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This was written 10 years ago when they were on the right track:

Finance and Economics Discussion Series

by Darrel S. Cohen and Glenn R. Follette

(Fed) — Abstract: This paper presents theoretical and empirical analysis of automatic fiscal stabilizers, such as the income tax and unemployment insurance benefits. Using the modern theory of consumption behavior, we identify several channels–insurance effects, wealth effects and liquidity constraints- -through which the optimal reaction of household consumption plans to aggregate income shocks is tempered by the automatic fiscal stabilizers. In addition we identify a cash flow channel for investment. The empirical importance of automatic stabilizers is addressed in several ways. We estimate elasticities of the various federal taxes with respect to their tax bases and responses of certain components of federal spending to changes in the unemployment rate. Such estimates are useful for analysts who forecast federal revenues and spending; the estimates also allow high- employment or cyclically-adjusted federal tax receipts and expenditures to be estimated. Using frequency domain techniques, we confirm that the relationships found in the time domain are strong at the business cycle frequencies. Using the FRB/US macro-econometric model of the United States economy, the automatic fiscal stabilizers are found to play a modest role at damping the short-run effect of aggregate demand shocks on real GDP, reducing the “multiplier” by about 10 percent. Very little stabilization is provided in the case of an aggregate supply shock.

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I like this line from Bill Black:

“These Democrats want to maintain America’s pre-eminence in global financial capitalism at any cost.”

Yes, they think it important for some measurement of ‘power’ that has nothing to do with our real standard of living. Like pyramid building or something like that.

I do think with net interest margins now north of 4% (thanks to government policy) and GDP stabilizing due to deficits in excess of 6% of GDP, and more fiscal on the way, the banks can now earn their way out of just about anything.

All they need is a year or two of very modest GDP growth. And it doesn’t bother me a bit that the legacy issues and past frauds might keep their net earnings depressed during that recovery time.

What does bother me is that it seems nothing has been done to remedy the fundamental flaws that support the ‘more trouble than it’s worth’ financial sector.

These include tax advantaged ‘savings’ incentives including pension rules, ira’s, corporate reserves, etc. as well as laws that support and enforce the trading of financial instruments.

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• MBA Mortgage Applications (Released 7:00 EST)
• MBA Purchasing Applications (Released 7:00 EST)
• MBA Refinancing Applications (Released 7:00 EST)
• Consumer Price Index MoM (Released 8:30 EST)
• CPI Ex Food and Energy MoM (Released 8:30 EST)
• Consumer Price Index YoY (Released 8:30 EST)
• CPI Ex Food and Energy YoY (Released 8:30 EST)
• CPI Core Index SA (Released 8:30 EST)
• Consumer Price Index NSA (Released 8:30 EST)
• Empire State Manufacturing Survey (Released 8:30 EST)
• Empire State Manufacturing Survey ALLX 1 (Released 8:30 EST)
• Empire State Manufacturing Survey ALLX 2 (Released 8:30 EST)
• Net Long Term TIC Flows (Released 9:00 EST)
• Total Net TIC Flows (Released 9:00 EST)
• Industrial Production MoM (Released 9:15 EST)
• Industrial Production YoY (Released 9:15 EST)
• Capacity Utilization (Released 9:15 EST)
• Capacity Utilization TABLE 1 (Released 9:15 EST)
• Capacity Utilization TABLE 2 (Released 9:15 EST)
• Capacity Utilization TABLE 3 (Released 9:15 EST)
• NAHB Housing Market Index (Released 13:00 EST)
• NAHB Housing Market Index TABLE 1 (Released 13:00 EST)
• NAHB Housing Market Index TABLE 2 (Released 13:00 EST)

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MBA Mortgage Applications (Apr 10)

Survey	n/a
Actual	-11.0%
Prior	4.7%
Revised	n/a

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MBA Purchasing Applications (Apr 10)

Survey	n/a
Actual	264.10
Prior	297.70
Revised	n/a

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MBA Refinancing Applications (Apr 10)

Survey	n/a
Actual	6071.70
Prior	6813.50
Revised	n/a

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Consumer Price Index MoM (Mar )

Survey	0.1%
Actual	-0.1%
Prior	0.4%
Revised	n/a

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CPI Ex Food and Energy MoM (Mar)

Survey	0.1%
Actual	0.2%
Prior	0.2%
Revised	n/a

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Consumer Price Index YoY (Mar)

Survey	-0.1%
Actual	-0.4%
Prior	0.2%
Revised	n/a

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CPI Ex Food and Energy YoY (Mar)

Survey	1.7%
Actual	1.8%
Prior	1.8%
Revised	n/a

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CPI Core Index SA (Mar)

Survey	n/a
Actual	218.042
Prior	217.670
Revised	n/a

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Consumer Price Index NSA (Mar)

Survey	212.900
Actual	212.709
Prior	212.193
Revised	n/a

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Empire State Manufacturing Survey (Apr)

Survey	-35.00
Actual	-14.65
Prior	-38.23
Revised	n/a

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Empire State Manufacturing Survey ALLX 1 (Apr)

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Empire State Manufacturing Survey ALLX 2 (Apr)

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Net Long Term TIC Flows (Feb)

Survey	$14.0B
Actual	$22.0B
Prior	-$43.0B
Revised	-$36.8B

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Total Net TIC Flows (Feb)

Survey	n/a
Actual	-$97.0B
Prior	-$148.9B
Revised	-$146.8B

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Industrial Production MoM (Mar)

Survey	-0.9%
Actual	-1.5%
Prior	-1.4%
Revised	-1.5%

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Industrial Production YoY (Mar)

Survey	n/a
Actual	-12.8%
Prior	-11.8%
Revised	n/a

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Capacity Utilization (Mar)

Survey	69.6%
Actual	69.3%
Prior	70.9%
Revised	70.3%

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Capacity Utilization TABLE 1 (Mar)

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Capacity Utilization TABLE 2 (Mar)

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Capacity Utilization TABLE 3 (Mar)

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NAHB Housing Market Index (Apr)

Survey	10
Actual	14
Prior	9
Revised	n/a

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NAHB Housing Market Index TABLE 1 (Mar)

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NAHB Housing Market Index TABLE 2 (Mar)

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