10/13/10 Post

BUZZ: Cities Hide Pension Liabilities, Study Says

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

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

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

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

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

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

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

10/12/10 Post

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

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

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

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

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


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

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

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

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

10/8/10 Post

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

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

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

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

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

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

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

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

10/7/10 Post

BUZZ: Waivers Address Talk of Dropping Health Coverage

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

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

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

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

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

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

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

10/6/10 Post

BUZZ: IMF Cuts 2011 Global Growth Prospects

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

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

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

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

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

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

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