NDD is traveling this week, and I'm beat. So, we'll see you on Monday. Have a safe weekend.
Links for 05-21-2013
37 minutes ago
Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman's presidency, a USA TODAY analysis of federal data found.Then there is this chart from Reuters:
Some conservative political movements such as the "Tea Party" have criticized federal spending as being out of control. While spending is up, taxes have fallen to exceptionally low levels.Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010.
The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; t hey didn’t know that it had been run over by a truck.In other words, a central reason why the stimulus didn't work as advertised is it was based on data that grossly underestimated the overall contraction. Initial estimates showed a contract that was half as small as the actual contraction that occurred. That is a huge understatement.
Some partisans offer a simple explanation for the depth and severity of the recession: It’s the stimulus’s fault. If we had done nothing, they say, unemployment would never have reached 10 percent.The argument that the stimulus didn't do anything is simply wrong. Government spending is a variable in the GDP equation; when you increase it, there will be an effect. There is no way to get around that basic mathematical truth.
That notion doesn’t find much support even among Republican economists. Doug Holtz-Eakin is president of the right-leaning American Action Forum and served as Sen. John McCain’s top economic adviser during the 2008 presidential campaign. He’s no fan of the stimulus, but he has no patience with the idea that it made matters worse.
“The argument that the stimulus had zero impact and we shouldn’t have done it is intellectually dishonest or wrong,” he says. “If you throw a trillion dollars at the economy, it has an impact. I would have preferred to do it differently, but they needed to do something.”
A fairer assessment of the stimulus is that it did much more than its detractors admit, but much less than its advocates promised.
Fannie and Freddie were not the only government-backed or government-controlled organizations that were enlisted in this process. The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.Let me respond with someone who knows something about this: Federal Reserve governor Randall S. Kroszner:
Our findings are important because neighborhoods and communities affected by the economic downturn will require the active participation of financial institutions. Considering the situation today, many neighborhoods that are not currently the focus of the CRA are also experiencing great difficulties. Our recent review of foreclosure data suggested that many middle-income areas currently have elevated rates of foreclosure filings and could face the prospect of falling into low-to-moderate income status. In fact, 13 percent of the middle-income Zip codes have had foreclosure-rate filings that are above the overall rate for lower-income areas.Barry Ritholtz over at the Big Picture Blog has a far more devastating take down of this intellectual bile. See the numerous links at the bottom of this link.
Helping to stabilize such areas not only benefits families in these areas but also provides spillover benefits to adjacent lower-income areas that are the traditional target of the CRA. Recognizing this, the Congress recently underscored the need for states and localities to undertake a comprehensive approach to stabilizing neighborhoods hard-hit by foreclosures through the enactment of the new Neighborhood Stabilization Program (NSP). The NSP permits targeting of federal funds to benefit families up to 120 percent of area median income in those areas experiencing rising foreclosures and falling home values.
In conclusion, I believe the CRA is an important model for designing incentives that motivate private-sector involvement to help meet community needs. The CRA has, in fact, been helpful in alleviating the financial isolation of many areas of concentrated poverty, but as our report illustrates, there is much more that could be done in these communities. Contrary to the assertions of critics, the evidence does not support the view that the CRA contributed in any substantial way to the crisis in the subprime mortgage market. Today's discussion is an important first step in the process of identifying other initiatives and areas of cooperation between government and the private sector that will effectively address the continuing challenge of poverty in the United States.
Food prices are likely to become more volatile in coming years, increasing the risk that more poor people in import-dependent countries will go hungry, the United Nations said in an annual report on food insecurity published on Monday.
Global food price indices hit record highs in February and were a factor in the Arab Spring of unrest in north Africa and the Middle East.
Prices have since eased but the U.N. report said economic uncertainty, low cereal reserves, closer links between energy and agriculture markets and rising risks of weather shocks were likely to cause more dramatic price swings in the future.
"Food price volatility featuring high prices is likely to continue and possibly increase," the Food and Agriculture Organization, the World Food Program and the International Fund for Agricultural Development said in the joint report.
"Demand from consumers in rapidly growing economies will increase, population continues to grow, and further growth in biofuels (displacing food crops) will place additional demands on the food system."
The report said that poor farmers and consumers in small importer countries, particularly in Africa, would be more vulnerable to shortages as a result.
Overall, “there is a favorable set of fundamentals giving support to crude oil right now, including strong job retention in the U.S., more evidence that [third-quarter] industrial and cyclical earnings will come in strong, and a firming up of the demand story especially in the U.S.,” he said. “This process is taking dollars out of the money markets and putting them back to work in stocks and commodities.”If prices move through the 50 day EMA, the next stop will be the 200.
Many foreign investors are not reassured by the increasingly explicit US government guarantee, and are wary of the debt that the two housing agencies issue. The political fallout over the US debt ceiling this summer and the consequent Standard & Poor’s downgrade of US sovereign debt intensified fears that politics might derail the US government promise to guarantee the debt.
“We have become hostage to the irresponsible behaviour of politicians,” said Bader al-Saad, head of the KIA, in a New York speech last month. “What happened during the debt negotiations will make many countries think twice about the investment environment of the US.”