Blogs

It is easy to demonize the “wealthy” who reside in the upper two income tax brackets.  After all, these “scrooges” are sitting on a pile of money, and they need to pay their fair share.  The thinking is that the government can simply skim some money off the top with virtually no effect on business since it is a tax on “personal income.”   This is the standard rhetoric coming from those who support the expiration of the Bush Tax Cuts in January 2011, but are they right that it will not affect businesses

The recent expansion of the government into the daily affairs of the business sector will create a more burdensome environment for small businesses and startups. Considering that startups are the main driver of net job creation, the signs are in place for a recovery that will be characterized by fewer-than-normal jobs being created.

by Drew Benson, Economist, ITR

Currently the FDIC guarantees $250,000 per depositor per bank.  This may sound comforting at first glance, but there are some unintended consequences lurking under the surface. 

            Like the bailout precedent, deposit insurance invites risky behavior.  To make matters worse, deposit insurance does not just encourage banks to engage in risky lending practices, but it also encourages depositors to be less prudent on where they invest their money. 

By guar

           by Drew Benson, ITR economist

 Many commentators are determined to blame the “financial crisis” on derivatives.  They suggest that reckless financial innovation exacerbated by greed ultimately induced the “Great Recession of 2008-09.” This ad hominem attack has failed to get at the crux of the issue, “Why did people make such outrageous bets on derivatives?”

            To suggest that derivatives are inherently dangerous and that

by Drew Benson, ITR Economist

There are many key indicators to look at to get a relative handle on the strength of the economic recovery, but unemployment is not one of them.  

Unemployment at 9.7% is not encouraging, that’s for sure.  However, many pundits are falsely using the number as an indication that the U.S.

            The most recent Federal Reserve (Fed) balance sheet reveals that 47% of the central bank’s assets are “toxic.”  The Fed owns $1.1 trillion mortgage-backed securities, which is a disturbing thought in terms of staving off inflation.

Thomas Malthus had it all wrong.  He believed that population growth would outstrip the earth’s fixed supply of resources and therefore cause famine, poverty, and starvation.  History proves him wrong as the U.S.

The Financial Reform bill is riddled with all kinds of new government control over the financial market.  One particular aspect of the bill will allow the Securities and Exchange Commission (SEC) to further regulate credit rating agencies.

The United States federal budget deficit as a percent of GDP is 9.3%, while Greece stands at 13.6%.  Despite the dismal U.S. deficit, the federal government will be fronting the indebted euro-zone tens of billions of dollars. Scary thought.

Many economists have feared that social democracies (marked by their welfare states) are on an inevitable march towards insolvency and outright default.  Greece will likely be the first victim claimed as it stands on the precipice, while Spain, Portugal, Ireland, and Italy are very close behind.  To avoid disaster, the European Union (EU) and International Monetary Fund (IMF) provided $1 trillion in bailout funds to those European nations facing fiscal problems.  This will specifically, but temporarily, prevent an outright default on Greece’s public debt.   However,