8/10/10 Post

BUZZ: Small-Business Sentiment Deteriorates Again

News
Unusual uncertainty clouds Fed meeting
Federal Reserve officials started their meeting today amid unusual uncertainty about what steps they might take in response to the downshift in economic growth over the past two months.
Incomes Fall in Most Metro Areas
Personal incomes fell across the U.S. last year except in areas with a high concentration of federal government and military jobs, the Commerce Department said Monday. They declined most in places with a lot of housing and finance jobs.
Gold Prices Follow Euro Down
Spot gold edged lower in Europe Tuesday as the euro weakened against the dollar ahead of the U.S. Federal Reserve meeting later in the day.
Russia Heat Wave May Kill 15,000, Shave $15 Billion of GDP
Russia’s record heat wave has already cost the economy $15 billion, or 1 percent of gross domestic product, as fires and drought ravage the country.
Worker Productivity in U.S. Unexpectedly Declined
The productivity of U.S. workers unexpectedly fell in the second quarter, indicating companies may redouble efforts to contain costs as the recovery unfolds.
Wholesale Inventories Rise Less-Than-Estimated 0.1%; Sales Fall 0.7%
Inventories at U.S. wholesalers rose less than forecast in June as companies kept stockpiles in line with slowing demand.
U.K. Housing Gauge Shows First Price Drop in a Year
A U.K. housing-market gauge signaled the first decline in prices for a year in July as demand for homes fell.
Pentagon Plans Steps to Reduce Budget and Jobs
Defense Secretary Robert M. Gates said Monday that he would close a military command, restrict the use of outside contractors and reduce the number of generals and admirals across the armed forces as part of a broad effort to rein in Pentagon spending.
14th Amendment causes GOP split
The push by congressional Republicans to deny automatic citizenship to the children of illegal immigrants has opened up a split in the GOP, with several former Bush administration officials warning that the party could lose its claim to one of its proudest legacies: the 14th Amendment.
Fannie and Freddie May Need Another Taxpayer Bailout
Some would like the government to scale back its support for Fannie and Freddie to give the private sector a chance to compete. But others say ending it is unrealistic because it would make the 30-year fixed rate mortgage less available or more expensive.
Crossroads poll: Dem Senate in peril
A new poll suggests the possibility that the balance of power in the Senate might be up for grabs in November.
House Returns to Empty Stage
The House has a rare moment in the spotlight today as it reconvenes to clear a 26 billion state aid package.
Census Bureau returns $1.6B of its operational budget
The U.S. Census Bureau is giving back almost a quarter of the money it received to do its job this year.
'Breaking The Buck' Was Close For Many
At least 36 of the 100 largest U.S. prime money-market funds had to be propped up in order to survive the financial crisis, according to a report from Moody's Investors Service.
Raise taxes now -- the elders of the economy say so
Extending the tax cuts for everyone would cost the government $3.7 trillion over 10 years. Taxing the high-earners would get back about $700 billion of that.
Wells Fargo: New Financial Rules to Cost $530 Million
Amendments to overdraft rules, as well as the bank's own voluntary policy changes, will reduce the bank's after-tax revenue by $225 million in the third quarter and $275 million in the fourth quarter, the San Francisco bank said in a quarterly filing with the Securities and Exchange Commission.
FinReg: More questions than answers
So many words ... so little clarity. That may be the best summation of the financial regulatory reform bill.
Useless: The Social Security trust fund
This year's cash deficit, the first since the early 1980s and the biggest ever, means the Treasury will have to borrow money to redeem some of the trust fund's Treasury securities.
Unions Spending Big to Influence House Vote
Top union brass are shuttling back to Washington D.C. today to make last minute pleas with undecided House Members.
Republicans Push Disapproval Measure Aimed at Gay Marriage Ruling
A group of House Republicans introduced a resolution of disapproval Tuesday regarding a California judge’s recent decision to reverse the state’s ban on gay marriage.
Five ideas to stimulate the economy
Fortune lists five stimulus plans - some bold, some borrowed, some borderline wacky, but all worth considering
McDonald's liquid profits
McDonald's performance over the past couple of years is often characterized as a classic recession success story, that's only part of the story, and a relatively small part at that.

Blogs
Statehood for Guam, American Samoa and the U.S. Virgin Islands
This is not the first time your tax dollars have been used to push for statehood of a U.S. Territory or Commonwealth.
‘Even in Recess, Congress Can’t Help Spending Billions for Bailouts
Not satisfied by the billions in federal bailouts already passed, House Speaker Nancy Pelosi recently announced that she intendeds to bring the House back from the August recess to pass yet another multi-billion-dollar federal bailout.
Under Obamanomics, Government Workers Win, You Lose
The effect of President Obama’s policies is becoming clear. The Wall Street Journal reports that personal incomes fell across the U.S. last year except in areas with a high concentration of federal government jobs.
Lame Duck Cap and Trade?
In other words, let’s tax the cheap, dependable energy sources and give subsidies to the expensive, unreliable sources. Let’s build a protectionist policy around renewable energy sources so we can produce them domestically—even if it causes our economy to operate less efficiently.
Will Ben Bernanke Scream "Bon Voyage"?
All eyes on the Street turn to the QE2.
Why Smart Money Is Focusing on Inflation
Warren Buffett is betting on inflation as Fed concludes meeting on monetary policy, Quantitative Easing 2.
European Corporate Bonds to Support Stocks
As the ECB isn't in a hurry to withdraw the stimulus, the eurozone will have to find somewhere for the money to go. That "somewhere" is more likely to be in stocks than in corporate bonds given the skinny yields available.
Where "Unusual Uncertainty" Has the Dow, Gold, and Oil
"Unusual Uncertainty" has the yield on the 10-Year below annual pivot and testing annual risky level. Plus, a look at the economy on the road.
Secondary Sources: Deflation, Authoritarian Growth, Manufacturing
A roundup of economic news from around the Web.
Rural Broadband Subsidies: Another Iraq?
In a 3-2 vote, the Federal Communications Commission recently decided to jack up its official definition of “broadband” from 200 kbps download to the 4 mbps dpwnload/1 mbps upload used as a benchmark in Our Big Fat National Broadband Plan.
San Francisco Fed Paper Warns Odds of Recession Rising
Over the shorter run, the paper, written by Travis Berge and Oscar Jorda, argues the odds of falling into recession are relatively low. But over the next two years it appears the odds are only slightly better than even that an already-tepid recovery will continue.
How Much Will a Carbon Tax Spur Innovation?
If Jim Manzi is right about the limited innovative effects of a carbon tax, then moving our houses around, slapping in some light rail, and maybe making the houses a little smaller, will be rearranging those deck chairs on our proverbial environmental titanic.
“Never Let a Crisis Go to Waste”
The opportunity is here. At first, interest groups will prevent attempts to cut either “discretionary” or “entitlement” spending. And then the system will begin to crack with public pension defaults perhaps leading the way, followed by Medicare and Social Security. Soon all will benefit from cuts more than they lose.
Fed Unlikely to Unveil Major Action
Market speculation that the Federal Reserve will act to boost the economy at its meeting today has grown recently, but most analysts caution the U.S. central bank is unlikely to take any major steps.
CR Index
Consumer survey reveals unsteady economic progress.
CEOs Less Confident in Recovery
The overall index slipped to 57.5 in July, from 61 in April. Any reading over 50 indicates optimism. The survey showed companies remain extremely reluctant to hire workers: nearly 62% said they didn’t expect their headcounts to have changed a year from now, while nearly 8.5% expected to cut more than 10% of their workers in that time.
“Creating a New Job Carries a Punishing Price”
...these added costs increase his firm’s vulnerability to government decisions — and not just those made in Washington, D.C. While not all of the non-salary costs are due to government policy — Bogen could offer less generous benefits — many are, and this means firms like Bogen “have lost control of a big chunk of our cost structure,” and this makes Bogen reluctant to hire more.
Student-Loan Debt Surpasses Credit Cards
Americans owe some $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. (Most of revolving credit is credit-card debt.) Student loans outstanding today — both federal and private — total some $829.785 billion, according to Mark Kantrowitz, publisher of FinAid.org and FastWeb.com.
Wastewater Treatment
The EPA itself estimates that 25% of the nation’s sewer pipes were in poor or very poor condition. They also estimate that this share will rise to 50% by 2020.
U.S. Incomes Tumbled in 2009
Income declined in 223 metro areas last year, increased in 134 and was unchanged in nine regions.
College: Easy Money
According to Philip Babcock and Mindy Marks, college students' weekly study time fell by 40% between 1961 and 2003.
CR: Travelers pay up to 144 percent more in taxes, study finds
A recent survey of government-imposed travel taxes in the nation's top 50 travel destinations has found that levies for car rentals, hotels, and meals can raise consumers' tax burden—what they would otherwise pay in general sales tax—by more than half.
Should We Raise Tax Rates on the Rich?
James Surowiecki today has a piece on why we need more tax brackets for the super-rich. After all, is it fair that a professional making $375,000 pays the same as LeBron James?
Where Americans Are Spending More...
Since the recession started in the fourth quarter of 2007, the common theme has been about Americans cutting back on their spending. But the latest numbers from the BEA show aggregate personal consumption expenditures are up 2.9%, or $285 billion.
Competition Breeds Success II
This morning, I got an e-mail that provides another example of how private schools tend to beat the government-union monopoly.
A Snapshot of "Recovery Summer"
...monthly analysis of the employment situation in the United States on how well the President's 2009 economic stimulus package, which provided the funding for these projects, is doing in creating or saving American jobs.
The Myth of Authoritarian Growth
"Don’t be surprised if Brazil leaves Turkey in the dust, South Africa eventually surpasses Russia, and India outdoes China."

Research, Reports & Studies
The Kampala Aftermath: The U.S. Should Remain Wary of the ICC
Overall, the U.S. effort at the International Criminal Court Review Conference in Kampala was a qualified success. The outcome could have been much worse.
Critical Lessons from the Federal Response to the Gulf Oil Spill By learning from both the mistakes and successes of the current Gulf spill, the federal government will dramatically increase the effectiveness of its future responses to Spills of National Significance.
Cronyism: Undermining Economic Freedom and Prosperity Around the World
In a true capitalist system success is determined by the market, the best mechanism ever discovered to set the value of goods and services—through the collective buying and selling decisions of all participants in the economy
CH4: The New Deal and Institutional Economics
In his first inaugural address Franklin D. Roosevelt declared that the federal government must treat the depression “as we would treat the emergency of war.” He was not speaking abstractly.
BLS: Productivity and Costs Q2 2010
Nonfarm business sector labor productivity decreased at a 0.9 percent annual rate during the second quarter of 2010, the U.S. Bureau of Labor Statistics reported today, with output and hours rising 2.6 percent and 3.6 percent, respectively.
U.S. Flying on One Engine
...in July, the diffusion index for manufacturing payrolls (an indicator of how widespread the payroll gains are across industries) continued to fall down, reaching neutral territory.

Economists’ Comments & Opinions
Unemployment: What Would Reagan Do?
Friday's grim labor report is the latest confirmation that our economy is not recovering.
What's Holding Back the Hiring?
President Obama claims that he's concerned about "jobs, jobs, jobs," but he has signed laws, issued executive orders and approved regulations that create incentives for private-sector employers to lay off people or delay hiring people. It's no wonder high unemployment persists.
Black Budget in the Red
This tale of government bloat...it sounds like a recipe for a conservative crusade.
Real 'Hope and Change' in the United Kingdom
Hope has been hard to come by for small-government types in the age of Obama.
‘Made in America’ is not the way out
By promoting manufacturing of all kinds (as can be expected as the sector’s lobbies get down to work) at the expense of more innovative and dynamic service sectors, precisely when America is faltering in its recovery from the crisis, this unhelpful fascination promises to inflict gratuitous damage on an economy that can ill afford new wounds.
Still Oblivious To Meltdown's Cause
One of the tragic ironies of the financial meltdown is that it was caused by well-meaning politicians who didn't know what they were doing — and ended up hurting the very people they intended to help.
The Golden State’s War on Itself
How politicians turned the California Dream into a nightmare.
Business Keeps Getting Squeezed
More damaging than the cost is the message sent to young people like Julie that voluntary, mutually beneficial trade between two willing parties, even around something as simple as a glass of lemonade, requires a direct government sanction… and an accompanying tax payment.
Lousy Lawmakers, Not Low Taxes, Created Our Woes: Amity Shlaes
You can have low taxes, or you can have an economic recovery, but you can’t have both. That’s the message the administration is hammering this summer.
For the Economy's Sake, No Quantitative Easing
The obvious problem there is that the Fed can push all the money it wants into banks, but so long as businesses are fearful of an economic outlook that government intervention, a weak dollar, looming tax increases and more regulations are making worse, there will be no demand for the reserves on bank balance sheets.
The Pension Bell Tolls
Want $600,000 a year in retirement? Work for the government.
RAHN: An inconvenient economic history
Record shows recovery results from tax cuts, not government spending.
Of CEOs and Congressmen
Private vs. public accountability.
BLANKLEY: 'We socialists' vs. 'we the people'
Americans are readying to reclaim their birthright of liberty.
The False Fed Savior
Monetary policy can't make up for failed fiscal and regulatory policy.

Graph of the Day
Mercatus: Jobs Loss and Creation Since the Recovery Act
See: Federal Employees Continue to Prosper
See Also: Estimated Impact of an Exogenous Tax Increase of 1% of GDP

Book Excerpts
"Interventionism is guided by the idea that interfering with property rights does not affect the size of production. The most naïve manifestation of this fallacy is presented by confiscatory interventionism. The yield of production activities is considered a given magnitude independent of the merely accidental arrangements of society's social order. The task of the government is seen as the "fair" distribution of this national income among the various members of society." –Ludwig von Mises, Human Action: A Treatise on Economics (1949)

Did You Know
The Social Security program turns 75 this Saturday. In June 2010, 53.4 million people, or about one in every six U.S. residents, collected Social Security benefits. While three-quarters of them received benefits from the programs for retirees and elderly widow(er)s, another 10.0 million received disability insurance benefits, and 2.3 million received benefits as young survivors of deceased workers. The risk of disability or premature death is greater than many people realize.

8/9/10 Post

BUZZ: America Is at Risk of Boiling Over

News
Some Firms Struggle to Hire Despite High Unemployment
Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work. Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth.
Dollar seeks footing ahead of Fed meeting
The U.S. dollar edged higher on Monday, as traders awaited this week's meeting of the Federal Reserve against a backdrop of rising worries about the staying power of the economic recovery.
Gold May Advance in New York on Dollar, Fed Purchase Concern
Gold may climb in New York on increased demand for a protector of wealth as the dollar weakens and on speculation that the Federal Reserve will step up buying of bonds to prop up the U.S. economy.
After summer slowdown, economy awaits fresh boost
The economy seems to have lost steam as it entered the summer.
Economic Reports This Week
Data will include second-quarter productivity and wholesale trade inventories (Tuesday); the trade deficit for June (Wednesday); import prices for July and weekly jobless claims (Thursday); and the Consumer Price Index for July, retail sales for July, the Reuters/University of Michigan consumer confidence index for August, and business inventories for July (Friday).
BP and U.S. Agree on Oil Spill Compensation Fund
The U.S. completed negotiations with BP Plc over the company’s agreement to establish a $20 billion fund to compensate victims of the oil spill in the Gulf of Mexico.
State, city job cuts taint recovery
Public sector job losses, not counting government losses from temporary positions collecting federal census data, rose to 48,000 in July - the biggest loss in the sector in a year.
America: States of distress
Using a rate of 3.6 per cent – what US Treasuries were yielding in June – Prof Rauh recalculates Illinois’ pension hole at $145bn – about $30,000 for every household in the state.
The $2.5 trillion slush fund
The program is running a deficit this year, and is projected to run growing deficits after 2015. But it will have money in the trust funds to pay full benefits until 2037.
Cash-Hungry States Lure Gamblers with New Casinos
The race in cash-starved states to open new casinos has become frenzy across the United States, lured by the easy money in gambling. But it’s a bet that could hurt taxpayers.
The BP spill is already gone and forgotten
BP's Deepwater Horizon disaster may have drawn more public attention than any other oil spill, but there's a good chance that sordid history of spill cleanup efforts will repeat itself.
Investor Appetite for Bonds in a Tepid Recovery Weighs on Rates
Rates keep falling, and Wall Street increasingly seems convinced that they will stay low for years. But it isn’t the Federal Reserve that is cutting them — it is the bond market. The weak-kneed economy has investors piling into United States Treasury securities, driving prices up and yields down.
How rich is rich?
Experts peg the figure to be somewhere around $2 to $12 million in savings.
GOP cash woes threaten fall gains
The Republican National Committee is entering the fall election season with dire financial problems and, to an unprecedented degree, will be forced to rely on outside groups to fund activities traditionally paid for by the national party.
Ailing public sector leads in layoffs
Congress heeds pleas for states.
In Ky., tea party vs. Obama proxy war
The battle between Conway’s institutional vulnerabilities and Paul’s individual weaknesses played out Saturday at the 130th rendition of one of the country’s longest-running political affairs, the Fancy Farm picnic.
Senate’s Costs for Foreign Travel May Set Record
The Senate is on pace to set an all-time high for foreign travel costs this year, with a burn rate that is 30 percent higher than the first half of last year.
Social Security Faces First Ever Shortfall
More people filed for Social Security in 2009 — 2.74 million — than any year in history, and there was a marked increase in the number receiving reduced benefits because they filed ahead of their full retirement age.
Democrats Put Immigration Back on Agenda
Democrats might prefer to spend the August recess focusing on jobs and the economy as they draw distinctions with the GOP leading up to Election Day.
Prime Numbers: Reasons for Consumers to Start Spending
The latest reports on employment on economic growth include data suggesting that consumers have reason to start spending again, a challenge to fears of a double-dip recession.

Blogs
Don’t Raise Taxes
"...I am aware of no serious analysis that would claim smaller costs to the economy—in lost output and foregone economic growth—of raising capital income taxes as opposed to increasing other taxes or limiting deductions or reducing federal spending."
‘Costs’ and ‘Benefits’ Not Our Concern When Regulating, Say Top FDA Officials
While Republicans and Democrats spar over how best to bring medical costs under control, the federal agency overseeing much of the healthcare industry says costs shouldn’t be considered when setting regulations.
Did Health Care Reform Cure Medicare?
Obamacare looks to me like the Massachusetts plan, which was supposed to save money, but did not. So I tend to think you have to be pretty gullible to believe that Obamacare will save money.
Consumer Credit Declines in June
"Consumer credit decreased at an annual rate of 3-1/4 percent in the second quarter. Revolving credit decreased at an annual rate of 9-1/2 percent, and nonrevolving credit was about unchanged."
No Common Ground on Energy Subsidies
Per-capita is the more meaningful metric of who gets more subsidies. And for energy, it’s subsidy-per-unit-of-energy-production that matters more than simply which sector gets more money.
On Congressman Paul Ryan
Princeton's Paul Krugman plays offense.
Brookings's Ted Gayer plays defense.
Consider the Source
Paul Krugman has an interesting post up on how to read a CBO document. He highlights the fact that the CBO reports using the assumptions it is required to make, not any estimate of what is particularly likely to happen in the real world...
How is Medicare doing?
Worse than official projections suggest...
A Wise Passage
"Politicians are in charge of the modern economy in much the same way as a sailor is in charge of a small boat in a storm. The consequences of their losing control completely may be catastrophic (as civil war and hyperinflation in parts of the former Soviet empire have recently reminded us), but even while they keep afloat, their influence over the course of events is tiny in comparison with that of the storm around them. We who are their passengers may focus our hopes and fears upon them, and express profound gratitude toward them if we reach harbor safely, but that is chiefly because it seems pointless to thank the storm."
Krugman Is Wrong on Ryan and the CBO
...it is not correct to accuse Ryan of deliberate dishonesty; he asked the CBO to score it, and they turned him down. Nor is it correct to imply that this is somehow out of the ordinary. If you supported the health care plan, you supported the exact same process that Ryan is now proposing to use to tweak his proposal.
Unofficial Problem Bank list increases to 811 institutions
The number of institutions has more than doubled since we started the list in early August 2009 - even with all the bank failures (failures are removed from the list).
Two from the New York Times
I agree with Phelps that the focus on aggregate demand is misplaced. I also really like the idea of tax credits for employing low-wage workers. Of course, as Greg Mankiw pointed out, the minimum wage is like a subsidy for low-wage workers paid for by a tax on firms that hire low-wage workers. Repealing the minimum wage and replacing it with a straight subsidy would be better.
Confusions about the multiplier...
The case against fiscal policy should examine long-term budgetary costs, possible confidence factors, implementation lags, political economy problems, difficulties in targeting unemployed resources, and also the (underrated) notion that sometimes fiscal policy postpones problems into the medium run rather than solving them through jump-starting a recovery. But it is difficult to deny that fiscal policy brings some economic benefits in the short run, or can brake an economic decline, even if the measured multiplier is less than one or for that matter well under one.
Weekly Summary and Schedule, August 8th
The key economic report this week will be July retail sales to be released on Friday. The FOMC statement on Tuesday will also be closely watched.
The Coming War Over Public Pensions
"At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying."
Political Mood Cycles
My casual observation of American politics suggests that national political mood follows a four-year cycle that syncs with the presidential electoral cycle.
National Parks – A Celebration of Democracy?
Once again, Burns shows us that government is raw power, and that the idea of democracy is not only cloudy, but invoked in the name of things that some individuals think is desirable. Saying something is democratic does not make it so, and invoking the term democracy does not make the objects of political decisions somehow sacred. I am happy we have National Parks. Whether they are best managed by the US Government is a very open question, and whether their creation was some sort of democratic success is not exactly historically accurate.
Why Encourage Discrimination? The Case of Mandatory National Origin Labels
The most obvious effect of such regulation is to slightly disadvantage foreign producers by raising their cost of production. But the only slightly less obvious effect is to reduce consumers' cost of discrimination.
Drop in Temps Signals Trouble Ahead
Temporary-help employment is generally considered a leading indicator for the overall labor market. So July’s decline in temp payrolls is a worrisome indicator for the coming months.
How economists (and how many) advise the President
Keith Hennessey serves up a first-rate post; to excerpt it would diminish the impact.
Number of the Week: Cheap Money Isn’t Free
This week, IBM set a sort of milestone in the bond market’s recovery from crisis: The iconic computer company borrowed $1.5 billion at the bargain-basement interest rate of only 1%.
Why No Jobs?
Sometimes commonsense economics trumps high theory. Firms aren’t hiring because it isn’t cost effective. The owner could hire more people and expand his business, but it isn’t cost effective.
Secondary Sources: Spending, Stagnation, Presidential Advisers
A roundup of economic news from around the Web.
Freddie Mac: $4.7 billion Loss, REO Inventory increases 79% YoY
Freddie Mac reported that their Real Estate Owned (REO) inventory increased 79% year over year, from 34,699 in Q2 2009 to 62,178 in Q2 2010.
Higher Freight Volume Lifts Buffett’s Railroad Revenue
Warren Buffett has often said he’d look at rail car loadings if he were forced to pick just one economic statistic to be stuck with for the rest of his life. The figure, he says, is a great real-time proxy for the health of the economy.
Summer of discontent
Why the White House has seen better days.
Time to admit Obamanomics has failed
It's no coincidence that Christina Romer, chairwoman of the White House Council of Economic Advisers, announced her retirement the day before Friday's brutal unemployment report.
The Problem With Pensions
Here, a peek into a very sobering report on how badly underfunded public pension are.
Obama’s Failed Stimulus and Opportunities Forgone
The immediate effects of Obama’s policies are easily seen. We can observe the workers of which billions of dollars have been spent to employ.
Heritage in Focus: The Bush Tax Cuts and the Deficit Myth
The leftist majority in Congress likes to blame their trillion-dollar budget deficits on the Bush tax cuts of 2001 and 2003, but The Heritage Foundation’s Brian Riedl disagrees.
Blaming Bush Doesn’t Create Jobs
Speaker Pelosi can try to play the blame game all she wants, but the facts of her economic record are rapidly catching up with her.
Why Buying Manpower Won't Work
With earnings well off its pre-recession peak and valuation stretched by historical standards, its highly cyclical shares appear primed for a contraction.
Should Corporate America's Excess Cash Be Returned to Shareholders?
The relationship between dividend returns and total returns.
Will US Avoid Double Dip Recession? Goldman Sachs Says Yes
Goldman's report confirms that QE2 is right around the corner.
Economy Will Likely Recover With Inflation, Not Deflation, to Follow
While transfer payments to middle-/lower-income recipients aren't going to be all that stimulative given falling housing prices, that still doesn't spell deflation.
Drilling Moratorium Devastating to Gulf
The president’s policy halts more than energy exploration: It also hurts the coastal economy and the day-to-day lives of workers.

Research, Reports & Studies
Time for a "Demographic Stress Test" for the Western Economies
The current global economic crisis is at heart a banking crisis (originating with bad debts in the US mortgage sector)--and historically banking crises end up being very expensive for modern Western taxpayers.
Down with Legal Tender
When studying the history of money, one cannot help wondering why people should have put up for so long with governments exercising an exclusive power over it for almost 2,000 years.
Cutting Is So Hard to Do
In recent months, fiscal austerity among governments on all levels has come to the political fore, albeit for different reasons.
No Secret to Improving Intelligence
Our intelligence bureaucracy is about as ineffective as any other facet of the federal government. That's why we need to make the system leaner and nimbler, less bureaucratic and more responsive to elected officials.
Heritage Employment Report: July Jobs Scarce
It is clear that the labor market has faltered since the spring. Employers are reluctant to hire given the looming tax increases and uncertainty over the economy and new regulations that will be imposed by federal bureaucrats.
RCM: Wells Fargo Economics Group: Weekly Economic & Financial Commentary
Slower Growth Looks Certain, but Not a Double Dip.
Ch 5: The Great Depression and Keynes’s General Theory
Why was the economy languishing through the 1930s? Several economic historians cite government policies such as the Smoot-Hawley tariff of 1930, the tax hike of 1932, and the NIRA along with similar policies as hampering market adjustments and thereby delaying recovery.

Economists’ Comments & Opinions
Not In 25 Years, Social Security Is Bankrupt Now
For the first time in its history the Social Security program will pay out more money than it takes in. This watershed event will occur this year, to the tune of $41 Billion dollars. Under any rational accounting standards this makes the Social Security program bankrupt. And that's right now, not in 25 years when the so-called Trust Fund becomes insolvent.
Canada, Land of Smaller Government
Its corporate income tax rate is 18% and falling. America's is 35%.
The end of responsibility
From homeowners to government, the buck stops nowhere.
Make the '03 Tax Cuts Permanent, But Curb the Enthusiasm
Here's hoping Congress does in fact make the '03 reductions law, but if so, investors and citizens more broadly would be wise to curb their enthusiasm. In no way would permanency be a sign that the U.S. economy is set to roar.
Fairness and the Capital Tax Fetish
No serious economist thinks higher dividend and cap gains taxes are efficient ways to raise revenue. Why not limit deductions for high earners instead?
Taxes, Fertility and Economic Growth
Our society does not -- despite rhetoric to the contrary -- put much value on raising children. Present budget policies punish parents, who are taxed heavily to support the elderly.
How public worker pensions are too rich for New York's - and America's - blood
He did nothing illegal. At 44, Hugo Tassone retired from the Yonkers police force with an annual pension of $101,333 - thanks to overtime pay he tacked on to his $74,000 salary. Tassone told The New York Times it was the pension he could collect after 20 years of service that attracted him to the job in the first place.
What Would it Take to Cut Government Spending?
Reforms won't be easy to implement, because of the havoc brought about by runaway spending, taxing, borrowing and inflation. There are two main approaches to reform: go slow or go fast.
The Great Privacy Debate
Only one thing is certain here: Nobody knows how this is supposed to come out. Cookies and other tracking technologies will create legitimate concerns that weigh against the benefits they provide. Browser defaults may converge on something more privacy-protective.

Graph of the Day
Australia appears to be showing the same signs of a housing bubble that the U.S. did prior to its collapse
See: U.S. Job Market Loses Steam

Book Excerpts
"To allow unrestricted access to either capital taxation or to public-debt issue ensures that a revenue-maximizing government may appropriate future revenue potential for current-periodA usage, a result that the potential taxpayer could hardly be expected to prefer." –Geoffrey Brennan and James M. Buchanan, The Power to Tax: Analytical Foundations of a Fiscal Constitution (1980)

Did You Know
Michelle Obama's vacation to Spain is estimated to cost taxpayers almost $75,000 a day. Mrs. Obama flew in on a type of aircraft used by Vice-President Joe Biden, which costs the government $11,555 an hour to operate the plane, according to the air force. Assuming a nearly eight-hour flight to nearby Malaga, the total round-trip cost of the flight is about $178,000. The Obama family will reimburse the government an amount equal to two first-class tickets, officials said, but, a round-trip first-class flight to Málaga only costs about $7,400 a piece.

8/6/10 Post

BUZZ: U.S. Employers Shed 131,000 Jobs in July

News
State aid bill a gamble for Dems
Even though party leaders expect that approval will be a slam-dunk, some early responses from rank-and-file Democrats have raised red flags about the optics of returning to a special session to vote on more spending.
New Medicare Report: Is It Based on a Rosy Scenario?
New report also confirms Medicare and Social Security headed for insolvency in the long term.
Senate passes $4.5B nutrition bill
The Senate voted to approve a $4.5 billion childhood nutrition bill on Thursday, which funds food programs in public schools.
US healthcare reform faces fresh challenge
One month before the first benefits of the Obama administration’s healthcare reforms start to kick in, nearly half of all US states are challenging key parts of the new law, with many seeking to have it ruled unconstitutional.
Senate Democrats' small-business deal
Senate Democrats set in motion a new plan Thursday night to free up their small business relief bill: guarantee votes first next month on small businesses relief from tax reporting rules in the Democrats’ own healthcare reform law.
Homeowner Bailout: States with High Unemployment Get Help
In order to avoid more foreclosures, states with the highest unemployment will receive $600 million in government aid.
Senators Break for August Recess
Senate Democrats ran for the exits armed with a few legislative victories and a handful of defeats going into the five-week summer recess.
Fannie Mae asks for less money from gov't and says it can cover most mortgage losses
The government-controlled mortgage buyer said Thursday it has now set aside enough money to cover the majority of losses stemming from bad loans made from 2005 through 2008.
U.S. Ends Private Talks on Web Rules
U.S. officials called off closed-door talks with lobbyists aimed at reaching a compromise on ways to regulate Internet traffic, saying they couldn't reach a solution.
China looks to US, others for more corn to feed livestock; food prices could rise worldwide
China could be about to increase its corn imports, offering American farmers a chance for greater profits but making it likely U.S. meat producers who use the grain for feed would have to raise their prices.
Romer resigns as chief of Obama's economic council
Christina Romer, head of President Barack Obama's Council of Economic Advisers, will step down and return to her teaching post at the University of California, White House officials said on Thursday. The resignation will take effect on September 3.
Dollar, Euro Weaken on Yen After Weak Jobs Report
The dollar broke below 86 yen to as low as 85.72 yen in the wake of the disappointing jobs report.
Wheat prices soar. Are bread prices next?
The price of wheat has surged more than 80% from its seven-month low in June. Prices continued to rally Thursday, surging to their highest level since August 2008.
Healthy profits, few jobs: How long can corporate America’s profit rebound continue?
The quarterly results show that American profits are already back to 11% of GDP.
Defying gravity and history: Despite dire predictions of a repeat of the 1930s, trade is bouncing back
There is even some evidence that activity has rebalanced from the lopsided trade pattern that existed just before the crisis.
U.S. Stocks Tumble After Weaker-Than-Estimated Jobs Report
U.S. stocks tumbled, paring a weekly advance for the Standard & Poor’s 500 Index, after weaker-than- forecast growth in company payrolls added to evidence the economic recovery is slowing.
Treasurys gain on payrolls; Fed action seen as more likely
Treasury prices rose Friday, pushing yields on 2-year notes to a record low, after a weak report on the labor market raised expectations that the Federal Reserve may take steps next week toward using monetary policy to support the faltering U.S. economy.
2 Top Economists Differ Sharply on Risk of Deflation
The split between the chief economists, whose work helps inform trading strategies recommended to investors by their firms, echoes a broader and sometimes fiercer debate among academic economists and commentators about the threat posed by deflation and what the government’s response should be.
Industrial production slip unlikely to dent German growth: Italian second-quarter GDP grows 0.4%; Spanish GDP growth seen at 0.2%
Industrial production in Germany fell in June, but the unexpected decline isn't likely to have put a major dent in second-quarter growth for Europe's largest economy, economists said Friday.

Blogs
Private Enterprise Does It Better
Why freedom and responsibility triumph over regulation and central planning.
Romer Steps Down from Council of Economic Advisors
While working for Obama, she was a chief architect of the stimulus program, a strong advocate for more government spending, and a believer that government should be in the driver's seat of the economy.
We Aren’t Exaggerating When We Rail Against Threats to Economic Liberty
Oregon officials told a 7-year-old with a lemonade stand that she needed to obtain a temporary restaurant license or incur a fine.
Rethinking Birthright Citizenship
Washington has apparently rediscovered a legitimate part of the immigration debate, one often treated as the untouchable third rail of the issue—birthright citizenship for children of illegal aliens and foreign visitors.
Energy Subsidies Prove Unsustainable
When faced with a need for drastic budget cuts and job creation, countries such as Spain, the United Kingdom, Germany, France, and the Czech Republic have all made the decision to reduce subsidies for green energy programs such as wind and solar energy.
It’s Official: Medicare’s Finances Shadowed by Uncertainty
The 2010 report shows that Medicare has a $30.8 trillion shortfall. Last year it was $38 trillion. Big improvement, right? Not so fast.
The Obama Tax Hikes, Another Step Toward a European Welfare State
The message to the U.S. economy’s job creators from this Administration and Congress is clear: You can expect higher spending, higher taxes and higher deficits for years to come.
What Recovery Summer?
The Obama Administration announced “Recovery Summer” in June to highlight the expected gains in jobs and economic strength resulting from Obama’s stimulus. Well, maybe next summer.
Summertime Blues for the Taxpayer
Sens. Tom Coburn (R-OK) and John McCain (R-AZ) have put out an excellent report on the 100 most wasteful projects funded in President Obama’s $862 Stimulus plan.
The High Cost of Over regulating Food
Intelligent food safety regulation is necessary. But unnecessary food safety regulation hurts everyone.
Payroll Data and a Deeper Dive into Checking Out
The weekly finale of the world’s wildest reality show is upon us and the plot thickens as our pulse quickens. The top story is the jobs report.
Economists React: ‘The Great Stall’ Takes Hold
Economists and others weigh in on the decline in U.S. jobs.
Maybe We Should Prohibit the Wheel, Too
Never mind that until the current downturn U.S. manufacturing output was at an all-time high and still growing. Even now it remains the largest in the world. The lie of U.S. manufacturing decline – repeated ad nauseam – conveniently paves the path for greater government control over the economy.
State/Local Job Cuts Accelerate
State and local governments shed 48,000 jobs in July, the biggest drop in a year and almost double last month’s drop, according to today’s employment report.
President Obama's Pro-Union Stance
"The real threat to a robust recovery on the labor side has come from employer and entrepreneurial fears that once the economic environment improves, a Democratic Congress and administration will pass pro-union and other pro-worker legislation that will raise the cost of doing business and cut profits. In this way the obvious pro-union-pro-worker bias of the present government has contributed to a slower recovery, especially in labor markets."
Broader U-6 Jobless Rate at 16.5%: May Be Headed Higher
The comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs.
Housing Insanity
It's true that this particular program is small--I don't think the economy is going to be brought to its knees by several hundred houses. The important thing, however, is that this is how the government thinks about housing.

Research, Reports & Studies
Need for Moratorium Mitigated by New Oil Spill Response Capacities
In the wake of the Deepwater Horizon disaster, the Obama Administration initiated a moratorium on deepwater oil exploration that impacted approximately 33 ongoing operations.
2010 Social Security Trustees Report Continues to Show the Urgency of Reform
The debate about whether Social Security faces a problem and needs to be fixed is over. The 2010 Trustees Report shows that the program faces massive permanent annual deficits starting in just five years.
Transitional Dynamics of Dividend and Capital Gains Tax Cuts
… studies the impact of the 2003 dividend and capital gains tax cuts.
Kauffman Economic Outlook: A Quarterly Survey of Leading Economics Bloggers
This paper reports the results of a survey of top economics bloggers. The survey was conducted in mid-July 2010 by soliciting input from among the top 200 economics bloggers as ranked by Palgrave’s Econolog.net.

Economists’ Comments & Opinions
When Labor Is Capital: The Limits of Keynesian Policy
The economic mystery of 2010 is the persistence of high unemployment, in spite of stimulus that follows the prescription of the prevailing Keynesian orthodoxy. Here’s an alternative to that orthodoxy.
Education jobs bill is motivated by politics
As of last school year, the money for 5.5 percent of the 6 million K-12 jobs nationwide came from Washington through the 2009 stimulus; the new money reinforces this dangerous dependency.
Washington Wages War On Investment
Will higher tax penalties on investment really spur jobs and faster economic growth? Most commentators would say no. It's really a matter of economic common sense. But Tim Geithner says, Yes!
Rewriting The History Of The '30s To Justify More Spending In 2010
Liberal economist Paul Krugman is beating the debt drum to ward off recession relapse. Little wonder. He finds himself trapped between the economics and politics of a still-struggling economy. To extricate himself, he is rewriting the history of the 1930s. The problem is that what he is not telling us is far more important than what he is.
McCollum v. ObamaCare
The federal Medicaid program, he notes, could soon be eating up 36% of Florida's budget—and that's before ObamaCare's new costs. Federal health, education, environmental and labor mandates are chipping away at the states' ability to keep their taxes low, to grow jobs, and to devote money to their own priorities.
Not So Golden
Massive debts, bickering politicians, a confusing and inept legislative process: Welcome to California.
SALTSMAN: Refresher course in personal finance
Congress is spending us toward national default.

July 2010 Employment Situation Hearing

"Unfortunately, today we received more bad news for American workers and their families. The unemployment rate remained elevated at 9.5 percent. Total non-farm payroll employment decreased by 131,000. After excluding the layoffs of 143,000 temporary Census workers, private sector payroll job growth remains anemic at 71,000. At this slow pace it will take much of the decade to return to normal employment levels.

The University of Michigan's July Index of Consumer Sentiment fell dramatically by 10.8 percent to 67.8, the lowest level in a year. The index of Consumer Expectations fell even further to 62.3, the lowest level since March of last year.

Along with the failure of the massive Democratic stimulus to put people back to work, families and businesses fear the dangerous levels of debt incurred by this Congress and a host of job-killing, anti-growth policies coming out of Washington including higher taxes, higher energy prices, burdensome regulations, and constant bailouts of special interests." - Congressman Kevin Brady, Ranking Republican House Member, Joint Economic Committee

Congressman Brady's opening statement to Dr. Hall, in reference to the Employment Situation Report for July 2010

See the full Employment Situation Summary Report ---July 2010

Graph of the Day
The Obama Tax Hikes: Killing Job Creation
See: Retailers Suffer Lazy Days of Summer
GALLUP: U.S. Underemployment Steady at 18.4% in July

Book Excerpts
"For the unemployed to be granted support by the government or by the unions only serves to enlarge the evil. If what is involved is a case of unemployment springing from dynamic changes in the economy, then the unemployment benefits only result in postponing the adjustment of the workers to the new conditions." –Ludwig von Mises, Liberalism: the classical tradition (1927, c2005)

Did You Know
For the last six years Mississippi has been the fattest state in the nation., The Centers for Disease Control and Prevention reported this week that 34.4% of Mississippi adults are obese.

8/5/10 Post

BUZZ: Show Me ObamaCare

News
SC gets $138 million in mortgage assistance
The Obama administration on Wednesday announced that it has approved mortgage-assistance proposals submitted by state Housing Finance Agencies in South Carolina, North Carolina, Ohio, Oregon and Rhode Island.
Geithner Defends Plan to Let Tax Cuts for Wealthy Expire
Mr. Geithner argued Wednesday that the wealthy tend to save more of their tax breaks than do other groups, so in letting their taxes rise there would be minimal impact on economic activity.
US jobs market still bleeding despite private hirings
A key US government report Friday is expected to show already high unemployment nudging up as firms remain reluctant to hire in large numbers.
Reality sets in for states on Real ID
Driver's licenses must meet rules.
In Germany, a Broad Recovery Is Under Way
German exports are booming again and so is employment. The country’s unemployment rate is 7.6 percent, almost at the pre-crisis level, and down from 9.1 percent in January.
Congress: Living High on the Backs of Taxpayers
As the rest of the country suffers, congressional perks and benefits are on the rise, costing taxpayers $4.66 billion a year—is it time for Congress to take a pay cut?
Ireland's unemployment rate rises to 13.7 percent as university students join welfare lines
Ireland's unemployment rate has reached a 16-year high of 13.7 percent as idle university students and laid-off professionals joined the welfare lines, the Central Statistics Office reported Thursday.
Congress Set to Boost Aid to States
Congress took a decisive step Wednesday toward finalizing a $26 billion bill offering aid to states, a surprise win for Democrats keen to demonstrate they're taking action on an economy showing signs of weakness.
The breakfast index: The cost of breakfast rises
The raw ingredients for breakfast in much of the rich world have increased in price by 25% since the beginning of June.
Billionaires to give away fortunes
Half of money will go to charity.
Euro higher after inspectors report Greek progress
The euro gained ground against the dollar on Thursday as European and International Monetary Fund inspectors said Greece has made considerable progress in dealing with its financial crisis
Hey, Dude, Where's My Job?
Minimum Wage Jump Teaches Teens Harsh Lessons.
European Central Bank, Bank of England hold steady
The European Central Bank and the Bank of England both left monetary policy unchanged Thursday, with key lending rates remaining at record lows.
State aid bill to bring House back
The sudden turnaround followed twin 61-38 Senate votes in which Maine Republican Sens. Susan Collins and Olympia Snowe joined in support of the $26.1 billion measure after Democrats agreed to pay for the costs with cuts from their own priorities, including food stamps for the poor.
In GOP Majority, Committees May Face Cuts
House Republican leaders are considering restructuring and possibly shrinking committees if they retake the majority this fall, according to several House GOP sources familiar with the discussions.
GOP Uses Health Care Playbook for Tax Cuts
Senate Republicans stepped up their withering criticism of Democrats over taxes, believing they have a line of attack that could prove as effective with voters in the midterm elections as their opposition to health care reform was last year.
GOP Marks Off Common Ground for Obama
House Republicans have identified some issues they might be able to work with President Obama on next year if the November elections deliver a GOP majority. But a good deal of partisan distrust would have to be overcome.
Prognosis guarded ahead of annual financial checkup for Medicare and Social Security
Seniors' groups are lobbying against benefit cuts, while conservatives say they will oppose tax increases, creating a difficult political environment for compromise.
So long, new deepwater drilling regulations
Democrats in the Senate rejected taking up a new oil spill response bill because of a dispute over who foots the costs of future spill cleanups and more importantly, how much those parties -- largely oil and exploration companies -- will pay.
What would FDR do? A Roosevelt speculates
Despite the fact that just about everyone has an opinion on it, the jury's out on whether President Obama is a latter day Franklin Delano Roosevelt.
Jobless claims jump to 3-month high
There were 479,000 initial jobless claims filed in the week ended July 31, up 19,000 from a upwardly revised 460,000 the previous week.
Tax cut squabble grows louder
Washington's big debate - whether or not to extend the Bush-era tax cuts – appears to be headed for a showdown when Congress returns from its summer break next month.
Back-to-school shopping starts slowly
Consumers are continuing to keep tight control of their spending as the economic recovery tugs along at a slower pace than most analysts predicted earlier this year.

Blogs
Secondary Sources: Taxes and Small Business, Exports, Technology and Jobs
A roundup of economic news from around the Web.
The Limits of Policy Analysis
Naturally, this has put me in mind of just how hard it is to predict policy outcomes--how easy it is to settle on some intuitively plausible outcome, without considering some harder-to-imagine countervailing force.
Compensation Study: Employers Pay More, Employees Make Less
Employers might be paying more for compensation but employees aren’t taking home the extras, according to a new study.
Great Moments in Government-Run Healthcare
What really astounds me is not that a Swedish man sewed up his own leg after waiting for a long time in a hospital... The really disturbing part of the story is that the hospital then reported the man to the police.
Bankruptcy Filings Drop in the South
While filings were up 9% in July compared to the same time a year earlier, they were down in a handful of southern states, such as Tennessee and Mississippi.
Primaries Show Continued Republican Enthusiasm
There were no huge surprises in primaries held yesterday in Kansas, Michigan, and Missouri. But one thing was clear. Many more voters showed up for the Republican primaries than on the Democratic side.
Worth a thousand words
After 50 years of communism, life expectancy has gone up dramatically (about 25%) in both countries. But now Portugal is more than twice as prosperous as Cuba.
Earnings, Not Lack of Social Security, Increased Past Poverty
...the real reason that half of the elderly lived in poverty before Social Security was that about half of everyone lived in poverty then, for the simple reason that the country was a heck of a lot poorer.
Imaginary Savings Used to Justify $26-Billion in Spending
Using the classic Washington fib that “It’s paid for,” Congress is spending an extra $26-billion to bail out state governments.
Extreme Judicial Activism on Marriage
Governments derive their just powers from the consent of the governed. The people of California, and the United States, have made clear in numerous ways that they have not consented to the redefinition of marriage.
The Obama Elite vs The American People
The facts are becoming quite clear. Kagan, Walker, Gibbs, and Obama all give the same weight to the will of the American people as expressed at the ballot box: “Nothing.”
The Two GOPs
As the fall elections approach, two factions within the congressional GOP have emerged. One is short-term oriented and just wants to return the GOP to power in Congress. The other is more ideas driven and views the upcoming election as an opportunity to push for substantive governmental reforms.
The Failure of Socionomics, Part 2
Even when analyzed on its own terms, socionomics fails rather badly as a social theory and as a tool of stock market prediction.
Why Government Spending, Public Sector Jobs Are Burden to Society
Society derives certain benefits from these expenditures but beyond a certain point, government spending, public sector employees have negative effects.
Five Reasons to Be Bullish
Five Reasons to Be Bullish
Financial Virus Permeates the System
Some sharp minds on the Street are "going dark" and removing themselves from the markets.
Once Again, the Social Security Trust Fund Has No Money in It
Almost as soon as the 2010 Social Security trustees report comes out today; various groups will claim that the program is fiscally healthy because its trust fund won’t run out until sometime in the 2030s. Sadly, the reality is very different.

Research, Reports & Studies
Going Soft: How the Rise of Software Based Innovation Led to the Decline of Japan's IT Industry and the Resurgence of Silicon Valley
...examines the change in the nature of Information Technology (IT) and the effects it has on the performance of the IT industries in the United States and Japan.
An Update on State Budget Cuts : At Least 46 States Have Imposed Cuts That Hurt Vulnerable Residents and the Economy
With tax revenue still declining as a result of the recession and budget reserves largely drained, the vast majority of states have made spending cuts that hurt families and reduce necessary services.

Economists’ Comments & Opinions
Your Stimulus Dollars at Work: Going to Places Regardless of Economic Need
"Hard-hit Florida ranks last in stimulus benefits per resident despite having the nation's fifth-highest unemployment rate. Nevada has the nation's worst unemployment — 14.2% — but ranks 46th in stimulus benefits."
What if the jobs don't come back?
Based on the history, pre-recession unemployment rates won't be seen again until 2027 as idled workers find it harder and harder to land jobs.
Squeezing the Rich Is Poor Way to Spur Growth: Commentary by Caroline Baum
To ignore evidence that the rich behave differently is silly. The government can’t get more blood from a stone, yet it keeps trying.
POWELL: The unemployment president
Obama joins tax hikers hall of shame.
Buffett on World's Growing Wealth
"We're in the early stages of fairly widespread enormous wealth around the world. The world will get more prosperous as we go along. Human potential has come nowhere close to being fully realized. As people exercise that potential and governments allow it to thrive you're going to have more and more wealth throughout the world."
Private Enterprise Does It Better
Free enterprise does everything better. Why? Because if private companies don't do things efficiently, they lose money and die. Unlike government, they cannot compel payment through the power to tax.
The Public Option Rises – Again
Liberals, who see the public option as the first step toward their goal of a single-payer government health care system, never truly abandoned the idea.
Saying No Is Not Nihilism
It's not just tea partiers that are seeking smaller government these days.
Did the Feds End the Great Recession?
A report released last week by prominent economists Alan Blinder and Mark Zandi and it says what the Obama Administration had hoped all along. So, with all due respect to Blinder and Zandi, I'll ask for a little patience to summarize my main criticisms of their report:

Graph of the Day
SeekingAlpha: The number of unemployed in Germany decreases while the number of the unemployed in the United States continues to rise
See: The Crisis in Deeply Underwater Mortgages, Unemployment Edition
See also: The Truth About the 2001-2003 Tax Cuts

Book Excerpts
"Just as there cannot be a uniform price for all kinds of labour, an equality of demand and supply for labour in general cannot be secured by managing aggregate demand. The volume of employment depends on the correspondence of demand and supply in each sector of the economy, and therefore on the wage structure and the distribution of demand between the sectors. The consequence is that over a longer period the Keynesians remedy does not cure unemployment but makes it worse." –F.A. Hayek, The Collected Works of F.A. Hayek, Vol. 6 (1999)

Did You Know
Some wasteful stimulus spending:
• $62 million for a tunnel to nowhere in Pittsburgh, PA that even Governor, Ed Rendell called “a tragic mistake”
• $1.9 million for international ant research
• $529,648 to study the effects of local populations on the environment…in the Himalayas
• $700,000 to study why monkeys respond negatively to inequity
• $456,663 to study the circulation of Neptune’s atmosphere
• $200,000 to help Siberian communities lobby Russian policy makers

8/4/10 Post

BUZZ: CBS Poll: 81% Say U.S. On Wrong Track

News
Private sector sees job gains in July
Private sector employment rose slightly more than expected in July adding 42,000 jobs, compared to the mere 19,000 jobs added in June.
Toyota earnings up 27% despite recalls in U.S.
Despite ongoing recalls in the U.S., Toyota posted a 27% increase in net revenue for its fiscal first quarter.
Futures turn higher after jobs report
With the release of the private sector job report yesterday, U.S. stocks futures erased earlier losses and moved higher.
Yen Rises to Eight-Month High Versus Dollar on U.S. Slowdown, Fed Outlook
The yen touched an eight-month high against the dollar on speculation growth in the world’s biggest economy is slowing and the Federal Reserve may signal additional stimulus measures at next week’s policy meeting.
China seeks to widen gold market
China has moved to liberalize its gold market further, increasing the number of banks allowed to trade bullion internationally and announcing measures that will encourage development of gold-linked investment products.
Oil Falls From Three-Month High on Concerns Over U.S. Recovery
The Energy Department is scheduled to release its weekly inventory report today at 10:30 a.m. in Washington but the report is forecasted to show that U.S. supplies fell for the first time in three weeks.
Geithner: Tax cuts for rich a '$700 billion mistake'
Treasury Secretary Tim Geithner is expected Wednesday to back the idea of letting tax cuts for the wealthiest Americans lapse as a step toward getting the nation's fiscal house in order.
Summer of no love
Thanks to the persistently lousy economy, a succession of major crises and middling distractions it’s turned into Obama’s Summer of No Love.
Democrats Punt Defense Bill in Bid for McCain's Backing
Senate Democrats are putting off consideration of the defense authorization bill until after the summer recess in hopes that Sen. John McCain will be a more agreeable negotiator after his August primary.
Senate Dems Get Help From Governors On State Aid Bill
Senate Democrats are going all out in hopes of winning 60 votes today to cut off debate on legislation that would extend Medicaid assistance to states and avert teacher layoffs, teaming up some of the nation's governors to help push the bill over the finish line.
GOP Senators Decry Stimulus Spending
Sens. Tom Coburn, R-Okla., and John McCain, R-Ariz., today unveiled a report that that identifies 100 projects funded by the $862 billion stimulus package that they contend wastes taxpayer money.
Democrats Likely to Lower Fiscal 2011 Spending Cap to GOP’s Proposed Amount
Senate Republicans may be on track to force the Democratic majority to shave roughly $6 billion from its proposed $1.114 trillion cap on fiscal 2011 discretionary spending.
$100M worth of merchandise seized, 11 indicted in West Coast counterfeit goods bust
The merchandise was illegally imported from China and includes bags, sunglasses and other items labeled with more than 70 brand names such as Gucci, Prada and Nike.
Working 12 months for 11 months pay
Some 22 states had furloughs in the past year, and at least 13 of them plan to continue them into 2011.
Calls for Review of 14th Amendment Gain Some Republican Support
Senate Republican leaders are backing calls for a review of the 14th Amendment’s guarantee of citizenship to the U.S.-born children of illegal immigrants in what critics say is a bid to energize their base going into the midterm elections.
U.S. Savings Rate at Highest Level in a Year
The Commerce Department reported Tuesday that the personal savings rate -- the amount of each paycheck that goes unspent -- jumped to 6.4 percent in June, the highest rate since June 2009. That's a far cry from the heady days of the spending boom when Americans set aside less than 1 percent of their paychecks.
125 Days Late, a State Budget With New Taxes
Lawmakers completed one of the latest budgets in New York State history on Tuesday night, passing a last piece of legislation that will raise an additional $1 billion — in part by increasing taxes on the sale of clothing and on a variety of businesses.
Foreclosed On—By the U.S.
With Bear Assets, Fed Balances Preserving Investment and Helping Borrowers.

Blogs
Secondary Sources: Tax Cuts, Inflation Expectations, Working Mothers
A roundup of economic news from around the Web.
Sentences to Ponder
"A report from Harvard's Kennedy Center last year found that the world could cut global CO2 emissions by about 6 percent simply by scrapping price supports for fossil energy."
Second-Quarter Slowdown Likely Worse Than First Thought
The slowdown in economic growth recorded in the second quarter was likely even less robust than initially reported on Friday, according to new inventory data released today.
How Don Boudreaux Got Hooked on Economics
...the supply curve, the demand curve, and the price ceiling--are the most important three lines in economics.
MBA: Mortgage Purchase Applications increase slightly last week
The purchase index has increased slightly for three straight weeks - but is still 40% below the level of the last week of April (and about 33% below the last week of April using the 4-week average).
With Wallets Thin, Consumers Face Zero-Sum Game
Consumers’ reluctance to spend is a headwind for second-half growth, not quite scuttling the recovery but not providing a strong boost either. Only a better job picture will lighten the mood.
Money and Liberty
...there is a good reason for government to not use a free currency – it’s the best way to tax its citizens without them ever knowing about it.
Tax Cuts vs. Deficits
As Real Time Economics recently noted, ending the tax cuts won’t make a huge dent in the deficit. The Tax Policy Center points to Treasury estimates that show a cost of $199 billion in fiscal year 2011 and $3.7 trillion over 10 years for extending all the tax cuts.
Personal Bankruptcy Filings up 9% in July
Excluding 2005, when the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" was enacted (really a pro-lender act), the record year was in 2003 when 1.62 million personal bankruptcies were filed. This year will be close to that level.
Competition Breeds Success
...road builders do things government workers said “could not” be done. Another story this week provides a similar example from another government-dominated field, K-12 education.
Economists Call for Clarity on Government Policy
A panel of economists Tuesday urged U.S. lawmakers to resolve outstanding uncertainty over tax and other policies to help the sluggish recovery, a difficult assignment for Congress as it heads into a contentious campaign season.
ISM Non-Manufacturing Index shows expansion in July
The July ISM Non-manufacturing index was at 54.3%, up from 53.8% in June - and above expectations of 53.7%. The employment index showed expansion in July at 50.9%.
No Such Thing as a Simple Mortgage
Much of this paperwork is the product of earlier acts designed to help uninformed borrowers deal with the complexity of their loans. If you read and understand all of it, perhaps you do. But there's so much of it that it's relatively easier to overlook something.
Some Links
Robert Barro on "stimulus" and more.
Pending and Existing Home Sales
It is hard to tell from the Pending Home sales index how far existing home sales will fall in July and August.
Obama’s Bogus 8 Million Jobs Saved
By the only objective standard available, President Barack Obama’s $862 billion economic stimulus has been a complete failure.
Tax Cut Myth Busting, Round 2
Bill Gale’s discussion of the five myths about the Bush tax cuts was an unusually slanted piece from a normally straight-shooting liberal economist.
Obamacare Loses Big in Missouri; Voters Reject Individual Mandate
Missouri voters dealt Obamacare a significant setback yesterday, approving a statewide ballot measure with an overwhelming 71 percent of the vote.
Let’s Get the Gulf Back to Work
Lifting President Obama’s job-killing oil ban is only the first step toward economic recovery in the Gulf. The region, and our country, are also in desperate need of oil spill liability reform that sufficiently aligns risk and liability with individual behavior.
Great Moments in Government-Run Healthcare
The bureaucrats in Sweden’s government-run healthcare system obviously were not pleased that he called attention to their failure.
The Failure of Socionomics, Part 1
In the socionomics literature, the tendency to rely on arbitrarily selected anecdotes is proof of the futility of the theory.
The Main Event: Inflation vs. Deflation
Two roads suggest very different courses of action.
Boomer Dynamics, Housing, Jobs Creation, and the Falling Participation Rate
Census firing is about to take back another chunk of census hiring; expect another lousy jobs report this month.

Research, Reports & Studies
Medicare Part D and the Financial Protection of the Elderly
...examines the impact of the expansion of public prescription drug insurance coverage from Medicare Part D on the elderly and evidence of substantial crowd-out is found.
Bureaucratic Tyranny or the Renewal of Self-Government: The Beginning of Centralized Administration in America
Today, we have a government skilled in obfuscation. Elected officials are so intent upon avoiding responsibility that even the “regular Statement and Account of the Receipts and Expenditures of all public Money,” which the Constitution directs to “be published from time to time,” is a multi-volume monster.
RCM: Wells Fargo Economics Group: Personal Income Was Largely Unchanged
Personal income and consumer spending were unchanged in June. Prices declined 0.1 percent, however, which means spending rose slightly after adjusting for falling prices. The saving rate rose to 6.4 percent.

Economists’ Comments & Opinions
Snooki Tanning-Bed Protest Splits Sin From Taxes
The first problem with this is that imposing a tax to improve public health doesn’t always succeed as policy. That’s partly because tax laws can’t keep up with scientific research, says J.D. Foster of the Heritage Foundation.
The Crisis When Our Debt Goes 'Pop'
As the Congressional Budget Office puts it, if the national debt continues to grow out of control, a "growing portion of people's savings would go to purchase government debt rather than toward investments in productive capital goods such as factories and computers; that 'crowding out' of investment would lead to lower output and incomes than would otherwise occur."
Rahn: Evidence and denial
Obama advisers refuse to believe they're failing.
An Age of Diminished Expectations?
In the end, policymakers must remember that whether or not the US and Europe avoid a lost decade depends on their ability to retain productive vitality in their economies, not simply on short-term demand-stimulation measures.
More Fed Power Won't Save the Economy
After failing to catch the last bubble the Fed and Treasury have been selected to stop the next crisis... really?

Graph of the Day
Cato: State debt doubles since 2000
See: Long Way to Go for Recovery
See also: Home Data Slide Again as Tax Credit Expires

Book Excerpts
"In essence, economics is the study of property rights. Without scarce resources property rights are pointless. The allocation of scarce resources in a society is the assignment of rights to uses of resources. So the question of economics, or of how prices should be determined, is the question of how property rights should be defined and exchanged, and on what terms." –Armen Alchian, Pricing and Society (1967)

Did You Know
About a third of people in nine states were obese in 2009, a dramatic increase from 2007, when only three states had obesity rates that high. Obese Americans cost the nation an estimated $147 billion in weight-related medical bills in 2008, double the amount a decade ago, government data released last summer show. Obese people have medical bills $1,429 a year higher than normal-weight people.