Economics and Other Random Stuff

Are they insane?

"Congressional negotiators are weighing House and Senate proposals to include dozens of tax breaks for industries in pending energy legislation, even though they could add as much as $19 billion to the federal budget deficit in the next decade."

The United States is facing the largest deficit ever both in absolute terms and relative to GDP, but the Republican Congress can't stop handing out the goodies.
0 comments

The Washington Post reports on the effect of Hurricane Isabel. I have not seen any official damage estimates, but it obviously is in the billions. Also, the power outages, flooding, and cancellations means GDP will probably take a couple tenths of percentage hit this quarter. Since people will have to rebuild, subsequent quarters will be slightly inflated (destruction of capital stock does not effect GDP, but the economic activity from rebuilding it increases GDP). It will be interesting to see how much Isabel is blamed if/when the 3rd quarter GDP numbers come out below expectations.
0 comments

Economic advisors ignored could have been the headline to this story on how steel tariffs are backfiring. In the middle of the story, you find out that all (or almost all) of the economic advisors were against this plan. In the end (and buried at the end of the article), their opposition didn't matter because they failed to rally support at what is described as a key meeting, but, given this White House, was probably meaningless, the decision already having been made.
0 comments

Leading Indicators are up for the fourth straight month according to the Conference Board. I think if you dig deeper, this news is not as good as it may first seem. The largest contributor to the increase was the interest rate spread (10 year rate minus fed funds). This spread has been climbing because of the massive budget deficit along with a loose monetary policy (real money supply is up too).
0 comments

California legislature will require most businesses to offer health insurance to their employees. 80% of the cost will have to be paid by the employer. If I was a California health insurance broker, I would be gearing up to offer the highest deductible, highest copay, lowest benefit, and most restricted access policies imaginable. There is little chance that this will yield the intended result. Instead businesses will just offer the cheapest, lousiest insurance they can get away with. At only 50 cents per hour additional cost, it probably is not too great of a burden, but it's funny how politicians who scream about unfunded mandates don't have any qualms about imposing them on businesses.
0 comments

The Washington Post reports that the Fed is unlikely to change interest rates and that inflation is under control http://www.washingtonpost.com/wp-dyn/articles/A62618-2003Sep11.html

I wonder if we aren't just exporting our inflation to China?
http://www1.chinadaily.com.cn/en/doc/2003-08/25/content_257820.htm
0 comments

Nothing really interesting to post yet. One thing to me that is always interesting is the disparity between the "official" unemployment rate and the alternative measures of unemployment. For example the unemployment rate for August as reported by the BLS is 6.1%. The alternative value also reported by the BLS is 10.0%. Which means that 1 in 10 workers would like a full time job, but cannot find one. http://www.bls.gov/news.release/empsit.toc.htm
0 comments