Estimates of monthly GDP indicate that the only growth in the first quarter of 2011 was from February to March. After a temporary rise in March, the economy began sliding again in April, with declines in real wages, in durable-goods orders and manufacturing production, in existing home sales, and in real per-capita disposable incomes. It is not surprising that the index of leading indicators fell in April, only the second decline since it began to rise in the spring of 2009.

The data for May are beginning to arrive and are even worse than April’s. They are marked by a collapse in payroll-employment gains; a higher unemployment rate; manufacturers’ reports of slower orders and production; weak chain-store sales; and a sharp drop in consumer confidence.

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[What about]…the government’s Medicare savings? CMS actuaries offered three estimates for a three-year period: $170 million, $510 million and $960 million (the higher the estimate, the less likely it was to occur). Even the highest figure is only five-one-hundredths of 1 percent of the $1.842 trillion of Medicare’s estimated spending from 2012 to 2014. If CMS modifies its rules to make ACOs more attractive to hospitals and doctors, they would probably keep more of the savings ”” and Medicare less.

It’s a good bet that what’s true of ACOs also applies to other cost-cutting ideas from the Obama administration, such as “bundled payments” and “comparative effectiveness research.” The concepts seem smart, but they’re likely to suffer from micromanagement. They create jobs for lawyers and health-care “experts.” They sound impressive in speeches and op-ed pieces. But they don’t much “bend the cost curve,” and they mislead the public by suggesting that health spending is being controlled. It isn’t.

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Federal Reserve Chairman Ben Bernanke offered a relatively glum view of the U.S. economy, acknowledging that it is growing more slowly than the Fed had expected, but predicted improvement later this year.

“The U.S. economy is recovering from both the worst financial crisis and the most severe housing bust since the Great Depression, and it faces additional headwinds ranging from the effects of the Japanese disaster to global pressures in commodity markets,” Mr. Bernanke said Tuesday, seeking””as he has before””to moderate expectations that the central bank can solve the economy’s lingering problems on its own. “In this context, monetary policy cannot be a panacea.”

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The health insurance program for seniors is the nation’s biggest financial challenge.

The first of 77 million Baby Boomers turn 65 this year and qualify for Medicare. Enrollment will grow from 48 million in 2010 to 64 million in 2020 and 81 million in 2030, according to Medicare actuaries. That 33-million increase in the next 20 years compares with 13 million in the last 20.

This demographic burst ”” combined with the addition of a prescription drug benefit in 2006 and rising health care costs generally ”” has created an unfunded liability of nearly $25 trillion over the lifetime of those now in the program as workers and retirees. That is the taxpayers’ obligation, beyond what Medicare taxes will bring in or seniors will pay in premiums for Medicare Part B ”” also called supplemental coverage ”” that helps pay for doctor visits and other expenses outside the hospital.

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The Congressional Budget Office (CBO) says the real cost of the federal government guaranteeing the business of failed mortgage giants Fannie Mae and Freddie Mac is $317 billion — not the $130 billion normally claimed by the Obama administration.

In a report delivered to the House Budget Committee on June 2, the CBO said a “fair value” accounting of guaranteeing the two defunct mortgage companies ”“ known as Government Sponsored Enterprises (GSEs) ”“ was more than twice as high as the Office of Management and Budget had accounted for.

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Secretary of State Hillary Rodham Clinton defended her new ambassador-at-large for international religious freedom on Thursday (June 2), calling the Rev. Suzan Johnson Cook a bridge-builder who is right for the job.

Speaking at Cook’s ceremonial swearing-in, Clinton cited Cook’s firsts as an African-American Baptist minister and New York police chaplain, as well as her involvement in international activities.

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After venting out their ire against Sony PlayStation Network and Sony Pictures, hackers have pointed their guns at the Federal Bureau of Investigation.

The group LulzSec has hacked an FBI-affiliated website called InfraGard and siphoned off with the details of around 180 users. The attack was on their Atlanta chapter.

InfraGard is a government and private sector alliance which provides actionable intelligence to protect critical national information infrastructure. The website defines its role as: “InfraGard is an association of businesses, academic institutions, state and local law enforcement agencies, and other participants dedicated to sharing information and intelligence to prevent hostile acts against the United States.”

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Speculation has swirled for months about whether Atlantic Bank would survive the fallout of the prolonged real estate downturn that began to take hold about five years ago.

The lender had been reeling from three back-to-back years of losses and was “critically undercapitalized,” federal regulators said in a statement Friday. Its 2011 first-quarter deficit totaled $4.4 million. The FDIC said Friday that Atlantic Bank was added to its “Problem Institution List” in February.

The lender began operating under a “cease-and-desist” supervisory order with the Office of Thrift Supervision in January after an examination last summer found “unsafe and unsound” practices.

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Take a careful look–ugh.

After several months of strong job growth, hiring slowed sharply in May, raising concerns once again about the underlying strength of the economic recovery.

The Labor Department reported on Friday that the United States added 54,000 nonfarm payroll jobs last month, following an increase of 232,000 jobs in April. May’s job gain was about a third of what economists had been forecasting.

The unemployment rate ticked up to 9.1 percent from 9.0 percent in April.

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The Obama Administration and Chairman Ben Bernanke’s Federal Reserve have bet on a recovery based on reflating asset prices with easy money, federal spending and temporary stimulus programs. Part of that bet was reflating the housing bubble.

The results are what we now see: higher stock prices for Americans lucky enough to own shares, but 2% growth and mediocre job creation, a housing recession stretching well into its fourth year, and soaring commodity prices that reduce real income growth.

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The White House said Wednesday that taxpayers could lose roughly $14 billion of the money spent on auto industry bailouts, despite the industry’s recent recovery.

The White House cites the potential losses in a report, “The Resurgence of the American Automotive Industry,” released ahead of President Barack Obama’s trip Friday to a Chrysler Group LLC facility in Toledo, Ohio.

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For a small cadre of CIA veterans, the death of Osama bin Laden was more than just a national moment of relief and closure. It was also a measure of payback, a settling of a score for a pair of deaths, the details of which have remained a secret for 13 years.

Tom Shah and Molly Huckaby Hardy were among the 44 U.S. Embassy employees killed when a truck bomb exploded outside the embassy compound in Kenya in 1998.

Though it has never been publicly acknowledged, the two were working undercover for the CIA. In al-Qaida’s war on the United States, they are believed to be the first CIA casualties.

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….suppose the law is implemented just as it’s written. In that case, according to the Medicare Trustees, Medicare’s long-term unfunded liability fell by $53 trillion on the day ObamaCare was signed.

But at what cost to the elderly? Consider people reaching the age of 65 this year. Under the new law, the average amount spent on these enrollees over the remainder of their lives will fall by about $36,000 at today’s prices. That sum of money is equivalent to about three years of benefits. For 55-year-olds, the spending decrease is about $62,000””or the equivalent of six years of benefits. For 45-year-olds, the loss is more than $105,000, or nine years of benefits.
In terms of the sheer dollars involved, the law’s reduction in future Medicare payments is the equivalent of raising the eligibility age for Medicare to age 68 for today’s 65-year-olds, to age 71 for 55-year-olds and to age 74 for 45-year-olds. But rather than keep the system as is and raise the age of eligibility, the reform law instead tries to achieve equivalent savings by paying less to the providers of care.

What does this mean in terms of access to health care? No one knows for sure, but it almost certainly means that seniors will have difficulty finding doctors who will see them and hospitals who will admit them. Once admitted, they will enjoy fewer amenities such as private rooms and probably a lower quality of care as well.

Read it all (also on the Op-ed page of this morning’s Wall Street Journal).

From 2001-07, he argues, the dollar underwent a long, steady decline against the euro, tacitly encouraged by U.S. monetary authorities. In response to the dollar’s decline, investors diverted capital into inflation hedges, notably real estate, leading to the subprime bubble. By mid-2007, the real-estate bubble had burst. In response, the Fed reduced short-term interest rates rapidly, which lowered the dollar further. The subprime crisis was severe, but with looser money, the economy appeared to stabilize in the second quarter of 2008.

Then, in summer 2008, the Fed committed what Mr. Mundell calls one of the worst mistakes in its history: In the middle of the subprime crunch””exacerbated by mark-to-market accounting rules that forced financial companies to cover short-term losses””the central bank paused in lowering the federal funds rate. In response, the dollar soared 30% against the euro in a matter of weeks. Dollar scarcity broke the economy’s back, causing a serious economic contraction and crippling financial crisis.

In March 2009, the Fed woke up and enacted QE1, lowering the dollar against the euro, and signs of recovery soon appeared. But in November 2009, QE1 ended and the dollar soared against the euro once again, pushing the U.S. economy back toward recession.

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Labour unions hate right-to-work laws, and are hoping that the NLRB will undermine them. They should be careful what they wish for. The NLRB’s line of reasoning would make it potentially illegal to build a new factory in a right-to-work state if you already operate one in a heavily unionised state””creating a powerful incentive never to do business in a heavily unionised state in the first place. It would be safer to make things only in places like South Carolina, or perhaps south China.

The NLRB is an autonomous body, but its board members are appointed by the president. Under a Democratic president, American businesses expect a more pro-union line, but the agency’s recent militancy is shocking, reminiscent of “loony-left” posturing in Britain in the 1970s. Not only does the agency in effect claim the power to tell firms where they may build factories. It is also suing two states (Arizona and South Dakota) where voters have decided that workers should be guaranteed a secret-ballot election before their workplace is unionised. Mr Obama has so far said nothing about any of these cases. The president claims he understands business. Condemning the NLRB would be a good way to prove it.

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…here’s the question for 2012: If we the people don’t want the higher taxes that are needed to support not only ObamaCare but a growing federal government, are we willing to support the real cuts that go along with that choice? And if we decide we don’t want these programs touched, will we accept the higher taxes that go along with keeping them, including for people making a lot less than $250,000?

This is the heart of the argument shaping up between Mr. Obama and Paul Ryan, chairman of the House Budget Committee. Manifestly Mr. Obama believes that as much as Americans say they want smaller government, the moment they find one of their favorite programs (e.g., Medicare) up for consideration, they balk.

Mr. Ryan and Republicans make the opposite bet: The president’s spending has made Americans more willing to face up to these choices, especially if the alternative is higher taxes on more people.

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The problems of old age (chronic illness, outliving savings, loneliness) are real, but age by itself is not an indicator of need. The blanket defense of existing Social Security and Medicare isn’t “liberal” or “progressive.” It’s simply a political expedient with ruinous consequences. It enlarges budget deficits and forces an unfair share of adjustment ”” higher taxes, lower spending ”” on workers and other government programs. This is the morality of the ballot box.

People do not lose their obligations to the larger society by turning 65. We need to refocus these programs on their original purposes. Social Security was intended to prevent poverty, not finance recipients’ extra cable channels. Medicare provides peace of mind as well as health insurance; wealthier recipients can afford to pay more for their peace of mind. Burden-sharing needs to include the elderly. This is the crux of the budget problem.

Facing it is both a moral and financial imperative. With the 2012 election looming, major overhauls of these programs seem unlikely. Still, more modest changes (slow increases in eligibility ages, added taxation of Social Security benefits, costlier Medicare for upscale beneficiaries) could produce significant savings. If even these are absent, the meaning will be plain: Old stereotypes continue to trump new realities.

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According to my calculations based on government data, such [typical] married couples [as I cite in my example] will begin receiving monthly Social Security checks that will, on average, total about $550,000 after inflation. They will receive health-care services paid for by Medicare that, on average, will total another $450,000 after inflation. The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending.

We cannot even remotely afford to make good on these promised benefits. Although our system of personal liberty, free enterprise and limited government has made us an affluent and upwardly mobile people, we are not yet a nation of [wealthy benefactor] John Beresford Tiptons.

The existence of so many million-dollar couples is not the result of elected officials carefully weighing the needs of senior citizens against the financial ability of younger workers to meet these needs. Rather, it is the result of decades of separate legislative actions by both political parties to liberalize retirement and health-care benefits, the sum total of which no one has bothered to calculate.

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Medicare, the U.S. health insurance program for the elderly and disabled, and the Social Security trust for the disabled and retirees are running out of money sooner than the government had projected.

While Medicare won’t have sufficient funds to pay full benefits starting in 2024, five years earlier than last year’s estimate, Social Security’s cash to pay full benefits runs short in 2036, a year sooner than the 2010 projection, the U.S. government said today in an annual report.

Both forecasts were affected by a slower-than-anticipated economic recovery, the government said. The estimates for funding add urgency to talks between Democrats and Republicans on ways to cut spending to reduce the U.S. budget deficit.

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Raj Rajaratnam, the billionaire investor who once ran one of the world’s largest hedge funds, was found guilty on Wednesday of fraud and conspiracy by a federal jury in Manhattan. He is the most prominent figure convicted in the government’s crackdown on insider trading on Wall Street.

Mr. Rajaratnam was convicted on all 14 counts.

Mr. Rajaratnam, dressed in a black suit, had no expression as the verdict was read in the overflowing courtroom.

His lawyer, John Dowd, said he would appeal.

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While better than expected, Friday’s employment numbers showed that the national economy still had a long way to go to fully recover. Though down from its peak of 10.1 percent in late 2009, April’s unemployment rate reflects only those Americans who are still actively looking for work.

As such, economists said the April jobs report was part of a larger picture of the economy that remained mixed. The rise in the unemployment rate reflects the survey of households, which indicated a 190,000 decline in employment in April. And recent data on initial jobless claims and other employment indicators have been weak.

“Millions of people are unemployed and many have left the labor market and given up,” Mr. Shapiro said. “Against that we are maybe creating 244,000 jobs. That is all well and good but it just shows you how much further we have to go to make a dent into what has happened in the labor market.”

“It gets the basic debate out there about the economy,” he added. “Is all we have seen the product of government stimulus, and are all the problems coming back or not?”

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The federal government will not run short of money to pay its bills on May 16, when the federal debt reaches the legal maximum of $14.3 trillion.

Even after Aug. 2, the deadline the Treasury Department set this week for Congress to lift the borrowing limit, the government might be able to delay a crisis, perhaps even for a few months, through extraordinary measures such as asset sales.

But with every passing week of stalemate over the debt ceiling, the risk increases that investors will start to fret that the United States will not pay its debts, and demand higher interest rates for loans to the federal government.

Should that happen, the cost could be vast and the damage difficult to reverse.

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It’s obviously been a good week for the Obama administration. But it comes at a dangerous time, for both the administration and the economy. The excitement over tracking down Osama bin Laden could end up making the president and his advisers less panicked over the state of the economy. And they should be a little panicked.

For the second straight year, the recovery seems to be at risk of stalling. The economy grew at an annual rate of only 1.8 percent last quarter ”” eerily similar to the 1.7 percent growth last spring, just when job growth started slowing down. Fully 80 percent of people say the economy is in fairly bad or very bad shape, according to a New York Times/CBS Poll last month. More people say it’s getting worse than getting better, the opposite of a few months ago.

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… if we’ve avoided rerunning the 1930s only to end up with a repeat of the 1970s, the public will judge… [Ben Bernanke] to have failed.

To this, the Fed has a stock response. It points to the all-urban consumer price index (CPI-U) and notes that it was up only 2.7 percent in March relative to the same month a year earlier. Strip out the costs of food and energy, and “core CPI”””the Fed’s preferred measure””is just 1.2 percent. When Google unveils its new index of online prices, it’s likely to tell a similar story.

To ordinary Americans, however, it’s not the online price of an iPad that matters; it’s prices of food on the shelf and gasoline at the pump. These, after all, are the costs they encounter most frequently. And with average gas prices hitting $3.88 a gallon last week, filling up is now twice as painful as when President Obama took office.

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The first failing, of which Mr Obama in particular is guilty, is misstating the problem. He likes to frame America’s challenges in terms of “competitiveness”, particularly versus China. America’s prosperity, he argues, depends on “out-innovating, out-educating and out-building” China. This is mostly nonsense. America’s prosperity depends not on other countries’ productivity growth, but on its own (actually pretty fast) pace. Ideas spill over from one economy to another: when China innovates Americans benefit.

Of course, plenty more could be done to spur innovation. The system of corporate taxation is a mess and deters domestic investment. Mr Obama is right that America’s infrastructure is creaking (see article). But the solution there has as much to do with reforming Neanderthal funding systems as it does with the greater public spending he advocates. Too much of the “competitiveness” talk is a canard””one that justifies misguided policies, such as subsidies for green technology, and diverts attention from the country’s real to-do list.

High on that list is sorting out America’s public finances….

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The U.S. dollar fell Thursday to its lowest point since the summer of 2008, but officials aren’t showing signs that they are alarmed by the currency’s descent or acting to stem it.

In recent days, the nation’s top two economic policy makers””Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner””have publicly expressed their desire for a strong dollar. But there is little indication of a change in policy from either the Fed or Treasury””or in underlying economic conditions””that would alter the currency’s downward course.

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More than half of Americans (55%) describe the U.S. economy as being in a recession or depression, even as the Federal Open Market Committee (FOMC) reports that “the economic recovery is proceeding at a moderate pace.” Another 16% of Americans say the economy is “slowing down,” and 27% believe it is growing.

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Buried in the ocean of news regarding our three wars has been what I think is the biggest U.S. economic story of the year: the federal government’s lawsuit against Boeing, seeking to prevent the opening of its $2 billion factory in South Carolina, for which 1000 workers have reportedly already been hired (in case you missed the news altogether: story, story, story).

Whatever the ultimate decision in the lawsuit, the very existence of the dispute will change the business landscape here in the U.S. for the next decade or two.

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…while President Obama has presided over an unprecedented federal spending spree, he’s far from the first White House occupant to run up big debt numbers while insisting that he’s moving toward lowering them — eventually.

He’s also not the first politician caught between contradictory public demands of lower spending and higher benefits. A Washington Post-ABC News poll released last week reports that 78 percent of Americans oppose cutting Medicare spending, and 69 percent oppose cutting Medicaid.

Yet even most liberal Democrats, including the president, concede this indisputable point: America’s long-term debt crisis will never be solved without containing the soaring costs of Medicare and Medicaid.

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