Economic Growth not Looking Good for 2012

The article I found on business insider talks about a variety of reasons why the economic growth will continue to disappoint in 2012. There is far more information than I want to talk about, but I urge everyone to take a look at some of the things they talk about.

The main reason that the outlook for 2012 looks disappointing is because the economy expanded at a 1.6% annual rate which is far below the 3% estimate of economists. This returned the US back to output levels in 07, but at the cost of adding $6 trillion in new debt. US economic growth may not top 2% this year and a 3rd round of quantitative easing by the Federal Reserve would have little effect. Martin Feldstein said "We're going to have a hard time reaching 2% this coming year, the economy is still in a "danger zone"".

http://www.businessinsider.com/why-economic-growth-will-continue-to-disappoint-in-2012-2012-1

Deficit Is Again Set to Top $1 Trillion

The tax increases and spending cuts scheduled to take effect January 2013 would slow the economy and raise unemployment next year unless policy makers strike a deal to keep those changes from having an impact. This agreement would boost the economy in the short term, but it would also expand the federal budget deficit over time if not combined with other policy changes. A $1.2 trillion federal deficit is projected for fiscal year 2012. This will be the fourth straight projected deficit of over $1 trillion, and Republicans are saying this proves that Obama was not doing enough to reduce government spending and expand the economy. I agree with the republicans that Obama has not done enough to get this country back on its feet.

http://online.wsj.com/article/SB10001424052970204740904577194872392678482.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsSecond

http://www.cnbc.com/id/46146242/

This is an interesting article about the concept of our generation needing to be worried about retirement.  Since the economic downturn in 2008, fewer people have been able to retire at 65! We need to open our eyes and think about long-term investments! But, should we be looking for a job that will help us closely manage our retirement funds?

401k Plans Step Into the Sunshine

http://online.wsj.com/article/SB10001424052970203920204577193444258923460.html?mod=WSJ_hp_LEFTWhatsNewsCollection

The rules governing America's most popular retirement are about to change. Currently, it is difficult for many 401k participants to determine how much they are paying in fees. These fees typically vary in size and type, and due to the length in time involved in retirement accounts, a small percentage change in an annual fee can make a big difference in the investment performance. However, recently, analysts and companies in the industry have been saying that increased disclosure will allow companies to negotiate better deals and employees to request more cost-efficient plans. I think this is a very good idea. If there is a way that retirement investment funds can become more efficient I am all for it.

Gingrich Endorses Obamacare

Once again Newt Gingrich has found his way to the hot seat. Gingrich has spent the leadup to the state's presidential primary making Mitt Romney out to be "Obama's republican twin" by accusing Romney's Massachusetts healthcare reform law as being Obamacare. Recently a conference call was unearthed in which Gingrich came out in support for Obamacare. Gingrich said "We believe that everyone must have health insurance, or if you are an absolute libertarian, we would allow you to post a bond, but we would not allow people to be free-riders, failing to insure themselves and then show up at the emergency room with no means of payment." At this point I think its safe to say I will not be voting for Gingrich.

http://www.businessinsider.com/newt-gingrich-endorses-obamacare-individual-mandate-audio-2012-1

This is not capitalism nor is it democracy

I have read most of your essays (I will finish the rest today).  Most of you reflected on some aspect of the relationship between capitalism and democracy.  ACTA is an international trade agreement that has been negotiated behind closed doors and is almost ratified by signature of "important people" rather than by constitutionally authorized parties.  Power and politics can be truly awful.  See here for a biased report on ACTA but go to the links for the straight news.

Tax Rule Opens Rich Vein for Debate

http://online.wsj.com/article/SB10001424052970203363504577187100058632034.html?mod=WSJ_WSJ_US_News_6

This article discusses the ongoing debate as to whether Romney continued to provide services to Bain Capital after he left in 1999, at least as far as that concept is defined by a 1993 IRS pronouncement. If he does not qualify under that policy tax lawyers say he might not be entitled to profits from Bain Capital investments. In the complex accounting of Mr. Romney's income, that could land him with a bill for back taxes. The tax assessed on carried-interest compensation has long been the subject of partisan controversy. Democrats have been trying to kill the provision, which benefits private-equity, real-estate and venture capital executives by allowing them to pay the capital-gains rate on a big portion of their compensation, significantly less than the 35% maximum rate for wages. Some say that the earnings are a form of capital gains and changing the law would punish the people whose investments help create jobs.

Romney Attack Ad

Just recently Mitt Romney released an ad specifically attacking Newt Gingrich. The ad features NBC's Tom Brokaw discussing Gingrich's ethics violation in 1997. Gingrich who was brought to power by preaching higher standards in American politics and brought down another speaker on ethic accusations, was found guilty himself of ethics violations. Romney's ad is really having an impact on Gingrich's campaign. NBC News has asked Romney's campaign to take down the ad, but the ad technically falls within fair use. Do you think Romney would benefit from taking down the ad or should he continue to use it?

http://online.wsj.com/article/SB10001424052970204573704577189121913181942.html?mod=WSJ_WSJ_US_News_5

Home-Aid program Expanded

http://online.wsj.com/article/SB10001424052970204661604577187273371383982.html?mod=WSJ_hp_LEFTWhatsNewsCollection

This article talks about Obama giving homeowners another year to enroll in the mortgage-assistance program and increase payments to banks in an effort to get them to more aggressively reduce borrower's loan balances. Obama's last few foreclosure prevention program have all fallen short of their goals. This programs have been revised for the past three years and are still not successful. Is this latest plan going to be the one that achieves its goal, or is it someone else's turn to give this a try?

Romney Would Rank Among Richest Presidents

Last week in class the participation leaders had us play a game where we tried to guess the amounts of money presidents made. The amounts were shocking. An article I found on USA Today talked specifically about Mitt Romney and how much wealth he had. According to the article, you could add the wealth of the last eight presidents then double the number and then you would be in Romney territory. The article proclaimed "he would be among the richest presidents in American history if elected - probably in the top four". Personally I could care less about how much money he has and I don't understand why people tend to make such a big deal of it. I don't think the amount of money someone has should be a factor in deciding whether or not to vote for him/her or if he/she should be president. What do you guys think???

http://www.usatoday.com/news/politics/story/2012-01-28/romney-richest-presidents/52838148/1

You get what you pay for.

I wonder if the bills will pass. Many of the Michigan Republican legislators are backed by the tea party. They promised no new taxes. Note that the bills are starting in the house. The house republicans are a tad more moderate than those in the Senate.


Bills would raise $1B for roads via new tax, fee hike; Snyder supports measure | The Detroit News | detroitnews.com

How Swedes and Norwegians Broke the Power of the ‘1 Percent’ | The Indypendent

I don't know if you read anything by socialist writers very much. Either way, you might find this piece by George Lakely interesting. He writes about how the Swedes and Norwegians created a fairly egalitarian economy. He says in part,

Both countries had a history of horrendous poverty. When the 1 percent was in charge, hundreds of thousands of people emigrated to avoid starvation. Under the leadership of the working class, however, both countries built robust and successful economies that nearly eliminated poverty, expanded free university education, abolished slums, provided excellent health care available to all as a matter of right and created a system of full employment. Unlike the Norwegians, the Swedes didn’t find oil, but that didn’t stop them from building what the latest CIA World Factbook calls “an enviable standard of living.”


It didn't just happen. It is a fascinating glimpse, both at countries that have made other allocative and distributive choices and at a writer who believes passionately in a even more socialist distribution of resources and outputs.

How Swedes and Norwegians Broke the Power of the ‘1 Percent’ | The Indypendent

Obama Proposes College-Aid Changes

http://online.wsj.com/article/SB10001424052970204573704577186653021909344.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsThird

Obama proposed a plan that would withdraw federal campus-based financial aid from colleges and universities that increase tuition too rapidly or fail to provide a good value for the money. This plan has major flaws to it. It penalizes colleges, instead of states, which are slashing higher education budgets. By punishing the schools, there would be a higher risk of less financial aid to students. The plan disadvantages the precise institutions that are doing exactly what he claims he wants us to do, move people into the middle class. This plan is counter productive because it is too rough on schools that need to raise tuition because of growing expenses for improvement, losses on investment, and cuts to funding. Colleges should realized that maybe being dependent on the federal government is not the greatest idea.

Reason Why GDP Was Such a Bummer

The online article I found stated that the first estimate of fourth quarter US GDP came in below the analyst expectations. A big reason for this can be blamed on the government. Government spending dropped 2.1% which is the largest drop since 1971. Other than imports, the declines in state, local, and federal government spending were primary factors working against GDP. Ben Bernanke, federal reserve chairman said "cutting spending will have a direct impact on growth as the recovery continues. The choice between spending cuts and GDP growth is going to be something the Obama administration will have to ponder a little deeper." Which is more important??

http://www.businessinsider.com/the-simple-reason-gdp-growth-was-such-a-bummer-2012-1

Who gets a piece of every penny you spend?

Consumers may suffer from fiscal illusion but not entirely.  In the UK, the tax man is concerned that too many people are spending their pounds in the black market economy so that the transactions are not being taxed appropriately. From the head taxman in the UK:

"Paying a builder or cleaner in cash, allowing them to evade VAT or income tax, will result in even deeper government cuts to public services, he says. People who contribute to the cash economy cannot then complain about austerity measures, he adds."  (see here for article)

In the US, its the bankers who are peeved over the audacity of the rest of the economy to protest paying higher fees for swiping debit cards.  Last year, the banks and retailers fought head to head over new legislation capping the amount of fees.  (oh yes, the real fight was in Congress but the legislators were fueled by donations and lobbyists from both sides)  The banks lost so now they are retailiating:


Even those in the industry who privately admired the aggressive tactic because they can claim a win if Lugar fails said it could backfire. GOP leadership and party committee aides have quietly let the industry know they aren’t happy, according to several downtown sources.
“Engaging in efforts to primary a sitting Republican senator is pretty reckless for an industry without a lot of friends at the moment,” said a senior Republican Senate aide. “It certainly hasn’t gone unnoticed within the Republican Conference.”
The decision made waves throughout the industry, where it was widely viewed as payback.
“There are just a lot of sour grapes out there,” said a GOP financial services industry lobbyist.
But with more battles over swipe fees on the horizon, bankers want to make it clear that there will be consequences for Republicans who vote against them.

Read more: http://www.politico.com/news/stories/0112/72055.html#ixzz1kfCSHbS9

Somehow considerations of social welfare functions don't feel terribly relevant to all of this.

Obama Embraces Natural Gas

http://online.wsj.com/article/SB10001424052970204573704577185131406225666.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsThird

Obama embraced the idea of using natural gas for transportation fuel. Obama says that the United States is the Saudi Arabia of natural gas. I like the idea of a cleaner and cheaper fuel; however, the externalities from fracking are too high and already cause life threatening issues out west.

Gingrich pledges moon colony during presidency

This article I found online states that Newt Gingrich if elected president will put a colony on the moon and develop a spacecraft that would travel to mars by the end of his second term as president. Gingrich proclaimed the "weirdest thing" he ever did in congress was introduce a Northwest Ordinance for space that would allow a moon colony to become a state once 13,000 people lived there. I really don't know what to think about this. Do you actually think that in 8 years time we could have people living on the moon? I personally think Gingrich should be dealing with issues at hand today like the financial crisis or gas prices. Hope you all enjoy the article.

http://www.washingtonpost.com/blogs/election-2012/post/gingrich-pledges-moon-colony-during-presidency/2012/01/25/gIQAmQxiRQ_blog.html?tid=pm_politics_pop

Think about this article in terms of a social welfare function

Roubini is one of the leading economists writing and talking about the financial crisis of 2008 and its aftermath. Here is an account of what he said at Davos. Note that he is on a panel of non-economists. He points to:

• 225 million people worldwide are unemployed
• 1 in 3 people on the planet are poor or unemployed
• 1% of the world's families own 40% of the wealth
• Wages as a percent of GDP are at an all-time low
• Corporate profits as a percent of GDP are at an all-time high
• Current policies will lead to explosions
• This inequality is "Great Gatsby revisited"
• We're in a "vicious circle"... fiscal austerity to solve debt problem is making everything worse

So, how do we fix this? We would have to move from one distribution of resources to another--move from the utilitarian to the Rawlsian social welfare function. Read the comments too. Very bleak for a major business blog.

Read more: http://www.businessinsider.com/the-seeds-of-dystopia-roubini-and-co-scare-the-crap-out-of-davos-2012-1#ixzz1kZE394WR

Tax returns of presidential candidates

In line with how much money they have, here is a graph (from here) showing their tax rates:



So, what does it say?  What we already know.  If you are extremely wealthy, you pay relatively little in tax each year.  And, to run for president or even for congress today,  you need to be wealthy. 

The Net Worth Of Every American President, From Washington To Obama

Here is the article (http://www.huffingtonpost.com/2011/02/21/the-net-worth-of-the-amer_n_825939.html?page=1 )we showed you in class with the net worth of the presidents.

State of the Union

http://news.blogs.cnn.com/2012/01/25/did-you-buy-what-obama-was-pitching-in-state-of-the-union-address/?hpt=hp_c1

This goes over the state of the union address which took place last night. "Hill, who is from Morehead City, North Carolina, said he felt the president is a "master storyteller," but needed to talk more actual substance about bypassing Congress" Do you think the things that Obama were saying are actually possible or do you think that he is a "Master storyteller"?

Capitalism is Flawed

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2012/01/inefficient-and-unfair.html

The article provides four major flaws of capitalism.  The author acknowledges the substantial benefits capitalism has had on global prosperity, however critiques the major shortcomings our current economic crisis has revealed.

Can the flaws of capitalism simply be 'glossed over'?  Has capitalism proven to both be unfair and inefficient?  

Freddie Mac: What it did, what went wrong

http://money.cnn.com/2012/01/24/news/economy/freddie_mac/index.htm?iid=HP_River

Interesting article going over the economics of Fannie Mae and Freddie Mac. The article starts with the housing crisis and how those two did not create the crisis. This states that the housing crisis was started because of the mortgages that were given out and "When you bring in 5 million marginal buyers who under normal circumstances would not qualify for a mortgage, that's what ends up driving home prices," said Barry Ritholtz, CEO of Fusion IQ. Do you think that Freddie and Fannie could have done anything differently to change the crisis we are in now?

Foreclosures

http://money.cnn.com/2012/01/23/real_estate/foreclosure_zip_codes/index.htm?iid=HP_Highlight

This article goes into depth about the foreclosure crisis and the different zip codes that it has affected. It was very interesting to see how the landscape has changed in the past 5 years. 5 years ago it was cities such as Detroit, Cleveland, and Indianapolis which economies relied heavily on the auto industry. "These days, however, many of the worst hit zip codes are communities that were built in the past decade or two in and around once-rapidly growing metro areas like Phoenix, San Bernardino, Calif. and Las Vegas, now the poster child of the foreclosure mess." The article also goes on to talk about the drop in prices of homes. Today, it seems as if once you buy a house, you are trapped in the house unless you want to take a big loss on it. How can people expect to live like this?

20 Investing Tips

http://www.businessinsider.com/these-20-common-sense-investing-rules-will-give-you-a-huge-leg-up-on-the-competition-2012-1

A fun article that lays out some broad guidelines when investing.  It is important to pay attention to growth patterns and dividend pay outs.  Don't sit around and wait for stocks to turn around, sell them as soon as they disappoint.  Be willing to lose at least 20%, and leave emotion out of the equation. 

Anyone with any experience trading stocks?