>
> California Gay Marriage on Hold as Case Is Appealed
>
> A U.S. appeals court panel on Monday ruled that same-sex
> couples could not marry in California while the court
> considers the constitutionality of the state's gay marriage
> ban, according to wire reports.
>
> But the Ninth Circuit Court of Appeals panel set a relatively
> aggressive schedule for hearing the case, ordering lawyers to
> produce a series of briefs between Sept. 17 and Nov. 1.
>
> The Monday decision by the appellate panel reverses a ruling
> last week by U.S. District Court Chief Judge Vaughn Walker,
> who had said marriages could resume while higher courts
> considered the matter.
>
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Monday, August 16, 2010
(BN) New York Factories Lose Sales, U.S. Builders Confidence, as Recovery Wanes
Bloomberg News, sent from my iPhone.
U.S. Economy: Factory Demand, Builder Confidence Fall
Aug. 16 (Bloomberg) -- Orders and sales at New York manufacturers decreased in August for the first time in more than a year and U.S. homebuilders turned more pessimistic, indicating the economic slowdown is becoming broad-based.
The Federal Reserve Bank of New York's so-called Empire State factory index today showed bookings dropped for the first time since June 2009, while sales fell at the fastest pace since March 2009. The National Association of Home Builders/Wells Fargo confidence index unexpectedly declined to a 17-month low.
Slower consumer spending and less inventory rebuilding may restrain manufacturing after the industry led the economy out of the worst recession in seven decades. Treasury securities climbed on growing concern the global expansion will cool in the second half of the year more than central bankers estimated.
The reports are showing "a truly weak recovery," said Tom Porcelli, a senior economist at RBC Capital Markets Corp. in New York. "There's no sustained driver. Sentiment is pretty weak in both of these rather large segments of the economy."
The yield on the benchmark 10-year Treasury note dropped to 2.57 percent at 4:24 p.m. in New York from 2.67 percent late on Aug. 13. The Standard & Poor's 500 Index was little changed at 1,079.38 at the 4 p.m. close in New York.
Less Than Forecast
The New York Fed's general economic index, which is a separate question not tied to orders or sales, rose to 7.1 this month from 5.1 in July. Economists forecast the measure would rise to 8, according to the median estimate in a Bloomberg News survey. Readings greater than zero signal expansion in the area covering New York, northern New Jersey and southern Connecticut.
Estimates of the 48 economists surveyed by Bloomberg ranged from zero to 12.3. Manufacturers account for about 6 percent of New York's economy.
The factory orders gauge decreased to minus 2.7 this month from 10.1 in July. A measure of shipments fell to minus 11.5 from 6.3.
The manufacturing executives' outlook index retreated to the lowest level since July 2009. Growing concern about the future may prompt companies to rein in hiring, depressing one of the bright spots in employment.
Factories nationally have added 183,000 workers to payrolls since the start of the year, according to Labor Department data. In July, they boosted payrolls by 36,000, while the factory workweek increased to 41.1 hours from 41 hours a month earlier.
Economies in Disequilibrium
ITT Corp., a maker of night-vision goggles, last month reported revenue for the second quarter that was below the analyst estimates in a Bloomberg survey.
"This global economy is not in a steady state of equilibrium now," ITT Chief Executive Officer Steven Loranger said on a conference call July 30. "We've seen a lot of short cycle volatility throughout our segments and throughout our geographies."
Homebuilders are also more concerned. The National Association of Home Builders/Wells Fargo sentiment index dropped to 13 this month, the lowest level since March 2009, from 14 in July, data from the Washington-based group showed today. Economists forecast a reading of 15, according to the median estimate in a Bloomberg News survey. Readings lower than 50 mean more respondents said conditions were poor.
Demand has slumped since a government homebuyers tax incentive expired in April. With mounting foreclosures adding to inventory and unemployment forecast to end the year at 9.5 percent, a housing recovery will take time to develop.
Many 'Challenges'
"The housing market still has many fundamental challenges that are likely to keep it depressed," said Zach Pandl, an economist at Nomura Securities International Inc. in New York. "The problem continues to be oversupply. There are just far too many homes."
The builders group's indexes of current single-family home sales and expectations for purchases over the next six months decreased.
"Builders are expressing the same concerns that they are hearing from consumers right now, particularly the sense that the overall economy and job market aren't gaining any traction," NAHB Chairman Bob Jones, a homebuilder from Bloomfield Hills, Michigan, said today in a statement.
To be eligible for government's tax incentive program, worth as much as $8,000, buyers had to sign contracts by the end of April and close on homes by June 30. The deadline for closings was extended until the end of September.
Global Asset Demand
Another report showed concern over slowing growth worldwide propelled global demand for long-term U.S. financial assets in June as investors abroad bought Treasuries and agency debt and sold stocks. Net buying of long-term equities, notes and bonds totaled $44.4 billion for the month, compared with net purchases of $35.3 billion in May, the Treasury Department reported.
Fed policy makers last week voted to keep the benchmark interest rate at a record low and said the recovery was likely to be "more modest" than earlier anticipated. The central bank decided to keep its bond holdings steady, taking an additional step to spur growth for the first time in more than a year.
The results of the Fed's quarterly loan-officer survey, also issued today, showed banks eased credit standards and terms on loans in the second quarter, even as demand for business and consumer credit was little changed at the majority of lenders. It was the first survey since late 2006 that showed a loosening of guidelines on loans to small companies.
To contact the reporters on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net Timothy R. Homan in Washington at thoman1@bloomberg.net
Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/Sent from my iPhone
Fwd: Morning Bell: Death, Taxes and the Failure of Obamanomics
08/16/2010
Death, Taxes and the Failure of Obamanomics
Benjamin Franklin famously said, "In this world nothing can be said to be certain, except death and taxes." With America's stagnant-as-a-swamp economy still stuck at 9.5% unemployment, an unexpected 484,000 new jobless claims, and reports of a slowed recovery, it might be time for old Ben to pull out his quill and add another certainty to his list: the continuing failure of Obamanomics. Judging by the words of one of President Barack Obama's economic advisors, it doesn't look like the Administration is going to change course anytime soon.
On ABC's "This Week with Christiane Amanpour," Laura Tyson, a member of the President's Economic Recovery Advisory Board, called for even more of the same tried-and-failed Obamanomics stimulus policies, when asked how to get the economy moving faster:
We have to continue to do everything we can to stimulate demand in the economy… Invest in people. Invest in infrastructure. Invest in knowledge," she said. "Invest, invest, invest is really what we must do.
Sunday, August 15, 2010
Friday, August 13, 2010
Fwd: Morning Bell: The Gulf Recovery Obama Does Not Want to See
08/13/2010
The Gulf Recovery Obama Does Not Want to See
Next week, for the fifth time since July, the first family will board Air Force One for yet another luxury vacation, this time to an exclusive Martha's Vineyard estate that rents for up to $50,000 a week. But before they head north, the Obamas will first grace Panama City, Fla., with their presence this weekend for what is being billed as a "solidarity vacation to the Gulf Coast." While in Florida, the President is expected to meet with local business leaders to discuss the effects of the spill before departing on a cross-country trip around the United States including stops in Los Angeles and Seattle to raise cash for Democrats and a stop in Wisconsin at a renewable energy factory. Not on the agenda? Any meetings with oil workers in other Gulf states who are now unemployed thanks to President Obama's Gulf oil drilling ban.
If the President really wanted to see the economic damage his policies are causing in the Gulf, he could first stop in Pascagoula, Miss., where idle oil rigs in the Signal International shipyard have formed an eerie floating ghost city that locals have dubbed "Rig Row." Instead of being deployed at sea where they could be creating wealth for this country and jobs for Gulf residents, these rigs are wasting away idly in port as a direct result of President Obama's oil drilling moratorium - a moratorium that when first issued on just deep sea rigs, a federal judge ruled was "arbitrary and capricious." Undaunted, the Obama administration doubled down, issuing a broader oil drilling injunction that is killing even more jobs than the first ban.
Thursday, August 12, 2010
(BN) Sovereign Debt Risk Surges in Europe as Slowdown May Deepen Deficit Woes
Bloomberg News, sent from my iPhone.
Sovereign Debt Risk Surges as Slowdown May Deepen Deficit Woes
Aug. 12 (Bloomberg) -- A gauge of government bond risk rose to the highest level in five weeks on concern Europe's deficit crisis will worsen as slowing economic growth exacerbates bank bailout costs.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose for a seventh day, climbing 4 basis points to 140, according to data provider CMA. The gauge is the highest since July 7 and up from a three-month low of 109.5 on Aug. 3.
Swaps on Ireland climbed to a 17-month high on speculation the $32 billion bailout bill for Anglo Irish Bank Corp. will add to the country's fiscal deficit. Greece's economy contracted for a seventh quarter and unemployment claims in the U.S. unexpectedly rose, deepening concern of a so-called double-dip recession.
"A weakening macro picture leading to increasing budget deficits for sovereigns has led to sovereign spreads widening again," BNP Paribas SA strategists in London wrote in a note to investors. "The size of 'Bad Anglo' while not finalized yet will probably add quite a bit to the Irish national debt."
Ireland's borrowing costs rose at an auction of 1 billion euros ($1.28 billion) of six and eight-month bills today. The country sold 500 million euros of securities due Feb. 14, 2011, at an average yield of 2.458 percent, compared with 1.367 percent at a July 22 auction of similar bills.
Bailout Costs
The cost of the Anglo bailout may trigger a surge in Ireland's budget deficit to 25 percent of GDP this year, before dropping to 10 percent in 2011, analysts at Dublin-based Davy Research wrote in a note today. The European Union limit for members of the euro area is 3 percent.
Default swaps on Ireland climbed 15 basis points to 286, the highest since March 2009, CMA prices show. Contracts on Anglo Irish jumped 17.5 to 551.5, Allied Irish Banks Plc increased 17.5 to 441 and Irish Life & Permanent Group Holdings Plc rose 14.5 to 337.
Germany may also have to absorb the holdings of two so- called bad banks, raising the nation's debt to 90 percent of gross domestic product, Die Zeit reported. Contracts on Germany increased 3 basis points to 47, the highest since June 29.
Swaps on Greece jumped 17.5 basis points to 809.5 as the wage-cuts and tax increases that aim to trim the European Union's second-biggest budget deficit deepened a recession. Contracts on Portugal climbed 8.5 basis points to 277, Italy rose 10 to 182 and Spain was 7 higher at 221.
U.S. Treasuries
The cost of hedging against losses on U.S. Treasuries climbed for the eighth day, with default swaps rising 1 basis point to 49.5, the highest level since February. Initial jobless claims rose by 2,000 to 484,000 in the week ended Aug. 7, the highest since mid February, Labor Department figures showed.
The cost of insuring corporate debt against default also rose with the Markit iTraxx Crossover Index of swaps linked to 50 companies with mostly high-yield credit ratings increasing 16 basis points to 520, according to JPMorgan Chase & Co., the highest in three weeks.
The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 4.25 basis points to 116.25, and the Markit iTraxx Financial Index of 25 banks and insurers rose 5.5 to 137.5, JPMorgan prices show.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year.
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net
Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/Sent from my iPhone
Fwd: Budget Bulletin: Trustees Report: Social Security and Medicare are Unsustainable
It's Official: Medicare's Finances Shadowed by Uncertainty 2010 Social Security Trustees Report Continues to Show the Urgency of Reform Trustees Report: Social Security and Medicare are Unsustainable
By Nicola Moore
The Social Security and Medicare Trustees today released their annual reports on the fiscal condition of the programs, and the situation for these programs is still dire.
Although the programs' fiscal health hasn't worsened since last year, both programs are still on an unsustainable course. Most significantly, the programs are running trillion-dollar shortfalls because they've promised more benefits than they can afford:
- Social Security has a $7.9 trillion shortfall (up $0.1 trillion from last year), which means the program would require $7.9 trillion in cash—today!—to afford its promises. Alternatively, closing that gap would require payroll taxes to rise immediately and permanently from 12.4 percent of earnings to 14.24 percent. For a worker earning $50,000, that's a $920 tax increase.
- Medicare has a $30.8 trillion shortfall. To put that into perspective, that is more than twice the size of the entire U.S. economy, which means it would be impossible to infuse enough cash into Medicare to fix the program. However, the assumptions used to arrive at this number give new meaning to the word optimistic.
The good news for Social Security is that the basic position of the trust fund is unchanged: The trust fund, which is currently running deficits and will rebound by 2012, will begin to run deficits in 2015, and the whole piggy bank will be exhausted 2037. The bad news for workers, as the Trustees indicated, is that the main reason these dates are unchanged is that workers will be paying more in payroll taxes thanks to Obamacare, which has made a larger share of earnings subject to Social Security taxes.
>> Click here to read Nicola Moore's full report
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Fwd: Morning Bell: The Dodd-Frank Bailout is Already Here
08/12/2010
The Dodd-Frank Bailout is Already Here
On July 21, when President Barack Obama signed the Dodd-Frank financial regulation bill, he promised: "There will be no more taxpayer-funded bailouts. Period." How long will this Obama promise last? Well, The New York Times reports today that "the Obama administration on Wednesday pumped $3 billion into programs intended to stop the unemployed from losing their homes," including a program announced by the Department of Housing and Urban Development that "will draw on $1 billion authorized by the new financial overhaul law." That's right. The Dodd-Frank "no more taxpayer-funded bailouts forever" bill is not even a month old, and already President Obama is using it to turn your tax dollars into yet another bailout.
And why is the Obama administration turning to Dodd-Frank bailout funds so soon after passage? Because its original mortgage bailout plan, the Home Affordable Modification Program (HAMP), has been a complete failure. Don't take our word for it. Here are the words of Special Inspector General for the Troubled Asset Relief Program Neil Barofsky:
Unfortunately, HAMP continues to struggle to achieve its original stated objective, to help millions of homeowners avoid foreclosure "by reducing monthly payments to sustainable levels." Despite a seemingly ever increasing array of HAMP-related initiatives designed to encourage participation in the program, the number of homeowners being helped through permanent modifications remains anemic, with fewer than 400,000 ongoing permanent modifications…and HAMP has not put an appreciable dent in foreclosure filings. Indeed, the number of trial and permanent modifications that have been canceled substantially exceeds the number of homeowners helped through permanent modifications.
Wednesday, August 11, 2010
(BN) U.S. Is Bankrupt and We Don’t Even Know It: Laurence Kotlikoff
Bloomberg News, sent from my iPhone.
U.S. Is Bankrupt and We Don't Even Know It: Laurence Kotlikoff
Aug. 11 (Bloomberg) -- Let's get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: "Directors welcomed the authorities' commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP."
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: "The U.S. fiscal gap associated with today's federal fiscal policy is huge for plausible discount rates." It adds that "closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP."
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It's also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.
Is the IMF bonkers?
No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.
'Unofficial' Liabilities
Based on the CBO's data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our "official" debt and our actual net indebtedness isn't surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities "unofficial" to keep them off the books and far in the future.
For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions "loans" and called our future benefits "repayment of these loans less an old age tax," with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.
The fiscal gap isn't affected by fiscal labeling. It's the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.
$4 Trillion Bill
How can the fiscal gap be so enormous?
Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today's dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.
Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: "Something that can't go on, will stop." True enough. Uncle Sam's Ponzi scheme will stop. But it will stop too late.
And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it's the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Some doctrinaire Keynesian economists would say any stimulus over the next few years won't affect our ability to deal with deficits in the long run.
This is wrong as a simple matter of arithmetic. The fiscal gap is the government's credit-card bill and each year's 14 percent of GDP is the interest on that bill. If it doesn't pay this year's interest, it will be added to the balance.
Demand-siders say forgoing this year's 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.
My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain "solutions."
(Laurence J. Kotlikoff is a professor of economics at Boston University and author of "Jimmy Stewart Is Dead: Ending the World's Ongoing Financial Plague with Limited Purpose Banking." The opinions expressed are his own.)
To contact the writer of this column: Laurence Kotlikoff at kotlikoff@bu.edu
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Fwd: Morning Bell: Summer of Bailouts
08/11/2010
White House press secretary Robert Gibbs did not give the White House daily press briefing yesterday. The stated excuse was a bad cough. But there was no mention of any flu-like symptoms when The Hill reported yesterday that Gibbs believes the "professional left" should be "drug tested" since they will only be satisfied "when we have Canadian health care and we've eliminated the Pentagon." After an outpouring of leftist protests over the article, including a call from Rep. Keith Ellison (D-MN) that he resign, Gibbs walked back his criticism, releasing a statement explaining: "Day after day it gets frustrating. Yesterday I watched as someone called legislation to prevent teacher layoffs a bailout - but I know that's not a view held by many."
Oh how wrong Gibbs is. "Bailout" is the only word that can accurately describe the $26.1 billion legislation that the House approved on a largely party line vote yesterday. Let's break down the bill's main provisions:
The $16.1 Billion Medicaid Bailout - Congress has already bailed-out state Medicaid programs three times this decade, the most recent $87 billion installment coming as part of President Obama's $862 billion failed economic stimulus bill. But the states with the most wasteful Medicaid programs have already blown through that money, and now they need another hit. Every state should have known that the stimulus funding would expire on December 31, 2010. But 30 states went ahead and built their budgets on the assumption that President Obama would hook them up for 2011 as well. This $16 billion Medicaid bailout is designed to aid to those states with the worst Medicaid spending problems. For instance, New York has nearly 30 percent of its citizens enrolled and spends in excess of $18,000 per person in poverty. Texas, in comparison, with 5 million more people and 1 million more individuals in poverty than New York, has a much smaller Medicaid program. In essence those 20 states that acted prudently and budgeted for the stimulus to expire are paying for the bailouts of the 30 states that can't control their Medicaid spending problem.
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