Chart of the Day: Net Payers and Receivers of EU Money – This chart is in German, but most of the terms should be clear. The top half of the chart are the net payers of existing fiscal transfers within the EU, Germany being the largest, followed by Italy, France, and the Netherlands. The biggest net beneficiaries are on the bottom half, with Greece in first place, followed by Poland, and Spain. Note that these sums from 2008 are in total euros and not on a per capita basis within the EU and not the euro zone.
Bernanke is 100% Sure – I don’t know about you, but I’m not 100% sure about anything. The older I get, the less sure I am about everything. I question things that I was sure were true when I was 25 years old. I’m not sure I’ll wake up in the morning. I’m not sure I’ll survive my commute to work. That is why I was flabbergasted last night as I watched Scott Pelley interview Ben Bernanke on 60 Minutes. As a side note, boy this show has gone downhill. In the old days of real journalism, Mike Wallace would have scorched Ben Bernanke, pointing out his phenomenal ability to be wrong or clueless on every financial issue the country has faced in the last 10 years. Today, Pelley underhands softball questions to Bernanke and never challenges him. It was a pathetic display of journalism. Below is the dialogue that made me almost fall off my chair:
- Pelley: Can you act quickly enough to prevent inflation from getting out of control?
- Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
- Pelley: You have what degree of confidence in your ability to control this?
- Bernanke: One hundred percent.
Sorkin: Pulling Back the Curtain on Fraud Inquiries –On Monday in Washington, Mr. Holder, the United States attorney general, announced with much fanfare the results of a new enforcement program: Operation Broken Trust. “With this operation, the Financial Fraud Enforcement Task Force is sending a strong message,” Mr. Holder declared, highlighting the Ponzi schemes, affinity frauds and investment scams his department had prosecuted. In all, Mr. Holder said his new task force had brought cases against 343 criminal defendants and 189 civil defendants for fraud schemes that harmed more than 120,000 victims throughout the country, involving more than $8 billion in estimated losses. Wall Street’s biggest firms or corporate America’s biggest companies paying any attention to Mr. Holder’s “strong message”? Of course not. (I actually called some chief executives after Mr. Holder’s news conference, and not one had heard of Operation Broken Trust.) That’s because in the two years since the peak of the financial crisis, the government has not brought one criminal case against a big-time corporate official of any sort. Instead, inexplicably, prosecutors are busy chasing small-timers: penny-stock frauds, a husband-and-wife team charged in an insider trading case and mini-Ponzi schemes.
Row Over ECB Handling of Euro Crisis : The Lonely Fight of Monetary Dogmatist Axel Weber – SPIEGEL – The head of the German central bank, Axel Weber, is openly critical of the way the European Central Bank has handled the euro’s debt woes. He is fighting to uphold purist monetary principles that are untenable in the current crisis. His chances of succeeding Jean-Claude Trichet as ECB chief are waning as a result.
Merkel says No and No, but Schauble is more circumspect – Merkel rejects both an increase in the seize of the EFSF and a European bond; says the bond would require changes to the European treaties; Juncker said the eurogroup has no new proposals, but he reaffirmed his E-bond proposal; IMF urges an increase in the EFSF ceiling; so does Lorenzo Bini Smaghi of the ECB; there was a top level crisis meeting yesterday, involving Barroso, van Rompuy, Rehn, Trichet, Juncker and Reynders; Merkel and Sarkozy will realign position by end of week; Schauble sticks to the official sceptical German line, but says fiscal union is a possibility; Jurgen Stark came out against an E-bond; Austria chancellor Werner Faymann says Spain will have to come under the EFSF – Spain denies; Lucas Zeise says debt restructuring is inevitable; an FT editorial welcomes the Juncker and Tremonti proposal, but says it implicitly acknowledges the need for debt restructuring; the ECB has upped its bond purchases last week; European bond spreads a rising again; In Taiwan, meanwhile, they are poking fun at us Europeans. [more]
Tax cuts, Oprah-style – The outlines of the tax-cut negotiations have finally come into focus: basically, it’s a kitchen-sink approach where Republicans and Democrats all get the tax cuts they want. The Bush tax cuts get extended for people earning more than $250,000 a year — and unemployment insurance gets extended, along with various tax credits. On top of that, there’s a 2% cut in payroll taxes, and the reintroduction of the estate tax at the Republicans’ preferred level: 35% of estates over $5 million. There’s even a nice new tax deduction for businesses making new investments. This is tax cutting, Oprah-style: you get a tax cut! And you get a tax cut! And you! And you! You all get a tax cut! This is clearly a win for the Republicans, who get everything they want for the rich. The tax cuts on incomes over $250,000 a year will last for two years, versus just 13 months for the extension of federal unemployment benefits, and just one year of lower payroll taxes. Meanwhile, all the Congressional opposition to this deal is going to come from Democrats, who are basically being asked to sign off on exactly the same bill that George W Bush would have asked for, with a spoonful of unemployment-benefit sugar to help the medicine go down. A lot of them will be wistfully eyeing David Leonhardt’s list of what could be achieved with the $60 billion going on those tax cuts for the rich, and wondering how a Democratic president could find himself doing this.
Obama and G.O.P. in Deal on Tax Cuts – President Obama announced a tentative deal with Congressional Republicans on Monday to extend the Bush-era tax cuts at all income levels for two years as part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy. The package would cost about $900 billion over the next two years, to be financed entirely by adding to the national debt, at a time when both parties are professing a desire to begin addressing long-term fiscal imbalances. It would reduce the 6.2 percent Social Security payroll tax on all wage earners by two percentage points for one year, putting more money in the paychecks of workers. For a family earning $50,000 a year, it would amount to a savings of $1,000.
- 1) The Bush tax cuts get extended for two years — with one ugly surprise: For the next two years, estates up to $5,000,000 will be protected from the estate tax, and the tax rate for the few estates that are taxed will be 35 percent..
- 2) The refundable tax credits are extended: The Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax Credit were all pumped up in the stimulus, but set to expire this year. All of them will be extended. Price tag? $40 billion or so.
- 3) Unemployment insurance gets extended for 13 months: … In perhaps the most important part of the deal, there’s going to be a 13-month extension at a cost of $56 billion.
- 4) A 2 percent cut in the payroll taxes paid by employees: This is perhaps the most unexpected part of the compromise. Rather than extending the administration’s Making Work Pay tax credit for two years, which would’ve been worth about $60 billion a year, they’ve agreed to a one-year cut in the payroll taxes paid by employees, which’ll raise $120 billion in 2011. …
- 5) Business expensing: Remember back in September, when the White House announced a proposal to give businesses two years in which they could deduct 100 percent of the cost of new investments? That’s in the deal, too. The cost of this is a bit complicated — it’s $30 billion over 10 years, but it works by offering huge tax cuts in the next two years and then paying that back over the next eight. …