James Pethokoukis

Why the U.S. may have a long-term unemployment problem

November 30, 2009

Wachovia’s John Silvia:

In recent years, permanent layoffs have surpassed temporary layoffs and this is reflected in the rapid rise in the mean duration of unemployment. In addition, the disparity of unemployment by education levels signals that the demand of employers for more highly educated workers does not fit well with the available supply of workers. Current policy initiatives have perverse economic effects. Health care mandates will likely raise the cost of labor and thereby discourage hiring.

Here is a way to create jobs

November 30, 2009

From Gary Becker:

My favorite approach it to try to stimulate the economy by cutting income taxes, especially corporate income taxes and other taxes on capital, both physical and human capital. Such tax cuts will stimulate investments in the economy, and in this way increase the demand for workers.

An offer China couldn’t refuse … or could it?

November 30, 2009

Dan Drezner on the trade deal he would offer the Chinese:

Hey, Wen, you’re right about the unfair tire tariffs and the like.  Let’s make a trade deal:  you allow the yuan to appreciate, say, 20% against the dollar over the next twelve months.  In return, we will announce a voluntary two-year moratorium on any new anti-dumping and escape clause measures targeted against Chinese imports.  What do you say?

There are worries … and then there are worries

November 30, 2009

David Goldman sums it up:

Far more worrying [than Dubai] is the commercial real estate problem in the United
States, the continued high rate of homeowner deliquency, the huge
backlog of foreclosures–in short, the whole range of problems that stem
from an effective unemployment rate (including “discouraged” and
underemployed workers) of 17.5%. The cumulative effect of the popping
of innumerable mini-bubbles, none of which are large enough to take
down the system but all of whom together constitute a millstone around
the neck of the banking system, will keep lending weak and the economy
in very, very prolonged recession.

Dubai and Islamic finance

November 30, 2009

Some great stuff from the great John Carney:

The market has recovered from the initial panic over a possible default on debt issued by Dubai World, and many are assuming that the United Arab Emirates will stand behind the bonds.

Obama’s reverse stimulus on its way

November 27, 2009

Jed Graham of IBD highlights the coming fiscal drag in a pretty picture:

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Me: What would that mean for GDP growth? A pre-financial crisis analysis by Goldman Sachs predicts, for instance, found that getting rid of all the Bush tax cuts at the end of 2010 would cause a 3 percentage point drop in the economy in 1Q 2011.  In any event, anti-growth fiscal policy is one more reason to believe in the dreary New Normal

Does Washington really get the jobs crisis?

November 27, 2009

David Rosenberg of Gluskin Sheff doesn’t think so:

These attempts to stimulate consumption at a time when household spending relative to GDP is already at an all-time high are not going to carry much of a multiplier impact. There is a youth unemployment crisis, a skills crisis, a crisis among the ability of small businesses, who have been responsible for 65% of the new hiring in the U.S.A. over the past 15 years — to secure financing for working capital purposes, there is a crisis in terms of a declining manufacturing capital stock, and the programs we get are these old and tired Keynesian attempts at temporary boosts to consumer demand. It truly boggles the mind, and as we show below, American taxpayers are still a long, long way from paying for all these transitory fiscal policies out of Washington.

Cap-and-trade prospects looking dodgy

November 27, 2009

Kim Strassel is right, cap-and-trade looks terminal for 2010 and beyond. Sure, the EPA could try to push its own draconian carbon regulation. But I think that would cause a firestorm on Capitol Hill. Strassel:

More Washington budget gimmickry

November 27, 2009

Karl Rove makes a good point:

The administration says it is now instructing agencies to either freeze spending or propose 5% cuts in their budgets for next year. This won’t add up to much unless agencies use the budgets they had before the stimulus inflated their spending as their baseline in calculating their cuts.