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Spartan Debate Institute Burk/Stone/Walters lab

Business Confidence DA – V. 1.0 2008 - 2009

Business Confidence DA

Business Confidence DA ...............................................................................................................................................1


1NC.................................................................................................................................................................................2
Uniqueness- Business Confidence High.........................................................................................................................4
AT-Low hiring proves business confidence low.............................................................................................................6
Economy high.................................................................................................................................................................7
AT: Regulations coming..................................................................................................................................................9
Links – Regulations hurt business................................................................................................................................10
Links – Consumption declines hurt business................................................................................................................13
Specific Links - Flex Fuel ............................................................................................................................................14
Specific Links –Tradable Permits.................................................................................................................................15
Specific Links – Tradable Permits................................................................................................................................16
Specific links – CAFÉ standards..................................................................................................................................17
Regulation Spillover.....................................................................................................................................................19
AT: Plan saves money...................................................................................................................................................20
some coal mining areas is not promising. After capital and labor have adjusted, consumers bear the ongoing costs of
carbon regulation. ........................................................................................................................................................20
I/L – Business Confidence Key to Economy................................................................................................................21
I/L – Small Business key to economy...........................................................................................................................24
I/L – US Business Confidence key to the world economy...........................................................................................25
I/L – US economy key to global economy...................................................................................................................26
Economy Impacts..........................................................................................................................................................27
Impacts - Econ decline hurts heg..................................................................................................................................29
DA Turns Case..............................................................................................................................................................30
AT: Economy Resilient.................................................................................................................................................31
Business confidence low ..............................................................................................................................................32
Economy low................................................................................................................................................................34
Economy low................................................................................................................................................................38
Regulations coming now...............................................................................................................................................39
AT-U.S. Econ key to world...........................................................................................................................................40
Recession doesn’t cause economic collapse.................................................................................................................41
Economy Resilient........................................................................................................................................................42
Alt cause – global economy collapse
.......................................................................................................................................................................................44
Growth drives confidence.............................................................................................................................................45
Turn / Confidence = Overinvestment............................................................................................................................46
Auto manufacturers support flex fuel...........................................................................................................................47

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Spartan Debate Institute Burk/Stone/Walters lab
Business Confidence DA – V. 1.0 2008 - 2009

1NC
A. Uniqueness – Business confidence is strong-small business prove.

Austin Business Journal, June 5, 2008, “Survey finds most small business owners optimistic about rest of ’08,” Online,
http://www.bizjournals.com/austin/stories/2008/06/02/daily37.html, accessed 6/27/08.
Nearly 78 percent of owners and managers of small businesses say their companies will meet or surpass growth
expectations this year, according to a national survey. The business confidence survey was conducted in May via
Kingwood-based Administaff Inc.'s database of more than 6,000 small and mid-sized businesses. About 44 percent of the
companies surveyed are hiring full-time employees, while 11 percent plan to add part-timers. Respondents stated average compensation is up 4.9
percent from the same time a year ago, while average commissions have increased 6.8 percent. The survey found business owners and managers
are willing to fight to keep valued employees. To accomplish that, more than half of the respondents said they are turning to pay increases or
providing workers with new challenges or responsibilities. More than 26 percent of the employers plan to increase salaries this year, according to
the survey, while 50 percent will maintain current wage levels. Sixty-four percent expect overtime to remain about the same. More than 60
percent of the companies cited the economy as their most serious concern in 2008, followed by 52 percent who said finding ways to control
operating costs was their principal challenge. Forty percent were most concerned with hiring the right employees. The majority of survey
participants expressed guarded confidence in the current business climate.

B. Links –

The entire economy perceives new environmental regulations as the beginning of an anti-
business campaign-the plan ripples through the economy
Schwartz 92 Confronting Climate Change: Risks implications and Responses ed. By Mintzer pg. 283
There are many impediments to environmental reforms but the principal obstacles, particularly in the United
States are psychological and philosophical rather than economic. While European corporations tend to treat environmental
regulations as a part of the operating environment, US business leaders seem to share a residual feeling that
environmental regulations are part of an anti-business, anti-progress political agenda. Richard Darman, Director of the
Federal Office of Management and Budget, articulated this paranoia when he argued that the goal of US policy was not to “make the
world safe for green vegetable.” This prejudice—coupled with the short-term orientation of the investment community
and a naturally adversarial business environment—has resulted in suspicion towards environmental issues.

Restricting consumption kills the global economy- multiple industries and nations will be
devastated by the plan causing wars and destruction of civilization.
Gelbspan dec 95 Harper’s magazine vol 291 pg. 31 ebscohost
That resistance is understandable, given the immensity of the stakes. The energy industries now constitute the largest
single enterprise known to mankind. Moreover, they are indivisible from automobile, farming, shipping, air freight,
and banking interests, as well as from the governments dependent on oil revenues for their very existence. With
annual sales in excess of one trillion dollars and daily sales of more than two billion dollars, the oil industry alone
supports the economies of the Middle East and large segments of the economies of Russia, Mexico, Venezuela,
Nigeria, Indonesia, Norway, and Great Britain. Begin to enforce restriction on the consumption of oil and coal, and
the effects on the global economy--unemployment, depression, social breakdown, and war--might lay waste to what
we have come to call civilization. It is no wonder that for the last five or six years many of the world's politicians
and most of the world's news media have been promoting the perception that the worries about the weather are
overwrought.

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C. Impacts

Recession results when business confidence declines


Braithwaite march 2004 592 annals 79
The challenge of designing institutions that simultaneously engender emancipation and hope is addressed within the assumption of economic
institutions that are fundamentally capitalist. This contemporary global context gives more force to the hope nexus because we know
capitalism thrives on hope. When business confidence collapses, capitalist economies head for recession. This dependence
on hope is of quite general import; business leaders must have hope for the future before they will build new factories;
consumers need confidence before they will buy what the factories make; investors need confidence before they
will buy shares in the company that builds the factory;bankers need confidence to lend money to build the
factory; scientists need confidence to innovate with new technologies in the hope that a capitalist will come along
and market their invention. Keynes's ([1936]1981) General Theory of Employment, Interest and Money lamented the theoretical
neglect of "animal spirits" of hope ("spontaneous optimism rather than . . . mathematical expectation" (p. 161) in the discipline of economics,
a neglect that continues to this day (see also Barbalet 1993).

US economic decline leads to a worldwide decline

Lawrence Kudlow 1996 The Washington Times p. A14


And what's good for America is good for the rest of the world. U.S.economic policy, its markets, its economy, and
its currency, all stand at the epicenter of the global economy. So do our free-market and pro-democracy values. When the United
States errs, as it did in the late '60s and '70s, the global economy suffers. When the United States recovers, as it has during the '80s (helped by
Britain's Margaret Thatcher) and '90s, so has the wealth of virtually all the other nations.

Economic decline causes global nuclear war

Mead 92 [Walter Russel, fellow, Council on Foreign Relations, New perspectives quarterly, summer pp. 28]
What if the global economy stagnates - or even shrinks? In that case, we will face a new period of
But what if it can't?
international conflict: South against North, rich against poor. Russia, China, India - these countries with their
billions of people and their nuclear weapons will pose a much greater danger to world order than Germany and
Japan did in the '30s.

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Uniqueness- Business Confidence High


Economy recovering now and business confidence increasing
Tim Paradis Associated Press Online July 17, 2008
Stocks surge as falling energy prices bolster mood BYLINE: By, AP Business Writer

Wall Street surged Thursday, extending its rally into a second session as tumbling energy prices bolstered an already upbeat mood
that followed stronger-than-expected quarterly reports from big names like JPMorgan Chase & Co. and United Technologies Corp. The Dow
Jones industrial average rose nearly 200 points as oil fell more than $3 and brought its three-day decline to more
than $13 a barrel. Investors got a double dose of good news that helped alleviate weeks of angst about the economy.
Three components of the Dow industrials JPMorgan Chase, United Technologies and Coca-Cola Co. issued comments that generally indicated that their businesses are holding up despite sometimes difficult economic conditions.

The reports appeared to let investors put aside some of their worst fears about the economy. Still, Wall Street has had some up periods in the
past few months as optimism grew only to fall back into a downturn as worries about the financial sector and the economy have welled back up. "There were some better-than-expected numbers out of the banks. I think we're maybe
getting a little bit of a sigh of relief rally. Things had gotten so scary there for a few days," said Denis Amato, chief investment officer at Ancora Advisors in Cleveland. Meanwhile, light, sweet crude fell $3.35 to $131.25 on the New

Oil fell more than $4 Wednesday and more than $6 Tuesday, offering investors some hope that
York Mercantile Exchange.

perhaps commodity prices will begin to decline. And natural gas prices fell sharply after the Energy Department
said domestic stockpiles rose last week, but remain below recent years' levels. Prices dropped 71.3 cents to $10.68 per 1,000 cubic feet. A sustained drop in energy
costs particularly oil would be welcome news for nearly all parts of the economy. Consumers have been hard-pressed by higher fuel and food costs.
Wall Street is worried they will pare their spending on discretionary items to make room in their budgets for the higher-priced necessities. A pullback could be troublesome as consumer spending accounts for more than two-thirds of

U.S. economic activity. But the decline in oil added to the optimism in early afternoon trading. The Dow rose 185.72, or 1.65 percent, to 11,425.00. The Dow on Wednesday
surged 276 points, or 2.5 percent, logging its best daily gain in three months. Broader stock indicators also rose. The Standard & Poor's 500 index advanced 15.83, or 1.27 percent, to 1,261.19, and the Nasdaq composite index rose

Stocks soared Wednesday


29.93, or 1.31 percent, to 2,314.78. Advancing issues outpaced decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.03 billion shares.

after better-than-expected quarterly results from Wells Fargo & Co. helped ease some of investors' worries about the
health of the banking sector. Wall Street has grown concerned that souring mortgage debt would force some banks to go under. Bond prices showed steep declines Thursday as investors turned away from
the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.01 percent from 3.94 percent late Wednesday. The dollar was mixed against other major currencies, while
gold prices rose. Wall Street also appeared placated by economic figures. A Commerce Department report showed construction of homes and apartments rose in June by 9.1 percent. The gain follows a change in New York laws that

has given a boost to apartment building. Construction of single-family homes fell by 5.3 percent to the slowest pace in 17 years. Applications for building permits, one indicator of
future activity, rose by 11.6 percent. The Labor Department reported that the number of newly laid-off people seeking unemployment benefits rose by 18,000 last week to 366,000. However, the
increase was below the number economists expected. Investors appeared undeterred by a reading from the Philadelphia Federal Reserve showing another decrease in regional manufacturing. In corporate news, JPMorgan Chase
posted a 53 percent decline in its second-quarter earnings as mortgage and other loan defaults worsened, but the decline in profits wasn't as steep as Wall Street had feared and the stock rose $3.48, or 10 percent, to $39.42. Among
other financials gaining, Fannie Mae and Freddie Mac jumped after Fitch Ratings affirmed long-term issuer default ratings on the government-chartered mortgage giants. Fitch cut Fannie's preferred stock rating and put Freddie's on
watch for a possible downgrade. Fannie rose $1.90, or 21 percent, to $11.15, while Freddie rose $1.65, or 24 percent, to $8.48. United Technologies rose $3.37, or 5.5 percent, to $64.48 after posting an 11 percent increase in its
second-quarter profit. The maker of everything from jet engines to ventilation systems reported strong growth at its Otis elevator and Carrier air conditioner divisions. The company also raised its full-year forecast for revenue and per-
share earnings. Coca-Cola's second-quarter earnings fell 23 percent as the world's largest beverage company earned $1.42 billion. While the company's revenue and earnings excluding items topped expectations, analysts said volume
growth was lighter than expected. The stock fell $2.14, or 4.1 percent, to $50.20. The Russell 2000 index of smaller companies rose 5.43, or 0.79 percent, to 692.18. Overseas, Japan's Nikkei stock average closed up 1.00 percent.
Britain's FTSE 100 jumped 2.63 percent, Germany's DAX index rose 1.88 percent, and France's CAC-40 surged 2.76 percent.

Business confidence is rising and the mood is improving


Thomson Financial News Super Focus, June 4, 2008 HEADLINE: Global risks tilted to downside, but inflation a
concern - Moody's Economy.com

A deteriorating outlook and tight credit conditions continue to weigh on firms, but Moody's Economy.com weekly Survey of
Business Confidence shows the mood improved markedly during May. Though sentiment across the globe remains
measurably weaker than prior to the subprime financial shock last summer, rising confidence is nevertheless a
positive development.

Business confidence is stable and has been improving since April.


Moody’s Economy.com July 14 2008
https://www.economy.com/home/login/ds_proLogin.asp?script_name=/dismal/pro/release.asp&r=usa_dsbc&src=economy_survey_landin
g

Global business confidence has remained in a tight range since late May, consistent with a global economy that is
barely growing. Developed economies, including the U.S., Europe and Japan, are contracting moderately, while most developing
economies are expanding moderately. This is an improvement since late April, however, when global business confidence fell to
a record low.
The most measurable improvement has been among real estate operations, financial services
companies, and business service firms. These firms are still dour, but not nearly so. As has been the case for the past year, the
most negative responses are to the broad questions concerning present conditions and the outlook.

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Small businesses and multinationals are gaining strength-multiple reasons.


Paul R. La Monica, (Editor CNN Money), June 6, 2008, “Corporate America is getting nervous,” Online,
http://money.cnn.com/2008/06/06/markets/thebuzz/?postversion=2008060610, accessed 6/27/08.
And according to Vistage's Pastor, he said more and more small and mid-sized businesses are increasing their
businesses abroad, lured by a weaker dollar, stronger growth overseas and the relative ease of reaching
international customers via the Web. Along those lines, many large multinational corporations have been holding
up reasonably well because they have stronger growth opportunities outside of the United States. Plus, many of
them have relatively low debt loads and lots of cash to keep them afloat.

Business confidence is rising; positive developments in the status quo.

Japan Economic Newswire June 3, 2008 HEADLINE: Dollar inches up in mid-104 yen range in Tokyo morning deals
Positive news on the dollar front, such as the U.S. Institute for Supply Management's business confidence data,
was mostly ignored as investors remained sensitive to negative news. On Monday, the ISM said that business confidence
among manufacturers cameto 49.6 in May, slightly higher than the average market estimate of 48.5.

Business confidence stable- executives are forecasting a leveling of the economy-confidence


isn’t tanked.
Paul R. La Monica, (Editor CNN Money), June 6, 2008, “Corporate America is getting nervous,” Online,
http://money.cnn.com/2008/06/06/markets/thebuzz/?postversion=2008060610, accessed 6/27/08.
Pastor also said that corporate confidence, while low, is not declining precipitously. He said this may suggest that
CEOs think the economy, while not ready yet to turn a corner, is not going to plunge significantly from here. The
executives surveyed by Dice shared that sentiment. "The majority of companies do not appear to be forecasting a
dire turn for the worse any time soon," Melland said in the report.

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AT-Low hiring proves business confidence low


Businesses are slow on hiring because they can’t find qualified candidates, not because of
economic concerns.
Paul R. La Monica, (Editor CNN Money), June 6, 2008, “Corporate America is getting nervous,” Online,
http://money.cnn.com/2008/06/06/markets/thebuzz/?postversion=2008060610, accessed 6/27/08.
According to the Dice survey, 52% of new hires are receiving salaries that are higher than a year ago while 45% of
new hires are getting paid about the same. That's a good sign. Given how rapidly food and gas prices rising, it's
crucial that workers continue to see wage increases. "The weakness in the employment market is not impacting
compensation. In many categories, this still is a tight labor market and companies realize they have to pay
competitive wages and take into account the cost of living," Melland said in an interview. In addition, nearly 60%
of those surveyed by Dice said that the main reason it's taking them longer to fill positions is because it's harder to
find qualified candidates, not because they are cutting back due to the economy. "Interestingly, the major reason for
the extended period to hire people isn't concern about the economy or a lack of urgency to fill a position. It's finding
the right people," the Dice report said.

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Economy high

US economy to grow and recover significantly in the next year-IMF forecasts prove
Swann 7/17/08 (Christopher. Ph.D. in Economics, University of Virginia,
Assistant Professor, Department of Economics, UNC Greensboro, 2004 -) http://www.financialpost.com/story.html?id=661896

July 17 (Bloomberg) -- The International Monetary Fund raised its forecast for global economic growth this year and
warned rich and poor countries alike that higher interest rates may be necessary to combat rising inflation.

The world economy will expand 4.1 percent this year, faster than the 3.7 percent pace projected in April, the fund
said in a report released today in Washington. The IMF raised growth forecasts for six of the Group of Seven industrial nations, with only Canada's economy downgraded. The outlooks for
China, Brazil, Russia and India were also lifted. A global slowdown in growth tied to tightening credit in the first quarter was less severe

than expected, the IMF said. The fund said inflation is a mounting threat and lifted its forecasts for price increases in both developing and advanced economies.``Inflation is a rising concern and will constrain the policy
response to slower growth,'' the IMF said in its latest World Economic Outlook. In many emerging markets, the fund said ``monetary policy needs to be tightened, combined with greater fiscal restraint and, in some cases, with more
flexible exchange-rate management in order to reverse the recent build-up in inflation.'' Expansions in the developing world are ``expected to lose steam,'' the fund said.

The IMF projects the U.S. economy will


For industrial nations, the fund said the ``the case for policy tightening in these economies is stronger than before the recent oil price increase.''

grow 1.3 percent in 2008, up from a forecast of 0.5 percent in April. This was the largest increase in the forecast of
any of the group of seven leading industrial nations.
U.S. Fed Policy Next year the U.S. will expand by 0.8 percent, compared with its previous prediction of 0.6 percent,
the IMF said. Federal Reserve policy makers on June 25 kept their benchmark interest-rate target at 2 percent and, in a statement, said ``the upside risks to inflation and inflation expectations have increased.''
In the euro zone, growth this year will be 1.7 percent, higher that the 1.4 percent expansion forecast three months ago, led by a faster expansion in Germany, the IMF said. A jump in consumer prices prompted the European Central
Bank to raise its key interest rate to a seven-year high of 4.25 percent this month.

There is no recession – sectors have declined but consumer growth and other areas have the
US economy looking okay.
The Times (London), Anatole Kaletsky, “Two sliding sectors do not a US recession make” June 16, 2008 p. ln
is America really in recession? Experts seem to think so, including Alan Greenspan, Warren Buffet, George Soros
But

and Martin Feldstein, the chairman of the National Bureau of Economic Research (NBER), the academic committee in Boston that determines business cycle dates. But where is the evidence for this belief?
To be sure, housing and finance, two important parts of the economy, are in serious trouble. Yet housing now accounts for only 3.5 per cent of GDP, down from a peak of 6.5
per cent two years ago, so most of the pain has already been felt there (in contrast to the situation in Britain and Europe). The financial sector is bigger, employing 5.9 per cent of American workers, but only a small proportion of

These two sectors between them employ far fewer people than the
these are employed in cyclically sensitive jobs related to mortgages or wholesale finance.

manufacturing and tradeable service industries that are benefiting from the cheap dollar. And thus far the troubles in US banking and
construction have been almost exactly offset by gains in America's booming international trade. There is a world of difference between a dislocation confined to only one or two parts of the economy, such as housing and finance,
and a generalised economic decline. Remember the official definition of recession devised by the NBER: "A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in

industrial production, employment, real income and wholesale-retail trade. A recession influences the economy broadly and is not confined to one
sector." The difference between a general recession and a sectoral slowdown is not just a semantic quibble. For businesses
and workers, a slowdown is a period of weak growth, modest job losses and disappointing profits; a recession is marked by mass unemployment and widespread

bankruptcies. For the financial markets, the two have totally opposite implications. In a recession, share prices collapse and the only safe assets are government bonds; in a slowdown, there are big shifts in relative
performance between stock market sectors, but equities generally do well (as they did in the late 1990s and late 1980s) while safety first bond investors suffer enormous losses, as they did in 1994-95 and 1986 87. What,

then, is the evidence of America moving into recession? Looking at the statistics used by the NBER, there is little
or none - at least so far. GDP has continued to grow, albeit slowly, in the past two quarters and almost certainly
will accelerate in the current quarter because of booming exports; industrial production has been positive, as have
real income and whole-retail trade. Employment has fallen slightly, but by nowhere near as much as in the mildest of past recessions. Reliable high-frequency indicators, such as the monthly
purchasing managers' surveys, point to continuation of modest growth. Most importantly, consumer spending has remained robust. American consumers, far from cutting
back to bare essentials as was expected by bearish commentators after the credit crunch, are actually increasing their spending. The evidence of this, contained in the strong retail sales figures for May published last Thursday, was
by far the most important economic news of the past few weeks. Yet these figures received almost no media coverage and little market attention. Yet May's retail sales figures revealed a picture completely at odds with conventional
wisdom about the US economy. Despite the jump in energy prices and the related collapse in measures of consumer confidence, retail sales rose by 1.1 per cent on the month, the strongest gain since last November. Sales adjusted
for inflation and excluding food and energy also showed gains much stronger than expected. Also April's sales, initially thought to have fallen, were revised upwards to show a significant gain - and the two-month average of these
volatile figures suggested that growth in the US consumer economy is now similar to the rate a year ago, before the sub-prime crisis and credit crunch. This conclusion is not based on one set of good retail sales statistics, but
includes stronger-than-expected recent figures on industry sales, stocks, imports, exports, purchasing managers' surveys and even home sales. But in saying this, am I not forgetting about the dreadful employment figures published
last Friday, which triggered the collapse of the dollar I mentioned at the start? Not at all. Despite the shock-horror headlines about a terrifying leap in unemployment from 5 to 5.5 per cent, employment figures for May were quite
strong and fully consistent with the message of economic acceleration. Rates of unemployment are irrelevant in timing the economic cycle, since they are a lagging indicator, turning some six to nine months after the economy as a
whole. Meanwhile, the job creation figures, which do reflect current economic conditions, showed a modest decline of 49,000 in payroll employment, exactly in line with expectations and consistent with the economy growing at
about 1.5 per cent, just slightly below the 2 per cent trend rate of productivity growth. Of course May's strong retail sales were due in part to the tax rebates of $600 to $2,000 per household from the US Treasury from last month.
Many analysts, therefore, dismissed the gains as misleading. But this was the wrong response. The role of tax cuts in boosting consumer spending is a reason for optimism, not scepticism, about the economic outlook. The tax
rebates were designed to boost consumer spending and that is why we have always expected (in line with the Fed and the US Treasury) to see economic recovery from this summer. Retail sales figures have now shown that the US
tax cuts are working as planned. They will temporarily boost consumption - and by the time that this temporary tax boost runs out around Christmas, the US economy will be starting to enjoy the benefits of lower interest rates,
operating with a lag of 12 to 18 months. In much of this discussion, my optimism on US economic statistics has been qualified by the weasel words "so far". But this can change. Until this month, sceptics could predict that trouble

. With the
lay ahead for America once consumers finally realised that their credit had run out. But the strong consumer response to the $110 billion tax rebate programme changes the balance of this argument

rebates flowing into bank accounts and boosting real disposable incomes, the period of greatest risk for the US
economy has passed. For the next two quarters, disposable incomes will rise at an annualised rate of 8 per cent or more and, given the normal lags between money appearing in bank accounts and flowing into
shop tills, the tax rebates will guarantee decently strong retail spending between now and Christmas - maybe a temporary consumer boom. If there were going to be a US recession in

response to the credit crisis, it would have started by now. So let me stick my neck out and say without
qualification - the US economy is out of the woods.

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No recession now – 3 reasons prove


James Pethokoukis Mental Recession? Maybe. Economic Recession? No July 16, 2008
03:21 PM ET | | Permanent Link http://www.usnews.com/blogs/capital-commerce/2008/7/16/mental-recession-maybe-economic-recession-
no.html

Bruce Kasman over at JPMorgan, and he still doesn't think the economy is going to fall into
One the smartest guys I know is
recession, much a less a severe, 1982-style downturn. (Neither, by the way, does the Fed.) Rather, he sees the economy muddling
along with 1 percent GDP growth in the second half. Here are his three reasons:
1) Profit margins at nonfinancial companies remain healthy. "This is a testament to the fact that firms have produced strong
productivity gains—estimated to have risen at a 2.5% pace in 1H08."
2) Trade remains strong. "This is related to the decline in the dollar and the composition of US exports which is concentrated in agricultural
products, industrial supplies, and capital equipment—items that remain in demand by rapidly growing emerging market economies."
3) Businesses will have to rebuild their inventories. "Apparently, retailers and manufacturers are using the lift to
demand from rebate spending and strong exports in 2Q08—in which final sales grew at a faster than 3% clip—to
clear their shelves. In addition, the agricultural sector is experiencing a forced inventory drawdown due to floods and bad weather
conditions. This destocking is holding back our estimate of 2Q08 growth to 2.2%. But it will add significantly to growth in the coming quarters. It
should be noted that only twice in the last three decades—at the end of 2001 and 1982—did firms destock at the pace seen in 1H08. In both these
previous cases, a stabilization in stockbuilding contributed more than 1.5 percentage points to growth over the following two quarters."

Economy high now.


Investor's Business Daily, “What Recession?” June 2, 2008 p. ln
real GDP, viewed on a year-over-year basis, increased 2.5% in this year's first quarter -- the same as in last year's fourth. (Year-over-year comparisons, not
The fact is that

he U.S. factory sector -- excluding automakers -- isn't doing too badly either. Believe it or
quarter-to-quarter, are most telling.) Thanks to the weaker dollar, t

not, we're in the middle of an export boom, with double-digit gains posted the last 16 months in a row. Last week's revision of first-quarter (month-to-month) GDP growth to 0.9% from
0.6% was due almost entirely to trade. And despite the slowdown in the overall economy, industrial output is still up 1.3% so far this

year -- not a sign of disaster. As for jobs, it's true that, since the start of the year, some 220,000 nonfarm positions have been shed. But even that is moderating. In April, analysts expected nearly 80,000 jobs would be lost; the
reality was a far-smaller 20,000. And year over year, the number of jobs is still rising. This is key, since we've never had a recession in which jobs kept growing. Yes, unemployment at 5% is up a little more than half a percentage
point from its cyclical low. But it's also below the 5.4% average for the last 20 years. In any other year, this would be called dangerously low. And though weak, aggregate hours worked, another key indicator, are also still on the

. Even some of the most troubled parts of the economy show signs of bottoming. New-home sales surprised everyone by rising last month
rise

As for the stock market,


(though they're still off sharply from a year ago). Core inflation remains a tame 2%. And real disposable personal income -- what you keep after taxes -- is growing at a 1.6% rate.

it still looks like it bottomed two months ago. In short, while a recession is still possible, it hasn't happened yet --
and every day that passes makes it less likely, not more. Don't get us wrong, the current gloom is not without reason. But it's just that: gloom, not reality. Fact is, we're
still in an expansion, albeit a weak one. And with last year's Fed rate cuts about to kick in and continued stimulus
from President Bush's tax rebate and cuts, we could see a surprisingly strong economy later this year.

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AT: Regulations coming


Bush administration is denouncing regulations now, automakers think they have won big
victories

David Shepardson / Detroit News Washington Bureau Saturday, July 12, 2008
http://www.detnews.com/apps/pbcs.dll/article?AID=/20080712/AUTO01/807120350 Carmakers can claim victory -- for now

WASHINGTON -- Automakers scored a major victory Friday after the White House and several Cabinet agencies
denounced the recommendations of career staff experts at the Environmental Protection Agency for limiting vehicle
tailpipe emissions.

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Links – Regulations hurt business


Environmental Regulations impose significant costs on businesses

Pollack 1998 52 Tax Law 81 The Tax Lawyer l/n


Businesses in the United States incur significant economic costs when complying with the vast array of governmental
regulations enacted since the 1960s and 1970s. n1 Among the most expensive of the new "social regulations" are those implementing federal and state
environmental policy. n2 Pervasive environmental regulation is now a recognized, although not necessarily welcome, fact of doing business in the United States. For many sectors of the
economy -- particularly, the chemical and petroleum industries -- state and federal environmental regulation reaches
virtually every level of business activity. While not all businesses so directly confront the plethora of rules and regulations enacted to protect the environment, for those that do, the cost of
compliance can be staggering. Even for those industries not directly subject to the environmental statutes, this form of regulation imposes "hidden" or indirect outlays as the

cost of compliance is built into the price of chemical and petroleum products used generally by American industry.
In this way, the costs of environmental compliance and remedial programs constitute a significant financial cost for
virtually every sector of domestic industry. An excellent analysis of the new "social regulation" that characterized federal activity during the 1960s and 1970s (as contrasted with the
regulatory agencies created during the New Deal) is presented by Richard Harris and Sidney Milkis: "Whereas the New Deal focused on economic issues, major initiatives during the 1970s involved the federal government directly in
so-called quality of life issues such as safety in the workplace, affirmative action, pollutioncontrol, and consumer protection."

"Of all the new social regulation, that dealing with environmental regulation imposed the highest compliance costs
on business firms." In those sectors of the economy where environmental regulation is a direct and visible cost of doing business, most decision makers have integrated this cost into the overall scope of their
financial planning and into the price structure of their products. However, even those familiar with the nature and magnitude of the costs of environmental regulation need to understand better the income tax consequences of such
expenditures. The tax considerations should be considered within the context of the current and long-term tax planning of the business entity as a whole. Yet remarkably, it is common for businesses to enter into consent agreements
with the Environmental Protection Agency ("EPA") or settlements with other parties in environmental litigation involving millions of dollars without adequately considering or anticipating the tax consequences of their actions.
This Article focuses on the major federal income tax issues related to the costs imposed on American businesses by federal environmental regulation. Manufacturing concerns, real estate developers, and even passive investors in
real estate syndications may find themselves facing potential liabilities and ultimately may be required to expend significant sums to comply with environmental statutes. This Article will evaluate the tax implications flowing from the
most common and important "environmental transactions" -- by which is meant those transactions required or mandated under the federal environmental statutes.

Governments regulation and mandates about climate undermine business confidence


Clyde W. Barrow, Journal of Economic Issues, Vol 38, 1998, “State theory and the dependency principle: an institutionalist critique of the
business climate concept.”, accessed July 17, 2008,
http://www.questia.com/googleScholar.qst;jsessionid=L1KpvHbjJM1bbYs92gTzMnSZ2pDRpVdL3d5vCyQ3V95Kz22ZcG0V!897753496?docId=5001345710

Interestingly, even though the dependency principle has been formulated by liberal and radical state theorists, its explanatory power relies on the assumption that policies such as increased state expenditures, high taxes,

business mandates, environmental regulations, and pro-labor legislation systematically undermine business
confidence and therefore lead to an unfavorable business climate. Conversely, it is assumed that low state
expenditures, low taxes, the absence of mandates, weak environmental protections, and right-to-work legislation will
sustain business confidence and therefore promote a favorable business climate. Thus, paradoxically, as Block [1987, chap. 9] has recently observed, the
explanatory power of the dependency principle rests on the belief that the neoclassical model accurately conceptualizes what business firms and capitalists need from the state (i.e., to be left alone). Hence, a laissez-faire

model of the capitalist economy has become a cornerstone in the construction of radical state theory over the last
two decades. Moreover, this foundation has rendered radical state theory practically useless against neo-conservative demands to "roll back the welfare state" and against assertions that "socialism is dead" even in its most
moderate forms.(4) As Amy Beth Bridges observes, such a concept makes it virtually "impossible to conceive of a state functioning against the interests of the bourgeoisie . . . short of removing the basis of their power, that is, control
of the means of production" [1973, 173]. Consequently, this view leaves us with policy options that evidently are restricted to the antinomies of laissez-faire capitalism or a command economy such as communism

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Regulations kill growth and send a negative signal to businesses about future prospects

Kemp 2001 Washington Times l/n


Even as the world faces the threat of a global economic downturn, government regulators here and abroad go about the business of destroying
wealth, jobs and opportunity, and stifling business and technological innovation. The regulatory burden has to be relaxed quickly, and the United
States has to lead the way. Regulations are a tax on the way we live, work and do business in the same way that the
income tax and tariffs are. To sustain long-run economic growth, we must not only get tax and monetary policy right but also regulatory
policy. Government regulation has a legitimate and important role to play in modern society (although arguably less so in the Internet Age), but
few regulations really pass the simple test of cost-effectiveness. Even well-intentioned regulations can cost lives. Fuel economy
standards, for example, have driven automakers to build lighter, more efficient cars that give a lot less crash protection and cause literally
thousands of deaths per year. Regulatory overkill, therefore, is about much more than just dollars. The latest edition of "10,000
Commandments," a comprehensive analysis of regulatory costs in the United States put together by Wayne Crews of the Competitive Enterprise
Institute, demonstrates that regulations cost our nation $788 billion in the year 2000 alone, or 7.9 percent of GDP. In human terms, Mr. Crews
points out that "regulatory costs now exceed spending for every item in the average family's after-tax budget," more
than for medical costs, food or transportation. Based on 1998 tax data, regulations cost the typical family of four $7,410. The
unchecked growth of regulation on both the national and global level not only distorts economic decision-making, it
demoralizes entrepreneurs and innovators in every field of endeavor. When the European Union's Mario Monti, for
example, can block the G.E.-Honeywell merger just to protect competitors in the European market, it sends a signal to
businesses large and small that they had better worship more often at the altar of global regulation. When the United States prescribes arbitrary
new efficiency standards for appliances like washers and air conditioners, it forces manufacturers large and small to work toward that particular
design goal, not other product improvements that make
life better for us all.

Regulations upset unpredictability which is key to business confidence

Universal News Service 11-15-1993 l/n

" Predictability is the mother of confidence, and we want government to provide a steady, growing economic environment in which we can develop our businesses with that confidence,"
the CBI conference in Harrogate was told today (Monday) by Clive Thompson, chairman of the SE Region and group chief executive
of the Rentokil Group. He added: "We in the CBI are no longer on the outside looking in - we're right on the inside. But being on the inside demands we express our views responsibly and completely. It is insufficient to put the
business view in isolation without thought or concern for the requirements of the other parts of the economy.

"We cannot ignore the demands of health, education, social services and transport on the public purse. Clearly, tax revenue
directed towards business means less resources for other important requirements in the economy. Recognition brings responsibility."He went on to advocate government focusing on creating an environment in which business could
create success."We don't want radical changes of policy and direction much loved by politicians. Peaks and troughs have done more to wipe out the confidence so necessary for investment in research and development, speculative

Businessmen invest in their businesses and take risks in new ventures


new projects, and investment in plant and machinery than any misguided political dogma."

if they believe they will be working in a business friendly environment. Confidence is the key, and for those who
have to invest in the future, predictability is the mother of that confidence."

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Regulations increase costs to businesses and collapses business confidence

Myers 11/11/2002 Maclean’s l/n

: It also increases the cost of doing business, and that's not a good thing. We want to encourage companies to
Myers

restructure to actually reduce emissions, so we should be thinking about commercializing strategies for existing
renewable resource technologies and new renewal energies so we can take advantage. What's happening in fuel-cell
technology is the typical Canadian story. While we're investing heavily in research and development, the
commercialization and testing are being done in the United States. That's where the economic opportunities will
come.
Hornung: How serious is the competitive concern really? One economic model says the impact of Kyoto on oil is
going to be three cents a barrel. That's not going to cause someone to leave the country. There's a difference
between short-term competitiveness and long-term. We know that investing and becomingmore efficient actually
benefit us in the long run. We know that as we move down the Kyoto road to the next stages, the demands for
reductions in greenhouse gas emissions are only going to increase. Looking at a future marketplace, we
know there's going to be a demand for people who can provide goods and services with less of an environmental
penalty. So making those investments will only improve your competitiveness in the longer term.
Myers: Well, I wouldn't underestimate the competitiveness problem. Before we talk about the long term, we
have to make sure companies are going to be around for the long term. Profit margins are pretty thin right now in
the middle of an economic slowdown. If we're going to increase the cost of doing business -- with no tax incentives
that could make it easier for industry to adjust -- then the signal we're sending out is going to affect investment
decisions, and the impact could be quite large. This means a loss of productionfrom Canada to the United States or
Mexico, and that just means we'll be exporting greenhouse gas emissions to other countries. That certainly doesn't
benefit the environment.

Regulations Kill Biz Con- they kill investment

Heritage Foundation Reports January 2002 l/n

Overly
Freedom to Operate a Business (Low Regulatory Burden). Countries must maintain an open environment for business.
burdensome regulations can deter trade and investment. Investors may choose not to enter a country because
of the difficulties involved in opening a business or because the cost of doing business in that country is excessive.
Countries must maintain simple licensing procedures, apply regulations uniformly, and be nondiscriminatory in their
treatment of foreign-owned business.

American business leaders hate regulations

PR Newswire July 10, 2008 HEADLINE: CEOs Portray a Dismal Forecast for the U.S.;
China to Overtake the U.S. in terms of Job Generation; U.S. will Still Hold the
Highest Paying Jobs; Future of the U.S. Economy will Depend on Lower Taxes, Lower Regulation Privatized Education and Free Trade
DATELINE: MONTVALE, N.J. July 10

An overwhelming majority of American CEOs believe that in order to create the highest paying jobs and maintain the
U.S.' economic competitiveness, the government needs to reduce taxes and regulation, privatize education and remove
restrictions on trade.

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Links – Consumption declines hurt business

A cutoff of oil consumption would collapse the world economy.


Alexanders’ Gas & Oil Connections November 10, 2001
For three decades, Americans have only haphazardly tried to fortify themselves against a catastrophic cut-off of oil
from the Middle East, which accounts for about a third of world production and two-thirds of known reserves.
Little seems to have changed in the past month, although the terrorism highlighted our vulnerability. Oil is barely
part of the discussion. Over the past 30 years, we have suffered Middle East supply disruptions caused by the Yom
Kippur War of 1973, the fall of the shah of Iran in 1979 and Iraq's invasion of Kuwait in 1990. We have fought one
war for access to oil -- the Persian Gulf War. How many times do we have to be hit before we pay attention? No
one can foresee what might lead to a huge supply shutdown or whether the present attack on Afghanistan might
trigger disastrous changes. A collapse of the Saudi regime? A change in its policy? Massivesabotage of pipelines?
Another Arab-Israeli war? Take your pick. Even if we avoid trouble now, the threat will remain. In 2000 the
United States imported 53 % of its oil; almost a quarter of that came from the Persian Gulf. Weaning ourselves
from Middle Eastern oil would still leave us vulnerable, because much of the rest of the industrial world -- Europe,
Japan, Asia -- needs it. Without it, the world economy would collapse. Of course, countries that have oil can't
benefit from it unless they sell it. The trouble is they can sell it on their terms, which might include a large measure
of political or economic blackmail.

Attempts to stymie oil dependence raise costs for everyone.


Raymond Keating, June 4, 2008, “Depressing energy policies,” The Washington Times, Online, Lexis, accessed 6/27/08.
Make no mistake, when politicians talk about abandoning fossil fuels, that's not just lofty rhetoric, it's loopy. For
example, the Energy Information Administration says 85 percent of U.S. energy demand in 2006 was met through
oil (39.7 percent), natural gas (22.4 percent), and coal (22.6 percent). That's not expected to change much by 2030,
with EIA projections at 80 percent of our energy coming from fossil fuels - again, oil (34.9 percent), natural gas (19.8
percent), and coal (25.3 percent). And the International Energy Agency expects global energy demand met by fossil fuels to rise from 81
percent in 2005 to 82 percent in 2030. Barring some dramatic revolution, the U.S. and world economies will be reliant on
fossil fuels for the foreseeable future. Given that reality, we need a far different energy agenda. For example, rather than trying to
stymie oil and gas production through higher taxes, Congress and the White House need to act to eliminate unnecessary tax and
regulatory costs on energy firms. Most critically, government lands and offshore areas must be opened up to energy exploration and
development. The American Petroleum Institute reports: "Federal lands hold an estimated 656 trillion cubic feet of recoverable natural gas,
enough to meet the natural gas heating needs of 60 million households for 160 years (approximately 60 million households in the United States
are heated by natural gas). Federal lands also hold an estimated 112 billion barrels of recoverable oil, enough to produce gasoline for 60 million
cars and fuel oil for 3.1 million households for 60 years." But the government has placed much of this off-limits. That's simply bad
policymaking that raises energy costs for everyone. Politicians closing their eyes and crossing their fingers, while pandering to and
perpetuating economic ignorance regarding energy, does not make for sound policy. Congress needs to look at the hard realities, and
act accordingly. If our elected officials do not make economically sound energy policy decisions, then high energy costs will persist, thereby
keeping consumers, entrepreneurs and our economy down in the dumps.

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Specific Links - Flex Fuel

Auto manufacturers dislike flex fuel mandates


Cato@Liberty January 31, 2008 HEADLINE: Flex-Fuel Nonsense

In short, there's
a good reason why auto companies aren't popping flex-fuel capabilities into every engine
consumers don't seem willing to spend the $100 extra for that extra. Well, to be precise, most consumers don't seem that
interested. Some are in fact buying flex-fueled vehicles right now 4 million such vehicles are thought to be on the road at present and dozens of
models are on sale right now. But some of us aren't willing to fork over the extra money for the option to use those fuels over the lifetime of our
new car. Should Congress override consumer preferences in that regard? No. Given the high cost of alternatives, consumers are not acting
irrationally when they say "no thanks" to flex-fueled vehicles.
Would auto companies be advantaged by a flex-fuel mandate? Mr. May thinks so, but auto executives tend to
disagree. My guess is that Mr. May knows less about their business than they do.
If and when alternative fuels are cheaper than gasoline, you can rest assured that consumers will increase their demand for flex-fueled vehicles
and that auto makers will supply them out of simple interest in profit. Government mandates are not necessary.

Auto industry opposes moves toward more flex fuel technology

Esquire December 1, 2007 HEADLINE: Occam's Oilman; Four ways to solve the energy crisis. Four reasons why Gal Luft is the most
hated man in Riyadh, Detroit, and Des Moines.

"These are only four of many common-sense opportunities throughout the economy, but we're not taking advantage of them, because there
isn't a sustainable market for alternative fuels. Yet. Which brings us back to step one: flex-fuel technology. Get that
and the other three will take care of themselves. There will be stiff opposition from the oil, corn, and auto lobbies. There
always is. But let's hope that Washington can step up for a change. Because once you take politics out of the energy policy, you get very
different-and much better-results."

Business would oppose regulations for flex fuels cars because they would have to raise
prices, which might anger consumers

Linda McQuaig, Toronto Star The Toronto Star January 22, 2008 HEADLINE: Elites love to pig out on energy
It's not even clear that the changes would have to impact the public that negatively. Auto manufacturers say that tough fuel
efficiency requirements would force them to spend more, pushing up car prices by thousands of dollars.
In fact, auto manufacturers are constantly spending large sums on improving engine technology. The question is
where they apply these technological advances.

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Specific Links –Tradable Permits


Tradable Permits cause corporate scandals
Marlo Lewis April 4, 2003 “Nix the Energy Bill” http://www.nationalreview.com/comment/comment-
lewis040403.asp

Transferable credits increase the risk of future Enron-type scandals. Firms might "earn" credits by not producing
things, outsourcing production, shifting facilities overseas, or "avoiding" hypothetical future emissions. A market in
such dubious assets will be fertile soil for creative accounting.

Corporate scandal causes economic collapse

Philip Gotthelf October 10, 2002 http://www.gold-eagle.com/gold_digest_02/consensus101402.html

Further, we see incentives to mislead one arm in favor of the other. A good stock recommendation insures continuing
banking relationships. The investor becomes a sacrificial lamb. Yet, we read that our economy is based upon
consumerism. By sacrificing the individual investor, these institutions have placed the entire economy at risk.
Wealth evaporation has slowed economic growth that, in turn, depletes wealth which, in turn, slows the economy.
This is the cycle.
I am not unique in my discovery of investor sentiment. "What's next?" As corporate scandal and Street dishonesty
make headlines, the public's confidence turns to despair. This is hardly an environment for a recovery. Lacking
fundamental encouragement, traders await technical confirmation of a bottom. Hopes hang on every rally. However,
the overall complexion is extremely weak.

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Specific Links – Tradable Permits


A cap and trade system would kill U.S. businesses.

Smith and Mix, 2007,


Julianne director of the CSIS Europe Program) and Derek (research associate in the CSIS Europe Program), “The
Transatlantic Climate Change Challenge,” The Washington Quarterly, 31.1, Online, Muse,
http://muse.jhu.edu.proxy.missouristate.edu/journals/washington_quarterly/v031/31.1smith.html, accessed 6/22/08.

Caught between climate change advocates and the skeptics are those that admit that warming is occurring but
oppose any initiative that might hurt the U.S. economy. These individuals, recognizing that the United States is the
world's largest per-capita source of greenhouse gases, argue that the United States will pay the highest price for
change. If the United States were to put in place a cap-and-trade system, for example, operating costs for U.S.
firms [End Page 150] would rise, making imported goods, especially from India and China, even more competitive
and possibly driving U.S. companies out of business. Any solution must therefore include China and India.

Their studies of how cap and trade works are flawed. They are bound in static economic
analysis. The plan will actually lead to even more volatility in energy markets empirically
proven by Europe.
Arthur Laffer and Wayne Winegarden economists September 2007 "The Adverse Economic Impacts of Cap
and Trade Regulations" Arduin, LAffer and Moore Econometrics
http://www.junkscience.com/Cap_and_Trade_Economic_Analysis_September_2007.pdf
Cap-and-trade advocates are correct only in a static world where market supply-and-demand curves are known
with certainty. Appendix I illustrates the theoretical benefits from a cap-and-trade policy, or what is known as a
quantity constraint in economics, under these hypothetical and unrealistic conditions. Markets are dynamic, and
people change their actions in response to the changing dynamics of the marketplace. Appendix II illustrates this
economic logic in a realistic scenario where the supply-and-demand curves vary compared to levels expected by
the government after establishment of a GHG cap. Once market dynamics are incorporated, the efficacy of the
cap-and-trade solution disappears. Significant price volatility emerges in the market because the supply-and-
demand curves are not known to policymakers when initial cap-and-trade policies are established. Furthermore,
the supply-and-demand curves will shift over time, and oftentimes in unpredictable ways. By definition of the cap-
and-trade quantity constraint, the quantity of the GHGs allowances cannot change and may become substantially
stricter in subsequent years. Changes in supply-and-demand, then, can only be accommodated through changes in
prices (see Appendix II). This process may lead to extreme price volatility in the emissions allowance market and
the markets for good and services produced under emissions caps. The European experience with cap-and-trade
exemplifies these fundamental flaws. The value of the GHG allowances in Europe nose-dived in April 2006 due to
a mismatch between the allowances granted and actual market demand. While some observers try to explain these
variations as a result of poor planning on the part of governments, such extreme price volatility is a natural
consequence of policies that arbitrarily cap quantities. As shown in Appendix II, this price volatility is what should
have been predicted prior to Europe’s implementation of cap-and-trade. The European experience supports the
contention that cap-and-trade is not the appropriate policy response for addressing the issues related to GHG
emissions.

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Specific links – CAFÉ standards


Auto lobbies oppose mandates like fuel efficiency in cars because they think they threaten
jobs
Kevin G. Hall, McClatchy Newspapers Charleston Gazette (West Virginia) December 2, 2007 HEADLINE: Friend vs. friend battles don't
help Dems on energy

The United Autoworkers Union is opposing environmentalists' attempts to


impose higher fuel-efficiency standards because auto manufacturers insist
that the standards would threaten manufacturing jobs.

CAFÉ standards will have grave economic consequences on business.


Gerry Rogers 2002 “the real café numbers”

The irony of the name calling by both sides is that each had a legitimate point to make, and ironically, each used excerpts from a recently
completed study by the National Academy of Sciences (NAS) to bolster their case for their respective positions. The study, now a matter of public
record and available online at www.nap.edu/catalog/10172.html, paints a complex but realistic picture of the social, economic, technical, safety
and political issues that have become interwoyen with the CAFE standard in the 27 years since its inception. Because the report is open to
raising CAFE arbitrarily will have grave economic consequence
interpretation, automakers claim it supports their position that
on the domestic auto industry, have little effect on actual fuel consumption and that higher mileage numbers are not
technologically practical without market incentive. Lawmakers hone in on the report's list of promising technologies, concluding
that workable technology exists that can boost economy by 50 percent.

Despite initial acceptance of environmental policies, US automakers have been successfully


opposing regulations
Zaleski 2007 Zaleski, Sarah, (Biofuels Market Analyst, United Nations Conference on Trade and Development [Researched emerging
national biofuel developments, markets, and trade flows throughout the world. Assessed the viability of foreign direct investment for renewable
energy projects in developing countries. Examined side effects of biofuel expansion including commodity pricing, food security, and rural job
creation], Congressional Affairs Staff, Pew Center on Global Climate Change [Educated over 250 individual Congressional offices on climate
change policy and the potential for policy. Inventoried and evaluated private sector climate programs while communicating relevant information
to legislators. Analyzed the politics and implications of the 2005 Energy Bill and its related amendments]). "Labor/Environmental Alliances."
Nicholas School of the Environment and Earth Sciences ( 24-May-2007): 9.

In 2001, Corporate Average Fuel Efficiency (CAFE) standards made their way to the Congressional floor for
the first time since their inception decades earlier. The push to strengthen the standards was met by
fierce opposition from U.S. automakers who, in turn, enlisted the political pull of the UAW to thwart their
tightening. Interestingly, the UAW supported the initial CAFE standards in 1975 in hopes that the measure would
help keep U.S. automobiles competitive in an energy-constrained world. However, the shrinking membership of the
UAW was swayed by industry which warned of the massive job losses that would occur if CAFE standards were
increased. Needless to say, CAFE standards remain unchanged still today.

CAFÉ standards hurt companies and competitiveness


Collier, 10-24-04 San Francisco Chronicle
Old habits die hard among Detroit's automakers. While Ford and GM have introduced some gasoline-saving hybrid cars, they
continue to emphasize larger gas-guzzling models and sport utility vehicles -- because the American public likes them and because the profit
margin is higher than on the smaller vehicles favored by their Japanese competitors. U.S. auto companies and the United Auto Workers union
have opposed a tightening of fuel-efficiency standards because they say Japanese firms would derive most of the benefit and American
workers might lose jobs. Because Michigan, where the industry is headquartered, is considered a swing state in the presidential campaign,
Kerry has dropped his support for mandatory increases in mileage standards (known as the Corporate Average Fuel Economy standards, or
CAFE) favoring instead voluntary improvements.

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CAFÉ standards will cost billions and eliminate thousands of jobs

Detroit News, 10-17-04


Kerry is one of the Big Three's most hostile critics in Washington, D.C. In 2002, he introduced legislation that would have raised
corporate average fuel economy standards (CAFE) to 36 miles per gallon from 24 mpg. The Energy Information
Administration estimated Kerry's proposal would have eliminated 450,000 jobs and resulted in $170 billion of lost
economic output. Kerry's fuel economy increase would have hit Michigan's economy especially hard because General
Motors, Ford and Chrysler depend more on the profits from low-mileage sport utility vehicles, pickups and
minivans than their foreign competitors. This reliance on light trucks is directly tied to the enormous labor costs
associated with paying United Auto Workers wages, health benefits
and pensions. Detroit can't cover its labor costs by selling sedans. It needs the profits from light trucks to compete with foreign
nameplates that employ nonunion workers.
Recognizing the economic pain Kerry's proposal would have brought to Michigan, the UAW and Democratic Sens. Carl Levin
and Debbie Stabenow fought to kill it. Levin noted the CAFE increase would benefit foreign carmakers at the
expense of the Big Three. Levin's case was bolstered by a study conducted by the Competitive Enterprise Institute that
found Kerry's proposal would have reduced GM's annual profits by $3.8 billion, Ford's $3.4 billion and Chrysler's $1.9 billion,
while increasing foreign profits a combined $4.4 billion.
Such losses would have accelerated the push of foreign automakers to grab more U.S. market share and hindered the Big
Three from meeting their UAW pension obligations.

CAFÉ standards will have a devastating economic impact on the auto industry

Washington Times, 7-29-03


The Senate will begin debating fuel-efficiency standards today after completing votes involving trade policy and a few
federal judge nominees.
Sen. Richard J. Durbin, Illinois Democrat, wants to mandate that automakers
create and sell vehicles that average 40 miles per gallon by 2014, a huge increase over today's
average of 25 miles per gallon. Mr. Durbin also has offered an amendment that would impose a tax on
cars that fail to meet those standards - as much as $7,700 if a vehicle falls 14 miles per gallon short of
the goal. "The Durbin amendments on [corporate average fuel economy] standards would have a
devastating impact on the automobile industry," said Sen. James M.Inhofe, Oklahoma Republican.

CAFÉ standards will hurt the US economy. Fuel efficiency costs consumers and
automakers billions. Consumers will buy fewer cars.
Greenwire, 4-29-04

But automakers said the solution is not in government mandates. "If we address this issue by adding a lot of
cost to vehicles, or by forcing consumers into vehicles they don't really want to buy, let's face it -- we're
going tosell fewer cars and trucks, hurt our own competitive position and hurt the U.S.
economy," said General Motors Chief Executive Officer Rick Wagoner in a speech
earlier this year (Danny Hakim, New York Times, April 29). A Congressional Budget Office study released in January said even
a modest increase in fuel economy standards for cars and trucks could cost consumers and
automakers as much as $3.6 billion. Increasing fuel economy standards under the existing CAFE
program would be the costliest route to gasoline savings, CBOsaid, saddling consumers and producers
with an additional $3.6 billion in costs, the equivalent of adding $228 to the price of every new vehicle sold. Currently,
fuel economy regulations require fleetwide averages of 27.5 mpg for cars and 20.7 mpg for light trucks (Greenwire, Jan. 8)

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Regulation Spillover

Imposition of environmental regulations will lead to a free-fall of regulatory activity


threatening all business
Sally Pipes and Benjamin Zycher 2k3 Attorneys General versus the EPA www.pacificresearch.org
Pipes is President and CEO of Pacific Research Institute and Zycher is a sr. fellow at the Pacific Research Institute

These studies are not directly applicable to the Attorney’s General Petitions, which attempt to force federal
regulations of carbon dioxide emissions from vehicles only. At the same time the available literature still is relevant,
in that the imposition of such controls on vehicles inexorably would lead to similar controls on many stationary (and
other mobile) sources. Once the environmental principle is conceded—that limits on carbon dioxide emissions are
appropriate—it would be impossible politically to prevent this expansion of regulatory activity. More broadly, once
the policy question shifts from whether to impose carbon dioxide regulations to the extent of such regulations, a
political freefall would result. Regulatory policy can be used to create winners offering political support for an
extension of the regulatory program. The prospect of an emissions trading program, in which relatively energy-
efficient firms and industries can sell some of their emissions permits to others, is only one prominent example of
this phenomenon. And so just as there is no such thing as slight pregnancy, there will be no program of carbon
dioxide emissions limits – and attendant costs—that remains limited to vehicles, powerplants, or other narrowly
defined sectors. Once regulatory policy embarks down that road, it will find no exits.

Environmental regulations crush business confidence. All sectors of the economy are
affected.
William G. Laffer, III 2/16/1993 Backgrounder #926 http://www.heritage.org/research/regulation/BG926.cfm

Regulation in one part of the economy can have an impact in other areas. For example, a recent study by economists
Michael Hazilla of American University and Raymond Kopp of Resources for the Future, a Washington, D.C.-based research group
specializing in environmental issues, found that environmental regulations had reduced employment in the finance, insurance, and real
estate industries by 2.64 percent as of 1990. (Michael Hazilla and Raymond J. Kopp, "Social Cost of Environmental Quality Regulations:
A General Equilibrium Analysis," Journal of Political Economy, Vol. 98, No. 4 (1990), p. 869.) This occurred despite the fact that these
industries produce no pollution themselves and thus did not incur the direct cost of pollution abatement equipment. Hazilla and Kopp
found that all sectors of the economy are affected by environmental regulations, because such regulations cause
the cost of inputs to the production process such as labor, raw materials, and electricity to rise, and cause
savings, investment and capital formation to fall.

Plan will embolden alarmists and lead to a cascade of regulation threatening industry
Marlo Lewis, Jr. (sr. fellow at the Competitive Enterprise Institute), 2k3 “it’s a gas” http://www.cei.org/gencon/019%2C03735.cfm

But if we do not know enough to establish a “planetary limit” on emissions, we do not know enough to establish carbon intensity targets either.
Absent real knowledge of the level at which carbon dioxide concentrations must be stabilized, there is no scientific basis for setting either
emission limits or intensity targets.
Mandating carbon intensity reductions would embolden rather than appease pro-Kyoto alarmists, who
would see the scheme for what it is — the crossing of a legal and policy Rubicon. From then on, debate
would not be over whether to suppress carbon-based energy, but over how much to suppress it.

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AT: Plan saves money


There are big short term costs, their link turns are long term

Cramton and Kerr 1999 http://www.cramton.umd.edu/papers1995-1999/99ee-distributional-effects-of-


carbon-regulation.pdf

Three groups ultimately bear costs: consumers, workers (owners of human capital), and capital owners, especially
current owners of physical capital. Consumers suffer loss of consumer surplus, workers suffer a fall in income,
and capital owners suffer a fall in the value of their capital. The legal incidence of the regulation does not affect
prices or cost bearing. Increased costs, due to the need to purchase a permit or pay a tax, are passed forward to
consumers, and backward to factor suppliers, capital owners and workers. How the prices throughout the economy
adjust depends on the elasticities of supply and demand at all levels in the economy. Prices will rise most where
behavior is most inelastic. In Figure 1 we illustrate one possibility. The relatively inelastic demander faces a large
price increase while the elastic supplier only suffers a small price decrease. Given a set of consumption price
changes, consumers will bear costs in proportion to their expenditures on goods produced using fossil fuels.
In the short run, fossil-fuel specific capital stocks such as oil-fired electric utilities, and the human capital and
location of workers in industries such as coal mining, will tend to be inelastic. Thus capital owners and workers will
suffer high short term costs. How these price changes translate into distributional effects depends on the distribution
of ownership of physical and human capital. The effects on physical capital will be diffused across many
shareholders when the companies are publicly owned. The effects on workers tend to be heavily concentrated in
relatively few individuals and communities. In the long run, capital is mobile and workers will make appropriate
choices of education and location. This will lower their costs as well as total costs. How long this requires depends
on the rate of obsolescence of capital and how quickly individuals and communities can adjust. The outlook for
some coal mining areas is not promising. After capital and labor have adjusted, consumers bear the ongoing costs of carbon regulation.

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I/L – Business Confidence Key to Economy


Loss of Confidence crashes the economy

Financial Express Jan. 3, 2003 l/n

I do not subscribe to the view that a systemic arrangement of law, regulations & standards, by itself could guarantee
good corporate governance; nor do corporate failures of the nature that we have seen,negate the merits of free
market - in fact they are an integral part of it.'Off-balance sheet' transactions which are opaque to investing public
are not because of inadequate accounting standards, they are in spite of them. Certainly, when corporate giants
collapse, the earth sha-kes under them. Moreimportantly, business confidence plummets, which is extremely bad
for economic growth of the country. There can be little argument that it is necessary to prevent cataclysmic failures
and if they are a result of poor corporate governance, it is no doubt necessary to address the issue. Strangely, the
response to this situation, from Governments including that of the United States, have been reminiscent of the way
Indian bureaucracy had dealt with systemic failures in the past: enact more law; regulate more. Whilst it is
certainly necessary to detect the crevices through which dishonest corporate behaviour leaks past the protective
sheath of regulatory framework, it is my sincere belief that this response might not provide a durable solution; it
might even be somewhat counter-productive, as it has happened in the present context.

Confidence is critical- single events can trigger irrational herd mentality plunging the
economy into a recession

Christopher Dow 1999 National Institute Economic Review January 1999 l/n
This analysis, as will be seen, emphasises the importance at all stages of changes in what may alternatively be called consumer-business
expectations, or changes in the mood, or confidence, of consumers and firms. The nature of
consumers' and firms' reactions is seen to depend not, as in neo-classical accounts, on rational responses to
dependable knowledge about the future; but rather on unreasoning responses to events in a situation where the future
can be discerned at best only very imperfectly. The predominant mechanisms are seen to be not equilibrium-seeking
mechanisms (comparable to an automatic governor on a machine), but rather to the lurches of herd behaviour. This
suggests that macroeconomics should in future give more weight to analysis of crowd behaviour. That is also
relevant to the relation between government and the individual, and hence to possibilities of political action to
control recessions.

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Business confidence key to the economy

PR Newswire 8/6/2002 l/n

Speaking on some of the foremost challenges facing the nation's capital markets today, Mr. Sodano remarked that,
"We have seen corporate scandals, politics, public policy issues and world terrorism quickly erode investor
confidence and witnessed the impact it has had on the economy."
"These events can have a devastating effect on a company's access to capital markets, especially small- and mid-
cap companies. Small companies are often our nation' s principle source of job creation and future economic growth,
and clearly this is a sector we do not want to see fail," continued Mr. Sodano. "Wall Street and Congress have
already begun to respond to the growing crisis of confidence, including the Amex," said Mr. Sodano. "It is critical
that we restore investor confidence in the markets. The Amex has established a framework for the development of
new corporate governance rules. It is our goal to establish rules that ensure accountability, transparency and
oversight while also recognizing the importance of diversity and critical needs of companies at
different stages of development."
"The global economy is changing rapidly and it is increasingly more important that the rules governing our nation'
s capital markets are on a competitive and level playing field with the rest of the world. We live in an age of delicate
economic equilibrium. Bound together in a global economy -- every action we take can result in reverberations in
the far corners of the earth. As a nation, we need to accelerate our efforts to reach agreement on a set of common
global accounting standards. Restoring investor confidence is paramount," concluded Mr. Sodano.

Business confidence is the motor of economic growth.


Arthur F. Burns (recipient of the AEI Francis Boyer Award for 1978) 1/1/2000
http://www.aei.org/publications/pubID.15232,filter.all/pub_detail.asp
The learning process that has thus been going on in our country is to me a basic reason for viewing our economic future with optimism.
Education may proceed slowly, but economic mistakes do not go unnoticed indefinitely in a vital democracy such as ours.
Responsible citizens have gradually learned that our striving for a better society must be disciplined by prudence. They have learned that our
productivity must increase faster if we are to remain a great nation, that governmental regulation can be overdone, that persistent federal
deficits release forces of inflation, that inflation has been sapping our nation's strength, and that inflation cannot be brought to an end without
making some economic sacrifices. They have learned also that confidence is still the main driving force of our economy and
that business confidence in particular requires sustained governmental policies for encouraging initiative,
enterprise, and investment.

Business confidence is key to growth

Lawrence Whitman 2k2 WebMemo #135 The Heritage Foundation


http://www.heritage.org/Research/Regulation/wm135.cfm

Confidence on the part of consumers, investors and business owners is an integral part to the economy. And the
greater the
confidence people have across the spectrum, the greater the chance for economic growth going forward. That's
why it's important for the President to hear the views of people, ordinary people as well as CEO's and academics, and for the President to get out
in front and lead on this issue, and inspire confidence in people. NACHMAN:
So this "feel good" stuff, no matter how ephemeral it is, can be meaningful in the economic reality, correct?WHITMAN:
It's not just that it's ephemeral, it's what some economists have called "animal spirit." It's what people perceive about the
future as well as the present that effects their behavior now.

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Investor Confidence Key to Economy

DeFeo 2002 Philip D. DeFeo Chairman and Chief Executive Officer Pacific Exchange, Inc. June 19
http://www.pacificex.com/news/pub_state/pub_state_investor_confidence.html

As long as investors do not trust the financial system, investment performance will lag economic
performance. Lacking confidence, they will overweight risk, discount values and potential
returns, and shy away from committing new capital to the market. I believe this can and will act
as a brake on essential capital formation. I believe will weaken and slow both the economic
recovery and long-term growth.

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I/L – Small Business key to economy


Small Business Are The Only Thing That Has Kept The Us Economy Afloat—They Are
Key

FDCH 5/19/1998
Overview of the Importance of Small Business in the United States Economy The United States has a strong and vital economy
envied by the world. We encourage entrepreneurship and the creation of businesses in order to drive our free market system. Currently,
there are 23.3 million small businesses in the United States, the vast majority of which are very small, but all of which have
aspirations to grow. Our small business community continues to maintain and sustain our economy. A number of small
business trends are affecting our economy: * Small firms created virtually all of the net new jobs between 1992 and 1996 (see
attached chart). While the Fortune 500's share of U.S. employment has declined steadily since 1968, small business entrepreneurs have filled the
gap (see attached chart). * It is estimated that the fastest growing segment of the small business community, called "gazelles" by many analysts,
numbers 300,000 businesses. * Our country is experiencing a major "information revolution" similar to the earlier industrial revolution-propelled,
at least initially, by small businesses. Our service-based industries are boorning, with the information and technology sectors growing at an
accelerated rate (see attached chart). * Small businesses are taking advantage of the global marketplace. A recent study
completed for the Office of Advocacy shows that small businesses are exporting at a much greater rate than ever before. 3 Every year, our
economy experiences dynamic changes through the births and terminations of businesses. Last year a record 884,609
firms with employees were created. In contrast, only 54,027 business-related bankruptcies-- primarily liquidations under Chapter 7-- were filed. 4
A high rate of business formation and dissolution is characteristic of a dynamic economy. Our nation's economy is characterized by
this dynamic and by the special role played by small business entrepreneurs to sustain overall growth.

Small Businesses Are Key To Economic Recovery

FNS 5/20/1998
Small business is the backbone of this nation's economy. It has been one of the driving forces behind this country's
past economic growth and will continue to be a major factor as we move into the 21st century. According to the
SBA, "small businesses are responsible for 75 percent of the new jobs in the economy and employ more than one-
half of the workforce.' Currently, small business is our largest employer and over 30 percent of all small businesses
are owned and operated by veterans.

Small businesses drive the economy

Raymond Keating, Chief Economic of the Small Business Survival Committee, FDCH, June 4, 1998
BACKGROUND Make no mistake, government-imposed costs inflict considerable harm on smaller enterprises.
Small businesses often operate on tight margins, struggling to stay alive month to month and year to year. This is
perhaps best illustrated by the fact that more than half of new businesses fail or reorganize within five years, as
noted by the U.S. Small Business Administration (SBA). At the same time, however, small businesses have long
proven to be the wellspring of innovation, invention and job creation in our economy. In any given year, smaller
businesses also account from anywhere from two-thirds to more than 100 percent (large firms often shed more jobs
than they create) of net job creation. So, these high-risk ventures are critical to the economy. Unfortunately,
increased government-imposed costs weigh heavily around the necks of entrepreneurs. For example, according to an
SBA study, the annual per employee costs of federal regulations range from $2,979 for businesses with 500 or more
employees to $5,195 for businesses with 20 to 499 employees to $5,532 for businesses with fewer than 20
employees. Regulatory economist Thomas Hopkins estimates that the real costs of federal regulations are expected
to rise by more than 30 percent between 1988 and 2000. Starting up and investing in businesses are high-risk
ventures. If government imposes weighty taxes and regulations, then fewer enterprises will be created, fewer will
survive, and job creation will wane. If implemented, the Kyoto Protocol would guarantee that governmental burdens
on entrepreneurs -- indeed, on businesses of all sizes -- would continue to rise, thereby damaging economic growth
and job creation.

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I/L – US Business Confidence key to the world economy


A fall in U.S. business confidence will affect the global economy.
Trevor Greetham (Director of asset allocation for Fidelity International), January 25, 2007, “America will lead they way,”
Online, Lexis, accessed 6/27/08.
US consumer strength has been a major driving force for global economic growth and has acted as a power supply
for the rapid economic development of China and other emerging markets in the past few years. With US house prices
falling, fears of a weaker US consumer demand and a fall in business confidence could become more prevalent. For a soft
landing in the US and world economy, there needs to be significant rate cuts from the Federal Reserve and lower mortgage rates. This,
in turn, hinges on the path of inflation.

Confidence in US key to the economy

Julian Jessop April 16, 2003 Business Times l/n

With the military phase of the crisis in Iraq virtually over, investor focus has shifted back to economic fundamentals and corporate earnings.
Events on Friday showed how fragile market sentiment still is. Despite strong US retail sales and consumer confidence data, the positive response
was short-lived. The big worry is that any post-war bounce in the global economy will prove to be temporary too.
The US will be pivotal. Europe remains too weak to be an engine of world recovery. Indeed, when the
International Monetary Fund (IMF) revised its 2003 forecasts last week, the largest cuts were to forecasts for
growth in the Euro zone. These economies are now expected to grow by only 1.1 per cent this year. (As recently as
September, the IMF was forecasting growth of 2.3 per cent.) Even the European Commission agrees, forecasting
growth of 1 per cent.

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US economy key to the world economy
Wall Street Journal January 22, 2008; A Global Selloff Page A18
http://online.wsj.com/article/SB120096124830205037.html?mod=opinion_main_commentaries

What was that about "decoupling"? There has been lots of hopeful talk in recent months that European and Asian
economies are starting to free themselves from dependence on growth in the U.S. Well, not so fast. Yesterday's rout
in global stocks showed once again that as America goes, so goes the rest of the global economy.
While U.S. markets were off for Martin Luther King Day, the world numbers were dismal after last week's U.S.
turmoil. Hong Kong's bourse fell 5.5%, its worst day since September 12, 2001. India fell 7.4%, Tokyo 3.9%, Seoul 2.9%, Singapore 6%. Even
Shanghai's A-shares market, which often bucks foreign trends thanks to capital controls, slid 5.1%. Europe followed Asia's lead. The DAX, the
German blue chip index, plunged 7.2%. London's FTSE closed down 5.5% and the French CAC-40 fell 6.8%. Fears of a U.S. recession appeared
to be the common theme.
The economies of Europe and Asia continue to be tightly bound to America's. Taking goods and services together,
the European Union and U.S. account for the largest bilateral trade relationship in the world, illustrating their
economic interdependence and common risks. Europe's well-developed financial system has already shown it isn't immune to U.S.
subprime contagion, which is also contributing to investor jitters.

US downturn brings down the rest of the world


Business Week 9-24-2001 l/n
A U.S. downturn will have repercussions all around the world. With Japanimploding economically, Asia in trouble, and Europe struggling, a recession in the U.S. would
remove the last remaining source of demand from the global
economy. ''It's like throwing cold water on any prospects for a recovery,'' says Chang Il Hyung, senior vice-president of South Korea's Samsung Electronics Co., the world's largest memory chipmaker. With people around the globe
watchingcarnage in New York, consumer confidence and business investment could be hit

everywhere. ''Since the global economy is interwoven through trade and investment, all of us will be worse off,''
says Sung Won Sohn, chief economist at Wells Fargo & Co.

U.S. decline goes global.


Eric Pfanner 1/10/2003 International Herald Tribune http://www.iht.com/articles/2003/01/10/a11_21.php
The global economy piggybacks on the United States, benefiting when America breaks into a run and suffering
when the U.S. pace wanes.

United States Fall Would Collapse The Global Economy

Francesco Sisci 2002, Asia Times, “THE AMERICAN EMPIRE: Part 3: The fear within”, October 18,
http://www.atimes.com/atimes/Middle_East/DJ18Ak02.html

The implosion or fall of the US would have been bad news not only for Europe, but for the rest of the world. A cowering,
wounded United States would have precipitated a global economic downturn, dragging down all emerging markets,
China's included, and would have created a huge vacuum of power that no one could fill. This in turn could have brought about chaos for
developed and developing nations, with the only benefit going to the ultimate producers of energy and fundamentalist faiths such as Wahhabi
Islam. Incidentally, both happen to reside in the same place - Saudi Arabia

The u.s economy is key to the world economy.

Roberts 2003 [Michael, Writer , “The World Economy After Iraq”, April 27, accessed @
http://www.marxist.com/Economy/world_econ_afteriraq.html via google on 7/26/06]

And the US is the key to the world economy. If the US catches a cold, then the rest of the world will catch Severe
Acute Respiratory Syndrome (SARS). Already European business surveys point to an economy that is teetering on
recession, while Japan's industry remains deep in a stagnant pool. The Japanese stock market is now at a 20-year
low!

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Economy Impacts
Economic collapse cause global nuclear war

Mead 98 Los Angeles Times August 23,” ECONOMY;MARKETS BIGGEST THREAT TO PEACE”
Even with stock markets tottering around the world, the president and the Congress seem determined to spend the next six months arguing about
dress stains. Too bad. The United States and the world are facing what could grow into the greatest threat to world peace in 60 years. Forget
suicide car bombers and Afghan fanatics. It's the financial markets, not the terrorist training camps that pose the biggest immediate
threat to world peace. How can this be? Think about the mother of all global meltdowns: the Great Depression that
started in 1929. U.S. stocks began to collapse in October, staged a rally, then the market headed south big time. At the bottom, the Dow Jones industrial average had
lost 90% of its value. Wages plummeted, thousands of banks and brokerages went bankrupt, millions of people lost their jobs. There were similar horror stories
worldwide. But the biggest impact of the Depression on the United States--and on world history--wasn't money. It was blood: World
War II, to be exact. The Depression brought Adolf Hitler to power in Germany, undermined the ability of moderates to oppose Joseph Stalin's power in Russia, and
convinced the Japanese military that the country had no choice but to build an Asian empire, even if that meant war with the United States and Britain. That's the
Let the world economy crash far enough, and the rules change. We stop
thing about depressions. They aren't just bad for your 401(k).
playing "The Price is Right" and start up a new round of "Saving Private Ryan."

Economic Collapse causes extinction

Lt Col.Beardon, PhD, 2000 http://www.cheniere.org/correspondence/042500%20-%20modified.htm Lt. Col Thomas E. Bearden (retd.)


PhD, MS (nuclear engineering), BS (mathematics - minor electronic engineering) Co-inventor - the 2002 Motionless Electromagnetic Generator - a replicated overunity EM generator Listed in Marquis' Who'sWho in America, 2004
The Tom Bearden Website From: Tom Bearden To: (Correspondent) Subj: Zero-Point Energy Date: Original Tue, 25 Apr 2000 12:36:29 -0500 Modified and somewhat updated Dec. 29, 2000.

Just prior to the terrible collapse of the World economy, with the crumbling well underway and rising, it is inevitable
that some of the weapons of mass destruction will be used by one or more nations on others. An interesting result then—as all the
old strategic studies used to show—is that everyone will fire everything as fast as possible against their perceived enemies.
The reason is simple: When the mass destruction weapons are unleashed at all, the only chance a nation has to survive is to
desperately try to destroy its perceived enemies before they destroy it. So there will erupt a spasmodic unleashing of
the long range missiles, nuclear arsenals, and biological warfare arsenals of the nations as they feel the economic
collapse, poverty, death, misery, etc. a bit earlier. The ensuing holocaust is certain to immediately draw in the major nations
also, and literally a hell on earth will result. In short, we will get the great Armageddon we have been fearing since the advent of
the nuclear genie. Right now, my personal estimate is that we have about a 99% chance of that scenario or some modified version of it, resulting.

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Global recession would result in a catastrophic explosion of conflicts, food riots, arms races
and full-blown wars.

Bernardo V. Lopez BusinessWorld 9/10/1998, HEADLINE: Global recession phase two: Catastrophic (Private
sector views)

What would it be like if global recession becomes full bloom? The results will be catastrophic. Certainly, global recession will spawn wars of all kinds. Ethnic wars

can easily escalate in the grapple for dwindling food stocks as in India-Pakistan-Afghanistan, Yugoslavia, Ethiopia-Eritrea, Indonesia. Regional conflicts
in key flashpoints can easily erupt such as in the Middle East, Korea, and Taiwan. In the Philippines, as in some Latin American countries, splintered
insurgency forces may take advantage of the economic drought to regroup and reemerge in the countryside. Unemployment worldwide will be in the billions. Famine
can be triggered in key Third World nations with India, North Korea, Ethiopia and other African countries as first candidates. Food riots and the breakdown of law and order are possibilities. Global
recession will see the deferment of globalization, the shrinking of international trade - especially of high-technology commodities such as in the
computer, telecommunications, electronic and automotive industries. There will be a return to basics with food security being a prime concern of all governments, over industrialization and trade expansions.

Protectionism will reemerge and trade liberalization will suffer a big setback. The WTO-GATT may have to redefine its provisions to adjust to the changing
times. Even the World Bank-IMF consortium will experience continued crisis in dealing with financial hemorrhages. There will not be enough funds to rescue ailing economies. A few will get a windfall from the disaster with the
erratic movement in world prices of basic goods. But the majority, especially the small and medium enterprises (SMEs), will suffer serious shrinkage. Mega-mergers and acquisitions will rock the corporate landscape. Capital markets
will shrink and credit crisis and spiralling interest rates will spread internationally. And environmental advocacy will be shelved in the name of survival. Domestic markets will flourish but only on basic commodities. The focus of
enterprise will shift into basic goods in the medium term. Agrarian economies are at an advantage since they are the food producers. Highly industrialized nations will be more affected by the recession. Technologies will concentrate
on servicing domestic markets and the agrarian economy will be the first to regrow. The setback on research and development and high-end technologies will be compensated in its eventual focus on agrarian activity. A return to the
rural areas will decongest the big cities and the ensuing real estate glut will send prices tumbling down. Tourism and travel will regress by a decade and airlines worldwide will need rescue. Among the indigenous communities and
agrarian peasantry, many will shift back to prehistoric subsistence economy. But there will be a more crowded upland situation as lowlanders seek more lands for production. The current crisis for land of indigenous communities will

Land conflicts will increase with the indigenous communities who have nowhere else to go either being
worsen.

massacred in armed conflicts or dying of starvation. Backyard gardens will be precious and home-based food production will flourish. As unemployment expands, labor will
shift to self-reliant microenterprises if the little capital available can be sourced. In the past, the US could afford amnesty for millions of illegal migrants because of its resilient economy. But with unemployment increasing, the US
will be forced to clamp down on a reemerging illegal migration which will increase rapidly. Unemployment in the US will be the hardest to cope with since it may have very little capability for subsistence economy and its agrarian
base is automated and controlled by a few. The riots and looting of stores in New York City in the late '70s because of a state-wide brownout hint of the type of anarchy in the cities. Such looting in this most affluent nation is not

The weapons industry may also grow rapidly because of the ensuing wars. Arms escalation will have primacy over food production if wars
impossible.

escalate. The US will depend increasingly on weapons exports to nurse its economy back to health. This will further
induce wars and conflicts which will aggravate US recession rather than solve it. The US may depend more and
more on the use of force and its superiority to get its ways internationally.

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Impacts - Econ decline hurts heg

Global economic decline destroys US Hegemony

Mead 98 Los Angeles Times August 23,” ECONOMY;MARKETS BIGGEST THREAT TO PEACE”

The global economic crisis of 1997-98 is indeed a historic event. If there were an Economics Channel as there is a Weather Channel, frenetic newscasters would be interrupting regular programming right now to give us hourly
updates on something they would be calling the storm of the century, an economic cataclysm as big as or bigger than the Great Depression of the thirties. The behavior of economic storms is as hard to predict as the course of a
hurricane. Still, this storm already has a track record, and it's pretty damned
chilling. If, God forbid, it reaches the United States, watch out. In a blow like this, stock prices could easily fall by two thirds--that's 6,000 points on the Dow--and it could take stocks a decade or more to recover. Many investors could
be destroyed; mass liquidation of mutual funds in a panic could wipe out some funds entirely. The carnage
among "growth" funds and such high-flying sectors as Internet and technology companies would be appalling. In a real meltdown, the damage wouldn't be limited to the financial markets. Housing prices would plummet, leaving
millions of highly leveraged home and apartment owners sitting on mortgages that are worth far more than their homes. Millions of people would lose their jobs, and tens of millions more would watch their wages drop as employers
frantically tried to cut back their payrolls. Many cities would face bankruptcy as their tax revenues collapsed. All these things and more have already happened in many countries around the world. Thailand, Indonesia, Malaysia, South
Korea, Japan, Vietnam, Russia, South Africa--stock markets in these countries have fallen by as much as 90 percent, unemployment rates are exploding, and countless people face the loss of their businesses, jobs, and homes. Even
starvation. Short of a massive asteroid strike from outer space, no natural disaster could destroy this much wealth or plunge this many people into misery. And more than a year after the crisis began, not one country where it has struck
shows any signs of recovery. With Japan, the world's second-largest economy, and Russia, its second-largest nuclear power, firmly in its grip, the economic crisis now sweeping the planet may be the most important event--and the

a full-fledged crisis of the international economic system,


most dangerous--since the Second World War. This isn't just an economic meltdown in a few emerging markets. It's

could plunge the entire world into a major depression. More than that, it could challenge the strength of the international political system and test
one that

the leadership of the country that widely and imprudently bills itself as "the only global superpower." Well, the only global superpower has recently made some very stupid mistakes. We put our confidence in two basic
ideas that turned out to be wrong. The first is that rapid deregulation of the international financial system would promote growth without creating dangerous financial crises. The second idea is that the export-oriented development
model pioneered by Japan, Taiwan, and South Korea would keep working forever. In fact, that economic strategy hit a wall ten years ago, and Japan's economy hasn't grown since. Now the problems have spread to the rest of Asia,

halting the tigers in their tracks. Under presidents Bush and Clinton, the United States has been the leading advocate of deregulating the global economy and reducing the barriers to investment and trade.

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DA Turns Case
Turns case: Collapse of business confidence harms the environment, and increases
emissions in other countries

Jayson Myers 2002


Maclean's http://www.rsicopyright.com/ics/prc_main/prs_request.html Nov 11 2002

Myers: Well, I wouldn't underestimate the competitiveness problem. Before we talk about the long term, we have to make sure companies are
going to be around for the long term. Profit margins are pretty thin right now in the middle of an economic slowdown. If we're going to
increase the cost of doing business --with no tax incentives that could make it easier for industry to adjust -- then the
signal we're sending out is going to affect investment decisions, and the
impact could be quite large. This means a loss of production from Canada to the United States or Mexico, and that
just means we'll be exporting greenhouse gas emissions to other countries. That certainly doesn't benefit the
environment.

Economic decline undermines solutions to ecology, diseases, famine, oppression

Silk 93 Leonard Silk Winter 1993 (prof. of economics @ Pace U.), Foreign Affairs, Dangers of Slow Growth
Like the Great Depression, the current economic slump has fanned the fires of nationalist, ethnic and religious
hatred around the world. Economic hardship is not the only cause of these social and political pathologies, but it
aggravates all of them, and in turn they feed back on economic development. They also undermine efforts to deal
with such global problems as environmental pollution, the production and trafficking of drugs, crime, sickness,
famine, AIDS and other plagues. Growth will not solve all of these problems by itself. But economic growth – and
growth alone – creates the additional resources that make it possible to achieve such fundamental goals as higher
living standards, national and collective security, a healthier environment, and more liberal and open economies and
societies.

Economic depression kills through food prices, outweighing war

Ellwood 03 Charles Ellwood, University of Missouri. "Sociology and Modern Social Problems"
http://www.nalanda.nitc.ac.in/resources/english/etext-project/sociology/sociology/chapter9.html

As already implied, then, economic depression exercises a very considerable influence upon death rate, particularly
when economic depression causes very high prices for the necessities of life and even widespread scarcity of food.
This cause produces far more deaths in modern nations than war. The doubling of the price of bread in any civilized
country would be a far greater calamity than a great war. While modern civilized peoples fear famine but little, there
are many classes in the great industrial nations that live upon such a narrow margin of existence that the slightest
increase in the cost of the necessities of life means practically the same as a famine to these classes. Statistics,
therefore, of all modern countries, and particularly of all great cities, show an enormous increase in sickness and
death among the poorer classes in times of economic depression.

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AT: Economy Resilient


US economy can crash and take the globe with it.
The Economist, “The turning point - The global economy” September 22, 2007 p. ln
Although it is perverse to argue the golden age has not been tested, it would be foolish to rule out a shock (or
combination of shocks) that might break the economy's resilience. Combine the present discord in credit markets
with the seeming vulnerability of housing markets and it is all too easy to imagine the rich-world economies in
trouble. What makes today's turmoil so disturbing is that one of the mechanisms which helped stabilise growth has
suddenly become a threat to it. Financial innovation is central to the Great Moderation, but its most recent creations
allowed credit to be extended on too easy terms. The fallout is now poisoning the markets for short-term funding
that are so essential to the economy's smooth functioning. Because of rising arrears and defaults on American subprime mortgages,
investors have lost faith in the securities backed by them. The impact has broadened to a more general revulsion against assets in which the
income depends on repayments of consumer debt. As funding dried up, the resulting squeeze has put upward pressure on the money-market
interest rates that determine the cost of borrowing for households and small businesses. As long as credit markets stay impaired, the economy's
normal self-regulation cannot fully be relied upon. A channel that for so long has helped smooth economic growth might now threaten it. A
shock-absorber could turn into a shock-amplifier. Indeed, the very stability of growth may have encouraged people to take on
a debt burden that could prove troublesome. Strong credit growth is both cause and consequence of the golden age. Belief that the business cycle has been tamed for
good helps explain why property prices in many rich countries have risen so high and why there has been such a willingness to take on debt at large multiples of income. A less volatile economy
makes income streams more reliable and, goes the argument, justifies higher prices for all assets, including housing. A reduced fear of job losses means homebuyers in America, Britain and
elsewhere have been content to take out huge home loans. But like all booms, the housing rush is dependent on ever-more risky borrowers to prop it up. Once credit conditions tighten, the
marginal homebuyer is frozen out of the market. That is one likely consequence of the trouble at Northern Rock, a mortgage bank that was rescued this week by the British government (see page
96). Northern Rock was responsible for a huge share of mortgage lending earlier this year. But after a run on the bank its ability to write new business has vanished. Britain has been growing
steadily in the last year, but it has the same fault lines as America--an overvalued housing market, high consumer debt (see chart 2 on previous page) and a huge trade deficit. Unlike other
European countries, it has a big non-prime mortgage market too. Though less than 10% of recent loan growth has been in subprime, this rises to around 25% if you count borrowers who never
had to prove how much they earn, according to David Miles, at Morgan Stanley. Just as the germ carried from America's subprime mortgage market is now infecting money markets elsewhere, so
the housing downturn itself could spread globally. As Alan Greenspan, the former Fed chief, reminded everyone this week, there have been housing booms in at least 40 different countries and
"the US is by no means above the median". If global house prices are as correlated on the way down as they were on the way up, the pain will not be confined to America. The cracks that have
spread with the credit crisis could be the network through which the housing malaise travels. As central banks try to mitigate these risks to growth, the danger is that they become complacent
about inflation. There is a sorry story of how monetary laxity once undermined hopes for a more stable economy. In 1959 Arthur Burns, then chairman of the National Bureau of Economic
Research (NBER), made a famous prediction that "the business cycle is unlikely to be as disturbing or troublesome to our children as it once was to our fathers." For a decade that optimism
seemed justified. But in the 1970s, on Burns's watch as Fed chairman, unemployment rose, inflation took off and a growing sense of economic crisis made a mockery of the idea that governments
could control the business cycle. Attempts to fine-tune the economy through cheap money instead led to higher inflation and increased economic instability. In his new book (see page 107), Mr
Greenspan delivers a timely warning that progress in policymaking is always vulnerable to reversal. Looking to 2030, he fears that the burdens of an ageing population will eventually lead to
upward pressure on inflation. And future Fed chairmen cannot rely on the deflationary effects of globalisation to tame prices, as Mr Greenspan could, as over time that impulse will fade. Mr
Greenspan questions the political will to enforce price stability. "Whether the Fed will be allowed to apply the hard-earned monetary policy lessons of the past four decades is a critical unknown.
But the dysfunctional state of American politics does not give me great confidence in the short run." Once people sense inflation is slipping out of control, changes in expectations can quickly
become self-fulfilling. Firms price higher and employees demand wages to match. If inflation expectations slip anchor, central banks will have to ratchet up real interest rates (or bond markets
will do the job for them). Policy might again become the source of economic shocks. Today the stakes are arguably higher. Highly leveraged economies rely on low nominal interest rates to keep
debt-service costs manageable. A spike in bond yields would probably cause huge instability as interest costs ate into available spending. If wiser central bankers have indeed played a big role in
the Great Moderation, it is sobering to think how easily the dangers of lax monetary policy might be forgotten. The prospect of a co-ordinated global housing slump is a very frightening one. For
the moment, it remains a plausible risk. If house prices hold up, the credit-market disruption is still likely to harm growth in 2008. Even if money markets settle down--and there are the first signs
of this happening (see page 92)--the loans that banks have been unable to sell as securities will instead sit on balance sheets, crimping their ability to lend. A more careful approach to credit
means businesses and households will find it harder to borrow. That will hurt the world economy. Private-sector forecasts for developed-world growth are understandably being revised down.
Revealingly, the biggest changes have been to expectations about interest rates. The likelihood of rate increases in Europe has been largely written off. And many projections for the Fed funds
rate were decisively reduced ahead of the decision this week to cut (see page 91). In essence, the markets are betting the Fed can save the day. Stockmarkets, at least, do not appear to be priced
If central bank actions are credited with mitigating previous
for a recession--or anything like it. On this they may be simply following the form book.
downturns, then why not this one? The global economy has proved to be far more resilient than had often seemed
likely. And it showed very few signs of trouble before the credit-market dislocations, mostly because growth outside the rich world has been
strong. In July the IMF revised down its projections for economic growth in America for this year, but still upgraded its global economic
forecasts because of the strength of the emerging markets. These economies --a source of a big shock only a decade
ago--could now prove to be a stabilising force for the world economy. Thanks to their handsomely cushioned foreign-exchange
reserves, the fast-growing economies of Asia and the Middle East are now less dependent on capital markets to fuel their growth. America
remains the biggest risk. Even here, where the outlook is gloomiest, recession is not a forgone conclusion. Perhaps the best that can be
hoped for--and maybe what policymakers are trying to engineer--is a continuation of the muddle-through growth of
the past year or so. That would help contain pressures on inflation without causing excessive dislocation in the
economy. But the risks to even this outcome are on the downside. In the past year, America has become less central to global
growth. But it is a big importer and a hard landing would affect other countries. Its fortunes over the next year will still have
huge significance for other reasons too. America has been at the leading edge of the Great Moderation and has arguably
pushed the boundaries of risk-taking furthest. If America falls hard now, it will be a harbinger for the rest of the rich
world.

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Business confidence low


Business confidence is at a 28 year low.
The Record 7/8/2008 [“National Briefs,” pg B04, Lexis]
WASHINGTON - Confidence among U.S. small business owners fell to a 28-year low in June as inflation topped
their list of concerns for the first time since Ronald Reagan's first term as president.
The National Federation of Independent Business Optimism Index decreased to 89.2, the lowest since April 1980,
from 89.3 in May, the group said. The share of respondents saying inflation was their primary concern jumped to 20
percent, from 17 percent in May, the first time since 1981 that rising prices were the biggest worry, the report said.

U.S. business confidence low


Japan Economic Newswire 7/4/2008 [“Dollar steady vs. yen,” Lexis]
The ISM also reported that business confidence among U.S. nonmanufacturers came to 49.9 percent in June,
compared with the market forecast of 51.5 percent.
"As we can see from Thursday's data, economic conditions in the United States are, without a doubt, weak," said
Yuji Kameoka, a senior economist and foreign exchange market strategist in the economic research department at
Daiwa Institute of Research. The jobs data partly triggered buying of the U.S. currency overnight as the reading was
close to the market forecast of a decline by 60,000. But unemployment remained flat at 5.5 percent, indicating that
U.S. employment conditions had not improved.

Business confidence and the U.S. economy are bad shape – unemployment rates prove.
Baum 7/12/2008 [Caroline, Bloomberg News Columnist, “All over but the dating for U.S. recession,” Lexis]

Last week, the National Federation of Independent Business reported that its small business optimism index
fell to a record low in June, a "recession level reading," according to the survey."It's highly unlikely we are seeing new
businesses formed, and it's highly likely we are seeing old businesses expiring," Kasriel said.Why all the focus
on employment? It's one of four coincident indicators the National Bureau of Economic Research's Business
Cycle Dating Committee (BCDC) looks at when determining the months in which the economy peaks and
troughs. Yet employment has always been first among equals.” The broadest monthly indicator is employment
in the entire economy," in the committee's own words.

Business confidence is down and the global economy is in serious decline

Kerry O'Brien ABC Transcripts (Australia) July 1, 2008 HEADLINE: Global economy a cause for concern
But we now have the predicament that inflation is expected to stay high for a time despite a slowing economy and
consumer and business confidence going backwards. But it's the global economy that's causing particular
concern. A highly influential world economic agency, the Swiss based bank for international settlements BIS,
has just released its annual report warning of a deeper and
more protracted global downturn than previously expected drawing comparisons even with the '30s.

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Business confidence is at its worst level since 2001

Boris Schlossberg, et. al, Senior Currency Strategist with Terri Belkas, John Kicklighter, David RodrA-guez, John Rivera, Ilya
Spivak, Currency Strategists strategist@dailyfx.com HEADLINE: Will The Dollar Buckle? DailyFX July 13, 2008
A dismal June Business Confidence report saw the headline figure print at the worst level since a spike low in
September 2001. Consumer Confidence followed suit as Westpac's index tumbled in July, reaching lows unseen
since 1992 with a reading at -6.7% versus -5.6% in the preceding month. May's Home Loans and Investment Lending
statistics also took a beating, with the former registering a fall of -7.9% versus expectations of -2.0% while the latter dropped -6.8% versus
1.4% in the preceding month.

Business confidence has collapsed in the status quo


B&T Weekly (Australia) June 13, 2008 HEADLINE: Forum paints retail at a crossroads
Three themes defined this year's World Retail Congress in Barcelona and taxed the 1500 assembled delegates. First, the world economic
outlook, then environmental sustainability and its implications for retail businesses and finally, the opportunities in emerging markets. The
current economic landscape is the most significant challenge facing retailers in a generation. The problems are
structural and a consequence of costs growing faster than consumer spending. This is evident in mature retail
markets. The economic malaise is clearly affecting consumer spending and business confidence in the United
States and Western Europe much more than we have seen to date in Australia

Business confidence is low

The Republican (Springfield, Massachusetts) July 2, 2008 HEADLINE: NEWS TO GO A QUICK RUN THROUGH SOME OF
TODAY'S TOP STORIE

AIM's Business Confidence Index lost a half point in June, falling to 48.9 on a 100-point scale. The Confidence Index has been
hovering right around the midpoint since January, having fallen to a low of 47.4 points in March. "It certainly brings to mind the
turbulent '70s," Gilmore said. "It wouldn't take much to tip it one way or the other." The rising cost of petroleum and tight credit
is on the bad side of the ledger, Gilmore said. On the good side, Massachusetts has a diversified, high-technology company. Also, the
falling dollar is making it easier to sell Massachusetts goods and services abroad. Each month AIM, a business lobbying group based in
Boston, sends questionnaires to 500 to 600 of the group's 7,000-business membership. of those, about 300 people turn in survey's each month.
No one member gets surveyed more than four times a year.

Business confidence is in the trenches.


Paul R. La Monica, (Editor CNN Money), June 6, 2008, “Corporate America is getting nervous,” Online,
http://money.cnn.com/2008/06/06/markets/thebuzz/?postversion=2008060610, accessed 6/27/08.
Businesses, like consumers, are starting to get much more nervous about the economy. The significant spike in the
unemployment rate in May, coupled with another month of job losses, is a certain indication that businesses are
feeling the need to cut costs. What's more, two separate reports about the health of Corporate America released
today provide even more somber news about business confidence. Talkback: How much worse will the job market
get? According to a survey of nearly 2,400 chief executive officers of small and mid-sized businesses by executive
coaching firm Vistage International, CEO confidence is at an all-time low. "It is clear the state of the economy is
factoring into stress levels for CEOs as more and more companies adjust their business plans in the United States
to survive," said Rafael Pastor, Vistage's chairman and CEO in the report. "CEOs are telling us they are more
stressed."

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Economy low
Economy is declining now; confidence levels are at the lowest in years
Scotland on Sunday, July 13, 2008, “Cheer up! Everyone else is suffering too”, accessed July 17, 2008, lexis.

Could anywhere be worse than Britain? A mortgage lending slump; the worst fall in house prices since the 1930s; a crisis across the
housebuilding industry with fears that 50,000 jobs in the sector may be lost by the end of the year; plunging consumer confidence; renewed
worries about the health of the banking sector - and the oil price soaring to a new record despite all evidence of an economy hurtling towards
recession.To where can we go this summer to escape the horrible gloom? As we look across the world this weekend, it is no better elsewhere.Let's
start with the United States, the world's largest economy. Its interest rates have been slashed to 2 per cent and taxpayers sent a dollars 600-a-head
rebate to help boost the economy. Here in Britain we have only been able to look on in envy. Yet neither of these levers has lifted the economy.
America's housing market continues to slide, with falling sales and prices. Airlines and car makers are being battered by the oil price surge. And
arguably most worrying of all, the financial sector is suffering a further flight of confidence.Overall growth in US GDP is forecast to slide from
2.2 per cent in 2007 to 2.1 per cent this year and 1.2 per cent next. But this rather masks the ferocity of the downturn.

Recession coming now – analysts are totally wrong who say that the economy is recovering

Joseph Brusuelas 2008 (Chief Economist at Merk) Merk Market Outlook:


An Economy In Trouble http://www.merkfund.com/merk-perspective/market-outlook/2008-07-11.html

Over the past few weeks many notable analysts have made the case that the economy is in the process of recovery. The
market has celebrated the wonder of the “resilient consumer.” Given the still fragile state of the economy we think that this is a bit overblown. A cold-
eyed, hard-nosed analysis of the true condition of all things financial provides us with a very different assessment of the economy. But, with a major week of fundamental data and the onset of earnings season for financials upon us we
thought it pertinent to put a few ideas to rest.

First, the credit crisis has yet to run its course. A genuine credit crisis is comprised of two components: a liquidity crisis and insolvency crises. With already $400.00 billion in global write
offs within the financial sector alone one might be tempted to declare the credit crises over. Yet, the problems on the balance sheets of financials will continue. Write-
downs and the process of de-leveraging have yet to be finalized. We believe that there are $75-$100 billion in write downs left in the US alone before we reach a conclusion to the liquidity portion of the crises. This will continue to
depress whatever appetite for risk taking in equity and credit markets remains. The Fed did not extend its primary dealer credit facility well into 2009 by accident.

Moreover, we have only begun to embark on the insolvency portion of the economic tragedy unfolding before our
eyes. Too many market players are operating on the unspoken assumption that the fall of Bear Stearns and the near miss at Lehman have signaled that the end of the troubles are at hand.
Unfortunately, this is not the case. The crisis that has primarily engulfed Wall Street is beginning to spillover onto Main Street. Ford and GM
will both be candidates for mergers, bankruptcies or bailouts in 2009. It is quite clear to anyone that care to look that Fannie Mae and Freddie Mac will have to be bailed out by the Federal Government. Pending legislation in Congress
regarding the end of private fee for service, if it is enacted, will put at least one major player in the healthcare sector and one minor actor at serious risk of insolvency early next year. And do not forget the 200-250 small and regional
banks that the Fed has warned us will eventually fail. Even such stalwarts as the gaming sector, which has been traditionally impervious to systemic economic slowdowns is going to see a spree of consolidations and perhaps a few
insolvencies on the back of too much debt and a sharp reduction in demand from consumers who have seen their discretionary income evaporate.

Second, the consumer is no longer resilient but in fairly significant trouble. A well -timed and quickly implemented fiscal stimulus program is masking the
true condition of the consumer. Pre-fiscal stimulus, the trend in real personal consumption was absolutely flat. Once the positive aspects of the stimulus withers away the prevailing trend in real consumption will reassert itself and we
shall be back to where we were in the first quarter of the year.
The market has observed six consecutive months of contraction in non-farm payrolls. Growth in the once vibrant service sector has collapsed to near zero growth over the past three months. The major factors keeping the labor sector
-
from collapsing appears to be the very questionable birth death model at the Bureau of Labor Statistics and the aforementioned healthcare and hospitality sectors. Over the next few months the modeling at the BLS will catch up with
reality and the healthcare/leisure sector will experience outsized contraction based on current economic conditions and trends. The decline in real income will put additional pressure on an already stressed consumer and set the stage
for the final capitulation.

Finally, we will see a series of revisions to recent economic data, including GDP that may change current
perceptions of the economy. We expect that the downward revisions will confirm that we are in a mild recession.
More importantly, we anticipate that when we get to the final quarter of 2008 will see another downturn in economic
activity. Since 2007 my forecast for the economy has been “W” (no pun intended) shaped recession. We saw the first
trough in late February and early March of 2008. We are currently at the middle apex of the “W” and expect to see
growth begin to decline during the early portion of Q4’08. The final trough in our double dip scenario should occur
in the second quarter of next year.
The sub trend 2.1% rate of growth that we expect to see in Q2’08 is a function of Washington priming the pump and the a vibrant external sector. Once the stimulus from the Federal government begins to fade and the impact of the
searing increase in the cost of energy and commodities can be assessed on a domestic and global basis, the last vestige of support for the economy, net exports will fade to away and the US economy will see its first
major recession since the early 1980’s.

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Economy low now, dollar is weak and housing and financial sectors are crumbling
Ye Xie and Stanley White. 7/16/2008. (Bloomberg. “Dollar Optimism Dissipates as Confidence in Fed Ebbs”,
http://www.bloomberg.com/apps/news?pid=20601087&sid=alSZFf4DnQ7g&refer=home)
The U.S. dollar will weaken against the euro, yen, Brazilian real and Swiss franc in the next six months as
confidence in Federal Reserve and Treasury efforts to keep the economy out of a recession fades, a survey of
Bloomberg users showed. U.S. investors turned bearish on the dollar for the first time in three months, according to
respondents in the monthly Bloomberg Professional Global Confidence Index, which questioned 5,450 users from
Los Angles to Paris to Tokyo. Participants became bullish on the franc for the first time since March and less
pessimistic about the British pound. The results are consistent with expectations of futures traders, who are placing
less of a chance that the Fed will raise its benchmark interest rate from 2 percent this year. The Dollar Index, which
tracks the currency against six of U.S. major trading partners, fell to a three-month low yesterday on concern that
losses at Fannie Mae and Freddie Mac, the two largest U.S. mortgage firms, will slow economic growth. ``The
markets were naïve to think that the Fed's efforts to restore stability would be enough to prompt an immediate
recovery,'' said Paresh Upadhyaya, who helps oversee about $50 billion in currency assets as a senior vice president
at Putnam Investments in Boston and participated in the survey. ``It takes time to resolve the issues in the housing
and financial sectors, and these problems will prevent any sustained recovery of the dollar.'

Econ low – consumer confidence indexes prove


Campos, Rodrigo. 7/15/2008 (Thomson Reuters. “US consumer confidence unchanged, near record low”,
http://www.reuters.com/article/economicNews/idUSN1536607520080715)
American consumers' confidence held steady at a low level in the latest week, more than 30 points below its all-time
average, a report showed on Tuesday. The ABC News Consumer Comfort Index held at -41 in the week to July 13, unchanged from the
previous week on its -100/+100 scale. Its all-time low, reached in May, is -51 and its historical average -10. In a separate survey, ABC
said pessimism about the economy's direction is at a 27-year high of 78 percent. Earlier on Tuesday, Investor's Business Daily
and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index held at 37.4 in July, a record low and 14.5 points or 28
percent below its all-time average. The Consumer Comfort Index's components were mixed in the latest week, as positive
views on personal finances gained 1 percentage point to 52 percent and those on the national economy shed one
percentage point to 14 percent. Views on the buying climate were unchanged at 23 percent. Confidence measures are
generally viewed as a barometer of consumer spending, which accounts for two-thirds of the U.S. economy.

U.S. economy expected to get worse throughout 2009.


Chong 7/8/2008 [Jordan, Staff writer, “Businesses bracing for difficult Sept qtr, survey says,” AAP Newsfeed,
Lexis]
The ability to secure funding will remain tough, says the chief executive Officer of the Australian operations of the
National Australia Bank (NAB) Ahmed Fahour. He said credit market pressures, particularly in the US, were not
expected to ease anytime soon. "If we look at the United States, difficult economic circumstance look set to remain
for some time, with falling house prices, increased funding and fuel costs, and credit rationing most likely
continuing for all of 2008 and most of 2009," Mr Fahour told a conference in Sydney on June 27.

U.S. economy getting worse-labor demand and unemployment figures prove


Baum 7/12/2008 [Caroline, Bloomberg News Columnist, “All over but the dating for U.S. recession,” Lexis]

The U.S. economy has been leaking jobs for six straight months, seven if you exclude government hiring. Granted,
it's been a slow leak in terms of the length of time and the magnitude of the losses (an average of 73,000 jobs a month), but there's nothing
to suggest an imminent about-face in the labor-market trend.Initial jobless claims breached the 400,000 mark two
weeks ago, a level consistent with the onset of past recessions. The Conference Board's Employment Trends Index,
an aggregate of eight leading labor market indicators, continued its yearlong descent in June, pointing "to an even sharper
deterioration in the labor market in the months ahead," according to the Conference Board.Taken in conjunction with the
decline to 43.8 in the Institute for Supply Management's non-manufacturing employment index, the lowest in its
11-year history, it's hard to be optimistic about employment prospects."Labor demand is shrinking, with both the help-

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wanted index and the net hiring of temporary workers hitting new lows in recent months," said Ian Shepherdson, chief economist at High
Frequency Economics in Valhalla, N.Y.

Economy is declining in the status quo.

Lewiston Morning Tribune (Idaho) July 16, 2008 Wednesday


Inflation dampens outlook :Low consumer spending, skyrocketing food and energy costs fueling economic slump
MARTIN CRUTSINGER and JEANNINE AVERSA

WASHINGTON - The U.S. economic downturn gained steam Tuesday, with a report of the highest inflation since
the early 1980s, more bad news for banks and automakers and a suggestion by the Federal Reserve chief that worse
days are ahead. President Bush sought to bolster confidence by declaring that the financial system was "basically sound," but he conceded:
"It's been a difficult time for many American families." The Labor Department said wholesale inflation, driven by skyrocketing
gas and food costs, rose by 9.2 percent for the 12 months ending in June - the fastest pace since the summer of 1981,
during another energy crunch. At the same time, consumers hit the brakes hard despite a massive infusion of
government stimulus checks. Retail sales turned in their poorest showing in four months. Federal Reserve Chairman Ben
Bernanke delivered a somber midyear outlook to Congress, saying the U.S. faces "numerous difficulties" despite the Fed's interest rate-cutting
campaign, which began last September in hopes of preventing a recession. Bernanke said the Fed expected the economy to grow for the rest of
this year "appreciably below its trend rate." He cautioned inflation was likely to move "temporarily higher" in the near future. That puts the Fed
in a bind: Rising inflation hamstrings the Fed from cutting interest rates to jump-start the economy. The Fed had already signaled last month the
rate cuts were probably at an end. Outside Washington, there was plenty more bad news. On Wall Street, the Dow Jones
industrials closed below 11,000 for the first time in two years, and shares of troubled mortgage giants Fannie Mae
and Freddie Mac tumbled again. Fannie shed 27.3 percent and Freddie lost 26 percent. In Los Angeles, police had to order people lined
up outside an IndyMac Bank branch to remain calm or face arrest as they tried to pull out their money on the second day of the failed institution's
federal takeover. An analyst downgraded Wachovia Corp. and said the outlook for its shareholders is "bleak." Its already-battered stock sank
about 7.7 percent further, to $9.08. U.S. Bancorp posted an 18 percent drop in second-quarter profit and tripled its provision for credit losses.
The dollar hit a new low against the euro. And even good news came with a dark side: Oil prices fell by more than $6 per barrel - the
biggest single-day drop in 17 years - as traders fretted that the slowing U.S. economy would dampen demand for crude. "The country is in a
bad spot right now, squeezed by high and accelerating inflation and a very weak economy and struggling to
overcome a very severe financial shock," said Mark Zandi, chief economist at Moody's Economy.com. Wholesale
prices for goods before they reach consumers rose by 1.8 percent in June from a year earlier and at 9.2 percent for the 12 months ending in June.
Core inflation, which excludes food and energy, was better behaved, rising by just 0.2 percent in June, slightly lower than expected. Food costs
were up 1.5 percent, the biggest increase since January, led by steep gains in the cost of vegetables and eggs. Even pet food jumped by 6 percent,
the largest monthly increase on record. Wholesale energy prices shot up 6 percent. The price of unleaded regular gas surged 9 percent in June on
top of a similar increase in May. Home heating oil, natural gas and liquefied petroleum gas also took big jumps. Retail sales were up just 0.1
percent in June, the worst showing since February. That figure reflected a huge drop in auto sales and would have been even worse had it not
been for a big jump in gas sales - reflecting higher prices, not demand. Analysts were particularly alarmed by the retail sales report because
consumer spending accounts for two thirds of total economic growth. The weak sales came as the government was pumping out $28 billion in
economic stimulus checks, bringing the total payments to $78 billion by the end of June. Those same analysts worried what will happen after the
government finishes mailing out the bulk of the checks this month. "Clearly the economy is on the ropes with weak employment market
conditions, declining home and equity prices and surging gasoline prices inducing the consumer to pull back," said Brian Bethune, chief U.S.
financial economist at Global Insight. Despite tough talk on inflation from Bernanke, many analysts predicted that the Fed will keep interest rates
unchanged for the rest of the year to give the financial system some breathing room to deal with a tidal wave of mortgage defaults. Those have
already resulted in an estimated $400 billion in losses at financial institutions. Treasury Secretary Henry Paulson, appearing with Bernanke
before the Senate Banking Committee, came under a barrage of tough questions about an emergency plan to bolster Fannie and Freddie, which
between them hold or guarantee more than $5 trillion in mortgage debt - nearly half of the nation's mortgage debt. The plan would have Congress
authorize billions of dollars of government help should the two giant institutions come under increased pressure because of the surge in mortgage
loan losses. As a last resort, the government could also invest directly in Fannie and Freddie. But both Democrats and Republicans on the
committee questioned why the administration was seeking what critics term a bailout for two big corporations, with taxpayers left holding the bag
in the event of severe losses. Paulson insisted taxpayers were being protected and said the offer of government help should be enough to calm
jittery markets.

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Global economy is low now – suffering from multiple factors leading to crisis

Peter Weekes July 6, 2008 Sunday Age (Melbourne, Australia)


This is the $64 million question after the Bank of International Settlements - widely known as the central bankers' bank - last
week said the global economy was at "tipping point". There is no doubt trouble is brewing. In the 1970s the world was battered by
the first oil shock, and the following decade we survived a global banking crisis. Today, we are confronted with simultaneous oil and
banking crises - while inflation is rising. Normally, as growth slows, central banks cut rates, which they were doing, but they can no
longer continue on this course due to rising inflation brought about by higher oil prices. AMP Capital
Investors' Shane Oliver says today has all the hallmarks of a "perfect storm", putting a 30% chance on the BIS
prediction coming true. So where did it all go so wrong from a year or two ago? This is what BIS had to say:
"A powerful interaction between financial market innovation, lax internal and external governance and easy global
monetary conditions over many years has led us to today's predicament."

Many already believe the economy is in recession and perception is reality.


The Republican (Springfield, Massachusetts) July 2, 2008 HEADLINE: NEWS TO GO A QUICK RUN THROUGH SOME OF
TODAY'S TOP STORIES

This country is already in a recession according to just more than half the business leaders who responded to
Associated Industries of Massachusetts's Business Confidence Index survey last month. Another 14 percent of the respondents to
June's survey said a recession is likely by the end of the year, according to results released by AIM on Tuesday.
The survey showed that 11 percent of the executives thought a recession was unlikely by the end of this year. "Perception is reality," said
Brian R. Gilmore, the Executive Vice President for Public Affairs at AIM. "Perception drives the market. I don't think there are
any real optimists out there."

Depression coming - housing bubble.


Desmon Lachman, resident fellow at AEI, “Is the US Recession Really Over?” June 11, 2008
Sadly, the immediate outlook for US home prices is grim. At present an estimated excess inventory of around 1
million unsold homes is weighing heavily on the housing market. Compounding this situation of excess supply is
the fact that private sector mortgage lending has all but dried up in the wake of large sub-prime mortgage losses.
Worse still, a rapidly increasing rate of foreclosures is substantially adding to supply on an already glutted market.
And there is every prospect that the foreclosure rate will continue to increase as declining home prices boost the
number of households with negative equity in their homes to around one third of all households by the end of the
year. A very real danger of rapidly declining home prices for the US economy is that it raises the real risk of
creating an adverse feedback-loop. For as declining housing prices reduce consumer wealth and add to the
financial system's losses, they push the economy further into recession. Yet as the economy slides deeper into
recession, it exacerbates the downward spiral in housing prices. To be sure, policy measures have been introduced
to stimulate the economy in the form of a US$170 billion tax reduction package and Federal Reserve interest rate
cuts totaling 3 ¼ percentage points. However, with the very real prospect of the US economy sliding deeper into
recession, one might ask whether enough has been done to cushion the economy from America's largest housing
market and credit market bust since the Great Depression.

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Economy low
The economy is doomed – fed policy on interest rates.
Gerald P. O'Driscoll Jr., formerly a vice president and economic adviser at the Federal Reserve Bank of Dallas,
is a senior fellow at the Cato Institute, Reason Foundation, “The coming recession: seven observers the; sorry state
of the economy” June 1, 2008 p. ln
The U.S. economy is in the midst of an old-style credit crunch brought on by a combination of bad policies and
incredibly lax underwriting standards at financial institutions. The biggest policy failure was the decision by Alan
Greenspan's Federal Reserve to hold interest rates too low for too long. That led to a tsunami of credit that
inundated the economy with cheap money. Mortgage lenders in particular were flush with funds and searched for
deals wherever they could be found. Heretofore unqualified borrowers suddenly "qualified" as underwriting
standards relaxed and then disappeared. Egged on by statements from Chairman Greenspan, market participants
came to believe the era of low interest rates would last indefinitely. But the era did come to an end as the Fed was
forced to begin raising interest rates. Faced with the prospect of paying higher rates on their mortgages in the
future, borrowers began defaulting. First home prices stopped rising, and then home prices began dropping--
precipitously in some overheated housing markets. Now we are approximately six months into a new cycle of
lower interest rates, but with no end in sight to the crunch. At least two other factors stoked the crisis. First, many
exotic financial products were issued whose value was tied in one way or another to home prices and the value of
the securities into which home mortgages were bundled, such as collateralized mortgage obligations. The pricing
of these financial products was the product of complex economic models, not the outcome of market transactions.
As the value of the underlying homes and mortgages declined, pricing of the financialexotica became nearly
impossible. As we learned in the collapse of Long Term Capital Management, these pricing models fail precisely
whentheir accuracy is most important--in times of financial turbulence. The inability to price the financial products
has exacerbated losses among the firms holding them. There is a wonderful parallel here to the collapse of the
Soviet Union. As the great Austrian economist Ludwig von Mises argued almost 100 years ago, central planning
inevitably fails because there are nomarket prices to allocate resources. Market prices can only be the outcome of
actual market transactions among buyers and sellers. Planners used mathematical formulas to value resources,
especially capital.Now Wall Street wizards have imported Soviet thinking to allocate financial capital. Is it any
wonder that it failed?

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Regulations coming now


Regulations coming now to hurt businesses

All Business, (Business Reporting Agency), 06/24/08, Reference Article, All


business.com,http://www.allbusiness.com/government/environmental-regulations/11898-3.html, date accessed: 07/07/08

The Environmental Protection Agency (EPA) has put the following acts in place to oversee and regulate the impact that businesses have on the
environment: * the Clean Air Act * the Clean Water Act * the Safe Drinking Water Act * the Resource Conservation and Recovery Act *
the Emergency Planning and Community Right-to-Know Act * the Pollution Prevention Act * the Toxic Substance Control Act.each of the
above acts has specific regulations and requirements that businesses must follow, and a review of each is important for all small business owners.
However, the EPA's regulations are often difficult to understand if not broken down into simpler terms and practical applications.For that reason,
many small business advocacy groups have lobbied to create laws and restrictions to protect small businesses while continuing to regulate their
impact on the The Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement Fairness Act (SBREFA) were both enacted
to provide small businesses with the flexibility and clarification necessary to comply with government standards. As a small business, it is helpful
to understand these acts and the rights that they provide.

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AT-U.S. Econ key to world


The U.S. is no longer the engine of world growth-other countries are finding ways to grow
despite a stifled U.S.
Michael R. Sesit, March 19, 2007, “World needs U.S. consumer,” The International Herald Tribune, Online, Lexis, accessed 6/27/08.
The debate over whether global growth can weather a steep U.S. slowdown has all the earmarks of a number-
crunching exercise, and it is already having an effect on stock prices in Asia and Europe. The U.S. economy is slowing. Gross domestic
product expanded at an annual rate of 2.2 percent in the fourth quarter compared with 5.6 percent in the first three months of 2006. U.S. growth
will average 2.5 percent in 2007, according to the median forecast of 73 economists in a Bloomberg survey published March 8. It was 3.3
percent last year. ING Groep last week lowered its 2007 U.S. GDP forecast to 2.1 percent from 2.3 percent as the decline in housing purchases
risks undermining consumer sentiment and as weakening corporate earnings threaten business confidence. Goldman Sachs Group's prediction
of 2.1 percent came before this month's announcement that U.S. service industries expanded in February at their slowest pace in almost four
years. ''We see some downside risks to our own U.S. forecast, which is below consensus,'' says Jim O'Neill, Goldman Sachs's global head of
economic research in London. He notes the recent increase in stock-market volatility, widening credit spreads and the potential unraveling of
the yen-carry trade. O'Neill says the world economy can ''decouple'' from the United States. ''The evidence is pretty
strongly in our favor.'' The 13-country euro area, Japan, Britain and the four so- called BRIC countries Brazil,
Russia, India and China all reported stronger growth in the fourth quarter than the United States, he says. ''It appears that
the U.S. has indeed stopped being the 'engine' of world growth.''

Countries are no longer dependent on U.S. Economy


Kelly 1-25-08 (FINANCIAL POST, http://www.nationalpost.com/opinion/story.html?id=261340&p=2)
Part of that attention has focused on the idea that the world is less leveraged to the U.S. economy, especially
given the phenomenal changes underway in emerging markets. But the idea that the global economy will
"decouple" from the American economic engine is pure fantasy. That doesn't mean the the global economy
would buckle under a U.S. slowdown. As the chart at right shows, developing economies as a whole have
managed to sustain economic growth rates above that of the U.S. economy every year so far this decade. As
the U.S. economy declines, therefore, the world economy is likely to continue to float above U.S. growth rates.

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Recession doesn’t cause economic collapse


No internal link between recession and economic collapse.
Bodil Nyboe Andersen (governor) 12/4/2002 Speech
http://www.nationalbanken.dk/DNUK/Publications.nsf/1c326d7c6cdf6f66c1256c080048787c/ed3a41139310e3b5c1
256cf500543379/$FILE/kap08.html
Virtually every report and article on the international economic development nowadays starts by describing the unusually high degree of
uncertainty. Not only has the expected upswing been deferred once again for another year, but it has also become more common to hear
expressions of concern for the economy's course in both the USA and Europe. The terms recession, depression and deflation make
frequent appearances in the headlines, and are often used interchangeably to describe the fact that things are not going as
well as we were accustomed to up to 2000. Economists apply these three terms to describe different concepts: Recession is
the least serious situation. A rule of thumb says that a drop in output for two quarters running is a "technical recession". In the USA, the
National Bureau for Economic Research operates with a more sophisticated definition of recession, based on the development in a number of
macroeconomic time series. According to this definition, the Bureau noted a year ago that the USA went into a recession in March 2001.
Whether this recession is persistent or has now ceased will not be revealed until the figures have been revised and closely analysed, with a
timelag of many months, and perhaps more than one year. Depression is a prolonged period of abnormally low growth and
high unemployment. So this is a far more serious situation than recession. The term depression is used in particular
to describe the persistent economic crisis in the 1930s. Deflation signifies a drop in the general price level, i.e. the opposite of
inflation. A situation with falling prices is dangerous, since it tends to have a self-reinforcing tendency. If sustained price drops are expected,
purchases and investments will be postponed, and this in itself will deepen the crisis. The confusion regarding these terms is exacerbated by the
fact that "deflationary" is sometimes used merely to describe a tendency for the economy to dampen. Lower growth is not necessarily
a major problem, however. After strong growth and pressure on the labour market, a calmer period can be healthy.

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Economy Resilient
US economy is resilient; skilled workforce, primacy in info technology and innovation

Martin T. Sosnoff 07.14.08, 6:00 AM ET http://www.forbes.com/opinions/2008/07/12/bear-consumer-investing-oped-


cx_mts_0714sosnoff.html Don't Despair The Bear

I've learned not to believe in America 365 days out of the year, and yet, the country always comes back.
This nation has an inherent resiliency that's the product of a skilled workforce, primacy in information technology
and innovation across a broad spectrum of disciplines, from farming to industrial production. Caterpillar (nyse: CAT -
news - people ) and Deere (nyse: DE - news - people ) sell plenty of tractors in China.

The global economy is resilient.


The Economist, “The turning point - The global economy” September 22, 2007 p. ln
Yet the global economy has taken some big blows during the golden age. In the last decade the rich world has
weathered the Asian financial crisis, Russia's debt default, the dotcom boom and bust, terrorist attacks on America,
sharp increases in oil prices and the uncertainty that came with wars in Afghanistan and Iraq. Still, economic
volatility has not picked up. It is true that the abrupt curtailment of energy supplies to a world that was highly
dependent on oil was a unique and traumatic event. But economies were more hidebound then: job markets were
less flexible and producers more stymied by regulation. The painful results cannot wholly be put down to energy
dependency. The more likely explanation is that economies have become far better at absorbing shocks, because
they are more flexible. There are many structural shifts that might have contributed to this, from globalisation to
the decline of manufacturing in the rich world. The academic literature keeps returning to three: improvements in
managing stocks of goods, the financial innovation that expanded credit markets, and wiser monetary policy. For
such a tiny part of GDP, the content of warehouses has had a surprisingly big effect on its volatility. When
industries cut or add stocks according to demand, that adjustment magnifies the effect of the initial change in sales.
Stock levels were once much larger relative to the size of the economy, so a small slip in demand could easily
blow up into a recession. But thanks to improvements in technology, firms now have timelier and better
information about buyers. Speedier market intelligence and production in smaller batches allows firms to match
supply to changing conditions. This makes huge stocks unnecessary and minimises the lurches in inventories that
were once so destabilising. The entire inventory of some lean-running companies now consists of whatever FedEx
or UPS is shipping on their account. Mr Cecchetti and his colleagues calculate that, on average, more than half the
improvement in the stability of economic growth in the countries they studied is accounted for by diminished
inventory cycles. That something so workaday as supply-chain management could have so marked an effect might
seem a dull conclusion. But dullness is a virtue, because technological improvement is irreversible. This means the
greater stability it provides is likely to be permanent.

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US economy resilient
Schmidt, 1/19/06 – Community Press
Two thousand and five will always be remembered as the year of the unprecedented natural disasters that devastated our nation’s Gulf State
region. But despite this national tragedy, our nation has shown resilience and a dedication to rebuild what was lost. As a result, our economy has
persevered through a tremendously difficult time. In fact, in recent years, our economy has withstood a series of major setbacks. From the
recession and ‘bubble burst” of the late 1990s, to devastating terrorist attacks, to two years of natural disasters, to funding the war, our
economy has certainly taken some significant hits. But as this year draws to a close, our nation’s economy is strong – and growing
stronger. The Department of Labor’s Bureau of Labor Statistics recently issued its monthly report for the month of November. The numbers were
positive. In November alone, 215,000 new jobs were created. In the past 12 months, the economy has created nearly 2 million jobs, and over 4.4
million jobs have been created since May of 2003. What is more, the unemployment rate is at 5.0 percent, which is lower than the average of the
1970s, 1980s, and 1990s.This means more Americans are working than ever before in our nation’s history, and America’s small business owners
are operating in an environment of lower taxes and less government interference, which is further fueling their growth.

Global econ resilient – even most serious shocks won’t stop growth
Giles, 1/25/06 – Financial Times
The global economy withstood natural disasters, a relentless rise in oil prices and
Stability and resilience characterised 2005.
widespread predictions of a dollar crash to enter 2006 with strong growth and continued price stability.
The international community managed to muddle its way through the continuing turmoil of the US occupation of
Iraq, the glacial progress in the Doha trade negotiations and the rejection of the EU constitutional treaty by the
voters of
France and the Netherlands without deepening long-standing divisions.
If 2006 can match that record, all but the most dewy-eyed idealists should be content. The process of globalisation creates vast opportunities for individuals, companies and societies. The rise of Asia, and China in particular, has
brought benefits to almost every community in the world. But change breeds fear. So the challenge for 2006 will be for the world to take advantage of the new opportunities while putting policies in place to mitigate the inevitable
threats. The world might have escaped a crisis in 2005, but the risks have not gone away, while some new threats to a stable world have emerged.
Muddling through political and economic challenges does not look so easy in 2006. The year has already seen a vicious dispute over gas prices between Russia and the Ukraine, highlighting the renewed power of energy producers;
Iran has decided to restart elements of its nuclear programme, putting the country on a collision course with some big players in the world. By the end of this month, the global economy must learn to live without the guiding hand of
Alan Greenspan at the Federal Reserve and, during the course of 2006, there will be either a completion or the collapse of the Doha trade round;
the US will be under severe pressure to come to a decision on the future of its troops in Iraq; and Israel will decide its political direction without the influence of Ariel Sharon. In addition to these certainties, the threats of ever
worsening global trade imbalances, energy insecurity and possible bubbles in bond and housing markets hang over the global economy.

The consensus among economists, international organisations and central banks is that the world's economy will be
able again to withstand these threats, posting another strong year of economic growth, supported by a rise in business
investment. If true, foreign affairs, led by events in the Middle East, will again grab the headlines.
Iran is the new flash-point in the region, with the hardline government led by President Mahmoud Ahmadi-Nejad upping the stakes in mid-January by reopening its uranium enrichment facility at Natanz. Although Iran has not
resumed full-scale production of enriched uranium, its move broke its moratorium, agreed with Britain, France and Germany in November 2004, and showed the limits of the international community's ability to hold rrant states to
account.
Unless Iran backs down and ceases its forays into nuclear weapons technology, referral to the UN Security Council will be the only available option, confronting Iran with the threat of sanctions from the whole of the international
community. Securing agreement at the UN will test the unity of the international community in the opening months of 2006. In neighbouring Iraq, the US continues to struggle to control the fierce insurgency that persistently
undermines efforts to bring physical security to the population. Under mounting domestic pressure to bring its soldiers home, the administration is likely to announce the start of a partial troop withdrawal later this year. There can be
no doubt this risky strategy will put even greater pressure on the Iraqi army and police, who are not yet able to maintain security in the country. Signs are more hopeful in the peace process between Israel and the Palestinians. Mr
Sharon might no longer be the central figure in Middle East politics, but his influence lives on in Israel's withdrawal from settlements in Gaza and his establishment of the Kadima ("Forward") political party that dominates Israel's
political centre ground. A final peace settlement is still far from reality, even if moderate parties triumph in January's Palestinian and March's Israeli elections, but hope now exists where there was none just over a year ago. Outside
the Middle East, the two issues that will dominate world affairs are energy security and trade. Russia assumed the G8 presidency at the start of the year, declaring energy security to be one of its two issues. It promptly demonstrated
its producer
power and the importance of the subject by cutting off gas supplies to the Ukraine after the country rejected Russia's quadrupling of gas prices. The Doha trade round limps on after the important players papered over the cracks at the
Hong Kong ministerial meeting in December. Though brinkmanship is always part of trade negotiations, the chances of a weak deal or collapse remain high. A deal must be struck in 2006 before the US administration loses its
authority, granted by Congress, to negotiate trade agreements. But the problem is that the concessions from the US, the EU and large developing economies needed for an ambitious deal appear more onerous to domestic audiences
than the perceived gains on offer. If the pressures of a firm deadline were not enough for trade negotiators, increased protectionist pressure is an ever-present risk with the continued surge in world trade, the rise of China and the
growth of economic imbalances. The US current account deficit is poised to exceed 7 per cent of gross domestic product this year.
After the US economy sailed through 2005 as though imbalances were an irrelevance, the betting is that 2006 will be just as benign. The central scenario is that US consumers and their government will continue to spend more than
they earn, but foreign investors, particularly official creditors in Asia and oil- producing countries, will be equally willing to go on lending to the US.

The lesson of 2005 is that the imbalances need not cause any immediate disruption . Indeed the initial signs in January are of positive economic
surprises around the world. But the further the elastic of the global economy is stretched, the greater is the threat of an unpleasant snap-back.
If US consumers were to decide to reduce their accumulation of debt, economic prospects would be damaged in every region. If other countries became less willing to finance the US trade deficit, the dollar could come under severe
pressure, raising global interest rates. Already in 2006 we have seen dollar jitters with signs that international investors are again concentrating on current account imbalances rather than interest rate differentials. Continental Europe
would be hardest hit by any rapid unwinding of global imbalances, as its economy has been most fragile with little sign of domestically generated growth. To mitigate the threat from global imbalances, China will come under
continued pressure to revalue the renminbi against the dollar. Its initial move last July gave only a 2.1 per cent increase in the value of its currency. Central bankers are an optimistic bunch at the moment, not over concerned about
global imbalances. Ben Bernanke, the incoming chairman of the Federal Reserve, staked his reputation last year on describing the trade imbalances as
the result of a global savings glut, mitigated by US willingness to absorb capital inflows. Those in charge of monetary policy worldwide are more concerned that the remarkable reduction in interest rate differentials between safe and
risky assets might be a sign of investor over-confidence which could reverse in 2006,
sending shock waves through the world economy. Good times have a nasty tendency not to last.

Serious though these threats are, their consequences are well-rehearsed and policymakers believe they would be able to
respond quickly to mitigate many of the consequences.

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Alt cause – global economy collapse

a. Kosovo
Gulf News 1/17/08 , http://archive.gulfnews.com/articles/08/01/17/10182503.html
"There are several risks facing the global economy in 2008, including the slowdown in the US, political risks
especially in places like Iran, Kosovo, and Pakistan, climate change, and the shift from an age of abundance to an
age of scarcity," Daniel Franklin, executive editor of The Economist said.

b. Pakistan
Sattar 1/19/08, babar, http://www.thenews.com.pk/print1.asp?id=91880
Territorially, Pakistan shares borders India, Afghanistan and Iran and its ethnic groups -- Punjabis, Kashmiris,
Pathans and Baloch -- spill across territorial boundaries into neighboring countries. The talk of a disintegrating
Pakistan or redrawn boundaries would have unpalatable consequences for our neighbors as well and we have thus
seen strong statements emanating from both Iran and India expressing solidarity with Pakistan in its fight against
terror. From an economics perspective, India and China -- the emerging economic engines of the new world
economy -- are in the neighborhood and an unstable and violence-prone Pakistan could have adverse consequences
for them as well as global economy. Further, due to its proximity with the oil rich Central Asian Republics and Iran,
Pakistan lies at the heart of a potential energy corridor that the world economy could benefit from.

c. China trade
Bremmer 1/18/08, Ian,
http://www.realclearpolitics.com/articles/2008/01/a_politicalrisk_outlook_for_20.html

But the more important shift in the United States is structural. One national poll (from the Pew Research Center) is
particularly instructive. In 2007, 59 percent of Americans considered international trade good for the United States .
. . compared to 78 percent five years ago (and 82 percent in Russia and 91 percent in China today). Relatedly, fewer
than half of Americans had a positive view of "large companies from other countries" compared with 64 percent of
Chinese, also with a comparable swing from previous years. In what has to be the single most troubling
development for the global economy in the past 20 years, domestic insecurities are quickly moving the American
electorate away from support for the international status quo.

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Growth drives confidence


Economic growth drives business confidence, not the other way around.
Michael A. Bernstein, 2001, OAH Magazine of History, Vol. 15 No. 4, __http://www.oah.org/pubs
/magazine/greatdepression /editor.html__

All short-run analyses of the Great Depression shared a common attribute. They focused on the immediate causes
and impacts of the New York Stock Market collapse of 1929, and they asserted that the resulting devaluation of
wealth and disruption of the banking system explained the intensity of the crisis. The "business confidence" thesis
was perhaps the best example of this school of thought. It held that regardless of the mechanisms that caused the
collapse, the dramatic slide of the stock market created intensely pessimistic expectations in the business
community. The shock to confidence was so severe and unexpected that a dramatic panic took hold, stifling investment and thereby a full
recovery. A more comprehensive formulation of the short-run argument directly confronted the question of why financial markets collapsed.
Looking to the political and institutional distortions created by the Treaty of Versailles, some writers (such as Irving Fisher and Lionel
Robbins) argued that the depression was the inevitable consequence of the chaotic and unstable credit structure of the twenties. The principal
irritant consisted of a dangerous circle of obligations and risks, epitomized by the Dawes Plan of 1924, in which the United States lent funds
to Great Britain, France, and Germany, at the same time the Allies depended on German reparations to liquidate their American debts. By
1928 American banks were already quite wary of the situation, but their predictable response, cutting back on loans to European governments,
merely made the situation worse. Moreover, the demise of the gold standard in international trade and demands that Germany make
reparations payments in gold created a net gold flow into the United States that led to a veritable explosion of credit. Extremely unstable credit
arrangements thereby emerged in the twenties, and once the crash came, the collapse of the banking system was quick to follow. Thus
excessive credit and speculation, coupled with a weak banking network, caused the Great Depression. Another version of the short-run
approach concerned the immediate effects of the crash on consumer wealth and spending. The severity of the downturn, it was argued,
resulted in a drastic devaluation of consumer wealth and a loss of confidence in credit. The resulting decreases in purchasing power left the
economy saddled with excess capacity and inadequate demand. None of these short-run arguments were completely
convincing. Because the business confidence thesis was subjective, it was virtually impossible to evaluate in the
light of historical evidence. There was also the objection that notions like these mistook effect for cause; the economic circumstances
of the thirties may have generated pessimism and panic, rather than being caused by such feelings. Later economists frequently
rejected the excessive credit and speculation argument on the grounds that it abstracted too boldly from real rather
than monetary events in the interwar economy. Indeed, business cycle indicators turned down before the stock
market crashed. Indices of industrial production started to fall by the summer of 1929, and a softness in
construction activity was apparent in 1928. Such critics as John Kenneth Galbraith held that "cause and effect run
from the economy to the stock market, never the reverse. Had the economy been fundamentally sound in 1929 the
effect of the great stock market crash might have been small . . . the shock to confidence and the loss of spending
by those who were caught in the market might soon have worn off."

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Turn / Confidence = Overinvestment


Overinvestment – business confidence leads to bad investment decisions causing economic
crisis
Victor Zarnowitz Spring 99 "Theory and History Behind Business Cycles: Are the 1990s the Onset of Golden Age? Journal of Economic
Perspectives, Vol. 13 No. 2

The disputes over the prospects for the current U.S. expansion are far from being merely academic: they reopen the fundamental yet unresolved
issue of the underlying causes of business cycles. One widespread and recurrent concern about tbe present, which has long roots in the
past, is that expectations of business profits and market returns may be outrunning the economy's potential to deliver.
Up to a point, high levels of consumer and investor confidence are self-confirming in their positive consequences. However, high confidence
can easily shade into overconfidence, which breeds misdirected or excessive investment. Eventually, tbe
balance of expectations shifts, as people realize that the market fundamentals no longer support the euphoria. The
expansion slows, then ends, as spending, employment and output turn down. All of this has occurred repeatedly in the past and there is
no compelling reason why it should not happen again. Believers in the inherent stability of market economies attribute recessions to policy errors
and external disturbances. Thus, misguided stimulation by excessively easy credit causes inflation, the belated curtailment of which causes
business activity to turn down. Some analysts consider the reactive nature of government actions
and other possible shocks but give no attention at all to any endogenous theories (for example, Temin, 1998). On the other hand, those who
suspect more systematic instability doubt that the story of the Fed killing each of the recent U.S. expansions is the right and full one. They can
point to many domestic and foreign recessions that originated mainly in market developments. Just to take the latest few years,
overconfidence, overborrowing, and overinvestment contributed to severe business downturns, financial crises, and
incipient deflation overseas, presenting the U.S. economy with new challenges.

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Auto manufacturers support flex fuel


Auto manufacturers are leading the effort to expand the flex fuel market – they support
the plan
Global News Wire 2007 Capitol Hill Press Releases May 24, 2007 GRASSLEY QUESTIONS BIG OIL'S COMMITMENT TO
LESSENING US

Our domestic auto manufacturers are leading the effort to expand the flex-fuel market. The domestic automakers
have produced approximately 6 million flex-fuel vehicles over the past decade.

Auto makers are leading the charge in production of flex fuel vehicles
Arlene Satchell, South Florida Sun-Sentinel South Florida Sun-Sentinel (Fort Lauderdale) July 9, 2008 HEADLINE: Flex-fuel gas
station opens in Broward County

Flex-fuel vehicles can run on either ethanol or gasoline and auto makers like General Motors, Chrysler, Nissan
and Ford are leading the charge in their production.
To launch E85 in Broward, the gas station offered an early bird deal of $1.85 a gallon for the E85 blend for two hours during this morning's rush
hour. The original price was $3.75 a gallon.

Auto manufacturers don’t oppose the plan – they have been making some flex fuel models
for decades.

The Arizona Republic (Phoenix) April 15, 2007 HEADLINE: THE ISSUE: AN ALTERNATIVE TO GASOLINE; FUEL UP
ON E85 AND ... BINGO!

Auto manufacturers have been making some " flex-fuel " models that will run on E85 for nearly a decade, although
the owners rarely realize it. An estimated 100,000 vehicles in Arizona are flex-fuel. They include certain Chevy Impalas, Dodge Caravans
and Ford Crown Victorias (for more information, go t www.e85fuel.com).

Businesses support fuel efficiency and hybrid cards because consumers want to be
involved in green technology

Business Wire M arch 18, 2008 HEADLINE: Americans Go Three Shades Greener in 16 Months;
Consumer survey finds more people regularly purchasing green products

Mintel Comperemedia, which analyzes direct mail and email advertising, has observed many green direct marketing campaigns for cars, trucks
and SUVs, for example. Increasingly, auto manufacturers are boasting their green credentials-more hybrid models,
better fuel efficiency and E85-compatibility-alongside traditional vehicles in advertisements. "In our consumer survey,
we saw a dramatic rise in people interested in
buying 'green' for major purchases," notes Ryan. "Of adults who purchase green products, 84% said they would consider green factors the next
time they shopped for a car or truck. Americans see greener purchases as a smart choice for both their pocketbooks and the
planet. Green shopping, both major and everyday, is definitely here to stay."

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