9/16/10 Post

BUZZ: Union Power and the Christie Effect

News
Jobless Claims in U.S. Unexpectedly Fell Last Week to 450,000
Initial jobless claims dropped by 3,000 to 450,000 in the week ended Sept. 11, Labor Department figures showed today in Washington.
Geithner says U.S. economic recovery not fast enough
Treasury Secretary Timothy Geithner said on Monday the U.S. economy was recovering but not fast enough and Washington needed to do more to boost growth and create jobs.
A Bitter Pill For Mortgage Borrowers
Top banking executives said this week that it may take years for the country to see a full-fledged housing recovery -- and that a government rescue program may actually be hindering progress.
Foreclosures Rise; Repossessions Set Record
Bank repossessions, often the final step in the foreclosure process after a home fails to sell at auction, inc. about 3 percent from the month before to 95,364, a record high.
Gold hits record high near $1,278
Gold hit a record 1,277.90 dollars an ounce at 12:30 pm (1130 GMT) on the London Bullion Market.
More Democrats break with Obama on tax cuts
Thirty-one House Democrats, most of whom face tough re-election bids this fall, have signed a letter to House Speaker Nancy Pelosi and House Majority Leader Steny Hoyer urging them to extend expiring tax breaks for all income levels, including the wealthy.
Senate to end debate, vote on small-business aid bill
The Senate is scheduled to vote Thursday on ending a debate on a bill that it says will aid small businesses and result in the creation of 500,000 jobs.
Many say poverty rate is a poor measure
The latest national poverty rate data are scheduled to be released Thursday, and that means there’s finally one thing both liberals and conservatives can agree on: The way we measure poverty is flawed.
Japan intervenes in currency market to weaken yen
Japan waded into the currency market Wednesday for the first time in six years, buying dollars to weaken the surging yen, which is battering famed Japanese manufacturers like Toyota and Sony after spiking to 15-year highs.
Budget chief nominee: Crucial times ahead
President Obama's pick to run the Office of Management and Budget told lawmakers Thursday that the coming months may be the most critical time for U.S. fiscal policy in recent memory.
Warren to Be Adviser to Consumer Watchdog Agency
The development means that the White House has decided not to nominate Ms. Warren as the first director of the agency, a move that Mr. Obama to avoid a likely grueling confirmation battle in the Senate.
Bank bailout: Don't bet on another one
The perception that a $700 billion bailout aided financial institutions more than consumers could make it harder to do something similar in another crisis.
Wholesale Prices Jump
The index of producer prices, which measures how much manufacturers and wholesalers pay for goods and materials, rose a seasonally-adjusted 0.4% for finished goods in August from July, a Labor Department report showed Thursday. In July, wholesale prices were up 0.2%.
FedEx: Economy improving but cutting 1,700 jobs
The outlook for a global economic recovery is still clouded by uncertainty, the FedEx Corp. expects "moderate growth" in the global economy going forward, it also plans to cut 1,700 full-time employees and close about 100 facilities as it consolidates two of its divisions.
Watchdog panel says Treasury's secrecy, missteps make it harder to respond to future crises
Unless the government can show a recession-weary public that the program worked, Congress will not approve another such measure when faced with financial threats. "The greatest consequence of (the bailout) may be that the government has lost some of its ability to respond to financial crises."
Room to Maneuver on Tax Cuts
House Majority Leader Steny H. Hoyer is leaving room for discussions with Republicans and moderate Democrats on the extension of expiring tax cuts.
Battleground Poll: Voters see November GOP takeover of the House and Senate
Voters, by a 9-point margin, believe Republicans will pick up both the House and the Senate, even though they are evenly divided over whom they intend to back in six weeks, according to a new POLITICO/George Washington University Battleground Poll.
Rebel Jim DeMint sparks GOP Senate civil war
DeMint’s philosophy is that it’s time for the GOP to return to its roots of limited government and fiscal responsibility, arguing that there’s little point in nominating Republicans who might vote with Democrats on fiscal issues.

Blogs
What Is Missed in Poverty Measures
Perhaps the biggest problem is that the official poverty rate — which rose to 13.2% in 2008, the highest since 1997 — doesn’t account for the lion’s share of antipoverty measures such as subsidized housing and the earned income tax credit. It also tends to overstate inflation.
Pragmatic Road to Bankruptcy
Who could have predicted the long-term consequences of case-by-case pragmatic problem solving? I suggest Herbert Spencer, Ludwig von Mises, and Friedrich Hayek.
Philly Fed Index Shows Contracting Manufacturing in Mid-Atlantic Region
The Federal Reserve Bank of Philadelphia reported Thursday that its index of general business activity for factories in its district moved to -0.7, from -7.7 in August, after having stood at 5.1 in July.
Weekly initial unemployment claims decline slightly
"In the week ending Sept. 11, the advance figure for seasonally adjusted initial claims was 450,000, a decrease of 3,000 from the previous week's revised figure of 453,000 [revised up from 451,000]. The 4-week moving average was 464,750, a decrease of 13,500 from the previous week's revised average of 478,250."
Secondary Sources: Fixing Economy, Boomer Bequest, Razors and Blades
A roundup of economic news from around the Web.
How much would the President raise the top tax rate?
Take into account state income taxes, and the top rate will be about 50 percent.
Localities Ramp Up Incentives, Credits To Attract Jobs
Facing high joblessness and lackluster economies, local governments are competing more aggressively with tax breaks and other incentives to lure companies to relocate to their regions.
The voice of reason vs. the voice of insanity
It was bad enough when we subsidized home ownership in the past. But to persist in these policies in the face of what has happened boggles the mind. Doing the same thing and expecting a different result is a measure of insanity.
Germany’s Anti-Deflation Weapon? Oktoberfest
Last year, over 6.6 million liters of beer were sold (and presumably consumed) at Munich’s Oktoberfest. That was in the early days of Germany’s recovery from a severe recession, and consumption was up smartly from 2008, though still considerably below 2007’s record of nearly seven million liters.
Do we need a new economics?
Paul Gregory says no. He says we just have to remember what we once knew. Very much worth reading.
Greenspan: Fiscal Stimulus Worked Far Less Than Expected
“We have to find a way to simmer down the extent of activism that is going on” with government stimulus spending “and allow the economy to heal” itself, former Fed Chairman Alan Greenspan told a gathering held at the Council on Foreign Relations in New York on Wednesday.
Christie’s Pensions Reforms: Significant and Bold
He proposes to freeze the COLA, roll back the 9 percent benefit enhancement passed in 2001, increase the size of the contribution made by workers to their pensions and their health care benefits.
The Something-for-nothing Quandary
Most of the debate over extending the Bush tax cuts has focused on whether to extend slightly lower marginal rates for higher earners who already bear a huge burden. But at the other end of the income spectrum, a growing share of Americans don’t pay income taxes. Indeed, the Bush tax cuts increased the share of U.S. households that pay no income taxes.
Rising Retail Sales Give False Hope of Recovery
US retail and food services sales for August rose 0.4% but the Census Bureau's data are off; renewed consumer slowdown is what's actually happening.
What to Do With Fannie and Freddie?
The need for reform is obvious and a return of private securitization may be the only option.

The New START Rubberstamp Threat to National Security
New START is so deeply flawed on the issues of missile defense and verification that amendment to the treaty is the best possible route for protecting our national security.
Mexico’s Bicentennial: The Unending Fight Against Tyranny
Two centuries ago in Mexico a powerful advocate proposed New World freedoms and liberty as the answer to Old World tyranny
Side Effects: More Americans Will Feel the Pain of Medicaid’s Shortcomings
The new law does this by expanding Medicaid’s eligibility to cover an additional 16 million Americans by 2019, according to the Congressional Budget Office (CBO). However, recent analysis from former CBO director Douglas Holtz-Eakin and American Action Forum analyst Michael Ramlet shows this strategy exacerbates existing problems within the health care system.
More Americans Receiving Government Benefits While Fewer Pay In
Simply put, the federal government is spending an increasing amount on benefits in the form of entitlements while simultaneously trimming the number of taxpayers paying the bill.
Tax Hikers Senselessly Stuck on Saving
Tax-hike advocates have erected yet another straw man to protect their high-tax policy, now arguing that little economic harm would be done if Congress and the president were to raise taxes on higher earners because these high-tax sufferers would have saved the money anyway.

Research, Reports & Studies
CENSUS: Income, Poverty, and Health Insurance Coverage in the United States: 2009
This report presents data on income, poverty, and health insurance coverage in the United States based on information collected in the 2010 and earlier Current Population Survey Annual Social and Economic Supplements (CPS ASEC) conducted by the U.S. Census Bureau.
RCM: Wells Fargo Economics Group: Industrial Production Up, Slow Factory Growth From Here
U.S. industrial production grew 0.2 percent in August. It was the 13th time in the last 14 months that output has expanded, but the previously reported 1.0 percent gain last month was revised to a 0.6 percent increase.
What Every American Needs to Know about Government-Entitlement Reform
The long-term budget challenge can be summarized in one word: entitlements. Without Social Security, Medicare, and Medicaid, the budget would be roughly in balance over the coming decades. Left unreformed, however, entitlement costs will become so wildly out of step with revenues that a fiscal crisis will be inevitable.
Euro Will Unravel, and Soon
The outbreak of a sovereign-debt crisis in the eurozone’s peripheral economies has been among the more important developments in the global economy in 2010. Sadly, this crisis will likely intensify in the months ahead. Such intensification will affect Europe’s already-troubled banking system, seriously threatening both the European and the global economic recovery.
Advice and Consent? The Senate Should START with Advice
There are no easy solutions to fixing the problems of the flawed New START treaty. Foremost, the Senate should avoid rubberstamping the treaty. The new strategic environment requires the U.S. to possess robust missile defenses and a range of conventional and non-conventional capabilities to prevent and deter attacks. The very survival of the U.S. may be at stake in these issues.

Economists’ Comments & Opinions
The Best Argument for the Extension of the Bush Tax Cuts for Top Earners
If policymakers’ main goal is to create new jobs, it doesn’t make sense to favor small firms over large or vice versa. New jobs come from small and big businesses. Small businesses — firms with fewer than 500 employees, according to the official definition — make up 99.7 percent of all employer firms and account for about half of the country’s total employment. Companies that employ more than 500 workers represent only .3 percent of all employer firms in the U.S., and yet they account for about half of the country’s total employment.
Why Does Government Grow and Grow and Grow?
Brooks and Ryan are right to argue for big choices, since it is only by confronting these choices that we can arrest creeping statism. But having looked at how we got here, those who value individual and economic freedom have a difficult task at hand in resolving this issue.
It's the Spending, Stupid
A chronic voter 'concern' has now exploded into a broad public movement.
How Pensions Can Get Out of the Red
The pension-fund crisis is rooted in the intersection of excessive optimism by fund managers and the funds’ influence on the political process.
New Bank Regulations Would Bless Lehman's Risk-Taking
Basel III improves on the old regime by strengthening the definition of "capital" and raising the bar for the ratios themselves. It does not do much about the definition of an "asset," however, which leaves the new standards open to abuse.
Let’s Cut Spending! (Just Not Any of the Spending That Benefits Me.)
Voters tend to voice general support for cutting spending, but don’t respond well to the idea of cutting benefits that affect them...
Deflation -- Delusion or Danger?
Even if political battles did not influence policy, it is not completely clear that the standard actions like reducing interest rates will always perk up the economy and prevent deflation, Allen warns.
The Case for a 'Repeal Amendment'
Virginia will consider proposing a constitutional amendment that would allow two thirds of the states to repeal a federal law.
The Economics of Mass Destruction, Part 1
The serious economic problems in America are the direct outcome of mainstream economic thought, and these ideas now operate worldwide.
Basel III Misses the Point; Bankers Will Still Cheat the Rules
The Basel III Accord won't have enough of an impact on Wall Street to dissuade another financial crisis.

"Consilience: Both subprime and 100% loan-to-value can be explained by lenders' belief that bubble is unlikely." -Garett Jones, Twitter

Graph of the Day
WSJ: Principles for Economic Revival
See: Welcome to the tea party
See also: August PPI report

Book Excerpts
"We are led to propose an avowed reversal of the Keynesian destruction of budget balance, an outcome that would be accomplished through an explicit reestablishment of balance between the two sides of the fiscal account as the overriding constraint on public outlays. The principle of budget balance has the great advantage of simplicity. It was, is, and can be understood by everyone, and the translation of the principles for private financial responsibility to those for governments tends to facilitate such an understanding. Furthermore, and perhaps most importantly, despite the Keynesian conversion of our politicians, there remain significant residues of this norm in prevailing public attitudes, residues that can be brought to bear productively in any genuine restoration." –James M. Buchanan, Democracy in Deficit: The Political Legacy of Lord Keynes (1977)

"Did You Know"
After banning cars from Times Square last year to turn the street over to pedestrians, the city now plans to outlaw smoking in the new plazas. Mayor Michael Bloomberg announced plans Wednesday to forbid smoking in all city parks, beaches and pedestrian plazas. The list of 1,700 parks and 14 miles of beach includes Central Park, the Coney Island beach and boardwalk, and the new pedestrian plazas in Times Square.

9/15/10 Post

BUZZ: Obstacle to Deficit Cutting: A Nation on Entitlements

News
Senate Likely to Pass Small-Business Bill Later This Week
U.S. Senate will likely approve a bill later this week that would spur small-business lending by providing financial incentives to banks that make loans to smaller companies, the Wall Street Journal reported.
Are poll workers being used to inflate jobs totals?
Workers at polling places for today's primary and November's general election are being required to file tax withholding forms for the first time ever in a move that could be aimed at inflating the nation's employment numbers.
Bank of America warns of new fees after financial reforms
Bank of America will charge clients new monthly fees if their accounts do not meet a minimum balance, the bank's CEO Brian Moynihan said on Tuesday.
States cutting benefits for public-sector retirees
Since 2008, New Jersey and at least 19 other states from Wyoming to Rhode Island have rolled back pension benefits or seriously considered doing do — and not just for new hires, but for current employees and people already retired.
Drive-Through Tax Proposed for Road Money
The West Virginia Department of Transportation is floating the idea of charging an additional tax on food purchased at drive-throughs.
Retirement on Hold: American Workers $6 Trillion Short
A new study obtained by CNBC says Americans are $6.6 trillion short of what they need to retire.
Chinese think tank warns US it will emerge as loser in trade war
A State Council think-tank in China has warned Washington that the US will come off worst in a trade war if it imposes sanctions against Beijing over the two nations' currency spat.
Gold prices touch another record high
Gold prices touched a record high Tuesday after disappointing reports on Europe's economy, a weaker dollar and a seasonal increase in demand for gold jewelry.
Obama may face fury over Chinese currency
The Obama administration this week may have to fend off a fight with Democratic allies in Congress who are angry about what they say is China's refusal to end trade-distorting policies and who are threatening reprisals that businesses fear could start a trade war.
Bush tax cuts: What you need to know
There probably aren't enough earbuds to go around to block out the confusing noise emanating from Washington over the expiring Bush tax cuts.
Senate Republicans unveil a plan to make Bush tax cuts permanent
"We have a spending problem. We spend too much. We don't have a taxing problem. We don't tax too little," McConnell told reporters Tuesday. "And if we want to begin to get ourselves out of this economic trough that we're in, the only way to do that is to grow the private sector."
Need a job? Head to Washington, D.C.
Employment in the District of Columbia is up 3% this year, outpacing every other state in the nation. Last month alone, D.C. posted a gain of 17,800 jobs, up 2.5% from July -- the country's biggest gain.
Germany asks US to give up its IMF veto
The US should give up its veto over important decisions in the International Monetary Fund in return for Europe accepting a smaller say, Germany has proposed.
House Dems Deeply Divided over Obama Tax Cut Plan
A group of moderate and conservative House Democrats was collecting signatures on a letter calling for Democratic leaders to offer a bill extending tax cuts for all Americans.
US companies in debt refinancing push
US groups outside the financial sector have refinanced a fifth of their debt that is due to mature over the next two years, securing low interest rates by renewing early, according to Moody’s, the rating agency.
Bankrupt, USA: Why our cities aren't too big to fail
Forty-eight states grappled with fiscal shortfalls in their 2010 fiscal budgets. Totaling $200 billion, or 30% of state budgets, this fiscal shortfall is the largest gap on record, according to the DC-based Center on Budget and Policy Priorities, which sees at least 46 states facing shortfalls this fiscal year.
Japan tries to rein in rising yen
Dollar rebounds against the yen after the Japanese government intervenes to try and weaken the currency.
America's most recession-proof cities
The 20 strongest-performing metro areas received high rankings for keeping their labor and housing markets stable and posting robust economic activity during the past few years.
Small biz bill breaks through Senate
Long-delayed small-business legislation broke through in the Senate Tuesday, even as Democrats signaled they want to add permanent estate tax relief to their draft bill extending middle-class tax breaks due to expire at the end of this year.
TARP: A success none dare mention
The Obama administration this week will mark the second anniversary of the collapse of Lehman Brothers and the ensuing Wall Street meltdown with an ironic bit of bipartisanship: letters of thanks to some of the congressional Republicans who helped fashion the government’s response in fall 2008.

Blogs
Secondary Sources: New Stimulus, Retail Skepticism, Free Trade
A roundup of economic news from around the Web.
On Energetic Government and Unlimited Government
The way that presidents and Congresses see their power to intervene in American life in 2010 is profoundly different from the way they saw it in 1963. In 1963, among mainstream Democrats as well as Republicans, it was accepted that an overarching purpose of the American Constitution was to limit the arenas in which government could act. Now, that recognition of that purpose has all but disappeared—in the executive branch, in the Supreme Court, and in Congresses controlled by Republicans as well as by Democrats.
Tight Labor Market Boosts Employee Tenure
Employees held their current positions for a median of 4.4 years as of January 2010, the Labor Department said in a report on employee tenure Tuesday. That’s up from 4.1 years in January 2008.
Industrial Production, Capacity Utilization increase in August
"Industrial production rose 0.2 percent in August after a downwardly revised increase of 0.6 percent in July [revised down from 1.0 percent]."
Economists React: Consumers Buying ‘When Necessary’
Economists and others weigh in on the jump in U.S. retail sales.
"Cash for Clunkers" failed
The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.
MBA: Mortgage Purchase Activity decreases slightly
"The Refinance Index decreased 10.8 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier."
How Much Does It Cost to Employ You?
If you want the bottom line answer, it's because many firms are unwilling to consider adding to their employee rosters because they don't believe their future prospects are bright enough to support the cost of adding additional people to their payroll.
Getting It Right
Even if capital gains taxes were capped at one percent, income subject to those taxes would be taxed at a higher rate than straight compensation. That’s because capital gains taxes (like all other taxes on capital income) are surtaxes, assessed over and above the tax on compensation.
What is to be done?
It would be great to think that the housing market and the financial sector can be repaired without pain. I don’t know how to do it and I don’t think anyone does.
A Trillion Here, A Trillion There
Just when I was getting excited about my new defined benefit retirement plan, I took a look at this depressing report by Courtney Collins of Mercer University and Andrew Rettenmaier of Texas A&M University. The authors claim unfunded liabilities across the US, when health care and other benefits are included, currently amount to some $3 trillion (approximately 20 percent of US GDP). According to the authors, the $3 trillion burden is driven primarily by accounting techniques that employ excessively high discount rates.
A New Handout for Small Business
...this [$50 billion bill] is completely unnecessary--a bit of fine-sounding pork with which to placate small business lobbies in advance of the election.
The romance of government vs. the reality
Deep meaning and true satisfaction comes from working with others on something bigger than ourselves. That comes from building our family. That comes from striving to reach something that exceeds our grasp. That’s what we get more of when government gets smaller.
Small Businesses and the Income Tax
Will this marginal effect bring America to its knees? Hardly. But will it deter productivity and employment enhancing investment? Almost certainly.
How Long is the Long-Run?
Because fiscal stimulus relies on a short-run/long-run tradeoff, many in Washington are trying very hard right now to extol the virtues of short-sightedness.
Why Congress Shouldn't Tax 1099s
For starters, no one is suggesting that this law will do much of anything to close America's "tax gap" (the gap between what the IRS thinks taxpayers should pay, and what they actually do). The tax gap is almost $300 billion; the new law would reduce that by perhaps a half a percent.
TARP and the small banks
Please remember that the cost of the TARP isn’t the cost to taxpayers. Even if banks paid back every single penny, the cost of the TARP is that it reduces current and future prudence.
ObamaCare: a Downward Spiral of Rising Costs and Deteriorating Quality
But until Congress or the courts discard ObamaCare’s mandates, price controls, and new entitlement spending, there is literally nothing that can arrest this downward spiral of rising costs and deteriorating quality.
Cuba Needs A Swift Transition Towards Capitalism
Very soon, hundreds of thousands of Cubans will be looking for a job in the dilapidated private sector. Social unrest could easily erupt if their search for a job or occupation goes unfulfilled. In the end, only a swift transition towards capitalism can rescue the Cuban people.
Cash 4 Clunkers Fails Again
In a new study, economists Atif Mian and Amir Sufi find that the government’s “cash for clunkers” program “had no long run effect on auto purchases.”
Unemployment Up, Crime Down
Violent and property crime fell in America last year, the second full year of the current recession, according to new data from the FBI.
The Obamacare and Obama Tax Hike Double Whammy on Seniors
No demographic was more opposed to Obamacare’s passage and no group wants to see the law repealed more than America’s seniors. They know that Obamacare used Medicare as a piggy bank to transfer half a trillion dollars out of Medicare, not to shore up Medicare’s solvency, but to spend on a new government program.
What’s Scarier Than Cap and Trade? A Renewable Electricity Standard
For the past year, the phrase “cap and trade” was taboo. For those hoping to pass cap and trade, it became “The-Energy-Policy-That-Will-Create-Jobs.”
Tax Hike Prevention: A Good Idea
Senators Mitch McConnell (R–KY) and Chuck Grassley (R–IA) have introduced legislation titled the Tax Hike Prevention Act. According to information provided with the release of the legislation, it provides for a “permanent extension of the provisions of the 2001 and 2003 tax bills, permanently patches the AMT and includes the Lincoln/Kyl death tax provisions for 2011 and beyond.
Obama Tax Hikes Already Hindering Job Growth
“The uncertainty over looming tax increases is starting to affect both investing and corporate decision making. … Small-business owners say unease about tax policy, along with the economy, has led them to hold off on hiring and investment.”
Grain Markets Are Hot, But Is it Too Late?
Shawn Hackett, who focuses on agricultural commodities, says speculators should be bearish, but that another chance to invest is coming.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Retail Sales Climbed Again in August; Auto Sales Weak
U.S. retail sales in August increased for the second month in a row, rising 0.4 percent. Outside of autos, gas and building materials, sales climbed 0.6 percent.
The Myth of a Return to Clinton-era Taxes
The claim that the president’s plan would only take the top tax rates back to Clinton levels isn’t quite right. Here’s why.
Federal Pay Still Inflated After Accounting for Skills
While federal employees do earn more partially because they are more skilled than the average private sector worker, controlling for skills does not eliminate the federal pay premium.
Reductions in Medicare Advantage Payments: The Impact on Seniors by Region
In this paper, we provide a brief background on the Medicare Advantage program and a description of the changes made by the new legislation. Most important, we provide quantitative estimates of the impacts of these changes on Medicare patients.
Obama Tax Hikes: McConnell–Grassley Tax Hike Prevention Act Would Help Taxpayers and Economy
The 2001 and 2003 tax relief packages are set expire at the end of this year. If these packages are allowed to expire, on January 1, 2011, taxes will go up automatically for American taxpayers—without a single piece of legislation ever crossing the President’s desk.

Economists’ Comments & Opinions
Tax Cuts vs. 'Stimulus': The Evidence Is In
A review of over 200 fiscal adjustments in 21 countries shows that spending discipline and tax cuts are the best ways to spur economic growth.
Financial regulation: The money moves on
Few are prepared to talk openly about the issue for fear of seeming disloyal to the campaign for concerted action against the banks but in interviews conducted over several months the Financial Times has pieced together a picture of mounting unease that the focused crackdown on banking could just push risk out of the reach of the toughest regulation and into fast-growing “shadow” areas.
Senate Tax Showdown
Five Democrats have already said no.
Rogue States
The revolt against ObamaCare.
The Harrisburg Canary
A muni bond bailout, coming soon to a city near you.
Obama Is Full of...Education Dollars
For every carefully considered dollar distributed to encourage reform, the feds undermined that message in a single stroke last month with two bucks that signal to states that they should hang in there, keep doing what they're doing, and whatever happens don't take the occasion of a budget crunch to rethink the way money is spent on education in this country.
How Tea Party Organizes Without Leaders
By embracing radical decentralization, tea party activists intend to rewrite the rule book for political organizing.
Health-care reform: Why I'm suing to get back my freedom
A small-business owner and former Iraq war combat medic explains why he's challenging the new health-care law's requirement that everyone buy insurance.
Where to Put Your Money in These Uncertain Times
As bonds and stocks may be too risky, these are ways to handle capital as you're heading into retirement.
What the Market Cycles Will Bring This October
The S&P is revisiting the scene of the crime, and all eyes are on 1130.

Graph of the Day
Mercatus Center: Stimulus Job Creation by Agency
See: Obama's Plan to Raise Tax Rates
See: Oil Crisis and Collusion
See: Federal Payments to Individuals
See also: Health Care Bill Still Unpopular & More

Book Excerpts
"...distribution will be shaped by two major activities of the state: its production of public goods (understood, broadly, to include law and order, public health and education, roads and bridges, etc.), and its production of social justice through income redistribution. On some definitions, the production of social justice becomes part of the production of public goods; this gives rise to difficulties we can safely and advantageously leave on the side. (There is a not too far-fetched sense in which the production of any public good at public expense is ipso facto redistributive, if only because there is no unique, "right" way of apportioning the total cost to be borne, among members of the public according to the benefit derived by each from a given public good. Some can always be said to get a bargain, a subsidy, at the expense of others. Thus, the distinction between the production of public goods and explicit redistribution must be a matter of arbitrary convention.) Even the pre-tax pattern of distribution is, however, upset by the feedback effect which the post-tax one exercises upon it. Factors of production will, in general, be more or less readily supplied according to the price they can command and the situation of their owners (technically, the price- and income-elasticities of supply), so that if one or both are changed by taxes, there should be repercussions on output and on marginal products." –Anthony de Jasay, The State (1985)

Did You Know
"The number of chronically hungry people will decline 10 per cent this year, the first fall since 1995, said the UN, while warning the global agreement to cut the percentage of people suffering from hunger by 2015 was in jeopardy... One target of the Millennium Development Goals, agreed by world leaders a decade ago, is to halve the proportion of undernourished people in developing countries by 2015, setting a goal of 10 per cent."

9/14/10 Post

BUZZ: 2010 US Deficit Likely to be Second Highest Ever

News
Obama says his policies have stabilized economy
Less than two months before the midterm elections, President Barack Obama is imploring voters to support his party's economic policies, even though he acknowledged that those policies haven't brought about a recovery fast enough for many Americans.
Thicker cushions, when you’re ready
Bank regulators make poor story-time princesses. Before the crisis, banks under their watch progressively thinned out the cushions of capital they were resting on while regulators slumbered on, oblivious to the huge lumpy risks beneath. Now they are trying to make amends.
US poverty on track to post record gain in 2009
The number of people in the U.S. who are in poverty is on track for a record increase on President Barack Obama's watch, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty.
Aug. retail sales up 0.4 percent, best in 5 months
Retail sales rose in August by the largest amount in five months, suggesting a late-spring economic swoon was temporary and not the start of another recession.
Rand Paul: GOP Shares Blame for Deficits
Paul said Democrats share greater blame for rising red ink, but the tea party favorite said Republicans squandered past congressional majorities by presiding amid times of growing federal deficits.
Banks get years to adjust to new global rules
Bankers and analysts said new global rules could mean less money available to lend to businesses and consumers, but they praised a decision to give them plenty of time — until 2019 — before the so-called Basel III requirements come into full force.
Cuba to Cut State Jobs in Tilt Toward Free Market
Cuba will lay off more than half a million state workers and try to create hundreds of thousands of private-sector jobs, a dramatic attempt by the hemisphere's only Communist country to shift its nearly bankrupt economy toward a more market-oriented system.
Jobless Are Straining Social Security's Disability Benefits Program
Applications to the program soared by 21 percent, to 2.8 million, from 2008 to 2009, as the economy was seriously faltering.
Reinsurers face taxing time on premiums
The insurance industry is facing political and regulatory tension between the US and Europe that threatens to make life more difficult for companies doing business in the US – and more costly for US consumers.
Boehner Budget Rollback would Cut Scores of Agencies
It sounds easy, but House GOP leader John Boehner’s proposal to roll back non-security federal spending to 2008 levels would require wrenching 20 percent reductions in many agencies, possibly including the FBI.
GOP leader nixes talk of taxing
Dares Obama to pursue hike.
Positions Harden on Tax Cuts
Boehner's Hint at Possible Compromise on Bush-Era Rates Doesn't Gain Traction.
Buffett: No double-dip recession
"I'm a huge bull on this country," said the Omaha, Neb.-based billionaire investor and philanthropist. "We will not have a double-dip recession at all," he said. "I see business coming back almost across the board."
Plan to end oil industry tax breaks draws fire
The debate over eliminating tax breaks for the oil and gas companies is heating up, with an industry group saying Monday that the move could cost the energy sector thousands of jobs.
Retail: Not out of the woods yet
Several encouraging signs in the retail sector -- including a strong retail sales report and an improved outlook from a retail bellwether -- show that spending is picking up.
Intel CEO: Stimulus didn't work
"Take the uncertainly out. Businesses can't invest until they have fewer variables and right now there are just too many variables,"
Hill battles over Bush tax cuts
With their backs to the wall, Democrats want two things from Congress this fall: a fast break and a political bank shot — melding small-business relief with a fight over Bush-era tax cuts for the wealthy.
House GOP Presses Democrats On Spending
Republican leaders of the House Ways and Means, Appropriations, and Budget committees today wrote to their Democratic counterparts asking them to cooperate on legislation to be enacted this month that would reduce federal spending in FY11 to FY08 levels and freeze federal tax rates for the next two years.

Blogs
Secondary Sources: Mortgage Deduction, Unemployment, Lost Generation
A roundup of economic news from around the Web.
Are Social Security Commitments a Sunk Cost?
The Supreme Court made it supremely clear in Flemming v. Nestor that the the Social Security system is essentially a tax and transfer scheme. If the government decides that it doesn't want to give benefits to people who paid into it over a lifetime, it can legally do so. So it's not a debt and it's not a sunk cost.
Small-Business Optimism Recovers Slightly
The Small Business Optimism Index edged up 0.7 points to 88.8 in August, said the National Federation of Independent Business.
What If Size Does Matter?
Swedish economists Andreas Bergh and Magnus Henrekson looked at the available literature in their book Government Size and Implications for Economic Growth and found “with few exceptions … a negative relationship between government size and economic growth in rich countries.”

CardHub Study says Decline in Credit Card Debt a Result of Chargeoffs, Not Frugality
A spreading meme is that there is a new frugality among consumers, as evidenced by a decline in credit card balances outstanding over the past several quarters. An interesting new analysis by CardHub, however, argues that this is a measurement error: that the decline in outstanding balances is actually a result of increased chargeoffs of debt, not consumers paying down debt. In the aggregate a chargeoff or a payoff both count as retiring the debt.
The “s” word
This is one of the most honest and depressing statements about the state of our knowledge of macroeconomics that I have ever seen. The CBO is admitting that the “new data”—what actually happened in the aftermath of the stimulus—cannot be used to evaluate the stimulus.
CR Index: Amid declines in spending and jobs, one bright note
The U.S. job outlook remains especially bleak. The August results for the Consumer Reports Employment Index marks a two-month decline, down in September to 49.1 from 50.2 in August.
TARP Deadbeat list grows to more than 120 banks
"The latest report ... shows that more than 120 institutions ... have missed their scheduled quarterly dividend payments ... a record six banks each missed six dividend payments."
The Output Gap Story
I am not sure about the economic parallel between stimulus spending and foreign-aid spending. But the political parallel is clear. I think that people who believe in foreign aid are not going to change their minds, and I think that people who believe that stimulus works are not going to change their minds.
Pension Reforms on the Horizon in New Jersey
Governor Chris Christie has announced his plan to tackle New Jersey’s pension shortfall. Officially estimated at $46 billion, Andrew Biggs and I estimate the figure is closer to $174 billion (using the risk-free discount rate to assess the size of the liabilities).
Viard on Marginal Tax Rates
Alan says supporters of the Bush tax cuts have neglected the best arguments.
Does spending create prosperity?
People will argue forever whether the Obama stimulus package was a waste of money, saved the economy from an even bigger downturn, or delayed the natural rebound of the economy. There is no evidence that it saved the economy from a bigger downturn. It could be true, but there is no evidence. The evidence that we do have on massive injections of money into broken economies is that they have little effect on the economy as a whole. They benefit the people who receive the money but do not repair what is broken.
Investment Contributions to GDP: Leading and Lagging Sectors
The key leading sector - residential investment - has lagged the recovery because of the huge overhang of existing inventory. Usually RI is a strong contributor to GDP growth and employment in the early stages of a recovery, but not this time - and this is a key reason why the recovery has been sluggish so far.
The Dynamics of Creative Destruction
The future of empirical macro is in the new labor dynamics (JOLTS) and business dynamics data sets. I predict that if the CBO, Mark Zandi, and other traditional macro modelers continue to ignore these data sets, they will be stuck in a time warp, like somebody who doesn't know how to use email or a cell phone.
Why inequality is a red herring
My only quibble with Alex is that it’s not really a winner-take-all world. It’s more of a winner-take-lots kind of world. If LeBron James had decided to be a social worker, yes, someone else (Kobe, maybe) would be considered the best player alive and that person would get some extra rents for being the best.
The Cost of High Taxes
If the U.S. had higher tax rates, we might not end up with any higher revenues. Instead, we would spend more time mowing our own lawns, cooking our own meals, doing our own household repairs, and so on.
The Return of No-Money Down
...having negative equity is very, very dangerous. And that's what a no-money-down borrower has in this market, because prices aren't rising much, and they need to find thousands of dollars to pay broker commissions and closing costs if they want to sell.
Did France cause the Great Depression?
The results indicate that France was somewhat more to blame than the United States for the worldwide deflation of 1929-33. The deflation could have been avoided if central banks had simply maintained their 1928 cover ratios.
Social Security: The Privatization Shell Game
So the government is going to have to come up with revenues to pay two groups of workers: those who want the present value of their future SS checks and those who don't want it but, instead, want to get the checks. The government hasn't come up with any new revenues to do this.
What will Basel III do?
1. This agreement is probably good news.
2. It is difficult to divine the net future effects of such changes upon announcement. There is also the question of how binding this ends up being and whether the implementation lags will matter.
3. One key question is how much current systems prevent regulatory arbitrage, namely driving more intermediation into less regulated, less reliable and less easily monitored institutions.
Sizing Up Obama’s Nominee as Chief Economist
In nominating Austan Goolsbee as chairman of the Council of Economic Advisers, President Obama chose a first-rate scholar and an exceptional expositor, an economist as good as anyone in his (and my) generation at the essentials of this position – thinking through the economic implications of a wide range of policies.
How Many Jobs Do We Need?
The answer to how many jobs the United States needs depends on how you define “we” and how you define need.
Keynes Was Wrong on Stimulus, but the Keynesians Are Wrong on Just about Everything
It’s very important to draw a distinction between Keynes, who was wrong on a couple of things, and today’s Keynesians, who are wrong about almost everything.
ObamaCare’s Threat to Free Speech
HHS Secretary Kathleen Sebelius is attempting to stifle political speech by using the new powers that ObamaCare grants her to threaten health insurance companies that claim ObamaCare’s coverage mandates are one cause behind rising premiums.
Tax Hikes on the Rich Will Hurt the Recovery
Supporters of President Obama’s refusal to extend the Bush-era tax policies have cloaked themselves in a mantle of fiscal responsibility, arguing that extending cuts, particularly for high-income earners, would increase the deficit and national debt.
Advance Competitiveness Through Economic Freedom
Early this year, The Heritage Foundation’s Index of Economic Freedom reported that the U.S. economy is no longer in the top tier of economically free countries and runs the risk of falling further behind.
Obamacare vs. the Rule of Law
Obamacare is deeply unpopular with the American people because, as the massive regulatory regime goes into effect, the American people are noticing that none of the administration’s promises are being honored.
Setting the Record Straight: Spending Cuts
The Federal Government takes and spends an ever-growing portion of the wealth of this Nation, and spends the money of future generations. This cannot continue. We must overhaul Federal entitlement programs and get their cost under control, before the country bankrupts itself.
Kids Deserve Better: Stopping the Obama Education Agenda
An education agenda that serves only to empower bureaucrats and politicians will never improve children’s education. It is time for the federal government to step aside and give authority back to parents and local leaders.
Medicaid May Bust State Budgets Next Year
Medicaid spending now represents on average about 21 percent of the typical state budget. If state Medicaid spending increases by 41 percent as projected by CMS, then by next year Medicaid could end up consuming nearly 30 percent of the average state budget.
Obama Sweeps the Declaration of Independence Under the Rug
President Obama just redecorated The Oval Office. Part of his feng shui includes a new rug featuring several of his favorite quotes. Of all the memorable quotes in American history, Obama chooses no Founders’ words for his office rug. There is not even a nod to the Declaration of Independence.
Side Effects: Obamacare’s Small Business Tax Credits Won’t Go The Distance
Though small firms eligible for some level of the tax credit employ approximately 16.6 million employees, the report estimates that businesses that might actually take advantage of the credit employ only 3.4 million workers. Moreover, a large portion of those 3.4 million already receive health insurance through their job.
Obamacare in Pictures Busts Health Care Myths
As America closes in on the six-month anniversary of the passage of Obamacare and prepares for the November elections, liberal health groups are revving up to defend the unpopular new health care law.
Are Big Companies Regaining Their Luster?
There's been a shift underway in terms of recent performance: Large-cap just rose for a second straight week while mid-cap, small-cap dropped.

Research, Reports & Studies
RCM: Cato Policy Report: The Era of Expert Failure
A key difference between experts in the private sector and experts in the government sector is that the latter have monopoly power, ultimately backed by force.
The High-Income Rate Reductions: The Neglected Stepchild of the Bush Tax Cuts
Congress is considering allowing the Bush tax cuts’ rate reductions for high-income households to expire at the end of 2010 while providing a deficit-financed extension of the middle-class portion of the tax cuts. This combination would damage economic growth by hiking marginal tax rates on saving and investment while swelling the budget deficit.
Don’t Ask, I’ll Just Tell You What the Law Should Be: Log Cabin Republicans v. United States
In Log Cabin Republicans v. United States, the Obama Administration sought to win a policy victory by losing a case. By failing to adequately defend the “Don’t Ask, Don’t Tell” (DADT) statute President Obama is able to undermine or do away with a statute that he opposes.
Legalizing Marijuana: Why Citizens Should Just Say No
The scientific literature is clear that marijuana is addictive and that its use significantly impairs bodily and mental functions. Nonetheless, this November, California voters will consider a ballot initiative, the Regulate, Control and Tax Cannabis Act of 2010 (RCTCA), that would legalize most marijuana distribution and use under state law.
Short Sales Bans: Shooting the Messenger?
In response to the recent financial crisis, many governments chose to ban or restrict short sales, hoping to mitigate the impact of the stock market downturn.

Economists’ Comments & Opinions
Reagan, Obama, Summers All Wrong on Tax Credit: Amity Shlaes
In reality, Obama’s idea isn’t such a noble idea. Because the investment tax credit has been around in different forms since the 1950s, it’s possible to examine the record. When you do, you find not great success but uneven performance.
Rep. John Boehner's Taxation Blunder
The real "cost" that needs to be trimmed is the $44.8 trillion in added federal spending expected over the next 10 years - which represents an 83% surge from the preceding decade.
The 1099 Insurrection
The White House fights an effort to ease a burden on small business.
Impulse Response
Except for a burst of census hiring that briefly pushed payroll growth above trend during the second quarter of this year, job growth has been perpetually below trend over the past two years.
The Day After Tomorrow
Throughout American history, in other words, there have been leaders who regarded government like fire — a useful tool when used judiciously and a dangerous menace when it gets out of control. They didn’t build their political philosophy on whether government was big or not. Government is a means, not an end. They built their philosophy on making America virtuous, dynamic and great. They supported government action when it furthered those ends and opposed it when it didn’t.
CANNON: Obamacare silences health insurers
Sebelius threatens companies that speak out of turn.
How Unreliable is CBO Scoring?
The bottom line is that CBO projections should be taken with a grain of salt — to say the least.
Obamanomics Meets Incentives
Why cuts in marginal tax rates increase economic growth, but cash for clunkers merely created a boom and bust cycle in auto sales.
Jump-starting the Economy
Because pumping trillions into the economy hasn't worked this time, maybe we ought to reflect on the last time government spending was under control — back in the 1920s.
Gangster Government Stifles Criticism of ObamaCare
"There will be zero tolerance for this type of misinformation and unjustified rate increases." That sounds like a stern headmistress dressing down some sophomores who have been misbehaving. But it's actually from a letter sent Thursday from Health and Human Services Secretary Kathleen Sebelius to Karen Ignagni, president of America's Health Insurance Plans--the chief lobbyist for private health insurance companies.
The Next Hoover
I'm beginning to think Barack Obama isn't the next FDR--as so many promised--but the next Hoover.
How to jump-start the economy
Americans have had enough of bailouts, government takeovers and stimulus spending sprees. All have combined to create massive uncertainty for businesses large and small, and our economy is showing the effects. The country has lost confidence in Washington — and rightly so.
Why It's More Than Just the Deficit, Part 2
If we want to reduce the deficits and reduce our personal debt, we must find a way to reduce the trade deficit.
Investing in the Coming Boom in Farming
Farming machinery, grain processing, and fertilizer companies are all options for investors who aren't prepared to buy a farm.

Graph of the Day
2010, a Year of No Inflation
See: Top 10% of Earners Paid 71% of Federal Income Tax
Obamacare: The Real Price Tag is a Moving Target

Book Excerpts
"We know, of course, that taxpayer adjustments to tax-rate changes take time. In response to rate increases, persons must seek out and find nontaxable substitutes for the tax base, or at least substitutes that are taxed at differentially lower rates, whether the tax is imposed on a source or a use of income. Persons must shift investment to nontaxed or low-taxed opportunities and must invest in opportunities that are complementary to those directly advantaged. Individuals must learn about, and take advantage of, legal loopholes, which may have to be invented by lawyers and accountants. The whole analysis here depends only on the plausible assumption that in considering the revenue potential of a tax or tax-rate increase, the participant in governmental decision making operates on the basis of a shorter time perspective (a higher discount rate) than the one that describes the adjustment of persons as taxpayers to a posttax equilibrium." –Geoffrey Brennan & James M. Buchanan, The Reason of Rules: Constitutional Political Economy (1985)

Did You Know
"From August 2008 to August 2010, the U.S. civilian workforce shrunk by 6.4 million, or 4.7 percent. While almost every single sector of the economy employed less workers in August than two years ago, two notable exceptions are the Federal government and the education & health services sector... Interestingly, there is one quasi-private sector that is booming and hiring a greater number of workers than the Federal government. The education & health services sector (defined as a single entity by the Bureau of Labor Statistics) employed 676,000, or 3.6 percent more workers than it did two years ago. In fact, for the past two years, this sector has never posted a single month-to-month decrease in employment."

9/13/10 Post

BUZZ: Boehner Opens Door in Tax Talks

News
Aid plan helps Pa. capital avoid default
State gives Harrisburg $4.3 million in loans and payments ahead of a Wednesday deadline to pay bondholders.
Three signs it's truly a jobless recovery
Average work week is still short, unemployment claims and the magic number and corporate cash balances remain high.
New year, no federal budget
With just a few weeks to go before kissing fiscal year 2010 goodbye, Congress won't be able to welcome the new year with any fiscal clarity because there is no budget.
Waning Economic Recovery Fuels Global Uncertainty
In recent weeks, data from around the world reveal a growth downshift. Companies that had been rushing to restock their inventories are now ordering only what they need to meet existing demand, affecting the entire global supply chain.
Big business and Wall St. bet on GOP
This election, more financial firms and business groups are giving to Republican campaigns than Democratic ones.
Obama’s New Econ Guru Holds the Line on Tax Cuts
In his television debut on the Sunday morning political shows, the newly appointed head of the White House Council of Economic Advisors, Austan Goolsbee, is making a clear case for ending the Bush tax cuts on high income earners.
New bank rules to curb risk
Global officials meeting in Switzerland Sunday announced new guidelines to strengthen the financial system by forcing banks to set aside more capital.
U.S. Poverty Set for Record Gains as Elections Loom
Economists are predicting the latest census figures coming out this week will show an almost 2 percent poverty rate increase.
China's inflation battle intensifies
Inflation in China accelerated last month, as rising food prices pushed overall prices higher. The consumer price index increased to 3.5% in August, compared to a 3.3% annual rate in July
A year later, tea party marches on
Thousands of tea party activists huddled in front of the U.S. Capitol on Sunday afternoon, eager to celebrate recent victories against the Republican establishment and rally together...
Fed Actions Seen, But Not Endorsed
Three in five economists surveyed by The Wall Street Journal expect the U.S. Federal Reserve to resume large-scale purchases of securities in the face of a deteriorating economic outlook—but, by a 3-to-2 margin, most of them also think that would be a mistake.

Blogs
Holding Economic Recovery Hostage
The last thing you want to do is raise taxes in the middle of a recession because that would just suck up, take more demand out of the economy and put businesses in a further hole.
Goolsbee on Tax Incentives
Here’s to hoping that Goolsbee doesn’t suffer the fate of his predecessor by abandoning everything he’s previously written in the interest of political expediency.
Goolsbee Appointment Good News for Global Trade
This appointment is good news for advocates of expanded international trade. One of the world’s leading trade economists, Jagdish Bhagwati, described Goolsbee as a valuable source of free-trade advice over almost a decade.
Slouching Towards a New Supreme Court Term
We’re now three weeks away from the new Supreme Court term and after a summer that included big opinions from The Nine, more confirmation hearings, and front-page district court decisions, we roll into a fall full of even more legal intrigue.
Obamacare and the Medicare Bureaucracy: A Dangerous Duo
In recent Heritage research, Clete DiGiovanni, MD, and Robert Moffit, Ph.D., lay out some of the other important changes to Medicare which could, depending on the direction taken in pending regulation, challenge the doctor-patient relationship and undercut physician autonomy.
Winner take-all economics
In a winner-take all economy, however, small differences in skills can mean large differences in returns and we have moved towards a winner take-all economy because technology has increased the size of the market that can be served by a single person or firm.
Back to Constitutional Basics in Education
In the mid 1960s, education policy took a wrong turn, away from America’s founding principles.
Austerity for Liberty
Instead of pushing for "constructive" free market reforms, libertarians should doggedly focus on austerity: opposing spending increases, and pushing spending cuts.
The First Part of ObamaCare to Go?
The provision is supposed to generate a substantial revenue — an estimated $17 billion over ten years — which could make repeal difficult, but it is interesting how many Democrats, including some who voted for the health care bill, now want repeal of this measure.
Schedule for Week of Sept 12th
The key releases this week will be retail sales (on Tues for August), Industrial Production (Weds for August) and the Empire state and Philly Fed surveys (Weds and Thurs for Sept).
A Dastardly Clever Scheme
In the end, the goal of the rent control laws is thwarted (the low rents are enjoyed by well-paid tenured faculty rather than the needy), the income tax laws are thwarted (a sizable part of compensation is untaxed), and all this is done by a nonprofit institution (the university) whose ostensible purpose is to serve the public interest.
Why does a rise in imports lower gdp?
The rationale is a) that is simply how the number is calculated, and b) a nation's capacity to produce goods and services determines its long-run standard of living. On b), you might argue that the world's capacity to produce goods and services is what matters in a globalized setting...
Against the Research and Development Tax Credit
...the economy would be better off if there no corporate income tax altogether. Instead, the combination of high rates and lots of holes yields relatively little revenue. It does, however, maximize the value of K street lobbyists.
Unofficial Problem Bank List increases to 849 institutions
"After six additions and one removal, the Unofficial Problem Bank List includes 849 institutions with aggregate assets of $415.3 billion, up from 844 institutions with assets of $412 billion last week."

Research, Reports & Studies
The Miscellaneous Tariff Bill: A Blueprint for Future Trade Expansion
For the past three decades a number of MTBs have been enacted that grant temporary relief, typically for three years, to U.S. manufacturers and other producers forced to pay duties that drive up the cost of imported inputs, such as chemicals and specialty parts. The bills have been relatively noncontroversial because the tariffs usually involve products no longer made in the United States, so there are no protected domestic competitors to oppose their suspension.
Obama Tax Hikes: Dividend Tax Increase Hurts Seniors and the Economy
A higher tax rate on dividend income will affect more than just decisions of companies. Senior citizens disproportionately hold dividend-paying stocks, with almost half of all tax filers ages 65 or older reporting dividend income. These seniors will have lower incomes and consume less due to lower payouts.
Implementing Obamacare: A New Exercise in Old-Fashioned Central Planning
Americans are confronted with the largest expan¬sion of government in almost half a century. President Barack Obama and the congressional Democratic leadership passed massive health care overhaul legis¬lation in March 2010 by the narrowest of margins. Despite the Administration’s ongoing efforts to per¬suade Americans that the medicine is good for them, well over half the country refuses to swallow it
Nine Years Since 9/11: When Will Congress Wake Up on Homeland Security?
This failure of leadership puts all Americans at risk. Congress must develop a homeland security agenda that will maintain security while keeping Americans free and prosperous. Such an agenda must include key reforms in oversight, grants and disaster declarations, terrorist detention policies, and immigration enforcement.
Over One-Third of New Tax Revenue Would Come from Business Income If High-Income Personal Tax Cuts Expire
Assuming that business income is the last dollar of income a taxpayer earns, Tax Foundation economists estimate that 39 per cent of the $629 billion tax increase on high-income taxpayers proposed in the Obama 2011 budget would be extracted from business income. Over ten years then, an extra $246 billion would be taken out of business income.
RCM: Wells Fargo Economics Group: U.S. Review
More Signs the Economic Recovery Is Still Intact.

Economists’ Comments & Opinions
POWELL: Jump-starting the economy
Because pumping trillions into the economy hasn't worked this time, maybe we ought to reflect on the last time government spending was under control - back in the 1920s.
Why the Bush Tax Cuts Worked
The Bush cuts provided lower taxes on ordinary income, especially for taxpayers at the high end of the income distribution. These are some of the most energetic and productive people in society; raising tax rates would discourage their effort and entrepreneurship. High-income taxpayers also have multiple ways of avoiding high tax rates, so any revenue gain from raising rates would be modest.
Financial Lifeguards Still on Duty
From Ireland to Germany to Pennsylvania, when the seas get rough, those drowning continue look to policymakers for help.
A Millionaire’s Bracket is a Bad Idea, Particularly for the Left
If the top 1 percent is responsible for 40.4 percent of revenue from federal individual income taxes, a new top rate will presumably increase revenue volatility, as income at the top of the distribution tends to fluctuate with the business cycle.
Why It's More Than Just the Deficit, Part 1
Increasing government debt crowds out the necessary savings for private investment -- the real factor in increasing productivity. But there's another part of that equation.
The Size of Government and the Choice This Fall
In polls, Americans overwhelmingly prefer small government and low taxes to the alternative. Yet they've been given big government, one program at a time.
How Obama Thinks
The President isn't exactly a socialist. So what's driving his hostility to private enterprise? Look to his roots.
GAO Finds Sebelius Misleading Taxpayers on Health Reform
The Government Accountability Office says a Medicare mailer sent out by Kathleen Sebelius, secretary of Health and Human Services, to Medicare recipients on the new health-care law isn’t accurate.

Graph of the Day
American Thinker: National Healthcare Expenditure Projections
See: Cuban Stagnation vs Chilean Growth

Book Excerpts
"Even the striving for equality by means of a directed economy can result only in an officially enforced inequality - an authoritarian determination of the status of each individual in the new hierarchical order." –F.A. Hayek, The Road to Serfdom (1944)

Did You Know
Thirty percent of those in the "overweight" class believed they were actually normal size, while 70% of those classified as obese felt they were simply overweight. Among the heaviest group, the morbidly obese, almost 60% pegged themselves as obese, while another 39% considered themselves merely overweight. According to the U.S. Centers for Disease Control and Prevention, 34% of adults aged 20 and older are obese, and 34% are overweight. Among children, 18% of teens aged 12 to 19 are obese, 20% of children aged 6 to 11 are obese, as are 10% of kids aged 2 to 5.

9/10/10 Post

BUZZ: Federal workers who owed money to the Internal Revenue Service in 2009

News
Goolsbee to Lead Council of Economic Advisers
President Barack Obama will name Austan Goolsbee, a longtime adviser and an architect of his campaign's economic message, to be chairman of the White House Council of Economic Advisers at a White House press conference Friday, an administration official said Thursday night.
Corporate debt issuance at 3-year high
Corporations issued $33.7 billion in investment grade debt this week, the highest weekly amount since May 2008, according to an analysis conducted by Thomson Reuters. Thirty-five offerings were made, the most in about three years.
Wall Street Faces a Grim Third Quarter
Less activity in the stock and bond markets may crimp profits.
Obama Says Economic Progress 'Painfully Slow'
Facing the possibility of a GOP blowout in November, Mr. Obama insisted again that Bush-era tax cuts be extended for individuals earning over $200,000 a year and joint filers earning over $250,000. All the tax cuts are due to expire at the end of this year unless Congress acts.
6-figure jobs - no degree required
You don't necessarily need to go to college to make big bucks. PayScale.com ran the numbers and found these 6 jobs where top performers can earn $100,000 or more a year without a bachelor's degree.
Calif. controller says no immediate threat of IOUs
Controller John Chiang issued a statement Thursday saying monthly cash totals for August were high enough to remove the immediate threat of IOUs. His office had earlier indicated it might need to issue them this month... Last year, his office issued IOUs for only the second time since the Great Depression.
Ireland, Hungary Have Success in Debt Sales
Ireland sold just €400 million ($508.6 million) of treasury bills, at the bottom of its targeted amount of €400 million to €600 million, but it paid lower yields than previously. Hungary sold 40% more bonds than planned, although at higher yields than two weeks ago but with reassuring coverage ratios.
AMT: A Bomb that Could Grind the Economy to a Halt
The Alternative Minimum Tax, or AMT, a huge and largely incomprehensible tax, will hit almost 27 million households in the next few months if Congress fails to act.
Growth Currencies Get a Data Lift
An unexpected improvement in Australian unemployment levels sent the Australian dollar to a four-month high against the greenback. The Canadian dollar hit a three-week high as it continued to benefit from Wednesday's increase in Canada's target interest rates.

Blogs
The rule of law, or the rule of men (women)?
Nowhere is it stated that these [insurance premium] rate hikes are against the law (even if you think they should be), nor can this "misinformation" be against the law. Here is further information, including a copy of the [warning] letter [to insurance industry's top lobbyist from Kathleen Sebelius], which is worse than I had been expecting.
Jon Chait Admits Federal Employees Are Overpaid
...federal government employees are overpaid by around 12 percent relative to private-sector workers with the same education, experience, and other characteristics. Including benefits that comes to around $14,000 extra compensation per year, totaling around $40 billion annually.
Wholesales Inventories increase 1.3% in July
"Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations but not for price changes, were $405.0 billion at the end of July, up 1.3 percent..."
Secondary Sources: Mortgage Crisis, U.S. and Japan, Productivity
A roundup of economic news from around the Web.
Pension Fact of the Day
...as the fraction of retirees goes up, so will the fraction of able-bodied retirees. In fact, we could maintain the status quo as long as people retired on the basis of how old they feel instead of how old they are.
On Comparing Tax Cuts to Social Security
To sum up: as I said in my follow-up post, the only reason the two numbers look even remotely similar is that they're using a present value calculation and a very long time frame. The present value calculation weights very near-term revenues and expenditures much more heavily than later ones; as a result, even though the expenditures on Social Security over the next 75 years are much larger than those on the Bush tax cuts for the wealthy in almost every time period, the early small surplus/small deficit of social security, and the fairly steady size of the Bush tax cuts, makes the present value much closer than the cash flows.
Education: First Cut, Then Improve
Strategically, my thinking is that a vast industry of researchers and activists is already trying to improve education. Competing with them isn't my comparative advantage. Instead, I should focus on the big reform that conventional researchers and activists Dare Not Name: Wasting less money on pseudo-investment in the nation's youth.
Political 'Thinking' on Stimulus
To my way of thinking, George Bush didn't do tax cuts because he cared about stimulus; he did tax cuts because he cared about tax cuts. And if Democrats had cared about stimulus, we would have gotten a stimulus bill that looked almost nothing like the one they actually delivered.
Double Digit Unemployment Rate early next year?
With growth slowing in the 2nd half (and into 2011), this means the unemployment rate will probably tick up too (unless the participation rate falls further).
What to Expect From Obama's Business Tax Cuts
Obviously, on the margin, this will make some investments more attractive, but I'd expect that effect to be swamped by the massive uncertainty surrounding the economy.
Prices Report Reality; Government Threatens to Shoot Messenger (Or At Least to Falsify the Message)
“Unreasonable” is too vague and subjective a standard for guiding a government agency that possesses the power to block price increases. While by definition any “unreasonable” action is questionable and likely harmful, there is in fact no objective way for government to distinguish reasonable price hikes from unreasonable ones.
Scary sentences
"It's not a good sign when the government has to intervene to prevent a run on a bank that is already owned by the government..."
Government Employment since 1976
Federal government employment has decreased over the last 35 years (mostly in the 1990s), state government employment has been flat, and local government employment has increased.
Stimulating $19,000,000,000 in New State Taxes
For every $1.00 in federal grants that a state receives today, the state can be expected to increase its own future taxes by somewhere between $0.33 and $0.42 in the future. Let’s assume it is the average of this range and that future state taxes will rise by $0.38 for every $1.00 in federal aid. If this is the case, then an additional $50 billion in “aid” to the states will cause states to raise their own future taxes by about $19 billion.
Austan Goolsbee to Head the CEA
Goolsbee was one of my favorite professors at the University of Chicago, and not merely because he's the most entertaining professor we had*. He's also one of the sharpest people I've ever met--he has a way of asking questions that cut through your fuzzy thinking to the heart of the problem.
Pension Reforms from California Progressive Leaders
California’s pension tsunami is a few years from decimating the cities. In 2015 it is estimated one-third of Los Angeles’ budget could go to pay for employee retirement costs.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: July Trade Deficit Narrows Substantially After June Jump
The trade deficit narrowed substantially in July following the sharp widening in June. Exports rose while imports contracted after surging in June. Petroleum imports held steady while non-petroleum imports fell.
AEI Political Report
Less than two months before Election Day, voters may be ready to reshuffle the deck, but as the data below show, they are deeply dissatisfied with both parties.

Economists’ Comments & Opinions
Treasurys and the Danger of Short-Term Debt
More than 60% of U.S. debt is set to mature within the next three years.
The Genteel Nation
The first lesson from the economic historians is that we should try to understand our situation by looking for shifts in ideas and values, not just material changes. Furthermore, most fundamental economic pivot points are poorly understood by people at the time.
Why We're in for a Long, Hard Economic Slog
Evidence from 14 U.S. recessions shows that the economy doesn't recover until housing recovers.
Restoring America's Growth
A straightforward plan to restore national growth.
Obama Discovers Incentives
The president's proposed tax cuts for business are a welcome departure from Keynesian stimulus.
The naked stimulus: Why savings stimulate more than spending
The Obama administration's stimulus package may have boosted spending in the short-term, but savings have a more lasting impact on the broader economy.
From Zombie Banks to Zombie Mortgages?
Japan misallocated capital during its lost decade. How the U.S. can avoid its mistakes.
Obama Stimulus Money Goes Where Needed Least: Veronique de Rugy
With a few exceptions, the data show little correlation between the level of unemployment and stimulus spending. In fact, the opposite is true. The federal government has given far fewer stimulus dollars to states with high unemployment than it has to states with low unemployment.
The Obama Heyday Is Over
With so many Democrats running against the president's agenda in the midterm, change will come in the next Congress, regardless of which party is in control.

Graph of the Day
American Thinker: Widespread Deceleration
See: Americans' Wellbeing Declines for Third Consecutive Month

Book Excerpts
"One would think that with at least 250 sovereign external default episodes during 1800-2009 and at least 68 cases of default on domestic public debt, it would be relatively straightforward to find a comprehensive long-range time series on public sector debt. Yet this is not the case; far from it. Government debt is among the most elusive of economic time series." –Carmen M. Reinhart & Kenneth S. Rogoff, This Time Is Different (2009)


Did You Know
"Capitol Hill employees owed $9.3 million in overdue taxes at the end of last year, a sliver of the $1 billion owed by federal workers nationwide but one with potential political ramifications for members of Congress."