10/15/10 Post

BUZZ: Early Third Quarter GDP Forecast

Today's News
Obama Administration Set to Announce Second Year of $1.3 Trillion Deficit
The Obama administration will announce it has exceeded the $1 trillion mark in the federal deficit -- predicted by Congress' research arm last week as $1.29 trillion -- for the second straight year as it projects an even larger gap between revenues and spending for fiscal year 2011.
Judge disses Dems' 'Alice in Wonderland' health defense
U.S. District Judge Roger Vinson allowed two major counts to proceed: the states’ challenge to the controversial requirement that nearly all Americans buy insurance and a required expansion of the Medicaid program.
Bernanke: Fed prepared to act to boost economy
The Federal Reserve is prepared to take new action to boost the economy, its chairman, Ben S. Bernanke, said Friday morning, because inflation has been too low of late and unemployment is poised to come down too slowly.
Bernanke Gives Strong Indication Fed Will Act
Just how much money the Fed will inject into the economy remains uncertain, and Bernanke gave no indication of a figure in his address. He did note some risks to embarking on another round of quantitative easing, including worries that the Fed would have a difficult time extricating itself when it wanted to tighten monetary policy again.
Social Security benefits will remain flat for 2nd straight year, government says
For the second year in a row, the nearly 54 million retirees and other Americans who receive Social Security benefits will not get any cost-of-living increase in 2011 in their monthly checks, government officials announced Friday morning.
TARP Contracting Has 'Significant' Transparency Issues
Treasury's use of private contractors as part of the much-criticized Troubled Asset Relief Program raises "significant" transparency and conflict concerns, the Congressional Oversight Panel said in a report this morning.
Who can magically fix the economy? No one
Let us tell you an ugly truth about the economy, a truth that no one in power or who aspires to power wants to share with you, at least until after the midterm elections are over. It's this: There is nothing that the U.S. government or the Federal Reserve or tax cutters can do to make our economic pain vanish overnight. There are no all-powerful, all-knowing superheroes or supervillains who can rescue or tank the economy all by themselves.
September Retail Sales Up for Third Straight Month
Americans spent more money on cars, furniture and at hardware stores to boost retail sales to a third monthly increase in September.
CPI: Inflation rate stays uncomfortably low
Consumer prices are up slightly over last year driven by climbing food and energy costs, but still lower than policymakers would like.
House to vote on bonus Social Security payment
Pelosi says $250 lump sum needed since no cost-of-living increase this year.
Lessons About Market Crises from Greece's Quiet Recovery
It may seem tough to fathom now, but few things struck terror in the hearts of investors like the tiny Greek economy did at the beginning of this year. However, the country's dire financial conditions have healed better than most would have imagined.
Sovereign Debt Default Risk
...default risk has fallen the most for Japan, China, Australia, Chile, and South Korea since July 2nd. It has risen for just four countries -- Egypt, Portugal, Ireland, and the US. Yep, the US has seen default risk rise 15.7% since the start of July, even as the equity market has performed well. Germany has the lowest default risk of all the countries shown.
Has Obama Raised Taxes? That Depends on Whom You Ask
Americans for Tax Reform (ATR) point to the cost of Obama's health care legislation as proof that the president has violated his pledge not to raise taxes on families earning less than $250,000 and on individuals earning less than $200,000.

Blogs
Atlanta’s Lockhart: Fed Should Provide ‘Certainty’
The whole theme of uncertainty is really very prominent in the minds” of Fed officials and quantitative easing could help alleviate the problem.
The Economist on the U.S. Pension Crisis
San Jose offers workers its own muncipal plan and according to Robert Novy Marx and Joshua Rauh, their unfunded liability is about $4 billion, or 321% of the city’s 2006 revenues
Parsing Bernanke: Takeaways From Boston Speech.
The takeaways:Unemployment is way too high, inflation is too low, the first round of bond buying — aka Quantitative Easing — worked and the Fed is thinking about publicly pledging to keep short term rates near zero for a REALLY long time.
Big Ben: What He Said and What it Means for the Markets
The S&P emerges as a government sponsored entity.
Time to go to work.
With a new round of monetary easing probably,every little utterance out of the leaders of the Fed's Open Market Committee is heavily scrutinised. Today it was the Chairman, Ben Bernanke's turn to set tongues wagging.
Obamacare Suffers Another Legal Blow
The deliberate consideration that these district courts are giving to these serious constitutional arguments indicates that the probability that the Supreme Court will ultimately strike down the individual mandate continues to increase.
How Government Micromanagement Could Discourage Access to Some Preventive Services
The new health care law requires insurers to cover all preventive measures rated “A” or “B” by the United States Preventive Services Task Force (USPSTF) with zero cost-sharing. Otherwise, “a plan or issuer has the discretion to either cover or not cover additional preventive services not recommended by the USPSTF.”
What’s the Biggest Tax Mistake That Might Be Made This Year? A Freakonomics Quorum
Consider the ingredients: a frail economy, a toxic political environment, looming hard deadlines and massive uncertainty in the business community — the perfect circumstances under which to write some great federal tax policy!
New, Useful Tool to Keep Up with the Health Care Lawsuits
Obamacare is now being challenged by 20 different lawsuits with 21 different states as plaintiffs, but it is difficult to find all the different court documents and key arguments for the ongoing cases.
Nearly three decades after the 1980s recession, those areas most damaged are still lagging behind.
Andrew Biggs
How Many Times Should We Rebate Payroll Taxes for Low Earners?
Over at e21, Chuck Blahous—the Bush White House’s point man on Social Security and now a public Trustee for Social Security and Medicare—discusses a Social Security reform proposal from the Committee for a Responsible Federal Budget, which is designed as a middle-ground plan that could achieve some level of consensus on reform
A Legal Victory on the Road to Repeal
Yesterday, Roger Vinson, senior federal judge of the United States District Court for the Northern District of Florida, characterized the Obama Justice Department’s motion to dismiss the constitutional challenge to Obamacare brought by 16 state attorneys general, four governors, two private citizens and the National Federation of Independent Business (NFIB) as “not even a close call.”
The wrong sort of inflation
Terrified by memories of the 1930s and Japan’s more recent experience in 1990s and 2000s, the academics who now dominate the Federal Open Market Committee display a hyperactive compulsion to tinker with monetary policy in a bid to solve all the problems besetting the U.S. economy.
Pelosi’s PAYGO Ploy: Budgetary Gimmick Provides Cover for Liberals
Four years after Democrats campaigned on the promise of using pay-as-you-go budgeting, their record is dismal. Since gaining control of Congress in 2007, they’ve gamed, ignored or employed PAYGO on 32 occasions to justify new spending or tax increases.
Secondary Sources: Value Added Tax, Rich Spending, Trade Risks
A roundup of economic news from around the Web.
Thoughts on Unemployment
The overall puzzle is why the unemployment rate is highest for low-skilled workers.
With Moratorium Lifted, Time to Start Issuing Permits
From the perspective of those in the Gulf who suffered from the moratorium, lifting it may seem more like an obviously smart move than a reason for self-congratulation. It has never been widely popular to celebrate putting out a fire one started in the first place. In fact, it is more like damage control.
Good Time to End Farm Subsidies
The Wall Street Journal reports that the agricultural sector is recovering nicely from the recent recession while the rest of the private sector continues to struggle. The counter-cyclical nature of some farm subsidy programs means that the taxpayer bill for the year could be cut in half to only about $12 billion.
U.S. Manufacturing Growth Likely to Slow
Production by U.S. manufacturers is likely to keep growing but at a slower pace, according to a new survey by the Manufacturers Alliance/MAPI, a public policy and economic research group in Arlington, Va.
“… this only applies to big business …”
The union- and trial-lawyer-backed Paycheck Fairness Act, which would greatly expand the scope of lawsuits against private employers alleging gender pay inequality, has run into considerable resistance in Congress.
Free Money! It’s a Nifty Gift from the Federal Government!
As state and local governments are under crushing budget constraints, mega-sized infrastructure boondoggles are cropping up all over the country. With the promise of “free money” from the federal government, these projects are proving too tempting for state governments to turn down.
Fannie and Freddie in a Mess
The foreclosure mess is now spreading to Fannie and Freddie, as our government-owned mortgage machines starts looking into what, exactly, its servicers have been doing with their loans.
“Dropout Factories” and “The Lemon Dance” in Waiting for Superman
Not only must students be free to learn, but good teachers must also be free to teach. The status quo punishes innovation and tolerates a baffling degree of teacher incompetence.
It’s Time to Foreclose on Big Government
The biggest foreclosure yet may begin on November 2nd, as voters start foreclosure proceedings against big government. It’s run up more debt than we can afford to pay.
No Fizz in Upcoming COLA
Tomorrow, new figures from the Labor Department are expected to confirm that for the second year in a row, Social Security recipients will receive no cost-of-living adjustment (COLA) in January. Nevertheless, people who have been receiving Social Security for a few years are still ahead of the inflation game.

Economists’ Comments & Opinions
QE2 and Rising Markets: Where Can Investors Find Real Value?
Don't be seduced by rising securities and commodities prices into thinking that all's well.
A Significant Victory In the Fight Against Obamacare
Americans who own and run their own small businesses understand better than anyone the importance of limited government for prosperity and liberty. So, when Congressional Democrats and the Obama administration decided that they had the power to force every American citizen to buy health insurance the National Federation of Independent Business moved quickly to oppose this unprecedented and profoundly unconstitutional claim of power.
Shamed By What America Owes
Barack Obama apparently never figured out that he had been elected in part because that massive Republican borrowing had sickened the American people. So in near-suicidal fashion, he took Bush's last scheduled budget deficit of more than $500 billion — in a Keynesian attempt to get the country out of the 2008 recession and financial panic — and nearly tripled it by 2010.
Stop Bashing Business, Mr. President
If we tried to start The Home Depot today, it's a stone cold certainty that it would never have gotten off the ground.
Put our money where our mouth is: Build better
This week, the Treasury Department and Council of Economic Advisers released an important new analysis on the economic benefits of transportation infrastructure investment. The findings prove what we have long been advocating: Our nation’s infrastructure has been neglected for far too long.
Liberalism and Public Works
Entitlement politics leaves little money for roads and tunnels.
Nightmare on Every Street
Fannie Mae and Freddie Mac are broke and the largest owner of their obligations is now the United States Federal Reserve.
Macroeconomic Predictions and Realities
Six months of spot-on predictions and educational misses regarding the US recovery, the European crisis, emerging markets, the dollar, and more.
Obama shafts the economy
Job growth trapped under bureaucracy and taxes.
Republican Congress means more jobs
What voters have been saying — to incumbents and challengers alike since early 2009 — is that the top job for the president and Congress is jobs. Voters want elected officials to focus, above all, on jobs and the economy.
Recession is tragedy for young, almost-old
Persistently high unemployment for teenagers is a tragedy that could haunt a whole generation for years. And the Great Recession has also been a disaster for older Americans that could ruin their finances for the rest of their lives.
Tax, Spend, and Shovel
Maybe it's unfair for people to think Obama is just another tax-and-spend Democrat. After all, some tax-and-spend Democrats are actually competent at it.

Research, Reports & Studies
The Regional Economist: Disagreement at the FOMC: The Dissenting Votes Are Just Part of the Story
It's safe to say that the past few years have been interesting for the Federal Reserve System, particularly for the members of the Federal Open Market Committee (FOMC). Difficult decisions have been made: The federal funds rate has been lowered to basically zero, and money has been distributed to various financial institutions in order to keep them solvent.
The 2010 Index of Dependence on Government
This year’s publication of the Index of Dependence on Government marks the eighth consecutive year that The Heritage Foundation has flashed warning lights about Americans’ growing dependence on government payments and programs. For eight years, the Index has signaled troubling and rapid increases in the growth of dependence-creating federal programs, and for each of these years Heritage has raised concerns about the challenges that rapidly growing dependence poses to this country’s republican form of government and for the broader civil society.
Defending Defense: Setting the Record Straight on U.S. Military Spending Requirements
Now, just as this strain on the military—engaged in today’s persistent irregular wars, yet unable to prepare fully for the wars of the future—reaches a point of crisis, come new calls to cut the Defense Department’s budget, amplified by the fears of a faltering economy, the federal government’s desire to boost spending elsewhere, and its inability to rein in other spending. Yet the arguments frequently made for Pentagon spending cuts are concocted from a mix of faulty analysis and out-of-context “facts.”

Book Excerpts
"The more the state "plans" the more difficult planning becomes for the individual." –F.A. Hayek, The Road to Serfdom, (1944)

"Did You Know"
Freddie Mac: 30 year Mortgage Rates fall to 4.19 percent... "The last time 30-year FRM rates were this low was April 1951 (based on a data series of FHA rates going back to 1948)."

10/14/10 Post

BUZZ: Applications for jobless benefits rise to 462K

News
Obama admission inspires GOP
Senate Republicans on Wednesday seized on President Barack Obama’s admission to The New York Times that “there’s no such thing as shovel-ready projects,” an acknowledgement they say suggests the administration’s $814 billion economic stimulus plan is a failure.
Government Approval at Lowest Point since Watergate
Public approval of the federal government at lowest level since the Watergate scandal, while Americans are evenly split over what the government’s role should be.
Ethanol decision seen as Corn Belt pandering
The Obama administration’s decision Wednesday to allow more ethanol in gasoline was met with fury from environmentalists and Big Oil, but it could help Democrats in the nation’s Corn Belt.
Lawmakers Urge Deficit Panel To Back Defense Cuts
House Financial Services Chairman Barney Frank, D-Mass., and more than 50 other lawmakers sent a letter to the Commission on Fiscal Responsibility and Reform describing the "urgent need" to cut excess defense spending.
Trade deficit widens sharply to $46.3 billion
The U.S. trade deficit widened sharply in August, reflecting a surge in imports of consumer products as businesses restocked their shelves in hopes of a pickup in consumer demand.
State and City Pensions Could Destroy U.S. Economy
Six major cities have current pension assets that can only pay for promised benefits through 2020: Philadelphia, Boston, Chicago, Cincinnati, Jacksonville and St. Paul. An additional 18 cities and counties, including New York City, Detroit, Cook County in Illinois and Orange County in California would be solvent through 2020 but not past 2025.
Foreclosure Mess Deepens, as Experts Fear that U.S. Has Yet to See the Bottom
Instead of selling foreclosed homes, banks have been hanging onto them, waiting for the economy to improve. "These banks that have all this pent-up inventory will unleash it on the market, as soon as they see a minor uptick in real estate prices."
China still stockpiling foreign currency
In the latest sign that the Chinese could be keeping the yuan artificially undervalued, China's currency reserves jumped in the third quarter, to one of the highest levels on record.
Fast-growing states suffer worst in recession
Call it the migration bust: Many of the fastest-growing areas of the country during the housing boom are now yielding some of the biggest drops in income as a result of the economic downturn.
Drilling ban's job impact less than feared
With the end of the deepwater drilling moratorium, it seems that fears of massive job losses among drill workers may have been overblown.
Food, drink makers push back at soda taxes, junk-food curbs
Last May, D.C. lawmakers approved a measure that would add sports drinks, soda and other sweetened beverages to the list of food items subject to the city's 6 percent sales tax.
U.S. producer prices up twice as fast as expected
Rising food and energy prices pushed inflation at the wholesale level up twice as fast as expected last month, and prices excluding those staples rose at the fastest annual pace in a year, data released by the Labor Department showed on Thursday.
Dollar hits fresh 15-year-low against yen
The dollar fell to a fresh 15-year-low against the yen in Tokyo on Thursday amid growing speculation that the U.S. Federal Reserve will ease monetary policy next month.
U.S. to Let Insurers Raise Fees for Sick Children
The Obama administration, aiming to encourage health insurance companies to offer child-only policies, said Wednesday that they could charge higher premiums for coverage of children with serious medical problems, if state law allowed it.
Regence Blue Shield customers notified of skyrocketing rates
Rates are going up, and many blame it on the new health care law.
Obama calls on Congress to extend tax break for college students
President Barack Obama called Wednesday for Congress to extend the tax credit that helped soften the blow of college tuition for more than 12 million students last year.
Don’t let them eat cake: Queen cancels holiday party for staff
Queen Elizabeth has canceled a planned Christmas party for her staffers after deciding it would be inappropriate to celebrate as ordinary Britons feel the pinch from tough economic times.
Thousands of Nonprofit Groups Face New Tax Burden Starting Friday
Thousands of nonprofit businesses across the U.S. -- from homeowners associations to Masonic lodges to collectors' clubs -- could be stripped of their tax-exempt status on Friday because of filing rules that changed three years ago but are still catching filers unaware.

Blogs
Secondary Sources: Retirement Planning, Why QE2?, Fed and the World
A roundup of economic news from around the Web.
Hoping it will Go Away? Employee Benefits Breaking Budgets
So far attempts to rein in costs by billing retirees for part of their premiums have met with lawsuits. And governments are only recently coming to terms with the size of these promises.
Did Fed Cause 2000s Bubble by Holding Rates Too Long Too Low?
Greenspan and Bernanke said: No, and they’ve got numbers to make their case. Now comes a pair of economists from the European Central Bank to make the opposite case.
Two unemployment puzzles
The first puzzle about unemployment when thought about from within the search-matching framework is that unemployment rates are highest among the least skilled and most homogeneous skills, i.e. among those worker/jobs with the easiest matches. ...the second puzzle is that uncertainty should matter most when hiring and firing costs are high and once again these costs are lowest for those workers with the greatest unemployment rates.
New Normal: 7%-8% Unemployment?
Those dire thoughts come from Joseph Stiglitz, Nobel laureate and economics professor at Columbia University. His book “Freefall,” now out in paperback, chronicles the events that led up to the financial collapse and global recession of the past few years and what lies ahead.
The Myth of Shovel Ready
The way to avoid this problem is a rigorous cost-benefit analysis of each government project. Such analysis is hard to do quickly, however, especially when vast sums are at stake.
Hard-Hit Areas Could Lag for Decades
Nearly three decades after the 1980s recession, those areas most damaged are still lagging behind.
RealtyTrac: Record Repossessions reported in September
"A record total of 102,134 bank repossessions were reported in September, the first time bank repossessions have surpassed the 100,000 mark in a single month."
Messynomics and the Troubles with Money
You don't need to call this "Austrian" economics, though Mises and Hayek did more than any other economists to get us to think about the messy implications of the world and how the market system and relative price adjustments guides us in copying with the imperfections of man and the world.
A Few More Thoughts on the Foreclosure Scandal
The "foreclosure scandal," as I understand it, is that with securitization, the actual noteholder has changed in ways that may not have been recorded properly at the county records office. However, the identity of the noteholder is well defined in the trading systems used by mortgage securities traders.
Just How Bad Will Foreclosure-Gate Get?
Ally Bank, JPMorgan Chase, and Bank of America have all begun investigating problems with foreclosure paperwork. But could it all be a blessing in disguise?
The Great QE2 Experiment: Success Now, Failure Later
Quantitative easing is supportive of the stock market, commodity prices for the time being, but will add to issues in the real economy and the Fed's exit problems down the road.
The Coming Energy Crunch: There's No "Plan B"
The impact of peak oil on markets, lifestyles, and national solvency deserves the highest attention -- but some important players seem to be paying no attention at all.
The Tea Party Is Here to Stay
There is still hope for our country: the Tea Party. Decentralized and skeptical of central authority, the Tea Party offers baffled politicians and lobbyists no one to co-opt.
The 2010 Index of Dependence on Government
The problem caused by unsustainable promises of entitlement benefits to millions of Americans will not go away of its own accord. In fact, the IMF predicts that U.S. public-sector debt (federal plus state) will equal 100 percent of the U.S. gross domestic product by 2015 unless the annual deficits are immediately cut by an amount equal to 12 percent of GDP.
The EPA Ozone Regs: Another Obama Jobs Killer
The EPA normally waits at least five years before revising their ozone standard, but there is nothing normal about the Obama EPA. In January 2010.
Spending Has Steeply Increased
Overall, Washington is spending 23 percent more today than it did two years ago. Quite a stunning increase given the concern about deficits and fiscal austerity other nations are embarking on.
After Waiting for Superman: Be a Part of the Solution
Waiting for Superman has left moviegoers rightfully outraged at the state of America’s education system. It’s an accurate portrayal. In many of the nation’s largest cities, fewer than half of all children graduate high school.

Research, Reports & Studies
The Regional Economist: Disagreement at the FOMC: The Dissenting Votes Are Just Part of the Story
It's safe to say that the past few years have been interesting for the Federal Reserve System, particularly for the members of the Federal Open Market Committee (FOMC). Difficult decisions have been made: The federal funds rate has been lowered to basically zero, and money has been distributed to various financial institutions in order to keep them solvent.
The 2010 Index of Dependence on Government
This year’s publication of the Index of Dependence on Government marks the eighth consecutive year that The Heritage Foundation has flashed warning lights about Americans’ growing dependence on government payments and programs. For eight years, the Index has signaled troubling and rapid increases in the growth of dependence-creating federal programs, and for each of these years Heritage has raised concerns about the challenges that rapidly growing dependence poses to this country’s republican form of government and for the broader civil society.

Economists’ Comments & Opinions
Your sovereignty & trade
The only fair policy -- and the only one that ensures long-run prosperity for all -- is a policy in which no one's consumer sovereignty is ever sacrificed.
Capitalism Saved the Miners
If those miners had been trapped a half-mile down like this 25 years ago anywhere on earth, they would be dead. What happened over the past 25 years that meant the difference between life and death for those men? ...Short answer: the Center Rock drill bit.
QE2: Why is the Fed doing this?
Most observers now seem convinced that the Federal Reserve will shortly implement QE2, a second round of quantitative easing. It's worth taking a look at what QE2 is and is not expected to accomplish.
The other demographic dividend
The next Facebook is increasingly likely to be founded in India or Indonesia rather than middle-aged America or doddery old Europe.
Tea partiers won't go when fun ends
The tea party isn’t about to go away after the November elections. Its powerful message of limited government is likely to remain a sharp thorn in the side of those in both parties who want to continue politics as usual.
Currency Devaluation War: When Will the Next Crisis Start?
Don't get caught up in the hype as this entire rise in the markets isn't sustainable.
A Runaway Market?
Even if you didn't anticipate this rally, there will always be new opportunities to make money in financial markets.
Hiding the Cost of Government Leads to Bigger Government
Politicians love to rail against car dealers and mortgage lenders who surprise consumers with hidden costs. Yet Congress hides from voters a huge part of the cost of government: the hidden costs of taxes, which include lost income and jobs. Failing to account for these costs creates a bias in favor of bigger government and a less efficient tax code.

Graph of the Day
A Hidden Cost of ObamaCare
See: Reagan Recovery vs. Obama Recovery

Book Excerpts
"The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities. What made some enterprises develop into big business was precisely their success in filling best the demand of the masses." –Ludwig von Mises, Planned Chaos, (1947)

Did You Know
Hispanics live longer than whites or blacks, according to the first-ever life expectancy data for the U.S. Hispanic population, which were released Wednesday. On average, Hispanics outlive whites by 2.5 years and blacks by 7.7 years, according to the report. Their life expectancy at birth in 2006 was 80.6 years, compared with 78.1 for whites, 72.9 for blacks and 77.7 years for the total population.

10/13/10 Post

BUZZ: Cities Hide Pension Liabilities, Study Says

News
Fed official: Stop asset buying
Wall Street is counting on the Federal Reserve to announce another round of asset purchases next month. But not everyone on the Fed is in favor of that policy.
Across the U.S., Long Recovery Looks Like Recession
Less than a month before November elections, the United States is mired in a grim New Normal that could last for years.
Health care: You don't get what you pay for
New industry report on health care quality shows plans that allows for many doctor visits and tests don't necessarily deliver the best care.
N.Y. Faces $200 Billion in Retiree Health Costs
...the report casts serious doubt over whether medical benefits for New York’s retirees will be sustainable, given the sputtering economy and today’s climate of hostility toward new taxes and taxpayer bailouts.
Fed's next move could come soon
Fed policymakers split on policy, with many wanting moves soon unless economy picks up, but some opposing action unless conditions get worse.
States to Unveil Joint Probe Into Foreclosures
If the states have their way, mortgage companies will have to revamp the way they handle foreclosures, pay penalties for violations and expand help to homeowners on the verge of foreclosure.
Dodd-Frank Act Faces Lawsuit
Major debit-card issuer TCF Bank announced today that it is suing the Federal Reserve Board over a provision of the Dodd-Frank Act that allows the board to lower debit-card fees charged by institutions with $10 billion or more in assets.
President Obama ends deep-water-drilling ban
The Obama administration Tuesday lifted its ban on deep water oil and gas drilling a month ahead of schedule, but it isn’t enough to get its top budget nominee past Sen. Mary Landrieu, a Louisiana Democrat who said the move doesn’t go far enough.
To Save $1 Trillion, Uncle Sam Should Take Cues from CEOs, Group Says
The biggest potential contributor to savings, the executives say: overhauling the government's supply chain, which could save $500 billion over the next 10 years.
Think tanks' new energy plan
Their vision: to accelerate energy innovation by investing $25 billion per year in clean energy technologies. The proposal advocates funneling cash into the Energy Department’s science funding, energy education, and the Defense Department’s energy innovation efforts.
Google Plans Alternative Inflation Index Using Web Data
Google is using its vast database of web shopping data to construct the ‘Google Price Index’ – a daily measure of inflation that could one day provide an alternative to official statistics.
Canceled NJ tunnel reflects mood on spending
The battle over whether to build a new rail tunnel between Manhattan and New Jersey illustrates the choice facing voters in November's elections: stimulate the economy or cut costs.
'No risk' of currency war: Geithner
There is "no risk" of a global currency war erupting, despite recent currency interventions by nations ranging from Japan to Colombia, US Treasury Secretary Timothy Geithner has said.
No Social Security benefits boost expected for 2011
As if voters don't have enough to be angry about this election year, the government is expected to announce this week that more than 58 million Social Security recipients will go through another year without an increase in their monthly benefits.
Mortgage bonds steady despite foreclosure flap
Warnings abound on the impact of delayed foreclosures on U.S. residential mortgage bonds, but the investors in the securities have not yet taken heed.

Blogs
Secondary Sources: Currency Battle, Small Business, Tax Evasion
A roundup of economic news from around the Web.
Good-Bye Job Killing Moratorium, Hello Job Killing Regulations
The White House announced today that the Department of Interior will be lifting the ban on off-shore oil drilling. Unfortunately, the Obama administration is leaving costly new job killing regulations in its place.
Where Public Trumps Private
Economists have shown that the wage premium is related to admissions selectivity, but for students choosing among similarly selective colleges, there is far less information to go on.
Regulating the College Dream
President Obama wants to see the U.S. lead the world in the number of college graduates by 2020. But new regulations being proposed by the Department of Education would undermine that goal by presenting more obstacles to students seeking to attend the higher education institutions that work best for them.
Refinance Activity and Mortgage Rates
As mortgage rates have fallen, there has been an increase in refinance activity. The peak this year was in late August, although the most recent week was close.
The Oil Drilling Moratorium Doesn’t End Till the Permits Begin
While yesterday’s announcement does remove one legal barrier to the resumption of energy investment in the Gulf, the Obama administration still retains full discretion over whether or not any new permits will be issued. And all indications are that those new permits will not be coming any time soon.
Bernanke to Repeat Japan's Mistakes
Years ago, as a Princeton professor, he chastised the Bank of Japan for failing to thwart deflation. Today it seems he hasn't learned the real lessons.
A Look Inside the Fed’s Balance Sheet
Assets on the Fed’s balance sheet have remained relatively stable around $2.29 trillion since mid-August when the central bank announced that it would reinvest the proceeds from its mortgage-backed securities and agency debt portfolios into Treasurys.
Fighting Food Subsidies with Food Subsidies
So their solution, subsidizing the low-carb foods that could counteract the lower costs that high-carb foods enjoy due to their own government subsidies would seem to be an ideal solution for the massive health problem being aggravated by the government's existing food subsidies in the first place!
Fed’s Hoenig Again Attacks Asset Buying
The central banker has been a persistent critic of Fed policy throughout the year, fretting that the current policy of zero interest rates is risking trouble. He has dissented against the majority at every FOMC meeting this year.
The Next Layer in the Pension Crisis: Local Governments Also Face Shortfalls
States together face unfunded pension obligations that, when using the risk-free discount rate,total $3 trillion. But, what happens when local pension plans are factored in? That number gets larger by an estimated $574 billion.
Rivlin Sees Tax Compromise at $500,000 Income Level
Democratic lawmakers could seek a compromise on extending the Bush administration’s tax cuts by exempting more people to the higher tax thresholds than the White House has proposed, said Alice Rivlin, a member of the White House’s National Commission on Fiscal Responsibility and Reform.
Mankiw's Bequest
...you can certainly disagree with the analytical choices he made in arriving at the government's cut of his children's inheritance, but the basic point is sound: we tax income many times as it is earned, which is especially hard on capital formation.
How bailouts (and political power) destroy markets
A reader the other day asked me something about the power of banks and what the government lets them do and I suggested that the most important thing government could allow banks to do is to fail and go out of business when they do a lousy job.
Delay on Bush-Era Tax Cuts May Cost You in January
If Treasury follows the current law and issues the 2011 tax withholding tables as if the tax relief expires, then workers will see a large decrease in their withheld taxes and lower take home pay.
Austerity Within Reason
I would say that the biggest iron law of fiscal policy is that We Don't Know. Some economists have models that tell us what the effects will be, assuming that the models are right. But we don't know whether or not the models are right.
The Mortensen and Pissarides employment model
The Mortensen-Pissarides model is daring and subversive and it is impressive that the committee would award a prize for what is essentially a single paper. Yet I don't see too many bloggers trying to come to terms with it.
Why the Public Sector Can No Longer Build
In the 19th and early 20th centuries, private enterprise, interested in making a profit rather than appeasing interest groups, created a quality rail and mass transit infrastructure funded by user fees. We need to return to that approach.
Higher Education Subsidies Wasted
A study from the American Institutes of Research finds that federal and state governments have wasted billions of dollars on subsidies for students who didn’t make it past their first year in college. The federal total for first-year college drop outs was $1.5 billion from 2003 to 2008.
Cato Study: ObamaCare’s Hidden $550 Billion Cost
In a study released today by the Cato Institute, Duke University professor Chris Conover estimates how much ObamaCare and related provisions will reduce economic output.
Meltzer on Looming Inflation
Allan H. Meltzer, a frequent participant in Cato’s annual monetary conferences, warns in the Wall Street Journal that the Federal Reserve may be about to lay the groundwork for another Great Inflation like we saw in the 1970s.
Cut (Really Cut) Military Spending
It is time for President Obama and the administration to finally notice the increasing calls—from across the political spectrum—that the Pentagon’s budget should not be off limits when reducing the deficit.
The Court Tackles a Hard Case: Implications for ObamaCare?
The Supreme Court hears oral argument today in an important pre-emption case, Bruesewitz v. Wyeth, which asks whether the National Vaccine Injury Compensation Act of 1986 pre-empts state law “design defect” suits brought against vaccine manufacturers. This could have implications for ObamaCare.

Research, Reports & Studies
Congress Should Account for the Excess Burden of Taxation
A well-established principle of public finance holds that taxes impose costs on society beyond the amount of revenue government collects.
Technology Explains Drop in Manufacturing Jobs
During the past decade, manufacturing employment has fallen by one-third while manufacturing output has remained roughly constant. Technological improvements, not international trade, are reducing U.S. manufacturing employment by automating many rote tasks.
Stagnant Economy in September
Earlier this year some economists and politicians predicted a “recovery summer” during which private sector job creation would finally pick up. This did not happen—employers created few jobs and unemployment remained high. This stagnation continued in September, now is the wrong time for Congress to raise taxes.
RCM: The Muni Opinion
Many state workers have been promised generous retirement benefits. At the same time, pensions have put some states on a trajectory toward fiscal ruin. Muni bond investors need to incorporate pension policy into their analysis—because something has to give.
The Foolish Foreclosure Moratorium
Democrats are calling for a nationwide end to mortgage foreclosures. It’s hard to imagine a more shortsighted policy under our current economic circumstances.

Economists’ Comments & Opinions
KLING: Foreclose on our antiquated title system
Real estate market needs dose of reality more than lawsuits.
Scoundrels and Pensions
...the best reform—the one that really takes the politics out of pension investing—is to turn defined benefit retirement plans into 401(k)-style defined contribution plans.
Why America is going to win the global currency battle
...behind the squabbles, lies a huge challenge: how best to manage the global economic adjustment.
Four Governors on How to Cut Spending
Four governors tell us how they are coping and how they plan to save money in the future.
For Orderly Dissolution Of The Fed, Before It Does Us Even More Harm
The Fed was established 97 years ago, and Fed officials were given considerable power over the economy as if they knew what they were doing, but they didn't. They're still winging it today.
A Growth Agenda for America
An economy grows through increased production, which is financed by capital or savings. Congress can encourage this process with the right tax reform.
Broken Promises
This month, McDonald's warned that the health-care reform law passed in March could force it to drop health coverage for some 30,000 workers. A few days later, 3M announced that starting in 2013 it will no longer provide health-insurance coverage to its retirees. This is the tip of the iceberg.
The Postal Service Can't Afford Unions
If you believe in a higher power, then I've got evidence for you that God has a sense of humor. Last week, the American Postal Workers Union, which represents more than 200,000 workers, had to extend its elections for national officers because ... wait for it ... thousands of ballots got lost in the mail.

Graph of the Day
Mercatus Center: Putting Tax Cuts in Perspective
See: Small Business Optimism, Hiring and "Biggest Problem"
See also: Many pension plans retain high return assumptions
See also: Your January 2011 Paycheck

Book Excerpts
"Exchange develops naturally to the point where further development would be more onerous than useful, and stops of its own accord at this limit. If exchange saves effort, it also requires effort. It expands, increases, multiplies to the point where the effort it requires equals the effort it saves, and then it comes to a halt until, through improvement in the commercial machinery, through the mere fact of increased population, of more men living closer together, it encounters the conditions necessary to resume its forward march. Consequently, laws that limit exchange are always either harmful or unnecessary. Governments, which are always disposed to believe that nothing can be done without them, refuse to understand this law of harmony. Consequently, we see governments everywhere greatly preoccupied either with giving exchange special favors or with restricting it. To carry it beyond its natural limits, they seek after new outlets and colonies. To hold it within these limits, they think up all kinds of restrictions and checks." –Frederic Bastiat, Economic Harmonies, (1964)

Did You Know
After nearly a decade, the Cape Wind offshore project has a lease approval from the Department of Interior, but it is not quite up and running. Once the 130 turbines that stand 440 feet high start moving, consumers will pay a hefty premium for the electricity the nation’s first offshore wind farm generates.

10/12/10 Post

BUZZ: The 2010 Spending Record: In two years, a 21.4% increase

News
Stocks drop as Fed rate-setter rattles investors
World markets fell Tuesday after a leading U.S. rate-setter dampened expectations that the Federal Reserve is preparing a massive monetary stimulus next month and amid mounting speculation that China is planning to raised reserve requirements for banks to cool lending.
US Cities Face Half a Trillion Dollars of Pension Deficits
Big US cities could be squeezed by unfunded public pensions as they and counties face a $574 billion funding gap, a study to be released on Tuesday shows.
Recession job losses: Worse than first thought
The government currently estimates that 2.2 million jobs were lost from April of 2009 through March of this year, a significant portion of the 7.8 million jobs lost since the start of 2008.
The Biggest Tax Hike Ever? It Depends on Who You Ask
If Congress returns after the Nov. 2 midterm elections and does nothing, allowing the Bush tax cuts to expire, then New Year's Day will usher in the nation's biggest tax increase since the end of World War II, according to Gerald Ahern, spokesman for the Tax Foundation, a nonpartisan tax monitoring group.
More Balk at Cost of Prescriptions
A review of insurance-claims data shows that so-called abandonment—when a patient refuses to purchase or pick up a prescription that was filled and packaged by a pharmacist—was up 55% in the second quarter of this year, compared with four years earlier.
Obama Highway Plan Fuels Talk of Gas Tax Hike
Two former transportation secretaries who recently co-chaired a panel that proposes gas tax hikes and user fees to pay for government transportation projects joined President Obama Monday as he called for a $50 billion immediate investment in roads, rails and runways.
GOP sets sights on reshaping reform
An all-out assault on government-sponsored loan enterprises, increased oversight of regulatory agencies and retooling the Wall Street regulatory overhaul are on tap if the Republicans retake the House.
A Gold Era for the Yellow Metal
A bull market during today's economic uncertainty suggests gold will keep rising in coming years, although at a slower pace than in recent times. Prices could average $1,500 an ounce by 2015.
Can they all get along?
Perhaps the biggest question surrounding implementation of the landmark Dodd-Frank Wall Street reform bill is one of personality: Can Timothy Geithner and Elizabeth Warren get along?
Wall Street Pay: A Record $144 Billion
Financial Overhaul Has Affected Structure but Not Level; Revenue-to-Compensation Ratio Stays Flat.
Credit crisis for small business?
While the credit crisis has eased for Big Business, the president has argued for months that additional help was needed to get loans flowing again to small businesses, so they can expand and hire more workers.
GOP Tries to Capitalize on Expanding House Field
Despite months of preparations by the House campaign committees, the latest party spending demonstrates the Congressional playing field remains relatively fluid three weeks before Election Day.
Unemployed find old jobs now require more skills
The jobs crisis has brought an unwelcome discovery for many unemployed Americans: Job openings in their old fields exist. Yet they no longer qualify for them.
Where Having It All Doesn’t Mean Having Equality
Courtesy of the state, French women seem to have it all: multiple children, a job and, often, a figure to die for... What they don’t have is equality: France ranks 46th in the World Economic Forum’s 2010 gender equality report, trailing the United States, most of Europe, but also Kazakhstan and Jamaica.
Foreclosure freeze could undermine housing market
Before a housing recovery can occur, all those foreclosed properties have to be re-scrutinized by the banks and then sold. With any foreclosure-related deal open to legal challenge, that inventory could be taken off the market while the legal challenges make their way through the courts.
Trio Share Economics Prize
Nobel Goes to Professors Who Help Explain Why Joblessness Remains High Now.
Senior citizens brace for Social Security freeze
Seniors prepared to cut back on everything from food to charitable donations to whiskey as word spread Monday that they will have to wait until at least 2012 to see their Social Security checks increase.
Why you can't find a job
While most people think businesses simply aren't hiring enough to absorb the millions of unemployed workers, a rising tide of prominent economists dispute that. They claim that there are jobs out there, just not the right candidates to fill them.
Immigration and the housing glut
Why are so many homes still sitting vacant? The U.S. Census offers some clues: falling immigration and more doubling up by young people.
Divided Fed is 'dysfunctional'
Financial markets are banking on another bond-buying spree by the Federal Reserve, but the central bank's policymakers aren't presenting a unified front on the controversial idea. The lack of a clear message could be one factor holding back the recovery, said several economists.
States to Probe Mortgage Mess
Attorneys General Hope Lenders Will Re-Write Loans With Troubled Documents.

Blogs
Small Business Optimism Ticks Up
The NFIB said four of the index’s 10 subindexes fell, four increased and two were unchanged in the month.
Work Choices, Money, and Status
...the long run effect of the higher marginal tax rate is much higher than anything you might have predicted, because it has affected cultural norms. I worry about this much more near the median of the income distribution than at the very high end.
Two Top Economists Spar on Outlook for Economy, Policy
As part of a panel discussion at the National Association for Business Economics gathering in Denver, Stanford University professor and George W. Bush-era Treasury official John Taylor locked horns with Macroeconomic Advisers economist and former Federal Reserve governor Larry Meyer.
CR Index: Consumers see gains, but still cite stress, low confidence
The Consumer Reports Trouble Tracker Index, which focuses on both the proportion of consumers who have faced financial difficulties as well as the number of negative events they have encountered in the past 30 days, has declined for four straight months.
NABE Forecasters Cut Growth Outlooks
According to a study released by the National Association of Business Economics Monday, analysts now expect to see the U.S. gross domestic product rise by 2.6% this year, versus the 3.2% expectation held back in May.
The people are upset at Greg Mankiw
I say keep your eye on the ball, filter out the analytically irrelevant social information, and consider that, even if you wish to raise taxes on the wealthy, that a ninety percent marginal rate -- even at a non-universal margin -- is a sign that something really is amiss.
Secondary Sources: Emerging Markets, QE and Dollar, QE and Markets
A roundup of economic news from around the Web.
Response to Queries
[Mankiw's] recent Times column generated more email and blogosphere commentary than usual. While it is impossible for me to answer all the questions raised, I thought it might be useful to address three of the more common ones.
How To Make Atlas – And Your Hip Surgeon – Shrug
The more you tax and regulate things, the less you get of those things. What’s really important to understand is the “less you get” part is not linear. There’s a tipping point where you may get nothing if you pile on too many burdens. The supplier always has a choice to supply or not. Capital can go on strike. Atlas can shrug.
Work of Economics Nobel Winners Informs Current Labor Debate
Though the theories are useful for many markets where interactions are more complicated than matching buyers and sellers, including housing and monetary theory, the committee cited its application to the labor market as a key contribution.
Is Residential Real Estate Recovering?
It is difficult to forecast a bottom of the housing market because of the “shadow” market and government and legal issues which thwart foreclosures.
A thought experiment
If you put enough people in the factories pretending to make tanks, there’s less stuff to buy out in the rest of the economy. You’d be poorer as a group. Not as poor as when you actually built the tanks. And not as poor as when people died in real fighting. But you’d still be poorer if lots of people were working in the fake factories.
Why Are China, India and Brazil Rebounding Faster Than the U.S.?
Rapidly growing economies aren’t generating the ideas and technology to propel growth; rather, they’re using ideas and technology from advanced countries to catch up.
Exports and the Depression of 1920-21
One of the steepest financial crises and depressions in U.S. history began in January 1920 and lasted for 19 months. During that depression, Americans each month exported, on average, $583.6 million worth of goods. During the 19 months immediately following that depression, Americans each month exported, on average, a mere $321.0 million worth of goods. That is, exports during this period immediately after the depression were only 55 percent of what they were during the depression.
Number of the Week: Consumers in China, Brazil Discover Debt
In 2009, the year the global recession hit bottom, the aggregate credit-card balances of Chinese consumers rose 17.1% even as those of U.S. consumers fell 8.7%, according to a study by financial consultancy Lafferty Group. Brazilians increased their balances by 28.9%, part of a 9.2% rise throughout Latin America.
Duration of Unemployment
In Setpember 2010, the number of unemployed for 27 weeks or more declined to 6.123 million (seasonally adjusted) from 6.249 million in August. It appears the number of long term unemployed has peaked, but it is still very difficult for these people to find a job - and this is a very serious employment issue.
Why TARP was wrong
It restored confidence in the nation's largest financial institutions, by declaring them too big to fail. But it in no way restored confidence in the biggest financial market, the market for mortgage-related securities. That market is still in agony. The latest problem is the "foreclosure scandal."
Unofficial Problem Bank List 877 Institutions
"The number of institutions on the Unofficial Problem Bank List remained unchanged this week at 877 but assets rose slightly from $416.1 billion to $417.3 billion."
Monetizing All the Debt, All the Time
The oracles at Goldman say that $750 billion of QE2 is priced in to the market, and possibly $1 trillion — a frightful prospect that was hardly diminished by today’s lost jobs report. On top of that, there’s $300 billion to $400 billion in annual GSE run-off that needs replenishment under QE1.5. So Brian Sack, the monetary apothecary who operates the New York Fed’s drive-thru window, is going to be giving Wall Street a lot of POMO. Call it $100 billion per month of Permanent Open Market Operations, and be done.
Schedule for Week of Oct 10th
The key release this week will be September retail sales on Friday. Also Fed Chairman Ben Bernanke will try to explain the objectives of QE2 on Friday "Monetary Policy Objectives and Tools in a Low-Inflation Environment".
What The September Unemployment Reports Mean
What is discouraging, but expected by The Daily Capitalist, was that the broadest measures of unemployment are going up, including the broadest measure, U-6 unemployment.
Unemployment by Level of Education and Employment Diffusion Indexes
Note that the unemployment rate increased sharply for all four categories in 2008 and into 2009.
Does government spending create jobs?
...the link between government spending and jobs is not nearly as automatic as many people think.
America's Perpetual Decline
"Twenty-two years ago, in a refreshingly clear-sighted article for Foreign Affairs, Harvard's Samuel P. Huntington noted that the theme of "America's decline" had in fact been a constant in American culture and politics since at least the late 1950s."
Austerity or prosperity?
One of the most mindless aspects of the multiplier is to treat is as a constant, such as 1.52. It can’t be a constant, not in any meaningful way. If the government conscripted half of the US population to dig holes all day and conscripted the other half to fill them back in, and paid each of us a billion dollars a day for the task, and valued holes that were dug and holes that were filled in at a trillion dollars a hole, then GDP would be very very large, unemployment would be zero and there would be no stimulating effect and we would soon be dead from starvation.
Obama and Infrastructure
The President is continuing his push for the federal government to go deeper into debt in order to fund infrastructure projects. While nobody disputes that the country has infrastructure needs, the precarious nature of federal and state finances indicate that policymakers need to starting thinking outside the box.
Mirror, Mirror, on the Wall, Which Nation Has the Most Debt of All?
The Economist has a fascinating webpage that allows readers to look at all the world’s nations and compare them based on various measures of government debt (and for various years).
It Can Happen Here
Government really can be cut: case studies from Canada, New Zealand, and the United States.
Nightmare on Every Street
How to carve Fannie and Freddie into pieces.
How the Obama Tax Hikes Affect You
The Heritage Foundation Center for Data Analysis has estimated the impacts of the Obama tax hikes and found they would: 1) decrease inflation-adjusted gross domestic product (GDP) by $1.1 trillion by 2020; 2) decrease business investment by $33 billion a year; 3)decrease personal savings by $38 billion in 2011 alone; 4)decrease consumer spending by $706 billion through 2020; and 5) kill an average of 693,000 jobs a year through 2020.
No Relief for Jobs Killed by Drilling Ban
Shallow-water rig workers and those in industries unrelated to oil drilling are losing their jobs and being denied access to relief funds.
High and Hidden Costs: There is Nothing Free about the Wind
Though wind farms produce emissions-free energy, they bring certain costs with them. One cost the wearisome low-frequency noise emitted by enormous blades.
If You Cant Beat Them, Silence Them
Faced with the obvious failure of their policies, the left is now desperately seeking to avoid accountability by blaming others.
Why QE2 Won't Be Enough
A look at how the markets have anticipated this second round of quantitative easing and what it will actually accomplish.
Dollar Depreciation and the Higher Cost of Living
Strategists talk about dollar depreciation and how it impacts consumers and investors.

Research, Reports & Studies
RCM: Wells Fargo Economics Group: Weekly Economic & Financial Commentary
U.S. Review: Disappointing Jobs Report Gives Fed Ammunition; Global Review: Central Bankers Off To the Races!

Economists’ Comments & Opinions
Strong Support For All Bush's Tax Cuts
A solid majority (56%) said they wanted tax cuts extended even for households with more than $250,000 in income and individuals with more than $200,000. Only 39% wanted the rich to pay more.
Obama Drags Recovery in Raw Deal for Contracts: Amity Shlaes
Gibbs is right about the unintended consequences. But those consequences aren’t the ones he means. By making foreclosure harder for lenders, the president makes it possible that banks will lend less next time.
RAHN: Lessons from Down Under
Unlike most of the world, Australia did not have a recession during the last two years. In fact, it has not had a recession in the last 19 years. Its economic growth rate is higher than in the United States, and the unemployment rate there is only 5.1 percent.
Jobless America threatens to bring us all down with it
A depression may have been averted, but nothing has been fixed. This is the depressingly downbeat message that came across loud and clear from last weekend's annual meeting of the International Monetary Fund.
First the stimulus, now the hangover
In short, when it comes to private job growth, the last decade has been a lost decade.
Obama and the Politics of Outsourcing
During difficult economic periods, people are tempted to seek refuge in the false promise of protectionism. This is true of both America and India... But the fact is that for every job outsourced to Bangalore, nearly two jobs are created in Buffalo and other American cities.
Do We Really Need a Central Bank?
...Fed functions seem compelling at first glance, but given a careful rethink, it becomes apparent that much of what it does is either ineffective or superfluous, and could be handled much more skillfully outside this government-chartered monopoly.
I Can Afford Higher Taxes. But They’ll Make Me Work Less
HERE’S the bottom line: Without any taxes, accepting that editor’s assignment would have yielded my children an extra $10,000. With taxes, it yields only $1,000. In effect, once the entire tax system is taken into account, my family’s marginal tax rate is about 90 percent. Is it any wonder that I turn down most of the money-making opportunities I am offered?
Boehner's 'Plan B' for ObamaCare
Republicans would do exactly what House Speaker Nancy Pelosi so memorably predicted would happen once the health-care bill passed: find out what's inside it. Mr. Boehner says his priority is full repeal. But he also knows he is in for a fight. In this fight, hearings would help Republicans accomplish several things.
Bernanke needs inflation for QE2 to set sail
It would have at best a modest effect in a large, liquid market such as Treasury bonds and, therefore, is unlikely to dig the US economy out of its current hole. There is, however, another option: for the Fed to clarify its “exit strategy” from its current, unconventional monetary stance.
The Economics of Drug Violence
Statistically speaking, Mexico is a relatively safe place with 12 murders per 100,000 inhabitants in 2009. The trouble is that the violence is concentrated, and according to one economist I talked with here, that's because the drug-trafficking business is structured much like Colombia's was in the 1980s and '90s.
The IRS and the latest licensing outrage
...the IRS will consider adopting a sweeping licensing scheme that would place the careers of 700,000 tax preparers in jeopardy and likely harm over 87 million American taxpayers while benefiting a few politically-favored insiders.
Tariffs Benefit Few, at Cost to All
Australia can teach President Barack Obama and his economic advisers a lesson on how to defeat protectionism in the US and elsewhere. At their Washington meeting in November 2008, leaders of the Group of 20 nations made a commitment to "resist" protectionism. At their London summit in April 2009, they undertook to "reject" protectionism. And at the Pittsburgh meeting in September 2009 — just days after Obama neither "resisted" nor "rejected" but put a 35 per cent tariff on Chinese tyres — the G20 vowed to "fight" protectionism.
The necessity of overseeing reform
Overseeing implementation of Dodd-Frank is the most important task the Senate Banking, Housing and Urban Affairs Committee faces heading into the next Congress.
Fed's Yellen: Low rates can fuel bubbles
When low interest rates stay too low for too long, easy money can fuel asset bubbles, Janet Yellen told a room full of economists Monday, in her first public remarks as the Federal Reserve's new vice chairwoman.


"I would argue there is less of a moral hazard after the crisis than before, b/c the public will tolerate less bailout & more panic now." -ModeledBehavior, Twitter

Graph of the Day
Cato: President Obama and Education Politics As Usual
See: Poverty Rates by Marital Status & Living Arrangement
Update: Unemployment Rate With and Without Recovery Plan
See Also: Dear Congress: Don't blow it on Bush tax cuts

Book Excerpts
"Ever since the beginning of modern science, the best minds have recognized that "the range of acknowledged ignorance will grow with the advance of science." "In science the more we know, the more extensive the contact with nescience." Unfortunately, the popular effect of this scientific advance has been a belief, seemingly shared by many scientists, that the range of our ignorance is steadily diminishing and that we can therefore aim at more comprehensive and deliberate control of all human activities. It is for this reason that those intoxicated by the advance of knowledge so often become the enemies of freedom ... The more men know, the smaller the share of all that knowledge becomes that any one mind can absorb. The more civilized we become, the more relatively ignorant must each individual be of the facts on which the working of his civilization depends." –F.A. Hayek, The Constitution of Liberty, (1960)

Did You Know
"The household survey portion of the BLS' September 2010 employment situation report delivered news we were surprised to see: the number of teens counted as being employed plunged by 112,000. Meanwhile, young adults saw their employed ranks increase by 3,000 while the number of individuals Age 25 or older counted as having jobs surged by 250,000... For teens, the decrease in the number of employed teens in September 2010 brings the percentage share of teens within the entire U.S. workforce to a new all-time low of 3.06%...To put this new record low in teen employment in perspective, since their employment numbers peaked at 6,241,000 in November 2006, the number of teens (Age 16-19) in the U.S. workforce has fallen by 1,980,000, or 31.7% of that peak figure."

10/8/10 Post

BUZZ: U.S. Economy Lost 95,000 Jobs in September

News
America's $4.6 trillion retirement hole
Americans are woefully unprepared to pay for retirement, according to research released Thursday. On average, U.S. workers would need to have an additional $48,000 when they retire at 65 to ensure they don't run shy of cash in retirement.
Tax-slashing proposals scare GOP, Democrats
While many states are wrestling with billion-dollar budget deficits, Colorado voters are being asked to adopt ballot initiatives that would ban borrowing for public works, cut the income tax and slash local property taxes.
Waiting For The Ax
This morning's jobs report doesn't appear likely to salvage democrats' election prospects.
Rory Reid Warns That Health Care Law Poses Risk to Nevada
Son of Senate Majority leader Harry Reid (D-Nev.), said “The law that was passed gives time for the new system to go into effect but there is potential for it to put significant pressure on states because Medicaid rates could go up significantly.”
Federal judge upholds health care law
U.S. District Court Judge George Steeh ruled Thursday that the so-called individual mandate falls squarely within Congress’s ability under the Constitution to regulate interstate commerce.
Government spending rises 9%
Basic government spending rose by 9 percent in fiscal 2010, driving the country to a $1.291 trillion deficit down $125 billion from 2009, but still the second-largest hole on record, the Congressional Budget Office said Thursday.
$4.6 million bridge being built by the state for horses
While hundreds of Massachusetts bridges are in need of serious repairs, one bridge is being replaced even though nothing heavier than a horse is expected to go over it.
Dollar Falls Below 82 Yen for First Time Since 1995 After Payrolls Report
The dollar dropped below 82 yen for the first time since 1995 as the U.S. payrolls report showed employers cut more jobs last month than economists forecast.
2010 deficit near $1.3 trillion
The federal government ran a deficit of nearly $1.3 trillion in the fiscal year that ended Sept. 30, according to preliminary estimates released Thursday by the Congressional Budget Office.
N.J. governor kills Hudson River tunnel project
New Jersey Gov. Chris Christie killed plans for a new train tunnel to connect his state with New York's Manhattan island Thursday, saying billions of dollars in possible cost overruns made the project "completely unthinkable."
US Chamber spends more than $10 million on ads
The U.S. Chamber of Commerce this week is airing more than $10 million in advertising in some of the most competitive House and Senate races, a massive infusion by the business lobby against Democratic candidates in about 30 contests.
Will paying with plastic cost you more?
On Monday, the Department of Justice came to a settlement agreement with Visa and MasterCard. The decision was a long time coming (two years), and the details are fairly complex. The upshot for consumers is simple, though: Merchants are now allowed to create pricing tiers based on how you pay, so pulling out the plastic could cost more than paying cash.
Obama vetoes bill to speed foreclosures
President Obama won't sign a bill that could have made it easier for courts to clear foreclosures, the White House said Thursday. The bill would have required federal and state courts to recognize documents that were notarized in other states.
Delays to Tax Tables May Dent Paychecks
Even if Congress plans to extend current tax rates, it needs to do so quickly to avoid disruptions. There are enough differences between 2010 and 2011 numbers, such as inflation adjustments, that payroll executives still need weeks to update and test their systems.
IMF chief says China, others may see currency as a 'weapon'
The head of the International Monetary Fund on Thursday said that China's currency is "substantially undervalued" and that he feared countries had begun viewing exchange rates "as a weapon" in the competition for economic growth.

Blogs
At the Mercy of the Obama Tax Hikes
When will the Obama administration admit their economic stimulus plan, which cost more than the Iraq war, failed?
The Real Scandal of the Foreclosure Mess
...good land titling is important. It is also emergent. When there are changes in the marketplace, we need new legal mechanisms for dealing with any resulting irregularities.
You Can’t Tax the Rich Enough to Close the Deficit
President Obama has driven spending and deficits to historic levels in just two years since taking office. Not content to stop there, his budget for the next 10 years keeps spending at record levels and piles up unprecedented amounts of debt in the process.
What’s Holding Employers Back?
The number of people employed part-time for economic reasons was 9.5 million in September, up 612,000 from the prior month. In the past two months the number of involuntary part-time workers has jumped by 943,000.
Fear – of Greenspan
As Greenspan observes, “Fear Undermines America’s Economy.” Fear of inflation. Fear of deflation. Fear of higher taxes. Fear of generalized governmental foolishness.
Obamacare vs. the Rule of Law
According to Bloomberg News McDonald’s had sought, and eventually won, a waiver from the upcoming Obamacare regulations. This allows them to continue providing health insurance coverage to 115,000 workers. In fact, McDonald’s workers were just some of the over 1 million of Americans who were spared losing their current health care coverage thanks to one-year waivers from the Obama HHS.
Two Years in, Obama Still Has an Unemployment Problem
Unemployment got steadily worse for three years during the Great Depression, and if things aren't quite that bad now, the lengthy decline is a reminder that recessions induced by financial crises are particularly severe.
Is America Exceptional?
In a new publication entitled “Why is America Exceptional?” Matthew Spalding takes a different view of America and her role in the world. Every nation, Spalding explains, “derives its meaning or purpose from some unifying quality—an ethnic character, a common religion, a shared history.” But America is different: it is a nation dedicated to a set of principles, proclaimed to be self-evident in the Declaration of Independence and secured in the United States Constitution.
To Survive This Global Crisis, We Must Remember Teamwork
Rather than working through problems together, as was done two years ago, nations are now individually choosing what they believe to be their own best course of action.
Economists React: Job Market ‘Uncomfortably Weak’
Economists and others weigh in on the September employment report.
ObamaCare Weakens: Jack in the Box, McDonald's, Others Get Health Care Coverage Waivers
ObamaCare has made yet another concession: reneging on the protection of US workers by exempting employers from having to raise minimum annual insurance benefits.
Employment: A New Trough
The employment situation reported today showed a decline in nonfarm payroll employment. That means that my favorite indicator, labor capacity utilization, is at its lowest level since the recession began.
The Ghost of QE2
Seeing both sides of an invisible catalyst.
Budget Woes Hit Local Government Jobs
Local governments have now cut jobs in nine of the past 10 months. But the losses only bring their payrolls back to late-2006 levels, just after housing values peaked, suggesting more pain ahead as budgets reflect lower property tax revenues.
Short Selling: Sexy or Dangerous?
While the profits can be astronomical, the risk is too far up in the stratosphere for ordinary investors planning for retirement.
Employment-Population Ratio, Part Time Workers, Unemployed over 26 Weeks
The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) was at 9.472 million in September, up sharply from August. This is a new record high, and is obviously bad news.
Broader U-6 Jobless Rate up to 17.1%: Why the Jump?
The U.S. jobless rate was flat at 9.6% in September, but the government’s broader measure of unemployment rose even more to 17.1%, the highest rate since April and down just slightly from the October 2009 high of 17.4%.
Backing 2010Q3 GDP Out of Today's Unemployment Rate Data
We then find the annualized compounded growth rate of GDP from the second quarter of 2010 ($13,194.9 billion) to the third quarter of 2010 (which the unemployment data would place around $13,272.3 billion) to be about 2.4%.
Kansas City Fed’s Hoenig Still Wants to Raise Rates
Countering the increasingly popular view that the Fed may again buy long-term assets to help spur growth, Federal Reserve Bank of Kansas City President Thomas Hoenig said, “I don’t think we should go that way at all.”
Market Failure vs. Government Failure
Public choice economists have varying beliefs about the efficacy of markets. Some think markets work quite well most of the time, others take the idea of market failure seriously. But they don’t assume—as most Keynesians seem to—that government corrections will be flawlessly executed.
Dallas Fed’s Fisher Rebuts Calls for More Action
“While none of us are satisfied with the current pace of economic expansion and job creation, presently it is not clear that conditions warrant further crisis-like deployment of the Fed’s arsenal,” Richard Fisher said, in text prepared for delivery before the Economic Club of Minnesota in Minneapolis.

Research, Reports & Studies
Fearing the Chávez Model
For many in Latin America, the Chávez model is the greatest threat to economic and political liberalism since the armed insurrections of the 1980s.
Why Inflation Matters
Even if inflation is not an immediate threat, the explosion in the deficit and debt over the last few years provides a reason to remind ourselves of the problems it can cause.

Economists’ Comments & Opinions
Financial literacy for all Americans
Youth financial illiteracy is a serious and growing problem. The average high school senior can only answer about half the questions on a basic financial knowledge test.
The quest for growth
It may depend on structural reforms as much as prudent macroeconomic policy.
Four obvious, key things still to be done
The Obama administration’s economic policy team is dominated by people who actually caused the crisis. The vaunted “financial reform bill” is, to mix metaphors, a watered-down fig leaf of a joke.So, what should have been in the new law? Here’s a list.
Is Commercial Real Estate Recovering?
We could still have another two years or so for the CRE market to tighten up. Here's why.
In foreclosure controversy, problems run deeper than flawed paperwork
The court decisions, should they continue to spread, could call into doubt the ownership of mortgages throughout the country, raising urgent challenges for both the real estate market and the wider financial system.
If Schools Were Like 'American Idol' . . .
Unless we measure success by how children perform, we'll have higher standards for pop stars than public schools.
Declining Economic Freedom
We are in the midst of a great debate between the proponents of limited government and open markets on the one hand and those favoring more collectivism and political direction of the economy on the other. The outcome of this debate will determine the future direction of both economic freedom and the prosperity of Americans and others throughout the world.
EPA to drain $1 trillion from economy
Less than two years ago, the EPA set a ground-level ozone standard of 75 parts per billion (ppb), but Obama administration officials are looking to impose an even lower standard of 60 ppb by fiat. That seemingly small change will have sweeping effects throughout the economy.

Graph of the Day
Obama’s Job-Killing Policies: A Picture Says a Thousand Words
See: Cutting Government the Canadian Way
See: Jobs Take a Hit in September
See Also: Challenge of Closing the Job Deficit
See Also: It’s Simple To Balance The Budget Without Higher Taxes

Book Excerpts
"Mass unemployment is not proof of the failure of capitalism, but the proof of the failure of traditional union methods." –Ludwig von Mises, Planning for Freedom, (1952)

Did You Know
"A government investigator says 89,000 stimulus payments of $250 each went to people who were either dead or in prison. The Social Security Administration's inspector general said in a report Thursday that $18 million went to 72,000 people who were dead. The report estimates that a little more than half the payments were returned. The report said $4.3 million went to a little more than 17,000 prison inmates."