What will the effect be over the next year? We believe it will be around ¾ percentage point, i.e. similar to the last year. This is based on the same reasoning as our July 2009 analysis, and it is illustrated in the third column of the table near the beginning of this comment.
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As explained in yesterday’s daily comment, we no longer expect Congress to extend FMAP. Hence, there is up to $15 billion or so of budgeted funds that may not materialize. This implies required budget cuts in a range of $89bn-$104bn, or 0.6%-0.7% of GDP, almost precisely the same numbers as we found a year ago for fiscal 2010.
By Chad Syverson of Chicago on the effects of e commerce in different sectors:
Those that are able to operate at low cost (and pass some of this cost advantage on to their customers) can gain market share and profitability, while higher-cost firms will be hurt, perhaps fatally.
* If you build it for $8 billion, they won't come. L.A. Times' Dan Weikel explains how the Los Angeles Metropolitan Transit Authority is actually carrying fewer people now than it did when it began its light rail building project 20 years ago. More than a million people a day ride buses in the county, a little more than 300,000 ride trains, and the figure for trains keeps falling. (I used to keep a close watch on these numbers, and it looks like the trend has been holding for almost ten years now: rail boardings decline a little almost every quarter, regardless of economic activity, gas price, or efforts to promote train ridership.) Transit gadfly Tom Rubin estimates the massive rail project has cost the MTA 1.5 billion potential passengers since 1986. Don't miss the comment section, where trainspotters are still saying the trains will be full once they have one that goes all the way to the ocean.
the economy’s fundamental problem is a decline in velocitySounds like bad paper all around!
It's part of Newark Mayor Cory Booker's belt-tightening plans that include reducing most city workers to a 4-day work week and shuttering city pools. Booker estimates that the pool closures alone would save $250,000. He also says that no gas will be purchased for municipal vehicles that are not deemed critically important.
Police officers, firefighters and sanitation workers would not be affected by the furlough plan. City workers were already bracing for furloughs starting in August. The number of unpaid days would increase from 11 to 19 with Booker's plan.
Can Anything Be Done?
This is all so outrageous it is hard to know exactly where to start. Yet, once again corrupt politicians and unwarranted public pension promises are right at the heart of the issue.
These people are supposed to be public servants but they have raped city taxpayers, and worse yet will continue to rape taxpayers for as long as they live unless and until a means is available to claw back pension benefits.
One way would be for the city to file bankruptcy, another way would be for the city or state to tax public pension benefits exceeding say $50,000 at an enormous, progressive rate topping at 100% for benefits in excess of $100,000.
In extraordinary times, the economy may be close to non-linear phenomena such as a rapid deterioration of confidence among broad constituencies of households, enterprises, savers and investors. My understanding is that an overwhelming majority of industrial countries are now in those uncharted waters, where confidence is potentially at stake. Consolidation is a must in such circumstances.Paul wants evidence of sudden non-linearities. I have evidence for Paul, the crash of July, 2008. In mid-July, there was a sudden non-linear desire to quit driving cars with gas at $4.50. Since then the bond vigilantes have been carefully working with OPEC to manage our oil supplies so that bonds are protected.
It’s come to this: The Texas budget outlook has become so bleak that we’re comparing rather favorably to the one state where balanced budgeting goes to die.
People, our budget deficit is now as bad as California’s.
Yes, the over-spending, over-regulated capital of hippiedom now has a state fiscal outlook on par with the Lone Star State.
Gridlock may offer the best possible solution—the surpluses of the Clinton years came as Washington started arguing more and spending less—but if this sort of pandering and evasion is what the GOP has to offer, it’s probably worth asking: How long can you gripe about deficits without being willing to even talk about possible specific ways to reduce them? A number of Senate Republicans seem determined to help us find out.
Let the upper-income tax cuts expire on schedule at year end. That would save the government an estimated $75 billion over the next two years. However, it would also diminish aggregate demand a bit. So, instead of using the $75 billion to reduce the deficit, spend it on unemployment benefits, food stamps and the like for two years. That would surely put more spending into the economy than the tax hike takes out, thus creating jobs.For 30 years we have studied and reported on the effects of taxes on Congressional spending. We have a name for the theory, the law of supply and demand. When taxes increase, we will get less spending, you can bet me on that, say $100? I am open to terms.
The activity of new entrepreneurs plunged in the first half of 2010, falling to the lowest rate in more than two decades as more workers found employment or were driven away from start-ups by a feeble economy.
Start-up activity fell to an average 3.7% in the first two quarters of this year, down from 7.6% in the first half of 2009 and 9.6% in the second half, according to a survey of about 3,000 job seekers by global outplacement and executive coaching firm Challenger, Gray & Christmas, Inc. Many of those surveyed are former managers and executives.
The two charts show the percentage contribution of investment and government purchases to real GDP growth in the first quarter and in the preceding quarters since 2007. The charts clearly indicate that the changes in real GDP growth have been mostly due to changes in investment and little to changes in government purchases
Working with the US Department of Transportation, Lockheed Martin will refine and validate the requirements and architecture for the new IntelliDrive communications infrastructure, which will ultimately permit safety and traffic systems to communicate. This 15-month contract is valued at approximately US$2.6 million.Government is better off funding an Open Source consortium. Lockheed has zero experience with civilian wireless networks. They have likely already spent the $1.5 million and will plan on coming back for lots more, and little will result.
IntelliDrive is a multimodal initiative that aims to enable safe, interoperable networked wireless communications among vehicles, the infrastructure, and passengers’ personal communications devices.
“This program leverages our extensive experience in developing wireless network architectures,” said Jim Quinn, vice president with Lockheed Martin’s Information Systems and Global Solutions-Defense. “We look forward to helping the DOT establish a new vision of preventative vehicle safety and mobility within the United States.”
The Federal Highway Administration (FHWA) has a requirement for the development and production of aftermarket devices to use in vehicles for generating "Here I Am" messages to other vehicles and other devices. These devices will support vehicle to vehicle (V2V) and vehicle to infrastructure (V2I) safety communications capability. The devices will produce dedicated short range communications at 5.9 GHz.
And then [White House Chief of Staff] Rahm Emanuel said to me, "Geez, do you really think we can afford to come in with a package that big, isn’t it going to scare people?" I said, "Rahm, you will need that shock value so that people understand just how serious this problem is."Mass psychotherapy from Congressional politicians? No wonder multipliers are less than one. I doubt that Keynes ever consulted with a psychotherapist, which would be Freud in his later years during the 1930s. I suspect Freud would not have recommended shock, and I know it never works with cow herds.
Commenters frequently ask me what would be the point of higher inflation expectations. Doesn’t the rational expectations model imply that only unanticipated inflation has real effects? Yes and no. As far back as the late 1970s people like Fisher had already shown that in a new Keynesian ratex model with sticky prices, monetary policy could still influence real variables. For this to happen, the monetary shock must occur after some wage or price decisions have already been made, but before those wages and prices are scheduled to be re-adjusted.
Taking the Driver Out of the Car
Why robocars, and not high-speed rail, could revolutionize transportation in the next decade
By RANDAL O'TOOLE
'Your grandchildren will snap across the entire continent in 24 hours on a new kind of highway and in a new kind of driverless car that is controlled by the push of a button," futurist Norman Bel Geddes promised in 1940. Mr. Bel Geddes designed Futurama, the most popular exhibit at the 1939 New York World's Fair, which in many ways inspired the construction of the Interstate Highway System.
Driverless cars have so far remained the stuff of science fiction. Seventy years after Mr. Bel Geddes's promise, they are finally close to reality.
Consumers today can buy cars that steer themselves; accelerate and brake to maintain a safe driving distance from cars ahead; and detect and avoid collisions with other cars on all sides. Making them completely driverless will involve little more than a software upgrade.
Yet the potential for advanced personal mobility is being ignored in debates over surface transportation. These debates come to a head every six years, when Congress hashes out how to spend federal gas tax revenues. Congress has increasingly diverted the funds—$40 billion a year by last count—from highways to transit.
The Obama administration and House Transportation Committee Chairman James Oberstar (D., Minn.) want to go even further in the next reauthorization, now scheduled for 2011. The administration has focused on a new national high-speed rail system, as well as streetcars, light rail and other projects, to reduce driving and congestion.
Yet driverless cars could render the hand-wringing over roads versus rail needless. Driverless technologies were demonstrated in 1997 on a California freeway when eight cars without drivers successfully operated just one car length apart at 65 miles per hour. In 2007, six cars negotiated the Defense Advanced Research Projects Agency Urban Challenge, following all traffic rules in an urban environment with other vehicles.
Volkswagen says enhanced global positioning systems can keep cars within two centimeters of their desired location on streets and highways. This summer, the company will demonstrate its technology by running a driverless Audi at racing speeds up the twisty Pikes Peak road.
At the 2007 event, General Motors vice president of research Lawrence Burns predicted that completely driverless cars would be on the market by 2018. He added that the primary obstacles were legal and bureaucratic, not technological.
Driverless vehicles offer huge advantages over current autos. Because computer reaction times are faster, driverless cars can safely operate more closely together, potentially tripling highway throughput. This will virtually eliminate congestion and reduce the need for new road construction.
Toyota's recent recalls naturally lead to worries that computer glitches could cause serious accidents. Since each car will be independently controlled, a failure in one would simply lead others to avoid that car. Modern cars already have numerous built-in computers that do things, such as anti-lock braking, far more reliably than humans, even those who are not texting or inebriated. Any serious problems could be quickly corrected through wireless software upgrades.
Driverless cars and trucks will be safer. They will also be greener, first by significantly reducing congestion, and eventually because vehicles will be lighter in weight due to reduced collision risks.
Perhaps most important, driverless vehicles will bring mobility to everyone, not just those able to pass a driver's test. While many people will still choose to own a car, increased numbers may rely on car sharing. Outside of ultra-high-density areas such as Manhattan, driverless cars will render urban transit and intercity passenger trains even more obsolete than they are today.
The American automobile fleet turns over every 18 years, so if Mr. Burns's prediction that driverless cars will hit the market by 2018 comes true, we could have a completely driverless system by 2036. State highway officials could accelerate this timetable by working with auto manufacturers to set standards and a transition path. State and local highway agencies could install wireless communication systems at major intersections and highways—a much less costly undertaking than building new roads, much less high-speed rail.
A 2007 report by the planning council estimated the Chicago region loses $7.3 billion a year in wasted time, fuel and environmental damage. The report also found that Chicago-area drivers spend an average of 2 1/2 days stuck in traffic each year.
Truckers on the Illinois Tollway already use congestion pricing because they get a discount for traveling during off-peak hours.
