ECONOMIC PERSPECTIVES

Adam Smith's most famous book, published in 1776, is An Inquiry into the Nature and Causes of the Wealth of Nations . Click the link above to access an online copy of the book.

In the January 29, 2010 Politico article " Obama rumbles with House GOP ," Patrick O'Connor and Tim Grieve report on the verbal sparring between President Barack Obama and the House Republicans that invited him to their policy retreat: BALTIMORE — President Barack Obama on Friday accused Republicans of portraying health care reform as a "Bolshevik plot" and telling their constituents that he’s "doing all kinds of crazy stuff that's going to destroy America." Speaking to House Republicans at their annual policy retreat here, Obama said that over-the-top GOP attacks on him and his agenda have made it virtually impossible for Republicans to address the nation’s problems in a bipartisan way. “What happens is that you guys don’t have a lot of room to negotiate with me,” Obama said, silencing the smattering of Republicans who had applauded when he said “Bolshevik plot.” "The fact of the matter is, many of you, if you voted with the administration o

Who to Blame for the Financial Crisis

Click on the image above to enlarge it. In the January 29, 2010 Reuters article " Economy soars 5.7 percent, fastest in 6 years ," Lucia Mutikani reports that the U.S. economy showed unexpectedly strong growth in the fourth quarter of 2009: WASHINGTON (Reuters) – The economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest in more than six years, as businesses made less-aggressive cuts to inventories and stepped up spending. The robust performance closed out a year in which the economy contracted 2.4 percent, the biggest decline since 1946. After falling off a cliff at the start of the year, gross domestic product turned higher in the third quarter, and the quickening fourth-quarter pace reported by the Commerce Department on Friday suggested a sustainable recovery was building. "Wow, great number. It's very solid and gives us a running start into the second half of the year when we can't rely on government stimulus," said

In the January 26, 2010 episode of The Daily Show , “Elizabeth Warren, Congress’ chief economic watchdog, talks about her work overseeing the bank bailout.”

According to the January 24, 2010 Grandparents.com article " 15 Things You Never Noticed on a Dollar ": Pull a buck from your wallet now and prepare to be amazed. We’re serious. Did you know a dollar bill has hidden pictures, flecks of color, and mysterious symbols? And that’s just the beginning. What do all those seemingly random letters and Latin phrases mean, anyway? The Basics: How much is a dollar worth? The question seems simple, but the answer is quite complex. Since 1973, the dollar bill has had no value tied to it. You cannot trade in a dollar to the government for gold, silver, or any other commodity. The value of the nation's currency is related to the decree by the government that a dollar is legal tender for all debts. This means if someone attempts to pay a debt using dollars, the person being paid must accept the money or the law no longer recognizes the debt. This is important enough that the phrase is printed on every bill the government creates. It is al

In the January 15, 2010 Business Week article " Debtor Nations ," Mark Scott explains how excessive public debt is threatening the global economy: The Debt Bomb Facing the World If policymakers focused their attention in 2009 on dragging the global economy out of recession, this year looks likely to center on reining in the massive piles of government debt built up by big bailout packages. Failing to wrestle down the fiscal debt monster could stall the nascent worldwide economic recovery. Already this year, international rating agencies have warned about unsustainable budget deficits in Greece and Ireland, and most members of the euro zone have sailed past the 3% budget deficit cap required for membership in the common European currency. Government debt ratios in the U.S. and Britain could take decades to return to normal levels. Countries are fiendishly trying to tackle the problem. On deck for this year are spending cuts, tax increases, and other belt-tightening measures d

In the January 15, 2010 CNNMoney article " More and More States on Budget Brink ," senior writer Colin Barr reports "some states are facing shortfalls as much as 40% of what they need to operate." California is hurtling into the budgetary abyss -- and it's not alone. Across the nation, state tax collections in the first three quarters of 2009 posted their steepest decline in at least 46 years, according to a report this month from the public policy research arm of the State University of New York. At least 30 states raised taxes in their most recently completed fiscal year -- which ended in most cases in mid-2009. Even more cut services. All told, states raised $117 billion to fill last year's budget gaps, the Pew Center on the States estimates. Yet despite all those new taxes and deep cutbacks, pressure on state finances continues to build. Economists warn that without a new round of federal stimulus spending, states could face another round of layoffs that

In the January 12, 2010 Wall Street Journal article " Even in a Recovery, Some Jobs Won't Return ," Justin Lahart explains some of the structural changes in the U.S. labor market. Even when the U.S. labor market finally starts adding more workers than it loses, many of the unemployed will find that the types of jobs they once had simply don't exist anymore. The downturn that started in December 2007 delivered a body blow to U.S. workers. In two years, the economy shed 7.2 million jobs, pushing the jobless rate from 5% to 10%, according to the Labor Department. The severity of the recession is reshaping the labor market. Some lost jobs will come back. But some are gone forever, going the way of typewriter repairmen and streetcar operators. Many of the jobs created by the booms in the housing and credit markets, for example, have likely been permanently erased by the subsequent bust. "The tremendous amount of economic activity associated with housing, I can't

In the January 11, 2010 article " AP IMPACT: Road projects don't help unemployment ," Associated Press writers Matt Apuzzo and Brett J. Blackledge report that recent road construction and maintenance projects have not generated the jobs many expected. WASHINGTON – Ten months into President Barack Obama's first economic stimulus plan, a surge in spending on roads and bridges has had no effect on local unemployment and only barely helped the beleaguered construction industry, an Associated Press analysis has found. Spend a lot or spend nothing at all, it didn't matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation, raising questions about Obama's argument that more road money would address an "urgent need to accelerate job growth." Obama wants a second stimulus bill from Congress that relies in part on more road and bridge spending, projects the president sa

In the January 11, 2010 TIME magazine article " Can Microfinance Make It in America? ," Barbara Kiviat asks if the success of microfinance in developing countries can transfer to the United States: Emily Medina isn't running a pyramid scheme, despite what people often think. As the petite 26-year-old works her way through some of New York City's poorer neighborhoods, she approaches women selling food and trinkets on the street and offers to lend them money to grow their businesses. The organization Medina works for, Grameen, is one of the world's largest microfinance outfits and has a Nobel Prize to its name for this work. But in New York neighborhoods where loans to street vendors tend to come with interest rates north of 40%, it can take a while to build trust. "I didn't believe it until I had the $1,500 check in my hand," says jewelry seller Rosa Lopez. Thirty years ago Muhammad Yunus, the founder of the Grameen franchise, started lending small su

Ranting about the unfairness of taxes has become a national sport. Yet, tax cuts (without commensurate reductions in spending) are a prime contributor to the more than $12 trillion U.S. public debt that has been accumulated largely since 1981. I challenge you to state how the U.S. federal government should generate an additional $1.5 trillion (give or take a few hundred billion) every year. Please be specific. Who should pay more in taxes? Who, if anyone, should pay less? It would be even better if you could find a politician who would make such a statement on the record. It is easy to rant about the unfairness of ANY tax. Anti-tax advocates are making U.S. fiscal problems worse, not better. They add to a culture of fiscal irresponsibility in which we demand government services, but are unwilling to pay for them. Please do not misunderstand me. I am not opposed to the reduction or elimination of ANY government programs. But until such a time as politicians are willing to upse

In the January 10, 2010 Boston Globe Sunday Magazine article " When clutter turns to crisis ," Stephanie Schorow reports "hoarders’ private problems can become a public nuisance, putting neighbors and firefighters at risk and dragging down property values. Now several Massachusetts cities and towns have decided it’s time to get involved." The Preamble to the Constitution of the United States says that government is create to "promote the general welfare." Does this qualify as an appropriate role for government? According to the article: No one walking by the neatly trimmed lawn of Shirley’s home west of Boston would see anything amiss. Inside, the small living room has enough space for her son and his friends to gather around the TV for a video game, although the room is lined with plastic tubs stuffed with old board games and toys. The kitchen is another matter; the table is piled high with papers -- newspapers, magazines, documents, letters -- which s

In the article " China Surpasses U.S. in 2009 Auto Sales ," Associated Press business writer Joe McDonald reports that consumers in China now buy more cars than those in the United States. This is further evidence of the shift of economic power away from the U.S. BEIJING (AP) -- China overtook the United States as the biggest auto market in 2009 and automakers should see more strong growth this year, an industry group reported Friday. Boosted by Beijing's stimulus, 2009 passenger car sales soared to 10.3 million and total vehicle sales are estimated at 13.6 million, the China Passenger Car Association said. That represents growth of about 45 percent from 2008. "This is even better than anyone expected," the group's general secretary, Rao Da, said at a news conference in Shanghai. By contrast, U.S. sales of cars and light trucks plunged 21 percent in 2009 to 10.4 million as a shaky economy kept buyers away from showrooms. It was the first time any country b

In the January 8, 2010 article " US troops, kin face cuts in base services ," Associated Press writer Kristin M. Hall reports that the U.S. Department of Defense is cutting services for military personnel. This is a direct result of U.S. citizens' reluctance to pay more in taxes, even to support the men and women defending the country. The current wars in Iraq and Afghanistan are the first ones in U.S. history during which taxes were not increased to support the war effort. FORT CAMPBELL, Ky. – Soldiers and their families on Army bases around the country could see cutbacks in trash pickup, lawn-mowing and other services as the military tries to hold down non-war spending while escalating the fight in Afghanistan. Even as total defense spending rises, the portion of the Army budget dedicated to running its bases is down 20 percent this year, according to figures provided to The Associated Press by an Army official who requested anonymity because he was not authorized to

In the January 8, 2010 article " Economy loses 85K jobs, unemployment rate steady ," Associated Press economics writer Christopher Rugaber summarizes the U.S. Bureau of Labor Statistic's employment situation report for December 2009. The BLS publishes its Employment Situation Summary on the first Friday of each month. It also provides other extensive U.S. labor market data . WASHINGTON – Lack of confidence in the economic recovery led employers to shed a more-than-expected 85,000 jobs in December even as the unemployment rate held at 10 percent. The rate would have been higher if more people had been looking for work instead of leaving the labor force because they can't find jobs. The sharp drop in the work force — 661,000 fewer people — showed that more of the jobless are giving up on their search for work. Once people stop looking for jobs, they are no longer counted among the unemployed. When discouraged workers and part-time workers who would prefer full-time j

--------------------------------------------------------------------------- The latest Employment Situation news release (http://www.bls.gov/news.release/pdf/empsit.pdf) was issued today by the Bureau of Labor Statistics. Highlights are below. --------------------------------------------------------------------------- Nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent. Employment fell in construction, manufacturing, and wholesale trade, while temporary help services and health care added jobs. ------------------------------------------------------------------------- News releases archives: http://www.bls.gov/schedule/archives/all_nr.htm To subscribe or unsubscribe to BLS news releases please visit http://www.bls.gov/bls/list.htm For help, email news_service@bls.gov -------------------------------------------------------------------------

If the purpose of speeding tickets is to discourage driving at excessive speed, perhaps the fines should be based on a person's income. That is the logic used in Switzerland, where a court fined a wealthy speeder $290,000. According to the January 7, 2010 article " Swiss court fines speeding millionaire $290,000 ": ST. GALLEN, Switzerland – A Swiss court has slapped a wealthy speeder with a chalet-sized fine — a full $290,000. Judges at the cantonal court in St. Gallen, in eastern Switzerland, based the record-breaking fine on the speeder's estimated wealth of over $20 million. A statement on the court's Web site says the driver — a repeat offender — drove up to 35 miles an hour (57 kilometers an hour) faster than the 50-mile-an-hour (80-kilometer-an-hour) limit. Court clerk Heidi Baumann-Becker said Thursday the unidentified driver can appeal the decision, handed down in November, to the Swiss supreme court. The Blick daily newspaper in Zurich reported the fine

In the January 7, 2010 Reuters article " U.S. airlines align to start new year with higher fares ," Karen Jacobs and Deepa Seetharaman report U.S. consumers can expect to pay more for air travel in 2010. Can you illustrate these changes in the market for air travel using supply and demand analysis? Do these changes include (a) an increase in the supply of air travel, (b) a decrease in the supply of air travel, (c) an increase in the demand for air travel, or (d) a decrease in the demand for air travel? Read the article below and then illustrate these changes in the market for air travel with a graph that shows the initial positions of the supply and demand for air travel and the new positions of the supply and demand curves. (Hint: Do both curves shift?) There is a link at the bottom that provides the answer. ATLANTA/NEW YORK – If you thought U.S. airlines would reduce fares following a laundry list of new security rules after an attempt to blow up a U.S.-bound plane on Chris