Capital Commerce
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Obama, GM and Chrysler
Continue reading… 8 CommentsWhy are people worried about government involvement in the auto industry? It's because they fear that we'll get the car version of these things.
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Biden, Swine Flu and the Economy
Continue reading… 2 CommentsLet's says the Biden Scenario is acccurate. Let's say we should be avoiding public places because of the swine flu. What is the economic impact of a pandemic that requires such measures? IHS Global Insight has run the numbers on Captain Trips:
Scenario One. "In an epidemic (roughly 75 million infected in the United States and 100,000 fatalities), the supply and demand effects cut less than 0.5% off the growth rate of real GDP and last less than a year. The impact in emerging markets would likely be two to three times as big."
Scenario Two: "In a more serious epidemic – or pandemic – with fatalities four to five times higher, the impact on real GDP growth in developed economies would be more like -2% to -3%. In the case of the United States, this could mean a growth rate of -4% to -5% in 2009 and an even bigger rise in the unemployment rate. For poorer countries, which are less able to cope with such an outbreak, the impact would be devastating, and produce downturns of depression-like proportions."
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Fun Housing Factoid of the Day
Continue reading… 2 CommentsThis from First Trust Advisers:
However, the stage is now set for a major turnaround in home building that will begin late this year and contribute substantially to the economy in 2010-11. Once the excess inventory is worked off completely, population growth and knock-downs will require about 1.6 million starts per year, which is more than triple the current rate. In other words, starts must climb 200% in the next few years just to get back to normal!
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Geithner and More Money for the Banks
Continue reading… 3 CommentsEven though most Americans may not have attended a Tax Day tea party yesterday, most of them are probably none too pleased about the bank bailout.That displeasure is reflected in the current unwillingness of Congress, even plenty of Democrats, to send any more dough their way. Yet the White House believes more taxpayer capital will likely be needed beyond whatever TARP money is still left. So what are Treasury Secretary TimGeithner's options. I think this about covers it:
1) Devote less money to the PPIP and TALF programs.
2) Free up money by using non-TARP money for the auto and housing bailouts.
3) Use the FDIC, which is attempting to expand it credit line to $500 billion, as a source of bailout funds.
4) Encourage, at some point, banks to repay their TARP injections so the money can be recycled.Bottom line: Unless the economy explodes upward, the White House will ask for more funds. Should be a fun battle to watch.
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Obama's Tax Cuts and Tax Hikes
Continue reading… 4 CommentsPresident Obama was talking up his record as a tax cutter earlier today. Hard to believe, then, that the Washington consensus is that taxes are going up for everybody in the future. I mean, take your pick -- income taxes, business taxes, investment taxes, energy taxes and healthcare taxes. Tax wonks are salivating over different ways they can raise revenue to pay for Obamacare. A value-added tax? A carbon tax. Not hearing much about that today.
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Bernanke: Blame China, Not Greenspan
Continue reading… 5 CommentsWhile not letting U.S. mortgage markets off the hook for the credit crisis, Federal Reserve Chairman Ben today Bernanke highlighted the role of excess savings from emerging Asia flowing:
In the past 10 to 15 years, the United States and some other industrial countries have been the recipients of a great deal of foreign saving. Much of this foreign saving came from fast-growing emerging market countries in Asia and other places where consumption has lagged behind rising incomes, as well as from oil-exporting nations that could not profitably invest all their revenue at home and thus looked abroad for investment opportunities. ... Saving inflows from abroad can be beneficial if the country that receives those inflows invests them well. Unfortunately, that was not always the case in the United States and some other countries. Financial institutions reacted to the surplus of available funds by competing aggressively for borrowers, and, in the years leading up to the crisis, credit to both households and businesses became relatively cheap and easy to obtain. One important consequence was a housing boom in the United States, a boom that was fueled in large part by a rapid expansion of mortgage lending. Unfortunately, much of this lending was poorly done, involving, for example, little or no down payment by the borrower or insufficient consideration by the lender of the borrower's ability to make the monthly payments.
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Analysis: Obama Georgetown Speech
Continue reading… 2 CommentsPresident Obama gave an economic pep talk today. Invoking some biblical imagery, the White House billed it as the "House Upon a Rock" speech. If all I knew about the U.S. economy came from listening to the president, I would think that we were a low-productivity country with an inefficient private sector dominated by Wall Street. Actually, we are a high productivity country with an extremely competitive private sector. Indeed, we have the most competitive economy in the world, according to the World Economic Forum. The U.S. economy is already built on a rock. We just need to rehab a few rooms, maybe replace some old wiring. This thing isn't a tear-down candidate. If we don't understand our strengths, we can't build upon them.
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Spencer Bachus and the '17 Socialists' in Congress
Continue reading… 9 CommentsOK, so Rep. Spencer Bachus, an Alabama Republican, told a Birmingham paper that there were 17 socialists in Congress. Of course, Newsweek has proclaimed "We're All Socialists Now." And a new Rasmussen poll found that just 53 percent of Americans thought "capitalism" was better than "socialism." I dunno, maybe the s-word isn't so negative an epithet anymore here in America. Liberal blogger Matthew Yglesias thanks Obama for that:
I think it reflects the fact that on a basic level “socialism” is good branding. The whole idea is that we should put society first rather than capital, or money. That sounds good! But in the United States we never had a Socialist Party so “socialism” was primarily associated with the Union of Soviet Socialist Republics which was not at all good. But to people under 30, there’s less of that old resonance. And saying that Obama, who’s popular, is a “socialist” may simply tend to make people have warmer feelings toward the word “socialism.”
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Unemployment, Democrats and the 2010 Election
Continue reading… 6 CommentsThe WSJ just caught up to something I have been writing about for months:
Just 12% of the economists expect the unemployment rate to fall some time this year. More than a third of respondents expect the jobless rate to peak in the first half of 2010, while about half don't see unemployment declining until the second half of 2010. ... The economists' forecasts indicate that the peak in the unemployment rate is likely to coincide with the midterm elections -- possibly bad news for Democrats. Even if the economy is growing, Americans still will be feeling the effects of the recession and could blame the incumbent. For example, when George H.W. Bush lost the presidency in 1992, the economy had been out of a recession for more than a year, but the unemployment rate didn't peak until June, and there was slow growth through the election.
Me: Obama has a deep reservoir of goodwill with voters. But do congressional Democrats? By all rights, 2010 should be at least another 198 when the Republicans lost 27 seats in the House in the midterm elections. High-tech gerrymandering will help the Dems hold seats, but it just be a tough year nonetheless.
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America's Uninsured
Continue reading… 44 CommentsFormer Bush White House economist Keith Hennesey walks his blog's readers through those "46 million American without health insurance."
1) There were 45.7 million uninsured people in the U.S. in 2007.
Of that amount, 6.4 million are the Medicaid undercount. These are people who are on one of two government health insurance programs, Medicaid or S-CHIP, but mistakenly (intentionally or not) tell the Census taker that they are uninsured. There is disagreement about the size of the Medicaid undercount. This figure is based on a 2005 analysis from the Department of Health and Human Services.2) Another 4.3 million are eligible for free or heavily subsidized government health insurance (again, either Medcaid or SCHIP), but have not yet signed up. While these people are not pre-enrolled in a health insurance program and are therefore counted as uninsured, if they were to go to an emergency room (or a free clinic), they would be automatically enrolled in that program by the provider after receiving medical care. There’s an interesting philosophical question that I will skip about whether they are, in fact, uninsured, if technically they are protected from risk.
3) Another 9.3 million are non-citizens. I cannot break that down into documented vs. undocumented citizens.
4) Another 10.1 million do not fit into any of the above categories, and they have incomes more than 3X the poverty level. For a single person that means their income exceeded $30,600 in 2007, when the median income for a single male was $33,200 and for a female, $21,000. For a family of four, if your income was more than 3X the poverty level in 2007, you had $62,000 of income or more, and you were above the national median.
5) Of the remaining 15.6 million uninsured, 5 million are adults between ages 18 and 34 and without kids.
6) The remaining 10.6 million do not fit into any of the above categories, so they are: U.S. citizens;with income below 300% of poverty;not on or eligible for a taxpayer-subsidized health insurance program;and not a childless adult between age 18 and 34.
As a policy matter, we care not about the total number of uninsured, but about the subset of that group that we think “deserves” taxpayer-subsidized health insurance. That is a judgment call that involves some value choices.
