Economic News and Opinion for September 21, 2011

For those of you not obsessed with the coming Pumpkin Shortage, here is your morning run down:

Which brings me to reaction to Friday's column from two executives about whether more government action is needed. Roger Colley, a former president of ... Betz Laboratories and Envirogen, would try to reduce uncertainty for business by doing the following: First, put all new regulations on hold and freeze federal spending, both for five years. Next, cut the corporate net income tax rate to 15 percent from a top rate of 35 percent and make the current rates for individuals permanent ... Tom Callahan, senior vice president of Bristol's Modern Group Ltd, ... would also cut the corporate tax rate so that businesses are not 'incented to do business overseas all the time.' Instead of a freeze on government spending, Callahan suggested it be cut, saying, 'The wars should be ended.'

Profits nationally reached 26% of national income in 2010, their highest share since World War II. In this environment, CEO pay is up 24% in just the last year! And a pair of top executives want you to know that the most important thing you can do right now is cut corporate taxes!

Who doesn't love a good scatter plot? The higher the unemployment rate in a state, the greater the default rate on student loans in that state. Let's call this reason number 1,000,000,001 why doing nothing to boost employment growth is not an option.

"Interest rates on US, German and UK government bonds have fallen to all-time lows. Yields on 10-year US Treasury securities, for example, are below two per cent. That is the lowest recorded since the Federal Reserve began publishing market data in 1953. In addition, yields on the inflation-protected 10-year Treasuries are zero. These are nearly incomprehensible levels whose implications are profoundly negative. Namely that Tuesday’s International Monetary Fund report is quite correct to warn that America and Europe are on the verge of renewed recession. It is only the anticipation of negligible demand for capital and negligible inflation both hallmarks of recession that could drive rates this low."

'Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers,' the letter from Republicans said. Many economists, however, are unconvinced by these risks and argue that a weakened dollar would be good for the country because it would make American exports more attractive.

A further fall in the value of the U.S. dollar makes U.S. produced tradeable goods and services cheaper which boosts exports. The Economic Policy Institute has estimated that, thanks in part to currency manipulation by the Chinese government, Pennsylvania has lost more than 100,000 jobs. Follow that link and you can see how many jobs were lost by Congressional district in Pennsylvania. For more on the value of the dollar, read Chapter 8 of Dean Baker's free book The End of Loser Liberalism: Making Markets Progressive.

The Federal Reserve and Congress need to do more to bring down unemployment and to advocate otherwise is to support high and rising unemployment.

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