Grim and getting grimmer

The Congressional Budget Office released a report today that is getting a lot of buzz because it shows a significant downgrade in CBO projections of growth, unemployment, the deficit, and debt.  James Pethokoukis provides the five scariest charts from the report.  As you are reading through them, note that the CBO's baseline projections are based on current law, which is how the CBO is required to calculate its baselines.  For example, the baselines are calculated with the Bush tax cuts being reversed (which they are set to do automatically) and the yearly fixes to the Alternative Minimum Tax and Medicare payments to doctors are not enacted.  The alternative scenarios, on the other hand, are much more realistic because they are based on reasonable expectations of what the laws will be in the future.

Mind the gaps

Comparing the Reagan and Obama recoveries: The $1.2 trillion GDP gap and the 10 million jobs gap.

Birds of a feather

Now you see why he's the Obama Administration's favorite billionaire: He's just like them. Warren Buffet continues to push for others to pay higher taxes while neatly avoiding those taxes for himself. 
"The Buffett Rule Won't Apply to Warren Buffett" 
"36 Obama Aides Owe $833,000 in Back Taxes"

Reagan vs. Obama

James Pethokoukis addresses the question "Is it unfair to compare the Reagan and Obama recoveries?"  His answer: No.  It's an important question because the policy responses have been complete opposites, as have the results.  Peter Ferrara has also talked about this.

I will happily relieve Elizabeth Warren of her burden

Most people would be happy to be among the 1%, but Elizabeth Warren, Democratic candidate for the Senate from Massachussetts and self-declared godmother of the Occupy movement, seems utterly embarrassed by it.  So much so that she's willing to lie about it:

Interesting fact about John Tyler, US President, 1841-45

John Tyler was the 10th President of the United States and left office 167 years ago.  Two of his grandsons are still alive.

Should we call it the Biden touch?

I don't know what the opposite of the Midas touch is called, but Joe Biden seems to have it.  It seems like every factory or company he visits goes bellyup soon after.

True unemployment in St. Louis

As I described in my previous post, because the official unemployment rate does not account for discouraged workers, it undercounts the true magnitude of unemployment in the United States.  To address this problem, I used pre-recession labor-force participation rates corrected for demographic trends to estimate the size of the true labor force.  From these numbers I calculated the rate of true unemployment for the U.S. since 2007.

True unemployment rates

Officially, the unemployment rate for the United States was 8.5 percent in December 2011.  While this number is pretty bad, it's pretty widely known that it does not capture the true nature of unemployment.  Specifically it does not account for discouraged workers--those who have given up looking for work, or didn't even start looking because of the weakness of the labor market.  Officially, discouraged workers are neither unemployed nor in the labor force, so they are not included in either the numerator or the denominator of the unemployment rate.

More about people's tax returns

Mitt Romney's True Tax Rate: 44.75%

Warren Buffet's secretary part of the 1%

WHO'S GREEDY? Obama Gave 1% to Charity, Romney Gave 15%, and Biden gave $369

They owe the President an apology

The St. Louis Post-Dispatch editors are in full re-elect-the-President mode, but they got themselves into a bit of a twist.  They have an editorial about General Motors's return as the world's top auto maker in terms of number of vehicles sold, which they take as proof of what "a smart, engaged national industrial policy can do."  They also go on to praise President Obama's role in saving GM. The editors admit, however, that the earthquake and tsunami that hit Japan last spring are responsible for Toyota's probably temporary fall from the top.

So, let me get this straight, the Post-Dispatch thinks that President Obama used national industrial policy to cause an earthquake off the coast of Japan.  Sounds like a rejected plot for a James Bond movie.

Truly pathetic, redux

As noted in my previous post, the Obama administration is trying to push the pathetically dishonest claim that it is responsible for the oil and natural gas boom, and this came up in the state of the union address. The administration has actually done much to prevent such a boom, which has been occuring despite the President's energy policies.  Here are the facts, which make it pretty clear that the President's claims are in direct opposition to the truth.

Truly pathetic

The Obama administration blames everyone but itself for the dismal performance of our economy, but now it's trying to take credit for something that it has put much effort into killing: the boom in domestic oil and natural gas production.  Via its mouthpiece at the Center for American Progress, we get this in today's WSJ:

In the hubbub around the president's decision not to approve the proposed Keystone XL pipeline between Canada and the United States, Americans missed the big picture. While conservatives have been fighting to build a pipeline to import more foreign oil and deepen U.S. dependence, the U.S. is poised to transform its energy portfolio by developing domestic resources—renewable and mineral—that will let it become a net exporter of clean energy and energy technology in this decade.

Under President Obama's leadership, we appear to be at the beginning of a domestic gas and oil boom. After a four-decade decline in oil production, the U.S. is now producing more than half of our oil domestically. This can free us from our addiction to foreign-sourced barrels, particularly if we utilize our dramatically larger and cheaper natural gas reserves. Natural gas now costs the equivalent of less than $15 per barrel, versus the $100-plus barrels we import from the Middle East.

Yes, all of this happened under President Obama's leadership.  Never mind the footdragging over Gulf drilling, the incursion of the EPA into fracking regulation, and closing off federal lands to exploration.  It is all happening because the President decided to protect us from Canadian oil.

Coincidence?

The alternative to the Keystone XL pipeline, which was recently rejected by President Obama, is railroads.  One of President Obama's favored 0.0000003 percenters, stands to benefit.

Warren Buffett’s Burlington Northern Santa Fe LLC is among U.S. and Canadian railroads that stand to benefit from the Obama administration’s decision to reject TransCanada Corp. (TRP)’s Keystone XL oil pipeline permit.

How is capitalism the problem?

So the very same elites who have misgoverned and driven economies into the ground to enrich themselves with money and power don't think that they're the problem.  The problem as they see it is capitalism, not the corrupt statism that they have presided over.

Cosseted greens with a lot of green

Most people are not rich enough to afford the vanity purchase of electric cars.  As a result, the average owner of the Chevy Volt, who receives generous taxpayer subsidies from the rest of us, earns $170,000.  They're also being provided with front-of-the-parking-lot privileges.

Mankiw on tax reform

Two presidential commissions have endorsed it, economists are nearly unanimously in favor of it, and Sen. Toomey proposed it to the deficit reduction supercommittee, yet there's little hope of it happening.  I'm talking, of course, about fundamental tax reform that would broaden the tax base and lower marginal tax rates. 

Three straw men, a non-sequitor, and a well-known fact

Alan Blinder had an op-ed in yesterday's WSJ titled "Four Deficit Myths and a Frightening Fact."  Three of Blinder's myths are more accurately called straw-men, one is a non-sequitor, and his frightening fact is news only to him:

Another in a long line of cynical decisions

From the Washington Post's Robert Samuelson:

President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn’t often that a president makes a decision that has no redeeming virtues and — beyond the symbolism — won’t even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his reelection that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.

By law, Obama’s decision was supposed to reflect “the national interest.” His standard was his political interest. The State Department had spent three years evaluating Keystone and appeared ready to approve the project by year-end 2011. Then the administration, citing opposition to the pipeline’s route in Nebraska, reversed course and postponed a decision to 2013 — after the election.

Now, reacting to a congressional deadline to decide, Obama rejected the proposal. But he also suggested that a new application with a modified Nebraska route — already being negotiated — might be approved, after the election. So the sop tossed to the environmentalists could be temporary. The cynicism is breathtaking.

A cringeworthy lack of self-awareness

I actually saw this a few days ago but didn't post it because it was almost too painful to watch.  The Daily Show's John Oliver interviewed journalist Froma Harrop about how her push for greater civility might conflict with her calling the Tea Party terrorists.  It is simultaneously about the funniest and most painful thing I've seen in a long time. 

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Civil Disservice
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog The Daily Show on Facebook

This is not a satire

The Federal government has put together a useful aid for Americans struggling to balance their budget.  Shikha Dalmia has the story:

The first step, says the agency, which represents a government that went over 800 days without passing a budget, is: create a budget! Get a “realistic assessment of how much money you take in and how much money you spend,” it lectures those in financial doo-doo, seemingly oblivious of the fact that its own bosses have promised $60 trillion to a $100 trillion more in entitlements than the country has money to pay for.

Fed economist sees the light

Much of my research over the past dozen years or so is about how an understanding of differences across geographic entities (regions, cities, states) is important for understanding how the national economy works.  I realize that a normal human being would find such a claim to be tautological, but macroeconomists are not normal human beings.  Even so, I think I made some headway over the years.  It's good to see, therefore, that my former St. Louis Fed colleague David Andolfatto has seen the wisdom of my approach (here and here).

Facts about progressivity.

Greg Mankiw has a useful summary on the progressivity of our fiscal system.  There is a myth out there that is pushed by people who should know better (and at least one who might have known better in his previous life as a sane person) that federal taxes favor the rich.  The claim is simply false.

Less sensible than WaPo

The best that the Washington Post can say about the President's decision to pass on the Keystone XL pipeline is that they

almost hope this was a political call because, on the substance, there should be no question. Without the pipeline, Canada would still export its bitumen — with long-term trends in the global market, it’s far too valuable to keep in the ground — but it would go to China. And, as a State Department report found, U.S. refineries would still import low-quality crude — just from the Middle East. Stopping the pipeline, then, wouldn’t do anything to reduce global warming, but it would almost certainly require more oil to be transported across oceans in tankers.

Keystone XL lunacy

So, let me see if I have this straight.  Rather than build a pipeline to take Canadian tar sands from our peaceful neighbor to the north, we bow to phony environmental concerns so that we can continue our dependence on oil from various despots and enemies.  Canada then builds a pipeline to the Pacific so that its energy resources can be shipped to China, our major economic and geopolitical rival.

In sum: Tar sand use is unaffected, our friend is pushed into the embrace of our rival, and our riches go abroad to support oppressive dictatorships.  We really do need more opposite days from the Administration.

President Obama needs a few opposite days

Since early 2009 I have said that President Obama has pretty much done the opposite of what should have in terms of economic policy.  His own blue-ribbon panels agree with me.

President Obama's job council recommends drilling and new pipelines.  The Obama Administration says no to Keystone XL and drags its feet on drilling permits.

President Obama's commission on fiscal responsibility recommends personal income tax reform with sharply lower marginal rates and the elimination of most deductions.  President Obama proposes higher marginal tax rates with increases in targeted tax credits and deductions.

At least his commissions would make a good president for the economy.

Not going for the gold

The gold standard is not favored by any in this group of leading economists.

"Green tech plus red tape yields no hope"

Not only do green energy projects face often insurmountable technical problems, but, like everything else, they also face red tape:

Where better to set up solar panels than California’s Death Valley? The sun’s always shining and from May to September the temperature doesn’t stray much below a whopping 100 degrees Fahrenheit.

According to the article, the solar panels in Death Valley have been unplugged for at least two-and-a-half years due to the various agencies tripping over one another.

And in the meantime, one has to wonder: if the wrangling, process crazed bureaucrats wrestling with the conflicting, nonsensical regulations and requirements issued by various state, local and federal bureaucracies can’t work out reasonable solutions to the relatively simple question involved in a no-brain solar installation in the desert, what chance is there that these same bureaucracies will redesign the American energy grid and take us to the low carbon utopia that always seems just out of reach?

Indeed, one does have to wonder.

I hope the President doesn't actually believe this.

If he does, we're in bigger trouble than I thought.  One thing that we all agree on is that we need some environmental regulations, although there is a lot disagreement about the level and type of regulations that are used.  In effect, the debate is about the proper balance of benefits and costs.  No one in their right mind, however, can actually believe that environmental regulations create jobs. 

The end of the liquidity trap?

Greg Mankiw has a post outlining a how the optimal Fed Funds rate might soon become positive again.  In this ad hoc framework, the optimal rate has been negative for some time, which has been achieved through the Fed's extraordinary quantitative easing.

Obamacare for thee, but not for me

It turns out that those lucky enough to be granted Obamacare cost waivers are the very people who helped push that monstrosity down our collective throats.

By the wildest of coincidences, 87% of them belong to Big Labor unions.

Interesting, since Big Labor pulled out all the stops to get the president's signature on health care reform passed in March 2010. But as the waivers came, it's clear they never had any expectation of paying for it.

Maybe it wasn't luck that got them the waivers.

From the very start they carved out special exemptions for themselves, showing all the earmarks of political favors in exchange for campaign contributions. The actual skyrocketing costs, reduced choices and lousy service were shoved on the rest of us.

This isn't conspiracy thinking. Judicial Watch obtained records from closed-door meetings between Richard Trumka of the AFL-CIO, Andy Stern of the SEIU and other labor advocates of health care nationalization, and Health and Human Services Secretary Kathleen Sebelius, Vice President Joe Biden, Majority Leader Harry Reid and ex-House Speaker Nancy Pelosi. They point to deals cut to benefit Big Labor.

Politicians will always use whatever policy discretion they have to further their political ends. Why would this be any different?

Not an economics post

Recently, I saw The Artist, the black and white, mostly silent, movie.  I sat through the entire thing with a smile on my face.  This review pretty much sums it up for me.

A handy tax policy tool

Americans for Tax Reform have a handy comparison of the tax plans of President Obama and the Republican candidates. Mitt Romney doesn't yet have a reform plan for personal income taxes, but it looks like he is going to support something like Jon Huntsman's plan. As quoted by Lawrence Kudlow,

But I look long term to do just what Jon [Huntsman] indicated, which is to take Bowles-Simpson and to reduce the rates in our tax code, to reduce the number of exemptions, and limit the amount of exceptions that can occur. At the same time, I don’t want to raise capital-gains tax rates, as they do in Bowles-Simpson. But simplifying the code, broadening the base, is the right way to go for our tax code long term.

Federal Reserve overreach

The Fed has decided to wade into policy questions that are far outside its responsibilities.  It doesn't help that it is throwing its ever-diminishing reputation behind a very misguided set of policies to prop up the housing market.  The Fed's new motto: If a housing bubble got us into this mess, a housing bubble will get us out of it.

Dumbest green policy of all, redux

The Wall Street Journal was on this a month ago, but even the NY Times has caught on to the utter stupidity of policies supporting cellulosic ethanol.  In short,

When the companies that supply motor fuel close the books on 2011, they will pay about $6.8 million in penalties to the Treasury because they failed to mix a special type of biofuel into their gasoline and diesel as required by law.

But there was none to be had. Outside a handful of laboratories and workshops, the ingredient, cellulosic biofuel, does not exist.

Left, right, and center

David Steinberg makes an interesting point about how to interpret polls that ask a person's party affiliation.  The usual way is to consider political views to be arranged along a line, with those who answer Republican on the right, those who answer Democrat on the left, and those who answer independent in the middle.  But why is this so?  Do the two major parties encompass all people to the extreme left and right?  Certainly not.  If a Republican becomes more moderate, he or she will lose people to the right, just as a moderate Democrat looses people to the left.  Thus, there are independents to the left of Democrats and to the right of Republicans.

The poll questions would be more illuminating if they had a richer notion of what it means to be independent. 

Economists and climatoligists: Birds of a feather

Over at What's Up With That is a collection of posts about ClimateGate 2.0 by Tom Nelson.  There are more than 250 of them, so it's a chore to look at all of them, but here's a sample.  In short, the climatologists in question

• were colluding to hide the vast uncertainties and fudges in their data.
• are not sure where much of their data come from.
• hid data from the public.
• tried to bully and ruin the carears of dissenters within their own profession.
• had the media in their pocket.

Meanwhile, the American Economic Association has approved a set of principles to disclose possible conflicts of interest.  This is certainly long overdue, but it's still a bit of a damp squib.  What is really needed is a set of binding rules about replicability and the availability of data.

Wow, another shocker

Tom Maguire over at JustOneMinute points out another shocker at the NY Times.  Paul Krugman thinks that budget deficits of 3.5 percent of GDP are problematic when a Republican is in the White House, but our current deficit of 8.5 percent of GDP is A-OK for some reason.  I'm sensing a pattern here.

Here's a shocker

You won't be surprised by this, but the New York Times's view of recess appointments seems to depend on the political party of the President.  From James Taranto:

Two Papers in One!

• "It is disturbing that President Bush has exhibited a grandiose vision of executive power that leaves little room for public debate, the concerns of the minority party or the supervisory powers of the courts. But it is just plain baffling to watch him take the same regal attitude toward a Congress in which his party holds solid majorities in both houses. Seizing the opportunity presented by the Congressional holiday break, Mr. Bush announced 17 recess appointments--a constitutional gimmick. . . . Presidents Ronald Reagan and Bill Clinton made scores of recess appointments. But both of them faced a Congress controlled by the opposition party, while the Senate has been under Republican control for Mr. Bush's entire five years in office."--editorial, New York Times, Jan. 9, 2006
• "Nearly six months after it opened its doors, the Consumer Financial Protection Bureau finally has a director, after President Obama's recess appointment of Richard Cordray. . . . Mr. Obama also appointed three new and qualified members to the National Labor Relations Board. . . . Announcing the appointments, Mr. Obama also asserted a welcome new credo: 'When Congress refuses to act, and as a result, hurts our economy and puts our people at risk, then I have an obligation as president to do what I can without them.' Hear. Hear."--editorial, New York Times, Jan. 5, 2012

Occupy the Chevy Volt!

What if there were a loophole in the tax code through which taxpayers were paying almost 20 percent of the cost of a new $40,000 car for people with an average income of $170,000 per year?  Any rightminded person concerned with economic equality would be outraged, especially after learning that this corporate welfare was for one of the largest corporations in the world, right?  Well, not if the car was an electric vehicle that really makes its owners feel good about themselves and is produced by a government-owned auto company. Then it's okay to transfer from the poor to give a handout to the rich.

Even so, it turns out that there is legislation to repeal this crazy loophole.  Where are those Occupy people when you need them?

A stark choice

The upcoming presidential election presents a stark choice between competing visions of what kind of country the United States will be in the future.  Depending on one's views, it might be a battle of freedom and capitalism against a socialist dystopia, or a continuation of a progressive revolution against reactionary forces.  Most people would paint the choice less starkly then either of those descriptions, but you get the idea. 

But what, exactly, would be the difference between a second Obama administration and a new GOP administration.  Washington Monthly published a symposium outlining just that.  As described by Instapundit,

The Washington Monthly asked a group of distinguished journalists and scholars to think through the likely ramifications of a GOP victory in November. Here’s what they conclude:

David Weigel reports that the Tea Party will control the agenda regardless of which Republican wins the nomination.

Norman Ornstein and Thomas Mann predict that there’s a “better-than-even chance” that the Senate filibuster will be destroyed.

David Roberts shows that the GOP won’t eliminate the EPA, but will permanently cripple it.
Harold Pollack disabuses liberals of the hope that health care reform can survive a Republican presidency.

Dahlia Lithwick writes that one more round of judicial appointments by a Republican president will lead to a generation of anti-government rulings no future Democrat can undo.

Plus: Jonathan Bernstein on why campaign promises matter; Michael Konczal on the end of Dodd-Frank; James Traub on the GOP’s “more enemies, fewer friends” doctrine; and Paul Glastris on why, this time, conservative anti-government aspirations will be fulfilled.

In sum, they think that the decision is stark.  People on the right would be mostly delighted if things turned out as described.  People on the left would be mostly horrified.  I think that the outcome wouldn't be nearly as extreme as described, and most of the contributors are liberals.  Then again, the President's best chance of reelection is fear of the alternative.

Dodging the real problems in Missouri

The Post-Dispatch reported this morning that "Missouri's leading business groups are pushing three bills that they say would improve the state's chances for economic growth by overhauling workplace laws."  The proposals appear to be a legislative priority for the Republican-controlled state legislators and would

• Keep certain disputes over workers' injuries out of the courts and replenish a state fund that covers employees with pre-existing disabilities.
• Make it harder for workers to prove discrimination cases against employers.
• Rewrite the rules for personal-injury lawsuits.

These issues simply should not be priorities in Missouri, which is already among the most business-friendly states in terms of its regulatory climate.  In fact, "(i)n recent years, Missouri has enacted comprehensive reforms in its workers’ compensation system and enacted strong tort reform laws."  Further, Missouri is an "at will" state where it is already extremely difficult to prove workplace discrimination.

The highest priority should be reform of secondary education and workforce development.  Productive workers mean growth and prosperity and this is where Missouri has been sorely lacking for years.

Maintain your focus

Back in October, Kevin Williamson said that "(b)etween the candidates’ debates and my conversations with the Occupy Wall Street protesters, it seems to me that there is a persistent, dangerous disconnect between our political conversation and reality."  He was right then and it has only gotten worse: The grand debate over economic policy was centered on whether an ineffective payroll tax holiday to drain funds from the Social Security system should be extended for two months for now and later be extended for another ten months, or whether it should be extended for the full year now.  What a pathetic display from the President and Congress.  If I thought they were capable of shame I would say "For shame!" to them.

At any rate, Williamson also provided 10 things to keep in mind so that you are focused on the real issues, even if our fearless leaders are not:

1.      There is no austerity.
2.      There was no deregulation.
3.      You can’t trust Republicans on spending.
4.      Wall Street loves Democrats.
5.      People who voted for Barack Obama on civil-liberties grounds are fools.
6.      If you aren’t for massive entitlement reform, you’re for massive tax hikes.
7.      But taxing the rich won’t close the deficit.
8.      The housing bubble was largely a political creation.
9.      Well-meaning politicians are just as dangerous as self-serving ones.
10.    There’s no way out of this jam without big cuts to popular programs.

How you should spend the next hour

I had a return trip to the Bernie Hayes Show on WGNU 930 AM this morning and it was just as fun and interesting as last time.  If you have an hour or so to spend listening to a discussion of the economy and other fascinating topics, click here.

Start the year off with a laugh

Scott Adams, the creator of the Dilbert cartoons, writes occasionally for the Wall Street Journal.  Yesterday's column, in which he describes a year spent confronting danger, was hilarious.  Here are two samples that I liked:

Shelly quickly embraced my new attitude and booked us on a trip to Costa Rica. That country has a huge population of monkeys and no military whatsoever—an obvious recipe for disaster.

I also took up golf this year because I figured that it would be a good challenge. So far, the only problem is that in every foursome, there's always one jerk who gives me a hard time for wearing a helmet.