January 4, 2007

Thursday’s Econ Reports

Filed under: Economy,Taxes & Government — Tom @ 8:00 pm

Note: This post was carried forward to Thursday evening because of new information.

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Yesterday’s post covered Wednesday’s releases on employment (ADP report), ISM manufacturing, construction, and vehicle sales. The results were collectively referred to as “a mixed bag.”

Now, on to Thursday’s releases.

ISM Services

AP said that expectations were 57.0 earlier in the week. It came in at 57.1, down from 58.9 in November. That’s 86% of the economy that’s still in pretty strong expansion mode.

Factory Orders

Expectations were for a 1.5% pickup for November (adjusted to 1.4% later), after a revised 4.5% decline in October. They came in at 0.9%, which has to be considered a disappointment.

Retail Sales

This link says that the overall increase came in at 4.5%, below the expectation of 5.0%. There sure seems to be a lot of wailing and gnashing of teeth over what I think is a pretty small variance. I would also suggest that the increasing reliance on gift cards (which are NOT recorded as sales until merchandise is purchased with them) is spreading December sales more into January with each passing year (and the retailers already have already pocketed the cash flow). Of course the test of that theory will be a month from now. The AP story notes the gift card point, and makes an additional one:

Sales results were also hurt by two big shifts in the way consumers are shopping: the increasing popularity of gift cards and robust online buying, which is not included in same-store results. Gift card sales are only posted when they are redeemed rather than bought, helping to extend the holiday season into January.

Assuming that online Christmas shopping was up by the same percentage as it was during the entire year (up 26% overall in 2006 vs. 2005), that’s a fairly significant shift that isn’t being picked up in the reported retail sales numbers.

Retail sales update — This link says that the International Council of Shopping Centers expected an increase of 3.0% for whatever they measure, and got 2.8%. I would assume that this excludes all of the big-box stores.

Additional report noted Thursday evening at 8PM — “The National Association of Realtors’ pending home sales index for November – a measure of future demand for homes – slipped 0.5 percent to 107.0 from a revised 107.5 in October.” This was seen as a disappointment, and the bond market rallied (i.e., effective interest rates went LOWER) in reaction.

Still to Come Friday — The Bureau of Labor Statistics Employment Report (New Jobs and Unemployment Rate). ADP’s minus-40,000 number from yesterday looms.

Medical ID Theft: An Ugly and Growing Problem

There’s a long Business Week article on this that is pretty good (and free for now), so I’ll spare readers a long post that goes with it. As they say, read the whole thing.

The very condensed version of the story is that there are people out there stealing others’ personal information for the purpose of getting free (to them) medical treatment. They are even setting up fake medical clinics to facilitate defrauding the insurance companies. The implications are not just financial, but can also relate to victims’ health, because whatever medical procedures are performed in your name may become part of your medical history.

There are a number of useful things you can do to prevent it from happening to you, and things you should do if you become a victim that are noted at this BW graphic. I would consider downloading it (as I have), especially since it has a couple of useful phone numbers and web addresses.

The New Transportation Secretary May Be Worse Than Norm Mineta

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 1:38 pm

This is a really bad decision, as described in a Wall Street Journal editorial last Saturday (requires subscription): The Department of Transportation has decided that the US is not “Virgin territory,” even when the company’s American subsidiary has complied with ownership rules:

….. barely a month ago DOT seemed to be in the process of relaxing antiquated rules that require that U.S.-based airlines be 75% U.S.-owned or “controlled.” But under pressure from airline unions and protectionist-minded U.S. carriers, new Transportation Secretary Mary Peters put a stop to that policy shift. And now DOT says that although Virgin America was structured to comply with the 75% rule, “Virgin America’s close relationship with the U.K.-based Virgin Group indicates that the carrier is not under the actual control of U.S. citizens.”

So DOT is telepathic too.

Even Norm Mineta, for all his considerable faults, didn’t claim those powers.

Continuing:

….. In addition to the consumers who won’t benefit if Virgin America doesn’t get the go-ahead, there’s also the matter of the 3,000 jobs Virgin America wants to create at its planned San Francisco hub.

Virgin America has until January 10 to respond to DOT’s complaints, and it says it plans to. But we’d also be curious to hear what interested lawmakers such as California Senators Barbara Boxer and Dianne Feinstein think about the issue.

So would I. That’s a lot of jobs for those two to blow off — especially because they are both fond of telling us how the Bush 4.5%-unemployment economy is supposedly not creating enough of them as it is.

UPDATE: Given her self-proclaimed status as “Most Powerful Woman in America” (HT Drudge) and as congressperson in the general area, perhaps even for the district that includes San Fran’s airport, it would be interesting to see how interested Nancy Pelosi might be in these 3,000 jobs.

Carnival Barking (010407)

Filed under: News from Other Sites — Tom @ 11:52 am

Newshound’s 55th on Ohio Politics is here.

Boring Made Dull’s 27th on Econ and Social Policy is here.

Stat of the Day: On US Poverty Spending

Filed under: Economy,Quotes, Etc. of the Day,Taxes & Government — Tom @ 9:22 am

From Rich Lowry, at Jewish World Review:

According to poverty expert Robert Rector of the Heritage Foundation, the federal government and states already spend roughly $585 billion a year on means-tested poverty programs — a record level. If we could buy people into the middle class, we’d have done it by now.

Let’s assume Rector’s number is correct; unfortunately, Lowry didn’t provide a link (I have my doubts, especially as to what Rector might have included and excluded — If anyone has a link to the support for the $585 billion, throw it in the comments or e-mail me).

If there are 40 million people living in poverty in the US (that would be 13.3% of the population, slightly higher than the current official rate), that would mean we are spending $14,625 on EVERY man, woman, and child living in poverty. A married family of four in poverty could live very nicely on over $58,500 tax-free dollars a year, as could a single parent with two kids on almost $44,000; but of course, the money and the value of the services isn’t getting to them.

So the question has to be asked, especially of John “Two Americas” Edwards, who wants us to spend even more: “Where is the money going now?”

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UPDATE: Funmurphy’s found congressional testimony by Rector from 2000 where he said that the country was spending $434.2 billion on means-tested welfare programs at that point ($121.3 billion state and $312.9 billion federal). That makes the $585 bil, which is about 35% more, unfortunately credible.
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Selected Previous Relevant Posts:
- Dec. 2, 2006, — Tax Foundation: Tears for the ‘Bottom Quintile’ Are Almost Completely Wasted
- Mar. 27, 2006 — A Really Scary Idea — That Just Might Make Sense
- Oct. 2, 2005 — NY State Medicaid Spending: Surely This Can’t Be (But It Is)
- Sept. 29, 2005 — Income Inequality + Economic Mobility = Long-Term Prosperity

Column of the Day: Don Luskin — Ford Successfully Field-Tested Supply-Side Econ

Filed under: Economy,Quotes, Etc. of the Day,Taxes & Government — Tom @ 7:36 am

Bullseye, as usual for Mr. Luskin. In 1975, Ford uncorked an idea that ultimately led to previously unseen levels of prosperity, for which we owe him our undying gratitude:

(In October 1974, it appeared that Ford would) deal with the recession by cutting spending and raising taxes with a 5% surtax on personal income.

Yes, tax hikes and spending cuts in a recession make about as much sense as putting a starving man on a diet, especially considering the astronomical tax rates that were already in effect then — the top personal tax rate on earned income was 50% (and it was a ridiculous 70% on “unearned” income — Ed.). And inflation was pushing more and more Americans into higher and higher brackets.

But that’s what America’s best economic minds were recommending — and the stock market knew it would only worsen the recession.

Then in December 1974, everything changed. In a restaurant in Washington, D.C., a young economist named Arthur Laffer was having dinner with a young White House aide named Richard Cheney. Laffer explained to Cheney that if you raise taxes, you diminish the incentives to work, and the economy slows down (and tax revenues for the government fall, despite the higher tax rate). If you lower taxes, the opposite happens. Incentives to work are increased. The economy grows faster (and tax revenues increase, despite the lower tax rate).

Laffer illustrated this principle by sketching a diagram on a cocktail napkin. His diagram has since been immortalized as “The Laffer Curve.” Cheney told his boss, White House Chief of Staff Donald Rumsfeld, about the Laffer Curve. And the rest, as they say, is history.

Soon Ford stopped talking about raising taxes, and instead started talking about lowering them. That’s when the stock market stopped going down.

In March 1975, it was official: Ford signed the tax cuts into law. That month marked the bottom of the recession.

And armed with the logic of the Laffer Curve, Ford decided not to veto a federal spending bill designed by the Democratic Congress to stimulate the economy. Ford made the bet that lower taxes would generate enough new growth to create the revenues necessary to pay for the spending.

….. a powerful new economic principle was abroad in the land — the idea that you could grow the economy by reducing the tax rates that hold back economic incentives.

Jimmy Carter, who followed Ford as president, did nothing with the new idea that Ford had fostered. (And, when Carter left office, the Dow was lower than when he arrived.) The next president, Ronald Reagan, grabbed that idea with both hands in the 1980s, with massive tax cuts that kicked Ford’s bull market into high orbit. The Dow blasted through 1000 and never looked back.

Similarly, the massive growth spurt of the late 1990s began when President Bill Clinton reduced the tax rate on capital gains. And the economic expansion we’re in right now kicked into gear in earnest in 2003 when President Bush cut tax rates on income, dividends and capital gains.

….. Take a look at the Dow Jones Industrial Average, now more than 20 times higher than what it was in that bleak December in 1974 when Ford made the right decision, and changed the course of economic history.

Thank you, President Ford.

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UPDATE, 11:45 PM: Commenter Michael Q and I are at loggerheads over whether Don Luskin is giving Ford too much credit, whether Ford deserves any credit at all, or whether the tax cuts involved were supply-side in nature.

Kudlow apparently gave Luskin a hard time about these matters too on his CNBC show, as Michael Q noted (I didn’t watch, though I am told a YouTube will be up shortly).

I believe he was in the process of doing this anyway (either that or he’s the fastest typist in the West), but I asked Don if he could resolve the situation. His new post does just that. I suggest everyone not only read all of Don’t post, but also read the Washington Post article he links to that recounts the progress of the economy once Ford moved in the tax-cut direction. The combination of those two linked items gets the history right. Perhaps Michael Q will accept a blogger and an Old Media paper actually agreeing on something as evidence of historical accuracy. Luskin’s bottom line:

It seems clear to me that while we can fault Ford for not doing more or for not doing better with his tax cut, he deserves a great deal of credit for (a) having an organization that was capable of getting outside-the-box inputs from a then-unknown Arthur Laffer, and (b) having the wisdom to take that advice and stand away from doing something really terrible – raising taxes – even though it was firmly embraced by the conventional wisdom of the time.

UPDATE 2, Jan. 6 — I wish I’d had Andy Vance’s succinctness a couple of days ago when I was blasting out windy comments:

There is some debate as to Ford’s understanding of supply-side, but the debate is largely irrelevant given that Ford got the job done regardless of his intentions, “field testing” the principles for Ronaldus Magnus to embrace following the economic quagmire of Jimmy “Peanut” Carter.

Ho Hum Hiring Headline (010407)

Filed under: Economy,Taxes & Government — Tom @ 6:19 am

Until his recent departure, Florida’s Jeb Bush was America’s best governor, and a man who hasn’t gotten nearly the credit he deserves.

He has, however, left an unsolved “problem” in his wake — Companies in at least one part of the Sunshine State are having a hard time finding workers:

Skilled professions shortage

….. The South Florida workforce added 47,200 jobs, or 2 percent growth, from October 2005 to October 2006, according to the Florida Agency for Workforce Innovation (FAWI). The unemployment rate in October ranged from 2.8 percent in Broward County to 4.2 percent in Miami-Dade County. That’s considered almost full employment for people seeking jobs.

But the job growth wasn’t enough to feed companies’ appetites for workers. Many industries reported difficulty filling positions and recruiting out-of-state workers to the suddenly pricey region.

According to the Bureau of Labor Statistics, the 47,200 jobs added in South Florida (specifically, Miami-Ft. Lauderdale-Miami Beach) from October 2005 to October 2006 are over 18,000 more than were added during that same time in Ohio, Indiana, and Kentucky — combined (8,600 in OH; 7,700 in IN; 12,800 in KY). The three states involved have over four times as many workers.

London’s Mayor Wants to Celebrate 50 Years of Castro

Filed under: Taxes & Government — Tom @ 6:14 am

I guess that means he’s optimistic about the Maximum Leader’s health. From the UK Daily Mail (HT Memeorandum):

(London Mayor) Ken Livingstone is planning a “massive festival” across London to celebrate the 50th anniversary of Fidel Castro’s Cuban revolution.

The event, to be staged in 2009, will involve street parties, sports venues and some of London’s leading museums as well as the closure of Trafalgar Square.

Although the Mayor’s office refused to provide budget estimates, it could cost up to £2 million.

Cuba’s gulag residents and oppressed people will doubtlessly be thrilled. With any luck, there’s enough time between now and then for the “celebration” to turn into one about the country’s liberation.

I Wish I Could Believe That This Is the Exception….

Filed under: Education,Taxes & Government — Tom @ 6:09 am

and not the rule (HT RAB). It comes from New York City:

Talk about a high-stakes test.

The radio audience was live and the question for teachers union president Randi Weingarten involved sixth-grade math: “What’s 1/3rd plus 1/4th?”

Weingarten, however, is a not a sixth-grader or a math teacher. She’s a lawyer and a union boss who once taught high school social studies – and no one told her there was going to be a quiz.

“I would actually have to do it on paper,” she said when asked yesterday to complete the math problem on WNYC’s “Brian Lehrer Show” where she was a guest.

Mike Pesca, who was filling in for Lehrer, introduced the show’s education topic by saying American college grads can’t do basic math while high school grads in Canada and middle-schoolers in India have no trouble.

After Weingarten stumbled, another guest quickly produced the correct answer: 7/12ths, leaving Weingarten to explain herself.

Go to the link for the laugher of an explanation.

New York Post Commenter Says It Best about This Unconscionable Idea

Filed under: Life-Based News,Taxes & Government — Tom @ 6:04 am

The idea is ensuring that your baby has the same handicap as you through the wonders of genetics (HT Large Bill).

This Post commenter reacts:

Anyone who really loved their child would want the best for it. And anyone who damages a child before its birth should be punished for practising (sic) mayhem on an infant.

Sad to say, it appears that we need a law to keep people from doing this. Either that, or someone needs to make it clear to parents considering this that the child will financially own them for what they have deliberately done once he or she reaches legal age.

Positivity: Bone Marrow Donor and Donee Meet

Filed under: Positivity — Tom @ 5:59 am

From Boca Raton, FL:

It was a moment when joy was inevitable.

It was a moment for flowers and hugs and swells of emotion.

The Gift of Life Bone Marrow Foundation of Boca Raton – an organization that locates marrow donors – brought Rabbi Daniel Treiser, of Temple Kol Ami Emanu-El in Plantation – together with Katherine Sullivan of Cherry Valley, N.Y.

His donation of blood stem cells two years ago – facilitated by the Gift of Life Bone Marrow Foundation – saved the life of the 63-year-old woman who was suffering from leukemia.

“The transplant was her only hope of survival,” said Jody Greenspon, marketing and communications manager for Gift of Life.

“When I heard I was a match, I was shocked, ecstatic and excited — all at the same time,” the rabbi said. “How many people have the chance to be a part of something so important and so special?”

“One of the greatest mitzvot we learn in Judaism, the one that supercedes all others, is that of pikuach nefesh, saving a life,” the rabbi said. “I am just so thrilled to know that, two years later, this stranger who I was able to help is doing so well. I couldn’t wait to finally meet her.”

Rabbi Treiser joined Gift of Life’s Registry of donors in the spring of 2002, when a family member brought testing kits to his Passover Seder. A simple cheek swab was all it took to add him to the Registry that is available worldwide to transplant centers searching for matches on behalf of their patients.

Less than two years later, Rabbi Treiser learned he was a match for someone in desperate need of a transplant. Without hesitation, he donated his blood stem cells, which were delivered to the patient out of state, Greenspon said.

Rabbi Treiser was ordained by the Hebrew Union College – Jewish Institute of Religion in June 2000. Born and raised in Queens, N.Y., he came to Temple Kol Ami Emanu-El just after ordination. He is the immediate past president of the Broward County Board of Rabbis.

He met Sullivan at Benvenuto’s Restaurant in Boynton Beach.

Headquartered in Boca Raton, Gift of Life facilitates bone marrow, blood stem cell and umbilical cord blood transplants for children and adults suffering from life-threatening illnesses around the world. Its services include transplant coordination, donor recruitment, patient advocacy and public education.

Through targeted recruitment in Jewish communities throughout North America, Gift of Life strives to overcome the loss of bloodlines following the Holocaust, a consequence that has made the search for genetically matched donors particularly difficult for Jewish patients.