7/14/10 Post

BUZZ: Chinese rating agency strips Western nations of AAA status

News
The financial regulation bill
Highlights of the compromise legislation to overhaul financial rules.
Court Tosses Out FCC Rules to Curb Indecent Speech
A three-judge panel of the Second U.S. Circuit Court of Appeals in New York said the Federal Communications Commission's indecency policies violate the First Amendment and are "unconstitutionally vague, creating a chilling effect that goes far beyond the fleeting expletives at issue here."
Crop insurance companies sign off on plan that will cut subsidies $6 billion over 10 years
All 16 private insurance companies that participate in a federal crop insurance program have signed off on a plan designed to cut their subsidies.
Finance Overhaul Casts Long Shadow on the Plains
...it's the derivatives portion—the part of the bill aimed directly at Wall Street—that might end up touching most lives in rural America.
New WH report says economic stimulus bill responsible for saving or creating 3 million jobs
A new White House report says last year's $862 billion stimulus law has now "saved or created" between 2.5 million and 3.6 million jobs. That's up from 2.2 million to 2.8 million in the last quarterly report from the White House Council of Economic Advisers.
Retail sales slip for 2nd straight month
Following seven consecutive increases retail sales fell for a second straight month, with weakness in the automotive sector a key factor in the downturn.
Higher Taxes Boost State Revenue
While states have seen modest tax growth, local-government revenues have just started to fall.
Dumping the dollar: Why it's time to diversify
As much as 64% of the world's currency reserves are held in greenbacks but given the manic ups and downs of the dollar in recent years, it may finally be time to diversify the world's reserves.
U.S. Business Groups Air Policy Concerns
Washington's major business groups plan a united front Wednesday in their confrontation with the Obama administration over economic policy, calling on the White House to cut taxes and curb its regulatory agenda.
TARP failed Main Street banks
The Troubled Asset Relief Program's help has made little difference for small banks, according to the latest report by the Congressional Oversight Panel.
Net neutrality comes back to haunt Google
This year, “search neutrality” has become the rallying cry of activists who believe that Google has too much power to decide which internet sites are granted the attention that comes with a high search ranking, and which are consigned to outer darkness.
Home-buying loan applications at 13-year low
Application for mortgages to purchase a home sank a seasonally adjusted 3.1% for the week ended July 9 on a week-over-week basis, driving the volume to its lowest level since December 1996. On an annual basis, applications for the week were down 43%.
Portugal Feels Austerity's Bite
After Years of Budget Cuts, Its Economy Isn't Healed; Scenario for Others in Europe.
U.S. June budget deficit $68 billion: Treasury
Income was $251 billion in June, about $36 billion higher than receipts in June 2009, due largely to a 39% increase in corporate tax receipts. Spending was $319 billion in June, versus $309 billion a year ago.
Fed Sees Slower Growth
Officials Debate How to Respond if Recovery Falters; Softer 2nd Half Is Seen.

Blogs
Morning Bell: Cap and Ban
On Monday the Obama administration reissued a ban on offshore oil drilling in the gulf after federal courts twice invalidated the first ban.
Senators Press Kagan about Obama-Care
Given that she appears to take an expansive view of Congress’ power to regulate interstate commerce, the best possible outcome for opponents of Obama-Care would probably be for Kagan to join the Court.
Senate Bill Sows Seeds of Next Financial Crisis
In choosing to ignore the actual causes of the financial crisis and instead further expanding government guarantees behind financial risk-taking, Congress is eliminating whatever market discipline might have been left in the banking industry.
It’s Summer in Washington and the Livin’ Is Good
According to a new Regional Income Earnings Index developed by the Martin Prosperity Institute, Greater Washington, D.C. is the nation’s metropolitan region with the highest income.
Macro Beliefs and Reality
I am leaning toward a view of macroeconomics in which firms, households, and government face a collision between beliefs and reality.
Economists React: ‘Shop til You Drop? Hardly’
Economists and others weigh in on the decline in June retail sales.
Sticky (and very high)
For states that have been irresponsible or unlucky and find themselves short of revenue, why not reduce salaries some, say 10% and save that money? ...One answer is that state and city employees are under union contracts that are not easily adjusted on short notice.
Farms Get Smaller, Less Government Support
More — but smaller — farms across the country generated greater national net income in times of drastically less government support.
Further stimulation
...on nominal vs. real effects of government spending.
Secondary Sources: Student Defaults, Factory Peak, Trichet on Austerity
A roundup of economic news from around the Web.

Research, Reports & Studies
The Secret to Human Happiness Is Earned Success
The free enterprise system is an act of self-expression reflecting that Americans truly value earned success, which gives people a sense of meaning about their lives.
As Obama Kowtows, Unions Eye the Private Sector
Unions gave $400 million to Democrats in the 2008 campaign cycle, and they expect to get something in return.
The Moral Basis for Economic Liberty
Those who defend free markets and capitalism often do so solely on managerial or technical grounds, but economic liberty needs a moral defense as well. Defense of economic liberty without reference to morality will ultimately prove injurious to liberty itself
“Rebalancing” Chinese Investment in the U.S.
The first policy step must be to remove confusion caused by ongoing and haphazard political interference. Because most Chinese investment in the U.S. is made by state-owned entities, it will be reviewed by the Committee on Foreign Investment.
Does Government Spending Stimulate Economies?
...greater government spending does not aid the economy; in fact, it causes decreased consumption and investment.
Macroeconomic Effects from Government Purchases and Taxes
Spending multipliers are identified primarily from variations in defense spending, especially changes associated with buildups and aftermaths of wars.

Economists’ Comments & Opinions
Time to fire America's management
Corporate income tax cripples the economy.
Fed should stay on sideline
The Fed should not overreact to every piece of news, either good or bad, as mixed data are part of every recovery, said president of the Kansas City Federal Reserve Bank Thomas Hoenig.
Politicians Are the Problem for Higher Ed
Higher education is awash in government cash, with tens of billions of taxpayer dollars going to schools and students annually.
The Uncertainty Principle
Dodd-Frank will require at least 243 new federal rule-makings.
Arrogance Surplus Leads to Government Excesses
Good policy is what might be called humble policy. It starts with admitting what we don’t know.
A New Immigration Policy Can Reduce U.S. Debt
Reducing the number of skilled legal immigrants reduces chances for economic growth.

Little-known macro fact: Reverse Phillips Curve. Correlation between annual real GDP growth and inflation, '47-'10 = -0.14 -Garett Jones, Twitter

Graphic of the Day
Federal budget gap tops $1 trillion through June
See: Gross public debt projections
See Also: June Retail Sales
See Also : Obama Job Deficit

Book Excerpts
"Today, when it is an accepted principle that the function of the state is to distribute wealth to everybody, it is natural that the state is held accountable for this commitment. To keep it, it multiplies taxes and produces more poverty than it cures. With new demands on the part of the public and new taxes on the part of the state, we cannot but go from one revolution to another. But if it were well understood that the state can take from the workers only what is strictly indispensable to guarantee them against all fraud and all violence, I cannot perceive from what side disorder would come." - Frédéric Bastiat, 'Justice and Fraternity' (1848)

Did You Know
According to a recent survey, 87 % of small business owners viewed free enterprise as “very positive” or “positive”; 78 % of all voters agreed. Conversely, only 12 % of small business owners and 3 percent of all voters viewed the idea of socialism “very favorably.” Small business owners know what they need for their businesses to flourish—and government isn’t it.

7/13/10 Post

BUZZ: Confidence in Obama reaches new low, Washington Post-ABC News poll finds

News
New Ban Hits Oil Drillers
Administration's Call for Halt Comes as BP Installs New Cap on Damaged Well.
New Orleans Mayor: Future 'in Peril'
New Orleans is facing a $67 million budget deficit, Mayor Mitch Landrieu announced Thursday, in an unflinching "state of the city" address in which he decried a litany of daunting problems, old and new, and said the future of the city is "in peril" unless it changes the way it does business.
U.S. Trade Gap Widens
U.S. exports grew 2.4% to a 20-month high of $152.25 billion, from $148.72 billion in April. Imports increased at a greater rate... 2.9% to $194.52 billion from $189.04 billion.
Snowe, Brown provide crucial GOP support for Wall Street regulation
Snowe of Maine and Brown of Massachusetts join Susan Collins of Maine as three crucial Republican votes for the legislation. The three lawmakers appeared to give Democratic leaders the 60 votes needed to overcome hurdles facing the legislation.
Bernanke: Bolstering small business lending crucial to economic recovery
While big companies have stockpiled cash and are expected to report strong profits starting this week, small businesses have struggled to secure loans to expand and hire.
4 reasons why Texas beats California in a recession
The reason is that Texas powered through the global fiscal crisis, while The Golden State's economy is forecast to remain tarnished for some time.
Wall Street reform and the price of milk
Congress is expected to finally pass the massive Wall Street reform bill later this week. For the first time, regulators will rein in speculative bets in the energy and commodities futures markets -- something that could affect what you pay for gasoline and milk.
Moody's downgrades Portugal's debt
Moody's downgraded Portugal's government bond ratings to A1 from Aa2, saying this stemmed from "ongoing deterioration in the country's debt metrics."
Out of jobless benefits? There's more government aid
A growing number of jobless Americans are maxing out their unemployment benefits. There are a handful of other lifeline benefits that the unemployed may qualify for.
Job openings drop in May
Job openings at U.S. workplaces fell to 3.2 million in May from an upwardly revised 3.3 million in April. There were 4.7 unemployed people for every job opening in May.
The real green solution: Tax the bad stuff
"The tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean energy future is now." from one of President Obama's speeches about BP

Blogs
Fighting Unemployment With a Stick
As the U.S. struggles with the problem of persistent long-term unemployment, a study of incentives in the Netherlands suggests a stick is more effective than a carrot.
The Growth of Federal Regulation
While taxes typically get the lion’s share of attention in popular discussions of government drags on the economy (and taxes are important), heavy-handed regulation is often a more pernicious drag.
Summer Reading
This Time is Different is sweeping in its compass and I have only just begun my reading. The aphorism is an “old saw” in the marketplace: “More money has been lost because of four words than at the point of a gun.”
Small Businesses Get More Pessimistic
Small businesses continue to feel highly pessimistic about the U.S. economic outlook, according to a report Tuesday that showed a monthly indicator of their sentiment turning weaker in June.
Department of Awful Statistics: How Much of the Government's Revenue Goes to a Few Programs?
I don't know who got this mangled, the reporter or the heads of the budget commission. But I sure hope it's the former, because if it's the latter . . . well, we're in even bigger trouble than I thought.
Dodd-Frank: Gift to Trial Lawyers, Feminists, and Hollywood The provisions of Dodd-Frank that mandate diversity and ban movie box-office futures support Paul Atkins’ observation that “This poorly drafted hodgepodge—most provisions have nothing to do with the true causes of the financial crisis—will drastically expand the power of the federal government, create new bureaucracies staffed with thousands, and do little to help the struggling American citizen.”
BLS: Low Labor Turnover in May
Layoffs and discharges have declined sharply since early 2009 - and are near a series low - and that is a good sign.
Should the U.S. Restrict Immigration?
Recent debates about Arizona’s new immigration law have taken as self-evident that immigration restrictions are good policy, with the only question being which level of government should enforce the law, and how.
Free Trade Begins at Home
It may surprise you to learn, then, that in Lake Elmo, Minnesota, proprietors of a 40-year-old family farm that yields flowers, pumpkins and Christmas trees, are facing fines and 90-day jail sentences for attempting to sell their products in that town.
Morning Bell: The Obama Tax and Spend Threat to Economic Recovery
Remember President Barack Obama’s promise to the American people not to raise taxes? Forget about it. While the President has already raised taxes on cigarettes and tanning beds, none of that compares to what could happen in January.

Research, Reports & Studies
The Effect of Corporate Taxes on Investment and Entrepreneurship
In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity.
Gates's Last Stand?
Few would say the current export control system adequately achieves its objectives--that is, protecting U.S. national security and facilitating U.S. technological leadership.
American Fairness Means Equality of Opportunity, Not Income
The intellectual and political leaders of the 30 percent coalition prefer a world in which we all end up in roughly the same economic place regardless of our abilities and efforts.
Further Medicaid Bailout: Unfair and Irresponsible
Many states are lobbying the Senate to extend the Medicaid bailout enacted in the February 2009 stimulus bill. While several attempts by Senate leaders to extend the bailouthave failed, it is likely to be brought to the floor again.

Economists’ Comments & Opinions
The Bush Tax Cuts and the Deficit Myth
Runaway government spending, not declining tax revenues, is the reason the U.S. faces dramatic budget shortfalls for years to come.
Obama's 'Export' Strategy Is a Laugh...we import more goods than we export precisely because a great deal of what we export is shares in some of the world's leading companies that don't count as exports. In short, our trade deficit results from a surplus of capital flowing into the U.S. thanks to investors viewing the U.S. as the best place to invest. All trade once again balances.
Obama's Immigration Fakery
In 2007, then-Sen. Obama helped derail an immigration bill he claimed to support. He's no more serious about a bipartisan bill today.

Graphic of the Day
Mercatus Center: Total Welfare Cost of the VAT
See: Dow vs GDP
See also: Food Consumption in America
See also: Social Security Spending Soon to Rise Rapidly
See also: May Trade Balance

Book Excerpts
"The consumers are merciless. They never buy in order to benefit a less efficient producer and to protect him against the consequences of his failure to manage better. They want to be served as well as possible. And the working of the capitalist system forces the entrepreneur to obey the orders issued by the consumers." - Ludwig von Mises, Bureaucracy (1944)

Did You Know
"The Capitol and other congressional buildings are rife with fire traps and other pervasive problems of age and dangerous design, with an estimated 6,300 safety hazards lurking on Capitol Hill this Congress... Workplace safety experts say that if Congress were a private-sector business, it would be at risk for massive fines from government regulators."

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.