Chinese drywall provides another example of the dangers of unregulated markets

The toxic Chinese drywall is an example of how unregulated markets provide many socially undesirable outcomes. Can you imagine what might be in products if there were no safety and labeling laws?

This is similar to the 2007 problem with lead in toys imported from China.

In the November 7, 2009 article "Expert: Problem of defective Chinese drywall is no surprise," Allison Ross says "During a summit on defective Chinese drywall, a toxicologist said that kind of problem was expected."

TAMPA -- It was just a matter of time before a problematic building material would make it into American homes.

That's what state toxicologist Dr. David Krause told attendees during a summit on defective Chinese drywall Friday in Tampa.

"That this took so long to occur is somewhat surprising,'' Krause said.

He said that Americans have for decades used building materials that were altered to be more durable and put them into homes that were built to be tighter and less breathable.

Combine that with an absence of indoor air-quality standards, and "this was bound to happen with some material at some point,'' Krause said.

But now the law of unintended consequences has hit home hard for thousands of families in Florida and throughout the United States, who are struggling to figure out what to do with defective Chinese drywall that gives off a sulfuric gas.

HUNDREDS COMPLAIN

Almost 1,900 homeowners in 30 states, the District of Columbia and Puerto Rico have complained of having a problematic drywall that's tied to corrosion of metal in their homes and blamed for giving them headaches, nosebleeds and respiratory irritation.

Part of the problem, Krause told the gathering of nearly 400, is a "lack and absence of indoor air-quality standards.''

He later told reporters that "we sometimes just get away from 'meat and potatoes' public health and stewardship,'' saying that the last major effort he was involved in to examine product emissions was in the mid-1990s.

"It was a valiant effort, but there was no interest,'' he said.

However, stricter regulation of chemicals in products would be a major undertaking, he added.

"You're talking about interstate commerce, and in this case, now international commerce,'' he said.

His comments wrapped up a two-day Technical Symposium on Corrosive Imported Drywall that brought together experts in both the private and public sector to discuss the latest details of testing and research being done on the corrosive drywall problem.

CHINA VISIT

U.S. Sen. Bill Nelson, D-Fla., was the keynote speaker Friday. He said he is pushing President Barack Obama to address the defective drywall issue when he goes to China next week.

"At the end of the day, the financial wherewithal to make these homeowners whole is going to be the party responsible. I think that's the Chinese government,'' Nelson said. "We've just got to keep agitating on this.''

The Employment Situation news release

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.
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In October, the unemployment rate rose to 10.2 percent, the highest since April 1983, and nonfarm payroll employment continued to decline (-190,000). The largest job losses over the month were in construction, manufacturing, and retail trade.

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News releases archives:
http://www.bls.gov/schedule/archives/all_nr.htm

Structural Unemployment: Even as layoffs persist, some good jobs go begging

In the November 3, 2009 CNNMoney article "Despite millions of job seekers, many positions sit open," Jessica Dickler provides evidence of structural unemployment in the U.S. economy. (Structural unemployment occurs when the skills of unemployed workers do not match the skills required in available jobs.)

Despite millions of unemployed job seekers desperate for work, many open positions are languishing unfilled. The reason? Not enough candidates.

With job openings largely concentrated in specialized industries like health care, green technology and energy, some employers say the problem is finding qualified workers, which are in short supply. Meanwhile, they are inundated with eager candidates from other industries who lack the skills and experience that the job requires.

According to a recent survey by Human Capital Institute and TheLadders, more than half of employers said "quality of candidates" or "availability of candidates" are their greatest challenges -- despite the recession.

Mary Willoughby, the director of human resources at the Center for Disability Rights in Rochester, New York, has been trying to hire registered nurses, home health aides and service coordinators for several of the agencies that she oversees.

Many of the positions, which require specific skills and offer salaries in the range of $30,000 to $45,000, have been vacant for six months or longer.

The job postings, which appear on CareerBuilder, Craigslist and some regional sites, garner a lot of attention, she says. "We get tons of résumés from people. We are just not getting highly qualified candidates."

The problem, according to Willoughby, is that they are bombarded by résumés from job seekers without the two years or more of health care experience necessary. "We're seeing a lot of people trying to break into the health care arena," she said.

As a result, human resources spends too much time sifting through résumés for people who aren't remotely qualified, and can't find many that are. "We've gotten close to 300 résumés for a service coordinator position. Out of that we brought in four people," she said.

Those that didn't make the cut included someone with previous experience as an office clerk and a job applicant with a bachelor's in mathematics, currently employed at a café.

Willoughby recently instituted a hiring incentive program to encourage existing employees to refer viable candidates. Those responsible for bringing in new hires are eligible to receive $2,500 to $5,000, depending on the position. She has also added in a signing bonus for the new employees.

Things are even worse on the higher end of the pay scale. At wireless leasing firm, Unison Site, a position for director of lead generation, which pays $90,000-$140,000, has been open for three months, with no candidates in sight.

"With the job market the way it is, we should be able to recruit really good people and it hasn't worked quite as well as we wanted," said Joe Songer, co-founder and chief financial officer. "My problem is when I put an ad out I just get bombarded with people that aren't qualified."

Typically, the jobs that are the hardest to fill are those that require unique or extensive work experience, according to management professor Peter Cappelli of the University of Pennsylvania's Wharton School of Business.

For job seekers, applying to those types of positions may be worth the off chance that one responds with a request for an interview. "They think, I've got nothing to lose," Cappelli said.

Recruiters recommend that job seekers create a targeted list of companies with a clear match to their background and tailor their experience to the job they are applying for, rather than blanketing all available job openings with the same résumé.

"Eighty percent of jobs are being obtained on personal referrals so candidates that are spending the bulk of their time sending their resume out blindly are not being the most fruitful," said Carolyn Thompson, president of CMCS, a boutique staffing firm near Washington, D.C.

Thompson advises job seekers to network within those target companies, whether in person or through social networking sites.

Without a contact at the company, résumés should highlight and emphasize any relevant experience specific to the job opening, added Jennifer Becker, market director for Ajilon Professional Staffing. "You really want your résumé to very quickly and easily reflect your relevant skills and the value you can bring to the position."

"If the client has to look for it, you are probably going to get passed over."

Productivity gains may be bad news for job seekers

In the November 5, 2009 article "Productivity gains may be bad news for job seekers," Associated Press business writers Martin Crutsinger and Stephen Manning suggest the recently reported increases in U.S. productivity could be detrimental to unemployed workers. This is the opposite conclusion from the one reported earlier in the day by Reuters writer Lucia Mutikani. Which conclusion should you believe? These productivity increases are not the result of increased capital investment (such as upgrading a computer network) or additional education that has improved the skills of U.S. workers. Thus, it is doubtful that they are sustainable. Employment increases are on the way.

WASHINGTON – Companies across the economy are finding ways to do more with fewer workers, dimming hopes that hiring will take off anytime soon.

Employers became leaner and more efficient in the third quarter. Wages, meantime, remain flat or falling. The result is that productivity — output per hour of work — jumped at the fastest pace in six years.

The good news for companies, though, may be bad news for the jobless. As long as companies can get their workers to produce more, they have little reason to hire — at least until consumer spending picks up. And the squeeze on incomes could depress consumer spending, putting the economic recovery at risk.

Still, some economists were encouraged by the productivity report. They say that eventually, employers won't be able to squeeze more from their staffs. They will then have to ramp up hiring — something that could happen next year, even though the jobless rate is expected to hit double digits.

Productivity rose at an annual rate of 9.5 percent in the July-September quarter, the Labor Department said Thursday. That was much better than the 6.4 percent gain economists had expected. Unit labor costs fell at a 5.2 percent rate.

While companies aren't doing much hiring, they're not cutting as many workers, either. The number of newly laid-off workers filing claims for unemployment benefits last week fell to the lowest level in 10 months.

On Wall Street, the better-than-expected jobless claims report and an upbeat forecast from Cisco Systems Inc. buoyed investors. The Dow Jones industrial average added nearly 204 points to 10,005.96, and broader indexes also gained.

The 9.5 percent productivity rise followed a 6.9 percent surge in the second quarter and was the fastest since a 9.7 percent increase in the third quarter of 2003.

The gain reflected that the overall economy, as measured by the gross domestic product, grew for the first time in a year — at an annual rate of 3.5 percent. The higher output came as companies continued to lay off workers. That meant employers produced more with fewer workers.

The 5.2 percent drop in unit labor costs marked the third straight decline and was larger than the 4 percent decrease economists were expecting.

Productivity is the key ingredient to rising living standards. It lets companies pay their workers higher wages. Those increases tend to be financed by increased output, rather than higher costs for products.

But as they struggled with the recession, companies boosted productivity while continuing to lay off workers. Many produced more goods; others kept their output down but slashed costs. Companies kept wages down by freezing pay or imposing unpaid furloughs.

"Survival meant cutting costs as rapidly as possible and fulfilling orders with the fewest number of workers," said Joel Naroff, chief economist at Naroff Economic Advisors.

Some companies in hard-hit sectors have managed to boost productivity despite job cuts. They've had to find ways to stretch their remaining workers to keep up with demand.

Fein Tool North America, a Cincinnati company that supplies auto parts manufacturers, has cut about 100 workers, or 33 percent of its staff. But Fein president Ralph Hardt said the company can still fill its orders by using more overtime shifts and temporary workers.

"We are asking more of our people than ever before," he said.

Fein also has made technical changes, including increasing their presses' strokes per minute so they can stamp more metal.

Hardt said he plans to rehire once the economy picks up again. But he's hesitant to do so quickly.

"If I see signs of recovery, I am going to hire back, but I am going to be very prudent," he said.

Elsewhere, Union Pacific has found ways to reduce the number of crews it needs and is using more fuel-efficient locomotives. The rail company also rewarded train engineers who saved fuel on their routes with free gas cards for their personal vehicles, all while furloughing nearly 10 percent of its 45,000 workers.

Naroff said hiring could remain sluggish for months. But other analysts are more optimistic. They were encouraged by the productivity report, noting that companies are starting to reach the limits of how much they can produce with their shrunken work forces.

"We believe businesses will have to start to increase hours worked and payrolls around the turn of the year since they cannot expect their current work force to sustain such rapid productivity growth," said Michelle Meyer, an economist at Barclays Capital.

The problem is that consumer demand could falter once the government removes the stimulus programs it has put in place, such as record-low interest rates and homebuyer tax credits. Companies could stop hiring if they think demand will slump again.

Temporary surges in labor productivity tend to follow the end of a downturn, said Cliff Waldman, an economist with trade group Manufacturers Alliance.

"You're having a turn in output from negative to positive with a significantly depleted labor force," he said. "It gives the illusion that productivity has increased. It's really just arithmetic more than reality."

In a separate report, the Labor Department said first-time claims for jobless benefits last week fell by 20,000 to a seasonally adjusted 512,000. That's better than economists' estimates of 523,000.

Economists closely watch initial claims, which are considered a gauge of the pace of layoffs and an indication of employers' willingness to hire new workers.

The four-week average of jobless claims, which smooths fluctuations, dropped to 523,750, its ninth straight decline. That's 135,000 below the peak for the recession, reached in early April.

Despite the improvement, initial claims remain well above the roughly 400,000 that economists say will signal job creation.

Another 4.1 million people claimed extended unemployment benefits in the week ended Oct. 17, the latest data available, an increase of about 100,000 from the previous week. Congress has added 53 weeks of emergency aid on top of the 26 weeks typically provided by states.

Still, as roughly 7,000 Americans run out of extended benefits every day, Congress has approved legislation that would add another 14 to 20 weeks. President Barack Obama is expected to sign the bill.

The National Employment Law Project, an advocacy group, estimates that up to 1.3 million people would exhaust their benefits without the extension.

Economists expect the nation lost a net total of 175,000 jobs last month, adding to the 7.2 million lost since the recession began in December 2007. And many expect the jobless rate could rise as high as 10.5 percent before the recovery gains enough steam to start pushing it down next summer.

Productivity surge signals job growth to follow

In the November 5, 2009 article "Productivity surge signals job growth to follow," Lucia Mutikani reports that recent increases in U.S. productivity may signal that businesses are ready to hire additional workers.

WASHINGTON (Reuters) – U.S. business productivity grew at its fastest clip in six years in the third quarter and new claims for jobless aid fell to a 10-month low last week, suggesting the labor market may be starting to bottom out.

The Labor Department said on Thursday that productivity surged at a 9.5 percent annual rate, the quickest pace since the third quarter of 2003, as companies squeezed more output from a smaller pool of labor to hold the line on costs.

The Labor Department also reported that initial claims for state unemployment benefits dropped to 512,000 in the week ended October 31, the lowest level since early January. Markets had expected a decline to only 523,000, from the 530,000 reported in the prior week.

Some healing of the labor market is crucial to sustaining and strengthening the economy's recovery after its worst recession in 70 years, with employment key to underpinning consumer spending.

Analysts doubt that the rapid growth rate in productivity, which measures the hourly output per worker, can be sustained, which some analysts say means businesses may soon have to step up hiring to meet the demand for their goods and services.

"We expect the pace of efficiency gains will soon begin to fade," said Michelle Girard, a senior economist at RBS in Greenwich, Connecticut. "Having cut payrolls so dramatically during the last downturn, we believe that companies will be forced to add workers earlier in this recovery than was the case following the last two recessions."

U.S. stocks rallied on the data, driving up the three main indexes more than 1 percent higher in morning trade.

Financial markets had expected productivity to rise at a 6.4 percent rate. It grew at a 6.9 percent pace in the April-June period, when the economy was still contracting.

MUTED INFLATION PRESSURES

The U.S. Federal Reserve on Wednesday held overnight interest rates close to zero percent and said it would keep them extraordinarily low as long as excess economic slack and a lack of inflation warning signs prevailed.

The U.S. economy grew in the third quarter for the first time in more than a year, driven largely by government stimulus.

The strong productivity report suggested little need to worry about inflation at this juncture.

Unit labor costs, a measure of the cost of labor for any given amount of production, fell 5.2 percent last quarter after declining 6.1 percent the previous period. Analysts had forecast a drop of only 4 percent.

"Heightened productivity, the shrinkage of unit labor costs improves prospects for hiring over the near term. It points toward wider profit margins, faster earnings growth and more hiring activity," said John Lonski, chief economist at Moody's Investors Service in New York.

Productivity in manufacturing rose at a record 13.6 percent rate in the third quarter, likely driven by automakers ramping up production to rebuild depleted stocks after the popular "cash for clunkers" program boosted sales.

Compensation per hour jumped at a 3.8 percent pace, but after adjustment for inflation it was up only 0.2 percent -- pointing to sluggish growth in incomes.

In the weekly jobs claims report, the four-week moving average for new benefit claims slipped 3,000 to 523,750 last week, the lowest in almost 10 months. The average, which is seen as a better gauge of underlying trends, has declined for nine straight weeks.

Still, claims remain high. Analysts say they need to drop below 400,000 to signal that the economy is creating jobs.

U.S. employers have cut 7.2 million workers from their payrolls since the economy fell into recession in December 2007, but the pace of job cuts has been easing.

While the Labor Department is expected to report on Friday that the decline in employment slowed further in October, the jobless rate is expected to rise to 9.9 percent, up from a 26-year high of 9.8 percent in September.

There were further hints of labor market improvement in the data on Thursday. The number of people still on the jobless benefit rolls after collecting an initial week of aid dropped to the lowest level since March in the week ended October 24, the latest week for which data was available.

"The falling number of people on state unemployment insurance programs implies that the unemployment rate is probably approaching its peak. We look for the unemployment rate to peak around 10.2 percent in early 2010," said Abiel Reinhart, an economist at JP Morgan in New York.

"Fair & Balanced" Fox News contradicts itself in coverage of election outcomes

In the November 4, 2009 FOXNews.com editorial "Four Things We Learned From the NY 23 Race," Andrea Tantaros argues that one should not infer much from the outcomes of the November 4 elections because "sometimes, candidates are just plain weak (see the Democrats in New Jersey and Virginia governor's races)." This is in sharp contrast to other Fox stories that suggest the Democratic losses are evidence of the failure of President Obama's policies (even though Virginia has long been a Republican stronghold). And the Republican congressional loss in New York is quickly dismissed as indicative of nothing, even though the seat had been held by the GOP for more than 100 years.

According to the Tantaros commentary:

The ups and downs and unknowns in the special election for the 23rd congressional district of New York prove one thing conclusively -- we all love political drama. Here's what we've also found out this week.

After weeks of ups and downs and unknowns in the special election for the 23rd congressional district of New York with conservative candidate Doug Hoffman losing to Democrat Bill Owens (one that which played out much like a political telanovela) analysts can agree on one absolute: we love drama.

This race was reality television at its best with all the necessary ingredients: an underdog (Hoffman), a train wreck (Scozzafava), celebrity influence (Palin) and an attentive national media. And like many reality shows, after you've watched it you feel like you learned almost nothing.

So what did we learn about NY 23 besides its dizzying storyline?

1. We learned that the Republican Party establishment in Washington is not losing its influence; it simply backed a bad candidate in Scozzafava -- someone it never initially selected, nominated or wholeheartedly endorsed. Sometimes, candidates are just plain weak (see the Democrats in New Jersey and Virginia governor's races) and in places like New York where third party candidates are common, a door is opened for someone outside the norm.

2. We learned that Sarah Palin doesn't just "go rogue" herself; she helps others do the same. Palin's an earned media machine. She was able to help bring the battle to the national stage (Heck, the woman could get the national press corps to focus on a potato sack race competition). Even those who think the former Alaska governor is political poison, at the very least, have to admit her endorsement didn't hurt Hoffman and didn't help Scozzafava. The real question: is this a trend...for her? If Sarah Palin has any hopes of winning a national office she can't run around endorsing unwinnable candidates. She'll lose her political mojo and be labeled a spoiler.

3. From the NY 23 race we also learned that this is not the beginning of a GOP civil war. For decades moderates and conservatives have faced each other in primaries, but when faux Republicans like Scozzafava who espouse liberal beliefs run for higher office they run the risk of getting challenged, clipped or even defeated by someone from the right, or often helping the guy on the left.

4. We learned that despite all the craziness, the voters -- not the pundits, polls or the politicians -- make the final call. But in the case of NY 23, maybe the most telling takeaway is the only absolute: we love a good story.

Andrea Tantaros is a conservative columnist and FOXNews.com contributor. Follow her at www.andreatantaros.com and @andreatantaros on Twitter.

The Jobs of the Future

In the November 3, 2009 Salon article "Why Dilbert is doomed," Michael Lind explains that "the jobs of tomorrow are not what you'd expect."

Where are tomorrow's jobs going to come from? The question is more urgent than ever, with official unemployment hovering around 10 percent and with nearly one in five Americans unemployed, if you count part-time workers who want full-time jobs and people so desperate that they have given up looking for work entirely.

Most popular discussion about jobs focuses on the effects of offshoring of manufacturing jobs to China and other countries, many of which, like China, manipulate exchange rates and use subsidies to promote their industries. Combating predatory trade practices and rebalancing global trade by means of higher U.S. exports is important, in the short and medium term. But in the long run technologically driven productivity growth is the most important factor in shaping employment in the U.S. and every country in the world.

Productivity growth substitutes machinery or more efficient techniques for physical labor (engines) and mental labor (computers). Even if the U.S. had a completely closed economy, over time inventors and investors would figure out ways to replace people with machines.

Since the beginning of the industrial revolution more than two centuries ago, sectors that have adopted labor-saving machinery have shed labor to other sectors. The mechanization of agriculture and mining -- "primary production" -- freed up labor for factories. Increasing productivity in the "secondary production" like manufacturing, by allowing one person with advanced technology to do the work of dozens, freed up workers who were then employed in "tertiary production" -- office work and business services that support primary and secondary production. Thus the evolutionary progression, from yeoman farmer to factory worker ... to Dilbert in his cubicle.

With the ruthlessness of Skynet in "The Terminator," computerization in the tertiary sector is now committing mass Dilberticide, replacing receptionists with automated phone systems and travel agents with services like Priceline. The emptying of the cubicles won't result in permanent mass unemployment, the present prolonged crisis notwithstanding. As it has always done in the past, labor will shift from more mechanized to less mechanized sectors. But what will those jobs be?

We already know the answer.

The most numerous and stable jobs of tomorrow will be those that cannot be offshored, because they must be performed on U.S. soil, and also cannot be automated, either because they require a high degree of creativity or because they rely on the human touch in face-to-face interactions. The latter are sometimes called "proximity services" and they include the fastest-growing occupations, healthcare and education.

Most job growth in the last decade has been concentrated in three sectors: healthcare, education and government, mostly state and local government. Since the recession began, healthcare has added 559,000 jobs. Even more remarkable, the average monthly gain of 22,000 jobs during 2009 has been only slightly lower than the average increase of 30,000 jobs a month in 2008.

Last July, in a study titled "Preparing the Workers of Today for the Jobs of Tomorrow," the Council of Economic Advisers predicted that between 2008 and 2016 employment will decline in manufacturing, retail and wholesale, business and financial services and other sectors. Public-sector employment will remain steady, and there will be growth in transportation and utilities and construction. The greatest job growth, according to the White House, will be in the health and education sectors. Healthcare-related jobs make up seven out of the 20 fastest-growing occupations, and 14 out of the 20 fastest-growing jobs. The fastest-growing occupations are home health aides and registered nurses.

The aging of the boomers accounts for only 10 percent of the growth. The rest comes from increasing demand. That's because productivity growth in agriculture, construction and manufacturing has greatly reduced the cost of food, shelter and appliances. In the U.S. and similar nations, the freed-up income tends to be used on quality-of-life goods, of which healthcare is the most important. So-called ambulatory healthcare services, defined as healthcare provision for people who do not need to be hospitalized, form the fastest-growing part of the healthcare field. This underlines the point: As other expenditures are reduced, Americans are spending more income on non-emergency healthcare, a superior good that makes it possible to enjoy the other goods of life all the more.

It's true that the U.S. needs to reduce unnecessary health cost inflation. Paradoxically, however, a more efficient healthcare sector is likely to hire more, not fewer, people, if tasks that are now carried out by highly paid doctors are allowed to be performed by nurses and home health aides. Two Stanford economists, Robert E. Hall and Charles I. Jones, have predicted that even if healthcare is delivered in the most efficient possible way, Americans are likely to seek to devote "30 percent or more of GDP on health by the middle of the century."

The healthcare sector as a whole should not be considered a drag on the real or productive economy. On the contrary, while employment in manufacturing is declining overall, employment in pharmaceutical and medicine manufacturing in the U.S. is expected to expand. In the words of the economist Robert Fogel, "Just as electricity and manufacturing were the industries that stimulated the growth of the rest of the economy at the beginning of the 20th century, healthcare is the growth industry of the 21st century. It is a leading sector, which means that expenditures on healthcare will pull forward a wide array of other industries, including manufacturing, education, financial services, communications and construction."

Another widespread myth holds that most Americans need to go to college in the future. In reality, most of the fastest-growing jobs, including those in healthcare, do not require a four-year bachelor's degree. According to the Council of Economic Advisers: "The categories with some education required beyond high school are growing faster than those not requiring post-secondary schooling. The growth is not solely among occupations requiring bachelor's degrees; occupations that require only an associate's degree or a post-secondary vocational award are actually projected to grow slightly faster than occupations requiring a bachelor's degree or more." The appropriate public policy response is not necessarily to send more Americans to expensive four-year colleges, particularly if that means crippling burdens of personal debt in the form of student loans. We need to expand the vocational training provided by the community college system.

None of this means that we don't need world-class scientists and engineers, or that we don't need to rebuild our manufacturing export industries, or that we don't need to hire people to design and build up-to-date infrastructure and energy systems. High-tech agriculture, manufacturing and infrastructure and related business and professional services will remain essential to economic dynamism. But thanks to ever smarter machines, fewer and fewer people will work in the primary (field), secondary (factory) and tertiary (office) sectors. Most of the job growth will be in the "quaternary" sector of healthcare and other qualify-of-life services.

Dilbert's days are numbered. Look for Dilbert Jr. at the nursing station.

Thank heavens for the downturn? Some people think so

In the October 30, 2009 article "Thank heavens for the downturn? Some people think so," Miral Fahmy reports that the recession has helped some people realize what is most important in life:

SINGAPORE (Reuters) – It seems the financial crisis isn't all doom and gloom: one in four people are glad the world's economy slumped like it did, because it helped them realize their priorities in life, according to a global survey.

Market research firm Synovate polled around 11,400 people across the world and found more than half had permanently changed their attitudes toward money over the last 12 months.

Another 47 percent, however, said they were looking forward to being able to spend freely again.

"The psychology of global recession has changed the way many people do things," Jenny Chang, Synovate's managing director in Taiwan, said in a statement.

"They are making life-altering decisions based on the current global recession, be it postponing marriage, having children, moving house, changing jobs or pursuing higher education. Even in a relatively impact-free economy like Taiwan's."

A quarter of all respondents led by Malaysians said they were glad the world had an economic crisis as it has helped them realize what's really important in their lives.

Nearly 60 percent said they would try their best to keep a tight rein on their spending so that it doesn't go back to what it used to be before the downturn, and over two-thirds are more interested in boosting their savings than reducing their debt.

"The credit crunch has been felt, and it has reinforced the family values of Malaysians, helping them to appreciate what they have rather than continually strive for more," said Steve Murphy managing director of Synovate in Malaysia, Steve Murphy.

The majority of respondents -- over 80 percent -- believed their generation had a responsibility to leave their country better off for the younger generation, even if it involves dramatically altering their lifestyles.

The survey showed that one in five people had put off an overseas trip in the last six months, 6 percent had delayed having a baby and another 5 percent had even postponed surgery until things got better.

And with the United States' economy still trying to shake off the credit crunch, Synovate's U.S.-based Claire Peerson Braverman said Americans, compared to other nationalities, were having to make some of the most difficult decisions concerning money.

"With the relatively high unemployment in the U.S., those Americans who have lost one or more incomes in the family are making very difficult decisions each day ... which bills do, and don't, get paid," she said.

Synovate, the market research arm of Aegis Group, surveyed 11,400 people in August across 16 markets: Australia, Brazil, Canada, Denmark, France, Hong Kong, India, Malaysia, New Zealand, Russia, Serbia, South Africa, Spain, Taiwan, Britain and the United States. More details at www.synovate.com.

Fox News: Opinions are Expressed Throughout Its Programming

Media Matters for America says Fox News is a full-time political operation, providing editorial opinions even on shows they claim to be unbiased news.

The watchdog group posted the video "Fox News: A 24/7 Political Operation" on YouTube to show how many of the opinions expressed in the editorial portions of the cable channel's broadcasting are echoed in the programs that are allegedly news.

According to an October 20, 2009 press release:

FOR IMMEDIATE RELEASE
Tuesday, October 20, 2009
CONTACT
Jess Levin (202) 772-8162
jlevin@mediamatters.org

Washington, D.C. - Today, after Fox News responded to White House criticism with the demonstrably false defense that, unlike the network's "editorial" programs, its "news" programs are straight and objective, Media Matters for America released a video demonstrating that Fox News' dayside programming unquestionably echoes the tones, themes, and content of its evening opinion programming. In fact, the parallels are so clear that the network's daytime anchors often seem to be taking direct marching orders from their colleagues like Glenn Beck and Sean Hannity.

WATCH VIDEO HERE: http://www.youtube.com/watch?v=YRx5ethd8JU

BACKGROUND:

Fox News has responded to White House criticisms of its network by claiming that while its "editorial" programs are filled with "vibrant opinion," its news hours are straight and objective. However, Fox News' purportedly straight news programs often echo its "editorial" programs and feature smears, falsehoods, doctored and deceptive editing, and GOP talking points. Examples include:

*Hemmer advances smear that Jennings knew of "statutory rape" and "never reported it." During the October 1 edition of America's Newsroom, co-host Bill Hemmer joined his network's smears against Department of Education official Kevin Jennings by claiming that Jennings knew of a "statutory rape" case involving a student but "never reported it." In fact, as Media Matters has confirmed, the student in question was of legal age of consent at the time he was counseled by Jennings.

*Baier smears Jennings as failing to report "sexual abuse." On October 1, host Bret Baier joined Fox News' witch hunt against Jennings, claiming that "Education Secretary Arne Duncan is standing behind his so-called safe schools czar after revelations that Kevin Jennings did not report a case of sexual abuse he encountered as a schoolteacher."

*Kelly on Sotomayor comment: "sounds to a lot of people like reverse racism." On May 26, Megyn Kelly joined conservative commentators such as Rush Limbaugh by stating that then-Supreme Court nominee Sonia Sotomayor's "wise Latina" remark "sounds to a lot of people like reverse racism, basically. Like she's saying that Latina judges are obviously better than white male judges, and that that's her assumption, and people get worried about putting a person like that on the U.S. Supreme Court." Kelly later added, "I've looked at the entire speech that she was offering to see if that was taken out of context, and I have to tell you ... it wasn't." In fact, Sotomayor was specifically discussing the importance of diversity in adjudicating race and sex discrimination cases; several conservative legal figures have made similar comments.

*America's Newsroom promotes tea party organizing info on-air and online. America's Newsroom encouraged viewers to get involved with April 15 "tea party" protests across the country, which Fox News had described as primarily a response to President Obama's fiscal policies. The program frequently hosted tea party organizers and posted on-screen organizing information such as protest dates and locations. America's Newsroom also repeatedly directed viewers to its website, which featured a list of tea party protests.

*America's Newsroom promotes czar hysteria with ominous music. On September 7, Kelly teased a segment on whether the so-called "mainstream media" was ignoring "questionable backgrounds of some of the other 30-some-odd czars" in the Obama administration while ominous music played in the background.

*"Death book" distortions abound on Fox News Sunday. On the August 23 edition of Fox News Sunday, Chris Wallace hosted former Bush administration aide Jim Towey to discuss his Wall Street Journal op-ed, "The Death Book for Veterans," and in doing so promoted numerous distortions about an end-of-life educational booklet used by the Veterans Health Administration (VHA). In addition to forwarding the smear that the booklet is a "death book," Wallace promoted Towey's distortion that the booklet encourages veterans to "pull the plug" -- it doesn't; Wallace and Towey both suggested that the Bush administration suspended use of the booklet -- it didn't; and Wallace claimed that a VHA document requires doctors to direct veterans to the booklet -- it doesn't.

Media Matters president Eric Burns recently explained on Countdown with Keith Olbermann: "I think that what we have all thought of as a conservative news organization has really morphed itself this year into a 24/7 political operation with a very specific goal. And that is to destroy this presidency, and destroy any sort of progressive policy agenda that the American people voted for in November."

Happy Planet Index

The Happy Planet Index "reveals the ecological efficiency with which human well-being is delivered. The index combines environmental impact with human well-being to measure the environmental efficiency with which, country by country, people live long and happy lives. Learn about the ideas behind the HPI, how it is calculated, why we need it and what it can teach us."

Economy grows in 3Q, signals end of recession

In the October 29, 2009 article "Economy grows in 3Q, signals end of recession," Associated Press economics writer Jeannine Aversa reports the U.S. economy grew at a 3.5% annual rate during the third quarter of 2009, perhaps signaling and end to the recession.

WASHINGTON – The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes. It's the strongest signal yet that the economy has entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.

Going forward, many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans.

"This welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered," said Christina Romer, President Barack Obama's chief economist. "It will take sustained, robust ... growth to bring the unemployment rate down substantially. Such a decline in unemployment is, of course, what we are all working to achieve."

The much-awaited turnaround reported Thursday by the Commerce Department ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947.

It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.

The third-quarter's performance — the strongest since right before the country fell into recession in December 2007 — was slightly better than the 3.3 percent growth rate economists expected.

Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.

Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.

The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive. Purchases of home furnishings and appliances also added to economic growth.

The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.

The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery.

A top concern is whether the recovery can continue after government supports are gone.

Many economists predict economic activity won't grow as much in the months ahead as the bracing impact of Obama's $787 billion package of increased government spending and tax cuts fades.

The National Association for Business Economics thinks growth will slow to a 2.4 percent pace in the current October-December quarter. It expects a 2.5 percent growth rate in the first three months of next year, although other economists believe the pace will be closer to 1 percent.

Romer, in remarks last week said the government's stimulus spending already had its biggest impact and probably won't contribute to significant growth next year.

Brisk spending by the federal government played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.

In other encouraging developments, businesses boosted spending on equipment and software at a 1.1 percent pace in the third quarter, the first increase in nearly two years.

Third-quarter activity also was helped by increased sales of U.S.-made goods to customers overseas, as economies in Asia, Europe and elsewhere improved. The cheaper dollar is aiding U.S. exporters, making their goods less expensive to foreign buyers. Exports of U.S. goods soared at an annualized rate of 21.4 percent in the third quarter, the most since the final quarter of 1996.

Businesses, meanwhile, reduced their stockpiles of goods less in the third quarter, after slashing them at a record pace in the second quarter. With inventories at rock-bottom levels, even the smallest increase in demand probably will prompt factories to boost production. This restocking of depleted inventories is expected to help sustain the recovery in the coming months, economists said.

Even with the third-quarter improvement, the economy isn't out of the woods yet.

Federal Reserve Chairman Ben Bernanke and members of Obama's economics team have warned that the nascent recovery won't be robust enough to prevent the unemployment rate — now at a 26-year high of 9.8 percent — from rising into next year.

Economists say the jobless rate probably nudged up to 9.9 percent in October and will go as high as 10.5 percent around the middle of next year before declining gradually. The government is scheduled to release the October jobless rate report next week.

The Labor Department said Thursday that newly laid-off workers seeking unemployment insurance fell by 1,000 to a seasonally-adjusted 530,000. Analysts expected a drop to 521,000.

The number of people continuing to claim benefits, fell by 148,000 to 5.8 million, steeper than analysts expected. Those figures lag initial claims by a week.

With joblessness growing and wages dipping slightly in the third quarter, consumers are expected to turn more restrained in the months ahead. That would put a much heavier burden on America's businesses to keep the recovery going.

"We're beginning to crawl out a very deep hole," said economist Ken Mayland, president of ClearView Economics. "It will take time to get back to normal again and there are questions about how consumers will hold up in the months ahead. But I think the recovery will be sustained."

To foster the recovery, the Fed is expected to keep a key bank lending rate at record low near zero when it meets next week and probably will hold it there into next year.

With the economy on the mend, the Fed has slowed down some key emergency support programs but doesn't want to pull the plug until the recovery is on firm footing.

Even if the economy climbs back into positive territory in the third quarter, it will be up to another group to declare the recession over. The National Bureau of Economic Research, a panel of academics, is in charge of dating the beginning and ends of recessions. It usually makes it determinations well after the fact.

Six Simple Steps to $1 Million

In the October 26, 2009 Investopedia article "6 Simple Steps to $1 Million," Glenn Curtis outlines six habits that will help you save a million dollars. These ideas echo those in the personal investments portion of this Economic Perspectives blog.

Let's face it; we all don't make millions of dollars a year, and the odds are that most of us won't receive a large windfall inheritance either. However, that doesn't mean that we can't build sizeable wealth - it'll just take some time. If you're young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.

Stop Senseless Spending

Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don't need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up - and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month.

That said, it's important to realize that it's usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere - this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses.

This doesn't mean that you shouldn't go out and have fun, but you should try to do things in moderation - and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits.

Fund Retirement Plans ASAP

When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.

Unfortunately, retirement planning is an afterthought for many young people. Here's why it shouldn't be: funding a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later.

How much difference will funding a vehicle such as a Roth IRA early on in life make?

If you're 23 years old and deposit $3,000 per year (that's only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it's clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest - your $3,000 contributions only add up to $126,000.

Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you've lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That's still a sizeable fund, but you had to contribute $160,000 just to get there - and it's no where near the $985,749 you could've had for paying much less.

Improve Tax Awareness

Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.

Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.

However, if you're not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return.

Own Your Home

At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren't sure where we want to live for the longer term. And that's fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.

Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)

Avoid Luxury Wheels

There's nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice - especially since this asset depreciates in value so rapidly.

How rapidly does a car depreciate?

Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.

In short, especially when you are young, consider buying something practical and dependable that has low monthly payments - or that you can pay for in cash. In the long run, this will mean you'll have more money to put toward your savings - an asset that will appreciate, rather than depreciate like your car.

Don't Sell Yourself Short

Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.

Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.

Bottom Line

You don't have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don't have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.

Why it doesn't feel like prices are falling

In the October 26, 2009 CNNMoney article "Consumers have trouble finding falling prices," Chris Isidore asks "the government says we're paying less for our everyday needs — so where are the savings?"

The government says consumers are paying less for their everyday needs compared to a year ago. But if it feels like your dollar is not going as far as it used to, you're not alone.

The Consumer Price Index is down 1.3% from a year ago, meaning that the typical market basket of goods and services should be costing you that much less.

But there are a number of factors, some having to do with how CPI is calculated by the Labor Department's Bureau of Labor Statistics (BLS) and some having to do with economic behavior, which can make those savings seem like a mirage.

Here are some of the reasons why your wallet isn't feeling any fatter.

Fuel

Nothing has driven down overall prices more in the past year than the drop in energy prices. Gasoline prices are down nearly 30% in the past 12 months, but if you strip out falling energy prices, the overall CPI is up 1.2%.

But even though gas may be cheaper than a year ago, it still probably feels like prices are going up. That's because gas prices are up 29% in the last six months.

That obviously can cause a squeeze on household budgets, especially as a weak labor market has resulted in tiny rises in the average weekly paycheck.

Health care

Health care is a significant part of consumers' expenditures, topping money spent on gasoline and trailing only housing and food. But calculating the cost of health care is perhaps the trickiest part of CPI, partly because insurance distorts how consumers pay for medical expenses.

According to the Labor Department, overall health care costs were up 4.2% in 2008. For those calculations, the BLS surveyed consumers, medical providers and insurers and tries to come up with a specific cost of medical care.

One reason that healthcare prices appear to have only increased slightly is because if something is judged to be an improved service, such as a new drug, the BLS does not actually consider the higher costs to be a price increase.

That's because the BLS assumes consumers are getting more for their money. But new drugs and treatments are common in the medical industry -- and insurers often charge consumers more for them.

But other calculations show health care expenses, including insurance and other out-of-pocket costs, are rising faster. For example, consumers spent 7% more on health insurance in 2008 than they did a year earlier, according to a separate government reading conducted by the Census Bureau.

And surveys from the Kaiser Family foundation found rises in deductibles, co-payments and other out-of-pocket medical expenses not being captured in either the Census figure or the CPI calculations.

Blame it on Washington

Some government payments, such as Social Security benefits, are pegged to CPI. The current year-over-year decline in CPI means that those benefits won't go up next year. That will be the first time since the cost-of-living adjustment was put in place in 1975 that retirees won't get an increase in Social Security.

Tax brackets and deductions also are pegged to CPI, meaning higher tax bills for many people in 2010 than they would have had to pay if prices were higher.

In the 1990's, then Federal Reserve Chairman Alan Greenspan argued that CPI was higher than justified by economic reality and costing the government money it couldn't afford. As a result, changes in the calculation of CPI were made.

One of the most significant changes was that the government started to assume that if the price of a good rose more than the price of an alternative product, consumers would shift more of their purchases to the lower priced option, limiting the price increase. But even if consumers behave that way, they would still be aware of the higher prices of the goods they can no longer afford.

Because the federal government benefits from lower inflation readings, critics accuse policymakers of intentionally calculating CPI much lower than it should be. Even the BLS admits CPI would be between 0.2 and 0.3 percentage points higher today if the old methods had been used.

Perception

Finally, it's very likely that consumers pay more attention to prices that are going up than prices that are going down.

Behavioral economists say people are very sensitive to any financial losses, meaning they will make far more effort to avoid losing or spending money than they will to make the same amount of money.

Robert Frank, a leading behavioral economist at Cornell University, said this well-documented theory is the reason that higher prices make so much more of an impression than the lower prices that might balance it out.

"Price declines don't register with the same intensity as price increases," he said. "Even if they notice it, it's just not going to arouse them in the same way a price increase will. People like to complain."

The fact that overall price decreases aren't keeping up with the record drop in household wealth over the past few years also makes consumers that much more concerned about prices that are rising.

Frank added that with wages flat and credit still tight, products that might have been considered affordable in the past may now be out of reach for consumers -- even if prices are only up slightly.

"Any struggle to make their budgets fit just exacerbates any injuries you feel from the prices that do increase," he said.

The Stimulus Spending Bill: Is It Working at All?

In the November 2, 2009 TIME magazine artilce "The Stimulus Spending Bill: Is It Working at All?," Justin Fox explains that much of the criticism of stimulus spending is misguided.

The $787 billion American Recovery and Reinvestment Act that Congress approved last February was the first major legislative accomplishment of the Obama White House. Lately, it has also become one of Washington's most frequently tossed political footballs.

Here's the play-by-play from a few days in mid-October. House Republicans wrote (and released to the public) a letter to the President in which they claimed that with the unemployment rate at 9.8%, "it is now evident that the massive 'stimulus' spending bill enacted months ago has been unsuccessful." Obama economic adviser Larry Summers stepped up to play defense. "Thanks largely to the Recovery Act ...," he wrote, "we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery."

The next counter came in a memo to House Republicans from economist and former John McCain adviser Douglas Holtz-Eakin, who wrote, "Jobs keep disappearing ... and the Obama Administration's only apparent plan is to double down on a failed strategy for economic stimulus." The next day, the White House went on offense, hailing a preliminary report on stimulus job creation (30,000 jobs directly created or saved by the first $16 billion in spending). House minority leader John Boehner retorted that such exulting was "beyond the pale" because "3 million private-sector jobs have been lost since it became law."

Who's right here? Well, first, the Republican argument that the stimulus is a bust because jobs have been lost fails a basic logic test. After last fall's global financial shock, the job market was going to be thrown for a loss no matter what. The issue is whether the number of job losses is greater or lesser than it would have been in the absence of the stimulus. "You can't answer these questions without a compared-to-what," says Jared Bernstein, economic adviser to Vice President Joe Biden, who is overseeing the stimulus. "We can have good arguments about the baseline, but a critique that doesn't evoke the baseline is useless."

I got my rough baseline from a conversation at the height of last fall's financial panic with Barry Eichengreen, an economist at the University of California, Berkeley, who is an expert on the Great Depression. "I doubt that we'll be able to avoid double-digit unemployment," he told me. "But I'm still confident we can avoid 24% unemployment like in 1933."

By that standard, we're doing O.K. But Bernstein and Christina Romer, the chairwoman of the President's Council of Economic Advisers, made the mistake of providing a more optimistic baseline last January — a forecast in which unemployment peaked at 9% without the stimulus bill and stayed below 8% with it.

Unemployment has of course passed both those mileposts and is probably still rising. ("I have noticed," Bernstein says dryly.) This overshoot says more about the inadequacy of economic-forecasting models than about the efficacy of the stimulus. But the White House cites these same kinds of models in claiming that the stimulus added between 2 and 3 percentage points to economic growth in the second quarter and 3 points in the third quarter. This may be correct as far as general direction — my unscientific assessment (a.k.a. guess) is that it is — but the exact numbers are probably bunk.

The political back-and-forth on the stimulus bill is the ultimate in bunk, though, because it ignores most of the fiscal stimulus provided by Washington so far. Anytime the Federal Government spends more than it takes in, it creates fiscal stimulus. That stimulus (deficit) was $1.4 trillion for the just-ended fiscal year, up about $1 trillion from the year before. The stimulus bill accounted for just $200 billion of that increase, according to the Congressional Budget Office. Bailing out banks and other financial firms cost $245 billion. A $419 billion drop in tax receipts (due mainly to recession, not legislation) without an offsetting spending cut was the biggest factor in the deficit's rise. Then there are the trillions of dollars the Federal Reserve put into asset purchases and other programs — surely the biggest stimulus of all.

Why don't we hear constant political debate about these other stimulus efforts? Presumably because they were the result of bipartisan legislation or were the doing of the nonpartisan Fed. That is to say, the Obama Administration can't take full credit for the bulk of the stimulus, and the Republicans can't disown it. So neither side talks much about it. Over the coming year these other forms of stimulus will — one hopes — be ratcheted back, while stimulus-bill spending will peak. At that point the great stimulus debate might actually start to matter. Until then, there's better football to be watched elsewhere.

Be Careful What You Wish For (... or what precedents you establish in Congress)

It is widely believed that Congress may use the process of reconciliation to limit opposition to proposals for health insurance reform. Wikipedia explains reconciliation as "a legislative process of the United States Senate intended to allow a contentious budget bill to be considered without being subject to filibuster. Because reconciliation limits debate and amendment, the process empowers the majority party." It goes on to explain that "until 1996, reconciliation was limited to deficit reduction, but in 1996 the Senate's Republican majority adopted a precedent to apply reconciliation to any legislation affecting the budget, even legislation that would increase the deficit. ... Under the administration of President George W. Bush Congress used reconciliation to enact three major tax cuts."

The irony of this is that Republicans were warned about reconciliation's potential use against their causes in a 1996 article published in the Congressional newspaper Roll Call and the Congressional Record:

[From Roll Call, May 30, 1996]
THE DAY THE SENATE DIED: BUDGET MEASURE WEAKENS MINORITY
(By Bill Dauster)

The Senate died last week. At the very least, it suffered a blow that leaves it clinging to life.

You may be forgiven if you missed it. It happened while the Senate considered the budget resolution, a budget whose fiscal priorities pretty much repeat last year’s endless budget failure.

But while most observers of Congress yawned, the Republican majority used the budget process to fundamentally alter the way the Senate works. From now on, the Senate will conduct much of its business at its hallmark deliberative pace only if the majority wants it that way.

It is the Senate’s deliberative pace that has distinguished it from the House of Representatives and other parliaments. Yes, the Senate does apportion its membership by state instead of by population, but its true uniqueness flows from the way its rules preserve the rights of determined minorities.

Once the presiding officer has recognized a Senator, the Senate’s rules allow the Senator to speak as long as humanly possible, unless 60 Senators vote to end the filibuster. The mere threat of filibuster—called a ‘‘hold’’ can detain legislation.

As well, when the Senate is considering one subject, Senators have the perfect right to offer amendments on entirely different subjects. These powers to debate and amend make every single-United States Senator a force to be reckoned with. They give dedicated groups of Senators substantial power. And they give 41 Senators the absolute right to kill a bill.

All that changed last week. Sen. Pete Domenici (R–NM), the Budget Committee chairman, brought to the Senate floor a budget resolution that markedly expanded the use of a procedure called ‘‘reconciliation.’’ The reconciliation process creates bills that the Senate considers with only limited debate and limited opportunities to amend.

Because reconciliation bills limit debate, Senators cannot filibuster them. A simple majority can pass them. Because Senators may offer only germane amendments to reconciliation bills, Senators must stick to only the subjects chosen by the majority in the committee process. Because of the reconciliation process’s power, the Senate has limited it solely to deficit reduction through the ‘‘Byrd Rule,’’ named after the Senate’s parliamentary conscience, Sen. Robert Byrd (D- WVa).

This year’s budget will generate an unprecedented three reconciliation bills—on welfare, Medicare, and tax cuts—designed to maximize partisan confrontation with the President. And in a marked departure from past practice, the Republican budget resolution devotes one of the three reconciliation bills—the one to cut taxes—solely to worsening the deficit.

On May 21, Senate Minority Leader Tom Daschle (D-SD), backed by Sens. Jim Exon (D-Neb), Emest Hollings (D-SC), and Byron Dorgan (D-ND), formally challenged the procedure. The Republican-appointed Parliamentarian gave it his blessing.

In a series of exchanges with the presiding officer, Daschle demonstrated that the new procedure has few limits. Daschle appealed the ruling, but the Senate sustained the procedure on a straight party-line vote.

From now on, the majority party can create as many reconciliation bills as it wants. And the majority can use them to increase spending or cut taxes, worsening the deficit. From now on, the majority can use the reconciliation process to move its entire legislative agenda through the Senate with simple majority votes and few distractions.

The old Senate is dead. Some may say, ‘‘Good riddance.’’ After all, as a Democratic Member of Congress once said, ‘‘In the Senate, you can’t go to the bathroom without 60 votes.’’

If a simple majority can now pass important legislation in the Senate, perhaps a lot more will get done. Democrats will recall their frustration with Republican filibusters. Indeed, then-Budget Committee Chairman Jim Sasser (D-Tenn) once tried to convince Byrd to allow the Senate to consider the Clinton health care reform bill using the reconciliation process. Byrd did not want that done.

Also, the Parliamentarian at that time advised that it would not be in order for a budget resolution to instruct the creation of a reconciliation bill that solely worsened the deficit.

One can think about efficiency and Congress in two ways. The current conventional wisdom thinks in terms of legislative efficiency: How many bills become laws?

But as Nobel Prize-winning economist James Buchanan has argued, societal efficiency may be better served by a Congress that has hard time enacting laws. Under those circumstances, laws would change less often, less frequently disrupting peoples’ lives, less often intruding into them. If you agree with Thoreau that the best government is that which governs least, then the most societally efficient government is the one with the most checks and balances.

The Republican majority may thus have served legislative efficiency at the expense of societal efficiency. Good or bad, the Senate has changed.

As Daschle warned on May 21, ‘‘What goes around comes around.’’ Democrats will remember the lessons the Republicans have taught them of how to use the power of the majority.

So say ‘‘bye, bye’’ to this slice of American pie. This’ll be the day that it dies. This’ll be the way that it dies.

Congressional Record -Senate - pages S6135-S6136 - June 12, 1996.