Relevant and even prescient commentary on news, politics and the economy.

The Point at which I stopped giving Barry O the benefit of the doubt

As quoted by Greg Sargent:

I am fierce advocate for equality for gay and — well, let me start by talking about my own views. I think it is no secret that I am a fierce advocate for equality for gay and lesbian Americans. It is something I have been consistent on and something I intend to continue to be consistent on during my presidency.

As Edith Keeler once noted, “A lie is a very poor way to say ‘hello.'”

The next four years will be an improvement. But, as John Aravosis notes:

Great, then where are the racists, Mr. Obama? We don’t see you embracing too many of them in the name of learning to agree to disagree. Or does your desire to create a new “atmosphere,” and reach out to our enemies, stop when it’s your own people, your own children, you’d be betraying? Funny how you only reach across the aisle when it’s someone else’s family, gay families in particular, getting the shaft.

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What helps the real economy?

(hat tip ataxingmatter)

Start Making Sense notes:

In 2004, Congress enacted a temporary dividends received deduction for U.S. multinationals that repatriated foreign earnings. Under the temporary DRD, the tax rate on dividends from foreign subsidiaries effectively was lowered from as high as 35 percent to just 5.25 percent, but only for dividends during a 12-month time window.

Every tax expert I know whose views on this proposal were sounded – except for those being paid to support it – thought it was a bad idea, despite the acknowledged case for permanently lowering the tax on U.S. multinationals’ foreign earnings. The problem lay in the provision’s being temporary, and thus creating lock-in when the rate went back up because people would anticipate and wait for the next tax holiday.

As it happened, there was an extraordinary level of response to the tax holiday, more than experts or revenue estimators had expected because it had been thought that companies with lots of perfectly legal and effective tax planning tricks might not be sufficiently worried about the repatriation tax even to pay 5.25 percent to get their earnings home for tax purposes. It’s also generally thought that the claim that the repatriations would create U.S. jobs proved predictably bogus. (See Lisa M. Nadal, “Bailouts Disguised as a Tax Cut?”, 121 Tax Notes 1230, 12/19/08.)

As Nadal notes, the same companies that successfully pushed for the tax holiday in 2004 are now already seeking a reprise. That didn’t take long.

In an important sense, the policy here is entirely backwards even apart from its temporariness, which Nadal suggests could be rationalized this time around in terms of the ongoing liquidity crisis in the U.S. economy. (For myself, in order to accept the liquidity argument for another tax holiday, I’d need to see good evidence that it cost-effectively addresses the credit crunch despite being aimed at just a small clientele of U.S. companies that happen to have trapped foreign earnings that they want to repatriate.)

What makes the policy backwards is that the case for exemption (or a low U.S. tax rate) for foreign source earnings is strongest for new investment, not old investments that have already been made. Retroactively exempting the profits from old investment creates a transition windfall without actually changing the past anticipated incentives, which by now are water under the bridge. A temporary rate cut for dividends, unlike a permanent one, is pretty much guaranteed to apply only to old investment.

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Biting satire

by James Flannery

Screw You Haikus, Take Two

Bubba in Ford Truck

made by Percy in Detroit

barks, “buy American!”

Percy in Nissan

made by Bubba in Dixie

scoffs, “Fords really suck!”

The end of NASCAR—

that might turn Alabama

blue in a hurry

Clinton, born Redneck,

sought to feign the aristocrat

revealed a Redneck

Bush feigned a Redneck

pedigree of aristocrat

revealed a Redneck

This is the fruit of

Woodstock Generation:

two stinking Yahoos

if red states are Ying

and if blue states are the Yang

both stuck up Ying-Yang


will need a Redneck buddy

when protein grows scarce

Ponder Cheney’s stent:

it is not in the right place

to ease scatoma

— Satire by James Flannery, 2008

Copyright waived. Please distribute freely.

author due credit

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Caught Between the Union Incompetence and Management Incompetence

by cactus

Caught Between the Union Incompetence and Management Incompetence

I was just talking to my Dad. He had an interesting take on the whole Big 3 bail-out, and I figured I’d try to pass along what he said as best I can:

When I was 18, I was elected a union representative. This was in Argentine, and at that time it was very unsafe to be a union representative. I think that’s why they made me representative – I was stupid enough to take the job.

Union representative didn’t mean I had any special privileges or added pay. I simply did my job, and had some added stuff to do on top of it all. Unions here in the US, for the last few decades, have been a racket. The UAW chief we see on TV – he doesn’t look like he can even remember the last time he sullied himself with work. Then there are the Teamsters – you had Jimmy Hoffa in bed with the mob, and now his son, a lawyer, is running the outfit. A union needs lawyers, but the head of the union should be like the other people in the union. Union bosses like this aren’t in it for average union member.

On the other side, you have the executives and Board of Directors of companies like GM. The executives make bad decision after bad decision and suffer no consequences, and the Board is composed in large part of people who don’t know anything about making cars.

Its no wonder Detroit is in trouble.

I agree with him on this. And unfortunately, I don’t see any solution to the problem that isn’t simply naive.
by cactus

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DECEMBER 14-20, 2008 Key economic news, data, reports, and other information in the rapidly changing economy. Your suggestions and links in comments will be updated periodically in the main post.

DECEMBER 14-20, 2008

Economic Forecast This week

Economic Forecast Next week

FRBNY National Economic Indicators Calendar

AFP ECON WATCH: Brief Overview of Economic Events; and here

Previous Angry Bear Economic Roundup – Dec 15, 2008 – TEST


12/16 – Federal Open Market Committee Action


12/16 – Treasurys spike after Fed repeats call to buy bonds


12/15 – Frenzy: THE CRASH What Went Wrong


12/15 – U.S. Aims to Rein In Credit-Card Rates

12/16 – Fed May Buy Lower-Rated Assets to Ease Credit Crunch

12/16 – Credit spreads expected to tighten in 2009

12/16 – Goldman Sachs Reports 1st-Ever Loss As Public Company; and here

12/18 Treasury – Office of Thrift Supervision (OTS) Approves Final Rule Barring
Unfair Credit Card Practices – Takes Effect July 1, 2010
; Fact Sheet; and Final Rule full text

12/18 Fed Takes Swipe At Credit Card Rules; See
this shocking VIDEO


Project on Student Debt

12/15 – States Eyeing Education Cuts Amid Budget Shortfalls

12/12 – U.S. DOL H-2A Final Rule; and here

12/18 – DOL
news release – U.S. Department of Labor Issues Final H-2B Rule

12/18 – DOL ETA
; and State details (last


12/05 – DOL Chart Pack – Employment Statistics Highlights: Nov 2008

12/11-Government Report – Unemployment Insurance Weekly Claims Report

12/12 – U.S. DOL H-2A Final Rule; and here


12/16 – Gov Report – Real Earnings

12/16 – Big 3 Not Only Employers with Great Wages and Benefits


12/16 – Gov Report – New Residential Construction: Nov 2008; and here


B2B Knowledge Source – White Papers

12/16 – New York Hospitals Brace for Healthcare Cuts under New State Budget

12/16 – California’s Healthy Families Program Gets A Last-minute Lifeline


12/11 – Gov Report – U.S. Import and Export Price Indexes: Nov 2008

12/12 – Gov Report – Producer Price Indexes: Nov 2008

12/16 – Gov Report – Consumer Price Index: Nov 2008

12/16 – Drop in Consumer Prices Is Most Since 1932


12/12 – Gov Report – Advance Monthly Sales for Retail Trade and Food Services: Nov 2008

12/14 – SpendingPulse 2008 Holiday Midseason Update

12/15 – States Worry About Slumping Retail Sales Revenues

12/16 – Mall Owners Sent Reeling by Spiraling Credit Woes

12/16 – Retail Sales Down for Fifth Straight Month


12/10 – U.S. Wholesale Inventories Drop Most in 7 Years

12/12 – Wholesale prices drop 2.2 percent in November


12/16 – GE to Eliminate Quarterly Earnings Guidance; and here


12/02 – Gov Report – Automotive Industry: Employment, Earnings, and Hours

12/16 – Chrysler Follows GM’s Lead, Partners with Credit Unions to Offer Loans

12/16 – Bush: More Time Needed for Auto Bailout

12/16 – Automakers Fend Off Parts Companies’ Cash Demands


12/12 – California Sliding Toward $41.8B Budget Deficit

12/16 – California Republican State Lawmakers Budget Plan: Slash $10 Billion from Schools

12/16 – New York Gov. Paterson Unveils New Budget in ‘Historic’ Fiscal Crisis

12/16 – Florida Legislature Sets Special Budget Crisis Session; and here


12/16 – Gov Report – U.S. Export Prices: Nov 2008

NOTE: Contributions by readers throughout the day are encouraged. Please add
your general comments and subject links in the comments section. Thanks.

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Helicopter Some Money Over Here?

Atrios writes:

I know we’re in crazy economic times here, but it’s still a bit weird seeing economists suggesting that our government get into the mortgage business at below market rates.

I say the economic times are so crazy that I’ll worry about getting a refi at “below market” rates when the market shows some signs of sanity.

The last time I was in the mortgage market, in late-2004, I obtained a 30-year fixed-rate mortgage at an interest rate approximately 1.6 percentage points over the 10-year Treasury bond yield at the time; that’s exactly what Hubbard and Mayer consider a normally-functioning-market spread in the W$J op-ed that CR takes on today. The same spread today would imply a rate of 3.8 percent! Now maybe a lender today would require a “world going to hell in a handbasket” premium. Fair enough. But as Hubbard and Mayer observe, that could be 70 bp and that would put us at this magical 4.5 percent. Just how much riskier are full-doc conforming prime mortgages?

Now I’m not keen on re-inflating the bubble per se, or creating a right to a 4.5 percent mortgage. But under the circumstances, there seem to be worse things that Uncle Sam (or Uncle Ben) can do than to lend money at normal-ish spreads on otherwise prudent terms — the “prudent” part being a missing element of a lot of bubble-era lending, of course.

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GAO US Government financial report…same news


GAO states in a press release today:

Demonstrates Significant Problems

Some Major Agencies Fail to Garner ‘Clean Opinions’;
Problems Make it More Challenging for Informed Decisions

WASHINGTON (December 15, 2008) – For the 12th year in a row, the U.S. Government Accountability Office (GAO) was prevented from expressing an opinion on the consolidated financial statements of the U.S. government—other than the Statement of Social Insurance—because of numerous material internal control weaknesses and other limitations.
“While significant progress has been made in improving financial management since the federal government began preparing consolidated financial statements 12 years ago, three major impediments have continued to prevent us from rendering an opinion on the accrual basis consolidated financial statements over this period of time,” said Gene L Dodaro, Acting Comptroller General of the United States and head of the GAO. “Those include serious financial management problems at the Department of Defense, the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and the federal government’s ineffective process for preparing the consolidated financial statements.” Dodaro also noted three additional material weaknesses related to improper payments, information security, and tax collection activities. Dodaro added that at least three major agencies did not get clean opinions – the Department of Defense, the Department of Homeland Security, and the National Aeronautics and Space Administration (NASA).

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"Ben Tre Logic" Redux: History Repeats Itself

Forty years ago, in 1968, an American major after the battle of Ben Tre in Viet Nam was quoted by Peter Arnett as having declared, “It became necessary to destroy the town to save it.”

Now, we have the contemporary version, from U.S. President George Walker Bush: “I’ve abandoned free-market principles to save the free-market system.”

This, apparently, is why banks are being paid not to make loans.

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Morici: Account Deficit Heightens Risk of Depression

Professor Morici warns that the “U.S. huge account deficit Heightens Risk of Depression.” Beginning with the graph below, Morici, notes that

At 4.8 percent of GDP, the huge current account deficit indicates Americans continue to consume much more than they produce, borrow too much from the rest of the world

The trade deficit will make the recession longer and deeper, and lessen the positive benefits of President-elect Obama’s proposed stimulus package. If Obama does not fix the banks and significantly reduce the trade deficit, stimulus spending will not permanently pull the economy out of recession, and the economy could easily slip into a prolonged malaise or depression.

Simply, money spent on Middle East oil, Chinese televisions and coffee markers, Japanese and Korean cars can’t be spent on U.S. made goods and services, unless offset by a comparable amount of exports. Since U.S. imports exceed exports by almost five percent of GDP, the trade deficit creates an enormous drag on demand for U.S.-made goods and services. Along with the credit crisis and resulting slowdown in new housing and commercial construction, the banking crisis and trade deficit could push unemployment above 10 percent.

Ultimately, the piper will be paid. I have often argued for a dynamic view of comparative advantage. To wit: the monumental trade imbalance will rectify itself, will finally balance, but not after, I suspect a whole lot of hurt. At that point, however, the U.S. will be a dwarf dressed in giant’s clothes.

My point is simple: Such imbalances cannot long be sustained. No country has ever sustained indefinitely such an imbalance. (At one point, the ratio of imports to exports was 2:1.) Credit has its limits. To think otherwise is to play foolish ponzi schemes as you waltz over the cliff.

Our monetary policy was always directed at the consumer. Keep him buying. Paulson knee-jerk initial response was to send out rebate checks. Now, we are about to up that ante.

Our banks, in their greed and mismanagement of credit, have pushed us over the edge. Now, we are fixated on rescuing them. Now we are conjuring up some silly Keynesian notion that government stimulus alone is the answer. But we saved nothing for this rainy day. The jig is up.

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CEO Math

by divorced one like Bush

Honda has done some math,

Honda Motor Co. now expects 185 billion yen ($2.06 billion) in group net profit for the fiscal year ending March 31, 2009 — less than a third of the 600 billion yen it earned last fiscal year.
For every yen the dollar declines, Honda loses about 18 billion yen ($200 million) in operating profit. In trading Wednesday, the dollar fell as low as 88.15 yen.

And is making some changes based on the results:

Underlining the tough times ahead, Fukui refused to set a vehicles sales target for 2009 — an unusual move for Honda.
To take responsibility for the faltering results, Honda directors will take a 10 percent pay cut and further bonus reductions are likely, he said.

Earlier this month, Honda said it was pulling out of the glamorous but expensive Formula One racing to save costs and focus on its core car business. (Hey, it’s not NASCAR so who care? I do.)

Honda lowered its sales forecast for the fiscal year through March by 13 percent to 10.4 trillion yen ($116.9 billion).

The company also trimmed annual investment spending by 60 billion yen ($674 million) to about 650 billion yen ($7.3 billion) to cut costs during hard times, including scrapping plans to introduce the Acura luxury line in Japan by 2010. Plans to develop a successor to the NSX sportscar were also canceled.

Yes, there are layoffs:

Honda had already said it was cutting 760 temporary workers in Japan, or nearly 18 percent of its Japan temporary work force of 4,300. On Wednesday, Honda said another 450 temporary workers in Japan will be reduced through February.

That’s all they have to cut? No regulars getting the axe? Don’t they know it’s the workers fault?

Toyota has done some math too.

Toyota is also reducing production. In a key setback, Toyota said earlier this week that it’s delaying indefinitely the start of production at its plant in Blue Springs, Mississippi. The plant had been scheduled to begin in 2010…

Hey Cochran baby, how’s that work’n for ya in old Mississippi?

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