Federal Reservations

As I wrote in a post for Big Government this past Sunday, January 22, the Arizona’s legislature has decided once more to do the job the feds won’t do, and has launched its own investigation into Fast and Furious. And during an appearance on FOX NEWS this morning, Arizona House Speaker Andy Tobin explained why they’ve taken this step. He said that constituents were flooding their offices with questions about the gun-running operation, and he said one recurring question was, “You’re not waiting for the feds [to do something] are you?” He then said the answer to that question was “No.”

Said Tobin:

This is an incident that occurred on Arizona soil, with Arizona business owners, [where we lost] an Arizona agent (Border Patrol Agent Brian Terry), and quite frankly we felt it needed a lot more attention. We felt our citizens needed a place to go to share their stories. Maybe there’s more there. This was a failed program right from the start and I think the idea is to put more light on it.

Tobin explained that as he’s watched this story unfold, and learned about the tactics used in Fast and Furious, it just hasn’t made sense: “I’m from the family of a law enforcement officer and I don’t think that the process by which they were going was the direction in which we fight back on border security and drug infiltration.”

He went on to explain that the Arizona House has been disappointed in the way Eric Holder has handled things up till now, and added:

It doesn’t appear he had a grasp on it right from the beginning when the inquiries started coming in. And forgive me for being concerned when I hear that the federal government’s here and they’re here to help. [We’re] the state that had to pass S.B. 1070 so we could help secure our borders, and the fed sued us…we’ve lost millions of acres of forest land [to fires] because the feds won’t let us clean them, we’ve got a Navajo power plant that the EPA may close…I meant the list goes on and on.

Without ambiguity Tobin added:

The public deserves some answers and we can’t wait for the fed to give us some of those answers. So let’s put some light on it, let’s have some transparency in government. Let’s go ahead and bring some Arizona citizens in to testify and see where this leads us.

I’m all for what Tobin and the rest of his colleagues in the Arizona legislature are doing. It’s time to put some heat on the feds and see if Holder changes his story (again).

Originally from Big Government

The latest money news from Ann Cates, including a look at the first Federal Reserve meeting of the year.

Originally from MarketWatch

The Federal Reserve Bank of St. Louis, without whose FRED database and Excel Add-in Economics Bloggers (and Matt Yglesias) would be Even More Boring, has been running a series of Discussions explaining why the Fed is incompetent—er, Why They Don't Follow Their Dual Mandate—er, well, something about how They're Doing The Best They Can.*

The Federal Reserve Bank of St. Louis will offer a live webcast of the finale of its fall evening discussion series for the general public, "Dialogue with the Fed: Beyond Today’s Financial Headlines," on Monday, Nov. 21, 2011.

The dialogue will be streamed live from the St. Louis Fed's Gateway Conference Center beginning at 7 p.m. CT/8 p.m. ET. It can be viewed at www.stlouisfed.org/live. No registration is necessary.

Christopher Waller, the St. Louis Fed’s senior vice president and director of research, will discuss "Understanding the Unemployment Picture." After his presentation, Waller, along with St. Louis Fed economists David Andolfatto and Natalia Kolesnikova, will take questions from the on-site audience at the Bank.

If you cannot catch the live webcast, it will be archived and available on the St. Louis Fed web site within a few days of the event, along with videos of the first two dialogues.

View Lessons Learned from the Financial Crisis with Julie Stackhouse, senior vice president, Banking Supervision & Regulation
Held Sept. 12, 2011

View Bringing the Federal Deficit Under Control with William Emmons, assistant vice president and economist
Held Oct. 18, 2011

Attend, enjoy, ask them about the Beige Book. David Andolfatto tries to be One of the Good Guys (well, for a Simon Fraser guy**, at least). Give him some love, attention, and Questions He Will Love to Answer.

*Whether you find this idea even more disappointing than the others is left as an exercise, unless you're looking for work, in which case:

**Think A Canadian Koch Brothers, but where the work is done in the Selection Bias.

Originally from Angry Bear

On Friday Former President Bill Clinton spoke at the dedication of a bridge at his Presidential library.  During his address he complained that Republicans try to take too much credit for his welfare reform legislation and for balancing the budget. The two parties can argue about who was behind welfare reform, but no one deserves credit for balancing the budget.  The truth is  the United States federal budget was not balanced in any of Bill Clinton’s eight years as President. Not once!

The federal government has two types of debt public debt and intra-governmental debt.  Public debt is comprises securities held by investors outside the federal government, including that held by investors, the Federal Reserve System and foreign, state and local governments  Intra-governmental debt comprises Treasury securities held in accounts administered by the federal government, such as the Social Security Trust Fund.

Traditionally the annual federal government budget deficit or surplus is the cash difference between government receipts and spending, ignoring intra-governmental transfers. This is a trick as intra-governmental debt needs to be repaid just like the publicly held debt. This is also how Clinton claimed a surplus in three out of his last four years. (Source for all of the numbers below, US Treasury Direct).

Fiscal Year	End Date		Public Debt	Claimed Surplus
FY1997	09/30/1997		$3.789667T
FY1998	09/30/1998		$3.733864T	$69.2B
FY1999	09/30/1999		$3.636104T	$122.7B
FY2000	09/29/2000		$3.405303T	$230.0B
FY2001	09/28/2001		$3.339310T

These figures include the public debt but not the intra-governmental debt.  Its like paying off your American Express card while ignoring the fact that your Mastercard over the limit and months past due. Your Amex looks great but your budget is not balanced.

When the Treasury department reports the National Debt (now at $14.5 trillion) it counts both public and intra-governmental debt. Clinton’s first full budget proposal in 1993 took effect in October 1993 and concluded September 1994 (FY1994) and his last started in October 2000 and ended in September 2001. Using those bookends and subtracting each year’s national debt from prior years,  here’s the national debt at the end of each year of Clinton Budgets.

Fiscal Year	Year Ending	National Debt	Deficit
FY1993	09/30/1993	$4.411488 trillion	$346.87 billion
FY1994	09/30/1994	$4.692749 trillion	$281.26 billion
FY1995	09/29/1995	$4.973982 trillion	$281.23 billion
FY1996	09/30/1996	$5.224810 trillion	$250.83 billion
FY1997	09/30/1997	$5.413146 trillion	$188.34 billion
FY1998	09/30/1998	$5.526193 trillion	$113.05 billion
FY1999	09/30/1999	$5.656270 trillion	$130.08 billion
FY2000	09/29/2000	$5.674178 trillion	$17.91 billion
FY2001	09/28/2001	$5.807463 trillion	$133.29 billion

To be fair, Clinton’s FY 2000 budget came very close, it only added about $18 billion to the national debt, but in his last budget he was back up over $130 billion.

Despite what you may hear from Democrats on the campaign trail, there were no giant surpluses that Bush squandered (Bush did overspend, but there was no surplus to squander). The myth of Clinton balancing the budget and producing surpluses belongs with unicorns and and elves, in the realm of myths. The last president to preside over a balanced budget/surplus was Dwight Eisenhower, whose government saw surpluses of  approximately $2 billion dollars in 1956 and 57.

Neither Bill Clinton nor any Republicans deserve any credit for balancing the budget in the 1990s, because the budget was never balanced.

Originally from Big Government

The sluggish recovery failed to gain any speed in recent weeks and softened in some areas of the nation, the Federal Reserve said on Wednesday.

Originally from All News, Video and Posts related to TOPIC: Federal Reserve

As I mentioned in the weekly schedule, the most anticipated event this coming week is Fed Chairman Bernanke's speech at Jackson Hole on Friday.

Here are some preliminary thoughts about the speech ...

• Last year Bernanke paved the way for QE2 with his Jackson Hole speech on August 27, 2010. Bernanke outlined three possible policy options for additional monetary accommodation: 1) additional purchases of longer-term securities (QE2), 2) change extended period language (the FOMC just did this), and 3) lower the rate of interest that the Fed pays banks on the reserves.

• It is likely that Bernanke will again outline policy options for further easing. It appears that Bernanke will once again discuss the possibility of additional purchases of longer-term securities (QE3), and some analysts have suggested that Bernanke will also discuss changing the composition of the balance sheet (keeping the size of the balance sheet stable, but changing the mix toward longer term securities). There will probably be some discussion of other options - like a higher inflation target - but just like last year, Bernanke will probably argue against these options.

• Bernanke will NOT commit to any option. Any further easing will be announced by the FOMC. However Bernanke might provide clues as he did last year. Here is what he said:

Under what conditions would the FOMC make further use of these or related policy tools? At this juncture, the Committee has not agreed on specific criteria or triggers for further action, but I can make two general observations.

First, the FOMC will strongly resist deviations from price stability in the downward direction. ...

Second, regardless of the risks of deflation, the FOMC will do all that it can to ensure continuation of the economic recovery. ...

He might change these comments a little this year.

• Economic outlook: Bernanke will probably make statements consistent with the recent FOMC statement:

"The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased."

Since the FOMC expects the unemployment rate to decline gradually, they probably expect trend growth (as opposed to the very slow growth that many analysts expect). That is consistent with comments from NY Fed President William Dudley this week:

Some of the weakness in economic activity in the first half of the year was due to temporary factors such as the hit to household income from higher food and energy prices, and supply chain disruptions following the tragic earthquake in Japan. These restraining forces have abated and thus, we should see stronger growth in the second half. But it is clear that not all of the weakness was due to these one-time factors—and in light of this, I have revised down my expectations for the pace of recovery going forward.

And from Cleveland Fed President Sandra Pianalto:

My latest forecast is for the economy to grow at a rate of about 2 percent this year, and about 3 percent in each of the next two years. Our economy has to grow at about a 2-1/2 percent clip just to absorb new labor force entrants and to keep the unemployment rate from rising.

That is still weak growth, but more optimistic than many analysts.

• My guess is Bernanke will outline some policy options, and probably focus on changing the composition of the balance sheet as the first choice. Additional asset purchases (QE3) will probably be discussed too.

Yesterday:
• Summary for Week ending August 19th (with plenty of graphs)
• Schedule for Week of Aug 21st

Originally from Calculated Risk

Economists for Obama suddenly showed up in my RSS reader again. It's not a pretty sight:

I suppose I might change my mind, but after watching the President give in to the Boehner-McConnell blackmail axis, I don't imagine I'll be spending much of my time advocating his re-election. Assuming he's the Democratic nominee, which I do, I'll vote for Obama, because the alternative will still--somehow--be worse. But I really can't see how, in good conscience, I could defend the economic policies of a guy who has signed on to fiscal contraction in the midst of a major downturn. And that's leaving aside the President's apparent lack of understanding of the importance of bargaining from strength. So much for all that poker expertise he's supposed to have.

What a shame.

See also The Rude Pundit, who is gracious:

I got into this relationship without any illusions about who you were. I never listened when others told me that you were perfect. I never listened when some told me you weren't worth my time. I got together with you because I believed in us. You and me. Somewhere along the way, you stopped caring. Somewhere along the line, you started believing in others more than you believed in me.

I loved you as a smart, principled man. I worked at this relationship. Even when we fought, I still sought out the good in you. Now, finally, after watching you have affair after affair, saying each time that it was just a one-time thing, I have to allow myself to feel bitter and angry and more than a little foolish. And I have to do that by myself.

I'm sure many of my friends will be upset. "What are you going to do now?" they'll say. "You're not going to date Mitt or Michele, are you?" What that implies is that I should settle, that I should compromise myself and my dreams just to keep us together. No one deserves that kind of power. And they never considered a third option between staying with you and being with someone else. They never considered that I could just be alone.

So this is a separation, and I'm sure you'll be dating again quickly. But I need a break. I need to remember why I loved you. I need to miss you. I need to see if I miss you. Sure, sure, you'll say, I'm being a drama queen, that nothing has changed, that I don't live in the real world, that everything you've done has been for me, that I just don't understand what it's like to live with the pressure that you have. No, but I have to live with the results of what you do. And after you're done, in 2013 or 2017, you'll still be a rich moderate conservative and I'll still be a middle-class liberal trying his best to clean up all the messes.

I'm gonna pack up my stuff and head out now. I wish you well, truly, for everyone's sake. But I think if there's anything you can take away from this, it's simple:

It's not me. It's you.

When even Larry Summers gives up on you, it's time to pack your bags. Which is undoubtedly what several of the more politically-aware appointees started doing around twenty-four hours ago, making getting anything done all the more improbable.

Three notes:

1. It's not a repeat of 1937. It's closer to 1882. Economists who know their history, speak up.
   
   
2. Quick compilation of expected drag from the "deficit agreement":
   
   1. J.P. Morgan: "we continue to believe federal fiscal policy will subtract around 1.5%-points from GDP growth in 2012"
      
      
   2. Tim Duy's "simple model": "0.6 and 0.7 percent, respectively, for the final two quarters of [2011]," and getting worse in 2012.
      
      
   3. Macroadvisers (h/t Brad DeLong): "a modest 0.1 percentage point of GDP growth in FY 2012," with the damage to be done by the Gang of 12 "No Revenooers" to cause death and destruction as Obama prepares to leave for Bachmann-Perry Overdrive (the MA graphic shows about 1/8th of 1%).
      
      
   4. Ryan Avent (on his Twitter feed yesterday): "Assuming no extension of the payroll tax cut or UI benefits, the US is looking at a 2% of GDP effective fiscal tightening over the next year." (NOTE: Later details appear to be that this is basically 2.6% decline from tightening, 0.5% cyclical gain, netting to around 2%. Reference also made to JPMC survey above.)
   
   
   I can't speak for anyone else, but I know which is the outlier in that set.
   
   And, finally:
   
   
3. Dear Greg Mankiw (h/t Mark Thoma):
   
   If you claim the Federal Reserve Board is an independent entity, why do you argue that "a higher inflation target is a political nonstarter" (even while conceding that "economists have argued, with some logic, that the employment picture would be brighter if the Fed raised its target for inflation above 2 percent")?

Originally from Angry Bear

WASHINGTON (Reuters) - Some Federal Reserve officials believe further monetary policy easing could be needed if the recovery remains too sluggish to cut the stubbornly high U.S. jobless rate and if inflation eases as expected, minutes of the Fed's last meeting show.

Originally from Reuters: Business News

WASHINGTON (Reuters) - Some Federal Reserve officials believe further monetary policy easing could be needed if the recovery remains too sluggish to cut the stubbornly high U.S. jobless rate and if inflation eases as expected, minutes of the Fed's last meeting show.

Originally from Reuters: Business News

WASHINGTON (Reuters) - Some Federal Reserve officials believe further monetary policy easing could be needed if the recovery remains too sluggish to cut the stubbornly high U.S. jobless rate and if inflation eases as expected, minutes of the Fed's last meeting show.

Originally from Reuters: Business News