November 1, 2009 - November 7, 2009 Archives
Nov 6 2009, 4:15PM
Worrying About Bailout Banks' Brain Drain
For the past year, the bailout banks have been complaining that the compensation restraints that came along with their acceptance of government aid would cause their best employees to flee to greener pastures. Although we've begun to see some repots of that, Bloomberg has a more tangible one, explaining who some of the major beneficiaries have been: Barclays and Nomura. I don't think we can be particularly surprised, but should we care?
Nov 6 2009, 3:17PM
Hey Obama, We Need a Job Stimulus, Now!
"When the economy's not strong there's a lot of interest in controlling spending," Nelson said.
Oh hi, Republican Rep. Paul Ryan. What's it like inhabiting the body of Sen. Nelson?
Nov 6 2009, 3:01PM
The Deficit Choice: What The White House Is Thinking
Huge deficits will be omnipresent throughout President Obama's first term, complicating his administration's messaging efforts on the economy. But advisers separate the political repercussions from the actual underlying fiscal and monetary policies. In some ways, the short-term politics of the deficit are negligible. They're preferable to the short-term politics of a much higher unemployment rate with no economic growth -- and a smaller deficit.
Nov 6 2009, 2:45PM
Why Did Savings Decline In The Third Quarter?
On Wednesday, I wrote about the odd observation that over the past year workers' hours have decreased while consumption spending has essentially been flat. One thing I noted was that savings have increased over the same period. One commenter, mgoodfel, requested a chart showing that decline. I added one, but in doing so noticed something kind of unexpected: savings suddenly decreased in the third-quarter of this year. What's going on here?
Nov 6 2009, 1:59PM
Guaranteeing Lower Borrowing Costs For Big Banks
As a part of the bank bailout, the government slapped federal guarantees on hundreds of billions of dollars in bonds issued by banks. This was above and beyond the direct capital infusions. The move was meant to calm investor fears in the banks' assets and provide more private capital to the struggling financial institutions. It worked, and they were seen as safer. Investors viewed them as so healthy, in fact, that big banks saved a great deal of money in borrowing costs. But the New York Times reports that a Congressional panel thinks this is a fishy situation. I find that reaction puzzling.
Nov 6 2009, 12:40PM
Fannie Seeks Another $15 Billion In Emergency Capital
Things at government sponsored owned mortgage giant Fannie Mae continued to deteriorate in the third-quarter. As a result, it's requested even more capital from the emergency fund set up by the Treasury. Its bailout's price tag now totals $60 billion, and there's no light at the end of the tunnel.
Nov 6 2009, 12:30PM
The Meaning of 10.2% Unemployment
Nov 6 2009, 12:15PM
You Get a Tax Credit! You Get a Tax Credit!
TaxVox, a Tax Policy Center blog, sighs that this extended tax credit, which follows on the heels of Cash for Clunkers, a credit for car swaps, presages a future in which tax credits are handed out like cars on a special episode of Oprah.
Nov 6 2009, 11:41AM
Leave the Deficit Hawks Alone! (Some of Them, Anyway)
Slate's biz man Daniel Gross delivers an ornithological smackdown to Washington's flock of deficit hawks. It is very amusing! It is also, like the morning bird who starts chirping outside my bedroom window around 6AM every morning, prematurely and cloyingly cheery. Chirp away, Mr. Gross...
Nov 6 2009, 11:01AM
Should Stimulus Projects Create Jobs?
Well, yes. The chief purported basis for February's $787 billion stimulus bill was to reduce the ever growing number of Americans unemployed. Back then, it was a mere 7.6% in January. Now it has risen by more than one-third standing at 10.2% in October. An article today in the New York Times explains precisely why so much of the spending has been so ineffective: because it was aimed less at creating jobs and more at satisfying other goals.
Nov 6 2009, 10:27AM
The Terrible, Horrible, No Good, Very Bad Jobs Numbers
Nov 6 2009, 9:25AM
U.S. Unemployment Jumps to 10.2%
U.S. unemployment leaped to 10.2% in October, from 9.8% in September, according to the Bureau of Labor Statistics. The U.S. economy lost 190,000 more jobs during the month, putting the number of unemployed Americans at 15.7 million. The 0.4% surge is highest the since May. Wall Street won't be happy either: it predicted the rate to increase modestly to 9.9%. October's losses push the unemployment rate into double digits for the first time since 1983, as it edges closer to the post-Great Depression high of 10.8% hit in 1982. I went through the report, looking for some glimmer of hope, but came up empty.
Nov 5 2009, 5:17PM
New Fannie Program Allows Troubled Homeowners To Rent
For months, copious bloggers and econo-pundants have suggested that underwater homeowners should be allowed rent their homes instead of foreclosing. Fannie Mae is finally listening. Sort of. It announced a new program today that would allow some struggling borrowers to rent their homes. But anyone interested in this program shouldn't get too excited: it's meant to be a temporary solution. I'll explain some details, and then pose some questions I still see as outstanding.
Nov 5 2009, 4:00PM
Should We Worry About An Asset Bubble?
Earlier this week, Nouriel Roubini had a column in the Financial Times warning that an asset bubble is forming. He asserts that investors are taking advantage of low interest rates and a weak dollar to speculate on assets, driving up prices. I think he's probably right. He worries, then, that this is forming yet another bubble. That might be true as well, but I need a little more convincing that this asset bubble will be as severe as Roubini appears to believe in the U.S.
Nov 5 2009, 3:41PM
Revisiting the Achievements of the Veterans Health Administration
Back in 2005, Phillip Longman wrote an article in the Washington Monthly, touting the strides the Veterans Administration had made in improving quality. Since then, it has become the model for a fair number of reformers, who frequently cite its ability to control costs and coordinate care as proof that we should move towards such a system nationwide.
Nov 5 2009, 3:31PM
Who's the Boss on Health Care? (You Are, Boss!)
Nov 5 2009, 2:37PM
Climate Bill Passes Senate Committee Without Republicans Or Baucus
The Senate Environment and Public Works Committee managed to clear their latest cap and trade proposal, which seeks a 20% cut in greenhouse gas emissions by 2020. But it did it so without any Republicans or Senator Max Baucus (D-MT) on board. Of course, Republicans and Democrats not agreeing isn't exactly shocking. But what I do find notable is the Republicans' rationale for not voting: economics.
Nov 5 2009, 1:57PM
Swine Flu Politics: Health Reform Takes Hits Over Flu Vaccine
Criticism of the Obama administration's handling of swine flu vaccines has bled into another area of politics: the Democratic push for health care reform.
The administration has come under attack recently for reports that swine flu vaccines would be delivered to two of the most maligned classes of people in American politics--Guantanamo Bay detainees and Wall Street executives--before the rest of the country could get them.
A spokesman for the Guantanamo prison said earlier this week that vaccines should start arriving this month, and that the facility's medical staff had requested them. That statement was later contradicted by White House Press Secretary Robert Gibbs, who denied that any vaccines are on their way to Guantanamo at a his daily briefing with the White House press corps yesterday.
Nov 5 2009, 12:45PM
October Unemployment Poll
Tomorrow a big economic measure will be announced: the national unemployment rate for October. As we have been doing over the past several months, we'd like to give Atlantic readers the opportunity to weigh in with their predictions for how the labor market fared last month. Vote below!
Nov 5 2009, 12:09PM
What Does Productivity Mean For Unemployment?
Generally, when U.S. workers are more productive that's a really good thing for the economy. It means that a higher GDP will result, as output per work hour will be higher. So this news today from the Bureau of Labor Statistics might sound great:
Nonfarm business sector labor productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the U.S. Bureau of Labor Statistics reported today. This was the largest gain in productivity since the third quarter of 2003, when it rose 9.7 percent.
That's a huge jump, but what does it mean in the broader context of unemployment?
Nov 5 2009, 11:53AM
Three Reasons to Support a Soda Tax
Nov 5 2009, 10:40AM
Why Verizon's Droid Falls Short
If we don't yet have a true iPhone Killer, at least we have a serious iPhone competitor in the new Motorola Droid. NYT's David Pogue gushes:
Nov 5 2009, 10:29AM
When The Yankees Win, The Stock Market Doesn't
In case you went to bed early and haven't glanced at the sports page, the New York Yankees won their 27th title last night after beating the Philadelphia Phillies in the 6th game of the World Series. That's great news for fans of the Bronx Bombers, but should the market also cheer? According to some analysis from Bloomberg, history shows that stocks might have been better off if the Yanks lost.
Nov 5 2009, 9:00AM
Jones v. Harris And Mutual Fund Fees
On Monday, the Supreme Court heard arguments on the case of Harris Associates v. Jones. The plaintiffs are three shareholders in the Oakmark mutual fund family, while the defendant is Harris Associates LP, which manages the funds. The claim is that Oakmark charges excessive fees for its mutual fund -- individual investors are charged roughly twice as much as institutional investors -- and has violated the "fiduciary responsibility" set out for it by Congress.
As Simon Johnson and James Kwak point out, as the trial was working its way through the lower courts, a surprising argument broke out. Chief Judge Frank Easterbrook, siding with the mutual fund noted:
Nov 4 2009, 5:52PM
Some Restaurants Wining For Profit
At a time when consumers are cutting back on unnecessary costs, one obvious victim stands out: wine heavily marked up by restaurants. Reuters has a sort of rambling article today about how two major restaurant chains, Morton's Steakhouse and California Pizza Kitchen, are bucking the trend of purchasing less wine and increasing their inventories. As someone who enjoys wine more than he should, I find this strategy interesting from a longer-term perspective, but wonder if restaurants have the right approach to capitalize on its wine-loving customers under current economic conditions.
Nov 4 2009, 4:47PM
The Recovery Will Be Worse Than You Think
Nov 4 2009, 3:43PM
Ben Bernanke Looks Past the Crisis
Ben Bernanke has a bit of a dilemma. On the one hand, he wants to be a credible inflation hawk, to keep expectations of inflation from doing bad things to the economy. On the other hand, he wants to reassure everyone that he's going to keep the liquidity in as long as necessary, to keep expectations of deflation from doing bad things to the economy.
Nov 4 2009, 3:20PM
Small Business Shielded From Sarbanes
The House Financial Service Committee today approved a measure seeking to stiffen fraud oversight by the Securities and Exchange Commission, so you might be surprised to hear that it watered down one antifraud measure in the process. The bill loosened Sarbanes-Oxley audit requirements for small business. Those regulatory changes were put into effect in 2002, as a response to the Enron and WorldCom debacles. Since then, business generally criticized the measure, saying it results in much higher auditor fees. You can debate whether the fraud protection Sarbanes-Oxley provides is worth the costs it imposes, but that those costs are too high for small business seems hard to dispute.
Nov 4 2009, 2:57PM
The Good and Bad of Tax Credits for Clunkers, Homes, Etc
Nov 4 2009, 1:21PM
How Are Consumers Spending So Much?
Could consumers be spending more than they should be? Such a possibility would go against an often heard complaint by economists that Americans aren't spending enough and consequently exacerbating the recession. This is the basis for the so-called "paradox of thrift," which says that when people save during a recession, it makes matters worse because their lack of spending hurts the economy. While I understand that logic, I've railed against the idea that consumers should be spending more, because they just don't have the money to responsibly spend more. University of Chicago economist Casey B. Mulligan presents a fascinating chart that implies that the common complaint I've noted might be misguided.
Nov 4 2009, 11:27AM
AT&T Sues Verizon Over Map Ad
In what may be an ill-advised move, AT&T has decided to sue Verizon over its television commercial that shows AT&T's 3G data coverage as paltry and Verizon's as robust. But AT&T isn't really disputing that fact. Instead, it's complaining that Verizon is falsely representing the sparse AT&T 3G map as it's more general data coverage map, which would include its slower, non-3G, data speeds. As far as I can see, that's not at all what Verizon is doing.
Nov 4 2009, 10:19AM
What To Expect Today From The Fed
Since yesterday, the Federal Open Market Committee has been meeting. Oh, to be a fly on the wall at the Fed. Instead of the full picture of the Committee's hopes and fears for the economy, their usual several paragraph statement will be released this afternoon for market movers and reporters to overanalyze. As the months progress, these statements should become increasingly interesting, as eventually the Fed will have to begin tightening monetary policy. But I don't expect much of that this month or any indication that it intends to raise interest rates in the near future. At least, I hope.
Nov 3 2009, 5:12PM
A Targeted First-Time Home Buyers' Credit
I just stumbled over a strong argument in the Washington Post against renewing the first-time home buyers' credit, put forth by the Baseline Scenario blog's Simon Johnson and James Kwak. I've argued in favor of the credit but believe it should remain isolated to first-time buyers. Johnson and Kwak have some valid criticisms, but I think there might still be ways to fix the credit and largely shield it from their worries.
Nov 3 2009, 4:41PM
Crazy Rumor of the Day: Does Google Want to Merge With the New York Times?
Nov 3 2009, 4:05PM
Should I Learn to Stop Worrying and Love the Deficit?
For a while now, I (and practically everyone else) has been saying that the deficit is making us nervous. Not the current deficit, but the future ones. I don't think that we should run any deficits outside of national emergencies, and while I think the current economic mess qualifies, I don't think 2019 does.
Nov 3 2009, 3:08PM
Lies, Damned Lies, and . . .
Statistics are useful things. But too often, they give a false sense of precision. "Counting" the jobs "created or saved" by the stimulus is one of our more ludicrous governmental activities of the moment. For one thing, the administration has made no attempt to net out the jobs that were not created, or destroyed, because the government had diverted the money from other uses. For another, as Bruce Bartlett points out, your count is only as good as your counters. And some of them aren't very good:
Nov 3 2009, 2:47PM
Why Is Britain Only Breaking Up Some Big Banks?
The Atlantic Wire reports that various economists and econo-pundits are applauding Great Britain's decision to break up some of its largest banks, which include Royal Bank of Scotland, Lloyds Banking Group and Northern Rock. I think whether banks should be broken up is a complicated question, probably best considered from antitrust and systemic regulation standpoints. With that said, there's something about Britain's actions here that really bother me: discrimination.
Nov 3 2009, 2:11PM
Overanalyzing Buffett's Burlington Northern Purchase
Each morning, while getting ready for work, I enjoy four egg hard-boiled egg whites, black pepper, a multivitamin and CNBC. Today, their commentators were going on and on about billionaire value investor Warren Buffett's decision to buy up all of Burlington Northern Santa Fe railroad. I couldn't help but picture Buffett like a big kid who just wants a $44 billion train set to play with. But seriously, it's a pretty big acquisition. His rationale? He calls it an "all-in wager on the economic future of the United States." That makes sense, but let's not overanalyze this statement.
Nov 3 2009, 1:30PM
Sick? Work at Home. Your Colleagues Will Thank You!
Nov 3 2009, 1:24PM
Paying For Access To Your Credit History
The New York Times today has an article about freecreditreports.com. You've probably seen their commercials, which feature actors who sing songs about how bad their life is since their identity was stolen. Though advertised as free, the company's ultimate goal is to lure unsuspecting consumers to pay for its credit monitoring service, so apparently the FTC worries that its tactics are misleading. That may be true, but I have a different concern.
Nov 3 2009, 12:22PM
Would You Pay $199 for a Twitter-Only Device?
But I hope we can at least agree on this: A new $200 mobile device designed exclusively for Twitter and nothing more is a hilariously bizarre idea.
Nov 3 2009, 11:30AM
Goldman's Attempt To Buy Fannie's Tax Credits
Yesterday, the Wall Street Journal reported that Goldman Sachs is attempting to buy tax credits from Fannie Mae, the mortgage giant put into a government conservatorship last year to avoid its failure. Fannie qualifies for lots of government tax credits for its efforts to secure housing for low income Americans. But since turning a profit isn't in the cards for Fannie this year, it can't use the credit to offset taxes: you don't pay taxes on a loss. Goldman Sachs, however, has plenty of profit. So it would love to offset some of its huge tax bill. The Treasury may balk. I have a few thoughts.
Nov 3 2009, 10:40AM
Is US Manufacturing Growing?
Nov 2 2009, 5:47PM
Brookings Debunks Myths About U.S. Opportunity
In an article that appeared this weekend in the Washington Post, a few economics fellows of the Brookings Institution present five myths about U.S. opportunity. I found some of their conclusions pretty surprising -- not from an economics standpoint, but more because scholars from Brookings were making them. Their tone appears to be unusually conservative for a think tank that tends be characterized as left-leaning. The piece makes a lot of sense, and its recommendations are worth noting. Let's consider each myth.
Nov 2 2009, 4:25PM
The Power of Prices
it's not clear that they'll be particularly competitive if they're primarily serving a subsidized population.Imagine that my family makes $45,000 a year. That puts us at about 250 percent of the poverty line. In the Senate finance bill, our premium contribution is capped at $4,349. Surveying our options, I see a plan from Aetna that costs $10,000, a plan from Kaiser that costs $9,000 and a plan from Cigna that costs $11,000. All seem pretty similar, but then, I'm not an expert in these things. Which do I choose?
Nov 2 2009, 3:59PM
Chrome And Firefox Up, Internet Explorer Down
Net Applications has released the internet browser usage statistics for October. While changes weren't dramatic, they do seem to indicate a continuing trend: more are using Chrome and Firefox, while fewer are using Microsoft Internet Explorer. Compared to September, Chrome and Firefox are up 0.4% and 0.3%, respectively, while IE is down a little over 1%.
Nov 2 2009, 3:53PM
Separate, and Unequal, Pension Treatment at GM
The ostensible defense of making the creditors take a deeper haircut than the workers in the auto bankruptcies was that the workers were needed for continuing operations, and besides, it would be bad for the economy if they lost their pensions, etc.
I'm curious to see whether the people advancing that argument can justify this:
Nov 2 2009, 3:21PM
$500 Billion Of Commercial Real Estate To Mature Soon
There was a Congressional subcommittee hearing today -- in Atlanta. The House Committee on Oversight and Government Reform's Domestic Policy Subcommittee addressed the residential and commercial real estate market in the Georgia metropolis. Sadly, the meeting was not on C-SPAN, but I managed to skim through some of the prepared remarks by more than a dozen witnesses from judges to economists to bankers. I was particularly interested to hear what those testifying had to say about commercial real estate, as I think that market will be one of the big business stories of 2010.
Nov 2 2009, 2:52PM
California's Tax Games
California has come up with a novel way to close this year's budget gaps: it's increasing withholding from the paychecks of its citizens. No, the government didn't actually increase taxes; it just raised the withholding. They'll give any extra funds back to taxpayers in April, and presumably fewer people will have to write checks to the government on April 15th.
Nov 2 2009, 1:31PM
Manufacturing And Home Sales Bring Good News
Two reports released today on manufacturing and home sales appear to indicate that the U.S. economy may, in fact, be on the mend. Although the third quarter's 3.5% GDP growth appeared to indicate this, subsequent spending and wage data clouded the picture. These reports swing the pendulum back in the positive direction.
Nov 2 2009, 12:57PM
The True Cost of the House Health Care Bill
Throughout Thursday, news accounts, including our own, focused on $894 billion, the total cost given out by aides to the House speaker, Nancy Pelosi, before the official cost analysis was released by the Congressional Budget Office.
Nov 2 2009, 11:42AM
Clorox Profits From H1N1 Fear
Here's an amusing example of economics in action: Clorox's profit is up 23% in the third-quarter. Why would that be? Check out the news blurb from MarketWatch:
The bleach maker said profit was aided by sales of disinfectant wipes to combat the worldwide H1N1 flu virus, shipments of Hidden Valley salad dressing, and lower costs. These gains were offset by soft demand for Glad trash bags and promotional spending.
Let's dissect this, because it's a fascinating explanation of human behavior in action.
Nov 2 2009, 10:48AM
46% Watch DVR With Commercials
I love to use my DVR to fast-forward through commercials. In a one-hour show, I can knock out generally just under 20 minutes of advertisements. That means DVR makes TV watching around 30% more efficient. I can then use the saved time to do something useful or entertaining. According to a New York Times article today, not everyone has the same attitude as I do when it comes to skipping commercials. In fact, nearly half of DVR users let the advertisements play. While I found this shocking at first, I shouldn't have.
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