10/7/10 Post

BUZZ: Waivers Address Talk of Dropping Health Coverage

News
Oil heads for $84 in Asia amid US dollar slide
Oil closed in on $84 a barrel Thursday in Asia as a weak U.S. dollar fueled gains in commodity prices.
Gold hits record, set for best week in six months
Gold rose to a third successive record high on Thursday, putting it on track for its strongest weekly performance in six months, as expectations for the
Federal Reserve to prop up the economy undermined the dollar.
Food Stamp Recipients at Record 41.8 Million Americans in July, U.S. Says
The number of Americans receiving food stamps rose to a record 41.8 million in July as the jobless rate hovered near a 27-year high, the government said.
Fed Officials Mull Inflation as a Fix
The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed's informal target.
Dollar tumbles to fresh 15-year low against yen
The dollar tumbled to a fresh 15-year low at 82.22 against the yen in Tokyo trading hours on Thursday on persistent fears over the US economic outlook.
NY seeks to ban sugary drinks from food stamp buys
New Yorkers on food stamps would not be allowed to spend them on sugar-sweetened drinks under an obesity-fighting proposal being floated by Mayor Michael Bloomberg and Gov. David Paterson.
Jobless claims fall to lowest level in 3 months
New U.S. claims for unemployment benefits unexpectedly fell last week, touching their lowest level in nearly three months, according to a government report on Thursday that pointed to some stability in the troubled labor market.
Nations see dip of dollar as threat to economies
The dollar's rapid decline has provoked a chain reaction in other countries, ranging from a decision by Australia not to raise interest rates this week to a forceful intervention in currency markets to support the dollar by Japan and a dramatic move by the Bank of Japan to slash interest rates to zero this week.
Midnight grocery runs part of the grim new reality
A monthly spurt of spending when food stamps are replenished.
Poverty is becoming a suburban problem now
Battered by the downturn, America's suburbs are bearing the brunt of poverty among those of working age that has climbed to its highest level in almost a half century, creating strains on dwindling safety-net programs focusing mostly on the inner-city poor.
Hill digs in for lame-duck tax fight
An orderly lame-duck compromise on expiring tax rates is starting to look a lot less likely as both parties dig in and refuse to negotiate ahead of elections.
Malls Begin Healing Process
Vacancy Rates in Top U.S. Markets Improved for the First Time Since Late 2006.
Teachers union to spend $15M to protect vulnerable Dems
The National Education Association, the country’s largest labor union, said Wednesday it will spend $15 million on independent television and radio ads to help re-elect a handful of public-education-minded Democrats facing tough races this fall.
Loan chaos may pose wider peril
These fundamental concerns over ownership extend beyond those that surfaced over the past two weeks amid reports of fraudulent loan documents and corporate "robo-signers."
Economics vs. politics on deficit
Martin Feldstein, Ronald Reagan’s former chief economist, Paul Krugman of The New York Times and Princeton University and Jan Hatzius, chief economist of Goldman Sachs, all called for far more aggressive economic intervention.
Cities Still Feel Sting Of Recession
Despite experts recently declaring that the economic recession is over, U.S. cities continue to feel the pinch as revenues in 2010 dropped 3.2 percent, adjusted for inflation.
Report Questions Income-Disparity Figures
The Census Bureau released data last month showing the widest gap since 1968 between the well-to-do and the poor. The Census Bureau does not factor capital gains into their calculations. Economists of different political bents agree that it's fair to consider stock market gains or losses when measuring total income.
Earmark Reformers Reach Out to Hill Staff
Critics of earmarks complain that the provisions tucked into various bills do not get proper scrutiny and can have a corrupting influence.
Splurges likely to stay part of Christmas past
The Christmas shopping season doesn't kick off for another six weeks, but retailers already are signaling they're prepared to discount aggressively if needed to entice shoppers still skittish about spending. Stores expect gift buyers to scrutinize every purchase, from $20 toys to $1,000 designer jackets, and to limit how many stores they visit.
Electronic medical records: great, but not very private
If you live in Texas, your medical records are definitely up for sale by the state. If you live anywhere else in the United States, they probably are for sale there, too.

Blogs
Secondary Sources: Goolsbee on Uncertainty, Currency War, Unemployment by Income
A roundup of economic news from around the Web.
The Curious Task
I do not believe we are on the road to serfdom or that President Obama is a socialist. But this scares the hell out of me...
Roubini: 40% Chance of Double-dip Recession
And, as Roubini noted, it doesn't matter if the economy is technically in a recession - it will feel like a recession to millions of Americans as long as jobs are scarce and incomes are under pressure.
States and Cities: Call Them ‘The Fiscally Challenged’
The Pew Center on the States and the Public Policy Institute of California surveyed the public in five populous, and very different but all “fiscally challenged” states: Arizona, California, Florida, Illinois and New York. The bottom line: Residents are “more likely to say their elected leaders are wasting money and could deliver services more efficiently than complain that state government is too big.”
Return to Solipsism
Notice, though, that my example shows the productivity effects of trade if you and I have different absolute advantages: you're a better farmer, I'm a better steel-worker. What about the case where you're better at both jobs?
How GDP Affects the Unemployment Rate
...in order to make the unemployment rate fall, at least on average, the real rate of GDP growth in the U.S. must be greater than 3.1%.
The Paradox of Voter Distrust in Government
The survey reveals that while many economists may view government inefficiency in terms of public versus private goods, the impossibility of ranking voter preferences, the calculation problem, institutional economics, and public choice theory, most people think of their governments as a kind of hybridized marketplace-bureaucracy capable of responding to individual constituency demands by offering better “prices” for a service they, as individuals, desire.
The Problem of Bad Patents
In this case, the government seems to allow quite a lot of bad patents, particularly in the software/technology field, but more broadly in all sorts of areas. This is a regulatory change that we probably could effect with relative ease compared to changing patent and copyright rules--although obviously, boundary cases would remain.
Obama: Give us More!
Now that the Feds have increased spending to $3.5 trillion and given us a horrible $13,685,832,391,141 national debt, the administration wants to spend still more.
The Obama Tax Hike and Lessons from 1937
Raising taxes on successful businesses is one thing we cannot afford to do. Large, successful businesses that create jobs would be hit the hardest, but small businesses would also be hurt by such a tax increase.
Rare Earths: Cause for Worry, not Panic
There are legitimate concerns over Chinese dominance in rare earth minerals but the near-frenzied nature of some of some assessments is unjustified.
The Obama Tax Hike Would Slam Seniors
There are many reasons to be against the Obama tax hikes, especially as the economy struggles to recover. Even the poorest seniors would face higher taxes: about 1 in 5 seniors in each of the first 3 income quintiles have capital gains income, and 40–50 percent of them have dividend income. All of these lower-income elderly would face a tax increase.
Surprise! Oil Spill Commission Critical of Government Response
“The federal government created the impression that it was either not fully competent to handle the spill or not fully candid with the American people about the scope of the problem.”
Is the Market Coming Back to Earth?
The market action on Wednesday may be a sign that a dramatic reversal is ahead, whether it be in October or even pushed out until January.
Does the Buck Stop Here?
Currency wars are being waged around the world.
Consumer Deleveraging Means Commercial Real Estate Collapse
Retail expansion into an oversaturated market in the midst of a depression will lead to the destruction of companies and the loss of millions of jobs.
Where are the ’60s Hippies Now that They’re Needed to Fight Keynesianism?
Keynesian economic theory is the social science version of a perpetual motion machine. It assumes that you can increase your prosperity by taking money out of your left pocket and putting it in your right pocket. Not surprisingly, nations that adopt this approach do not succeed. Deficit spending did not work for Hoover and Roosevelt is the 1930s. It did not work for Japan in the 1990s. And it hasn’t worked for Bush or Obama.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Will India Reach Its Long-Run Growth Potential?
Real GDP rose 8.8 percent in the second quarter of 2010, the strongest year-over-year growth rate since the 2005–2007 period when growth rates between 9 percent and 10 percent were the norm.
The Case Against a China Currency Case
Relying on a World Trade Organization filing to address China’s undervalued currency won’t get very far.

Economists’ Comments & Opinions
Fear undermines America’s recovery
The instinctive reaction of businessmen and householders to uncertainty is to disengage from those activities that require confident predictions of how the future will unfold.
President Obama's Tax Piracy
A family of four earning $50,000 per year will pay more than $2,100 in higher taxes. A single mom earning $36,000 per year will pay over $1,100 more in taxes. Married senior citizens earning $40,000 per year will pay more than $1,400 in higher taxes.
TARP Did Not Save Us From A Great Depression, It Nearly Created One
...by March 9, 2009, just a little over five-months after TARP, the Dow Jones bottomed at 6440. Shortly, after this bottom, sanity actually returned to the marketplace, and “all” global markets returned to the levels of today, which is essentially the same level that they were at the time prior to the initiation of TARP in America.
Toward a New American Century
Immigration reform, investments in human capital, and a saner housing policy can help restore U.S. economic leadership.
The enemy is not cheap goods
Affordable imports are a godsend, not grounds for a trade war. It’s distressing that so many members of Congress have trouble understanding that. Maybe a return to private life would help them figure it out.
The Protectionist Instinct
Political support for free trade is a remarkable achievement of civic education—one threatened by our weak economy.
Joseph Stiglitz sees bleak future for euro as New Malaise takes hold
Exclusive extract: In an updated edition of his critically acclaimed book, Freefall, Joseph Stiglitz analyzes the response to the financial crisis and finds new threats stalking the global economy.
Coming Full Circle on Monetary Policy
Oct. 6, 1979 marked the beginning of disinflation. Now we're headed in the opposite direction.
Congress Can't Repeal Economics
This is just the beginning of reality's backlash. President Obama promised that under his scheme no one will have to change medical plans, but some 840,000 Americans are already left without coverage because their insurer, the Principal Financial Group, decided to leave the market.
Bad Policies Push U.S. in Wrong Direction
No one at the Federal Reserve, Treasury or Council of Economic Advisors foresaw the crisis. When the crisis hit, the predictions were that unless the government dramatically increased its role in the economy, the U.S. would fall off a cliff. In reality, after billions in stimulus spending, unemployment is still unusually high, growth is sluggish, and uncertainty prevails.
BCBSNC's Premium Refunds Show the Perils of ObamaCare
Some of the worst news for President Barack Obama's beleaguered health care law comes from North Carolina. Yet the law's supporters are treating it like good news.
What Consumer Metrics Institute's Data Is Saying About the Economy
Dr. Rick Davis, founder of CMI, created a new leading indicator because he says current measures of economic growth use outmoded data. Here's what he's seeing.

Graph of the Day
Canada’s Spending Cuts and Economic Growth
See: New Jersey State Spending, 1987-2009
See Also: Jobless claims fall below 450,000

Book Excerpts
"It would scarcely be an exaggeration to say that the greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with what they regards as the public good." –F.A. Hayek, The Constitution of Liberty, (1960)

Did You Know
"Nationwide, about one in 18 women working full time earned $100,000 or more in 2009, a jump of 14 percent over two years, according to new census figures. In contrast, one in seven men made that much, up just 4 percent... Only a relatively small segment of either sex has passed the $100,000 benchmark - about 2.4 million working women and 7.9 million men earn that much."

10/6/10 Post

BUZZ: IMF Cuts 2011 Global Growth Prospects

News
Republicans Urge No Earmarks In Omnibus
More than 50 Republicans, including House Minority Leader John Boehner, R-Ohio, and other GOP leaders, Tuesday sent a letter to House Speaker Nancy Pelosi, D-Calif., beseeching her not to include any earmarks in catch-all omnibus spending legislation Democrats hope to pass after the election.
U.S. Is in ‘Race to the Fiscal Bottom’
David Stockman, the former budget director during Ronald Reagan’s first term, speaks out on the Obama presidency, the state of the economy, the Bush tax cuts, and what the midterm results might do to the Democratic agenda.
TARP Losses Won't Top $50 Billion
The Treasury Department released a rosy report of the Troubled Asset Relief Program today by noting that total losses would not exceed $50 billion for the program, which has become reviled among most lawmakers as an unwarranted bailout that benefitted Wall Street but not Main Street.
Unemployed? Get a federal loan to pay your mortgage
You can soon apply for a no-interest government loan for up to $50,000 to pay your mortgage and cover your arrears. The loan, which can offer assistance for up to two years, will be forgiven if the homeowner stays in the house for five years.
Amid backlash and budget deficits, government workers' pensions are targets
Public employment was once viewed as less rewarding than work in the private sector, but that has changed. State and local government employees earn an average of $39.74 an hour in wages and benefits, about 45 percent more than private-sector workers, whose total compensation averages $27.64 an hour, according to the Labor Department.
Social Security: No 2011 increase expected
Chances are high that for the second year in a row Social Security beneficiaries will see no increase in their benefit checks.
Middle Class Slams Brakes on Spending
Households in the middle fifth of the population sliced their average annual spending to $41,150 in 2009, the Labor Department said Tuesday in its annual spending breakdown. That was down 3.1% from 2007 and 3.5% from 2008, the steepest one-year drop since records began in 1984. The drop came even as those households' after-tax income remained relatively stable over the two years, at an average $45,199.
No paper, no plastic. The tax that works too well
The tax on single-use disposable bags in Washington D.C. is proving to be very effective -- maybe too effective. The tax is bringing in far less revenue than expected.
Central Banks Open Spigot
Stocks Leap as Japan Launches Bond Buying, Fed Official Urges More Easing.
Is the Fed playing with fire?
The Federal Reserve is about to throw some more fuel on the fire it has been stoking for more than two years.
IMF sees global economy gaining, US growth slowing
The global economy will likely strengthen the rest of this year and in 2011 as China and other emerging powers offset weakness in the United States and Europe. The international lending agency predicts the U.S. economy will grow 2.6 percent this year, below the previous estimate of 3.3 percent, and 2.3 percent next year.
Private sector sheds 39,000 jobs in September
Private employers unexpectedly cut 39,000 jobs in September after an upwardly revised gain of 10,000 in August, a report by a payrolls processor showed on Wednesday.
New Yorkers' Income Falls for 1st Time in 70 Years
The recession put a 3.1 percent dent in the personal incomes of New York state residents, who endured their first full-year decline in more than 70 years, according to a report released Tuesday.
$162 million in stimulus funds not disclosed
Recovery.gov promised transparency on how the government spends every dollar of stimulus money, but there's $162 million the website doesn't disclose.
Greek debt and deficit figures to shoot up
Increased figures for Greek national debt and deficits covering contested data from 2006 to 2009 will be published this month, the EU said on Wednesday after conducting its first invasive audit.
Fitch Downgrades Ireland's Rating on Cost of Banking Bailout
Fitch Ratings lowered Ireland’s credit grade to the lowest of any of the major rating companies and said there’s a risk of a further reduction.
USA Today's overhaul cuts 35 newsroom positions
USA Today is eliminating 35 jobs from its newsroom as it de-emphasizes its print edition and feeds more content to mobile devices.
Jobs picture: Stagnant, stubborn
Looking ahead to Friday's government jobs report, the outlook doesn't look rosy. Two separate reports issued Wednesday paint a grim picture of the job market.
UN report: 22 nations face protracted food crises
U.N. food agencies said Wednesday that 166 million people in 22 countries suffer chronic hunger or difficulty finding enough to eat as a result of what they called protracted food crises.
City budgets slammed by falling property taxes
The housing crisis is finally catching up with cities -- and the impact isn't going to be pretty.
Lawsuits over health care law heat up
A number of interest groups, state officials and ordinary citizens are seeking to have the health care law struck down in federal court, and action is heating up.
Banks' $4 trillion debts are 'Achilles’ heel of the economic recovery', warns IMF
More taxpayer support is needed to ensure global financial stability despite the billions already pledged, the International Monetary Fund has warned, as banks remain the “achilles heel” of the economic recovery.
Retail Data: September Sales Edge Up
...pockets of growth during the five weeks between Aug. 29 and Oct. 2 point to a modestly more robust holiday season this year than last.

Blogs
The big picture on Japan
Almost every pundit and economist discussing Japan’s lost decade and whether we are headed for one are missing the big picture, and the most relevant research. They’ve forgotten or, even more embarrassingly, never read Gregor Smith’s 2006 paper “Japan’s Phillips Curve Looks Like Japan”.
How to Slash the State
14 ways to dismantle a monstrous government, one program at a time
State of the Economy: "Endless Possibility" Replaced With "Limited Reality"
In March 2000, markets were euphoric. Fast-forward to today's "unusual uncertainty" and "lack of visibility" and it's easy to see how much our world has changed.
Should they have let the guy's house burn down?
To borrow language from Thomas Schelling, social systems involve costs in terms of both "known" and "statistical" lives. It's the sum total of costs which is important. It's fine (though controversial) to argue that a "known" life should be more important than a "statistical" life, but it's not dispositive to pull out one example of a "known" life and draw a significant conclusion from that anecdote.
How the US Should, But Won't, Handle Job Creation
As elections near, policy makers must look toward real solutions: lower taxes, less regulation, low cost energy, and education reform.
Fighting Back Against Arbitrary Government Rule
In conjunction with NACDL, The Heritage Foundation released a report, Without Intent, in May recommending that Congress should do the following...
Cigarettes or Books? Spending Tradeoffs Amid Recession
The Labor Department’s report on consumer expenditures tells us something about how consumers changed their behavior to muddle through the recession and dawdling recovery — they ate out less, they spent less on apparel and, for those higher on the income spectrum, they cut deals on their mortgages.
Side Effects: Obamacare Compels More Employers to Dump Coverage
Obamacare has struck again. Last week, 3M announced plans to drop health benefits for retirees, citing the new law’s impact as a contributor in its decision.
MBA: Mortgage Purchase Activity increases, FHA applications increase sharply
"The Refinance Index decreased 2.5 percent from the previous week. The seasonally adjusted Purchase Index increased 9.3 percent from one week earlier and is the highest Purchase Index observed in the survey since the week ending May 7, 2010."
Personal Bankruptcy Filings Jump
Today, the White House announced that that Obama Administration will use taxpayer dollars to build solar panels and a solar hot water heater on the roof of the White House in the spring of 2011.
Would You Trade Higher Taxes for Much Lower Spending and Less Red Tape?
I dislike taxes as much as the next person (and probably a lot more), but other policies matter as well, so if I had the choice of replacing current government policies with the ones that existed at the end of the Clinton years, I would gladly make that trade.
Treasury Sees ‘Substantial’ Offset to Fannie, Freddie Losses
The Treasury Department on Tuesday acknowledged that it expects “to incur substantial losses” from these government-sponsored enterprises, which have operated under federal control since 2008.
QE2: The Ship Is Leaving The Dock
If unemployment does increase or fail to trend down, then you could see the QE2 exploding well beyond $1 trillion. This, despite Mr. Dudley’s protestations would monetize more debt which would lead to higher inflation than the Fed ever intended. This of course is difficult to predict because you have to tell me what the Fed and the government would do in the future.
Is Boosting Teacher Pay a Legitimate Use of the Stimulus?
...it makes little sense to argue that a salary boost right now would serve the original purpose of the stimulus (which was intended to stimulate the economy, for those who are still paying attention).
Treasury Updates Debt-Management Operations
Mary Miller, the assistant secretary for financial markets at the Treasury Department, offered a broad update on the government’s debt-management operations, as well as a look at the state of the economy.
Is it Possible that the President thinks Economists Agree That Spending is the Answer?
It would be one thing to know about this evidence and to dismiss it. The president, however, seems not to have heard of it.
More Credit Card Loan-Backed Deals Likely in 2010
About $5 billion of asset-backed bonds backed by credit-card debt have been sold so far this year. By contrast, auto sector asset-backed securities issuance stands at $45.95 billion of the total $78.14 billion sold, according to Citigroup data. This is about 60% of all consumer loan-backed bonds sold.
Pass the Debt
The same moral hazard problems that the stimulus introduced to the states, exist when the state bails out its municipalities. In essence, a bailout weakens the incentive to deal with the underlying problem.
A Solipsist's Guide to Comparative Advantage
You might object, "We already know that trade increases productivity via shared knowledge, increasing returns, etc." But these are all empirical claims. My point is stronger: Trade tautologically increase productivity.

Research, Reports & Studies
Impact of Obama Tax Increase: National, State, and Congressional District Levels
The macroeconomic model presented in “Obama Tax Hikes: The Economic and Fiscal Effects” makes predictions at the national level. Converting the model’s predictions to state and congressional district levels requires supplemental analysis.
RCM: Wells Fargo Economics Group: September ISM Non-Manufacturing is Stronger Than Expected
The ISM Non-Manufacturing index came in at 53.2, which was better than expected. The increase is consistent with an economic recovery, but we continue to see slow growth in the second half of the year.
Do We Really Need a Bigger IMF?
A dangerous idea is making the rounds in Washington. It is International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn's proposal to increase the IMF's war chest by US$250 billion. If past experience is any guide, such a proposal is all too likely to only prolong the euro zone's sovereign debt crisis.

Economists’ Comments & Opinions
The Soul of the Spending Machine
...Republicans won't succeed in their professed goal of cutting spending, boosting the economy, and reforming the entitlement state without disassembling Congress's tax-and-spending machine.
The Economist vs. Alesina on Austerity
The main difference between Alesina and the IMF paper is how they define fiscal adjustments. Unlike the IMF, Alesina’s original paper raises the potential issues with his methodology and spends some time explaining why, in spite of some limitations, this methodology is worth using. In his response, he shows that the IMF’s methodology also has pros and cons.
Foreclosure follies slap taxpayers again
Technical legal challenges threaten to delay hundreds of thousands of foreclosures by up to a year -- and once again, the biggest victim will be the US taxpayer.
Why QE2 Isn't the Answer
It's called QE2, but it should really be called QE4. The first QE was in November 2008, back when the banking crisis was still in full swing and the Fed and the Treasury were actively engaged in bailing out Citigroup in various ways.
Washington can save $1 trillion
The Technology CEO Council is to present to policymakers a proposal for how the federal government can save $1 trillion over the next decade by applying homegrown expertise, technology and organizational innovation.
A compromise for the tax cut debate
The debate about whether to extend the Bush tax cuts just for the middle class and whether to make the extension temporary or permanent couldn’t be more important. A permanent extension of most or all of them is unaffordable, given looming deficits. But allowing all the tax cuts to expire, given the state of the economy, is unwise.
Geithner: Currency problems risk global growth
Treasury Secretary Timothy Geithner took a sharper tone on the issue of currency Wednesday, saying global economic growth could be at risk unless developing nations are more flexible about undervalued currencies.
Quantitative Easing II: The Ship Is Leaving the Dock
The key question is, how much? If unemployment increases or fails to trend down,QE2 could explode to well beyond $1 trillion.

Graph of the Day
Temp hiring is back. Is a jobs recovery next?
See: The Global Debt Clock
See: Chart: The IMF’s New Growth Projections
See Also: Holiday sales outlook hinges on bargains
Video: Heritage Foundation Takes On White House’s Misleading Tax Video

Book Excerpts
"What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it." –Adam Smith, The Wealth of Nations, (1776)

Did You Know
"From 2007 to 2009, the 24,033 households in the middle fifth by income cut their average annual spending on alcohol by a stunning 20.1%, the Labor Department reported Tuesday in its Consumer Expenditures Survey. On average, U.S. households in the middle spent $330 last year on alcohol, down from $413 in 2007 before the recession kicked into high gear... Middle-income households cut back on booze spending far more than other groups. Slightly more well-heeled households, whose income ranged from $57,944 to $91,290, actually spent 6.9% more on alcoholic beverages from 2007 to 2009. The poorest fifth cut back by 3.4%."

10/5/10 Post

BUZZ: Cities in Debt Turn to States, Adding Strain

News
Illinois Pays More Than Mexico as Cash-Strapped States Sell Bonds Overseas
Illinois capital-markets director John Sinsheimer and Citigroup Inc. bankers took a globe-girdling trip from the U.K. to China in June to persuade investors that the state’s $900 million of Build America Bonds were a bargain.
Retailers plan to bump up seasonal jobs
Macy's, Toys R Us, Pier 1, American Eagle Outfitters and Borders all plan to hire more temporary holiday workers this year than last, emboldened by several months of sales gains and a slowly improving economy.
Retirement funds tapped for kids' tuition
Nearly a quarter of the nation's parents saving for their children's college education intend to raid their own retirement accounts, despite increasing their tax liability, according to a new study released Tuesday.
Moody's Warns on Ireland Rating
Moody's Investors Service said Tuesday it may cut Ireland's debt rating again, citing the increased cost to the government of repairing the stricken banking system, weak economic growth and rising borrowing costs.
A stimulus program that won't be mourned
As the economy continues to sputter, President Obama recently signed legislation extending the life of several stimulus measures. But one program designed as an emergency rescue for small businesses didn't get life support, and no one seems to be mourning its loss.
Why did federal health-care costs increase?
Average increases for the Federal Employee Health Benefits Program will be 7.2 percent, significantly more than the anticipated 1.4 percent pay raise in 2011.
Obama Open to Lowering Corporate Tax Rate
Barack Obama signaled he was open to lowering the US corporate tax rate from its level of 35 per cent, amid speculation that the administration could seek broad-based reform of the tax code as early as next year.
Pending home sales rise 4.3 percent in August
The National Association of Realtors said Monday that its seasonally adjusted index of sales agreements for previously occupied homes rose 4.3 percent to a reading of 82.3. That's still more than 20 percent below the pace in the same month a year earlier.
Greek '09 Deficit May be Revised Higher: Official
Greece expects to slash this year's budget deficit to 7.8 percent of GDP from 13.8 percent in 2009, based on its draft 2011 budget unveiled on Monday.
Americans Sour on Trade
Generally, businesses and economists argue that free-trade pacts help America. "When we knock down barriers in those markets, we create jobs here," said Myron Brilliant, senior vice president for international affairs at the U.S. Chamber of Commerce. "We've got to trade to create jobs in our country."
Treasury Bailed Out 66 Weak Banks
Treasury Department officials sent bailout money to dozens of banks with known financial problems, and a growing number of bailed-out banks are struggling to stay afloat, a new government audit says.
Barack Obama debates over tax cuts
In a discussion that mirrored the Democrats’ split in Congress, President Barack Obama debated two members of his economic recovery board over middle-class tax cuts Monday, swatting down arguments that the richest Americans need the same relief.
Bank of Japan Reverts to Zero Rates in Surprise Move
The Bank of Japan on Tuesday effectively reverted to zero interest rates on growing signs the strong yen is hurting a fragile economy, surprising markets and preceding the Federal Reserve in stepping up its expansionary monetary policy.
States face Medicaid expansion challenge
Political hostility over the health care law and the potential for turnover in statehouses this November are creating uncertainty for state Medicaid leaders as they prepare for a huge expansion of their programs.
DOJ Hands Credit Cards Another Setback
The Justice Department reached a settlement Monday with Visa and MasterCard that would allow merchants to offer discounts to consumers who use lower-cost credit cards, the latest setback for an industry under increasing scrutiny by regulators and lawmakers.
Fed boss: Threat From Deficits 'Real and Growing'
The economy could be hurt if Congress and the White House fail to come up with a plan to curb the nation's huge budget deficits in the coming years, Federal Reserve Chairman Ben Bernanke warned Monday.
Euro Drops Below $1.37
Early afternoon, the euro was at $1.3686 from $1.3780 from late Friday. The dollar was at 83.35 yen from 83.31 yen, while the euro was at 114.07 yen from 114.80 yen. The U.K. pound was at $1.5841 from $1.5836. The dollar was at 0.9717 Swiss francs, from 0.9751 francs.

Blogs
At Citi, Risk Management Is Still Lacking
At least so says a new report from Crédit Agricole Securities financial analyst Mike Mayo, a vocal critic of Citigroup who met with company execs on Friday (after having “lobbied for nearly two years for an audience with” Citi chief exec Vikram Pandit) in preparation for the release of his long-term outlook on the company.
Secondary Sources: Fed Communication, Job Retraining, Long Stagnation
A roundup of economic news from around the Web.
ISM non-Manufacturing Index increases in September
The September ISM Non-manufacturing index was at 53.2%, up from 51.5% in August - and above expectations of 52.0%. The employment index showed slight expansion in September at 50.2%, up from 48.2% in August. Note: Above 50 indicates expansion, below 50 contraction.
Bernanke: Additional Asset Purchases Could Ease Financial Conditions
Speaking to college students, Bernanke illustrated how the Fed was able to lift the economy even after it took short-term interest rates close to zero by buying $1.7 trillion bonds in what he defined as an “effective program.”
Forecasting GDP for 2010-Q3
Using the official "final" estimate of GDP from the second quarter of 2010, we can now project that GDP, when adjusted for inflation, will fall between $13,019 billion and $13,550 billion during the third quarter of 2010, with a target value of $13,284.3 billion. All these values are expressed in terms of 2005 U.S. dollars.
Personal Bankruptcy Filings Jump
Personal filings for bankruptcy increased in September, pushing the total number of bankruptcies this year to nearly 1.2 million.
Current Data Survey Points To Stagnation
Reports on jobless claims, manufacturing, factory orders, and consumer spending were all rather flat to negative—except for jobless claims which have declined for the fifth straight week.
Coming soon to your bank statement: Tax info & Macy's coupons
If, for instance, you'd recently made debited several charitable donations from your bank account, your statement would instantly show how those donations would affect your upcoming Form 1040.
ABC vs. Recalculation
I think of Austrian Business Cycle theory as based on the notion that the structure of production can be long or short. Or, if you will, more roundabout or less roundabout.
The Future According to Dividends, September 2010 Edition
What we find is that investors expect very little in the way of economic growth in the fourth quarter of 2011. That would appear to be followed by a major economic boom in the first quarter of 2011, followed by a very sluggish second quarter, before growth would seem to pick up again in the third and fourth quarters of the year.
Central Banking, Limited Purpose Banking, Free Banking...
What needs to happen is bold and creative thinking through the institutional structures, not changing parties nor changing policy per se. Buchanan makes the distinction between policy (changes within the given institutional structure) and politics (changes of the institutional structure).
Does money boost real output?
We do have theoretical grounds for believing that monetary expansions will be potent when there are lots of unemployed resources and when the demand for money has recently spiked up. But if we're relying on theory, theory doesn't tell us much about expected employment effects...
Private Construction Spending declines in August
"Spending on private construction was at a seasonally adjusted annual rate of $498.2 billion, 0.9 percent (±1.1%)* below the revised July estimate of $502.6 billion."
Why taxpayer receipts aren’t a good idea
The idea of these receipts is to let people find out not just what their they’re putting into the system but what they’re getting out of it. And that’s a great idea — it would be fantastic if people understood exactly what their tax money was going to. But these receipts won’t do this, and here’s why.
Scary Monsters
The growth of government threatens freedom much more than mosque-building Muslims do.
Why Employment Won't Accompany the Economy's Recovery
We're facing a battle between expensive labor and cheap capital.
US Economy Not Turning Japanese
American culture and recent policy decisions have set the US on a similar but different path.
Data Survey Points to Stagnation
Over the last week, reports on manufacturing, factory orders, and consumer spending were all rather flat to negative.
Narrowing the Rights of the Minority
“Filibuster reform” is the new cause of the left. Senator Mark Udall (D–CO) has drafted up a rules change that would chip away at minority rights in the Senate by severely limiting the filibuster.
Local Control Is the Key to Education Reform
Greater federal control is not the answer to improving the nation’s education system.
Side Effects: Obamacare Fails to Halt Rising Premiums
President Obama and his supporters have said that one of the major benefits of the Patient Protection and Affordable Care Act would be a drop in health insurance premiums. But a new Hewitt Associates study shows that insurance costs will continue to rise for 2011.
$700K Taxpayer-Funded Play on Climate Change
The National Science Foundation (NSF) is “an independent federal agency created by Congress in 1950 ‘to promote the progress of science. The New York Times reports that the federal agency will award $700,000 of taxpayer money to a New York theater company to produce a show on climate change.
CBO Makes the Case for Change of a Different Sort
Congressional Budget Office (CBO) Director Douglas Elmendorf recently testified before the Senate Budget Committee on policies that might give the economy a helpful lift in the near term.
A Free Market Solution to Helping the World’s Poor
A featured op-ed in The Wall Street Journal last week documented the recent, surprising successes of Bangladesh. It has little economic freedom, and many in the international community saw little hope for it, but it has made some large achievements in recent years.
Arm Our Children to Succeed and Arm the Military to Prevail
As a nation, we shouldn’t have to choose between defense and education.
Anti-Poverty Approach Needs Reform: Who Said That?
“What’s needed most right now is creating the conditions where assistance is no longer needed.”
Is the Media Reporting or Distorting American Opinions About Trade?
The media seem intent on convincing Americans that they no longer support free trade.
Media Darken Americans’ Perceptions of Trade
Americans have soured on trade largely because of the way media conveys its stories about trade. There is no alternative explanation for a majority of Americans harboring ill-will toward trade.
Welfare and Fiscal Federalism
Federal policymakers should get out of the anti-poverty business as the Constitution intended.
Have Americans Turned against Free Trade?
The facts are on the side of expanding the freedom of Americans to trade and invest with people in other countries. What is lacking are political leaders in Washington who will stand up for the broader national interest of our country against the special interests who are exploiting anxiety about the economy to trash trade.
President Touts New Jobs At Solar Farm Funded By 5 Year Old Program
The President points to a revolutionary new solar plant that will employ 1,000 people and power 140,000 homes. Desperate for any good news about jobs, it is no wonder the President highlights this new solar farm from a company called BrightSource Energy. The problem is that this plant is being built largely thanks to a funding program that was passed 5 years ago.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Factory Orders Slip in August, But Details Remain Solid
Factory orders fell 0.5 percent in August, which was slightly more than expected. The report’s details show non-defense capital goods orders excluding transportation are holding up somewhat better than anticipated.
Japan Launches Global Quantitative Easing
The usually-cautious Japan is leading the way with a policy of quantitative easing, hoping to boost exports and steer its economy away from deflation. But Japan’s problems are not unique; in the wake of the financial crisis, economies worldwide are facing a global shortage of demand and competing for their share of exports. The United States has moved decisively toward quantitative easing, with the Federal Reserve hinting at further steps by early November.
The Lieberman–Kerry Cap and Trade Bill: Making Housing Less Affordable
Proposed legislation would offer financial incentives to increase the population density of communities in an effort to reduce greenhouse gas emissions and energy use. However, the available evidence, which is admittedly limited, indicates that such “smart growth” policies are misguided, producing minimal results at great expense and disruption.
Obamacare’s Medicaid Policy: Putting the Doctors in Another “Fix”
Obamacare increases enrollment in the troubled Medicaid program by over 20 million persons. However, providers are already limiting the amount of Medicaid patients they accept because of low payment rates.

Economists’ Comments & Opinions
The Bill Gates Income Tax
If Washington's most famous billionaires are really worried about their state's finances, they'd write personal checks to the government and leave everyone else alone.
The False Obstacles to Pension Reform
... the problems with defined-benefit pensions aren't a one-time fluke caused by a bad recession and a stock market crash. Their flaw, especially in the public sector, is structural: they involve involves lawmakers making promises today about payments the state will make decades from now.
O's quietest jobs-killing machine
...a major contributor to businesses' worries is the Obama Environmental Protection Agency, which is issuing a daily barrage of rules and regulations threatening jobs in American industry.
$10,000 Gold?
...the most powerful argument to justify today’s high price of gold is the dramatic emergence of Asia, Latin America, and the Middle East into the global economy.
Hating 'Superman'
Teachers unions and the public school monopoly have long benefitted from wielding a moral trump card. They claimed to care for children, and caring was defined solely by how much taxpayers spent on schools.
Republican Record Backs Spending Cuts
Republicans will be under great pressure from the media to sign on to the tax increases in exchange for the spending cuts.
Stimulus even a deficit hawk could love
In the short-run, the jobs picture is bleak and consumers and businesses aren't spending. In the long run, the growing national debt could lead to many years of substandard growth or even an abrupt fiscal crisis. Fortunately, there is a solution: Tie stimulus to budget reforms. That would create a "twofer" out of each policy -- first help the economy and then the budget.
Peace Doesn't Keep Itself
Defense spending has increased at a much lower rate than domestic spending in recent years and is not the cause of soaring deficits.

Graph of the Day
Mercatus Center: Projected Interest Payments on Federal Debt Balloon
See: Bush vs Obama Spending
See also: TARP Is Dead; Long Live QE
See also: How volatile is the US stock market?

Book Excerpts
"There is but one way toward an increase of real wage rates for all those eager to earn wages: the progressive accumulation of new capital and the improvement of technical methods of production which the new capital brings about. The true interests of labor coincide with those of business." –Ludwig von Mises, Bureaucracy, (1944)

Did You Know
"Apparently the Greek original is “sittybas,” from “sittyba,” “parchment label or title-slip on a book” — but then an early printing of Cicero mistranscribed the word as “syllabos.” ...That’s the way language works: Errors, accepted long enough, become standard."

10/4/10 Post

BUZZ: IMF admits that the West is stuck in near depression

News
A tax cut both parties should love -- but don't
Would you like a 6% raise in your next paycheck? Some economists want to give you one -- in the form of a payroll tax holiday -- to stimulate the struggling economy.
Voters in 3 states to consider opting out of 'Obamacare'
Following the lead of the successful Missouri initiative, which passed with 71 percent of the vote, Arizonans, Coloradans and Oklahomans will decide this fall whether to approve proposed constitutional amendments that would allow them to opt out of key provisions of President Obama's signature national health care law.
Obama tax plan: Who gets hit - and why
President Obama's plan to raise taxes on the nation's highest income households may not quite mean what you think. A closer look suggests that fewer people may get whacked than either Obama or his Republican critics suggest.
California Budget Plan Draws Skepticism
Rank-and-File Lawmakers Express Doubts About Proposal From Governor, Legislative Leaders to Close $19.1 Billion Gap.
Latest unemployed: Stimulus-subsidized workers
Tens of thousands of low-income workers lost their jobs Thursday as a stimulus-subsidized employment program came to an end.
Cheap Debt for Corporations Fails to Spur Economy
Corporations now sit atop a combined $1.6 trillion of cash, a figure equal to slightly more than 6 percent of their total assets. In the first quarter of this year it was 6.2 percent of assets, the highest level since 1964, when it was 6.4 percent.
Bernanke: Teach us out of the next crisis
Fed Chairman Ben Bernanke told a crowd of schoolteachers in Washington Thursday they can help prevent the next big financial crisis by teaching students personal finance basics of saving and budgeting.
NFL ticket prices on the rise
The average ticket price for professional football games increased 4.5 percent this year to $76.47, even as some teams struggled to fill every seat.
Visa, MasterCard Near Antitrust Settlement: Report
Visa and MasterCard are close to settling a Justice Department antitrust probe over credit card acceptance rules, the Wall Street Journal reported on Sunday, citing people familiar with the negotiations.
UK cuts child benefit payments in austerity drive
Britain will cap payments to jobless families and scrap child benefits for high earners in a sweeping overhaul of the country's welfare system, Treasury chief George Osborne said Monday.
Global Economy Week Ahead-Currency war fears tinge IMF meetings
If there's one thing the world's economic powers can agree on, it's that none of them wants a strong currency right now.
Wall Street Sees World Economy Decoupling From U.S.
Wall Street economists are reviving a bet that the global economy will withstand the U.S. slowdown.
More Countries Adopt China’s Tactics on Currency
As the Obama administration escalates its battle with Chinese leaders over the artificially low value of China’s currency, a growing number of countries are retreating from some free-market rules that have guided international trade in recent decades and have started playing by Chinese rules.
State DOTs: A Word from Our Sponsor
As the recession threatens popular highway programs, the Georgia Department of Transportation is looking to the private sector for creative funding solutions.
Liberals at 'One Nation Working Together' rally press for jobs, unity
Liberal activists who rallied in Washington Saturday seemed as concerned about bridging the divide between Democrats and disillusioned progressives as they were about promoting civil rights and other social issues.
Conflict Awaits in Lame-Duck Session
Democrats studiously avoided Senate floor fights over taxes and spending before hitting the campaign trail last week, but the post election debate on those issues promises drama and gridlock.
Stimulus: Design Is Important
Nobel Prize-winning economist Joseph Stiglitz and former Federal Reserve Board official Vincent Reinhart presented differing views of America's continuing economic challenges at a National Journal Live event on September 28, moderated by NJ Correspondent Major Garrett.
Summers On The Upside Of Economic Cycles
Lawrence Summers looks back at two years on the front lines, and ahead to the prospects of a stronger recovery.
August factory orders decline 0.5 percent
Orders to U.S. factories fell in August, reflecting a big drop in demand for commercial aircraft. But outside of the volatile transportation sector, orders rose for the first time since March.
Bank of America delays foreclosures in 23 states
Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents. The move adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

Blogs
Number of the Week: 41.7 Million Spend Too Much on Housing
As of 2009, some 41.7 million U.S. households, or 36.7% of the total, faced housing costs that exceeded 30% of their pretax income — a level typically defined as the threshold of affordability. That’s an increase of 1.5 million from 2007, despite a sharp drop in house prices and policy makers’ extraordinary efforts to bring down mortgage payments.
Rates keep falling: 2-Year Treasury Yield Hits Record Low
"The 30-year fixed-rate mortgage rate [4.32 percent] dropped to tie the survey’s all-time low and the 15-year fixed-rate [3.75 percent] set another record low."
Secondary Sources: Tech and Income Redistribution, Keynes, IMF and Currency
A roundup of economic news from around the Web.
Limited Purpose Banking?
Whether the case for narrow banking can finally be convincingly made remains to be seen. The case for mutual-fund banking is a giant leap beyond that. The FFA would, I predict, create an even more horrible mess than yet witnessed in financial services.
Weekly Schedule for October 3rd
The key economic release this week is the September employment report on Friday. Fed Chairman Ben Bernanke will speak Monday evening, and his speech will be closely watched for additional hints on QE2.
The Debate over Fiscal Adjustment
1.The IMF and the Economist take on Alesina and Ardagna.
2.My Harvard colleague Alberto Alesina responds.
Real-Cash-Balance Effect
Beijing’s policy makes all consumer prices in the U.S. lower than they would otherwise be. Therefore, any given volume of dollar spending allows Americans to purchase more real goods. The volume of dollar aggregate demand depends most importantly on Federal Reserve policy, not on the Chinese.
Unofficial Problem Bank List increases to 877 institutions
"The number of institutions on the Unofficial Problem Bank List rose this week but assets fell with the removal of a large publicly traded bank."
Another Empty Promise of ObamaCare: More Jobs
Data is not Information: Would you like a Receipt for your Taxes?
Just because a only a couple hundred of your tax dollars were appropriated to the Department of Agriculture doesn’t make farm subsidies a good idea.
September Employment Report Preview
Goldman Sachs is forecasting a minus 50,000 headline payroll number and an increase in the unemployment rate to 9.7%.
Medicaid Costs: Take II
Coughlin and Zuckerman found that since 2001, 24 states expanded eligibility. In some cases, the expansion was dramatic. For example, New York expanded its eligibility requirements so that the share of those eligible grew from 13 to 35 percent of the state’s population. Most of these expansions did not target those who are least-advantaged.
The Sad State of Economic Modeling
It's fine to say "Our best guess is that TARP and the stimulus did some good. But it's well to remember that our best guess really isn't very good. And putting an exact number on it--"3.1 million jobs created or saved!" creates a dangerous false precision, giving people the illusion that we have good knowledge in a very foggy area.
School House Pork
By focusing on education pork—legislative earmarks that go directly to favored constituencies—the report highlights politicians literally glorifying themselves with “education” dough.
Immigration Enforcement at the Crossroads: Arizona v. Obama Administration
The Obama Justice Department has launched an unprecedented legal assault on Arizona’s attempts to stem the tide of illegal immigration, filing at least three lawsuits against Arizona and other state officials and entities.
Reviewing a Do-Nothing (Right) Congress
As Members of Congress limp out of Washington to face their constituents, it’s worth reviewing their accomplishments—or lack thereof.
Claim Check Needs to Do Fact Checks
Claim Check, which supposedly fact checks public statements, employs the different-must-be-wrong-theory in dismissing a Heritage analysis because it is an “outlier.”
Public Citizen and EPI on Trade and Employment
Reports from the Economic Policy Institute (EPI) are being misrepresented by leftist organizations like the AFL-CIO and the Alliance for American Manufacturing.
Marriage Goes Down, Poverty Goes Up
For the first time in recent history, adults between 25 and 34 years of age who are single outnumber their peers who are married. On top of this, the number of married adults in 2009 reached a historical low.
Small Reactors, Large Potential Impact
A new report by the Energy Policy Institute, in collaboration with the American Council on Global Nuclear Competitiveness, titled “Economic and Employment Impacts of Small Modular Nuclear Reactors,” investigates how four separate scenarios of small modular reactor (SMR) construction could affect the U.S. economy.
The Obama Experts vs. the Rule of Law
Last week President Barack Obama’s most recently minted czar, Special Advisor to the President for the Consumer Financial Protection Bureau Elizabeth Warren, spoke to 400 bankers at the swanky Mandarin Oriental Hotel in Washington, DC. Her message, according to The Washington Post: “Behave, play nice, and we’ll get along just fine.”
Where to Put Your Money in the Homestretch of 2010
Choppy markets are tough, but they usually signify good trends ahead. Here, a look at what's happening in equities, bonds, commodities, and more.
The Best Ideas in Oil, Capacity Utilization, Real Estate and Employment
John Hofmeister talks oil and gas, David Rosenberg sees negative growth by year end, and David Shilling looks at relationship between employment growth and GDP.
Markets Will Unravel Faster Than Expected
Peak Oil, sovereign insolvency, and currency debasement will permanently transform the economic landscape.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Weekly Economic & Financial Commentary: U.S. & Global Review
Slow Growth Is Still the Order of the Day; Japan’s Economy Stumbles as Export Growth Fades.
Learning From Canada's Budget Triumph
The United States can replicate this by pursuing fiscal discipline, with heavy emphasis on spending cuts rather than tax increases, and by making changes in the responsibilities for congressional committees.
From ‘Government’ Motors to ‘Shanghai’ Motors?
President Obama has a delicate balancing act to manage in the upcoming General Motors initial public stock offering.
Why is America Exceptional?
To this day, so many years after the American Revolution, these principles still define America as a nation and a people. Which is why friends of freedom the world over look to the United States not only as an ally against tyrants and despots but also as a powerful beacon to all those who strive to be free.

Economists’ Comments & Opinions
The Trade and Tax Doomsday Clocks
Thankfully, we're not repeating all the mistakes of 1937. But Congress and the Obama administration are flirting dangerously with one of them by failing to extend the expiring low tax rates for all Americans.
The Ghost of Smoot-Hawley Stalks Congress
Congress is angry that the Chinese government is screwing itself delivering great bargains to American consumers while financing the Obama administration's spending orgy. The solution is to tax American consumers every time they try to buy something made in China.
Entrepreneurs: The Real Jobs Machine
The good news is that the entrepreneurial instinct seems deeply ingrained in the nation's economic culture. Americans like to create; they're ambitious; many want to be "their own bosses"; many crave fame and fortune... The bad news is that venture capital for start-ups is scarce, and political leaders seem largely oblivious to burdensome government policies.
Facebook Exposes Tax and Consumption Myths
...Facebook’s existence is the certain result of rich individuals who chose to delay their consumption, as opposed to spending current income on fancy cars and mansions. Absent Thiel’s willingness to “squirrel” away his earned income, Facebook, along with every other economic innovation, would not be with us today. The seen is consumption, but the unseen is what delayed consumption brings to the economy.
Count on Sequels to TARP
Given the multiple bailouts of 2008, it is to be expected that the line of institutions clamoring to join the cannot-fail party will grow longer. That’s the definition of moral hazard — if you rescue one group, others are sure to want the same treatment and behave in a way that ensures they’ll get it. The losses that taxpayers may endure in the next debacle, meanwhile, mount higher.
Healthamburglar
...McDonald's didn't deny that the new rules will wipe out its existing plans. And that's precisely the point. The entire philosophical and policy architecture of ObamaCare is explicitly designed to standardize health benefits and how those benefits should be paid for. Those choices and tradeoffs will be made for everyone by Ms. Sebelius's regulators.
We Can't Afford the Luxury of High-speed Rail
This past Tuesday, Amtrak proposed to spend more than $100 billion increasing the top speeds of trains in its Boston-to-Washington corridor from 150 to 220 miles per hour. In August, Secretary of Transportation Ray LaHood estimated that President Obama's proposal to extend high-speed rail to other parts of the country will cost at least $500 billion.
Task force undermines freedom
The health reform law undermines Americans’ control over their health care in multiple ways. One of the most troubling provisions gives unchecked power to the U.S. Preventive Services Task Force.
Taxing the Rich
As I've said before, a tax cut is not a handout. It simply means government steals less. What progressives want to do is take money from some—by force—and spend it on others. It sounds less noble when plainly stated.
Doomsday Math That Doesn't Add Up
The US economy may actually face Armageddon, but the arguments that have been offered in substantiation of these claims often don't make sense.


"Key macro and finance theories are about twice-century events. Min. acceptable sample size=30 observations=15 centuries." -Garett Jones, Twitter


Graph of the Day
Dollarization Keeps Ecuador Economically Stable Despite Political Instability
See: 36% - Okay to "Walk Away" from a Mortgage

Book Excerpts
"If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants." –F.A. Hayek, "The Pretence of Knowledge," (1974)

Did You Know
"In fiscal year 2009, [San Francisco] spent $175 million on homelessness—that's $26,865 on each of the city's 6,514 "homeless" persons, the majority of whom are housed in city-subsidized lodgings. Its police budget was $442 million, or $52 per San Franciscan. The gargantuan outlay for the homeless has done little to dent the vagrancy problem."

10/1/10 Post

BUZZ: McDonald's May Drop Health Plan

News
The legacy of the 111th Congress
Like a tale of two cities, the 111th Congress roared out of the starting gate in January 2009 only to gasp to a pre-election halt this week after punting major spending and tax decisions to an uncertain lame-duck finale.
Pew Report Finds 'No Silver Bullet' For Deficits
Both tax hikes and spending cuts will be needed to reduce crippling national debt, new study shows.
Foreclosures Slow as Document Flaws Emerge
Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the last two weeks.
Bloomberg Would Extend Tax Cuts For Two Years
"I'd be worried a little about the economics of stopping any growth," he told the audience gathered at the Newseum for the Washington Ideas Forum. "The economy is so fragile you don't want to do that."
Many wheat growers won't benefit from price jump
Although the poor harvest in Russia helps U.S. wheat growers, no one expects wheat prices to reach the record levels they did two years ago when the world was down to almost a 60-day supply of wheat.
Dollar Reverses Course on Upbeat U.S. Data
Second-quarter gross domestic product data, weekly jobless claims and a closely watched survey of Chicago-area purchasing managers all gave investors heart that the economy may be regaining some steam.
Americans tread water in gulf between rich, poor
The recession technically ended in the middle of last year, but the numbers can't tell the whole story. The census report translates to stories of impatience, resignation and hopelessness for those who are living it across the country.
Austerity Plan Spurs Bond Rush
A measure on the Colorado ballot for November would ban all borrowing by the state and severely restrict it at the municipal level, making Colorado the only state whose agencies would be unable to issue debt, municipal experts say.
Holiday hiring picture gets a bit merrier
The jobs probably won't be enough to be a dent in the nation's nearly 10 percent unemployment rate, but for Americans desperate for some work, they're far more than an early Christmas present.
Bernanke: Teach us out of the next crisis
Fed Chairman Ben Bernanke told a crowd of schoolteachers in Washington Thursday they can help prevent the next big financial crisis by teaching students personal finance basics of saving and budgeting.
Veteran Staffer To Replace Emanuel
White House Chief of Staff Rahm Emanuel, one of the most visible faces of the Obama presidency, will step down Friday to run for mayor of Chicago, leaving the high-profile post at least temporarily to a longtime Obama aide who has guarded his privacy fiercely.
Postal Service denied rate hike
Christmas is not coming early this year for the U.S. Postal Service, after regulators denied a request Thursday that would have raised the price of a first-class stamp by 2 cents, to 46 cents.
Irish Crisis Shakes Europe
Dublin to Spend Billions More to Shore Up Lenders; Jitters Over Euro's Future.
Personal income is up, and so is spending
Personal income increased $59.3 billion, or 0.5% last month, while spending by individuals remained steady.
Regulators: Much to do on Wall Street reform
The Federal Reserve has 50 new rules to write, the Federal Deposit Insurance Corp. has 44 new rules to write. The Securities and Exchange Commission has 100 rules and 20 studies on its plate. And Treasury has two new agencies and an oversight council to set up.
U.N. Says Global Employment Needs 5 Years to Rebound
To get back to the level of employment in 2007, the global economy needs to create nearly 23 million jobs, including more than 14 million in developed countries, the report said.
China manufacturing sector grows
China's manufacturing sector picked up pace in September, easing some fears that the world's third largest economy might be in for a rapid slowdown.
China warns U.S. currency bill might hurt ties
Beijing warned Washington Thursday that economic ties might be damaged after American lawmakers escalated the conflict over China's currency controls, inching the two economic giants closer to a trade war.
Health reform to worsen doctor shortage: group
The U.S. healthcare reform law will worsen a shortage of physicians as millions of newly insured patients seek care, the Association of American Medical Colleges said on Thursday.
Ireland Prices Bank Rescue; Deficit at 32% of GDP
Ireland's central bank has put a 34 billion euro price on bailing out stricken Anglo Irish Bank under a worst case scenario and said Allied Irish Banks needs to raise an additional 3 billion euros by the end of the year.
Global employment crisis will stir social unrest, warns UN agency
Global employment will not recover to pre-crisis levels until 2015 if current policies are pursued, creating social tension, the International Labor Organization has warned.
Thousands show up in LA for free mortgage help
Armed with folding chairs, coolers and jugs of water, thousands of people who want to avoid losing their homes lined up around the Los Angeles Convention Center on Thursday seeking help with mortgages they can no longer afford.
Latest unemployed: Stimulus-subsidized workers
Tens of thousands of low-income workers lost their jobs Thursday as a stimulus-subsidized employment program came to an end.
Consumer spending, incomes both rose in August
Consumer spending rose by a moderate amount in August while incomes increased by the largest amount in eight months, a gain that was propelled by the resumption of extended unemployment benefits.
Child nutrition bill stalls in House
First lady Michelle Obama's campaign for healthier school lunches has stalled in Congress after anti-hunger groups and more than 100 Democrats protested the use of food stamp dollars to pay for it.
Second-Quarter Growth Is Revised Higher, to 1.7%
Still, that is a sharp slowdown from a 3.7 percent rate in the first quarter and does not change the big picture: the economy has been losing momentum since the end of last year.

Blogs
ObamaCare Prods Yet Another Insurer to Flee the Market
By forcing the exit of Principal Financial Group — which ran a profitable, $1.6 billion health insurance business — ObamaCare has now left 840,000 Americans to find another source of coverage.
Hotel Occupancy Rate: Slightly below 2008 Levels
"Overall, the U.S. hotel industry rose 7.5% in occupancy to 64.2%, average daily rate was up 2.6% to US$103.09, and RevPAR ended the week up 10.3% to US$66.15."
Postal Service’s Financial Woes
The U.S. Postal Service is in a lurch after Congress wrapped up business until November without giving the USPS a break on a $5.5 billion retiree health benefits payment that’s due tomorrow. Combined with an expected loss in the billions of dollars, the USPS could run out of money in October.
Which Cities Face Biggest Housing Risks?
Within more than 500 metro areas, the top 20 most stressed include nine in California and six in Florida, where the housing bust has been particularly acute. Among the most populous cities, Miami tops the list, followed by California’s Inland Empire, Los Angeles and San Diego.
McDonald’s Case Highlights ObamaCare’s Threat to Low-Income Workers’ Health Insurance, Political Freedom
Many employers, such as McDonald’s, provide health benefits that are less comprehensive than most. They may have an annual claims limit of $10,000 or less. These are the health plans (and the workers), however, that are seeing the highest premium increases under ObamaCare.
What Makes the US Health Care System So Expensive?
In particular, Aaron Carroll's series on What Makes the US Health Care System so Expensive does a very good job of locating the sectors where the US health care system is more expensive than we would expect compared to other countries (it's less good at identifying why these sectors are expensive but we have to start somewhere.)
Overhauling CBO and JCT Is a Real Test of GOP Resolve, not the ‘Pledge to America’
Redemption is a good thing, however, so maybe the GOP actually intends to do the right thing this time around. One key test is whether Republicans do a top-to-bottom housecleaning at both the Congressional Budget Office and the Joint Committee on Taxation.
Secondary Sources: Small Business Job Creation, Fiscal State of the Union, Economics of Lobbying
A roundup of economic news from around the Web.
One reason why fiscal reform is difficult
The dilemma is simple: variations in Medicaid coverage account for a lot of the variation in the health of state government finances. Yet if states cut back on Medicaid in some manner, there will be more people on the more expensive subsidized exchanges, come the full onset of the Obama health plan.
Geithner on the Economy, Politics and More
Treasury Secretary Timothy Geithner spoke for roughly a half hour at The Washington Ideas Forum hosted by The Atlantic and the Aspen Institute on Thursday. Here are some points he made during his appearance...
Balancing the Fed’s Hawks, Doves
The Senate’s confirmation of Janet Yellen and Sarah Bloom Raskin to the Federal Reserve’s Board of Governors, continues to shift the balance of those who want more action to spur growth with those who are more concerned about inflation.
The Keynesian Attraction
Introspection, though fallible, is genuinely informative. We use it all the time to our great profit. And Keynesians should celebrate this truth, because some of their key premises pass the test of introspection with flying colors. Much unemployment is involuntary - there's no denying it. And workers genuinely resent - and employers therefore genuinely fear - nominal wage cuts. ...Of course, once Keynesians admit their real reasons, they do have a little problem: Some of their positions fail the introspective test!
Goolsbee Takes a Turn at the White Board to Explain Tax Cuts
Austan Goolsbee, the newly minted chairman of President Barack Obama’s Council of Economic Advisers, takes a turn at the White Board to explain the tax fight in Congress – and why Obama does not want to extend the expiring tax cuts of George W. Bush for households earning more than $250,000.
Is a Municipal Debt Crisis Imminent?
The basic problem: state and local governments are facing a new budgetary reality.
China's Embarrassing Foreign Aid Scam
While China spent tens of billions on hosting the Olympics, it still has its other hand out asking for donations.
Let the Market Control Pharmaceutical Costs
US consumers are being burdened with unnecessary costs that could be alleviated if worldwide prices were factored into the equation.
Is the Obama DOJ Committed to Race Neutral Law Enforcement?
On May 14, 2010, Department of Justice Civil Rights Division Assistant Attorney General Thomas E. Perez testified before the U.S. Commission on Civil Rights about the DOJ’s decision to completely drop charges against the New Black Panther Party and two of its members for alleged voter intimidation in violation of the 1964 Voting Rights Act.
Duck Season Opens
As Congress vacates Washington to campaign, they promise to return after Election Day to clean up the mess they leave behind.
Side Effects: Massachusetts Seniors Will Lose Medicare Advantage Plans in 2011
President Barack Obama’s promise that “if you like it you can keep it” may be this generation’s “read my lips—no new taxes,” claim.
The “Myth” of the American Founding
You should think twice the next time you invoke the Constitution or argue that the federal government is overreaching its power. According to The Economist, you may well have succumbed to “The Perils of Constitution Worship.”

Research, Reports & Studies
Canada’s Budget Triumph
...just 16 years later, Canada’s federal debt had fallen from 67 percent to only 29 percent of GDP. Moreover, in every year between 1997 and 2008, Canada’s federal government had a budget surplus.
Fiscal Policy Report Card on America's Governors: 2010
America needs a lot more "A" governors to face the fiscal challenges and make the needed tax and spending reforms.

Economists’ Comments & Opinions
Echoes of the Great Depression
As in the 1930s, policy uncertainty and hostility to business have retarded recovery. At least this time around the political price for economic failure promises to be swift.
Workers, Not Employers, Bear the (Full) Cost of Health Benefits
The Kaiser Family Foundation recently issued its annual survey of employer-sponsored health benefits, declaring: "Family Health Premiums Rise 3 Percent to $13,770 in 2010, But Workers' Share Jumps 14 Percent as Firms Shift Cost Burden." That's half-right — but the other half perpetuates a myth about employee health benefits that stands in the way of real health care reform.
CBO: Obama's Tax Plan Could Be Worst of All
...Obama's plan to extend only 80 percent of the Bush tax cuts could be worse for the economy in 2020 than the Republican plan to extend 100 percent, even though the GOP's plan would saddle us with more debt.
Curb Medicare Spending the Ryan Way
Nothing presents as great a threat to the federal budget — and therefore to economic growth — as the persistent and rapid growth of Medicare spending.
The Newspeak of Paul Krugman
To believe that spending — any kind of spending — is the cure for what ails us is to ignore the subjective nature of wealth and the microeconomic basis of economic growth in favor of an absolute reification of economic aggregates such as GDP and unemployment.
WARREN: It's Time to Simplify Financial Regulation
Perhaps most remarkably, the agency will not simply create new regulations: It has the power to get rid of old ones that are outdated, expensive or don't work.
They’re Coming to Get You
A fiscal horror story so terrifying, it can only be told in 3D!
Consumers Still Unaware of Impending Doom, Part 1
Credit cards and the government have encouraged spending, leaving many completely unprepared for retirement. This financial crisis will take decades to repair.
Why America Won't Have Hyperinflation
Many of the most respected names in economics predict hyperinflation, yet none of the actual economic or political factors required are present.
Consumers Still Unaware of Impending Doom, Part 2
Nobody believes today that major mega retailers like Target might not exist in 10 years, but it's an entirely plausible scenario.
David Rubenstein: U.S. is losing its competitive edge
The Carlyle Group co-founder says the U.S. threatens to fall behind China, thanks to our growing deficit and government debt. Meanwhile, Treasury Secretary Tim Geithner downplays the threat of a looming trade war.

"We get rich by finding ways to do more with less. As productivity increases in manufacturing and agriculture, employment falls." -Russ Roberts, Twitter

Graph of the Day
Mercatus Center: Tax Cuts, or Hikes, Are a Sideshow
Bush Tax Cuts: The Cheat Sheet
See: The Luck of the Irish
See: Where your taxes all go
VIDEO: The Latest from the Standup Economist

Book Excerpts
"The consumer-voter may be viewed as picking that community which best satisfies his preference pattern for public goods. This is a major difference between central and local provision of public goods. At the central level the preferences of the consumer-voter are given, and the government tries to adjust to the pattern of these preferences, whereas at the local level various governments have their revenue and expenditure patterns more or less set. Given these revenue and expenditure patterns, the consumer-voter moves to that community whose local government best satisfies his set of preferences. The greater the number of communities and the greater the variance among them, the closer the consumer will come to fully realizing his preference position." –Charles M. Tiebout, "A Pure Theory of Local Expenditures," (1956)

Did You Know
In Washington D.C. and the surrounding suburbs, 47.3% of people 25 years or older have bachelor's, master's, professional school or doctorate degrees, according to new Census Bureau data released Tuesday. The national average barely tips 25%. That metro area has the nation's highest percentage of residents with college degrees so you can call it America's brainiest place to live.