8/13/10 Post

BUZZ: Economists Want Policy Makers to Back Off Now

News
U.S. Retail Sales Rise Less Than Economists Estimated
Sales at U.S. retailers rose less than forecast in July, indicating a lack of jobs is prompting Americans to hold back on spending.
Fiscal fundamentalists
By most people’s standards, George Osborne, Britain’s 39-year-old chancellor of the exchequer, is a fiscal hawk. In his first budget, announced in June, he promised to raise taxes and cut spending without flinching. As a result, Britain’s net public debt should peak at about 70% of GDP in March 2014.
Consumer Prices Rise in U.S., Easing Deflation Risk
The cost of living in the U.S. climbed in July for the first time in four months, pointing to a stabilization that may ease concern a slowdown in growth will spur deflation.
German economy surges 2.2% in quarter
Germany on Friday reasserted itself as the economic growth engine of the eurozone, after gross domestic product expanded at a stellar 2.2 percent rate in the second quarter compared with the previous three months.
The world's best stock market
Which country's stock market has been the best performer in the world -- not just over the past year or decade, but over the last 110 years? It's Australia, which stands above all others in its combination of higher returns and lower volatility.
Tale of the Totem: $23G Census Project to Thaw Alaska Hearts and Minds Questioned
The Census Bureau spent $20,000 on a totem pole art project in a effort to try to the disparate and hard-to-count communities of America's largest state.
Dow's Losing Streak: 3 Days
Stocks declined for a third straight session as economic warnings from weekly jobs data and Cisco Systems added to investors' concerns about a possible double-dip recession.
Stocks look to extend losses as investors wait for government's July retail sales report
Stocks appear headed for their fourth straight day of losses as investors wait for the latest readings on consumers and how confident they feel about spending.
Progressives: Don't Touch Social Security
The leaders of the Progressive Caucus today wrote to the co-chairmen of the president's deficit commission urging them not to seek savings by cutting Social Security.
Obama Plans Coast-to-Coast Dash for Democrats
President Obama swings into full campaign mode next week crisscrossing the country for a string of fundraisers aimed at boosting Democrats before the November elections.
Hong Kong Lifts GDP Forecast
The government raised its full-year GDP growth forecast to 5%-6% from 4%-5% and maintained its forecast of a 2.3% rise in the consumer price index this year, up from last year's 0.5% increase.
Money can't always buy them love
Along with conveying their distinct dislike of career politicians, voters seem increasingly intent on delivering another pointed message to candidates: They’re not necessarily impressed with wealthy businesspeople-turned-politicians, either.
Greek Recession Deepens
The national statics service Ellsta said Thursday that second-quarter gross domestic product fell 1.5% on a quarterly basis, weaker than forecasts of a 1% drop and the 0.8% fall in the first quarter.
Senate passes $600M border bill
The Senate briefly suspended its month-long summer recess to give final approval to a $600 million border security bill Thursday.

Blogs
More Nonsense about the Trade Deficit
Contrary to the conventional wisdom reflected in this morning’s headlines, that an expanding trade deficit does not appear to be a drag on growth. In fact, the plain evidence is that an expanding trade deficit is more often than not a signal of stronger growth.
Time to Reclaim Our Economic Future
Now that the congressional money tree has bloomed again, this time in the form of new stimulus money for the states, we are faced with the question of whether the federal government will ever learn self-control.
The Gulf Recovery Obama Does Not Want to See
Next week, for the fifth time since July, the first family will board Air Force One for yet another luxury vacation. If the President really wanted to see the economic damage his policies are causing in the Gulf, he could first stop in Pascagoula, Miss.
Latest Bailout Paid for Only in Fantasyland
The newest bailout spends $10 billion for education funding in the states. This money is on top of the $100 billion in education funding the states got from the stimulus. The remaining $16 billion will bailout states’ bankrupt Medicaid programs.
No Hope and Little Change
Unrealistic expectations of the Obama presidency lie at the heart of the problem, raised mainly by the President himself, first during the presidential campaign and then in the first six months of his presidency.
Another Recession, Already?
There’s not much Washington policymakers can do at this point to address many of these economic forces, but they can do a lot to begin to restore some confidence in America’s economic future.
The Self-Destructive Path of Growing Public Sector Employment
We're currently headed in the wrong direction, needing instead to grow the private sector, lower tax rates, and fix the pension system.
The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism, Part 2
The Financial Stability Oversight Council has the power to do almost anything and there's very limited judicial review of their decisions.
Economists React: Consumer Can’t Drive Recovery
Economists and others weigh in on the increase in retail sales.
How much border security does $600 million buy?
Short answer: Not too much.
After the Tape: What’s Really Going on With CPI?
Deflation? Apparently not in the consumer-price index, which posted its first increase in four months in July. Yet that may be a somewhat misleading result.
Does it Matter Where the Laffer Curve Bends?
So the right question to me is not "where do we maximize revenue", but "where do we maximize utility?" Obviously, that's not an easy question to answer. But when you add in deadweight loss, and the long-run drag on economic growth it implies, I think it's pretty clear that the right answer is well short of the rate where we collect the most taxes.
Secondary Sources: Deficit Questions, Manufacturing, Germany
A roundup of economic news from around the Web.
Reuters University of Michigan's Consumer Sentiment increases slightly in August
This was a big story last month when consumer sentiment collapsed to the lowest level since late 2009. Even with the slight increase, this is still at the levels of late last year.
What Does Seasonal Employment Show About Nominal Rigidity?
What we learn from seasonal employment, in short, is that if all workers were like temporary workers, there wouldn't be much of an unemployment problem. Unfortunately, most workers aren't like temporary workers, and the unemployment problem is very real.
Dallas Fed Research Questions Stimulus
The 2009 fiscal stimulus plan enabled the economy to grow in the short term, but it is unclear how large the boost has been, the latest issue of the Federal Reserve Bank of Dallas’ Economic Letter suggests.
Seasonal Employment (Not Wonkish)
In any event, this seasonality has become less pronounced over the years. I suspect that as we have become a Garett Jones economy, we have moved some of the Christmas seasonality offshore.

Research, Reports & Studies
The Second World War and Hayek’s Road to Serfdom
Free choice meant ―that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion.
Social Security Keeps 20 Million Americans Out of Poverty:
A State-By-State Analysis

Economists’ Comments & Opinions
Say Goodbye to Fannie and Freddie
Can the home mortgage market stand on its own, without support from federally sponsored mortgage companies? Experience tells us that the answer is an unambiguous yes.
Financial Repression
Although the large banks are in no immediate danger, there are warning signs that the banking sector is more fragile than commonly understood.
Don't blame the consumer
The economy appears locked in a self-defeating cycle, where consumers won't spend more unless the jobless rate improves and companies won't hire more until GDP growth steadily recovers -- like two gunslingers, both waiting for the other to draw first.
EDITORIAL: Obama's economic tragedy
U.S. fiscal gap makes Greece look responsible.
Market Compass Goes Awry When Governments Steal: Mark Gilbert
...it looks like the U.S. plans to tweak the rules governing Fannie Mae and Freddie Mac to enhance the pace of mortgage forgiveness. In other words, it will force the now government-controlled agencies to let debtors keep their houses without making all of their debt payments.
America: A new way forward
...the economic focus of Wichita – population 366,000 – is very different from the emphasis on services and consumer demand typical of 21st-century America. According to a study published late last month by the Brookings Institution, a Washington think-tank, nearly 28 per cent of the city’s gross metropolitan product is sold abroad.
Taxes No Longer So Certain
United States taxes may soar next year, or they may not.
A Small Price For Jobs
A new study from the Democratic Congress claims that keeping the Bush tax cuts is too expensive. What's too costly, though, is the economic price of adding to the tax burden of job creators.
Are We Headed for a Lost Economic Decade?
Not if we embrace pro-growth fiscal policies. A good start would be the bipartisan Wyden-Gregg tax reform bill.

Graph of the Day
President Obama says he wants to “invest in our people without leaving them a mountain of debt.” CBO's debt projections paint a different picture
See: Forgotten Men
See: Race to the Bottom
See also: July Retail Sales

Book Excerpts
"I genuinely do not know whether we will or will not ultimately survive the desperate damage our government has done to our economy. The potential power of the economy is immense, and its regenerative power in freedom is incalculably great. I am prepared to say, however, that a financial collapse is not only possible but probable unless we reverse almost half a century of irrational and unrealistic policies." –Former Treasury Secretary William E. Simon, A Time for Truth (1978)

"Did You Know"
"As a public service, British researchers are proposing that fast-food eateries dole out complimentary cholesterol-lowering statin drugs to offset the hazardous glories of their fatty cuisines."

8/12/10 Post

BUZZ: Deficit in July Totals $165.04 Billion

News
US jobless claims jump to highest level since February
New claims for US jobless benefits jumped unexpectedly last week to the highest level in about six months. Initial claims climbed by 2,000 to 484,000 in the week to August 7 from the previous week's upwardly revised figure of 482,000.
Taleb Says Government Bonds to Collapse, Avoid Stocks
“I’m very pessimistic,” he said at the Discovery Invest Leadership Summit in Johannesburg today. “By staying in cash or hedging against inflation, you won’t regret it in two years.”
Homes lost to foreclosure up 6 pct from last year
The number of U.S. homes lost to foreclosure surged in July. Lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009.
Wider Trade Gap Signals Weak Growth
Imports Jump, Exports Sag in Sign U.S. Upturn Is Slowing; Demand Rises for Foreign-Made Autos, Electronics Goods.
Watchdog panel cites global impact of US bailout
The $700 billion U.S. bailout program launched in response to the global economic meltdown had a far greater impact overseas than other countries' financial rescue plans did on the U.S., according to a new report from a congressional watchdog.
Obama Administration to Provide $3 Billion in Housing Aid
The Obama administration is providing $3 billion to unemployed homeowners facing foreclosure in the nation's toughest job markets. The Treasury Department says it will send $2 billion to 17 states that have unemployment rates higher than the national average for a year.
We Want Our IOUs
State Controller John Chiang said Tuesday that without a state budget, California's government would be unable to pay its bills in late August (or maybe early September). That means issuing IOUs to some people.
Debts Rise, and Go Unpaid, as Bust Erodes Home Equity
The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.
Economists Cut U.S. Growth Forecasts as Firms Limit Hiring
Gross domestic product will expand at an average 2.55 percent annual rate in the last six months of 2010, according to the median of 67 estimates in a survey taken July 31 to Aug. 9, down from the 2.8 percent pace projected last month.
Science Stimulus Funds Called Wasteful
Funding for a range of other studies on substance abuse and public health has raised eyebrows, including research into whether female college students are more likely to engage in casual sex after drinking alcohol, the reasons why young men don't use condoms correctly, how methamphetamine enhances the motivation for female rats' sexual behavior and "obesity and psychosocial adjustment during adolescence."
Market Drop Signals Fears About Global Recovery
...after downward revisions to other economic data like inventories and the export figures, even that 2.4 percent annual rate is now looking too rosy — and may even be as low as 1 percent, some economists say.
Markets Swoon on Fears
Stocks Pummeled on Signs of Global Slowdown; Money Flees to Dollar and Yen.
Analysts Detail Tax Cuts’ Deficit Implications
New data from the nonpartisan Joint Committee on Taxation show that households earning more than $1 million a year would reap nearly $31 billion in tax breaks under the GOP plan in 2011, for an average tax cut per household of about $100,000.
2010s a 'lost decade,' or temporary funk?
Economic outlook divides Fed.
Support for Broadband Loses Speed as Nationwide Growth Slows
The center said 53 percent of those surveyed felt that the government's programs for broadband access should not be attempted or were "not too important" a priority, and those who felt most strongly were older than 50 and skeptical that they would benefit from the Internet.
GM Posts $1.33 Billion Profit, Prepares for Public Offering
It was the second straight quarterly profit for GM, which made $865 million in the first quarter.
Foreclosures rise in July
They're up 3.6% from the month before but down 9.7% from 12 months earlier.
Will 'tax the rich' save the economy?
Higher taxes on the nation's top wage earners could give a needed jolt to the struggling U.S. economy. Or it could be the tipping point that topples the nation back into recession.
Is this finally the economic collapse?
With 40.8 million Americans on food stamps and 45% of the unemployed having been seeking employment for 27 weeks or more what's left if QE2 doesn't kick start GDP growth?
The preventative medicine problem: nobody wants it
The health care system in America has been set up, thanks to decades of government and private sector incentives, to be all about treatment, not prevention.
Foreign economies aided by bailout, didn't help U.S.
The $700 billion bank bailout program helped rescue overseas economies, but international bailout programs did little to help the United States in return.

BlogS
Secondary Sources: Deflation, Fed and Inflation, Fannie and Freddie
A roundup of economic news from around the Web.
A Challenge to Extreme Keynesians
Most economists, Keynesians and otherwise, ignore this summer change in employment because we focus on seasonally adjusted data. But as Casey points out, the raw unadjusted data may have something important to teach us.
Consumer Spending Slows in July
MasterCard Advisors’ SpendingPulse, a unit of MasterCard Worldwide, said Thursday that retail sales, excluding auto, fell in July by a seasonally adjusted 0.9% from June, but grew by 1.4% over a year earlier.
Why is there a boom in temporary hiring?
"The only obvious culprits here are a) higher required wages and healthcare costs (minimum wage, housing interventions and Obamacare are prime candidates here) and b) general lack of confidence in the economy and policy (the political climate in general is the prime candidate here)."
Policy is the Problem
Epistemological issues aside, as Tyler Cowen points to today, the fact is that temporary hiring has experienced a boom, while private sector permanent hiring is lagging behind. This is a strong indicator that the policies have created regime uncertainty which has clouded the investment horizon.
Mortgage Modifications Aren't Working So Well
That means that even post-modification, there are a lot of people who cannot afford their debt loads.
When Only Certain Jobs Count
...apparently some jobs are created more equal than others. While America’s schools continue to collapse thanks to ideologically rigid teachers’ unions, they can nonetheless count on more taxpayer handouts.
The End of Retirement as We Know It
Mathematically, society simply cannot have a high and growing dependency ratio--at least, not if the retirees expect to be supported in the style to which they have become accustomed.
The Great Recession and the Specificity of Labor
Rather than a more complex, wealthier economy having greater dampening effects on the volatility of cycles, it may well be the case that an economy with a greater division of labor and specialization, and therefore more heterogeneous human and physical capital will actually suffer larger booms and longer and deeper busts from the same bout of inflation than would simpler economies.
Strange Question from Ed Glaeser
It seems to me that if you look at the ratio of median house prices to median incomes, you learn something. That ratio rose significantly, particularly in California.
The Dodd-Frank Bailout is Already Here
The Dodd-Frank “no more taxpayer-funded bailouts forever” bill is not even a month old, and already President Obama is using it to turn your tax dollars into yet another bailout.
The Private Sector Can’t Keep Bailing Out the Public Sector
The public sector has been thriving at the expense of the private sector. So how much longer can the private sector continue to bail out the public sector?
Can You Call it ‘Social Security’ if it’s Built on Nothing but Monopoly Money?
Social Security faces the serious danger of failing to live up to its name due to its unfunded obligations.
The Dodd-Frank Wall Street Reform and Consumer Protection Act: The Triumph of Crony Capitalism
The revolving door between Washington and Wall Street allows people attracted to power and skeptical of free markets to dominate economic policy for their benefit.
Why Sellers, Not Buyers, Are Now the Urgent Players
Among other reasons, lousy sentiment data and the ghastly financial sector make the probability of profitability appear to favor the bears.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Budget Deficit Narrowed in July—Challenges Remain
At -$165.0B for the month of July, the deficit is on pace to notch a near-record reading of -$1.3T in fiscal year 2010. Marginal improvement over 2009 stems from higher corporate profits and less emergency spending.
The Trade Performance of Asian Economies During and Following the 2008 Financial Crisis
In September and October 2008, the world experienced the onset of a major Financial Crisis. Although the worldwide crisis seemingly originated in the United States, its effects were felt by all economies around the world. This paper compares the trade performance of the major Asian economies both during and following the 2008 financial crisis.
2010 Social Security Trustees Report: Reform Needed Now
The 2010 annual report by the Social Security trustees has been released. It comes as no surprise that the Trustees Report predicts massive—and permanent— yearly deficits if the Social Security system is not reformed.
The President’s Worrisome Narrative to Discourage Homeownership
There is much evidence to indicate that many of the costly efforts by the federal government to promote housing and homeownership were at best ineffective and at worst contributed to a serious recession

Economists’ Comments & Opinions
Washington vs. Paul Ryan
What happens when a politician is more honest than his critics.
Say Goodbye to Fannie and Freddie
A practical approach would be to set a gradually rising schedule of fees, motivating private companies to enter the securitization business.
Wall Street Plays Uncle Sam Like A Fiddle In Matters Of Finance
Congress does the bidding of some of its biggest patrons, the titans of Wall Street. Don't expect real reform.
Congress Decides to Help Its Own
Although private sector employment has declined by 7.8 million since December 2007, on Tuesday President Obama signed into law the Education Jobs and Medicaid Assistance Act, a bill that would spend $10 billion on state and local government workers and $16 billion on state Medicaid payments.
The Great Stock Myth
Why the market’s rate of return—and your nest egg—may never recover.
Memo to Alan Greenspan: Keep Quiet
If cutting taxes leaves less money for government programs, the answer is simple: Ax the programs!
The true costs of very low interest rates
Hayek observed that interest rate stimulus interfered with economic calculations, causing managers to invest in projects that would not otherwise have appeared profitable.
Europe Jumps Off the Keynesian Bus
The economy is looking bright in Britain and Germany after those governments announced plans to reduce spending.
Debt and growth revisited
With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship between debt and growth based on data from 44 countries over 200 years with a focus on the debt-growth link during high-debt episodes.
Did the Stimulus Stimulate?
Since the beginning of the recession, the number of unemployed has increased by more than 8 million people. For $800 billion, we could have handed every one of these people a check for $100,000.
When Keynesians Attack
So, it is rather silly to say the recession was caused by tax cuts and the recovery was triggered by tax increases.
Green Protectionism
Western policy makers know it is against established trade law to block imports for protectionist purposes; no trade court would allow it. So they have shifted strategy. Welcome to the world of “green protectionism.”

Graph of the Day
Shadow economies have grown since the financial crisis began
See: Lower Rates, Higher Revenues

Book Excerpts
"Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such an inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling." –Ludwig von Mises, Socialism: An Economic and Sociological Analysis (1922)

Did You Know
The UN is considering strategies to cut levels of meat consumption worldwide as part of its commitment to stamp out famine and cut global warming. The UN claims livestock, such as cows and pigs, require too much space and fodder to be an energy-efficient source of food for the everexpanding population. Ultimately, it argues, there’s simply not enough land for us all to eat roast beef. So, the UN Food & Agriculture Organisation is urging people to try other alternatives, including insects. The UN reports that ‘as a food source, insects are highly nutritious’, and they require a mere fraction of the resources to rear, pound for pound, as more conventional meats.

8/11/10 Post

BUZZ: Second-Quarter Growth Looking Even Worse

News
U.S. Trade Deficit Widens
The U.S. trade deficit widened unexpectedly to a record 21-month high in June, as imports from its largest trading partners ballooned.
Beware the VAT: Why the consumption tax is coming
The report states that if the crisis strikes in 2011, and rates on Treasury bonds rise by around 4 points, interest on the federal debt will double from $460 billion to around $900 billion by 2015... interest payments alone will account for around one in every six dollars of government spending... equivalent of 40% of all income taxes.
Fed Move on Debt Signals Concern About Economy
With short-term interest rates already close to zero, the Fed’s policy makers have relatively few tools available to encourage consumer and corporate spending. So they now plan to use the proceeds from the Fed’s huge mortgage-bond portfolio to buy long-term government debt.
US regulators tighten control over Wall St
US regulators have increased their scrutiny of the country’s largest banks in recent months, digging deeper into riskier activities and pushing institutions to conduct more rigorous “stress tests” of their financial health.
House Passes $26 Billion in State Aid
The House interrupted its summer recess on Tuesday to approve $26 billion in aid to school districts and states to prevent large-scale layoffs of teachers and public employees and to engage in another partisan fight over policy priorities.
Yen Hits 15-Year High vs. Dollar
The yen hit a 15-year high Wednesday against the U.S. dollar, following the U.S. Federal Reserve's downgraded assessment of the U.S. economy Tuesday and its decision to reinvest some bond holdings.
Wholesale Inventories Up in June but Sales Drop
Inventories at the wholesale level edged up slightly in June but sales fell by the largest amount in 15 months.
Fed keeps key interest rate low; Hoenig is lone dissenter again
Tom Hoenig, president of the Federal Reserve Bank of Kansas City, remained the sole dissenting voice on the Federal Open Market Committee as it once again voted to keep short-term interest rates low.
Californians’ income falls for first time since WWII
The federal Bureau of Economic Analysis said personal incomes of Golden State workers fell by that amount in 2009 compared with the previous year – the state's first year-to-year decline since World War II.
States not facing teacher layoffs get federal money from education jobs bill anyway
With the passage of a $26 billion aid package Tuesday to help states pay for Medicaid and teacher salaries, most state budgets will get some help in paying for education programs, but states not facing massive teacher layoffs and cutbacks are also set to receive millions in federal money.
The stakes in the health care war
In recent months, as voters express anger across-the-board with Washington, there may well be no single initiative as unpopular as the administration’s health care reform bill.
Senate May Clear Immigration Bill This Week
Senate Majority Leader Harry Reid is expected to bring the chamber back into session as soon as this week to clear border security legislation.
China needs 'U-turn' to avoid crash landing
China's economic growth continued to ease in July, signaling that the world's third-largest economy may need to loosen its policies to avoid a hard landing.

Blogs
Secondary Sources: Debt and Growth, Job Troubles, World Trade
A roundup of economic news from around the Web.
The Health Insurance Hurdle
Health care now approaches 20 percent of the economy. With health insurance included in compensation, that means that 20 percent of compensation is determined not by your skill level, but by the median cost of health insurance. ...if the value of your skills has been rising more slowly than the median, then your skill level is no longer enough to overcome the health insurance hurdle.
Spontaneous order on the road
"Not only had congestion decreased in the intersection—buses spent less time waiting to get through, for example—but there were half as many accidents, even though total car traffic was up by a third."
Economists React: Fed Takes the ‘Middle Road’
Economists and others weigh in on the Fed’s policy statement and its decision to reinvest proceeds from its mortgage holdings.
What's the actual problem in the labor market?
David Leonhardt has a very good piece which presents some relevant facts about unemployment.
Moody's: Money Market Accounts Were in Worse Trouble Than We Thought
Moreover, it seems to have been happening long before the crisis hit; presumably firms figured they'd lose less money by making good the losses than they would by alienating customers who lost money on a "sure thing".
“Buy and Bail”:
Apparently this strategy works best for those with excellent credit scores and high income who can qualify for two mortgages.
What's Wrong with Paul Ryan's Plan?
Not because it's dishonest, but because it's hard. Really hard. As in, I-don't-see-how-it-could-possibly-survive-the-legislative-process hard.
Comparing CBO and White House Budget Forecasts
...the OMB has once again estimated just how much in the red the Obama administration's spending will put the U.S. in 2010: 1.471 trillion U.S. dollars.
Paul Krugman is Still Wrong on Paul Ryan and the CBO
Many policy proposals that have been marinating considerably longer than Ryan's roadmap have to go through grueling marathons of tweaking and resubmission until they get a good score. Indeed, that's why we have the CBO and the JCT as an independent check on our politicians.
The States and Too Big to Fail
Today’s action is not a full state bailout (as far as I know, none of the states are threatening bankruptcy just yet), but the federal assertion that the states are too big to fail does mean that they will face a significantly softer budget constraint tomorrow than they did yesterday.
FOMC: What Does It Mean?
Interest rates were left unchanged, but there's much more to this story.
Next Round of Losses for the GSEs
The numbers are in for Fannie Mae and Freddie Mac on the second quarter of 2010, and from all accounts, they are stabilizing—if stability includes being essentially owned by the government without a chance to survive alone in a private market.
Home Depot Does What FEMA Dreams About
The fifth anniversary of Hurricane Katrina, and all its attendant devastation, is a good reminder that the federalization of natural disasters by the Federal Emergency Management Agency continues uninterrupted.
Economic Effects of 2011 Tax Hikes: Killing One Bird with Two Stones
The right answer is to extend the tax cuts for all Americans—including top earners.
Anti-Deflationists Win the Day at the Fed
While the short-term effect of the Fed's decision will be modest, longer-term implications should unfold.
Summer of Bailouts
When the House recessed last week, taxpayers had the chance to believe that their long national bailout nightmare was over. No such luck. Just when you thought your tax dollars were safe, the Obama administration sucks them back in.
The Assault on For-Profit Universities
For-profit higher education is serving the needs of students, as evidenced by the significant increase in enrollment over the past two decades.
President’s Commission Recommends President Reconsider Drilling Ban
The President’s National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling has called on the Obama Administration to consider lifting the ban on drilling for certain rigs.
The FOMC Meeting Aftermath
A few observations in the wake of statements by the FOMC and New York Fed.

Research, Reports & Studies
Hudson Institute Economic Report
The recovery is progressing, but it is not V-shaped. The July jobs report showed that the economy lost 131,000 jobs and the unemployment rate remained at 9.5%.
RCM: Wells Fargo Economics Group: Productivity Fell in the Second Quarter
Nonfarm productivity decreased at a 0.9 percent annual rate during the second quarter after a revised 3.9 percent pace of growth during the first quarter. Output and hours both increased.
Calling Recessions in Real Time
Although the hypothesis that recessions may be caused by an exogenous decline in productivity has been popular with real business cycle theorists, this paper does not find that account compelling.
A Prescription for Export Growth—and Economic Recovery
President Barack Obama recently pledged to double U.S. exports over the next five years through a program of subsidies and aggressive diplomatic intervention in favor of selected U.S. firms. Following are four better options for boosting U.S. exports.
Medicare Trustees Issue Report Disavowed by Chief Actuary
Over the past six years, Congress has twice passed and two Presidents have signed into law major legislation affecting Medicare.

Economists’ Comments & Opinions
The Conspiracy Against Economic Growth
America does not need higher taxes, it needs more economic growth. Prosperity is possible, but the Republicans must make a decisive, public break from the conspiracy against economic growth.
Stimulus Pushers
The latest bailout for public unions and spendthrift states.
OMAN: The hidden cost of auto bailouts
Government takeovers make private investment too risky now.
For Those With Jobs, a Recession With Benefits
...in today’s high-tech, global economy, educated workers remain very much in demand. They make their companies more productive and the American economy more competitive. They expand the size of the economic pie.
Our Exhausted Monetary Policy Arsenal
So in the end, what's left? Only real stimulus of the "supply-side" variety - the kind that creates not debt and phony money, but increased output through serious spending cuts, genuine entitlement reform, freer trade, less-onerous regulations and - yes - either further tax cuts or at least the extension of the Bush tax cuts due to expire at year-end.
Higher Taxes On The Wealthy Mean 3.4 Million Spenders May Cut Back
If the Bush tax cuts are allowed to expire, Uncle Sam will get more money but he is likely to be the only one who does. Higher taxes will be needed on everyone, not just the rich, at some point in the near future to pay for the record spending by Washington, but with an economic recovery as fragile as this one now is not the time.
Life before industry
...daily life in the 18th century bore little resemblance to the "life" we see at Colonial Williamsburg. Being preindustrial, everyone but royalty and the upper-crust nobility of that era was oppressively poor by our standards.
Obama's State Capitalism: A Failure of Modesty
In this summer of unrecovery it's still important to understand how so many smart people got so much so wrong…
Memo to Republicans: It's Big Government, Stupid!
Given this record of Democratic ineptitude and the voters' reaction to it, one would think that Republicans would be talking about these issues every day.
A Captive of the Industry
The solution is not to double-down on the failed regulatory model.

Graph of the Day
2009: Percent change in per Capita Income by Metro Area
See: Californians' income falls for first time since WWII
See: Weekly Initial Jobless Claims
See also: Federal Government Is a Lucrative ‘Industry’

Book Excerpts
"Permanent budget deficits, inflation, and an expanding and disproportionately large public sector are all part of a package. They are all attributable, at least in part, to the interventionist bias created by Keynesian economics. Deficits and inflation are related to the growth of government in a reciprocal fashion. Deficits and inflation contribute to the growth of government, while the growth of government itself generates inflationary pressures." –James M. Buchanan and Richard E. Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes (1977)

Did You Know
Since the Constitution took effect in 1789, there have been more than 11,000 attempts to amend it. Just 27 have been ratified in those 221 years, and that includes the Bill of Rights, the first 10. The last one, the 27th Amendment, dealing with congressional pay raises, was finally ratified in 1992, was first proposed in 1789.

8/10/10 Post

BUZZ: Small-Business Sentiment Deteriorates Again

News
Unusual uncertainty clouds Fed meeting
Federal Reserve officials started their meeting today amid unusual uncertainty about what steps they might take in response to the downshift in economic growth over the past two months.
Incomes Fall in Most Metro Areas
Personal incomes fell across the U.S. last year except in areas with a high concentration of federal government and military jobs, the Commerce Department said Monday. They declined most in places with a lot of housing and finance jobs.
Gold Prices Follow Euro Down
Spot gold edged lower in Europe Tuesday as the euro weakened against the dollar ahead of the U.S. Federal Reserve meeting later in the day.
Russia Heat Wave May Kill 15,000, Shave $15 Billion of GDP
Russia’s record heat wave has already cost the economy $15 billion, or 1 percent of gross domestic product, as fires and drought ravage the country.
Worker Productivity in U.S. Unexpectedly Declined
The productivity of U.S. workers unexpectedly fell in the second quarter, indicating companies may redouble efforts to contain costs as the recovery unfolds.
Wholesale Inventories Rise Less-Than-Estimated 0.1%; Sales Fall 0.7%
Inventories at U.S. wholesalers rose less than forecast in June as companies kept stockpiles in line with slowing demand.
U.K. Housing Gauge Shows First Price Drop in a Year
A U.K. housing-market gauge signaled the first decline in prices for a year in July as demand for homes fell.
Pentagon Plans Steps to Reduce Budget and Jobs
Defense Secretary Robert M. Gates said Monday that he would close a military command, restrict the use of outside contractors and reduce the number of generals and admirals across the armed forces as part of a broad effort to rein in Pentagon spending.
14th Amendment causes GOP split
The push by congressional Republicans to deny automatic citizenship to the children of illegal immigrants has opened up a split in the GOP, with several former Bush administration officials warning that the party could lose its claim to one of its proudest legacies: the 14th Amendment.
Fannie and Freddie May Need Another Taxpayer Bailout
Some would like the government to scale back its support for Fannie and Freddie to give the private sector a chance to compete. But others say ending it is unrealistic because it would make the 30-year fixed rate mortgage less available or more expensive.
Crossroads poll: Dem Senate in peril
A new poll suggests the possibility that the balance of power in the Senate might be up for grabs in November.
House Returns to Empty Stage
The House has a rare moment in the spotlight today as it reconvenes to clear a 26 billion state aid package.
Census Bureau returns $1.6B of its operational budget
The U.S. Census Bureau is giving back almost a quarter of the money it received to do its job this year.
'Breaking The Buck' Was Close For Many
At least 36 of the 100 largest U.S. prime money-market funds had to be propped up in order to survive the financial crisis, according to a report from Moody's Investors Service.
Raise taxes now -- the elders of the economy say so
Extending the tax cuts for everyone would cost the government $3.7 trillion over 10 years. Taxing the high-earners would get back about $700 billion of that.
Wells Fargo: New Financial Rules to Cost $530 Million
Amendments to overdraft rules, as well as the bank's own voluntary policy changes, will reduce the bank's after-tax revenue by $225 million in the third quarter and $275 million in the fourth quarter, the San Francisco bank said in a quarterly filing with the Securities and Exchange Commission.
FinReg: More questions than answers
So many words ... so little clarity. That may be the best summation of the financial regulatory reform bill.
Useless: The Social Security trust fund
This year's cash deficit, the first since the early 1980s and the biggest ever, means the Treasury will have to borrow money to redeem some of the trust fund's Treasury securities.
Unions Spending Big to Influence House Vote
Top union brass are shuttling back to Washington D.C. today to make last minute pleas with undecided House Members.
Republicans Push Disapproval Measure Aimed at Gay Marriage Ruling
A group of House Republicans introduced a resolution of disapproval Tuesday regarding a California judge’s recent decision to reverse the state’s ban on gay marriage.
Five ideas to stimulate the economy
Fortune lists five stimulus plans - some bold, some borrowed, some borderline wacky, but all worth considering
McDonald's liquid profits
McDonald's performance over the past couple of years is often characterized as a classic recession success story, that's only part of the story, and a relatively small part at that.

Blogs
Statehood for Guam, American Samoa and the U.S. Virgin Islands
This is not the first time your tax dollars have been used to push for statehood of a U.S. Territory or Commonwealth.
‘Even in Recess, Congress Can’t Help Spending Billions for Bailouts
Not satisfied by the billions in federal bailouts already passed, House Speaker Nancy Pelosi recently announced that she intendeds to bring the House back from the August recess to pass yet another multi-billion-dollar federal bailout.
Under Obamanomics, Government Workers Win, You Lose
The effect of President Obama’s policies is becoming clear. The Wall Street Journal reports that personal incomes fell across the U.S. last year except in areas with a high concentration of federal government jobs.
Lame Duck Cap and Trade?
In other words, let’s tax the cheap, dependable energy sources and give subsidies to the expensive, unreliable sources. Let’s build a protectionist policy around renewable energy sources so we can produce them domestically—even if it causes our economy to operate less efficiently.
Will Ben Bernanke Scream "Bon Voyage"?
All eyes on the Street turn to the QE2.
Why Smart Money Is Focusing on Inflation
Warren Buffett is betting on inflation as Fed concludes meeting on monetary policy, Quantitative Easing 2.
European Corporate Bonds to Support Stocks
As the ECB isn't in a hurry to withdraw the stimulus, the eurozone will have to find somewhere for the money to go. That "somewhere" is more likely to be in stocks than in corporate bonds given the skinny yields available.
Where "Unusual Uncertainty" Has the Dow, Gold, and Oil
"Unusual Uncertainty" has the yield on the 10-Year below annual pivot and testing annual risky level. Plus, a look at the economy on the road.
Secondary Sources: Deflation, Authoritarian Growth, Manufacturing
A roundup of economic news from around the Web.
Rural Broadband Subsidies: Another Iraq?
In a 3-2 vote, the Federal Communications Commission recently decided to jack up its official definition of “broadband” from 200 kbps download to the 4 mbps dpwnload/1 mbps upload used as a benchmark in Our Big Fat National Broadband Plan.
San Francisco Fed Paper Warns Odds of Recession Rising
Over the shorter run, the paper, written by Travis Berge and Oscar Jorda, argues the odds of falling into recession are relatively low. But over the next two years it appears the odds are only slightly better than even that an already-tepid recovery will continue.
How Much Will a Carbon Tax Spur Innovation?
If Jim Manzi is right about the limited innovative effects of a carbon tax, then moving our houses around, slapping in some light rail, and maybe making the houses a little smaller, will be rearranging those deck chairs on our proverbial environmental titanic.
“Never Let a Crisis Go to Waste”
The opportunity is here. At first, interest groups will prevent attempts to cut either “discretionary” or “entitlement” spending. And then the system will begin to crack with public pension defaults perhaps leading the way, followed by Medicare and Social Security. Soon all will benefit from cuts more than they lose.
Fed Unlikely to Unveil Major Action
Market speculation that the Federal Reserve will act to boost the economy at its meeting today has grown recently, but most analysts caution the U.S. central bank is unlikely to take any major steps.
CR Index
Consumer survey reveals unsteady economic progress.
CEOs Less Confident in Recovery
The overall index slipped to 57.5 in July, from 61 in April. Any reading over 50 indicates optimism. The survey showed companies remain extremely reluctant to hire workers: nearly 62% said they didn’t expect their headcounts to have changed a year from now, while nearly 8.5% expected to cut more than 10% of their workers in that time.
“Creating a New Job Carries a Punishing Price”
...these added costs increase his firm’s vulnerability to government decisions — and not just those made in Washington, D.C. While not all of the non-salary costs are due to government policy — Bogen could offer less generous benefits — many are, and this means firms like Bogen “have lost control of a big chunk of our cost structure,” and this makes Bogen reluctant to hire more.
Student-Loan Debt Surpasses Credit Cards
Americans owe some $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. (Most of revolving credit is credit-card debt.) Student loans outstanding today — both federal and private — total some $829.785 billion, according to Mark Kantrowitz, publisher of FinAid.org and FastWeb.com.
Wastewater Treatment
The EPA itself estimates that 25% of the nation’s sewer pipes were in poor or very poor condition. They also estimate that this share will rise to 50% by 2020.
U.S. Incomes Tumbled in 2009
Income declined in 223 metro areas last year, increased in 134 and was unchanged in nine regions.
College: Easy Money
According to Philip Babcock and Mindy Marks, college students' weekly study time fell by 40% between 1961 and 2003.
CR: Travelers pay up to 144 percent more in taxes, study finds
A recent survey of government-imposed travel taxes in the nation's top 50 travel destinations has found that levies for car rentals, hotels, and meals can raise consumers' tax burden—what they would otherwise pay in general sales tax—by more than half.
Should We Raise Tax Rates on the Rich?
James Surowiecki today has a piece on why we need more tax brackets for the super-rich. After all, is it fair that a professional making $375,000 pays the same as LeBron James?
Where Americans Are Spending More...
Since the recession started in the fourth quarter of 2007, the common theme has been about Americans cutting back on their spending. But the latest numbers from the BEA show aggregate personal consumption expenditures are up 2.9%, or $285 billion.
Competition Breeds Success II
This morning, I got an e-mail that provides another example of how private schools tend to beat the government-union monopoly.
A Snapshot of "Recovery Summer"
...monthly analysis of the employment situation in the United States on how well the President's 2009 economic stimulus package, which provided the funding for these projects, is doing in creating or saving American jobs.
The Myth of Authoritarian Growth
"Don’t be surprised if Brazil leaves Turkey in the dust, South Africa eventually surpasses Russia, and India outdoes China."

Research, Reports & Studies
The Kampala Aftermath: The U.S. Should Remain Wary of the ICC
Overall, the U.S. effort at the International Criminal Court Review Conference in Kampala was a qualified success. The outcome could have been much worse.
Critical Lessons from the Federal Response to the Gulf Oil Spill By learning from both the mistakes and successes of the current Gulf spill, the federal government will dramatically increase the effectiveness of its future responses to Spills of National Significance.
Cronyism: Undermining Economic Freedom and Prosperity Around the World
In a true capitalist system success is determined by the market, the best mechanism ever discovered to set the value of goods and services—through the collective buying and selling decisions of all participants in the economy
CH4: The New Deal and Institutional Economics
In his first inaugural address Franklin D. Roosevelt declared that the federal government must treat the depression “as we would treat the emergency of war.” He was not speaking abstractly.
BLS: Productivity and Costs Q2 2010
Nonfarm business sector labor productivity decreased at a 0.9 percent annual rate during the second quarter of 2010, the U.S. Bureau of Labor Statistics reported today, with output and hours rising 2.6 percent and 3.6 percent, respectively.
U.S. Flying on One Engine
...in July, the diffusion index for manufacturing payrolls (an indicator of how widespread the payroll gains are across industries) continued to fall down, reaching neutral territory.

Economists’ Comments & Opinions
Unemployment: What Would Reagan Do?
Friday's grim labor report is the latest confirmation that our economy is not recovering.
What's Holding Back the Hiring?
President Obama claims that he's concerned about "jobs, jobs, jobs," but he has signed laws, issued executive orders and approved regulations that create incentives for private-sector employers to lay off people or delay hiring people. It's no wonder high unemployment persists.
Black Budget in the Red
This tale of government bloat...it sounds like a recipe for a conservative crusade.
Real 'Hope and Change' in the United Kingdom
Hope has been hard to come by for small-government types in the age of Obama.
‘Made in America’ is not the way out
By promoting manufacturing of all kinds (as can be expected as the sector’s lobbies get down to work) at the expense of more innovative and dynamic service sectors, precisely when America is faltering in its recovery from the crisis, this unhelpful fascination promises to inflict gratuitous damage on an economy that can ill afford new wounds.
Still Oblivious To Meltdown's Cause
One of the tragic ironies of the financial meltdown is that it was caused by well-meaning politicians who didn't know what they were doing — and ended up hurting the very people they intended to help.
The Golden State’s War on Itself
How politicians turned the California Dream into a nightmare.
Business Keeps Getting Squeezed
More damaging than the cost is the message sent to young people like Julie that voluntary, mutually beneficial trade between two willing parties, even around something as simple as a glass of lemonade, requires a direct government sanction… and an accompanying tax payment.
Lousy Lawmakers, Not Low Taxes, Created Our Woes: Amity Shlaes
You can have low taxes, or you can have an economic recovery, but you can’t have both. That’s the message the administration is hammering this summer.
For the Economy's Sake, No Quantitative Easing
The obvious problem there is that the Fed can push all the money it wants into banks, but so long as businesses are fearful of an economic outlook that government intervention, a weak dollar, looming tax increases and more regulations are making worse, there will be no demand for the reserves on bank balance sheets.
The Pension Bell Tolls
Want $600,000 a year in retirement? Work for the government.
RAHN: An inconvenient economic history
Record shows recovery results from tax cuts, not government spending.
Of CEOs and Congressmen
Private vs. public accountability.
BLANKLEY: 'We socialists' vs. 'we the people'
Americans are readying to reclaim their birthright of liberty.
The False Fed Savior
Monetary policy can't make up for failed fiscal and regulatory policy.

Graph of the Day
Mercatus: Jobs Loss and Creation Since the Recovery Act
See: Federal Employees Continue to Prosper
See Also: Estimated Impact of an Exogenous Tax Increase of 1% of GDP

Book Excerpts
"Interventionism is guided by the idea that interfering with property rights does not affect the size of production. The most naïve manifestation of this fallacy is presented by confiscatory interventionism. The yield of production activities is considered a given magnitude independent of the merely accidental arrangements of society's social order. The task of the government is seen as the "fair" distribution of this national income among the various members of society." –Ludwig von Mises, Human Action: A Treatise on Economics (1949)

Did You Know
The Social Security program turns 75 this Saturday. In June 2010, 53.4 million people, or about one in every six U.S. residents, collected Social Security benefits. While three-quarters of them received benefits from the programs for retirees and elderly widow(er)s, another 10.0 million received disability insurance benefits, and 2.3 million received benefits as young survivors of deceased workers. The risk of disability or premature death is greater than many people realize.

8/9/10 Post

BUZZ: America Is at Risk of Boiling Over

News
Some Firms Struggle to Hire Despite High Unemployment
Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work. Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth.
Dollar seeks footing ahead of Fed meeting
The U.S. dollar edged higher on Monday, as traders awaited this week's meeting of the Federal Reserve against a backdrop of rising worries about the staying power of the economic recovery.
Gold May Advance in New York on Dollar, Fed Purchase Concern
Gold may climb in New York on increased demand for a protector of wealth as the dollar weakens and on speculation that the Federal Reserve will step up buying of bonds to prop up the U.S. economy.
After summer slowdown, economy awaits fresh boost
The economy seems to have lost steam as it entered the summer.
Economic Reports This Week
Data will include second-quarter productivity and wholesale trade inventories (Tuesday); the trade deficit for June (Wednesday); import prices for July and weekly jobless claims (Thursday); and the Consumer Price Index for July, retail sales for July, the Reuters/University of Michigan consumer confidence index for August, and business inventories for July (Friday).
BP and U.S. Agree on Oil Spill Compensation Fund
The U.S. completed negotiations with BP Plc over the company’s agreement to establish a $20 billion fund to compensate victims of the oil spill in the Gulf of Mexico.
State, city job cuts taint recovery
Public sector job losses, not counting government losses from temporary positions collecting federal census data, rose to 48,000 in July - the biggest loss in the sector in a year.
America: States of distress
Using a rate of 3.6 per cent – what US Treasuries were yielding in June – Prof Rauh recalculates Illinois’ pension hole at $145bn – about $30,000 for every household in the state.
The $2.5 trillion slush fund
The program is running a deficit this year, and is projected to run growing deficits after 2015. But it will have money in the trust funds to pay full benefits until 2037.
Cash-Hungry States Lure Gamblers with New Casinos
The race in cash-starved states to open new casinos has become frenzy across the United States, lured by the easy money in gambling. But it’s a bet that could hurt taxpayers.
The BP spill is already gone and forgotten
BP's Deepwater Horizon disaster may have drawn more public attention than any other oil spill, but there's a good chance that sordid history of spill cleanup efforts will repeat itself.
Investor Appetite for Bonds in a Tepid Recovery Weighs on Rates
Rates keep falling, and Wall Street increasingly seems convinced that they will stay low for years. But it isn’t the Federal Reserve that is cutting them — it is the bond market. The weak-kneed economy has investors piling into United States Treasury securities, driving prices up and yields down.
How rich is rich?
Experts peg the figure to be somewhere around $2 to $12 million in savings.
GOP cash woes threaten fall gains
The Republican National Committee is entering the fall election season with dire financial problems and, to an unprecedented degree, will be forced to rely on outside groups to fund activities traditionally paid for by the national party.
Ailing public sector leads in layoffs
Congress heeds pleas for states.
In Ky., tea party vs. Obama proxy war
The battle between Conway’s institutional vulnerabilities and Paul’s individual weaknesses played out Saturday at the 130th rendition of one of the country’s longest-running political affairs, the Fancy Farm picnic.
Senate’s Costs for Foreign Travel May Set Record
The Senate is on pace to set an all-time high for foreign travel costs this year, with a burn rate that is 30 percent higher than the first half of last year.
Social Security Faces First Ever Shortfall
More people filed for Social Security in 2009 — 2.74 million — than any year in history, and there was a marked increase in the number receiving reduced benefits because they filed ahead of their full retirement age.
Democrats Put Immigration Back on Agenda
Democrats might prefer to spend the August recess focusing on jobs and the economy as they draw distinctions with the GOP leading up to Election Day.
Prime Numbers: Reasons for Consumers to Start Spending
The latest reports on employment on economic growth include data suggesting that consumers have reason to start spending again, a challenge to fears of a double-dip recession.

Blogs
Don’t Raise Taxes
"...I am aware of no serious analysis that would claim smaller costs to the economy—in lost output and foregone economic growth—of raising capital income taxes as opposed to increasing other taxes or limiting deductions or reducing federal spending."
‘Costs’ and ‘Benefits’ Not Our Concern When Regulating, Say Top FDA Officials
While Republicans and Democrats spar over how best to bring medical costs under control, the federal agency overseeing much of the healthcare industry says costs shouldn’t be considered when setting regulations.
Did Health Care Reform Cure Medicare?
Obamacare looks to me like the Massachusetts plan, which was supposed to save money, but did not. So I tend to think you have to be pretty gullible to believe that Obamacare will save money.
Consumer Credit Declines in June
"Consumer credit decreased at an annual rate of 3-1/4 percent in the second quarter. Revolving credit decreased at an annual rate of 9-1/2 percent, and nonrevolving credit was about unchanged."
No Common Ground on Energy Subsidies
Per-capita is the more meaningful metric of who gets more subsidies. And for energy, it’s subsidy-per-unit-of-energy-production that matters more than simply which sector gets more money.
On Congressman Paul Ryan
Princeton's Paul Krugman plays offense.
Brookings's Ted Gayer plays defense.
Consider the Source
Paul Krugman has an interesting post up on how to read a CBO document. He highlights the fact that the CBO reports using the assumptions it is required to make, not any estimate of what is particularly likely to happen in the real world...
How is Medicare doing?
Worse than official projections suggest...
A Wise Passage
"Politicians are in charge of the modern economy in much the same way as a sailor is in charge of a small boat in a storm. The consequences of their losing control completely may be catastrophic (as civil war and hyperinflation in parts of the former Soviet empire have recently reminded us), but even while they keep afloat, their influence over the course of events is tiny in comparison with that of the storm around them. We who are their passengers may focus our hopes and fears upon them, and express profound gratitude toward them if we reach harbor safely, but that is chiefly because it seems pointless to thank the storm."
Krugman Is Wrong on Ryan and the CBO
...it is not correct to accuse Ryan of deliberate dishonesty; he asked the CBO to score it, and they turned him down. Nor is it correct to imply that this is somehow out of the ordinary. If you supported the health care plan, you supported the exact same process that Ryan is now proposing to use to tweak his proposal.
Unofficial Problem Bank list increases to 811 institutions
The number of institutions has more than doubled since we started the list in early August 2009 - even with all the bank failures (failures are removed from the list).
Two from the New York Times
I agree with Phelps that the focus on aggregate demand is misplaced. I also really like the idea of tax credits for employing low-wage workers. Of course, as Greg Mankiw pointed out, the minimum wage is like a subsidy for low-wage workers paid for by a tax on firms that hire low-wage workers. Repealing the minimum wage and replacing it with a straight subsidy would be better.
Confusions about the multiplier...
The case against fiscal policy should examine long-term budgetary costs, possible confidence factors, implementation lags, political economy problems, difficulties in targeting unemployed resources, and also the (underrated) notion that sometimes fiscal policy postpones problems into the medium run rather than solving them through jump-starting a recovery. But it is difficult to deny that fiscal policy brings some economic benefits in the short run, or can brake an economic decline, even if the measured multiplier is less than one or for that matter well under one.
Weekly Summary and Schedule, August 8th
The key economic report this week will be July retail sales to be released on Friday. The FOMC statement on Tuesday will also be closely watched.
The Coming War Over Public Pensions
"At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying."
Political Mood Cycles
My casual observation of American politics suggests that national political mood follows a four-year cycle that syncs with the presidential electoral cycle.
National Parks – A Celebration of Democracy?
Once again, Burns shows us that government is raw power, and that the idea of democracy is not only cloudy, but invoked in the name of things that some individuals think is desirable. Saying something is democratic does not make it so, and invoking the term democracy does not make the objects of political decisions somehow sacred. I am happy we have National Parks. Whether they are best managed by the US Government is a very open question, and whether their creation was some sort of democratic success is not exactly historically accurate.
Why Encourage Discrimination? The Case of Mandatory National Origin Labels
The most obvious effect of such regulation is to slightly disadvantage foreign producers by raising their cost of production. But the only slightly less obvious effect is to reduce consumers' cost of discrimination.
Drop in Temps Signals Trouble Ahead
Temporary-help employment is generally considered a leading indicator for the overall labor market. So July’s decline in temp payrolls is a worrisome indicator for the coming months.
How economists (and how many) advise the President
Keith Hennessey serves up a first-rate post; to excerpt it would diminish the impact.
Number of the Week: Cheap Money Isn’t Free
This week, IBM set a sort of milestone in the bond market’s recovery from crisis: The iconic computer company borrowed $1.5 billion at the bargain-basement interest rate of only 1%.
Why No Jobs?
Sometimes commonsense economics trumps high theory. Firms aren’t hiring because it isn’t cost effective. The owner could hire more people and expand his business, but it isn’t cost effective.
Secondary Sources: Spending, Stagnation, Presidential Advisers
A roundup of economic news from around the Web.
Freddie Mac: $4.7 billion Loss, REO Inventory increases 79% YoY
Freddie Mac reported that their Real Estate Owned (REO) inventory increased 79% year over year, from 34,699 in Q2 2009 to 62,178 in Q2 2010.
Higher Freight Volume Lifts Buffett’s Railroad Revenue
Warren Buffett has often said he’d look at rail car loadings if he were forced to pick just one economic statistic to be stuck with for the rest of his life. The figure, he says, is a great real-time proxy for the health of the economy.
Summer of discontent
Why the White House has seen better days.
Time to admit Obamanomics has failed
It's no coincidence that Christina Romer, chairwoman of the White House Council of Economic Advisers, announced her retirement the day before Friday's brutal unemployment report.
The Problem With Pensions
Here, a peek into a very sobering report on how badly underfunded public pension are.
Obama’s Failed Stimulus and Opportunities Forgone
The immediate effects of Obama’s policies are easily seen. We can observe the workers of which billions of dollars have been spent to employ.
Heritage in Focus: The Bush Tax Cuts and the Deficit Myth
The leftist majority in Congress likes to blame their trillion-dollar budget deficits on the Bush tax cuts of 2001 and 2003, but The Heritage Foundation’s Brian Riedl disagrees.
Blaming Bush Doesn’t Create Jobs
Speaker Pelosi can try to play the blame game all she wants, but the facts of her economic record are rapidly catching up with her.
Why Buying Manpower Won't Work
With earnings well off its pre-recession peak and valuation stretched by historical standards, its highly cyclical shares appear primed for a contraction.
Should Corporate America's Excess Cash Be Returned to Shareholders?
The relationship between dividend returns and total returns.
Will US Avoid Double Dip Recession? Goldman Sachs Says Yes
Goldman's report confirms that QE2 is right around the corner.
Economy Will Likely Recover With Inflation, Not Deflation, to Follow
While transfer payments to middle-/lower-income recipients aren't going to be all that stimulative given falling housing prices, that still doesn't spell deflation.
Drilling Moratorium Devastating to Gulf
The president’s policy halts more than energy exploration: It also hurts the coastal economy and the day-to-day lives of workers.

Research, Reports & Studies
Time for a "Demographic Stress Test" for the Western Economies
The current global economic crisis is at heart a banking crisis (originating with bad debts in the US mortgage sector)--and historically banking crises end up being very expensive for modern Western taxpayers.
Down with Legal Tender
When studying the history of money, one cannot help wondering why people should have put up for so long with governments exercising an exclusive power over it for almost 2,000 years.
Cutting Is So Hard to Do
In recent months, fiscal austerity among governments on all levels has come to the political fore, albeit for different reasons.
No Secret to Improving Intelligence
Our intelligence bureaucracy is about as ineffective as any other facet of the federal government. That's why we need to make the system leaner and nimbler, less bureaucratic and more responsive to elected officials.
Heritage Employment Report: July Jobs Scarce
It is clear that the labor market has faltered since the spring. Employers are reluctant to hire given the looming tax increases and uncertainty over the economy and new regulations that will be imposed by federal bureaucrats.
RCM: Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Slower Growth Looks Certain, but Not a Double Dip.
Ch 5: The Great Depression and Keynes’s General Theory
Why was the economy languishing through the 1930s? Several economic historians cite government policies such as the Smoot-Hawley tariff of 1930, the tax hike of 1932, and the NIRA along with similar policies as hampering market adjustments and thereby delaying recovery.

Economists’ Comments & Opinions
Not In 25 Years, Social Security Is Bankrupt Now
For the first time in its history the Social Security program will pay out more money than it takes in. This watershed event will occur this year, to the tune of $41 Billion dollars. Under any rational accounting standards this makes the Social Security program bankrupt. And that's right now, not in 25 years when the so-called Trust Fund becomes insolvent.
Canada, Land of Smaller Government
Its corporate income tax rate is 18% and falling. America's is 35%.
The end of responsibility
From homeowners to government, the buck stops nowhere.
Make the '03 Tax Cuts Permanent, But Curb the Enthusiasm
Here's hoping Congress does in fact make the '03 reductions law, but if so, investors and citizens more broadly would be wise to curb their enthusiasm. In no way would permanency be a sign that the U.S. economy is set to roar.
Fairness and the Capital Tax Fetish
No serious economist thinks higher dividend and cap gains taxes are efficient ways to raise revenue. Why not limit deductions for high earners instead?
Taxes, Fertility and Economic Growth
Our society does not -- despite rhetoric to the contrary -- put much value on raising children. Present budget policies punish parents, who are taxed heavily to support the elderly.
How public worker pensions are too rich for New York's - and America's - blood
He did nothing illegal. At 44, Hugo Tassone retired from the Yonkers police force with an annual pension of $101,333 - thanks to overtime pay he tacked on to his $74,000 salary. Tassone told The New York Times it was the pension he could collect after 20 years of service that attracted him to the job in the first place.
What Would it Take to Cut Government Spending?
Reforms won't be easy to implement, because of the havoc brought about by runaway spending, taxing, borrowing and inflation. There are two main approaches to reform: go slow or go fast.
The Great Privacy Debate
Only one thing is certain here: Nobody knows how this is supposed to come out. Cookies and other tracking technologies will create legitimate concerns that weigh against the benefits they provide. Browser defaults may converge on something more privacy-protective.

Graph of the Day
Australia appears to be showing the same signs of a housing bubble that the U.S. did prior to its collapse
See: U.S. Job Market Loses Steam

Book Excerpts
"To allow unrestricted access to either capital taxation or to public-debt issue ensures that a revenue-maximizing government may appropriate future revenue potential for current-periodA usage, a result that the potential taxpayer could hardly be expected to prefer." –Geoffrey Brennan and James M. Buchanan, The Power to Tax: Analytical Foundations of a Fiscal Constitution (1980)

Did You Know
Michelle Obama's vacation to Spain is estimated to cost taxpayers almost $75,000 a day. Mrs. Obama flew in on a type of aircraft used by Vice-President Joe Biden, which costs the government $11,555 an hour to operate the plane, according to the air force. Assuming a nearly eight-hour flight to nearby Malaga, the total round-trip cost of the flight is about $178,000. The Obama family will reimburse the government an amount equal to two first-class tickets, officials said, but, a round-trip first-class flight to Málaga only costs about $7,400 a piece.