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What We Read Today 22 November 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

  • House Republicans File Obamacare Lawsuit (Igor Bobic, Huffington Post) Republicans in the U.S. House of Representatives have filed a law suit accusing President Obama of "acting without congressional authority" when he ordered a delay in implementation of the employer mandate under PPACA (Patient Protection and Affordable Care Act of 2010, aka Obamacare).

The suit also alleges the "giveaway of $175 billion to insurance companies" by the administration under the law is illegal because "the funds weren't explicitly appropriated by Congress". House Speaker John Boehner (R, Ohio) made the following statement:

"Time after time, the president has chosen to ignore the will of the American people and re-write federal law on his own without a vote of Congress. That's not the way our system of government was designed to work. If this president can get away with making his own laws, future presidents will have the ability to as well. The House has an obligation to stand up for the Constitution, and that is exactly why we are pursuing this course of action."

The $175 billion for insurance companies is the estimate of payments to be made over the next decade to support insurance companies offering lower premium rates. Over the past year $3 billion has been spent in this way. According to the Boston Globe, ACA established the fund, but the Republican Congress has not appropriated any money specifically for it.

  • Rob Portman: Obama Will Face 'Lawsuits' If He Acts Alone On Immigration (Igor Bobic, Huffington Post) Sen. Rob Portman (R-Ohio) warned that Republicans would take legal recourse if President Obama goes forward with a planned executive action on immigration, a move the senator from Ohio described as "illegal." House Speaker John Boehner (R, Ohio) told reporters that "all options are on the table", even if that means triggering a shutdown. However, incoming Senate Majority Leader Mitch McConnell (R-Kentucky), pledged a government shutdown would not happen. Republicans are feeling their oats following their party's resounding victory in the November midterm elections. Bobic writes they are "clamoring for a fight".
  • Obama’s Immigration Action Shows the Limits of Executive Power (Edward Alden, Council on Foreign Relations) Alden says the president has not really done much. The people covered by his order had "extremely small" probability of deportation to begin with and the order is temporary. There is nothing in the order that moves the covered people any closer to permanent residency status or makes them eligible for any U.S. social programs like food stamps, welfare, Obamacare insurance policies, Medicare or Social Security benefits. Econintersect: However they do pay the payroll taxes that support some of these programs. To change the status of these "visitors" in any permanent way requires congressional action.

  • Articles about events, conflicts and disease around the world

Ebola

Ebola outbreak can be ended in 2015: UN's Ban Ki-moon (BBC News)

An Ebola Clinic Figures Out A Way To Start Beating The Odds (NPR)

Nigeria

U.S. Policy to Counter Nigeria's Boko Haram (Council on Foreign Relations)

Liberia

EXCLUSIVE: Revealed, how American tyre giant Firestone forces families of dead Ebola victims to leave their homes on Liberian plantation (Daily Mail)

Gaza

UN-backed reconstruction efforts set to kick-off in Gaza next week (UN News Centre)

Israel says rockets test-fired from Gaza (Al Jazeera)

Israeli forces shoot, injure Palestinian on Gaza border (Ma'an News Agency)

Syria

ISIS suffers setback in drive for Syria-Turkey border city Kobani (CBC News)

Two Britons 'killed in Islamic State fighting' in Syria (BBC News)

Iraq

ISIL launches fierce assault on Iraq's Ramadi (Al Jazeera)

Ukraine

U.S. Delivers Radar Systems to Ukraine (U.S. Department of Defense)


There are 14 articles discussed today 'behind the wall'.

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  • U.S. 10-Year Yield (Investing.com) The U.S. 10-year Treasury has moved in the opposite direction from the German bund over the last two years, although in 2014 the U.S. yield has also declined, just not as much (~77% of 01 January yield). Compare to German chart previous article. The general trend indicated by the U.S. bond is for a strengthening U.S. economy (with considerable equivocation).

U.S.-10-year-2014-nov-21

  • Japan 10-Year Yield (Investing.com) German 10-year yields look a lot more like the Japan chart than the U.S. Japan has an even loer 10-year yield, down by a similar amount (to Germany) for the year (36% for Japan vs. 40% for Germany). If the bond markets have it right Euro land, Germany in particular, is movin' on down the Japanese path.

Japan-10-year-2014-nov-21

  • Japan’s Sensible Fiscal Retreat (Robert Kahn, Council on Foreign Relations) See also next article for comprehensive review of Abenomics. Kahn says the fiscal austerity move to higher taxes was not consistent with the easing strategy of Abenomics (see 2013 report by GEI News) and the apparent decision to postpone the next step is the right move. He further says that tax cuts in other areas to offset the higher consumption tax would be a good idea. All in all Kahn says that the weak yen trade lives on. For a different takes Betting on Japan (Yiannia G. Mostrous, Capitalist Times) and With Bad Economic News for Japan, Abe’s Magic Seems to Evaporate (Martin Fackler, The New York Times). Kahn concludes with worries about currency wars:
One issue that has not received much attention is that, at the same time the BOJ announced its easing of policy, the government pension investment fund (GPIF) announced a shift in its portfolio away from domestic bonds and into domestic and foreign stocks. Combining monetary easing with direct purchases of foreign stocks is the economic equivalent of direct exchange rate intervention, something the G-20 has previously ruled out. Particularly if the Japanese moves bring forth copycat depreciations elsewhere, this will be a continuing issue for discussion in the coming months, and could find its way to Capitol Hill in the context of upcoming debates over trade policy.
  • Abenomics and the Japanese Economy (Beina Xu, Council on Foreign Relations) This is a comprehensive review of Abenomics. Most of the press has been about the fiscal and monetary policy aspects of Prime Minister Shinzo Abe's economic plan. But it is the "third arrow" which has the best chance of effecting permanent change for Japan. The third arrow refers to structural reforms in the Japanese economy. Biena Xu has the best short summary we have seen of what things are involved in formulating the third arrow:

While monetary and fiscal policies will do most of the heavy lifting in the short term, structural reforms, which the BOJ has argued are long overdue, will be the long-term linchpin of Abe's plans. Japan's troubling demographic landscape-the population of Japanese workers between ages fifteen and sixty-four has contracted by 6 percent in the past decade-has been one of the largest culprits in hampering growth. Initiatives to counteract this trend include encouraging greater female participation in the workforce by adopting more comprehensive child-care support policies. Abe's government has also laid out specific initiatives to overhaul regulations in key sectors like energy, environment, and health care. In June 2014, Abe announced a broad package comprising the "third arrow" of the plan, including corporate tax rate cuts and liberalization of the agriculture and healthcare sectors. Changes also include shifting the investment strategy of the massive Government Pension Investment Fund, and eliminating a spousal tax exemption in hopes of increasing career opportunities for women.

But one of the most high-profile elements of Abe's structural reform plans includes his decision to join the Trans-Pacific Partnership (TPP) [PDF], a proposed regional free trade agreement being negotiated between the United States and eleven other countries in Asia and the Americas. On March 15, 2013, Abe announced that Japan-which accounted for 14 percent, or $146 billion, of U.S. goods trade with TPP partners in 2012-would seek to participate in the TPP negotiations.

  • Vehicle Miles Traveled: A Structural Change in Our Behavior (Doug Short, Advisor Perspectives dshort.com) Doug Short contributes to GEI. Short shows that major recessions have been associated with significant reductions in vehicle miles driven, but for The Great Recession the reduction has been much more significant. See also next article. He finds an indication that gasoline prices may have some affect but is not representing that as a major factor.

As is readily apparent, the correlation is fairly weak over the entire timeframe. And, despite the volatility in gasoline prices since the onset of the Great Recession, the correlation since December 2007 has been even weaker. There are profound behavioral issues apart from gasoline prices that are influencing miles traveled. These would include the demographics of an aging population in which older people drive less, continuing high unemployment, the ever-growing ability to work remote in the era of the Internet and the use of ever-growing communication technologies as a partial substitute for face-to-face interaction.

See the recent study by the Frontier Group, A New Direction: Our Changing Relationship with Driving and the Implications for America's Future (PDF format).

miles-traveled-600px

  • The magnitude of change has been much different for the increases from 1970 to 2000-2005: miles driven per (adult) capita grew by more than 60% while the labor force participation rate grew only by 12%.
  • The magnitude of change following the peaks (2000-2005) to 2013 are more similar: labor force participation rate declined by approximately 6.5% and vehicle miles by about 9%.
  • The peak for labor participation rate occurred between 5 and 6 years earlier than the June 2005 peak for vehicle miles driven.
  • For the 1990-91 period the recession had a relatively minor impact on vehicle miles driven compared to the relatively strong impact on labor force participation. The timelines for the two metrics are fairly closely overlaid.
  • For the 1980-82 recessions there was a much clearer definition of a dip in vehicle miles driven compared to a pattern of fluctuation for labor force participation. The peak for miles occurred about two years before for the highest point in labor participation.
  • During the 1973-74 recessionary period the the timelines for miles and labor nearly overlay with labor force participation rate peak and valley occurring a few months later.

The implication is that, although vehicle miles driven and labor force participation rates show correlations to recessions over the past several decades, timeline variations preclude trying to identify any direct connections that might be consistent over the entire time period.

In the 20th century the high point for vehicle miles driven occurred before or concurrently with the peak in the labor force participation rate.

For The Great Recession the labor force participation rate actually peaked before the previous recession (2001) while vehicle miles driven peaked in 2005. This is a reversal of the prior time sequences.

There were short periods in the last third of the 20th century where labor force and miles moved in opposing directions, but no period nearly as long as 2000 to 2005 where the two were trending in opposite directions.

With the changed relationships between labor force participation rate and vehicle miles driven there is clear support for the suggestions by Vrba and Short that structural changes have occurred in the economy in the 21st century. But beyond that a great deal more work is needed to define those changes. In that regard see Structural Trends in Employment by Age Group (Doug Short, Advisor Perspectives dshort.com)

labor-force-participation-rate-1947-2013

  • Other Economics and Business Items of Note and Miscellanea

Grecovery: Political uncertainty could trip up the euro zone’s new star performer (The Economist)

Economic Activity Slows in Eurozone, Survey Shows (The New York Times)

Morning Plum: GOP to double down on ‘voodoo’ economics? (The Washington Post)

Cheap credit in Europe, China: Too little, too late? (CNBC)

7 Charts Show Why Trickle-Down Economics Has Been an Enormous Failure (Policy.Mic)

The behavioral economics of international diplomacy (The Washington Post)


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