Economics in the News

Back to the barter system for Zimbabweans – Desperate times in Zimbabwe and this article illustrates what can happen when people lose total confidence in their currency. The image below is a Barter Exchage Rate List placed outside a hospital where “where patients barter goods from their farms for medical treatment.”
 
Housing Disaster Update – Is the Housing Market the forgotten crisis, as columnist Rex Nutting recently asserted? It depends. If you check in with Calculated Risk everyday, then you receive the same updates on the disaster I do. But if you look for mainstream media reports, there are few new stories making the rounds because glowing reports are hard to come by. There are no new initiatives to "save" the market because all the previous ones, such as HAMP, were miserable failures. Here’s Nutting—  For typical Americans, two things determine their financial well-being: Their job and the equity they have in their home [left]. They get almost all of their income from wages and salaries, while most of their wealth is tied up in their house. When wages and house prices are rising, they are confident. When wages and house prices are falling, they are fearful. Policy makers may have rescued the banks, but they haven’t figured out a way to bring back the jobs that were lost, nor have they found any answer to the problem that was the nucleus of the crisis: housing
 
How the mortgage industry polices HAMP – American Banker’s Kate Berry uncovers a stunning factoid today: the nonprofit Homeownership Preservation Foundation, the official body charged with resolving disputes over HAMP modifications, was founded by ResCap and to this day is run by GMAC and other finance officials from within the mortgage industry.No one involved even bothers to dispute the conflict of interest, one of many that have plagued the Treasury Department’s Home Affordable Modification Program, or Hamp. “Because we’re supported by the industry, are we really working for the homeowner?”
 
DOT: Vehicle miles driven increased in October – The Department of Transportation (DOT) reported that vehicle miles driven in October were up 1.9% compared to October 2009: Travel on all roads and streets changed by +1.9% (4.9 billion vehicle miles) for October 2010 as compared with October 2009. Travel for the month is estimated to be 259.5 billion vehicle miles. Cumulative Travel for 2010 changed by +0.6% (16.0 billion vehicle miles). This graph shows the rolling 12 month total vehicle miles driven.  On a rolling 12 month basis, vehicle miles driven have only increased 1.2% from the bottom of the recession.  Miles driven are still 1.4% below the peak in 2007. This is another indicator of a sluggish recovery.
The 2% (non) Solution: Part One – As part of the Tax Cut deal Obama cut with Republicans there was included a one-year cut of 2% of payroll out of the 6.2% employee share of the overall 12.4% of payroll sent to Social Security. This cut was ostensibly designed in a way that held harmless the Trust Funds, the dollars not being sent from paychecks instead being replaced by transfers from the General Fund. Plus the diversion is on paper only temporary. But in reality this deal not only should have raised red flags, it also should have blown reveille and set off the disaster warning klaxons. This deal represents a terrible danger to Social Security in at least two ways and is terrible policy besides. More below the fold. If the so-called Payroll Tax Holiday stood on its own, you could argue that it is mildly progressive in that for one year it reduced the taxes of everyone on their first $106,800 of income while paying for it out of taxes that are mostly incident on the top 50%. Unfortunately it effectively replaced the expiring Making Work Pay tax credit which directed all of its benefits to families making at most $70,000. The net result may be a tax hike for as many as one in three workers. The whole grim business is described in this Huff Post piece: Obama-Republican Deal Could Mean Tax Hike For One In Three Workers by the appropriately named Ryan Grim. From my point of view the fact that the tradeoff was suggested by Republicans is all you need to know, millionaires will get a tax cut ten times of that of a single person working at FPL in a minimum wage job.

Obama-Republican Deal Could Mean Tax Hike For One In Three Workers – The tax deal reached between President Obama and congressional Republicans could mean a higher tax bill for roughly one in three workers as a result of the Social Security tax cut Republicans pushed as a replacement for the current Making Work Pay tax credit.  The Making Work Pay credit gives workers up to $400, paid out at 8 percent of income, meaning that anybody making at least $5,000 gets the full amount — and gets as much as anybody else. Its replacement knocks two percentage points off the payroll tax cut, meaning a worker would need to make $20,000 to get a $400 break. Of the nation’s roughly 150 million workers, around 50 million make less than $20,000 and will see at least some increase as a result. Additionally, roughly a quarter of 20 million state and local workers pay no payroll tax, because they have a separate pension system. Some of those workers with children will benefit from the extension of other tax credits, but overall will have less money in their pocket.

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