Wednesday, March 31, 2010

According to Mankiw, the US is about average on taxes...

Greg Mankiw posted this today on his blog. Interesting way to look at whether the US is a high/low tax country.
"...Looking at taxes as a percentage of GDP may mislead us into thinking we can increase tax revenue more than we actually can. For some purposes, a better statistic may be taxes per person, which we can compute using this piece of advanced mathematics:

Taxes/GDP x GDP/Person = Taxes/Person

Here are the results for some of the largest developed nations:

France: 0.461 x 33,744 = 15,556

Germany: 0.406 x 34,219 = 13,893

UK: 0.390 x 35,165 = 13,714

US: 0.282 x 46,443 = 13,097

Canada: 0.334 x 38,290 = 12,789

Italy: 0.426 x 29,290 = 12,478

Spain: 0.373 x 29,527 = 11,014

Japan: 0.274 x 32,817 = 8,992
Of course, the US is middle-of-the-pack as it stands today, and after two rounds of tax cuts under Bush, which this administration is intent on letting expire to Clinton-era levels. A more interesting analysis would be to examine the level this administration's policies will raise that number to.

Stay tuned.

Tuesday, March 30, 2010

Doubling down...

It's hard to deny it: the President had a good political week last week. He signed the health care bill, reached an agreement with Russia on nuclear nonproliferation, and won a PR victory by visiting our troops in Afghanistan, unannounced. Seems like a perfect time for the President to build some political capital, prove to the public that he is listening (after suggesting otherwise for the past year) and shelve his ultra-partisan legislative agenda unless he garners significant Republican support. That's too logical for Washington. Rather, the President is going to take his waning political capital stock and double-down.
A senior Democratic official said the push was a textbook case of taking advantage of political momentum as the campaign season begins. Republicans are "on the defensive," the official said, "and as long as they're not cooperating, we ought to keep them there." - WSJ 3/30/10
On Thursday, the president challenged Republicans who planned to campaign on repealing his health-care bill with, "Go for it." Two days later, he made 15 senior appointments without Senate consent, including a union lawyer whose nomination had been blocked by a filibuster. - WSJ 3/25/10
For someone who came into office as the "first post-partisan" President, he's been anything but that.  According to Rasmussen, "Only 28% now say the president is governing on a bipartisan basis". Proving time-and-again his unwillingness to work with Republicans and an uncanny knack for revising the historical record on Republican participation / ideas throughout the legislative process.

His objective is clear: one of the few ways Democrats can avoid a shellacking in November is to make sure their base is energized. Given the partisan rancor this country is enveloped in, what better way to work towards this goal than lambasting Republicans? The only problem is, there are segments of the President's electoral voting bloc from 2008 that are net sellers, not buyers, of his first 15 months.

For instance, a study released by Pew Research in February about the Millennial generation (those aged 18-30) pointed out the following:

Politically, Millennials were among Barack Obama's strongest supporters in 2008, backing him for president by more than a two-to-one ratio (66% to 32%) while older adults were giving just 50% of their votes to the Democratic nominee. This was the largest disparity between younger and older voters recorded in four decades of modern election day exit polling. Moreover, after decades of low voter participation by the young, the turnout gap in 2008 between voters under and over the age of 30 was the smallest it had been since 18- to 20- year-olds were given the right to vote in 1972.
But the political enthusiasms of Millennials have since cooled —for Obama and his message of change, for the Democratic Party and, quite possibly, for politics itself. About half of Millennials say the president has failed to change the way Washington works, which had been the central promise of his candidacy. Of those who say this, three-in-ten blame Obama himself, while more than half blame his political opponents and special interests.
To be sure, Millennials remain the most likely of any generation to self-identify as liberals; they are less supportive than their elders of an assertive national security policy and more supportive of a progressive domestic social agenda. They are still more likely than any other age group to identify as Democrats. Yet by early 2010, their support for Obama and the Democrats had receded, as evidenced both by survey data and by their low level of participation in recent off-year and special elections.
The infatuation of young voters with Obama and his "Rock Star" personality shouldn't come as a surprise, especially if you read more about Millennials and what they believe. It also reminds me of the classic Churchill quote. The question is: can Obama invigorate his supporters when he's not no the ticket? Judging by this chart, he may have a difficult time.

To be fair, this is only one segment of his voting bloc, but it did represent roughly 20% of total votes, which is significant, and up from 17% in 2004, or a 17.5% increase in turnout within this single demographic.

While November is a universe away, it will be interesting to see how much of a bump this past week gives Obama (and Democrats) and how sustainable it is. Voter fatigue should be a real concern for Democrats, particularly given the amount of energy spent since 2006 to get where they are. If the generic ballot remains within its recent range (Republicans +6-9), the enthusiasm gap remains wide, and Independents continue to prefer Republican candidates, pandering to his base and not engaging the other team could be a losing strategy for the President.

Thursday, March 25, 2010

How to create jobs...

Good article in today's USA Today about a new Kia plant in West Point, GA. Its Kia's first North American manufacturing plant and is it any surprise that they chose a right-to-work state and a state government that proved it was on the side of business, and not against it? What did Georgia do? "State and local officials made a huge investment to get Kia — local, state and federal tax breaks, incentives, even a new exit off Interstate 85. People here say that investment is paying off." The result? Over 1,200 jobs were created, with another 1,200 on the way and it has turned a struggling community into a prosperous one. "Sales and property tax receipts are going up, jobs are being created, and there's a sense of unbridled optimism here."

Note how sales taxes are increasing after taxes were cut...


Kia breathes life into old Georgia textile mill town


By Larry Copeland, USA TODAY

WEST POINT, Ga. — This old textile mill town of 3,500 along the Alabama border 80 miles southwest of Atlanta is dealing with a problem it hasn't had in ages: Downtown is booming so much it's often hard to find a parking spot.

"It's a problem we don't mind," says Mayor Drew Ferguson, pointing out business after business that have opened recently, 24 in the past 20 months. "It's amazing, the economic viability of downtown."

At a time when once-viable manufacturing communities across the USA are struggling to hold on, West Point — which flirted with obsolescence after the textile mills moved abroad — is beginning to prosper once again. Sales and property tax receipts are going up, jobs are being created, and there's a sense of unbridled optimism here.

The excitement is being driven by the recent opening of Kia Motors' first North American manufacturing plant, which began building the Sorento here last fall. In an area that has been staggering since the textile mills began moving out 20 years ago, the Kia plant is generating enormous enthusiasm. Kia says 43,000 people applied for 1,200 jobs on the first shift; it's now sorting through 31,000 applications for 1,200 second-shift jobs.

State and local officials made a huge investment to get Kia — local, state and federal tax breaks, incentives, even a new exit off Interstate 85. People here say that investment is paying off.

"When I first came here, there were, like, tumbleweeds rolling around downtown," says Ruthanne Williams, owner of the Irish Bred Pub downtown. She and her husband, Trent Williams, poured their life's savings into the restaurant and bar, betting that Kia would attract enough business for them to succeed in a location where several restaurants had failed before they bought the place.

"We definitely came to West Point, aka Kiaville, because of the plant," she says. "And it's been a very good decision. We believe in this town. We believe in this community. And we believe in Kia."

Outsize economic impact

Researchers at Georgia Tech estimate that Kia will generate 20,000 new jobs in a nine-county area of western Georgia and eastern Alabama by 2012, generating an annual economic impact in Georgia alone of $4 billion a year.

That's a new heartbeat for West Point.

The city was once home to textile giant WestPoint Stevens, one of the nation's top producers of towels with thousands of employees in this area in the 1980s. Competition from Asian and South American manufacturers, outdated plants and a hostile takeover soon led to the closing of plants in this area and around the South.

This community lost about 16,000 jobs over the past 20 years, Ferguson says. Just since 2001, Troup County has lost more than 5,000 jobs, a 15% decrease, according to the Georgia Department of Labor. Most of those jobs were in manufacturing, primarily in textiles.

"After the mills left, you could ride through the middle of West Point on a Thursday or Friday afternoon and sometimes you wouldn't see a single car parked," says Griggs Zachry, 70, owner of Zachry Construction and secretary of the West Point Development Authority. "It was absolutely heartbreaking."

Zachry says the rebirth of West Point has been slowed by the recession. "It's been a little slow; because the economy is so bad, nobody can get any money."

Many workers not local

Another dark spot on West Point's bright horizon: Many of the new jobs are going to people outside the county, including to Alabamians.

Troup County's unemployment rate in January was 13.4%, making it the 35th highest of Georgia's 159 counties. State Labor Commissioner Michael Thurmond, who calls this area "the epicenter" of economic activity in Georgia, says success is "not without challenges. Not everyone will benefit unless they are educated, skilled or trainable."

Many of the Kia workers come from Alabama, which has long had a workforce of skilled autoworkers. The state has three automobile plants: a Mercedes-Benz plant in production in Vance since 1997; a Honda plant in Lincoln since 2001, and a Hyundai plant in Montgomery since 2004.

Western Georgia and the eastern Alabama communities just across the Chattahoochee River — such as Lanett, Valley and Shawmut — have long been closely linked, so Alabama is seeing a boom, too: About half the 20 or so new automotive suppliers in the area are there.

Residents here say the population in West Point is growing.

"I have been here 19 years, and now, for the first time, I walk down the street and don't recognize people," says Doug Shumate, owner of CopperMoon, a maker of exterior landscape lighting for high-end homes, and chairman of West Point 2100 Foundation, a non-profit group that buys and refurbishes old buildings.

There is a significant construction boom, concentrated mostly in Alabama. The Greater Valley Group, one of the area's largest development companies, has $195 million in residential, retail and commercial construction underway, spokeswoman Jeanne Charbonneau says. "To date, everything we've built is within 7 miles of the new Kia plant," she says.

Ferguson says West Point is positioned to leverage its good fortune to revitalize neighborhoods that have languished in disrepair for years. He says his city is acutely aware of how strong its position is compared with many former manufacturing towns.

"We have a huge sense of our place in history," Ferguson says. "We're so empathetic to what a lot of other communities in our country are going through. We are very thankful — and very aware of the opportunities that lie in front of us."

(c) USA TODAY

Wednesday, March 24, 2010

Buh-bye Keynes...

C/O Fed Up USA...

This chart takes the cake. It explains the jobless recoveries of the 00's, the lack of the "multiplier effect", sovereign debt crises, currency debasements, etc. It essentially shows the marginal impact to GDP from the infusion of $1 of additional debt. "In the USA by the end of 2009, each $1 of debt subtracted 45 cents from GDP!"

Tuesday, March 23, 2010

The race to the bottom...(of the polls)

Good polling data from Stu Rothenberg...(Note: it's unclear whether "registered" voters or "likely" voters were used. The latter has proven to be more accurate.)
For Democrats, This Isn’t Simply Another Chicken Little Story

By Stu Rothenberg

For Democrats, the sky is falling, according to two national polls, one conducted by Peter Hart and Bill McInturff for NBC News/Wall Street Journal and the other by OnMessage Inc. for the Republican National Committee.


The results of the two surveys are very much in sync and present an increasingly disturbing picture for Democrats.

OnMessage’s March 9-11 survey found President Barack Obama’s job rating at 49 percent approve/47 percent disapprove, while the Hart/McInturff survey (March 11, 13-14) found it at 48 percent approve/47 percent disapprove.

Both found far more Americans believing the country was headed off on the wrong track (66 percent in OnMessage and 59 percent in Hart/McInturff) than in the right direction, and both found the once strong Democratic advantage in the generic ballot, which measures how people plan to vote in November (OnMessage) or which party they would like to control Congress after the next election (Hart/McInturff), has narrowed or disappeared.

The Hart/McInturff poll shows only 35 percent of respondents saying the February 2009 stimulus legislation was a good idea, while 42 percent said it was a bad idea.

Even worse for Democrats, by 61 percent to 30 percent, Americans now say it is better to have different parties controlling Congress and the presidency rather than to have one party controlling both branches — a significant increase in the “different parties” response compared to the October 2008 Hart/McInturff poll.

On specific issues, Democratic numbers have weakened dramatically, according to NBC News/Wall Street Journal polling

When asked which party would do a better job dealing with health care, the Democrats’ 31-point advantage in July 2008 has slipped to a mere 9 points now. The party’s 16-point advantage in July 2008 on dealing with the economy has evaporated completely, and the parties are now even. And on taxes, the Democrats’ 1-point advantage in July 2008 has turned into an 11-point GOP advantage.

No matter what happens with the health care bill (and it may well have been passed by the House by the time you read this), the issue has severely damaged Democratic prospects for the fall.

Not surprisingly, the OnMessage survey shows Democratic support for the bill and Republican opposition, but it also shows 2-to-1 opposition from voters who identify themselves as undecided about which party they plan to support in the midterm elections. In question after question in the OnMessage poll, these “generic undecided voters” look like very much like Republican voters.

After scouring dozens of polls over the past couple of weeks, I have found only a few poll questions that can give Democrats much hope for November.

First, the Republican brand still stinks. Voters aren’t clamoring for Republicans to run anything in Washington, D.C., and polls continue to show that Americans still think that former President George W. Bush bears more of the responsibility for the nation’s economic pain than anyone else.

Unfortunately for Democrats, their own brand has fallen like a rock.

In April, almost a year ago, the Hart/McInturff poll found 45 percent of Americans with a positive view of the Democratic Party and 34 percent with a negative view. In the most recent Hart/McInturff survey, the Democratic Party’s positives have sunk to 37 percent and its negatives have risen to 43 percent. Yes, those numbers are slightly better than the GOP’s (31 percent positive/43 percent negative), but not enough to help Democrats in the fall.

As for Bush, he won’t be on the ballot or in the public’s consciousness in November, so Democrats will have to spend a great deal of time (and money) trying to make the midterms a referendum on the former president rather than on the sitting president. The chances that most Democratic candidates will succeed in that effort are exceedingly small.

Privately, many Democratic insiders acknowledge that the party’s outlook is increasingly bleak for the fall. Health care reform, once seen as a party strength, has turned into a significant liability, and few think the economy will turn around far enough or fast enough to help Democratic candidates in the midterm elections.

Even before this election cycle started, midterm election turnout trends put Democrats at something of a disadvantage. But now, every poll that I have seen suggests that Republicans are dramatically more motivated than are Democrats, which means a more conservative and Republican electorate this year than in 2008, as well as much-improved Republican prospects.

I have been hesitant — and I remain hesitant — to get too far in front of the election cycle, since circumstances can change and Democrats could well have an important financial advantage in the key post-Labor Day time period. But let’s be clear about what is developing: Obama and the Democratic Congressional leadership have dug themselves into a deep and dangerous political hole, and the only question right now seems to be the severity of the drubbing.

As one smart Democratic strategist told me recently, “All of the elements are in place for a disaster like 1994. But it could be even worse.”

Friday, March 19, 2010

Quick hits (health care version)...

Attorneys General in South Carolina and Florida Set to Sue on Health Care Reform

South Carolina Attorney General Henry McMaster says he and Florida Attorney General Bill McCollum are ready to file a federal lawsuit if health care reform legislation passes.


The U.S. House plans to vote on the plan Sunday.
McMaster said Friday that he expects attorneys general to join the lawsuit. He and other GOP counterparts have denounced the legislation.
Democratic Rep. DeFazio Switches Vote to 'No' on Health Care Bill 
Democratic Rep. John Boccieri of Ohio is switching his vote to "yes" on President Obama's health care overhaul, bringing House Speaker Nancy Pelosi just one vote shy of the 216 needed for passage .
The vote tally on health care reform is starting to look like the Dow.


Just when House Speaker Nancy Pelosi seemed to be one vote shy of the number needed for health care reform to pass, a Democrat who voted for the bill last year says he's switching his vote to no.

The opposition from Rep. Peter DeFazio, D-Ore., dials back the number of House members leaning toward voting yes to 214, and the number leaning toward voting no to 217.

Pelosi needs 216 for the bill to pass.
Democrats Gain Support as They Move on Health Vote 

March 19 (Bloomberg) -- U.S. House Democrats, who cleared a big hurdle in their effort to overhaul the health-care system by producing compromise legislation, are picking up fresh support for a showdown vote this weekend.


Democrats need about six more votes from House members to pass the 10-year, $940 billion bill, Obama administration officials said today. President Barack Obama and Democratic leaders aim to sway some in a pool of 14 or 15 undecided lawmakers to get to the 216 votes needed to pass the measure, according to the officials, who spoke on condition of anonymity.

“We are going to have the votes, when the roll is called,” House Majority Leader Steny Hoyer told reporters today. A vote is scheduled for March 21, leaders said.
Caterpillar: Health care bill would cost it $100M

Dow Jones Newswires Caterpillar Inc. said the health-care overhaul legislation being considered by the U.S. House of Representatives would increase the company's health-care costs by more than $100 million in the first year alone.

In a letter Thursday to House Speaker Nancy Pelosi (D-Calif.) and House Republican Leader John Boehner of Ohio, Caterpillar urged lawmakers to vote against the plan "because of the substantial cost burdens it would place on our shareholders, employees and retirees."

Caterpillar, the world's largest construction machinery manufacturer by sales, said it's particularly opposed to provisions in the bill that would expand Medicare taxes and mandate insurance coverage. The legislation would require nearly all companies to provide health insurance for their employees or face large fines.

The Peoria-based company said these provisions would increase its insurance costs by at least 20 percent, or more than $100 million, just in the first year of the health-care overhaul program.

"We can ill-afford cost increases that place us at a disadvantage versus our global competitors," said the letter signed by Gregory Folley, vice president and chief human resources officer of Caterpillar. "We are disappointed that efforts at reform have not addressed the cost concerns we've raised throughout the year."

Thursday, March 18, 2010

Quick hit...

"Even one of House Speaker Nancy Pelosi’s floor whips, U.S. Rep. Stephen Lynch, says a proposed parliamentary move to pass health-care reform would be “disingenuous” and harm the credibility of Congress.


In a sign of how tough it’s been for Pelosi to round up votes for the massive bill, Lynch - a South Boston Democrat who supported a House reform package last year - said he’ll probably vote against a key Senate version of the legislation, unless unexpected major changes are made soon.

Lynch, who serves as one of Pelosi’s key vote counters, said he also can’t support a proposed “deem and pass” procedure that would allow Democrats to vote to strip out controversial portions of the Senate bill and then “deem” that the entire package has passed without a second, direct vote.

“It’s disingenuous,” said Lynch, who considers unfair a Senate provision to tack a surcharge on higher-end health plans. “It would really call into question the credibility of the House.”

Other Democrats have countered that the “deem and pass” tactic has been employed before, including when Republicans were in the majority in Congress."

Wednesday, March 17, 2010

This is the key...

On the surface, "Deem and Pass" (AKA "The Slaughter Rule" -- named after the Chairwoman of the House Rules Committee)---the method the democrats are proposing to pass the health care bill---might be unconstituional, but I'm no lawyer. That said, I can read and the Constituion appears to be pretty cut-and-dry that "[v]otes of both Houses shall be determined by Yeas and Nays"...
Article I, Section 7 of the U.S. Constitution states: "Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law. But in all such Cases the Votes of both Houses shall be determined by Yeas and Nays, and the Names of the Persons voting for and against the Bill shall be entered on the Journal of each House respectively.”
Put simply,
"...instead of House members casting their votes on the Senate version of the health-care bill, the House would vote on a package of “fixes” made to those parts of the Senate bill to which House members object...Under the House’s “self-executing rule” provision, if the lawmakers pass a rule that says passing the “fixes” is the same as passing the actual bill -- then the House would magically "deem" the health-care bill to be “passed.” The "rule" itself would be sponsored by the chairman of the House Rules Committtee, Rep. Louise Slaughter (D-N.Y.)."
Source: http://www.cnsnews.com/news/article/62939

Does the math work...?

The question remains: do the democrats have enough votes to pass health care?


According to most reports, the health care vote is set to take pace sometime on Friday (or Saturday). As it stands today, it appears the democrats do not have enough votes to carry-the-day; otherwise, as logic goes, they would have already voted. Rumors are percolating that another "deal" may have been struck between the Obama Administration (more accurately, the Department of the Interior) and two California Congressman (Cardoza and Costa, who both voted 'yes' previously) at the behest of Boxer and Feinstein. (http://nrcc.org/blog/blogitem.aspx?id=261)

ABC News took a stab at estimating where the vote stood yesterday (http://blogs.abcnews.com/thenote/2010/03/do-pelosi-and-the-democrats-have-the-health-care-votes-heres-the-math-.html) and came up with the following conclusion:
“If every sitting House Democrat who voted for the health care bill in November, voted for it again this weekend, Nancy Pelosi would have the 216 votes she needs to pass it.
However, because of resistance to the Senate bill overall and (for several anti-abortion rights Democrats) specifically its abortion language, Democrats know they will not be able to get all their previous YES votes to vote YES again.

So, the game becomes how many previous YES votes can Democratic leaders afford to lose? The answer to that question is another question, of course.

How many previous NO votes can Democratic leaders definitively flip to YES?

You will see below that there is no margin for error. And this remains somewhat fluid as Pelosi searches for her final handful of votes.”
There are a handful of "targets" (ie, those representatives who will decide the outcome). See below.




































Assuming the democrats that voted 'yes' previously vote 'yes' this time around, the democrats will come up five votes shy of the requisite 218 votes.





Obviously, this is very fluid and the numbers are certain to change but this helps to explain why Pelosi hasn't held the vote, Obama delayed his trip to Australia, and 'deals' are being made.

Tuesday, March 16, 2010

Impact of Charter Schools...

The last "quick hit" from this morning reminded us of a great "apples-to-apples" study that was released in September 2009 on the impact of Charter Schools in New York City authored by the National Bureau of Economics (NBER) and Stanford University (Link to report: http://www.nber.org/~schools/charterschoolseval/). The entire report is 85 pages and well worth reading. As it stands today, there are real-time studies unfolding in Washington, DC and Newark, New Jersey (to name a couple) on the impact school choice does, or does not, have on education standards and achievement. The New York City report gives an introspective look into the impact Charter Schools had (and presumably continue to have) on narrowing the so-called “Scarsdale-Harlem” gap.

What allowed the study to present data on an apples-to-apples basis is the unique method in which attendees are selected to attend New York City Charter Schools. As the study outlines,

“94 percent of charter school students in New York City are admitted to a school after having participated in a random lottery for school places. In a lottery-based study like this one, each charter school's applicants are randomly divided into the "lotteried-in" (who attend charter schools) and the "lotteried-out" (who remain in the regular public schools.”

Socio-economic, ethnicity, language skills, and gender are effectively neutralized for the purpose of the study given the lotteried nature of the selection process. The students are only separated by number.

There is a plethora of data but below are some interesting highlights:

Application process:

Ø  Charter school applicants are much more likely to be black and much less likely to be Asian or white than the average student in New York City's traditional public schools

Ø  Charter school applicants are more likely to be poor than the average student in New York City's traditional public schools.

Ø  Charter schools' lotteries appear to be truly random, as they are designed to be. Our tests for randomness are based on students' race, ethnicity, gender, prior test scores, free and reduced-price lunch participation, special education participation, and English Learner status.

Achievement and effectiveness of Charter Schools:

Ø  Lottery-based analysis of charter schools' effects on achievement is, by far, the most reliable method of evaluation. It is the only method that reliably eliminates "selection biases" which occur if students who apply to charter schools are more disadvantaged, more motivated, or different in any other way than students who do not apply.

Ø  On average, a student who attended a charter school for all of grades kindergarten through eight would close about 86 percent of the "Scarsdale-Harlem achievement gap" in math and 66 percent of the achievement gap in English. A student who attended fewer grades would improve by a commensurately smaller amount. [see all tables & charts below]

Ø  Compared to his lotteried-out counterpart, a student who attends a charter high school has Regents examination scores that are about 3 points higher for each year he spends in the charter school before taking the test. For instance, a student who took the English Comprehensive exam after three years in charter school would score about 9 points higher.

Chart 1: Lotteried-Out v. Lotteried-In














Table 1: Effect of Charter Schools on Math & Science










Chart 2: Standard Deviation Distribution of Charter School Impact on Math

















Chart 3: Standard Deviation Distribution of Charter School Impact on English & Arts














I suggest reading the entire study and we’ll get into more detail in future posts, but the study suggests what some of the differences for the better performance of Charter School attendees compared to public school attendees.

Ø  Longer school year

Ø  More minutes dedicated to English each day

Ø  Small rewards / penalties disciplinary policy

Ø  Performance based pay for teachers (exceptionally important, we’ll present more data later as to why – think market principles)

Ø  Mission Statements that emphasize academic performance, compared to other things.

Does "restoring America's image abroad" imply browbeating our allies?

Just wondering...

 'Israel must prove peace commitment'
WASHINGTON — US Secretary of State Hillary Rodham Clinton said Tuesday that Israel must prove it is committed to the Mideast peace process with actions, but brushed aside suggestions that US-Israeli relations were in crisis and reaffirmed America's steadfast commitment to the security of the Jewish state.


Clinton said US and Israeli officials were in intense talks about how to repair the damage caused by last week's Israeli announcement of new Jewish housing in east Jerusalem while US Vice President Joe Biden was visiting the country. She said the goal was to relaunch stalled Israeli-Palestinian peace talks.

"We are engaged in very active consultations with the Israelis over steps that we think would demonstrate the requisite commitment to the process," she told reporters at a joint State Department news conference with visiting Irish Foreign Minister Michael Martin.

"It's been a very important effort on their part as well as ours," Clinton said. "We know how hard this is, this is a very difficult, complex matter. But the Obama administration is committed to a two-state solution, we are committed to a resumption of the negotiations between the parties."

The announcement of the approval of 1,600 new Jewish homes in east Jerusalem, which the Palestinians want to be the capital of a future state, while Biden was in Israel deeply embarrassed the administration and Clinton has called it an insult. The uproar has led many to believe that US-Israeli ties may be at their lowest point in history.

Clinton restated US "dismay and disappointment" with the announcement but disputed the perception of the relationship in crisis.

"I don't buy that," she said. "I have been around a long time, not that long, but a long time. We have an absolute commitment to Israel's security. We have a close, unshakable bond between the United States and Israel and between the American and Israeli people who share common values and a commitment to a democratic future for the world."

Clinton said she remained confident that the US special Mideast peace envoy, George Mitchell, who abruptly postponed a visit to the region this week, would return soon and begin shuttling between the Israelis and Palestinians for indirect negotiations.

"We'll see what the next days hold and we're looking forward to Senator Mitchell returning to the region and beginning the proximity talks," she said. She added that she thought Mitchell's "legendary patience will win the day as the process gets started again because there is just too much at stake for both the Palestinians and the Israelis."

Quick hits...

California Senate: Boxer 43%, Campbell 41%


Incumbent Democrat Barbara Boxer is now in a virtual dead heat with former Congressman Tom Campbell in California's U.S. Senate race. The latest Rasmussen Reports telephone survey of likely voters in the state finds Boxer leading Campbell 43% to 41%. Six percent (6%) prefer some other candidate, and 10% are undecided.
 
 
Is Now Really the Time To Create a New $2.5 Trillion Entitlement?
 
In theory, the federal government has $2.5 trillion stashed away in a nondescript office building in the sleepy little town of Parkersburg, West Virginia. That is where the Treasury Department keeps stacks of nonnegotiable Treasury bonds payable to the Social Security Administration. But as the Associated Press reported yesterday, for the first time since the 1980s, the federal government will not be adding to that stack. Thanks to an aging population and slow economy, Social Security will pay out $29 billion more this year than it takes in. And the Congressional Budget Office reports that after small surpluses in 2014 and 2015, the program is projected to be in the red from 2016 until forever.


Obama runs out of patience with Israel

The Israeli Prime Minister Benjamin Netanyahu yesterday strongly defended Jewish settlement construction in East Jerusalem in the face of US pressure and what one of his own top diplomats described as the worst crisis in relations with Washington for more than three decades.

A defiant Mr Netanyahu appeared to be digging in despite clear indications that the Obama administration is now demanding the scrapping of plans for 1,600 new Jewish homes, whose announcement overshadowed last week's visit to Israel by the US Vice-President Joe Biden. Mr Netanyahu's stance appeared to guarantee, after a highly charged week, the protraction of a stand-off in which a full-scale diplomatic row blew up at the start of Mr Biden's visit and appeared to abate at the end of it. But it was then reignited by demands from Hillary Clinton and an angry White House that Israel make amends for the "insulting" announcement just as indirect negotiations with the Palestinians had finally been arranged.


Pelosi: 'Once we kick through this door,' more reform will follow

If you have any doubt that the Democratic leadership of the House views passing the current health care reform bill as the beginning, not the end, of the process of creating a national government health care system, just note what Speaker Nancy Pelosi told a group of bloggers on Monday. "My biggest fight has been between those who wanted to do something incremental and those who wanted to do something comprehensive," Pelosi said, according to an account by Washington Post reform advocate Ezra Klein. "We won that fight, and once we kick through this door, there'll be more legislation to follow."



Charter Schools and Student Performance
On Saturday, President Obama delivered a radio address on education and he didn't shrink from saying that American high school students are trailing international averages. He sketched out details of a bill his administration is now pushing to revise the No Child Left Behind Act. He proposes to preserve testing requirements but create a better measuring stick, require teachers be evaluated by performance (not credentials), and use carrots instead of sticks to encourage progress....

Yet few doubt that public schools today are troubled, as the president noted on Saturday. What the president left out is that the performance of American high school students has hardly budged over the past 40 years, while the per-pupil cost of operating the schools they attend has increased threefold in real dollar terms. If school districts were firms operating in the market place, many would quickly fall victim to Schumpeter's law of creative destruction.

Monday, March 15, 2010

Sunday show highlights...(or lowlights)

Do the rating agencies still matter...?

Do the rating agencies have any credibility left? One would figure after completely missing the boat (think CDOs, etc) over the last 3 years their analysis would no longer be news worthy...
U.S., U.K. Move Closer to Losing Rating, Moody’s Says
March 15 (Bloomberg) -- The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.


The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.

Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.

“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”

The pound fell against the dollar and the euro for the first time in three days, depreciating 0.8 percent to $1.5090, while the dollar index snapped a four-day drop, adding 0.3 percent to 90.075.

The U.S. government will spend about 7 percent of its revenue servicing debt in 2010 and almost 11 percent in 2013, according to the baseline scenario of moderate economic recovery, fiscal adjustments in line with government plans and a gradual increase in interest rates, Moody’s said.

Under its adverse scenario, which assumes 0.5 percent lower growth each year, less fiscal adjustment and a stronger interest-rate shock, the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA, Moody’s said.

U.K. Debt Service

The U.K. is likely to spend 7 percent of revenue servicing debt this year and 9 percent in 2013, rising to almost 12 percent under the adverse scenario, Moody’s said.

Financing costs above 10 percent put countries outside of the AAA category into a so-called debt reversibility band, the size of which depends on the ability and willingness of nations to reduce their debt burden by raising taxes or reducing spending. The U.S. has a 4 percentage-point band, while the U.K. has a 3 percentage-point band.

“Those economies have been caught in a crisis while they are highly leveraged,” Cailleteau said, referring to the level of private and public debt as a percentage of gross domestic product. “They have to make the required adjustment to stabilize markets without choking off growth.”

The U.S. would be the “most affected” under the adverse scenario, as the only country that would face a downgrade, Cailleteau said. The company’s baseline scenario assumes that all current AAA sovereigns will keep their ratings over the next three years, he said.

‘Warning Shot’

“On balance, we believe that the ratings of all large Aaa governments remain well positioned, although their ‘distance-to- downgrade’ has in all cases substantially diminished,” Moody’s said in the report.
None of the current Aaa rated countries are likely to lose their ratings, said Peter Chatwell, a fixed-income strategist at Credit Agricole CIB in London.

“This report is a warning shot to governments, setting out the line that they can’t cross with their budgets,” he said.

While the U.S. is likely to benefit from economic growth more than other AAA nations, weak public consumption is likely to weigh on GDP this year, the ratings company said.

“The pattern of growth and the high rate of unemployment raise the question of how strong the recovery will be going forward,” Moody’s said. “The ability of the U.S. economy to grow more rapidly and, therefore, for government revenues to contribute to fiscal consolidation, will have to depend on a revival in the growth of consumption.”

U.S. Growth
The U.S. economy will grow 3 percent this year and in 2011 after contracting 2.4 percent in 2009, according to the median estimate of economist forecasts compiled by Bloomberg. Unemployment will average 9.6 percent this year, up from 5.8 percent in 2008, and will fall to 9 percent next year, based on the median estimate.
Sales at U.S. retailers unexpectedly climbed 0.3 percent in February, compared with a median forecast for a 0.2 percent contraction, the Commerce Department said on March 12.

“The emphasis of the market, and our own, will move increasingly away from public finance developments in 2010, towards medium-term consolidation plans and the credibility thereof,” Moody’s said.

Achieving the fiscal consolidation necessary to avert a downgrade will test “social cohesion” and may involve rewriting the “social contract” between governments and their people, Cailleteau said. “People have to decide what level of pain they are willing to accept to have a healthy economy.”

U.K. Prime Minister Gordon Brown has clashed with opposition leader David Cameron over the timing and speed of budget cuts as they prepare for an election that must be held by June 3.

‘Very Fragile’

The opposition Conservatives argue that the government should come to grips now with the budget deficit, while Brown’s Labour Party says it’s too soon to remove fiscal stimulus.
“Although the economy is now growing, recovery is still in its early stages and remains very fragile,” Brown told business leaders in London on March 10. “We’re not going to withdraw the stimulus until the recovery is assured.”
The U.K. economy, which emerged from its longest-ever recession last quarter, is forecast to expand by 1.2 percent this year after a 5 percent contraction in 2009, according to median economist estimates compiled by Bloomberg. Unemployment will average 8 percent this year and 7.9 percent next year, the estimates show.

“The question here is less when fiscal retrenchment ought to start, but rather how credible it is that sufficient retrenchment will take place,” Moody’s said.

Friday, March 12, 2010

Interest free loans to the government...

Where can I get one of these?


States May Hold onto Refunds for Months

By William M. Welch, USA TODAY

Residents eager to get their state tax refunds may have a long wait this year: The recession has tied up cash and caused officials in half a dozen states to consider freezing refunds, in one case for as long as five months.

States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls.

"It's an indicator of how bad it is," says Scott Pattison, executive director of the National Association of State Budget Officers. "You know things are bad when you have to do that."

New York, hit with a $9 billion deficit, may delay $500 million in refunds to keep the state from running out of cash, says Gov. David Paterson.

Hawaii's Department of Taxation says some residents may not see state income tax refunds until the end of August, The Honolulu Advertiser reported. It was part of a plan by Gov. Linda Lingle to deal with a revenue drop-off by pushing costs into the next fiscal period, which begins in July.
States often do not have a timetable for refunds because delays are based on cash flow. Most states typically issue refunds within 30 days.

Delaying refund checks isn't unprecedented, Pattison said, but it is something virtually no politician wants to do, because taxpayers are owed the money and in most cases want it fast. Delays in paying refunds and other state bills can trigger interest on those overdue payments, depending on state laws, he said.

California's massive budget shortfall of more than $20 billion last year prompted it not only to delay tax refunds but to issue billions of dollars in IOUs to vendors and others who were owed money. State Controller John Chiang called the delayed payments a "shameful chapter in the State's history" when the IOUs ended last September.

California still faces budget problems, but Chiang said that revenue is running ahead of projections so far this year, lessening the threat of a repeat.

"Californians should expect to receive their hard-earned tax refunds on time," Chiang said.

The delays come as some states continue to face deep budget holes, even as economists say the nation as a whole has begun recovery. In a recent report, the budget officers group and the National Governors Association said state fiscal conditions "have continued to worsen," and that state revenues can be expected to lag one to three years behind a national recovery from recession.

This fiscal year, the report said, 36 states have cut nearly $56 billion in spending, and 30 states have cut funding to public and higher education.

Is inflation the prescription for deleveraging...?

This is definitely worth a read, and if you can't read look at the chart, as it dovetails nicely into yesterday's post. Part of the problem state-level governments are facing is the inaccuratte belief amongst policy makers that inflation is the answer to deleveraging (declining debt/GDP) and their inability to use history as a guide that such a method simply doesn't work; that is, unless you desire hyper inflation ala the Weimar Republic.



Thursday, March 11, 2010

Daily Links

Polls:

85% of people believe the Iraq War is still a war...

Giannoulias leads Kirk by 3%...

Right Track, Wrong Track...

Approval of Obama, Dubya, and Bubba by Age Group...


Articles:

Dem pollster warns against ignoring national polls against HC...

Where's the base...?

60,000 people take to the streets in Greece...

FedEx unsure about US recovery...


Video of the day:

Anyone else pumped for The Pacific?


On the Edge...

The Flow of Funds report came out today, some interesting data points. Consumers and businesses continue to de-lever at record pace but what's more interesting is the precipice local and state governments appear to be hanging over.
Source: Federal Reserve Flow of Funds Report, 3/11/2010.

Forced to deal with increasing unemployment and the associated benefits (see yesterday’s post) and a record drop-off in tax receipts (11% decline from October 2008 to September 2009 according to the Center on Budget and Policy Priorities), 2010 is setting up to be an ugly year. Governors and state legislators continue to prove they lack creativity. Rather than trying to increase the tax base by creating incentives for businesses and people to relocate (Nevada wooing Californians and Florida promoting film production are two examples that come immediately to mind) state-level politicians resorted to raising taxes and fees across the board. The lack of political entrepreneurs is startling.
"In 33 states, tax changes are increasing annual revenues, relative to what the state otherwise would have collected, by $31.7 billion. Even after accounting for a few states that lowered taxes, net tax changes for 2008-2009 total $29.7 billion in expected revenues, or 3.8 percent of total state revenues." -- Center on Budget and Policy Priorities 3/8/2010
The table below says it all.

Source: Center on Budget and Policy Priorities, 3/8/2010.


The $55 billion short-fall is being reflected in the municipal bond market, as credit default swaps (insurance against possible default) continue to rise which will only increase the cost (think interest rate) for issuing new municipal bonds potentially resulting in higher taxes to offset the increased cost of financing.


Source: ZeroHedge (www.zerohedge.com)

With the likelihood of Federal tax increases all but guaranteed (yes, letting tax rates "expire" to higher levels is the same as "raising" taxes) and with 33 states having already raised taxes, the noose around the consumer and small businesses is sure to get tighter. Deleveraging will continue and the prospects for growth given the current fact set and policy prescriptions are limited, at best.