killing, anti-growth policies coming out of Washington including higher taxes, higher energy prices, burdensome regulations, and constant bailouts of special interests." - Congressman Kevin Brady, Ranking Republican House Member, Joint Economic Committee

Congressman Brady's opening statement to Dr. Hall, in reference to the Employment Situation Report for July 2010

See the full Employment Situation Summary Report ---July 2010

Graph of the Day
The Obama Tax Hikes: Killing Job Creation
See: Retailers Suffer Lazy Days of Summer
GALLUP: U.S. Underemployment Steady at 18.4% in July

Book Excerpts
"For the unemployed to be granted support by the government or by the unions only serves to enlarge the evil. If what is involved is a case of unemployment springing from dynamic changes in the economy, then the unemployment benefits only result in postponing the adjustment of the workers to the new conditions." –Ludwig von Mises, Liberalism: the classical tradition (1927, c2005)

Did You Know
For the last six years Mississippi has been the fattest state in the nation., The Centers for Disease Control and Prevention reported this week that 34.4% of Mississippi adults are obese.

8/5/10 Post

BUZZ: Show Me ObamaCare

News
SC gets $138 million in mortgage assistance
The Obama administration on Wednesday announced that it has approved mortgage-assistance proposals submitted by state Housing Finance Agencies in South Carolina, North Carolina, Ohio, Oregon and Rhode Island.
Geithner Defends Plan to Let Tax Cuts for Wealthy Expire
Mr. Geithner argued Wednesday that the wealthy tend to save more of their tax breaks than do other groups, so in letting their taxes rise there would be minimal impact on economic activity.
US jobs market still bleeding despite private hirings
A key US government report Friday is expected to show already high unemployment nudging up as firms remain reluctant to hire in large numbers.
Reality sets in for states on Real ID
Driver's licenses must meet rules.
In Germany, a Broad Recovery Is Under Way
German exports are booming again and so is employment. The country’s unemployment rate is 7.6 percent, almost at the pre-crisis level, and down from 9.1 percent in January.
Congress: Living High on the Backs of Taxpayers
As the rest of the country suffers, congressional perks and benefits are on the rise, costing taxpayers $4.66 billion a year—is it time for Congress to take a pay cut?
Ireland's unemployment rate rises to 13.7 percent as university students join welfare lines
Ireland's unemployment rate has reached a 16-year high of 13.7 percent as idle university students and laid-off professionals joined the welfare lines, the Central Statistics Office reported Thursday.
Congress Set to Boost Aid to States
Congress took a decisive step Wednesday toward finalizing a $26 billion bill offering aid to states, a surprise win for Democrats keen to demonstrate they're taking action on an economy showing signs of weakness.
The breakfast index: The cost of breakfast rises
The raw ingredients for breakfast in much of the rich world have increased in price by 25% since the beginning of June.
Billionaires to give away fortunes
Half of money will go to charity.
Euro higher after inspectors report Greek progress
The euro gained ground against the dollar on Thursday as European and International Monetary Fund inspectors said Greece has made considerable progress in dealing with its financial crisis
Hey, Dude, Where's My Job?
Minimum Wage Jump Teaches Teens Harsh Lessons.
European Central Bank, Bank of England hold steady
The European Central Bank and the Bank of England both left monetary policy unchanged Thursday, with key lending rates remaining at record lows.
State aid bill to bring House back
The sudden turnaround followed twin 61-38 Senate votes in which Maine Republican Sens. Susan Collins and Olympia Snowe joined in support of the $26.1 billion measure after Democrats agreed to pay for the costs with cuts from their own priorities, including food stamps for the poor.
In GOP Majority, Committees May Face Cuts
House Republican leaders are considering restructuring and possibly shrinking committees if they retake the majority this fall, according to several House GOP sources familiar with the discussions.
GOP Uses Health Care Playbook for Tax Cuts
Senate Republicans stepped up their withering criticism of Democrats over taxes, believing they have a line of attack that could prove as effective with voters in the midterm elections as their opposition to health care reform was last year.
GOP Marks Off Common Ground for Obama
House Republicans have identified some issues they might be able to work with President Obama on next year if the November elections deliver a GOP majority. But a good deal of partisan distrust would have to be overcome.
Prognosis guarded ahead of annual financial checkup for Medicare and Social Security
Seniors' groups are lobbying against benefit cuts, while conservatives say they will oppose tax increases, creating a difficult political environment for compromise.
So long, new deepwater drilling regulations
Democrats in the Senate rejected taking up a new oil spill response bill because of a dispute over who foots the costs of future spill cleanups and more importantly, how much those parties -- largely oil and exploration companies -- will pay.
What would FDR do? A Roosevelt speculates
Despite the fact that just about everyone has an opinion on it, the jury's out on whether President Obama is a latter day Franklin Delano Roosevelt.
Jobless claims jump to 3-month high
There were 479,000 initial jobless claims filed in the week ended July 31, up 19,000 from a upwardly revised 460,000 the previous week.
Tax cut squabble grows louder
Washington's big debate - whether or not to extend the Bush-era tax cuts – appears to be headed for a showdown when Congress returns from its summer break next month.
Back-to-school shopping starts slowly
Consumers are continuing to keep tight control of their spending as the economic recovery tugs along at a slower pace than most analysts predicted earlier this year.

Blogs
Secondary Sources: Taxes and Small Business, Exports, Technology and Jobs
A roundup of economic news from around the Web.
The Limits of Policy Analysis
Naturally, this has put me in mind of just how hard it is to predict policy outcomes--how easy it is to settle on some intuitively plausible outcome, without considering some harder-to-imagine countervailing force.
Compensation Study: Employers Pay More, Employees Make Less
Employers might be paying more for compensation but employees aren’t taking home the extras, according to a new study.
Great Moments in Government-Run Healthcare
What really astounds me is not that a Swedish man sewed up his own leg after waiting for a long time in a hospital... The really disturbing part of the story is that the hospital then reported the man to the police.
Bankruptcy Filings Drop in the South
While filings were up 9% in July compared to the same time a year earlier, they were down in a handful of southern states, such as Tennessee and Mississippi.
Primaries Show Continued Republican Enthusiasm
There were no huge surprises in primaries held yesterday in Kansas, Michigan, and Missouri. But one thing was clear. Many more voters showed up for the Republican primaries than on the Democratic side.
Worth a thousand words
After 50 years of communism, life expectancy has gone up dramatically (about 25%) in both countries. But now Portugal is more than twice as prosperous as Cuba.
Earnings, Not Lack of Social Security, Increased Past Poverty
...the real reason that half of the elderly lived in poverty before Social Security was that about half of everyone lived in poverty then, for the simple reason that the country was a heck of a lot poorer.
Imaginary Savings Used to Justify $26-Billion in Spending
Using the classic Washington fib that “It’s paid for,” Congress is spending an extra $26-billion to bail out state governments.
Extreme Judicial Activism on Marriage
Governments derive their just powers from the consent of the governed. The people of California, and the United States, have made clear in numerous ways that they have not consented to the redefinition of marriage.
The Obama Elite vs The American People
The facts are becoming quite clear. Kagan, Walker, Gibbs, and Obama all give the same weight to the will of the American people as expressed at the ballot box: “Nothing.”
The Two GOPs
As the fall elections approach, two factions within the congressional GOP have emerged. One is short-term oriented and just wants to return the GOP to power in Congress. The other is more ideas driven and views the upcoming election as an opportunity to push for substantive governmental reforms.
The Failure of Socionomics, Part 2
Even when analyzed on its own terms, socionomics fails rather badly as a social theory and as a tool of stock market prediction.
Why Government Spending, Public Sector Jobs Are Burden to Society
Society derives certain benefits from these expenditures but beyond a certain point, government spending, public sector employees have negative effects.
Five Reasons to Be Bullish
Five Reasons to Be Bullish
Financial Virus Permeates the System
Some sharp minds on the Street are "going dark" and removing themselves from the markets.
Once Again, the Social Security Trust Fund Has No Money in It
Almost as soon as the 2010 Social Security trustees report comes out today; various groups will claim that the program is fiscally healthy because its trust fund won’t run out until sometime in the 2030s. Sadly, the reality is very different.

Research, Reports & Studies
Going Soft: How the Rise of Software Based Innovation Led to the Decline of Japan's IT Industry and the Resurgence of Silicon Valley
...examines the change in the nature of Information Technology (IT) and the effects it has on the performance of the IT industries in the United States and Japan.
An Update on State Budget Cuts : At Least 46 States Have Imposed Cuts That Hurt Vulnerable Residents and the Economy
With tax revenue still declining as a result of the recession and budget reserves largely drained, the vast majority of states have made spending cuts that hurt families and reduce necessary services.

Economists’ Comments & Opinions
Your Stimulus Dollars at Work: Going to Places Regardless of Economic Need
"Hard-hit Florida ranks last in stimulus benefits per resident despite having the nation's fifth-highest unemployment rate. Nevada has the nation's worst unemployment — 14.2% — but ranks 46th in stimulus benefits."
What if the jobs don't come back?
Based on the history, pre-recession unemployment rates won't be seen again until 2027 as idled workers find it harder and harder to land jobs.
Squeezing the Rich Is Poor Way to Spur Growth: Commentary by Caroline Baum
To ignore evidence that the rich behave differently is silly. The government can’t get more blood from a stone, yet it keeps trying.
POWELL: The unemployment president
Obama joins tax hikers hall of shame.
Buffett on World's Growing Wealth
"We're in the early stages of fairly widespread enormous wealth around the world. The world will get more prosperous as we go along. Human potential has come nowhere close to being fully realized. As people exercise that potential and governments allow it to thrive you're going to have more and more wealth throughout the world."
Private Enterprise Does It Better
Free enterprise does everything better. Why? Because if private companies don't do things efficiently, they lose money and die. Unlike government, they cannot compel payment through the power to tax.
The Public Option Rises – Again
Liberals, who see the public option as the first step toward their goal of a single-payer government health care system, never truly abandoned the idea.
Saying No Is Not Nihilism
It's not just tea partiers that are seeking smaller government these days.
Did the Feds End the Great Recession?
A report released last week by prominent economists Alan Blinder and Mark Zandi and it says what the Obama Administration had hoped all along. So, with all due respect to Blinder and Zandi, I'll ask for a little patience to summarize my main criticisms of their report:

Graph of the Day
SeekingAlpha: The number of unemployed in Germany decreases while the number of the unemployed in the United States continues to rise
See: The Crisis in Deeply Underwater Mortgages, Unemployment Edition
See also: The Truth About the 2001-2003 Tax Cuts

Book Excerpts
"Just as there cannot be a uniform price for all kinds of labour, an equality of demand and supply for labour in general cannot be secured by managing aggregate demand. The volume of employment depends on the correspondence of demand and supply in each sector of the economy, and therefore on the wage structure and the distribution of demand between the sectors. The consequence is that over a longer period the Keynesians remedy does not cure unemployment but makes it worse." –F.A. Hayek, The Collected Works of F.A. Hayek, Vol. 6 (1999)

Did You Know
Some wasteful stimulus spending:
• $62 million for a tunnel to nowhere in Pittsburgh, PA that even Governor, Ed Rendell called “a tragic mistake”
• $1.9 million for international ant research
• $529,648 to study the effects of local populations on the environment…in the Himalayas
• $700,000 to study why monkeys respond negatively to inequity
• $456,663 to study the circulation of Neptune’s atmosphere
• $200,000 to help Siberian communities lobby Russian policy makers

8/4/10 Post

BUZZ: CBS Poll: 81% Say U.S. On Wrong Track

News
Private sector sees job gains in July
Private sector employment rose slightly more than expected in July adding 42,000 jobs, compared to the mere 19,000 jobs added in June.
Toyota earnings up 27% despite recalls in U.S.
Despite ongoing recalls in the U.S., Toyota posted a 27% increase in net revenue for its fiscal first quarter.
Futures turn higher after jobs report
With the release of the private sector job report yesterday, U.S. stocks futures erased earlier losses and moved higher.
Yen Rises to Eight-Month High Versus Dollar on U.S. Slowdown, Fed Outlook
The yen touched an eight-month high against the dollar on speculation growth in the world’s biggest economy is slowing and the Federal Reserve may signal additional stimulus measures at next week’s policy meeting.
China seeks to widen gold market
China has moved to liberalize its gold market further, increasing the number of banks allowed to trade bullion internationally and announcing measures that will encourage development of gold-linked investment products.
Oil Falls From Three-Month High on Concerns Over U.S. Recovery
The Energy Department is scheduled to release its weekly inventory report today at 10:30 a.m. in Washington but the report is forecasted to show that U.S. supplies fell for the first time in three weeks.
Geithner: Tax cuts for rich a '$700 billion mistake'
Treasury Secretary Tim Geithner is expected Wednesday to back the idea of letting tax cuts for the wealthiest Americans lapse as a step toward getting the nation's fiscal house in order.
Summer of no love
Thanks to the persistently lousy economy, a succession of major crises and middling distractions it’s turned into Obama’s Summer of No Love.
Democrats Punt Defense Bill in Bid for McCain's Backing
Senate Democrats are putting off consideration of the defense authorization bill until after the summer recess in hopes that Sen. John McCain will be a more agreeable negotiator after his August primary.
Senate Dems Get Help From Governors On State Aid Bill
Senate Democrats are going all out in hopes of winning 60 votes today to cut off debate on legislation that would extend Medicaid assistance to states and avert teacher layoffs, teaming up some of the nation's governors to help push the bill over the finish line.
GOP Senators Decry Stimulus Spending
Sens. Tom Coburn, R-Okla., and John McCain, R-Ariz., today unveiled a report that that identifies 100 projects funded by the $862 billion stimulus package that they contend wastes taxpayer money.
Democrats Likely to Lower Fiscal 2011 Spending Cap to GOP’s Proposed Amount
Senate Republicans may be on track to force the Democratic majority to shave roughly $6 billion from its proposed $1.114 trillion cap on fiscal 2011 discretionary spending.
$100M worth of merchandise seized, 11 indicted in West Coast counterfeit goods bust
The merchandise was illegally imported from China and includes bags, sunglasses and other items labeled with more than 70 brand names such as Gucci, Prada and Nike.
Working 12 months for 11 months pay
Some 22 states had furloughs in the past year, and at least 13 of them plan to continue them into 2011.
Calls for Review of 14th Amendment Gain Some Republican Support
Senate Republican leaders are backing calls for a review of the 14th Amendment’s guarantee of citizenship to the U.S.-born children of illegal immigrants in what critics say is a bid to energize their base going into the midterm elections.
U.S. Savings Rate at Highest Level in a Year
The Commerce Department reported Tuesday that the personal savings rate -- the amount of each paycheck that goes unspent -- jumped to 6.4 percent in June, the highest rate since June 2009. That's a far cry from the heady days of the spending boom when Americans set aside less than 1 percent of their paychecks.
125 Days Late, a State Budget With New Taxes
Lawmakers completed one of the latest budgets in New York State history on Tuesday night, passing a last piece of legislation that will raise an additional $1 billion — in part by increasing taxes on the sale of clothing and on a variety of businesses.
Foreclosed On—By the U.S.
With Bear Assets, Fed Balances Preserving Investment and Helping Borrowers.

Blogs
Secondary Sources: Tax Cuts, Inflation Expectations, Working Mothers
A roundup of economic news from around the Web.
Sentences to Ponder
"A report from Harvard's Kennedy Center last year found that the world could cut global CO2 emissions by about 6 percent simply by scrapping price supports for fossil energy."
Second-Quarter Slowdown Likely Worse Than First Thought
The slowdown in economic growth recorded in the second quarter was likely even less robust than initially reported on Friday, according to new inventory data released today.
How Don Boudreaux Got Hooked on Economics
...the supply curve, the demand curve, and the price ceiling--are the most important three lines in economics.
MBA: Mortgage Purchase Applications increase slightly last week
The purchase index has increased slightly for three straight weeks - but is still 40% below the level of the last week of April (and about 33% below the last week of April using the 4-week average).
With Wallets Thin, Consumers Face Zero-Sum Game
Consumers’ reluctance to spend is a headwind for second-half growth, not quite scuttling the recovery but not providing a strong boost either. Only a better job picture will lighten the mood.
Money and Liberty
...there is a good reason for government to not use a free currency – it’s the best way to tax its citizens without them ever knowing about it.
Tax Cuts vs. Deficits
As Real Time Economics recently noted, ending the tax cuts won’t make a huge dent in the deficit. The Tax Policy Center points to Treasury estimates that show a cost of $199 billion in fiscal year 2011 and $3.7 trillion over 10 years for extending all the tax cuts.
Personal Bankruptcy Filings up 9% in July
Excluding 2005, when the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" was enacted (really a pro-lender act), the record year was in 2003 when 1.62 million personal bankruptcies were filed. This year will be close to that level.
Competition Breeds Success
...road builders do things government workers said “could not” be done. Another story this week provides a similar example from another government-dominated field, K-12 education.
Economists Call for Clarity on Government Policy
A panel of economists Tuesday urged U.S. lawmakers to resolve outstanding uncertainty over tax and other policies to help the sluggish recovery, a difficult assignment for Congress as it heads into a contentious campaign season.
ISM Non-Manufacturing Index shows expansion in July
The July ISM Non-manufacturing index was at 54.3%, up from 53.8% in June - and above expectations of 53.7%. The employment index showed expansion in July at 50.9%.
No Such Thing as a Simple Mortgage
Much of this paperwork is the product of earlier acts designed to help uninformed borrowers deal with the complexity of their loans. If you read and understand all of it, perhaps you do. But there's so much of it that it's relatively easier to overlook something.
Some Links
Robert Barro on "stimulus" and more.
Pending and Existing Home Sales
It is hard to tell from the Pending Home sales index how far existing home sales will fall in July and August.
Obama’s Bogus 8 Million Jobs Saved
By the only objective standard available, President Barack Obama’s $862 billion economic stimulus has been a complete failure.
Tax Cut Myth Busting, Round 2
Bill Gale’s discussion of the five myths about the Bush tax cuts was an unusually slanted piece from a normally straight-shooting liberal economist.
Obamacare Loses Big in Missouri; Voters Reject Individual Mandate
Missouri voters dealt Obamacare a significant setback yesterday, approving a statewide ballot measure with an overwhelming 71 percent of the vote.
Let’s Get the Gulf Back to Work
Lifting President Obama’s job-killing oil ban is only the first step toward economic recovery in the Gulf. The region, and our country, are also in desperate need of oil spill liability reform that sufficiently aligns risk and liability with individual behavior.
Great Moments in Government-Run Healthcare
The bureaucrats in Sweden’s government-run healthcare system obviously were not pleased that he called attention to their failure.
The Failure of Socionomics, Part 1
In the socionomics literature, the tendency to rely on arbitrarily selected anecdotes is proof of the futility of the theory.
The Main Event: Inflation vs. Deflation
Two roads suggest very different courses of action.
Boomer Dynamics, Housing, Jobs Creation, and the Falling Participation Rate
Census firing is about to take back another chunk of census hiring; expect another lousy jobs report this month.

Research, Reports & Studies
Medicare Part D and the Financial Protection of the Elderly
...examines the impact of the expansion of public prescription drug insurance coverage from Medicare Part D on the elderly and evidence of substantial crowd-out is found.
Bureaucratic Tyranny or the Renewal of Self-Government: The Beginning of Centralized Administration in America
Today, we have a government skilled in obfuscation. Elected officials are so intent upon avoiding responsibility that even the “regular Statement and Account of the Receipts and Expenditures of all public Money,” which the Constitution directs to “be published from time to time,” is a multi-volume monster.
RCM: Wells Fargo Economics Group: Personal Income Was Largely Unchanged
Personal income and consumer spending were unchanged in June. Prices declined 0.1 percent, however, which means spending rose slightly after adjusting for falling prices. The saving rate rose to 6.4 percent.

Economists’ Comments & Opinions
Snooki Tanning-Bed Protest Splits Sin From Taxes
The first problem with this is that imposing a tax to improve public health doesn’t always succeed as policy. That’s partly because tax laws can’t keep up with scientific research, says J.D. Foster of the Heritage Foundation.
The Crisis When Our Debt Goes 'Pop'
As the Congressional Budget Office puts it, if the national debt continues to grow out of control, a "growing portion of people's savings would go to purchase government debt rather than toward investments in productive capital goods such as factories and computers; that 'crowding out' of investment would lead to lower output and incomes than would otherwise occur."
Rahn: Evidence and denial
Obama advisers refuse to believe they're failing.
An Age of Diminished Expectations?
In the end, policymakers must remember that whether or not the US and Europe avoid a lost decade depends on their ability to retain productive vitality in their economies, not simply on short-term demand-stimulation measures.
More Fed Power Won't Save the Economy
After failing to catch the last bubble the Fed and Treasury have been selected to stop the next crisis... really?

Graph of the Day
Cato: State debt doubles since 2000
See: Long Way to Go for Recovery
See also: Home Data Slide Again as Tax Credit Expires

Book Excerpts
"In essence, economics is the study of property rights. Without scarce resources property rights are pointless. The allocation of scarce resources in a society is the assignment of rights to uses of resources. So the question of economics, or of how prices should be determined, is the question of how property rights should be defined and exchanged, and on what terms." –Armen Alchian, Pricing and Society (1967)

Did You Know
About a third of people in nine states were obese in 2009, a dramatic increase from 2007, when only three states had obesity rates that high. Obese Americans cost the nation an estimated $147 billion in weight-related medical bills in 2008, double the amount a decade ago, government data released last summer show. Obese people have medical bills $1,429 a year higher than normal-weight people.

8/3/10 Post

BUZZ: Factory Growth Slows Around World

News
Geithner: U.S. unemployment could rise
Treasury Secretary Timothy Geithner said the U.S. unemployment rate could rise for two months before it drops, potentially deepening Democrats' problems in the midterm elections.
White House wants Housing Reform
The U.S. Treasury Department will hold a “Conference on the Future of Housing Finance” on Aug. 17, where “leading academic experts, consumer and community organizations, industry groups, market participants, and other stakeholders” will discuss the right approaches to housing.
Treasury's Geithner: Dramatic Reforms Will Be Needed For GSEs
Treasury Secretary Geithner believes that "dramatic" changes will be necessary for the structure of Fannie Mae and Freddie Mac.
Geithner defends Obama policy on tax cut extension
Treasury Secretary Timothy Geithner said Tuesday it would be "deeply irresponsible" for the Obama administration to support a wholesale extension of Bush era tax cuts, including breaks for the wealthy.
Slow and Slower
Real GDP increased at a 2.4% annual pace in the second quarter—less than forecast and the lowest rate since the third quarter of last year.
Americans who swap passports
In order to avoid taxes, some Americans are renouncing their U.S. citizenship in the U.K.
Stimulus Slammed: Republican Senators Release Report Alleging Waste
Senators Coburn and McCain released a report that argues that the stimulus is ridden with wasteful projects that will not create jobs.
Fed Likely to Pass On More Stimulus Amid Signs Economy Weak
Federal Reserve policy makers signaled they will probably pass on providing more stimulus at their Aug. 10 meeting and wait to see if signs of weaker economic growth persist.
P&G Profit Forecast Trails Estimates as Shoppers Limit Spending
Procter & Gamble Co., the world’s largest household-products maker, forecast first-quarter profit that fell short of analysts’ projections as some consumers limit spending on name brands.
Pending Sales of Existing U.S. Homes Decrease 2.6%
The index of pending home resales dropped 2.6 percent from the prior month, figures from the National Association of Realtors showed today in Washington.
Oil Rises to Three-Month High Above $82 Before U.S. Supply Data
Crude oil rose above $82 a barrel as the dollar weakened on speculation the U.S. may require additional stimulus measures to boost the economic recovery.
Greece Passes First Deficit Test as Budget Challenges Greece Passes First Deficit Test as Budget Challenges Mount
Greece’s austerity drive may pass its first test this week as a European Union-led mission prepares to dole out more rescue funds for a government trying to cut the euro-region’s second-biggest budget gap and weather a recession.
MasterCard Declines as Growth in Processed Transactions Stalls
MasterCard Inc. fell in New York trading after the company said growth in the number of transactions on debit and credit cards stalled in the second quarter.
U.S. savings rate hits highest level in year
Income was unchanged in June, failing to show growth for the first month since July 2009. Consumer spending was also flat.
Yields on 2-year Treasury notes fall to record low
Treasury prices rose on Tuesday, pushing yields on 2-year notes to a record low, after a published report said that the Federal Reserve may buy more debt.
Australia keeps rates steady, as expected
The Reserve Bank of Australia kept its benchmark cash rate unchanged at 4.5% Tuesday, as widely expected, citing in-line growth and inflation.
Spending, Income Flat in June
U.S. consumer spending was flat in June as incomes stopped growing and prices remained subdued, pointing to a weaker economy.
99 Weeks Later, Jobless Have Only Desperation
In June, with long-term unemployment at record levels, about 1.4 million people were out of work for 99 weeks or more, according to the Bureau of Labor Statistics.
Budget woes snare state aid bill
While scrambling to save pre-election jobs assistance, Senate Democrats are quietly conceding that Republicans have already won and big swaths of President Barack Obama’s 2011 budget will be cut when Congress returns after its summer recess.
Bid For Medicaid, Teacher Funds Kicked Further Down Road
A bid to approve increased Medicaid and teacher funding failed yet again in the Senate Monday night, after CBO said the legislation was not fully paid for.
Manufacturing keeps recovery afloat with 12 straight months of growth and talk of hiring
It's a rare bright spot in an otherwise troubled economy: The nation's manufacturing sector has now grown for a solid year, and more of its companies say they're ready to hire.
Iffy Senate outlook for aid package to state governments, local school systems
President Barack Obama's Senate allies are taking one last run at advancing what's left of his tattered jobs agenda. The $26 billion spending measure would help states and local school boards with their budget problems.
Health reform: What you're not getting
Under reform, health plans that existed on March 23, 2010 are "grandfathered," meaning they are exempt from implementing some of the law's new provisions. Plans that lose this status will have to apply all of the changes required by the law.
The Wrong Fight
People who want to sell more American-made goods to China keep prodding Beijing to raise the value of the yuan against the dollar. But prodding China to let the yuan appreciate won't help much. Americans won't buy fewer Chinese imports if the yuan appreciates. China won't buy more American products.

Blogs
Secondary Sources: Fed Watch, Bond Vigilantes, Deflation
A roundup of economic news from around the Web.
Political Futures Market: Dems to Lose House
The political futures market at Intrade.com provides additional support for Barone’s prediction that the Democrats will lose control of the House this fall. When President Obama took office in January 2009, the Intrade odds were only 15 percent that the Republicans would control the House in 2010, but those odds have been consistently rising ever since...
James Manzi on Experimental Social Science
One of the lessons that is implicit in the essay (and that I think that Manzi ought to make explicit) is, "Don't trust one-offs." That is, do not draw strong conclusions based on a single experiment, no matter how well constructed. Instead, wait until many experiments have been conducted, in a variety of settings and using a variety of techniques.
Economists React: Cautious Consumers Save More
Economists and others weigh in on the flat readings on personal income and spending.
Preview: Auto Sales, Pending Home Sales, Aug 10th FOMC Meeting
The consensus is for a slight decline in the pending homes sales index for June, after the 30% drop decline in May.
A Look Inside the Fed’s Balance Sheet
Assets on the Fed’s balance sheet contracted a bit in the latest week, dropping to $2.308 trillion from $2.315 trillion. Most of the decline came from a decline in the value of the Fed’s mortgage-backed securities.
Pending Home fall to record series low in June
This decline was expected and suggests existing home sales - reported at closing - will fall sharply in July and probably a little further in August.
After Scorching Year-Long Run, Factories Chill Out
The two most positive items in the report were pickups in employment and exports. The gains continue previous trends: Factory jobs have been leading the modest pace of hiring so far this year, and faster recoveries in emerging markets are pushing up foreign demand.
Administration Still Double-Counting Medicare Cuts
Last year, the administration grew fond of "double counting" the savings from the Medicare cuts in health care reform--claiming that they'd reduced the deficit, paid for reform, and extended the life of the Medicare trust fund. Eventually, Republicans got around to asking for an analysis from the CBO, which told us what anyone who ever took first year accounting already knew: this is not true. If you used the savings to "pay for" the new spending, you can't also say that you've used them to shore up the finances of Medicare.
Another Victory on the Road to Repeal
In total, 33 states have mounted legal and legislative challenges to Obamacare. The American people are going to continue to fight this intolerable act in Congress, in the courts and in the states. It may take some time, but they are going to win.
Lift Liability Caps, Promote Safety, and Continue Drilling
The Heritage Foundation’s solution accurately assigns risk, holds oil and gas companies fully liable, promotes safety, and guards against frivolous lawsuits. To achieve this, Congress must do the following:
Liberty Wins First Skirmish in the Obamacare Legal Battle
Judge Henry Hudson of the Eastern District of Virginia denied the government’s motion to dismiss Virginia’s legal challenge to Obamacare. Notably, Judge Hudson agrees that the government’s assertion of Commerce Clause authority for the individual mandate is unprecedented:
The Fed Plays Stick-Up!
Hints from the beltway battle consumer stagnation.
Seven ETFs to Play Deflation
As deflationary concerns continue to make headlines among investors, dividend-paying investments, interest-bearing investments, and cash become more appealing.
Why Deflation Isn't Bad
Some of the most prosperous times in American history were during periods of deflation.
Why Anyone Who "Knows" When the Economic Recovery Will Occur Is Wrong
Job creation is idea-driven, not data-driven. And no amount of information can change that.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: ISM: Growth Moderates, Jobs Positive, Prices as Well
Moderating gains in the ISM index continues to suggest slower growth in the second half of this year. July’s ISM index at 55.5 further supports the slowdown outlook. On the plus side, prices have moderated as well.
State Budget Gaps and State Budget Growth
...states whose per capita spending levels increased the most over the last two decades had larger percentage budget gaps in FY2010. Furthermore, states whose policies permit economic freedom and states with strict balanced budget requirements experienced smaller budget gaps. Taken together, these results suggest that spending restraint, economic freedom, and institutional rules that ensure a strict balanced budget requirement seem to be a more reliable path to fiscal balance than tax increases.
Restoring Trust In the Highway Trust Fund
The urgent need to rebuild and modernize vital Interstate highway infrastructure is bogged down by politics and the current system’s failure to prioritize projects that deliver the most benefits.
Oil Spill Liability: A Plan for Reform
Current law states that oil or gas companies do not have to pay more than $75 million in liability costs for accidents they cause—no matter how great the damages.
Tax Cuts Are Still Not Driving the Budget Deficit: The Critics Fall Short
With critics regularly blaming the 2001 and 2003 tax cuts for deficits caused more by runaway spending and a sluggish economy, The Heritage Foundation recently released “The Three Biggest Myths About Tax Cuts and the Budget Deficit” to set the record straight.
Financial Conditions Indexes: A Fresh Look after the Financial Crisis
Starting in August of 2007, the U.S. economy was hit by the most serious financial disruption since the Great Depression period of the early 1930s. This paper examines why financial condition indexes can be a useful tool for both forecasters and policymakers.
We Do Not Have Liftoff
Nearly two years of zero percent interest rates, a $1.2 trillion expansion of the Federal Reserve's balance sheet, and a nearly $800 billion fiscal stimulus package in February 2009 have failed to produce sustainable growth.

Economists’ Comments & Opinions
Geithner: Welcome to the Recovery
While the economy has a long way to go before reaching its full potential, last week’s data on economic growth show that large parts of the private sector continue to strengthen.
The President's Four Rotten Policy Planks
High taxes, fair trade: no wonder the U.S.S. Obama rides low in the water.
Reform Bond Subsidies to Improve States' Behavior
The federal government didn't create the crisis in state and local finance, but it has enabled it. It can stop the enabling by removing incentives for states to ignore their long-term budget problems, and by putting some common-sense limits on the use of tax advantaged borrowing.
Rewriting Fannie Mae History
The effort is underway to resurrect the biggest housing losers.
The Federal Reserve is Running out of Options to Spark the Economy
The Fed has only a few remaining options for spurring economic growth and job creation or warding off a debilitating period of deflation, but they are unlikely to work.
The Next Sovereign Debt Crisis
Europe’s PIIGs are in a poke, but U.S. states and municipalities risk their own sovereign debt crisis.
Yes, Virginia . . .
. . . ObamaCare is unconstitutional.
Has Congress Become Useless?
Congress ducks responsibility because We the People have let them get away with it for far too long.

Graph of the Day
American Thinker: Three Years of GDP Data Revised in One Month By Dept. of Commerce
PODCAST: Brady on the State of the Electorate
See: What Americans Love & Hate about the USA
See also: July Personal Income and Spending

Book Excerpts
"The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gathered, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty." –Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776)

Did You Know
"For losing all of their World Cup games, including a 7-0 defeat at the hands of Portugal, the North Korean soccer team was subjected to six hours of public shaming."

8/2/10 Post

BUZZ: Economic Outlook: Data to show EU and US divergence

News
House approves bill to crack down on offshore drilling
The legislation, which passed 209-193, has yet to be taken up in the Senate, where partisan disagreements will likely delay final consideration of a joint House-Senate bill until after the August congressional recess.
Those predicting a double dip recession may be helping to cause one by raising consumer anxiety
Most mainstream economists agree the recovery road will be long and bumpy, but probably without leading into double-dip territory. But there are plenty of other voices warning of grimmer times ahead.
Former Federal Reserve chief Alan Greenspan says economic recovery is modest but 'in a pause' Greenspan says long-term unemployment is pulling the economy apart even though large banks are doing much better and large companies are in excellent shape.
Why fears of hyperinflation won't die
Deflation may be on Federal Reserve Chairman Ben Bernanke's tongue, but inflation is wagging in at least one corner of the economy.
China manufacturing growth slows
China's manufacturing sector is still growing, but the pace is starting to slow. That could set off some alarm bells in the financial markets about the state of the global economy.
The red-hot debate over raising the retirement age
Of all the flash points in the debate over Social Security, few generate as much heat as raising the retirement age. It's time to lay bare the arguments.
Manufacturing expands in July, but at slower pace
The Institute for Supply Management (ISM) index of U.S. manufacturing dropped to 55.5 in July from 56.2 in June. Any score above 50 indicates growth in the manufacturing sector.
Economy Gets Healthier as Company Yields Narrow to Treasuries
For all the concern about another recession, the outlook for America’s economy is looking brighter in the bond market, where investors are accepting the lowest yields since 2004 to lend companies money.
Little improvement in labor market seen in July
The U.S. economy likely added about 100,000 private sector jobs in July. This will be slightly above the 83,000 private sector jobs added in June.
Bernanke says states should build bigger buffers
Federal Reserve Chairman Ben Bernanke on Monday called for states to build up larger rainy-day funds as he said consumer spending is set to sustain the economic recovery.
Geithner: Bank reform cannot move at 'glacial' pace
Treasury Secretary Timothy Geithner said that Bank and securities regulators need to move quickly to write rules based on sweeping bank reform legislation approved in the wake of the financial crisis.
Hopes for a Rebound Show a Modest Increase
Executives at U.S. Companies Expect Improvements in Revenue in Next 12 Months, but Hiring Is Tentative, Survey Says.
Hurdles Deter Obama’s Pledge to Double Exports
in hundreds of pages of comments filed last week with the Commerce Department, industries as varied as winemaking and long-haul trucking identified dozens of smaller hurdles — including regulatory barriers and a shortage of customs officers — that they claim hinder trade.
Investors on Defense as Fed Considers New Game Plan
The combination of a lower growth rate and a downward trajectory puts the economy on a worrisome path. The Conference Board, a New York-based consultancy, expects GDP growth will slow to a 1.6% pace in the second half of this year.
Prime Numbers: State Woes Threaten National Economy
Nearly two-thirds of 42 economists surveyed by the Associated Press viewed the intense pressure on state and local finances as either a “significant” or “severe” threat to the national economy.
Dollar Could Lose if U.S. Economy Slips More
...if data continue to point to a slowing U.S. economy, the dollar should also weaken against the yen, against which the dollar dropped to an eight-month low on Friday.
Economic Reports This Week
Data this week includes the Institute for Supply Management manufacturing index for July and construction spending for June (Monday); personal income and spending for June, pending home sales for June and factory orders for June (Tuesday); ADP employment for July and the I.S.M. service index for July (Wednesday); weekly jobless claims (Thursday); and unemployment for July and consumer credit for June (Friday).
Business Tax Surprise in Health Care Law
Tucked into the new health care law is a requirement that could become a paperwork nightmare for nearly 40 million businesses. They must file tax forms for every vendor that sells them more than $600 in goods. The goal is to prevent vendors from underreporting their income to the Internal Revenue Service. The government must think vendors are omitting a lot because the filing requirement is estimated to bring in $19 billion over the next decade.
Rep. Ryan pushes budget reform, and his party winces
He is determined to persuade colleagues to get serious about eliminating the national debt, even if it means openly broaching overhauls of Medicare and Social Security.
Bernanke faces US growth mysteries
There are two ways to read the revisions. One is that the economy is even further from using its full capacity than previously believed – an argument for more easing by the Fed. The other is that the economy’s capacity to grow is less than thought.
Turbines Too Loud? Here, Take $5,000
Patricia Pilz of Caithness Energy, a big company from New York that is helping make this part of Eastern Oregon one of the fastest-growing wind power regions in the country, is making a tempting offer: sign a waiver saying you will not complain about excessive noise from the turning turbines — the whoosh, whoosh, whoosh of the future, advocates say — and she will cut you a check for $5,000.

Blogs
Welfare in the Bronx: Personal Responsibility Is Still the Key
Remarkably, the amount government spends on means-tested welfare is four times what would be necessary to lift every poor person out of poverty.
It’s About the Spending, Speaker
The solution to our economic troubles is not higher taxes, it is less spending: If the federal government managed to return to the per-household spending level of the Reagan administration, the budget would be balanced by 2012 without any tax hikes.
Federal Judge Denies Obama Administration’s Motion to Dismiss Virginia’s ObamaCare Lawsuit
Virginia’s lawsuit challenging the Obama administration’s health care reform law has cleared its first legal hurdle.
With Tax Increases Looming, CBO Does About-Face and Frets about Deficits and Debt
Now that tax increases are the main top the CBO has done a 180-degree turn and has published a document discussing the negative consequences of too much deficits and debt.
Secondary Sources: Middle Class Crisis, Government Jobs, Resilient Texas
A roundup of economic news from around the Web.
Health care and revenue competition in Britain
...although full details are not yet clear, it seems doctors will be much more in charge, in a decentralized manner.
Number of the Week: Default Repercussions
25%: The share of Americans with a credit score of less than 600.
Negative Equity in Underwater Homes
"There are 14.75 million underwater homes and 4.1 million of these have more than 50% negative equity (the homeowners owe 50%+ more than their homes are worth)."
Q&A: Romer Reacts to GDP Data
Christina Romer, who chairs the president’s Council of Economic Advisers, spoke with the Journal about the report. She said that there is room for the government to do more to promote economic growth and jobs, and noted some encouraging signals, including a higher savings rate that indicates much of the necessary consumer retrenchment may be past.
Ending Austerity in the Austerity Debate
What is particularly interesting about this work is that it shows that important distortions can be produced by excessively low interest rates before either “full employment” is reached or the price level begins to rise at all.
Democracy as Cure to Resource Curse
...two International Monetary Fund economists, Rabah Arezki and Markus Bruckner, parse the data to find an intriguing difference among 30 commodity-exporting developing countries, between 1997 and 2007. Those that were democracies flourished during price boons; those that were autocratic didn’t.
Weekly Summary and Schedule, August 1st
The key economic report this week will be the July Employment Report to be released on Friday. It will be a busy week ...
Weak Labor Cost Data Darken Consumer Outlook
Compensation is barely growing and that highlights an obstacle to growth: consumers–even those with jobs–are strapped for cash. Without household spending rising at a healthy clip, the recovery will struggle to gain traction.
Blunt opinions, supported elsewhere but not here
I don't trust stimulus analyses which fail to assign a central role to confidence and confidence is hard to model.
Greenspan: A ‘Quasi-Recession’
The U.S. is in the midst of “a pause” in a “modest recovery” that feels like a “quasi-recession,” Greenspan said on NBC’s “Meet the Press” television program.
Growth of Problem Banks (Unofficial)
...the number of institutions on the unofficial problem bank list now over 800...
“Measuring” the impact of the stimulus
...we don’t have a reliable model of the economy in its current state. The CBO concludes that we should instead look at previously estimated relationships in the economy (holding everything else constant) and that’s the best we can do. I conclude we’re incapable of holding everything else constant and therefore the CBO’s results are fake science.
Banks, Private Benefits, and Social Benefits
...when one financial intermediary competes with another, the ability to use high leverage makes a large difference in market share and profits, even though it makes only a small difference in the ultimate cost to the the users of the intermediary's services. The ability to achieve high leverage creates private competitive benefits that far exceed the social benefits.
Estimate of July Decennial Census impact on payroll employment: minus 144,000
The employment report will be released on August 6th, and the headline number for July - including Census numbers - will probably be negative again.
Plagiarism 2.0
The mash-up culture is not a culture of plagiarism. Those who copy music, lift riffs, or appropriate images don’t usually claim authorship of the original source material or claim it as their own. They use this material in works of their own, while freely acknowledging its provenance. The creativity and originality comes from finding the right source material and putting it to good use, not from denying the original source. Whether such copying and appropriation should be legal, it’s not the same as plagiarism, as it’s sourced.

Research, Reports & Studies
We Do Not Have Liftoff
The sharp loss of demand growth will mean a substantially weaker second half of 2010 for the U.S. economy, with the possibility of negative growth by the fourth quarter.
Obamacare Only Gets Worse Upon Further Review
Based on the administration's own numbers, as many as 117 million people might have to change their health plans by 2013.
Voters Want Supersized Government To Go on a Crash Diet
Government has grown vastly more expensive but has not acted with the speed and suppleness that it did under Franklin Roosevelt in the 1930s.
Utah’s Defined-Contribution Option: Patient-Centered Health Care
The state of Utah has addressed many of the problematic issues of health care, by the creation of a defined-contribution option for employer-sponsored health insurance administered by a state health insurance exchange.
Who Decides on Health Care Value?
Bureaucrats now have the power to force private health plans to make business decisions based on regulations rather than on what is best for company or customer health.
Hudson Institute Economic Report
This week’s major news is that GDP growth slowed more than forecast in the second quarter, as consumers cut back on spending out of concern for future economic conditions.
Spending Beyond Our Means
The U.S. fiscal picture is shaping up to be a category 3 hurricane of red ink. Unless Congress takes action immediately to reduce the deficit, the deficit will inflict devastating damage on our economy.
Privatization and Nationalization Cycles
...national ownership results in more redistribution of income and more equality, but undermines incentives for effort.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
The Second Quarter Ended on a Soft Note.

Economists’ Comments & Opinions
The New Credit-Card Tricks
Just months after historic legislation banned certain billing practices, card issuers have dreamed up new ones designed to trip up consumers.
High prices will fix what politicians cannot
The fact that high oil prices survived the crisis excises the ghosts of the 1980s, and gives entrepreneurs and investors confidence to support cleaner vehicles and develop alternative fuels.
Jerry Brown's Pension Punt
This year, the Golden State is running a $19 billion deficit, at least $6.2 billion of which is owed for retiree pension and benefit payments. That number is expected to nearly triple in the next decade as the pension tsunami gains speed. All told, California's unfunded pension liability is scored at more than $120 billion, with some estimates rising to $500 billion.
Soaking the Rich
The key lesson is that higher tax rates on entrepreneurs and investors are misguided.
The Stimulus: The Government Job Creation Myth
Policymakers today have no choice but to drastically reduce spending if we are to head off the looming fiscal train wreck.
Testimony of Dr. Anthony B. Sanders Before the House of Representatives Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises
Topic: “The Future of Housing Finance: The Role of Private Mortgage Insurance”
How Texas Is Dominating the Recession
Maybe it's the lack of a state income or capital gains tax. Or the dearth of union workers. Or the plentiful labor supply on the border of Mexico, or the lower wages, or the stable and lean regulations. There's something about Texas that makes it the most popular place for business to do its business, as CEO Magazine and CNBC both found the last year. As Brooke Rollins, president of the Texas Public Policy Foundation, told me: "Our research shows that the more tax incentives and less regulation you have, and the less likely businesses are to get sued, the more likely it is they'll want to come and prosper in your state."

The wage equals the marginal product of labor, but the MPL depends on the marginal production function. -Garett Jones, Twitter

Graph of the Day
Mercatus: Companies Reluctant to Spend in Uncertain Regulatory Environment
VIDEO: The Decline: The Geography of a Recession
See: Federal Debt Held by Public
See also: A Clear Picture of the Class Program

Book Excerpts
"Tax reduction thus sets off a process that can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle—workers without jobs and farm and factory capacity without markets. Yet many taxpayers seemed prepared to deny the nation the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit. Let me make clear why, in today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit—why reducing taxes is the best way open to us to increase revenues." –President John F. Kennedy, Economic Report of the President (1963)

Did You Know
Illinois will offer tax-free shopping this month for the first time, bringing to 18 the number of states that suspend sales tax on designated days, up from 16 states in 2009 and seven in 2000. The end of summer is the most popular time for tax holidays: 15 states will suspend sales taxes this month.

7/30/10 Post

BUZZ: U.S. Growth Slowed in 2nd Quarter

News
States Going Deeper into Debt
The amount of debt that states are carrying spiked 10.3% last year to $460 billion, according to Moody's Investors Service. The debt is paid for through taxes and fees, making residents ultimately responsible.
South America Beckons to U.S. Firms
With the U.S. and European economies recovering in fits and starts and companies' beachheads in China providing more potential than profits at this point, robust demand from Brazil, Argentina and other countries in South America has bailed out companies that would have otherwise fallen short of expectations.
Treasuries Gain as Growth Slows, Pushing 2-Year Note Yields to Record Low
Treasuries climbed, pushing two-year note yields to the lowest ever, as a government report showing U.S. economic growth slowed in the second quarter spurred demand for the world’s safest securities.
Economic Growth Now Hinges on Consumer Spending
The fading inventory effect means growth now largely depends on how much people are willing to spend on finished goods—not the calculus at companies about how much they need to build stocks to meet future demand.
The New Abnormal
Americans are broke and depressed—and also swilling $3 lattes and waiting in line for iPhones. Welcome to the schizophrenic economy
Strong Profits. Weak Economy. Odd Couple?
GDP growth, which is seasonally adjusted, is usually reported on a quarter-to-quarter basis. Corporate profits, which can be highly seasonal, are typically expressed in year-on-year terms. When GDP growth is viewed on an annual basis, the story is more consistent: Growth turned positive in the fourth quarter, the same time S&P 500 earnings growth resumed after nine quarters of declines.

Blogs
Economists React: GDP Signals Companies More Optimistic Than Consumers
Economists and others weigh in on the slower gross-domestic-product growth.
Memo to My Beloved NY Times: The Stimulus Was Not $787 Billion
When the stimulus package was adopted in February 2009, the Congressional Budget Office estimated its cost for fiscal years 2009 through 2019 at $787 billion. In Appendix A of its January 2010 economic and budget outlook, however, CBO revised its estimate to $862 billion. The agency found that unexpectedly high unemployment had boosted the cost of the package’s jobless and food stamp benefits and that state and local governments had issued an unexpectedly large volume of the new Build America Bonds authorized by the stimulus package. These differences, as reinforced and offset by other minor changes, added $75 billion to the estimated cost.
Wage, Benefits Costs Rising Slowly
The Labor Department’s Employment Cost Index, which measures changes in the cost of labor, rose 1.8% for all civilian workers in the second quarter compared to a year ago. It was the largest year over year increase since the second quarter of 2009. The index rose 0.5% on a quarterly basis.
Some Further Comments on Blinder-Zandi
There is no specialization and trade in a representative agent model. Since I think that economic activity consists of sustainable patterns of specialization and trade, in my view these models contain no economic activity. Consequently, they capture none of the characteristics that I think are important for explaining macroeconomic outcomes.
Which country has the largest (percentage) ramp-up fiscal stimulus?
According to the IMF it is Saudi Arabia.
Revisions: Real GDP and PCE far away from previous peak
In fact real GDP in Q2 2010 was lower than originally reported for Q1 2010. And annualized real GDP is still 0.85% below the pre-recession peak. This means that real GDP would have to grow at a 3.4% rate over the next four quarters to reach the recession peak by the end of Q2 2011.

Research, Reports & Studies
Social Entrepreneurship: Concepts and Implications for Problem Solving
"Social entrepreneurship" describes the efforts of highly motivated individuals and organizations to solve economic and social problems for the benefit of society in general through the use of business methods and innovative strategies. These solutions are the result of the application of new resources or new combinations of existing resources and of the mobilization of diverse funding mechanisms which increase the sustainability, quality, and scalability of social enterprises.

Economists’ Comments & Opinions
Bank reforms to pinch consumer credit
Call it the law of unintended consequences. That's what many finance experts are saying will be the result of Congress' latest attempt to micromanage the world of consumer credit through the financial-reform measure President Obama signed into law last week.
Urban Myths
...the number of private-sector jobs on average each month has been 96,000. That's well below the 125,000 that economists say is needed each month just to keep up with growth in the work force. We're not even treading water.
Son of TARP
More politically directed credit, this time for small banks.
The Growth Imperative
We could be in for a long, slow decade. There’s a confluence of forces that are probably going to retard economic vitality.
Who Decides on Health-Care Value?
New rules to micromanage insurance companies could cost patients.
Want to Stimulate the Economy? Lower the Retirement Age to 55 Now!
If enough Boomers left the job market, it would even flip the current dynamic of too-many-people-chasing-too-few-jobs upside down, and create a tight labor markets. Tight labor markets drive up wages.
What Would Happen if the Bush Tax Cuts Expire
Much of the focus has been on the wealthy, but what will the expiration of the tax cuts mean for everyone else?

Graph of the Day
American Thinker: 2009 Median Hourly Earnings, Selected Occupations
See: US State Deficits: Minding the Gap

Book Excerpts
"Greater consumption due to an increase in population and growth of income heightens scarcity and induces price run-ups. A higher price represents an opportunity that leads inventors and businesspeople to seek new ways to satisfy the shortages. Some fail, at cost to themselves. A few succeed, and the final result is that we end up better off than if the original shortage problems had never arisen. That is, we need our problems, though this does not imply that we should purposely create additional problems for ourselves." –Julian Simon, The Ultimate Resource 2 (1996)

Did You Know
"China’s chief currency regulator, Yi Gang, revealed today that China has overtaken Japan as the world’s second-largest economy, and is now dwarfed only by the United States. However, projections from banks and economists suggest that China will trump the U.S. by 2025."