Felix Ortiz, D-Brooklyn, wants to ban the use of salt in restaurants.

“No owner or operator of a restaurant in this state shall use salt in any form in the preparation of any food for consumption by customers of such restaurant, including food prepared to be consumed on the premises of such restaurant or off of such premises,” the bill, A. 10129 , states in part.

But, is salt necessary for some cooking? Yes.

Salt is probably the most important seasoning in cooking. On its own, or when used to deliberately make something taste salty, salt’s flavor is quite distinct. But salt can also enhance the flavors of other ingredients without calling attention to itself. A light seasoning with salt can bring out flavor, smooth out bitterness, and make foods taste not salty, but more like themselves.

Salt also affects the way foods look and smell. Salt will help to preserve the green color in cooked vegetables when added to the cooking water. It has the same effect on cauliflower, keeping it from yellowing. Salt intensifies aromas, making them more apparent.

Pickling salt is used to enhance the flavor of pickles. It is simply table salt without the additives that can turn a pickling liquid cloudy. If you can’t find it, you can use table salt or sea salt, as long as it doesn’t have any additives.

Adding a pinch of salt to eggs is standard culinary practice, because the chemical reaction of salt with the fats and emulsifiers causes the egg to break down and smooth out quickly, making it more apt to combine with other ingredients.

Salt is an important ingredient in bread making. It adds taste, and inhibits yeast production, thus preserving the bread. It also contributes to the texture, having a toughening effect on gluten. However, salt, being a yeast inhibitor should never be added directly to the dissolved yeast.

Salt is an important ingredient in marinades. It draws the water out of the food being marinated, helping to concentrate the flavor of the food.

In other words, you will no longer be able to eat fresh baked bread in your favorite restaurant. No more pizza dough where the dough is made on the premises. The vegetables will look less appealing as well. And taste will likely be adversely impacted and I’m willing to bet that the typical response by most people will be to…add salt.

This article demonstrates what a blithering idiot Ortiz is, by the way, in Ortiz’ case does the D stand for Dimwit? If I were a Democrat I’d want this guy booted from the party.

Ortiz admits that prior to introducing the bill he did not research salt’s role in food chemistry, its effect on flavor or his bill’s ramifications for the restaurant industry. He tells me he was prompted to introduce the bill because his father used salt excessively for many years, developed high blood pressure and had a heart attack.

“I think salt should be banned in restaurants. I ask if a dish has salt in it, and if I does, I get something else that doesn’t have salt,” Ortiz tells me, before going on to say that he has eaten, and expects he will continue to eat, among other things, ham, cheese and bread in restaurants, all of which contain salt.

How about baking soda or baking powder? Those are types of salt, unless I’m mistaken. And what about MSG, no more Chinese restaurants either.

“That [bill is] insane,” says Christopher Allen Tanner, a culinary professor at Schenectady County Community College in Schenectady. “You can’t make hams without salt, you can’t make bacon without salt,” he tells me. “There would be no pickles, no relishes, no — no just about everything.”

In what seems an annual exercise, the Postal Service is complaining about resources and proposing to end Saturday mail service.

Customers are continuing to migrate to the Internet and to cheaper standard-mail options, and away from the Postal Service’s signature product — first-class mail, Postmaster General John E. Potter will report in announcing the projections.

The Postal Service experienced a 13 percent drop in mail volume last fiscal year, more than double any previous decline, and lost $3.8 billion. The projections anticipate steeper drops in mail volume and revenue over the next 10 years, and mounting labor costs only complicate the agency’s path to firm fiscal footing.

In an effort to offset some of the losses, Potter seeks more flexibility in the coming year to set delivery schedules, prices and labor costs. The changes could mean an end to Saturday deliveries, longer delivery times for letters and packages, higher postage-stamp prices that exceed the rate of inflation, and the potential for future layoffs.
The U.S. Postal Service will release projections Tuesday that confirm for the first time the suspicion that mail volume will never return to pre-recession levels. In response, the agency is pushing anew for a dramatic reshaping of how Americans get and send their letters and packages.

The irony of course is that people are increasingly accepting of the possibility of losing Saturday mail delivery precisely because of the obsolescence of regular mail.  That is, if you absolutely, positively need it overnight, you don’t mail it.  So, for the most part, all that comes on Saturday is junk mail and sundry other crap that can wait for Monday.

Potter has a more fundamental problem, in that what remains of his “business” is what used to be its loss leader. First Class mail was highly subsidized by package delivery and other functions that are increasingly performed by private competitors or by the Internet, facsimile, and other technologies.  While a First Class stamp may well cover the cost of sending your check to the cable company across town, it’s ludicrously cheap for sending something from small town Georgia to small town Alaska.

Haiti suffered much more devastation from its recent earthquake than Chile did over the weekend from a far more powerful earthquake. Jonathan Franklin and Jeffrey Smith report for WaPo:

While the death toll rose steadily to more than 700, according to a midday estimate, it remained a small fraction of the tally from a far less powerful earthquake last month in Haiti that claimed at least 220,000 lives. That temblor was more shallow and much closer to a large population center, the Haitian capital, Port-au-Prince. But the deaths there were mostly because of widespread building collapses, which Chilean cities did not experience.

Earthquake scientists, building engineers and political scientists in Chile and the United States agreed that even though half a million homes were heavily damaged during more than 120 seconds of shaking, the fact that so many Chileans survived was a testament to the nation’s enactment and enforcement of stringent building codes.

Matt Yglesias says this just goes to show that effective government matters.  He concludes that, contrary to the views of strawmen on the right,  “Effective and well-enforced building codes in an earthquake zone can save many lives, and the same is true across an extremely wide swathe of public activities.”

First off, not many of us doubt this.  The quibbling about more regulations is on 1) whether they’re worth the tradeoffs in liberty, economic productivity, or whathaveyou and 2) whether they should be done at the federal or the local level.   But only extremists think caveat emptor should rule the day on construction of houses and skyscrapers.

Second, as noted in the piece –and quoted by Matt — the Haiti quake “was more shallow and much closer to a large population center.”

Third, as we see from the very next paragraph of the WaPo report, there’s a reason that Haiti and Chile have different building codes.

“Unlike in Haiti, people think about earthquakes all the time in Chile. It’s in their mind,” said Michael Shifter, vice president for policy at the Inter-American Dialogue think tank in Washington. “This is a country that can mobilize resources and meet these national challenges.”

Chile has relatively low levels of corruption, making enforcement of building codes more credible than in other Latin American countries; its rank on Transparency International’s Corruption Perceptions Index is 25, just six spots below the United States, while Haiti’s is 168.

So, Chile is better equipped to handle earthquakes than Haiti for the same reason that Boston is more prepared for heavy snowfall than Washington, DC.

Oh, and there’s another factor in the relative construction quality of the two countries:  Chile is a relatively wealthy society while Haiti is among the world’s poorest.  Haiti’s per capita GDP is something like $772 a year while Chile’s is $8853, according to 2009 figures from the IMF.   It’s hardly a shocker that the latter would have safer buildings.

To be sure, increased regulation is part and parcel of modernity and progress.   While overregulation can stifle competitiveness, too little leads to distrust.  But Haiti is simply not in a position to regulate its way to safer buildings until it first achieves a radical improvement in its economic quality of life.

UPDATE: Dave Schuler makes an excellent point in the comments:

Let’s add the 2008 Chinese earthquake into the mix. It was stronger than the Haitian earthquake but nothing like as strong as the Chilean earthquake. Nearly 70,000 people died by official count (it might have been a lot more). Building codes? Check. Effective? Obviously not. But the authorities clearly thought they were.

My take would be that government that doesn’t really give a good goddam about ordinary citizens was part of the problem both in Haiti and in China.

Quite.

Ladies and Gentlemen, the ATF has made a gigantic leap forward in the field of making sure adorable blonde moppets can’t shoot their eye out.

A local business owner is flabbergasted after a shipment of 30 toy guns for his store was confiscated by ATF agents in Tacoma.

Brad Martin and his son, Ben, sell the Airsoft BB guns from their store in Cornelius where they’ve been in business for seven years.

The Martins said they buy their stock from Taiwan because the merchandise is less expensive. But the Bureau of Alcohol, Tobacco, Firearms and Explosives seized a shipment of 30 in October. That shipment is worth around $12,000 and the ATF is promising to destroy the entire shipment.

I feel safer already, don’t you? After all, who knows who might have been hurt by these things if some enterprising young felon had gotten their hands on one of these!

Special Agent Kelvin Crenshaw said the toys can be easily retro-fitted into dangerous weapons.

“With minimal work it could be converted to a machine gun,” Crenshaw said.

I’m not the world’s biggest gun expert, but I’m fairly certain that you can’t convert a BB gun into a machine gun. Maybe, with some effort, you could convert one to fire small caliber rounds (I doubt more than a .22), but it would almost certainly be a single shot weapon. But a machine gun? There’s no way that the internal structure of a BB gun would be strong enough to handle that rate of fire.

But even if this absurd premise is true, I can’t think of a legal justification for this seizure off the top of my head. It’s possible, after all, to convert certain semi-automatic rifles to be fully automatic if you know what you’re doing, but you can buy and sell them legally. On the face of it, this looks like a nonsense seizure and if that’s true I hope that the Martins get their property back.

h/t Radley Balko

In my discussion with Dave Schuler on the hearings about Toyota safety issues on last night’s episode of OTB Radio, I noted in passing my concern that Congress has a conflict of interest now that the federal government is effectively the owner of General Motors and Chrysler — direct competitors with Toyota.

PJM’s Tom Blumer (via Insty) seems to be taking this to conspiratorial levels, seeing an “orchestrated campaign against Toyota,” an “unsettling series of events,” and expressing “hope that the folks at Toyota fully appreciate the ugliness they’re up against.”   It’s not precisely clear, though, what he’s charging.

I don’t think Congress is trying to drive Toyota out of business nor do I get any sense that anything in particular untoward is going on under the circumstances.

I am, nonetheless, uncomfortable with the federal government being in a position of competing with a private firm and also publicly investigating said firm in a way that’s clearly driving down the value of its brand and, ultimately, its market share.   That was one of many reasons I opposed the bailout of GM and Chrysler and, in particular, the government taking effective ownership.

Here is a public service announcement to all police departments, when you find guys like this in your ranks it is probably a better idea to kick them from your ranks and throw the book at them, legally speaking. Protecting them just gets their stink on you.

FAIRMONT — A Marion County sheriff’s deputy accused of sending sexual text messages to a 17-year-old girl, was back in court Thursday.

Cpl. Joseph McKinney pleaded guilty to four counts of indecent exposure.

He was sentenced to 12 months in the regional jail for each count, to be served consecutively.

Judge David Janes then suspended the sentence and placed McKinney on supervised probation for four years.

He was also required to resign from the sheriff’s department.

McKinney worked for the department for 11 years.

And just to be clear, if it was another 17 year old or a non-LEO adult sexting with this girl, he’d likely be charge with child pornography and/or indecent exposure, and wind up looking at jail time and time on the sex offender registry. There really are two Americas when it comes to the law. One for us peasants and one for the Law Enforcement Officers.

Tracking cell phones is now something the Obama administration wants to do.

Even though police are tapping into the locations of mobile phones thousands of times a year, the legal ground rules remain unclear, and federal privacy laws written a generation ago are ambiguous at best. On Friday, the first federal appeals court to consider the topic will hear oral arguments (PDF) in a case that could establish new standards for locating wireless devices.

In that case, the Obama administration has argued that warrantless tracking is permitted because Americans enjoy no “reasonable expectation of privacy” in their–or at least their cell phones’–whereabouts. U.S. Department of Justice lawyers say that “a customer’s Fourth Amendment rights are not violated when the phone company reveals to the government its own records” that show where a mobile device placed and received calls.

Those claims have alarmed the ACLU and other civil liberties groups, which have opposed the Justice Department’s request and plan to tell the U.S. Third Circuit Court of Appeals in Philadelphia that Americans’ privacy deserves more protection and judicial oversight than what the administration has proposed.

“This is a critical question for privacy in the 21st century,” says Kevin Bankston, an attorney at the Electronic Frontier Foundation who will be arguing on Friday. “If the courts do side with the government, that means that everywhere we go, in the real world and online, will be an open book to the government unprotected by the Fourth Amendment.”

Well cool, if the Obama Adminsitration has its way they will know where you are so long as you have your cell phone with you. Isn’t that nice to know that your big brother is monitoring your where abouts at all times? Next up, remote activation of your cell phones video capabilities to make sure you aren’t doing something you shouldn’t be doing. Wish I were kidding with that last one, but I wouldn’t be surprised to find out that some people actually think this way.

Like Ezra Klein, I was surprised to read that “one in eight Americans” are now getting food stamps.

But, reading Jason Deparle and Robert Gebeldoff’s feature, it’s not hard to see why:  We’re actively recruiting people to sign up!

A decade ago, New York City officials were so reluctant to give out food stamps, they made people register one day and return the next just to get an application. The welfare commissioner said the program caused dependency and the poor were “better off” without it.

Now the city urges the needy to seek aid (in languages from Albanian to Yiddish). Neighborhood groups recruit clients at churches and grocery stores, with materials that all but proclaim a civic duty to apply — to “help New York farmers, grocers, and businesses.” There is even a program on Rikers Island to enroll inmates leaving the jail.

“Applying for food stamps is easier than ever,” city posters say.

[...]

But support also turned on chance developments, including natural disasters (which showed the program’s value in emergencies) and the rise of plastic benefit cards (which eased stigma and fraud). The program has commercial allies, in farmers and grocery stores, and it got an unexpected boost from President George W. Bush, whose food stamp administrator, Eric Bost, proved an ardent supporter.

[...]

States eased limits on people with cars and required fewer office visits from people with jobs. The federal government now gives bonuses to states that enroll the most eligible people.

A self-reinforcing cycle kicked in: outreach attracted more workers, and workers built support for outreach. In a given month, nearly 90 percent of food stamp recipients still have incomes below the federal poverty line, according to the Department of Agriculture. But among families with children, the share working rose to 47 percent in 2008, from 26 percent in the mid-1990s, and the share getting cash welfare fell by two-thirds.

I’m of mixed minds on all this.  We should help the working poor — and their children — get enough to eat.  Ditto those too disabled to work and provide for themselves.   De-stigmatizing aid to such people — and even reaching out to make sure they know help’s available — makes sense.

But, rather clearly, we’ve taken this to absurd levels, creating a self-licking ice cream cone in which the program’s main focus is on expanding the program.   Do we really need to be providing food stamps to able-bodied college graduates who are Americorps volunteers?   Or, indeed, if we think Americorps is so valuable, why not provide a stipend so its “volunteers” can afford to feed themselves rather than treating them as indigents?

This is a classic case where good intentions and rent seeking collide.  We want to help the poor.  And we’re doing it through a mechanism that’s good for local farmers, local grocery stores, and the local economy.  And paying for it with federal money!

UPDATE:   Frequent commenter UlyssesUnbound, himself a former Americorps volunteer, offers a detailed response, including this justification:

Americorps VISTA (the only program I have experience with) is a program designed to reduce poverty. The idea is that to reduce poverty, you have to understand poverty. To understand poverty, you have to live it. That includes doing things like living in low-income housing, or using food stamps. You find out what its like to rely on assistance for sustenance, the stigma that is associated with it, and you learn firsthand why it is important to ensure that people lift themselves out if it.

I’m not sure I buy the soundness of this reasoning but it’s interesting.

Arnold Kling has a post on the temper tantrums some progressives have been throwing and here is the concluding comments,

The important point is that Progressives are never wrong. Top-down reform is the only way to fix the health care system. Anthropogenic global warming is scientifically proven, and its solution requires strenuous exercise of political control over individual behavior. Deficit spending is necessary and sufficient to create jobs. Technocrats can make banks too regulated to fail. Markets without technocratic control are like adolescents without adult supervision. Individual happiness can be improved by political authorities using scientific knowledge. Concentrated political power is the wave of the future, and it is good.

I am not a populist. I fear the mob. But how can I fear the Progressives any less?

University of Chicago Professor John Cochrane explains the causes of the financial panic and how two mistakes turned what might have been a mild recession into a deep recession.

The short form is:

• Failure to bailout Lehman Brothers after bailing out (or at least appearing to) Bear Stearns.
• The chaos surrounding the TARP legislation.

Cochrane points out that the bankruptcy of Lehman was nothing special in an of itself. Many of Lehman’s operations were back up and running within days under new owners. Overall, it was unremarkable save for a few glitches here and there. What was really problematic though was that initially the government had signalled that it would bailout large financial entities under the “too big to fail” belief. Then when Lehman indicated it was in trouble the government not only didn’t act, it claimed it didn’t have the legal authority to act. Basically the belief that the government saw large financial entities were “too big to fail” was in serious doubt and people panicked.

After that the TARP mess just made things worse. As Cochrane puts it,

Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and President Bush got on television and said, basically, “The financial system is about to collapse. We are in danger of an economic calamity worse than the Great Depression. We need $700 billion, and we won’t tell you what we’re going to do with it. If you need a hint, we justmade it illegal to shortsell bank stocks.”

These speeches should be remembered as a case study in how to start a financial crisis, not how to relieve one. In the Washington context theymay havemade sense, and I understand and sympathize with the awful position that Bernanke and Paulson were in. I suspect that they wanted legal authority to bail out the likes of Lehman and they needed to scare Congress into giving themthemoney, even as stubborn rightwing fiscal conservatives like Barney Frank were saying impolite
things like, “No one in a democracy, unelected, should have $700 billion to spend as he sees fit.” Alas, the speeches scared everyone outside the Beltway too.

And these kinds of things did not start recently. As has been noted before this has happened before. In 1998 the government bailed out Long-Term Capital to some financial fall out. You can read about it here, but the bottom line was that a bail out was arranged because fairly large amounts of money were owed to Bear Stearns, Merrill Lynch, and Lehman Brothers.

Cochrane’s look at mortgage backed securities and how things went so wrong there is interesting as well.

Third, it hides risk and avoids regulations, which may be much of its design. An institution that issues short-term debt to hold mortgages is what we used to call a “bank.” Why call it an spv? Because the regulations assessed lower capital requirements on spvs. This structure allows investors who really do want higher risks and higher yields, but are constrained by regulations that specify types (commercial paper) and ratings of individual securities they must hold rather than focusing on portfolio risk. Thus the regulatory system ends up encouraging artificial obscurity and fragility.

It is often claimed that “free, deregulated markets failed,” bringing about the housing collapse and financial crisis. In fact, the free, relatively deregulated equities market absorbed massive losses this time, as last time, with relatively little turmoil. It was the regulated, supervised part of themarket that failed.

I recommend reading the whole thing.

In a few posts I’ve noted that we can expect lower economic growth in the future and one reason is the enormous amounts of debt that the country has been taking on. Carmen Reinhart and Kenneth Rogoff layout why this is so here.

In previous cycles, international banking crises have often led to a wave of sovereign defaults a few years later. The dynamic is hardly surprising, since public debt soars after a financial crisis, rising by an average of over 80 per cent within three years. Public debt burdens soar owing to bail-outs, fiscal stimulus and the collapse in tax revenues. Not every banking crisis ends in default, but whenever there is a huge international wave of crises as we have just seen, some governments choose this route.

We do not anticipate outright defaults in the largest crisis-hit countries, certainly nothing like the dramatic de facto defaults of the 1930s when the US and Britain abandoned the gold standard. Monetary institutions are more stable (assuming the US Congress leaves them that way). Fundamentally, the size of the shock is less. But debt burdens are racing to thresholds of (roughly) 90 per cent of gross domestic product and above. That level has historically been associated with notably lower growth.

While the exact mechanism is not certain, we presume that at some point, interest rate premia react to unchecked deficits, forcing governments to tighten fiscal policy. Higher taxes have an especially deleterious effect on growth. We suspect that growth also slows as governments turn to financial repression to place debts at sub-market interest rates.

[...]

Another big unknown is the future path of world real interest rates, which have been trending downwards for many years. The lower these rates are, the higher the debt levels countries can sustain without facing market discipline. One common mistake is for governments to “play the yield curve” – as debts soar, shifting to cheaper short-term debt to economise on interest costs. Unfortunately, a government with massive short-term debts to roll over is ill-positioned to adjust if rates spike or market confidence fades.

Given these risks of higher government debt, how quickly should governments exit from fiscal stimulus? This is not an easy task, especially given weak employment, which is again quite characteristic of the post-second world war financial crises suffered by the Nordic countries, Japan, Spain and many emerging markets. Given the likelihood of continued weak consumption growth in the US and Europe, rapid withdrawal of stimulus could easily tilt the economy back into recession. Yet, the sooner politicians reconcile themselves to accepting adjustment, the lower the risks of truly paralysing debt problems down the road. Although most governments still enjoy strong access to financial markets at very low interest rates, market discipline can come without warning. Countries that have not laid the groundwork for adjustment will regret it.

This is why I’ve been seemingly wishy-washy on things like deficits and tax cuts. On the one hand tightening the belt by reducing spending could send the economy back into recession (assuming we are indeed out, if not it would just make the recession worse). If we raise taxes across the board, same thing. Yet if we keep spending as we are then we can expect lower growth for quite some time. Add on things like Social Security and Medicare and we have a very bleak picture indeed.

Rent seeking in economics is where firms or individuals seek economic rents (unearned profits) via the political process. Here is a nice example.

Senator Richard Shelby, the top Republican on the Senate Banking Committee, placed a blanket “hold” in part because of the feud pitting Airbus parent EADS and its partner Northrop Grumman against Boeing, his office said.

[...]

The European Aeronautic Defence and Space Company and its rival Boeing have been locked in a long-running rivalry to win a 35-billion-dollar contract for a fleet of new aerial refueling tankers.

The EADS/Northrop partnership would build the airplane in Shelby’s home state of Alabama but have accused the Pentagon of favoring Boeing in a draft request for proposal and warned they may withdraw from the competition.

[...]

Shelby is also “deeply concerned” that Obama may block the construction of an FBI center in Alabama to test improvised explosive devices — the “roadside bombs” that have killed hundreds of US soldiers in Iraq and Afghanistan.

And its always nice when they can put such a nice patriotic spin on it too,

“This decision impedes the US military, the intelligence community, and federal law enforcement personnel in their missions to exploit and analyze intelligence information critical to fighting terrorism and ensuring American security worldwide,” said Graffeo.

Where should we point the fingers for our current fiscal/economic mess? Keith Hennessey has a post that I tend to agree with. Hennessey looks at the opening statements from President Obama on his new budget,

The fact is, 10 years ago, we had a budget surplus of more than $200 billion, with projected surpluses stretching out toward the horizon. Yet over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy, and funded two wars without paying for any of it -– all of which was compounded by recession and by rising health care costs. As a result, when I first walked through the door, the deficit stood at $1.3 trillion, with projected deficits of $8 trillion over the next decade.

Hennessey has a fairly long list of responses to this, but I want to try and keep this post somewhat short. Obama lists a number of reasons why the current problems we face aren’t his fault,

Medicare Drug Program
Tax Cuts
Iraq and Afghanistan
Recession (2 of them actually)

Now, how many of these are “Bush’s fault”? I’d say the first 3 can be partly blamed on Bush. But let us consider what Team Obama is going to do:

Medicare Drug Program—Keep it
Tax Cuts—Keep Most of them
Iraq and Afghanistan—Continue Bush’s policies.

Huh. Not all that much change if you ask me. What was Candidate Obama’s campaign slogan again?

And to be fair, if the Democrats were in charge during the Medicare Drug Program we’d have an even larger program than we do now. And regarding Iraq and Aghanistan, I’ve seen the claim that Obama’s first term could be considered Bush’s third term. So, even though Obama, ostensibly, could take different policy positions on several of things he claims are responsible for our current plight…he doesn’t.

For the fourth time in the last 5 weeks first time jobless claims have risen.

WASHINGTON (AP) — The number of newly laid-off workers filing initial claims for jobless benefits rose unexpectedly last week, evidence that layoffs are continuing and jobs remain scarce.

The rise is the fourth in the past five weeks. Most economists hoped that claims would resume a downward trend that was evident in the fall and early winter.

I think that we are seeing the effects of ending Cash For Clunkers and other programs. Sure it was great for awhile where care sales were moved forward, but now that people have bought the cars, demend has become slack.

The Labor Department said Thursday that new claims for unemployment insurance rose by 8,000 to a seasonally adjusted 480,000. Wall Street economists had expected a drop to 460,000, according to Thomson Reuters.

The four-week average, which smooths fluctuations, rose for the third straight week to 468,750.

[...]

The number of people continuing to claim benefits was unchanged at 4.6 million. That data lags initial claims by a week.

But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

More than 5.8 million people were receiving extended benefits in the week ended Jan. 16, the latest data available, up from about 5.6 million the previous week. The extended benefit data isn’t seasonally adjusted and is volatile from week to week.

Calling the recession over may have been premature. And yes, I realize that unemployment is a lagging indicator. But consider that while personal income and disposable income are rising, personal consumption expenditures seem to be slowing down. Yes, GDP grew at 5.7% (advanced estimate) for the fourth quarter, but as James Hamilton notes, the fundamentals aren’t all that good.

Three-fifths of that Q4 GDP growth came from the fact that businesses were drawing down inventories more slowly than they had the quarter before. Firms sold $8.5 billion more goods (at a quarterly rate) in 2009:Q4 than they produced, and met those sales by drawing down inventories by $8.5 billion. This reduction in inventories counts as negative investment spending of -$8.5 billion at a quarterly rate (or -$34 B at the annual rate these numbers are typically reported) for purposes of calculating fourth-quarter GDP. Firms sold $34.8 billion more than they produced in 2009:Q3, which amounted to negative inventory investment of -$139 B at an annual rate for Q3. Since this component of investment spending went from -139 to -34, it counts as positive growth when you compare Q3 GDP with Q4 GDP. This mechanism alone contributed 3.4 percentage points to the 5.7% growth rate for real GDP reported for Q4.

In other words, investment decreased at a slower rate and made up the bulk of that 5.7% (about 60% of it). This not exactly what you call great news. Its like being on a ship and the captain comes on the intercom and says, “Great news, we are now sinking slower!” Or to put it yet a third way, suppose this was the only thing affecting a change in GDP, we’d have 3.4% growth in GDP because businesses are drawing down inventories to the tune of $8.5 billion in quarter four vs. $34.8 billion in quarter three. That isn’t something to consider great, and would be an explanation of why we see first time jobless claims rising.

Of course, we can’t continually draw down inventories without eventually starting to restocking them. So, there is hope. And as Prof. Hamilton notes, plugging in the new data into his recession indicator index the index is at 37.6% which indicates that the expansion probably started in 2009:Q3. And if the GDP numbers hold up for one more revision the index will likely fall below the 33% threshold for declaring the recession over and weak growth starting in 2009:Q3. But we can probably expect weak growth for sometime.

According to this story President Obama is planning on letting the Bush tax cuts and the ATM.

In the 2010 budget tabled by President Barack Obama on Monday, the White House wants to let billions of dollars in tax breaks expire by the end of the year — effectively a tax hike by stealth.

While the administration is focusing its proposal on eliminating tax breaks for individuals who earn $250,000 a year or more, middle-class families will face a slew of these backdoor increases.

[...]

If the provisions are allowed to expire on December 31, the top-tier personal income tax rate will rise to 39.6 percent from 35 percent. But lower-income families will pay more as well: the 25 percent tax bracket will revert back to 28 percent; the 28 percent bracket will increase to 31 percent; and the 33 percent bracket will increase to 36 percent. The special 10 percent bracket is eliminated.

Investors will pay more on their earnings next year as well, with the tax on dividends jumping to 39.6 percent from 15 percent and the capital-gains tax increasing to 20 percent from 15 percent. The estate tax is eliminated this year, but it will return in 2011 — though there has been talk about reinstating the death tax sooner.

[...]

Without annual legislation to renew the patch this year, the AMT could affect an estimated 25 million taxpayers with incomes as low as $33,750 (or $45,000 for joint filers). Even if the patch is extended to last year’s levels, the tax will hit American families that can hardly be considered wealthy — the AMT exemption for 2009 was $46,700 for singles and $70,950 for married couples filing jointly.

I don’t see how this wont be a campaign issue and it could be an expensive one for the Democrats.

Update: Reuters has pulled the story.

Update II: And this one notes that Obama’s budget will extend Bush’s tax cuts for the middle class.

Update III: And here is part of the 2011 budget that addresses the Bush tax cuts (pages 39-40).

Allow the Bush Tax Cuts for Households Earning More Than $250,000 to Expire. In the last Administration, those at the very top enjoyed large tax breaks and income gains while almost everyone else struggled and real income for the middle class declined. Our Nation cannot afford to continue these tax cuts, which is why the President supports allowing those tax cuts that affect families earning more than $250,000 a year to expire and committing these resources to reducing the deficit instead. This step will have no effect on the 98 percent of all households who make less than $250,000.

This is what I thought the Obama Administration would likely do. Still, from a fiscal standpoint it is going to make the situation worse than better. Of course, considering the weak nature of the economy allowing the tax cuts to expire for everyone probably is not the best course either.