9/21/10 Post

BUZZ: Obama Hints at High-Level Changes

News
Risk of double-dip recession: Unlikely, but rising
While the risk of the U.S. economy falling into a double-dip recession is rising, there is only about a one-in-four chance of that happening, according to a CNNMoney.com survey of top economists.
Fed Purchases Lift Treasurys
In recent trading, the benchmark 10-year Treasury note was up 6/32 in price, and its yield fell to 2.719%. The 30-year bond was 16/32 higher to yield 3.875%. Bond prices move inversely to their yields.
Obama defends economic record
Obama said he has limited discretion over the biggest aspects of the budget, including Social Security and Medicare. But he said his administration has identified billions of dollars in spending and tax loopholes that can be eliminated in the 2011 budget.
The real fix for the economy: Savings
We've said it before, and we'll say it again: Savings are a better stimulus for the economy than consumer spending. For the skeptics, here's what you need to know.
Economy improving, but still hurting
Even if the economy avoids falling into a double-dip recession, the next year will probably feel like one anyway. Unemployment is expected to remain high, economic growth is expected to be anemic at best.
As Tax Cut Expirations Near, Democrats Tackle the Issue on GOP’s Terms
Despite solid majorities in both chambers and ample time to develop their own ideas, Democrats head into this fall’s fiscal debate trapped inside a tax agenda constructed by Republicans.
Looming Tax Hike Stays Under the Radar
While Democrats and Republicans debate extending Bush-era tax cuts for the wealthy, a middle class tax cut Congress passed as part of last year’s stimulus package is set to expire. Neither party’s leaders have put forward a play to extend it.
Capitol Police shortfall may hit $21M
The department already has a history of budgetary miscalculations and cost overruns.
Home construction jumps 10.5 pct in August
Home construction increased last month and applications for building permits also grew. The gains were driven mainly by apartment and condominium construction, not the much larger single-family homes sector.
U.S. Loses No. 1 to Brazil-China-India Market in Investor Poll
The U.S. has fallen behind emerging markets in Brazil, China and India as the preferred place to invest, a Bloomberg survey shows, though the world’s largest economy still ranks highest of all major developed countries.
U.S. household net worth drops
U.S. household wealth fell by $1.5 trillion in the second quarter, according to Federal Reserve data on Friday that showed the strain a slow-paced recovery and high unemployment are putting on Americans.
UN: Rich must not cut aid to poor to balance budget
U.N. Secretary-General Ban Ki-moon pressed debt-ridden donor countries on Monday not to cut aid to the poor despite their budgetary woes.
Fed Mulls Trillion-Dollar Policy Question
The Federal Reserve is scheduled to meet Tuesday to debate what would warrant pumping more money into the financial system.
Jobs picture gets worse in 27 states
The national unemployment rate may have only ticked up slightly in August, but on a state-by-state basis, the jobs picture continues to look a lot more grim in places like Nevada, Michigan and California.
Dollar Falls on Euro; Aussie at 2-Year High
Late Monday, the euro was at $1.3064 from $1.3039 from late Friday. The dollar was at 85.70 yen from yen 85.82, while the euro was at yen 111.96 from 112.89 yen. The U.K. pound was at $1.5547 from $1.5626.

Blogs
Recession is Officially Over--Now What?
One way to look at this is that we are one year into a "lost decade" of economic stagnation. While the Obama Administration can slough off blame for the Great Recession, it's going to have to take responsibility for America's Lost Decade
Lame Policy for Lame Duck
It seems that many in Washington had their books upside down when they studied economics.
Secondary Sources: Recession End, Hard Times, Individualism
A roundup of economic news from around the Web.
A Leftist Wish List vs. National Security
This week the U.S. Senate is scheduled to take up the FY 2011 National Defense Authorization Act. This legislation is necessary to fund the defense of the United States and its interests abroad. The House already passed their bill in May. But Majority Leader Harry Reid (D-NV) would rather talk about amnesty.
New data on income inequality and finance
"...for 2004, nonfinancial executives of publicly traded companies account for less than six percent of the top 0.01% income bracket. In that same year, the top twenty-five hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. The number of Wall Street investors earning over $100 million a year was nine times higher than the public company executives earning that amount."
Progressivism: Still Dangerous After All These Years
Progressivism rejects America’s foundational principles. For the past one hundred years, progressive intellectuals and politicians have been desperately trying to sever Americans’ attachment to the principles of the Declaration of Independence and instead embrace a more European model of governance.
Did the Recession End 15 Months Ago?
I have gotten so used to not thinking of economic activity as spending that I am totally blowing off the fact that GDP has been increasing for the past year. Instead, I focus on patterns of sustainable specialization and trade, which I think are better indicated by employment.
Big Spending, Not Tax Cuts, Drive U.S. Budget Deficits
The left wants you to believe that we must pass the Obama tax hike because low taxes on wealthy Americans are the cause of our nation’s budget deficits.
Obama’s Wants a 23.9% Capital Gains Tax, but the Rate Actually Will Be Much Higher Because of Inflation
The capital gains tax rate will jump to 20 percent next year if the President gets his way. This sounds bad (and it is), but the news is even worse than you think.
Not From the Onion
"The UK's tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer."
ObamaCare’s Premium Refunds: Bad News for the Sick
USA Today and Politico Pulse report that ObamaCare has prompted BlueCross BlueShield of North Carolina to rebate $156 million to its customers in the individual market. This may seem like good news. It’s actually bad news, particularly for BCBS’s sickest customers.
Why Can't We Have Higher Inflation?
At Brookings' semi-annual presentation of economics papers, which I attended on Friday, one of the participants made an interesting point: the fear of nominal losses made the crisis much worse than it had to be.
How should economic instruction change?
...along with responses by Alberto Alesina, Laurence Kotlikoff, Michael Pettis, Gilles Saint-Paul, Paul Seabright, Richard Baldwin, Michael Bordo, Guillermo Calvo, Tyler Cowen, Harold James, David Laibson, and Eswar Prasad [All Responses].

Research, Reports & Studies
Obama Tax Hikes: Economic Harm to All Americans
The economic effects of not extending the 2001 and 2003 tax laws would impact all Americans, especially those who will just start their economic lives and the millions more trying to find work...
The Obama Administration’s Ambitious Export Control Reform Plan
On August 31, the White House announced its plan to reform both the policy and process for controlling the export of militarily sensitive commodities and technologies. It is clear that the United States’s export control system is in need of reform.
Budgetary Savings from Military Restraint
Concern about deficits has prompted greater scrutiny of all federal spending...
The Value Added Tax: Too Costly for the United States
This study projects that if the United States introduced a VAT in 2010, its net effect on tax revenue would be minimal by 2030 because VAT revenue would mostly be offset by declines in revenue from other tax bases.

Economists’ Comments & Opinions
Why It Feels Like We're Still in Recession
The NBER has declared that the recession ended in June 2009, but money credit and other indicators show that we're still a long way off from recovery.
A Very Grim Reaper
While Washington debates whether to raise taxes on incomes and dividends next year, another huge tax increase looms as an even grimmer reaper: The death tax, which is currently zero, but will return to a rate of 55% next year if Congress fails to act.
Why Pensions Are in So Much Trouble
It was only a matter of time before pensions were subject to the same transparency as banks, however it's happening sooner than expected.
Foolhardy Tax Hikes
"Raising taxes on the top 2% of households, as Mr. Obama proposes, would bring in $34 billion next year: enough to cover nine days' worth of the deficit," notes The Economist. So that is what all the political fuss about extending the Bush tax cuts for another year is all about. Does this make any sense?
Cap Gains Taxation: Less Means More
A new study suggests a zero cap gains rate could create millions of jobs at a fraction of the cost of the spending stimulus.

Graph of the Day
WSJ: Charkbook: The Depth of the Downturn
See: The Housing Recession Isn't Over
See also: The Biggest Issue of 2010, In One Chart

Book Excerpts
"'Taxes upon the transference of property from the dead to the living,' said Adam Smith, 'fall finally, as well as immediately, upon the persons to whom the property is transferred.' But this view altogether neglects the ulterior effects on the distribution of wealth that the duties may bring about. If, as Ricardo argued, they fall mainly on capital, it is evident that the whole society suffers by less efficient production, and it is also probable that the higher value of the remaining capital will lead to a rise in interest and a consequent fall in wages." –Charles Bastable, Public Finance (1892)

Did You Know
"Secretary of State Hillary Clinton will announce on Tuesday a U.S. contribution of more than $50 million toward providing clean cooking stoves in developing countries to reduce deaths from smoke inhalation and fight climate change. The U.S. funding, which will be spread over five years, is part of a Global Alliance for Clean Cookstoves being started to combat a problem officials equate with malaria and unclean water in terms of their health impact worldwide. More efficient stoves can be purchased for $10 to $100, according to one senior U.S. administration official, who spoke on condition of anonymity ahead of Clinton's funding announcement."

9/20/10 Post

BUZZ: Bond Markets Get Riskier

News
Nevada unemployment rises to 14.4 percent
Even as thousands of Nevadans abandoned the state's workforce, unemployment in the Silver State has risen to a record yet again, new numbers reveal.
For the Unemployed Over 50, Fears of Never Working Again
Of the 14.9 million unemployed, more than 2.2 million are 55 or older. Nearly half of them have been unemployed six months or longer, according to the Labor Department. The unemployment rate in the group — 7.3 percent — is at a record, more than double what it was at the beginning of the latest recession.
Americans' Net Worth Falls Along With Stocks
The Federal Reserve reported Friday that household net worth—stocks, bonds, homes and other assets, minus mortgages and other debts—fell 2.8% to $53.5 trillion in the second quarter, driven by a sharp decline in the value of stock investments.
Fed Expected to Weigh More Stimulus
With tax rates at the center of the debate over how to revive the stalled recovery, the Federal Reserve is likely to spend its policy meeting on Tuesday weighing the merits of additional steps to stimulate the economy, while deferring some major decisions until later this year.
Global ‘internet treaty’ proposed
Deal would enshrine in law the founding principles of open standards and net neutrality, and protect the web from political interference.
Government could seek foreign investors for GM
Investment bankers handling the upcoming General Motors Co. stock sale are expected to court foreign investors as well as those in North America, according to a U.S. Treasury Department statement.
Inflation remains flat in August as consumer prices rise 0.3 percent
Consumer prices posted a small rise in August, but outside of a big jump in volatile gasoline prices, inflation was essentially flat.
UK Proposes All Paychecks Go to the State First
The UK's tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.
Economists: Extend Bush tax cuts for everyone
With income tax rates set to go up on Dec. 31, Congress is hotly debating what to do next. But most economists agree: Keep them where they are.
GOP Aims to Erode White House Agenda
Eyeing a potential Congressional win in November, House Republicans are planning to chip away at the White House's legislative agenda—in particular the health-care law—by depriving the programs of cash.
Tax cuts: Small biz fact check
Republicans say raising taxes on the wealthy would cause small businesses to pull back on hiring. Many leading Democrats say that's nonsense. Who's right? The answer isn't black and white, despite politicians' confident assertions to the contrary. It's more like multiple shades of gray.
Pension Gaps Loom Larger
Funds Stick to 'Unrealistic' Return Assumptions, Threatening Bigger Shortfalls.
States playing fast and loose with teachers' jobs money
Congress gave states $10 billion to save 145,000 teachers' jobs. But it won't help all school districts rehire educators since some governors are planning to take away state aid.
Treasurys Can Be Painful, as History Shows
Investors in 10-year Treasurys would lose around 20% if yields rise to, say, 7% over the next two years. Thirty-year Treasurys would lose about 34% if the yield rises to 7.5%.
Retailers to boost holiday jobs
Stores could add up to 600,000 jobs during the holidays -- up from last year but still not in line with pre-recession levels, report says.
Wall Street Reform Spurs Hiring Spree on K Street
The nation’s banks seem to have received one powerful message from this year’s finicial services reform measure: Get more help on K Street.
DeMint to GOP: We must produce
Sen. Jim DeMint (R-S.C.) says the Republican Party - even if it regains control only of the House - is "dead" unless it follows Americans' demands to rein in government spending.

Blogs
NAHB Builder Confidence stuck at low level in September
The National Association of Home Builders (NAHB) reports the housing market index (HMI) was at 13 in September. This is the same low level as in August and below expectations.
Defaults Account for Most of Pared Down Debt
0.08% — The annual rate at which U.S. consumers have pared down their debts since mid-2008, not counting defaults.
Greenspan Paradox on Recovery
Alan Greenspan exemplifies an inconsistency that appears to be widespread. He reportedly said that the stimulus has fallen far short of expectations and the government should get out of the way and allow businesses to power the recovery. At the same time, he’s so worried about budget deficits that he supports higher taxes.
We Have Obama's Number!
...under the president’s proposal, virtually all of top earners’ ordinary income will be taxed at 44.6 percent, starting in 2013.
The Anti-Government Straw Man
Nearly all economists agree that these kinds of failures can justify some degree of state intervention. Furthermore, it is legitimate (in our view) for society to provide some minimum basic standard of living for all, and government has a role to play in that process.
Weekly Schedule for September 19th
Four key housing reports will be released this week: the September homebuilder confidence survey (Monday), August housing starts (Tuesday), August existing home sales (Thursday), and August new home sales (Friday). Also the FOMC meets on Tuesday.
Dirtier Dishes, Cleaner Lakes
...the environmental benefits of reformulated products can depend on how consumers respond. Low-flow toilets don’t save as much water if they prompt some users to flush multiple times. Might there be a similar rebound effect with low-phosphate detergents? Perhaps.
The Second Austrian Moment
...the consequences both for policy and the future of economics depend on the interpretation of the financial crisis and the Great Recession.
Q2 Flow of Funds: Household Net Worth off $12.3 Trillion from Peak
According to the Fed, household net worth is now off $12.3 Trillion from the peak in 2007, but up $4.7 trillion from the trough in Q1 2009.
My Hammer and Some Nails
I would like to be able to subscribe to the school system of my choice, the financial regulatory system of my choice, the food inspection system of my choice, and so forth. Monopoly based on geography is not necessary for most government services.
Unofficial Problem Bank List increases to 854 institutions
"...the Unofficial Problem Bank List stands at 854 institutions with assets of $416 billion, up from 849 institutions with assets of $415.3 billion last week."
Krugman and Taxes
Well, yes: save for corporate-welfare kings and queens, rich people earn their riches. They are, in fact, entitled to their money, and entitled to be angry when government tries to take more of it.
No increase to Social Security Benefits for 2011 (unofficial)
It won't be official until the BLS releases the September CPI-W report, but we can already say there will be no increase in Social Security benefits or the Maximum Contribution Base in 2011 (assuming no new legislation).
Underestimating the Pension Bomb’s Impact
...over a 25 year period pension plans had an annualized median return of 9.3%. Over a 10 year period that fell to 3.9%. However in choosing a discount rate it’s not simply the number or time-period they’re selecting that matters. It’s the rationale.
Mad Ireland Hurt Them Into Austerity
Alex Massie offers a powerful rebuttal to those who would use Ireland's woes to argue that this somehow "proves" that austerity is bad: they didn't really have much choice.
Companies Still Holding Lots of Cash
Nonfinancial firms held $1.845 trillion in cash and other liquid assets last quarter, down from $1.847 in the first quarter, the Federal Reserve’s flow of funds report shows. Meantime, the value of companies total assets rose to $14.366 trillion. Cash as a share of total assets edged down from 7.1% to 7%.
For Needy Families, a Needy Program
Temporary Assistance for Needy Families, our nation’s primary cash-welfare program for families with children, would more accurately be named Inadequate Assistance for Needy Families.
This Week in Government Failure
These wasteful government issues have been exposed...
China Currency Hearings a Distraction
The chief obstacle to America’s recovery is not China’s currency regime, but a housing market that remains depressed, soaring government spending and debt, looming tax increases, and grandstanding politicians who refuse to remove those very large boots from the neck of the American economy.
Is the U.S. Still the Land of Opportunity?
The Global Entrepreneurship and Development Index (GEDI) report by researchers at the Small Business Administration shows that the U.S. may be slipping in its ability to sustain productive entrepreneurship relative to other countries.
The Economic Toll of the Obama Tax Hikes
Before the recession, federal spending totaled $24,000 per U.S. household. President Obama’s FY 2011 budget would hike it to $36,000 per household by 2020. But spending is just one-half of this White House’s economic plan. Massive wealth-distributing tax hikes are the other half of President Obama’s wish list, and they are just as big a threat to our nation’s economy.
Increasing Numbers of the Poor: Why Government Anti-Poverty Programs Have Failed
Since 2008, food stamp rolls have risen by nearly 50 percent to more than 40 million, and the number of welfare recipients rose to 4.4 million, an 18 percent increase. In fact, government expenditure for anti-poverty programs is now at an all-time high.
Why Preserve the Constitution?
For over a hundred years, Progressives have been trying to persuade Americans that times have changed, and therefore our founding documents must evolve to meet the needs of a developing society.
The Cause and Effect of Financial Recklessness
We can blame consumers, policymakers, and risk for the current financial situation, but isn't it time to stop the finger pointing?
In Reality, Housing Is Not Even Close to Stabilizing
Shadow inventory -- distressed residential properties that will almost certainly come onto the market in the not-too-distant future -- paints a more accurate and more dismal outlook than many claim.
Misguided Stimulus: Businesses Won't Hire Until Demand Exceeds Supply
The Obama administration's stimulus package doesn't guarantee businesses will immediately grow employment and work toward expanding the economy.

Research, Reports & Studies
Hudson Institute Economic Report
This week saw better than expected economic news. Retail sales rose 0.5% in August from July, and were up 3.7% from last year...
RCM: Wells Fargo Economics Group: U.S. Review
Mostly Better News But Sluggishness Still Reigns.
Closing the Racial Achievement Gap: Learning from Florida’s Reforms
An education gap between white students and their black and Hispanic peers is something to which most Americans have become accustomed. But this racial division of education—and hence of prospects for the future— is nothing less than tragic. The good news is that the racial divide in learning is a problem that can be fixed.
Obama Tax Hikes: The Economic and Fiscal Effects
Since 1996, Congress after Congress has voted to lighten the tax burden on Americans. The current Congress will decide this fall whether to continue this policy or to significantly raise personal income taxes.

Economists’ Comments & Opinions
Can the Fed Offer a Reason to Cheer?
As high unemployment continues, more and more people, including top economists, are asking the Fed to promise a credible commitment to a more expansionary monetary policy. This approach will work only if the Fed finds a way to be bold — and if we find a way to believe in it.
Many Are the Errors
Perhaps Paul Krugman believes that by labeling other economists as politically extreme, he can undercut their credibility. But his is badly weakened by the myriad errors he makes.
Solving the Unemployment Crisis
If we truly want to create jobs, it is not enough to simply berate business to create them. We must address the dynamics that keep businesses from offering jobs and that keep people from accepting jobs.
The Christie Example
Far from being onerous, these changes are consistent with current standards across private industry. The Christie plan would eliminate a major chunk of the state's unfunded liabilities, and for that he deserves kudos.
Stimulus for Clunkers
The [Cash for Clunkers] program "had no long run effect on auto purchases." It did juice sales during its two-month run last summer, by about 360,000 cars, but then it quickly hurt sales by about the same amount, in effect stealing purchases from the future.
The Estate Tax Is A Tax On Those Without Estates
All entrepreneurial concepts morph into innovative realities thanks to the savings of others. When estates are left alone, the money doesn't disappear; rather it's lent to or invested in the ideas of those not yet wealthy.
Why It's Time for the Tea Party
One difference so far between the tea party and the great wave of conservatives that elected Ronald Reagan in 1980 is the latter was a true coalition—not only North and South, East and West but right-wingers, intellectuals who were former leftists, and former Democrats. When they won presidential landslides in 1980, '84 and '88, they brought the center with them.
Pelosi's False Tax Choice
Stop the presses: House Speaker Nancy Pelosi has discovered fiscal discipline.
More Proof We Cant Stop Poverty By Making It More Comfortable
One definition of insanity is doing the same thing over and over and expecting different results. Perhaps that's something to keep in mind the next time we hear a call for more welfare spending.
How Underwater Mortgages Can Float the Economy
Recent calls for another federal stimulus package raise an important question: Before considering costly short-term measures to raise overall consumer demand, have we done enough to ensure that financial markets will work properly and lead us to recovery?
A Poverty of Statistics
Unfortunately, official U.S. poverty statistics do not satisfy this assigned function.
A Conservative Plan to Transform America
"Solutions for America," a comprehensive 54-page guide from The Heritage Foundation that presents more than 120 conservative policy prescriptions to get our nation back on the right track. Some of the recommendations are groundbreaking. Others are familiar. All have one thing in common: They would return power to the people. And, collectively, they will transform America.
The Economics of Mass Destruction, Part 2
Governments around the world are focused on spending money, but these policies are ultimately destroying capital.
What America Needs Is Complete Economic Overhaul
Nouriel Roubini argues that our country needs a payroll tax cut, but that will do little to nothing to actually stimulate the economy.


"Insight from the Median Voter Theorem: Zero-based budgeting can lead to bigger government. Why? b/c MV thinks 1.2X>0X." -Garett Jones, Twitter

Graph of the Day
Recession officially ended in June 2009
Medicaid: Are Costs Up or Are We Buying More?

Book Excerpts
"[Economists] ask first: what are the effects of confiscatory taxation on capital accumulation? The greater part of that portion of the higher incomes which is taxed away would have been used for the accumulation of additional capital. If the treasury employs the proceeds for current expenditure, the result is a drop in the amount of capital accumulation. The same is valid, even to a greater extent, for death taxes. They force the heirs to sell a considerable part of the testator's estate. This capital is, of course, not destroyed; it merely changes ownership. But the savings of the purchasers, which are spent for the acquisition of the capital sold by the heirs, would have constituted a net increment in capital available. Thus the accumulation of new capital is slowed down. The realization of technological improvement is impaired; the quota of capital invested per worker employed is reduced; a check is placed upon the rise in the marginal productivity of labor and upon the concomitant rise in real wage rates. It is obvious that the popular belief that this mode of confiscatory taxation harms only the immediate victims, the rich, is false." –Ludwig von Mises, Human Action: A Treatise on Economics (1949)

Did You Know
"The House last week advanced a bill that would for the first time require federal health officials to ask patients about their sexual orientation and gender identity. The proposal was introduced by Rep. Tammy Baldwin, D-Wis. Under the proposal, programs and surveys administered through the Department of Health and Human Services would be required to ask people about their sexual orientation and gender identity, though the response would be voluntary. "

9/17/10 Post

BUZZ: Washington Firms Soak Up Stimulus

News
Obama to tap Wall Street critic Elizabeth Warren for consumer post
President Obama will appoint Wall Street critic Elizabeth Warren as a special adviser to oversee the creation of a new consumer protection bureau, a Democratic official said Wednesday.
U.S. Consumer Prices Remain Steady
Consumer prices remained mostly flat in August, according a government report released Friday, continuing the trend of an extremely low and stable inflation rate.
Michigan's poverty rate hits 14%, highest level in 16 years
Michigan's poverty rate last year reached a 16-year high as the full effects of the recession continued to sweep across the country, according to a report issued Thursday by the U.S. Census Bureau.
Poverty Rise Stirs Debate Over Aid Programs
While the Census Bureau's report Thursday on the economic conditions of U.S. households found that 3.8 million more people lived in poverty last year than in 2008, the agency and advocates for the poor say millions of others were sustained with the help of government programs.
Pelosi hedges on tax cuts
House Speaker Nancy Pelosi Thursday renewed her pledge to pass an extension of the Bush tax cuts for the middle class, but now she’s leaving the door open to extending the tax cuts for upper-income Americans.
Stimulus funds failed to create enough jobs: LA City Controller
The Los Angeles City Controller said on Thursday the city's use of its share of the $800 billion federal stimulus find has been disappointing. The city received $111 million in stimulus under American Recovery and Reinvestment Act (ARRA) approved by the Congress more than year ago.
Are we there yet?
America’s recovery will be much slower than that from most recessions; but the government can help a bit.
Ohio Bank To Back Off Overdraft Charges
Huntington Bancshares Inc. said it will give its retail customers at least a business day without fees to restore any overdrawn accounts.
Someone will pay
But raising taxes on the rich alone simply won’t fix the deficit.
Geithner Says China Needs to Allow `Significant' Yuan Gains
Treasury Secretary Timothy F. Geithner said the U.S. will use every available tool to urge China to let its currency rise more quickly, including congressional pressure and a twice-yearly report on foreign- exchange markets.
Expiring Tax Cuts Hit Taxpayers at Every Level
Here's some pressure for lawmakers: If they don't reach agreement on extending soon-to-expire Bush-era tax cuts, nearly all their constituents back home will get big tax increases.
Construction projects, a ferry terminal, battery factories ... and maybe a cure for cancer
The White House is to issue a report Friday defending its $814 billion stimulus program by highlighting 100 projects it says are creating jobs and growing the economy.
Lifelines for the poor are disappearing
With more people than ever living in poverty, the government's unprecedented effort to strengthen the safety net for needy Americans is running out.
Economic Ride Turns Bumpier for the Rich
In the first year of the recession that began in 2007, the top 0.01% of earners in the U.S. saw their pretax income fall by an average of 12.7%, compared with 2.6% for all earners, according to an analysis of data from income-tax returns by economists Jonathan Parker and Annette Vissing-Jorgensen, in a paper presented Thursday at a Brookings Institution conference.
What happened to Europe's collapse?
The euro has been strengthening against the dollar. Europe's political commitment to the single currency remains as strong as ever. There has been remarkably little labor unrest in Greece since the spring, nor in Spain, where the government adopted a tough austerity package that included wage cuts for public servants.
A housing rebound? Yes, it's possible.
Despite continued discouraging data from the real estate sector, a few bullish arguments are beginning to emerge. One MIT economist even believes that demand for new homes exceeds residential construction.
White House defends $814 billion stimulus
In a report being released Friday by Vice President Joe Biden, the White House pushes back against criticism of its $814 billion stimulus program and highlights 100 projects that it says are creating jobs and growing the economy.
Recession Swells Number of Uninsured to 50.7 Million
The percentage of Americans covered by private insurance last year, 63.9%, was the lowest since 1987, while the percentage of people covered by government programs, 30.6%, was the highest.
Auction of warrants from insurance company Lincoln National brings government $213.7 million
The government says it has raised $213.7 million from the sale of warrants it held in Lincoln National Corp. It is the latest move to recoup costs for taxpayers from the $700 billion financial bailout.
A Risky-Loan Market Is Back in Gear
Leveraged Debt, Part of the Credit Bubble, Attracts Yield-Hunting Investors; Not as Frothy as '07.
United, Continental shareholders voting on deal to create world's biggest airline
Results of voting that started in late August will be announced Friday. If shareholders approve, the $3 billion stock deal could close in two weeks. Then the real work begins, including dealing with labor issues, combining reservations systems and even putting new paint jobs on the planes.
Examining our founding principles
We are a complex nation, with a diverse set of ethnicities, backgrounds and beliefs — but united in the idea that each American is created equal, entitled to the same privileges and protections as any other. A broad understanding of liberty is the centerpiece of this set of rights.
OMB’s Jack Lew Could be Obama’s Magic Bullet
During the 1990s, Lew held the same position as director of the Office of Management and Budget under Clinton and is widely credited with working closely with Republican and Democratic leaders to balance the budget.

Blogs
Economists React: What Are Risks of Deflation?
Economists and others weigh in on the increase in consumer prices.
Consumer Sentiment declines in September, lowest level in a year
"The UMich index declined to 66.6 in September - the lowest level since August 2009 -- from 68.9 in August."
Secondary Sources: Rajan and Krugman, Payroll Tax Cut, Traffic and Tolls
A roundup of economic news from around the Web.
A chronicle of Krugmania
[Raghuram Rajan's] response will be familiar to Cafe Hayek readers but it is convenient to have all of Krugman’s mistakes about the housing bubble assembled in one place.
Why the Federal Government Shouldn’t Use the States to Implement Fiscal Stimulus
"Projected fiscal deficits did lead to more assistance, but ARRA covered at most $0.25 of each dollar of projected state budgetary shortfalls."
In Pursuit of Empirical Macroeconomics
...firms generate patterns of specialization and trade. Profitability is what makes those patterns sustainable.
As a Rule, Protectionism Masks Itself as Competition
The real irony is that, for its entire 120-year history of being used to stymie competition and the forces of creative destruction, antitrust regulation continues to be portrayed as pro-competitive.
Regulating the shadow banking system
I liked this paper very much. It has excellent detail on how the shadow banking system works, excellent conceptual analysis comparing shadow banking to America's earlier "free banking era," and the central point that we don't have enough safe collateral for repo (should the Fed issue a special form of such collateral?).
End the Penny
For more than twenty years, the Department of Defense (DOD) has eliminated the use of pennies in its facilities at its overseas bases. Since these bases are located in areas such as Japan and Germany, remote from normal circulation of U.S. money, the transportation of currency proved to be costly.
What Small Business Wants
it's important to worry about things like the regulatory burden, which falls heaviest on businesses that can't afford a small fleet of full-time staff to ensure that they are in compliance. ...it's important to worry about whether taxation is choking off their growth--which doesn't mean that we should grant them tax subsidies, but only that this is one of the costs that must be counted when we're considering tax hikes.
Principled Economic Policy
Let us once and for all be done with endless discussions of temporary policies with transient effects. They don’t work and they distract us from the business at hand. Low marginal tax rates, transparent and not burdensome law and regulation, and non-inflationary monetary policy promote economic growth. The opposite leads to recession and anemic recovery.
The “Things Would Have Been Worse” Excuse
This spring, the Census hired a bunch of new workers, providing a fresh opportunity to test the fiscal stimulus hypothesis. At the same time that the Census went on its hiring binge, non-Census worker employment seems not to have budged much at all.
Massive Medicare Advantage Cuts
President Barack Obama has repeatedly said, “If you like your health plan, you can keep it.” But is that true?
Constitution Day and the Perilous Future
This is the day we commemorate the birth of the United States as a nation, based on the rule of law and dedicated to the preservation of personal liberty, political freedom, economic opportunity, and the natural rights with which we are all endowed by our Creator.
Max Baucus Clears Way for Death Tax Repeal
There have been sporadic efforts in the Senate this year to address this impending massive tax hike that will threaten the existence of family-owned businesses if it takes effect. None have succeeded.
Side Effects: Fuzzy Math Won’t Bend the Health Care Cost Curve
Obamacare will force health care spending to rise faster and higher over the next decade than if Congress had just left the nation’s health system unchanged. That’s according to a recent report from the Office of the Actuary at the Center for Medicare and Medicaid Services.
Playing Politics with the “Troops”
The White House has discovered a new tactic for pushing legislation that most Americans don’t want through Congress: implying the legislation in question is either all for the troops or could hurt the troops if not passed.
The Uninsured Numbers Are Bad, but Obamacare Can Make Them Worse
Given today’s high rates of unemployment and the fact that most Americans get health insurance through their employers, the increased number of uninsureds comes as no surprise. The exodus from job-based insurance will only escalate under Obamacare.
Marriage, Happiness, and a Prayer of a Chance at Escaping Poverty
At a time when unwed childbearing is at an all-time high, there is a ray of hope.
Spending Cuts Are Good for the Economy
Reducing budget deficits by cutting government spending has a stronger record of economic stimulus than either reducing the deficit with tax increases or increasing government spending.
Is allowing tax cuts to expire "raising taxes"?
Many economists and most voters don't like the idea of "raising taxes during a recession". But many other economists and many voters think that in a time of fiscal dire straits, "tax cuts" (especially on the richest earners) are morally unjustifiable and economically reckless.
More Evidence of the Failed Stimulus
Not that we need more evidence, but a report from Los Angeles reveals that the city only created 55 jobs with $111 million of stimulus funds.
ObamaCare & Health Insurance Premiums: Out of the Frying Pan, into the Fire
During the (initial) congressional debate over ObamaCare, President Obama vilified Anthem Blue Cross of California for a 39 percent rate increase. Now it seems that ObamaCare might be doing the exact same thing.

Research, Reports & Studies
The Business of Government Shouldn’t be Business
Arguing that small businesses create the most jobs, lawmakers are instituting several programs that focus on helping small businesses. The effectiveness of these policies, though, is dubious.
RCM: Wells Fargo Economics Group: Gasoline Drives Wholesale Prices Higher in August
Lifted on the strength of energy, total finished goods prices increased by a stronger than expected 0.4 percent in August. Rising commodity prices have reignited price pressures further back in the pipeline.
Marriage: America’s Greatest Weapon Against Child Poverty
Child poverty is an ongoing national concern, but few are aware that its principal cause is the absence of married fathers in the home.
Collapse of Marriage Spurs Explosion in Poverty
If Americans are serious about reducing poverty and getting control of federal welfare spending, we must strengthen marriage. We can do this in several ways, beginning with reducing anti-marriage penalties currently in welfare programs and providing factual information to low-income communities about the benefits of marriage.
Adding DREAM Act to Defense Bill Is Another Form of Amnesty
The Development, Relief, and Education for Alien Minors (DREAM) Act would essentially repeal part of prior federal law, “that prohibits any state from offering in-state tuition rates to illegal aliens unless the state also offers in-state tuition rates to all U.S. citizens.”

Graph of the Day
Health Care Plan: Favor/Oppose
See: What is Washington's spending costing you?
See also: Inflation rate flat amid price confusion
VIDEO: Honoring Constitution Day

Book Excerpt
"The assertion that wealth on the one hand and poverty on the other are ever increasing was maintained at first without any conscious connection with an economic theory. Its supporters think they have derived it from an observation of social relations. But the observer's judgment is influenced by the idea that the sum of wealth in any society is a given quantity, so that if some possess more others must possess less. As, however, in every society the growth of new riches and the coming into existence of new poverty are always to be found in a conspicuous manner whilst the slow decline of ancient fortunes and the slow enrichment of less propertied classes easily escape the eye of the inattentive student, it is easy to arrive at the premature conclusion summed up in the socialist catchword 'the rich richer, the poor poorer.'" –Ludwig von Mises, Socialism: An Economic and Sociological Analysis (1936)

Did You Know
"It wasn't until January 1791 that the Constitution became ratified completely by all the States, concluding with Vermont."

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."