Tuesday, October 4, 2011

New security screening program starts at four airports

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The Transportation Security Administration on Tuesday began testing a program to allow prescreened travelers to zip through special checkpoint lanes at four U.S. airports.

Under the pilot program, dubbed TSA PreCheck, travelers who register by voluntarily providing background information can avoid the crowded checkpoints and instead use faster security lanes at the participating airports.

The program is part of the TSA's effort to break away from a security process that treats all travelers as if they pose the same risk.

"As TSA moves further away from a one-size-fits-all approach, our ultimate goal is to provide the most effective security in the most efficient way possible," TSA administrator John S. Pistole said.

If the program is successful, he said it will be expanded to other airports.

The change in tactics has been advocated by the U.S. Travel Assn. and other tourism trade groups and businesses who say the current security process deters foreign and domestic travelers from flying.

For now, the pilot program is operating only at Hartsfield-Jackson Atlanta International, Detroit Metropolitan Wayne County, Dallas/Fort Worth International and Miami International airports. Eligible travelers include frequent fliers from American Airlines and Delta Air Lines, as well as international travelers who have preregistered with the U.S. Customs and Border Protection.

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-- Hugo Martin

Photo: TSA officials demonstrate body-scanning machines used at checkpoints at Los Angeles International Airport. Credit: Los Angeles Times.

Stocks recover from early bear-market plunge

Ben S. Bernanke's suggestion that the Federal Reserve could take further measures to help the economy helped stocks recover from an early-morning plunge.

In early trading the broad Standard & Poor's 500 index fell into bear-market territory, which is defined as a 20% drop from the recent highs reached in late April. By midday the S&P 500 had recovered most of its losses for the day and was hovering just above the bear-market threshold, 1090.89. The index was recently trading down 4.49 points or 0.4%, at 1094.74.

The Dow Jones industrial average saw less recovery from the early-morning drop, and was recently trading down 107.50 or 1.0%, at 10547.80.

The declines come a day after U.S. stocks closed at their lowest levels in a year.

Stocks fell early Tuesday after European finance ministers indicated that they may be preparing to restructure a Greek bailout plan and force investors to take bigger losses. Leading indexes finished the day down 3.0% in Germany and 2.6% in England.

Just as the trading day in Europe was drawing to a close, Bernanke, chairman of the Fed, testified before Congress that the central bank "is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability."

Bernanke warned Congress that its efforts to cut government budgets too quickly could worsen the economic situation.

The comments did not help gold, which is continuing its recent slide downward, falling 2.3% to $1,670 an ounce at midday.

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For investors, third quarter was one to forget -- if only we could

-- Nathaniel Popper

twitter.com/nathanielpopper

Falling stocks bring S&P 500 into bear market

Bear - national geo
The bear has arrived.

As markets around the world fell Tuesday on fears about the European financial crisis, the broad Standard & Poor's 500 index entered into bear market territory, which is defined as a 20% drop from recent highs.

The index was trading down 19.59 points, or 1.8%, to 1076.98 this morning. That is 21% below the closing price reached at the market's peak this year in April.

The Dow Jones industrial average fell even more sharply Tuesday morning, though it is has not dropped as steeply for the year. It was recently trading down 244.64 points, or 2.3%, to 10,410.70.

The declines come a day after U.S. stocks closed at their lowest levels in a year.

U.S. markets followed European indexes, which fell 4.1% in Germany and 3.7% in England after European financial ministers meeting in Luxembourg indicated that a recently crafted bailout plan for Greece may have to be restructured.

The fear drove down near all assets, including oil and gold. U.S. Treasury bonds once again provided one of the only safe havens for investors; the yield on the 10-year government bond was down to 1.76% from 1.78% Monday.

-- Nathaniel Popper

twitter.com/nathanielpopper

Wall Street: Stocks mixed, gold down

Wall Street 
Gold: Trading now at $1,642 an ounce, down 1.0% from Monday. Dow Jones industrial average: Trading now at 10,499.70, down 1.5% from Monday.

Mixing it up. After two days of declines, stocks were wavering this morning on encouraging words from Fed chief Ben Bernanke and discouraging words from European finance ministers.

Trimming the luxury. Employees at Barclays' investment bank are having to cut back on business-class flights and free meals as part of the company's cost-cutting measures.

Political gold. As politics plays a bigger role in determining the direction of stocks, hedge funds are paying big money to get intelligence from Washington.

UBS still in the black. Even with $2.3 billion in losses from its rogue trader, Swiss bank UBS is planning to post a modest profit in the third quarter.

Defending Morgan Stanley. Morgan Stanley's CEO sent a memo to his employees defending the bank, as investors made a run on its stock.

Second careers. As the NBA lockout stretches on, Philadelphia 76ers guard Andre Iguodala is using the time off to do a brief internship at Bank of America that has taken him to the floor of the New York Stock Exchange.

Love at a protest. A Wall Street protester arrested over the weekend has taken to Craigslist to find a cute fellow protester who he'd just met before being hauled off.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Bernanke warns Congress against deep budget cuts in weak economy

Fed Chairman Ben Bernanke
Federal Reserve Chairman Ben S. Bernanke warned lawmakers Tuesday against cutting the budget too sharply with the U.S. economy still weak and facing new stresses from the European debt crisis.

And the central bank chief expressed some empathy with protesters who have marched on Wall Street and in other cities in recent days complaining of the role of big financial institutions in creating the current economic mess.

"Very generally I think people are quite unhappy with the state of the economy and what’s happening. They blame, with some justification, the problems in the financial sector for getting us into this mess and they're dissatisfied with the policy response here in Washington," Bernanke told Congress' Joint Economic Committee.

"On some level I can’t blame them," he said. "Like everyone else, I’m dissatisfied with what the economy is doing right now."

Bernanke noted the difficulty for Congress to rein in the long-term federal budget deficit while trying "to avoid fiscal actions that could impede the ongoing economic recovery."

But he said that one factor weighing down the U.S. recovery is "the increasing drag" from cutbacks in government spending.

"Notably, state and local governments continue to tighten their belts by cutting spending and employment in the face of ongoing budgetary pressures, while the future course of federal fiscal policies remains quite uncertain," Bernanke told the committee.

He admitted that addressing the long-term budget deficit without further hindering the weak recovery is "a complex situation." And he had unusually sharp words for the bitter debate over raising the U.S. debt ceiling this summer, which led Standard & Poor's to downgrade the nation's credit rating and also hurt market confidence.

Misrepresentations, Regulations and Jobs

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.

Republicans have a problem. People are increasingly concerned about unemployment, but Republicans have nothing to offer them. The G.O.P. opposes additional government spending for jobs programs and, in fact, favors big cuts in spending that would be likely to lead to further layoffs at all levels of government.

Today’s Economist

Perspectives from expert contributors.

Republicans favor tax cuts for the wealthy and corporations, but these had no stimulative effect during the George W. Bush administration and there is no reason to believe that more of them will have any today. And the Republicans’ oft-stated concern for the deficit makes tax cuts a hard sell.

Perspectives from expert contributors.

These constraints have led Republicans to embrace the idea that government regulation is the principal factor holding back employment. They assert that Barack Obama has unleashed a tidal wave of new regulations, which has created uncertainty among businesses and prevents them from investing and hiring.

No hard evidence is offered for this claim; it is simply asserted as self-evident and repeated endlessly throughout the conservative echo chamber.

On Aug. 29, the House majority leader, Eric Cantor of Virginia, sent a memorandum to members of the House Republican Conference, telling them to make the repeal of job-destroying regulations the key point in the Republican jobs agenda.

“By pursuing a steady repeal of job-destroying regulations, we can help lift the cloud of uncertainty hanging over small and large employers alike, empowering them to hire more workers,” Mr. Cantor said.

Evidence supporting Mr. Cantor’s contention that deregulation would increase unemployment is very weak. For some years, the Bureau of Labor Statistics has had a program that tracks mass layoffs. In 2007, the program was expanded, and businesses were asked their reasons for laying off workers. Among the reasons offered was “government regulations/intervention.” There is only partial data for 2007, but we have data since then through the second quarter of this year.

The table below presents the bureau’s data. As one can see, the number of layoffs nationwide caused by government regulation is minuscule and shows no evidence of getting worse during the Obama administration. Lack of demand for business products and services is vastly more important.

These results are supported by surveys. During June and July, Small Business Majority asked 1,257 small-business owners to name the two biggest problems they face. Only 13 percent listed government regulation as one of them. Almost half said their biggest problem was uncertainty about the future course of the economy — another way of saying a lack of customers and sales.

The Wall Street Journal’s July survey of business economists found, “The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists.”

In August, McClatchy Newspapers canvassed small businesses, asking them if regulation was a big problem. It could find no evidence that this was the case.

“None of the business owners complained about regulation in their particular industries, and most seemed to welcome it,” McClatchy reported. “Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-9 and its grim aftermath.”

The latest monthly survey of its members by the National Federation of Independent Business shows that poor sales are far and away their biggest problem. While concerns about regulation have risen during the Obama administration, they are about the same now as they were during Ronald Reagan’s administration, according to an analysis of the federation’s data by the Economic Policy Institute.

Academic research has also failed to find evidence that regulation is a significant factor in unemployment. In a blog post on Sept. 5, Jay Livingston, a sociologist at Montclair State University, hypothesized that if regulation were a major problem it would show up in the unemployment rates of industries where regulation has been increasing: the financial sector, medical care and mining/fuel extraction. He found that unemployment rates in these sectors were actually well below the national average. Unemployment is much higher in those industries that one would expect to suffer most from a lack of aggregate demand: construction, leisure and hospitality, business services, wholesale and retail trade, and durable goods.

Gary Burtless, an economist at the Brookings Institution, asserts that if businesses were really concerned about rising regulations, they would be investing now to avoid them. But there is no indication that this is the case. “The real reason for anemic investment and hiring is that businesses are not confident there will be enough potential customers to justify expansion or even routine capital replacement right now,” he says.

In my opinion, regulatory uncertainty is a canard invented by Republicans that allows them to use current economic problems to pursue an agenda supported by the business community year in and year out. In other words, it is a simple case of political opportunism, not a serious effort to deal with high unemployment.

China lashes out against U.S. bill aimed at currency manipulators

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China on Tuesday blasted a proposed U.S. bill that would punish countries for undervaluing their currency by saying it would undermine the global economy and potentially lead to a trade war.

China’s central bank and ministries of commerce and foreign affairs released separate statements criticizing the bill, which is being championed by Democratic lawmakers who hope to protect U.S. jobs by slapping tariffs on Chinese imports.

Such a move “seriously violates rules of the World Trade Organization and obstructs China-U.S. trade ties,” said Foreign Ministry spokesman Ma Zhaoxu in a statement posted on the Chinese government’s official website.

China’s central bank said the attention given to China’s currency, known as the yuan or renmenbi, deflects Washington from the real issues plaguing the American economy.

“The yuan bill passed by the U.S. senate will not solve its problems, such as insufficient savings, high trade deficit and high unemployment rate, but it may seriously affect the whole progress of China's reform of its yuan exchange rate regime and may also lead to a trade war which we would not like to see,” the bank said on its website, according to a translation by Reuters.

The yuan’s value is set daily by China’s central bank, not by free markets. Critics of China’s currency policy contend the yuan is undervalued by as much as 40% to give the world’s second largest economy an unfair trade advantage.

Labor advocacy groups in the U.S. such as the Economic Policy Institute say this has fueled a trade deficit with China that has cost Americans 2.8 million jobs between 2001 and 2010.

Debate still rages over whether targeting China’s currency will return jobs to the U.S. as manufacturing could shift to another low wage country such as Vietnam.

The yuan has edged-up about 10% against the dollar since it was de-pegged from the greenback in June, 2010. Experts say the central bank is in favor of faster appreciation to combat inflation, which is running at a three-year high. A stronger yuan would make imports cheaper.

But the Ministry of Commerce, which oversees trade, and officials in coastal manufacturing provinces are against more aggressive appreciation for fear it will bankrupt factories, sap taxes and leave millions out of work.

RELATED:

Bill targeting trade deficit would tax imports from China

Passage of South Korea, Colombia, Panama trade pacts is expected

China rejects U.S. complaint against chicken tariffs

--David Pierson  

Twitter.com/dhpierson

Photo: China blasted a proposed U.S. bill that would slap tariffs on countries that undervalued their currency. Above, a bank clerk counts notes. Credit: Zhong Min / EPA

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