7/12/10 Post

BUZZ: U.S. Weighs Tax That Has VAT of Political Trouble

News
Analysis: How 2 million Americans lost their jobless benefits in an election year
Hundreds of thousands of workers unemployed for more than six months started losing the weekly checks in June and it's not clear when they could resume.
Congress is back - and so is the spending debate
To spend money or to watch their pennies that is the question. There are three pressing issues that lawmakers will wrestle with in July, Unemployment insurance, Aid to states, and Temporary Assistance to Needy Families Emergency Fund.
U.S. economy still in a soft patch
We're still growing, but the slower pace is forcing us to rethink how durable the recovery is. Retail sales, production expected to decline in June.
Some sound businesses shut by lack of credit: Bernanke
Although there is a debate over the causes of the problem of the lack of credit to small businesses, the bottom line is that some good businesses have been shut as a result.
Wall Street reform bill: One vote away
"It is a better bill than it was when this whole process started," Sen. Scott Brown, R-Mass., said in a statement. "While it isn't perfect, I expect to support the bill when it comes up for a vote."
Byrd seat at issue in special W. Virginia meeting
With Democrats in Washington seeking all the votes they can get for a financial-reform bill and an extension of unemployment benefits, members of the West Virginia legislature will meet Thursday to clarify how a successor to the late Sen. Robert Byrd will be decided.
The Herd Instinct Takes Over
Component Stocks' Correlation to S&P 500 at Highest Level Since '87 Crash.
Obama's debt commission warns of fiscal 'cancer'
The two leaders -- former Republican senator Alan Simpson of Wyoming and Erskine Bowles, White House chief of staff under President Bill Clinton -- sought to build support for the work of the commission, whose recommendations due later this year are likely to spark a fierce debate in Congress.
Changes Choke Cap-and-Trade Market
The market's collapse shows how vulnerable market-based approaches to reducing air pollution are to government actions. That could scare off investors, who won't commit to a market where the rules can change at any minute.
Crisis Awaits World’s Banks as Trillions Come Due
If institutions are unable to raise the money that they need on the open market, the European Central Bank would have to decide whether to continue to prop them up.
Revisiting the Regulations Affecting Business
White House, in Policy Review, Asks Executives to List Obstacles to Growth; No Specific Changes Proposed So Far.
IRS starts mopping up Congress's tax-reporting mess
With a new mandate looming that will require business owners to file millions more tax forms, the Internal Revenue Service has begun the daunting process of figuring out how to turn the law's sweeping demands into actual rules for taxpayers.
Hiring Tax Credit Pushed
The Joint Committee on Taxation estimated the stimulus program would cost $13 bil.
End of Census, and for Many, End of Job
In past decades, the bureau faced a challenge just keeping workers around to close up shop, as most dashed for new jobs that might pay better. Not this time around.
Debt, Bank Troubles Leave U.S. Trailing in Job Growth
One year into the global recovery, the U.S. is lagging far behind other major economies in restoring jobs lost in the recession.
US stimulus shifts to infrastructure spending
It was tilted towards tax breaks and safety-net payments to states and individuals in the first year, before shifting to infrastructure projects in 2010...
Investors Still Demand Treasurys, Despite Puny Yields
Faced with the prospect of a weak and uneven recovery and lingering concerns over Europe's fiscal problems, investors see plenty of reasons to buy traditionally safer government securities.
Racial quotas in Dodd-Frank financial regulatory bill
The Dodd-Frank financial regulatory bill, ostensibly aimed at reforming Wall Street and preventing a future financial crisis, will impose racial and gender quotas on financial institutions if passed, according to economist Diana Furchtgott-Roth.

Blogs
Restore Free Markets to Health Care
Eline van den Broek urges the repeal of Obama-care and also points out some of the other reforms that are needed to restore a free market to the US health care system.
As Predicted, Obama Weak on Immigration Enforcement
Obama Administration’s year-old worksite audit policy is resulting in far fewer deportations of illegal immigrants, which means that those illegal immigrants are simply moving to different jobs elsewhere in America.
Are the Rich Really More Likely to Walk Away From Their Mortgages?
All the data I've seen show that millionaires--aka "high net worth individuals" are not particularly likely to live in million dollar homes. Who is? People who live in areas with expensive real estate. And where is the expensive real estate? Why, often in the areas that experienced the biggest inflation during the housing bubble.
Minsky-Jones Answers Tyler Cowen
Garett Jones would say that labor is mostly overhead, and firms have shed a lot of overhead. They are sacrificing growth in future capabilities in order to shore up current profits. Minsky would say that they are shoring up current profits because we are at the "hedge finance" stage of the business cycle, in which firms are trying to reduce debt in order to be able to finance operations internally.
Last Call
Daniel Okrent's Last Call, a history of the rise and fall of alcohol prohibition, is a masterpiece. Of course the writing is great but Okrent is also very good at building the history on a framework of analysis and social science.
Weekly Summary and a Look Ahead
This will be a busy week. The key economic report this week will be June retail sales to be released on Wednesday.
Still Hearing Defunct Economists in the Air: Krugman’s Misplaced Attack on Hayek
I fear that Dr. Krugman is one of those “practical men of affairs” who is the slave of a defunct economist named John Maynard Keynes.
Is the economy headed down again?
...I'm still not an economic optimist, but I do have a rosier view of the default course than do many other commentators. I just don't think the shocks have finished arriving.
Bernanke Urges Small-Business Lending
Federal Reserve Chairman Ben Bernanke urged banks and regulators Monday to seek out ways to ensure that small businesses get the credit they need to create jobs.
Euro and European Bond Spreads
Although off the recent peak, the Greek spreads have widened over the last month. For the other countries, the spreads have been mostly flat since mid-June.
Pearlstein Wants Tough Trade Measures Against China…and the U.S.
By balancing the economic relationship, presumably Pearlstein is speaking about the need to reduce the bilateral trade deficit, which spurs a net outflow of dollars to China, some of which the Chinese lend back to Americans, who in turn can then buy more imports from China, and the cycle continues. But to tip the scales in favor of the blunt force action he recommends later, Pearlstein characterizes Chinese investment in the United States as living beyond our means, losing ownership of “our” assets, and eroding our industrial and technological base. That is a paternalistic and inaccurate characterization of the dynamics of capital inflows from China.
Secondary Sources: Fed Action, Deficits, Rich Defaulters
A roundup of economic news from around the Web.
Tough Love
The Federal Government’s balanced budget requirement isn’t weak; it is nonexistent (you might say they are on the honor system). So what might we expect spending to look like if every state in the union could borrow from the Federal Government whenever it was expedient?
Easterly channels Hayek
How do you liberate people to allow them to help themselves? You look for the barriers that keep them from helping themselves. Ironically, sending large amounts of money to corrupt leaders probably creates the single largest barrier.

Research, Reports & Studies
On the New Culture War over Free Enterprise
“The Battle" presents the evidence that free enterprise is an expression of the core values of a large majority of Americans. Personal liberty, individual opportunity and entrepreneurship are the explanation for our nation's past success and the promise of greater things to come.
Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law
The more we learn about what is in this new law, the more it looks like bad news for American taxpayers, businesses, health-care providers, and patients.
Obama Economy Sends Americans to Their Mattresses
Government policies designed to stimulate the economy seem to be having the opposite effect. Consumers aren't buying, businesses aren't hiring and those fortunate enough to have some cash on hand don't seem to be investing. I call it the mattress economy.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Those Lazy Days of Summer Are Here.
Public Interest Comment on the Connect America Fund
Creation of the Connect America Fund offers the FCC the opportunity to make a clean break with past subsidy disbursement practices that were often ineffective, inefficient, and unaccountable for achieving the outcomes articulated in the 1996 Telecommunications Act.
Hudson Institute Economic Report
In another sign of slower growth, wholesale inventories rose 0.5 percent in May, following a 0.2 percent increase in April, as shoppers stayed home and inventories built up.
Wells Fargo Economics Group: What Really Drives Growth in the Industrial Sector?
Although U.S. manufacturing employment has declined by 40 percent since its peak in 1979, the volume of industrial output in the United States has nearly doubled over the past 30 years.

Economists’ Comments & Opinions
Positives outweigh the negatives, top forecaster says
The U.S. economy has lost some momentum in the past month or two, but the recovery is still on track.
The Great Recession's Stranglehold
Most Americans, Pew says, believe adverse economic changes will be temporary. Optimism will return.
Immigration Can Fuel U.S. Innovation—and Job Growth
Lost amid the heated debate over U.S. policy is a key point: Immigrant entrepreneurs and skilled workers are a boon to the economy.
Here's How You Quickly Create Jobs
Abolish the corporate income tax.
Housing Gets Sick on Keynesian Roller Coaster
Many nonpartisan economists who have studied stimulus spending have generally concluded that it is counterproductive and destabilizing. The history of the homebuyers’ credit provides a case study that illustrates where that conclusion comes from.
Who Pays for ObamaCare?
...much of ObamaCare's redistribution will merely move income to the lower middle class from the upper middle class, and the President habitually promises that people earning under $200,000 will be exempt from his tax increases. We now know they won't be.
Canada's economy can teach the U.S. a thing or two
The United States will probably take years to recover from the global recession and credit crunch, economists say, but its northern neighbor is back in fine shape.
Prime Numbers: Oil Spill Has Little Effect on U.S. Economy
The industries most affected — oil and gas exploration, commercial fishing and tourism — account for about 9 percent of gross domestic product in the Gulf region, according to an analysis by Barclays Capital. That’s about 1.5 percent of U.S. GDP, and only a tiny fraction of that has been disrupted by the spill.
The Trilemma of International Finance
AS the world economy struggles to recover from its various ailments, the international financial order is coming under increased scrutiny.

Graphic of the Day
WSJ: Number of the Week: Euro Zone Debt Is Coming Due
INTERACTIVE: The Economist house-price indicators
PODCAST: Gregory on Politics, Murder, and Love in Stalin's Kremlin
See: Taking apart the federal budget
See also: Recent Federal Deficits

Book Excerpts
"Not understanding the process of a spontaneously-ordered economy goes hand-in-hand with not understanding the creation of resources and wealth. And when a person does not understand the creation of resources and wealth, the only intellectual alternative is to believe that increasing wealth must be at the cost of someone else. This belief that our good fortune must be an exploitation of others may be the taproot of false prophecy about doom that our evil ways must bring upon us." - Julian Simon, The Ultimate Resource (1981)

Did You Know
"About a quarter of the swine flu vaccine produced for the U.S. public has expired – meaning that a whopping 40 million doses worth about $260 million is being written off as trash."

7/9/10 Post

BUZZ: IMF Urges U.S. to Consider Higher Taxes, Social Security Cuts

News
Obama Seeking $5 Billion for Clean-Energy Tax Credit to Spur Job Creation
Obama said in his prepared remarks, released by the White House, that the $5 billion investment would generate almost 40,000 jobs and the $12 billion in private capital would add another 90,000 jobs.
Retailers Stock Up on Caution
Consumers aren't stepping up spending at the pace many retailers expected just a few months ago, raising the specter that stores will be stuck with piles of unsold goods later this year.
Canada Job Creation Is Five Times Economist Forecasts as Economy Recovers
Employment rose by 93,200 in June, following gains of 24,700 in May and April’s record 108,700, Statistics Canada said today in Ottawa. The jobless rate fell to 7.9 percent, the lowest since January 2009, from 8.1 percent.
U.S. Plans Cyber Shield for Utilities, Companies
The federal government is launching an expansive program dubbed "Perfect Citizen" to detect cyber assaults on private companies and government agencies running such critical infrastructure as the electricity grid and nuclear-power plants, according to people familiar with the program.
Rogoff Sees `Very, Very High' Chance European Aid Package Will Be Tapped
Harvard University professor Kenneth Rogoff said European nations will likely draw on a regional aid package after the International Monetary Fund urged the region to take further steps to combat its debt crisis.
A New Detroit Rises in India's South
Car Makers Are Lured by Chennai's Port, Educated Workers and Limited Hassles.

Blogs
A Grove of Misconceptions
It’s ironic that a pioneer in an industry that has done so much to make workers more efficient – to enable a small handful of workers today to produce what in the past required many workers – now calls for public policies (such as trade barriers) to reverse many of the very efficiencies that his own entrepreneurial efforts have made possible.
Gratitude for ‘Broken’ American Healthcare
For my part, at the moment, the only appropriate response is awe and gratitude to have access to the healing power of American medicine. It’s an unfortunate human tendency that we often fail to be thankful for something until we’re in danger of losing it.
Dictionary of Received Ideas
That's the name of a feature by Justin Evans in the new periodical The Point (issue two, Winter 2010).
Consumer Credit declines sharply in May
Consumer credit is off 3.9% over the last 12 months.
Lebron and State Taxes
...omitted is the huge income-tax advantage on LeBron's non-athlete earnings. He could claim those as income he made in Florida and I would bet that those earnings are a multiple of his pay from whatever team hires him.
30 Year Mortgage Rates fall to Record Low
...averaged 4.57 percent with an average 0.7 point for the week ending July 8, 2010, down from last week when it averaged 4.58 percent. Last year at this time, the 30-year FRM averaged 5.20 percent.
Laffer on Unemployment Insurance
...I don't think unemployment insurance is stimulus. But you don't prove something by assuming it from the getgo.
How Large is the Outstanding Value of Sovereign Bonds?
Debt issued by governments worldwide is immense.
Warren Buffett’s Favorite Indicator Pops
According to Warren Buffett’s favorite economic indicator, rail traffic in the United States is booming again and gaining momentum this year, which is a good sign for the future direction of the U.S. economy.
Why Hold Reserves?
Suppose you see an individual, a bank, or a corporation sitting on a big pile of money. What should you conclude?
Volunteers Take Better Care of Detroit Than Elected Officials
This is a great example of why private citizens can be more invested in their communities, and thus take better care of them, than the government.

Research, Reports & Studies
How the Great Recession Has Changed Life in America
A Balance Sheet at 30 Months.
Regulation: Money to Go
The title loanmarket, like other markets for nontraditional loans, appears to be highly competitive and barriers to entry appear to be low. Pricing is highly transparent and simple, allowing easy comparison shopping by consumers. Absent an identifiablemarket failure, the case for heavy-handed paternalistic intervention is weak.
Ten Principles of Privatization
Best practices in privatization to lower the costs of government.
Regulation: Tracking ‘Go-Getters’ Across America
We discovered that emerging knowledge economies and
high levels of economic freedomdo indeed attract go-getters. Personal freedomand a creative environment are also important factors. Most consequential, however, is evidence that domestic and internationalmigrants behave very differently when deciding where to locate in the United States.

Did You Know
According to Forbes.com, the top 10 tax havens are: Delaware, Luxembourg, Switzerland, Cayman Islands, the City of London, Ireland, Bermuda, Singapore, Belgium, and Hong Kong.

Graphic of the Day
Political Calculations: Texas vs California: Which State Do CEOs Think Is Better for Business?
See: Construction and Education/Health Jobs

Economists’ Comments & Opinions
Obama threatens to follow in FDR's economic missteps
"By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses."
Mitch Daniels on American Conservatism
Hayek, when I thumb back through it and look at what I marked when I first read it, was the book that, to me, convincingly demonstrated what was already intuitive: namely, the utter futility, the illusion of government planning as a mechanism for uplifting those less fortunate.
Housing Bulls Should Try Texas
Texas may have avoided the excesses of other states partly because of laws enacted after its own property bust in the 1980s.
The Obama-Pelosi Lame Duck Strategy
Union 'card-check,' cap and trade, and so much more.

Why do people presume that there must be something the government can do that would speed recovery? -Russ Roberts, Twitter

Book Excerpts
"What we know with certainty is that the regulatory process—acutely stepped up since the sixties—has had a devastating impact on investment, price stability, innovation, productivity, and economic development.

The incredible irony is that all this, allegedly executed in the interest of the consumer, has ultimately come out of the consumer’s pocket." -Former Treasury Secretary William E. Simon, A Time for Truth (1978)

7/8/10

BUZZ: U.S. marks 3rd-largest, single-day debt increase

News
Weekly Jobless Claims Fall
The number of U.S. workers filing new claims for unemployment benefits fell last week by 21,000 to 454,000, more than analysts expected.
Apartment Vacancies Fell in Quarter
People Who Moved In With Others Are Getting Their Own Places as Economy Improves, Driving Rents Slightly Higher.
Europe presents main threat to global recovery, IMF says
Europe's weakened economy is now the central threat to global recovery, as its countries struggle with heavy debt, banks face a reckoning over their lack of capital and growth is slowing, the International Monetary Fund said Wednesday in its first assessment of the world economy since a crisis over government borrowing in Greece.
U.S. Retailers Weathered a Bumpy June
June is usually a month for clearing out merchandise, but many retailers this year seemed to go especially heavy on the discounts.
Australia Employment Soars; Currency Up
Australia's employment soared in June as 45,900 jobs were added to the labor force, ramping up pressure on the central bank to resume policy tightening on the back of a surging commodities boom.
Obama: New Export Initiative off to Good Start
President Obama declared good progress on his pledge to double U.S. exports over the next five years.
Dow Roars Past 10000 Again
Stocks rallied, reversing a three-week slide and pushing the Dow Jones Industrial Average through the 10000 mark as investors grew hopeful for the approaching earnings season.
Returns on U.S. TARP Investments May Decline
Now, with financial stocks sliding, the Treasury and taxpayers are facing the prospect of diminishing returns as more companies repay their public support.

Blogs
Why are corporations saving so much?
Corporations with cash surpluses are not destroying real resources, nor are they stuffing cash in their mattresses. They are investing in financial assets.
“Unions Outspending Corporations on Campaign Ads”"Unions have spent $9.7 million (or 39 percent of the total), compared with $6.4 million (26 percent) spent by individuals and $3.4 million spent by corporations."
Confirmation Bias and Stimulus
...outside of economics models where you can hold every variable but one constant, ceteris is rarely paribus.
All the news that’s fit to print (plus some more)
How can the economy recover without government stimulus? Let’s keep an eye on Ireland.
Are stimulus skeptics logically incoherent?
...businesses may be reluctant to invest in an economy that they expect to be distorted by historically unprecedented levels of taxation in the future. The more the government borrows, the higher taxes will need to go, the more distorted the future economy will be, and the less attractive is investment today.
NYTimes Cluelessness Part IX
...the SBA likes to think that the taxable revenue from the businesses that they “produce” will offset the cost of the program overtime. Their website is forced to make it clear: on average, the SBA loses about 6% a year, and taxpayers are currently owed $9,971,048,478.
A Speed Bump on the Road to Universal Broadband?
Section 254 of the Telecommunications Act of 1996 lays out criteria the FCC is supposed to consider when it decides whether to provide universal service subsidies for new services in addition to phone service. One of the criteria is that the new service must be subscribed to by a “substantial majority” of residential consumers.
Cut Medicare first
"...if we’re going to cut spending on retirement programs then it makes much more sense to reduce Medicare outlays by $1 than to reduce Social Security benefits by $1."

Research, Reports & Studies
The Importance of Startups in Job Creation and Job DestructionA relatively new dataset from the U.S. government called Business Dynamics Statistics (BDS) confirms that startups aren’t everything when it comes to job growth. They’re the only thing.
Trade, Taxes, and Terroir
High internal tax rates generated Alchian-Allen effects that biased consumption and production towards local producers who sold higher priced wine.

Graphic of the Day
Mapping the EU's debt, jobs and growth worries
See: Taxes and Growth
See also: America's Birthday by the Numbers

Economists' Comments & Opinions
Both Krugman and Wesbury Get It Wrong
About the only thing policymakers can do is responsibly enact laws that set the stage and provide the environment for the free society unfettered by central government planning that the founding fathers envisioned.
The Berwick Evasion
Obama dodges a Senate debate on his ideal Medicare chief.
The Next Bailout: Save USPS or Its Padded Pensions
The US Postal Service is in a deep financial hole with liabilities and obligations over $88 billion last year alone. With the decline in the use of mail, the USPS may need a taxpayer bailout.
Unemployment Benefits Aren't Stimulus
Let's not reduce the incentive to find work. A federal tax holiday is a better way to cut the high jobless rate.
The Rout of Obamanomics
The top 1% of income earners in the U.S. pay more in income taxes than the bottom 95% combined.
Obama and the Spending Volcano
An eruption of public spending from Mount Obama has caused deep anxieties among the voters in America's villages.
Baptists & Bootleggers: Red-light-camera manufacturers lobby for red-light cameras
Local governments tell us red-light cameras make us safer. Of course they fill local government coffers. But they also enrich private industry, too — private industry that fights for more cameras.

Book Excerpts
"Those who wish to destroy the conditions which allow for a strong democratic nation can do little better than to reduce the self-reliance of citizens and of their families by converting them into dependants of the state. Inevitably the result is the strengthening of state bureaucracy and the weakening of civil society." -Sir James Goldsmith, The Trap (1994)

"Did You Know"
The most severe polluter of the US is the Department of Defense.

7/7/10

BUZZ: Long Recession Ignites Debate on Jobless Benefits

News
Credit card delinquencies fall to 8-year low
The number of consumers behind on their credit card payments fell to an eight-year low in the first quarter of 2010. Overall, delinquencies across a wide-range of consumer debt categories have also fallen.
Farm workers: Take our jobs, please!
Facing growing anti-immigrant rhetoric, the United Farm Workers union is challenging Americans to take their labor-intensive, low-paying farm jobs.
Bush tax cuts up in the air
Odds are good that the middle-class will get to keep their tax cuts. The question now is for how long.
Mortgage Applications in U.S. Rise 6.7% as Homeowners Move to Refinance
The Mortgage Bankers Association’s index increased 6.7 percent in the week ended July 2. The Washington-based group’s refinancing gauge jumped 9.2 percent to the highest reading since May 2009, and its index of purchases fell 2 percent to the second-lowest level since 1997.
Obama Will Appoint CMS Chief While GOP Is Away
Obama intends to overcome GOP resistance to his nominee to lead the Centers for Medicare and Medicaid Services by making a recess appointment Wednesday.
Expect lots of government layoffs at state, local level
Up to 400,000 workers could lose jobs in the next year as states, counties and cities grapple with lower revenue and less federal funding.
Services report fuels US recovery fears
Concerns that the US economic recovery is in danger of stalling mounted on Tuesday when a monthly report on activity in the services sector showed a surprisingly steep drop in June.
Even State Capitals Feel the Squeeze
Many capital cities, particularly those with limited private industry, may suffer additional strain as states embark on their deepest cuts yet in the financial downturn.
Hard Times for Ill., but Not for Governors Staff
Giving Quinn's staff big pay hikes while he slashes spending in education and health care services doesn't sit well with lawmakers and could hamper the governor's efforts to convince them to support borrowing for state pensions.
Home-Efficiency Program Takes Hit
A White House-backed effort to encourage home-energy improvements was dealt a blow Tuesday after a federal regulator said the program posed significant risks to mortgage lenders and investors.
TSA drops policy blocking 'controversial' sites
Revises 'acceptable use' for Internet access after criticism.

Blogs
States Fighting Back Against Obamacare: Virginia
Although President Obama signed the Patient Protection and Affordable Care Act into law , the battle against the federal takeover of health care is far from over. In March, Virginia passed its own statute protecting Virginians from having to comply with such a mandate.
Side Effects: Obamacare Shifts Costs to the Privately Insured
President Obama promised to address the growing costs in health care with passage of his “reform” bill. But instead of reducing costs, Obamacare will succeed only at shifting the burden to taxpayers and the privately insured.
Unemployment Extension Could Boost Jobless Rate
The government’s unemployment rate counts only workers who say they’re looking for work. To qualify for benefits, a person has to say he or she is looking for work. When benefits were less generous – or simply unavailable – more jobless workers indicated that they had given up looking, and thus weren’t officially counted as unemployed.
Legislators’ Ignorance of the Legislation is No Excuse
'Suppose a “yes” vote also requires a signed statement, before the vote, that says, “I have personally read this law, in its entirety, and approve its content.”'
Secondary Sources: Better Jobs, Putting Idle Cash to Work, Benefits Extension
A roundup of economic news from around the Web.
The Obama Tax Future
How heavily will President Obama's planned tax hikes weigh upon the U.S. economy?
Induced Human Error
No one who has studied much economics will be surprised by this: the Peltzman effect in action.
The Ethics and Etiquette of Statistical Discrimination
No matter what they say, everyone engages in statistical discrimination.
Environmental Disaster
[The administration's energy retrofit program is] Not so blandly heartwarming after all; more like an unmitigated disaster for anyone who took one of these loans
Administration More Concerned about Trade Appearances than Action
Simply relying on bigger federal government programs is not going to increase exports.
Executive Compensation By Any Other Name and Continued
Most convincing piece of evidence: public company CEOs are not paid more than their private counterparts.

Economists' Comments & Opinions
Keynes vs. Hayek: The Great Debate Continues
Is all spending equally productive, or should government policies aim to simulate private investment?
More Grade Inflation for President Obama
Just 18 months into his term, a team of presidential scholars has decided Barack Obama's already the 15th best president we've ever had. On Thursday, the Siena Research Institute released its latest presidential rankings list, based on a poll of 238 academics.
A Trillion Unintended Consequences
Dodd-Frank's last minute assault on Main Street derivatives.
The Curse Of Economic Uncertainty
Fiscal austerity is not the problem-- lack of clarity is.
Government taxes imaginary income
IRS has long been a lawless agency outside the Constitution.
Hard Knocks From Easy Money
The Federal Reserve is feeding big government and harming middle-class savers.

Somebody will come up with a way to genuinely rebuild some trust, and securitization will return. -Garett Jones, Twitter

Graphic of the Day
NYTimes: American Dream Is Elusive for a New Generation
See: Total Government Spending (% GDP)
See also: After the gold rush
PODCAST: Kling on the Unseen World of Banking, Mortgages, and Government

Research, Reports and Studies
The Rising Threat of Deflation
As we enter the second half of 2010, while markets have been obsessed with Europe's debt crisis, they have failed to notice potentially more ominous developments. By later this year, persistent excess capacity will probably create actual deflation in the United States and Europe
How Americans Are Overtaxed to Overpay the Civil Service
Salaries and benefits—for identical jobs—are 30 percent to 40 percent higher in the federal government than in the private sector. Congress should not overtax all Americans to overpay the privileged workers in the civil service.
The Death of Neoliberalism
As the Bush-Obama era of bailout economics and Keynesian rehabilitation settles into something like cruising speed, perhaps the most fantastic fact to swallow will be that once upon a time the United States had a president who restrained government spending, balanced the budget, argued forcefully for the benefits of free trade, and declared that “the era of big government is over.”
ISM Nonmanufacturing Survey Disappoints
The headline reading of the health of the non-factory sector was below the consensus estimate, a weaker but still expansionary 53.8. The contraction in employment and drop in new orders are particularly bothersome.
Missing the Point: Lessons from The Big Short
The regulatory legislation now before the House and Senate will make it difficult for participants in the CDS market to speculate against a bubble, making future bubbles more likely.
Do Consumer Price Subsidies Really Improve Nutrition?
In fact, it may have had a negative impact for some households.

Book Excerpts
"Interference of any kind... in the spontaneous direction of industry, and the free employment by their owners of the great agents in production, labour, land, and capital, has the certain effect of benumbing their powers and lessening the sum of production, and consequently the shares, of the producing parties; as well as of needlessly, and therefore unjustly, curtailing their freedom of action." -George Julius Duncombe Poulett Scrope, Principles of Political Economy (1833)

"Did You Know"
The average private-sector employer pays $9,882 per employee in annual benefits, while the federal government pays an average of $32,115 per employee. Since the recession began, federal employment has risen by 240,000—12 percent. The unemployment rate for federal employees has only slightly risen from 2.0 percent to 2.9 percent between 2007 and 2009.

7/6/10 Post

BUZZ: States Struggle to Stem False Unemployment Claims

News
House Job cuts for state and local government workers could deepen in 2nd half of year
States and municipalities are facing gaping budget gaps. Many have responded by slashing services, raising taxes and, for the first time in decades, making deep job cuts.
7.9 million jobs lost - many forever
The job losses during the Great Recession were so off the chart, that even though we've gained about 600,000 private sector jobs back, we've got nearly 8 million jobs to go.
Job gloom at all-time high
A record 1.21 million people want to work, but said they aren't looking because of the weak labor market, according to federal statistics released Friday. The June figure is up from 793,000 a year ago.
Congress fixes Wall Street - and orders up 68 studies
The bill studies, among other things: short selling, reverse mortgages, improved insurance regulation, private student loans, oversight of carbon markets and the "feasibility of requiring use of standardized algorithmic descriptions for financial derivatives."
Treasuries Show 12% Chance of Double Dip to Fed as Yields Near Record Lows
U.S. government bond yields are signaling almost no chance of the economy slipping into another recession even as stocks and commodities tumble.
Service sector weakens a bit in June
The ISM nonmanufacturing index fell to 53.8% last month after holding at 55.4% for the past three months. This is the lowest level since February.
Treasury run-up won't last forever
The best investment by far for the first half of this year has been the one that people like me have been warning against: long-term U.S. Treasury bonds. What goes way up, must come down.
Office Vacancy Rate Keeps Climbing
Vacant office space continued to accumulate in the second quarter, the latest indication that businesses aren't planning significant hiring in the near future.
TSA to Block "Controversial Opinion" on the Web
The Transportation Security Administration (TSA) is blocking certain websites from the federal agency's computers, including halting access by staffers to any Internet pages that contain a "controversial opinion," according to an internal email obtained by CBS News.
Cost of Stimulus Cash Vexes Universities
...the stimulus grants have also required the [University of California] to spend about $69 million that wasn't reimbursed by federal agencies to support the new research projects.
They Did Their Homework (800 Years of It)
Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.
'Game Changer' Rule Looms For Health Insurers
How federal regulators interpret a metric known as a medical-loss ratio could affect players from industry giant UnitedHealth Group Inc. down to specialized companies such as American National Insurance Co. Plans could be forced to pay out millions in rebates, while others may be driven out of the market.
Post Office Plans to Announce New Rate Increase
The agency lost $3.8 billion last fiscal year despite cutting 40,000 full-time positions and making other reductions. It has continued to face significant losses this year.

Blogs
Department of Selective Charts: Social Security Tax Cap Division
The fight over Social Security policy has almost nothing to do with low earners; they’ll be taken care of no matter whose reform philosophy gets enacted. The real question is whether to impose higher taxes on high earners in order to pay higher benefits to high earners.
Morning Bell: Reclaiming Our Founding Principles
The Declaration of Independence serves as a philosophical statement of America’s first principles. But since the early 20th century, these principles have been under attack and now there is no need for consent of the governed, just experts who will tell us how to live and how to progress.
“And then He said, ‘Let there be Higher Wages’”
Low wages are not the result of arbitrary company decisions; they are the result of low worker productivity. A pen even as mighty as that of Pres. Obama cannot miraculously invest low-skilled workers with greater skills.
Saving and Identities
In general, I think it is really bad economics to tell stories about accounting identities that blame one side of the identity or the other. Instead, economists should trace movements in saving and investment back to exogenous factors that affect relative prices, including risk premiums.
Is Illinois “Greece on Lake Michigan”?Downgraded by every ratings agency, Illinois’ pension system is likely to run out of money to pay retirees in the next few years.
Are We Suffering from Concealed Inflation?
The conventional explanation for the lack of price inflation is that banks are sitting on the reserve because the interest the Fed is now paying is a better deal than lending in a risky environment. I think this point is largely true, but it also may be that we are suffering from inflation that is not being accurately measured.
Weekly Summary and a Look Ahead
This will be a light week for US economic data.
Repeating Tax History -- From Luxury Tax to Tanning Tax
This isn’t the first time, of course, that a tax has reached people that it wasn’t intended to affect.
When will we know if Irish pre-emptive fiscal austerity is a failure?
The Irish experiment remains an open book. In the meantime, it's simply not true that the pre-emptive austerity advocates are committing some kind of economic malpractice. Three years out from now, let's compare Ireland to the other PIIGS.
Failure
The bottom line. Obama took a gamble. He has tried to achieve a lot. He passed a health care bill that still fails to garner majority support and a financial reform that no one understands. The economy is not improving. Throw in the oil spill and you have an administration that no one wants to embrace. We are in for a lot of change in the next 6 months.
Fewest Teen Jobs added in June since 1951
According to the BLS, only 497,000 teens (ages 16 to 19) found jobs in June 2010 NSA (June is the key months for summer employment).
Global Recession Led to Stricter Immigration Rules
Stemming from increased unemployment rates, many countries made changes to migrant policy that largely encouraged both migrant residents to leave and discouraged new immigration from beyond their borders, according to a study by the Federal Reserve Bank of Dallas.
ISM Non-Manufacturing Index shows slower expansion in June
The June ISM Non-manufacturing index was at 53.8%, down from 55.4% in May - and below expectations of 55. The employment index showed contraction in June at 49.7%.

Research, Reports & Studies
Creating a Crisis: Spending Increase to Fund Bloated Education Bureaucracy
Congress will soon consider spending $10 billion to prevent layoffs in the public education sector. This money comes in addition to the $80 billion awarded to the U.S. Department of Education (DOE) for K-12 education as a result of the stimulus bill.
Heritage Employment Report: June Job Market Jolts Economy
While the unemployment rate dropped from 9.7 to 9.5 percent, this is due to a large drop (–652,000) in the labor force.
Weak Economy, Failed Policies Keep Obama Jobs Deficit High at 7.4 Million
According to the latest jobs report, total U.S. employment stood at almost 130.5 million in June, which means the cumulative Obama jobs deficit—the difference between the end target and the current employment level—stands at almost 7.4 million.
Ask George W. Bush How to Avert a Double Dip
...given the dramatic changes in taxation and the winding down of stimulus spending just over the horizon that the U.S. economy is getting weaker.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
U.S. Economic Slowdown... Still No Double Dip.
Hudson Institute Economic Report
A disappointing jobs report for June followed May’s weak housing and retail sales data, leading some to forecast a slowdown in the recovery.
Public Interest Comment on the Draft 2010 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities
...a more careful look at economic theory is warranted as the government seeks to intervene in the obesity arena, although we acknowledge that to be a significant public health concern. Drivers in Q3
...even though the markets are as complicated as they've ever been, there are two key drivers that stand out: the European debt crisis and the macro-economy.

Graphic of the Day
Government Growth Outpaces Private Growth This Decade
See: Poverty in the US and Europe
See also: How much a country's leader is paid compared to GDP per person
>VIDEO: How to create one million jobs

Economists’ Comments & Opinions
Lack of jobs increasingly blamed on uncertainty created by Obama’s policies
...fresh fears about another down turn are combining with the regulatory and tax burdens businesses see coming down the pike.
The Government Pay Bonus
Private employees toil 13½ months to earn what federal workers do in 12.
Welcome to the Double-Dip Recession
From a theoretical point of view, another recession is what we should expect right now. This is because both GDP and employment are driven by private business investment, and huge tax increases on both business income and capital investment are now only six months away.
Dear Mr. President: Immigration Reform Won’t Be Enough To Stop The Brain Drain
Fixing immigration policy is an important start, but it won’t be enough to stop the brain drain of highly educated and skilled workers that the U.S. is presently experiencing.
Fed's Fisher sees slower U.S. growth ahead
The U.S. will experience "slower economic growth than we've had in the first and second quarter." He estimated U.S. growth of 2%-3%, saying that the figure will likely come "closer to the low end of that range."
Why are firms saving so much?
Much of the recent increase in private-sector saving comes from businesses. What explains the rise in corporate thrift?

Sadly, we learn so much from fools, economists, & other reverse role models then pay them back with ingratitude. -Nassim Taleb, Twitter

Book Excerpts
"It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort." -Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (1950)

Did You Know
Since 2007, vice presidents have seen an 11% decrease in overall compensation, while the highest-ranking executives (a category that includes president, CEO, COO, and chairman) have seen their pay drop by 16%. Perks like company cars and club memberships have been hit pretty hard: 51% of employers sweetened the deal with such goodies in 2007, but only 28% still do. Rather ominously, the percentage of companies offering guaranteed severance pay to executives has dropped by half, from 44% in 2007 to 22% today. Also, 23% of companies are still paying sign-on bonuses, down from 36% in 2007, and one-third (33%) are offering stock options or other forms of equity, down from slightly more than half (51%) three years ago.

7/2/10 Post

BUZZ: U.S. Sheds Jobs

Today's News
House passes unemployment benefits extension
After a failed attempt earlier this week, the House voted to extend the deadline to file for federal jobless benefits Thursday. But the bill will be stuck in limbo as Congress takes a weeklong summer break.
Stimulus: The big bang is over
This summer will be the peak of the $787 billion stimulus program in terms of creating jobs and pumping money into the economy. It will be a downhill slide for stimulus even as the economy is expected to continue sputtering.
Bankruptcy filings on the rise
Bankruptcy filings surged 14% during the first half of 2010. Filings totaled 770,117 through June, compared to 675,351 during the same period last year.
Job recovery hits a wall
The U.S. economy lost jobs in June, for the first time this year, a net loss of 125,000 jobs in the month. That was due primarily to the loss of 225,000 Census jobs that had swelled payrolls by 433,000 net jobs in May.
Euro-zone unemployment unchanged at 10%
The number of unemployed workers across the 16-nation euro zone ticked higher in May, but the unemployment rate remained at a 12-year peak of 10% for a third consecutive month.
Jobs report prompts new political sparring
A fresh round of political sparring broke out Friday morning following the release of a disappointing jobs report, as Republicans attacked the White House, and President Barack Obama said the country's "heading in the right direction," but admitted the economy's not whole yet.
US stocks fall on poor economic data
Disappointing economic data that fuelled concerns about the strength of the economic recovery sent US stocks lower on Thursday, but some ground was recovered in the last second half of the trading day.
New Financial Rules Will Lower Bank Profits
The landmark financial overhaul legislation will raise banking industry regulatory costs, lower their profits and limit their use of their own assets in risky investments.
Global Manufacturing Momentum Fades, Fueling Worries
Manufacturing lost momentum around the world in June, adding to worries that global economies are poised for slower growth in the months ahead.
Fiscal Commission Debates Deficit Cuts
The president’s fiscal commission heard from advocacy groups and a few public citizens Wednesday afternoon as it considered ways to reduce the federal deficit.
Car Sales Slowed in June
Auto makers saw their U.S. sales rise in June from the depressed level of a year earlier, but sales fell from May as jittery consumers slowed the pace of recovery in the car market.
Schwarzenegger Pressures Lawmakers in Budget Battle
Gov. Arnold Schwarzenegger's order to pay 200,000 state workers just the minimum wage sent a signal to California lawmakers: In the impasse over closing California's $19 billion budget deficit, Schwarzenegger is ready to play hardball.
Dollar Tumbles in Broad Retreat on Weak Data
The dollar fell against the euro and yen after worse-than-expected economic data fueled concern the U.S. recovery was slowing, leading investors to sell the greenback.
Health overhaul may mean longer ER waits, crowding
Emergency rooms, the only choice for patients who can't find care elsewhere, may grow even more crowded with longer wait times under the nation's new health law.
Premiums for New 'High Risk' Pool Could Be Steep
President Barack Obama's new health coverage for uninsured Americans with health problems won't be cheap — premiums averaging $300 to $600 a month in the largest states, according to a government website that went live Thursday.

"The Employment Situation" Hearing Report
"Today's report is bad news for American workers and their families. At this slow pace it will take much of the decade to reutrn to normal emplyoment levels. President Obama and Congressional Democrats are pursuing reckless fiscal policies that are clearly unsustainable. Unless their excessive spending, deficits, and debt accumulation are quickly reversed, the United States may experienece a debt crisis similar to Greece."

- Representative Kevin Brady, Senior House Republican for the Joint Economic Committee

Total nonfarm payroll employment declined by 125,000 in June, and the unemployment rate edged down to 9.5 percent. The unemployment rate only decreased because there was another step down in the labor participation rate. As the number of discouraged workers continued to rise and the labor force shrunk by 652,000. The decline in payroll employment reflected a decrease (-225,000) in the number of temporary employees working on Census 2010. Private-sector payroll employment edged up by 83,000.

See: BLS Employment Situation Summary

Blogs
June Employment Numbers Raise Specter of a "Lost Decade"
The soft employment numbers build the case for those who believe we may be entering a "lost decade" similar to what Japan experienced before the Great Recession.
Time to Go Global with Greater Economic Freedom
The latest study by the McKinsey Global Institute reveals some astonishing facts concerning contributions of U.S. global companies to the American economy.
Democrats Rescind Recovery Act Funding to Finance More Ineffective Spending
Conservatives began talking about rescinding the stimulus after President Obama signed it into law. Liberals are starting to listen.
Economists React: Is Economy Deer in Headlights or Roadkill?
Economists and others weigh in on the June employment report.
Economic “Experiments”If Barro and the others are correct, we can’t afford to keep throwing good money after bad.
Employment Report: Temporary Help and Diffusion Index
The decrease in the diffusion index in June (almost falling to 50%), is disappointing.
Why Did the Unemployment Rate Drop?
The unemployment rate fell in June to 9.5% from 9.7%, reaching its lowest point since last July. But the decline wasn’t due to improvement in the labor market. Instead, jobless Americans dropped out of the labor force in droves.
Shovel-ready, revisited
Maybe [the stimulus] would have done more stimulating if the spending had actually been directed at projects that use shovels.
State/Local Government Still Shedding Jobs
The pace of state and local government job loss has slowed in recent months. State/Local governments shed 10,000 jobs in June, compared with 18,000 a month earlier and more than 25,000 in each of the first two months of the year.
More Problems With MassCare
If you don't have the mandate, guaranteed issue and community rating will result in the kind of cost spiral we've seen in New York, where only the very sick bother to buy insurance.
Take That, Keynes and Lerner
"Once you break the spell--once governments find that they can get away with borrowing instead of taxing to pay the bills--it is almost impossibly tempting for politicians to do it again and again until the debt is out of control."
Good News about Polluted Water
Pollution is bad, but there is another side to the story. The Hudson River is now clean enough that I’ve swum in it. Air pollution has dropped by 41% since 1990. U.S ocean fisheries have improved substantially in the last few years. Forest cover in the US is larger today than it was 100 years ago. Then, of course, there are the oysters…

Research, Reports & Studies
Tax to the Max?
Should we lift the payroll-tax ceiling to fix Social Security? It’s pretty much accepted, even among policy folks well to the left-of-center, that the trust fund isn’t real savings and that marginal tax rates do matter.
Europe's Sovereign Debt Crisis: No Place to Hide?
As the debt-to-GDP ratio approaches 100 percent, the effort to reduce it by cutting government spending, raising taxes, or both actually raises the ratio because it cuts GDP growth faster than it cuts debt.
One More Thing America Must Learn from Europe
The United States could learn a lesson from Europe: how to make flying cheaper. In the European Union, any EU-based airline from any member country can pick up and drop off passengers anywhere within the Union.
The Economic Impact of an Offshore Drilling Ban
In short, petroleum can be a major energy source for many decades. Consequently an offshore drilling ban’s impact on the U.S. would be felt for decades.
Errors, Robustness, and the Fourth Quadrant
The paper proposes a methodology to calibrate decisions to the degree (and computability) of forecast error.
Social Security Policy Options
This CBO study examines a variety of approaches to changing Social Security, updating an earlier work, Menu of Social Security Options, which CBO published in May 2005.
International Business Cycle Synchronization in Historical Perspective
We then examine the role of global shocks and shock transmission in the trend toward synchronization. Our key finding here is that global (common) shocks generally are the dominant influence.
Some Intellectuals and Society
Sowell claims that those of us who favor free markets aremore empirically inclined and have less ego invested in our views than those who advocate central planning and heavy government intervention generally.

Graphic of the Day
the Atlantic: Dismal Jobs Report
See:Today’s Jobs Report in Pictures
See Also: June Nonfarm Payrolls
See Also: Intelligence tested
VIDEO: Pelosi: Unemployment Checks Fastest Way to Create Jobs

Economists’ Comments & Opinions
The Obama Tax Trap
How some Republicans are preparing to walk right into it.
Economy: the musical
Commentary: The song remains the same for the economy

For them this is a financial crisis; to me it is an intellectual crisis, a crisis of civilization. -Nassim Taleb, Twitter

Book Excerpts
"[L]egal plunder can be committed in an infinite number of ways; hence, there are an infinite number of plans for organizing it: tariffs, protection, bonuses, subsidies, incentives, the progressive income tax, free education, the right to employment, the right to profit, the right to wages, the right to relief, the right to the tools of production, interest-free credit, etc., etc. And it is the aggregate of all these plans, in respect to what they have in common, legal plunder, that goes under the name of socialism." -Frédéric Bastiat, The Law (1850)

"Did You Know"
AAA projects that 34.9 million Americans will travel 100 miles or more during the Independence Day weekend, a jump of 17.1% from last year's 29.8 million travelers.