UMKC SDI 2008 Starter Pack

Economy

Economy Disadvantage
Economy 1nc..................................................................................................................................................................2 Economy 1nc..................................................................................................................................................................3 Economy High................................................................................................................................................................4 No Recession..................................................................................................................................................................5 Economy high.................................................................................................................................................................6 Generic Links..................................................................................................................................................................7 Nuke Power Cost Money................................................................................................................................................8 Subsidy Link...................................................................................................................................................................9 Economy Low...............................................................................................................................................................10 Economy low................................................................................................................................................................11 Economy low................................................................................................................................................................12

1

UMKC SDI 2008 Starter Pack

Economy

Economy 1nc
The U.S. economy is set to rebound and have growth in 2009, and new change will crush investment and confidence derailing the economy Vikas Bajaj 7/1/2008 “At Midyear, the Economic Pain Persists”, New York Times,
http://www.nytimes.com/2008/07/01/business/01place.html?em&ex=1215057600&en=6cc470e7cba33e7c&ei=5087 %0A Many policy makers and bankers said this credit mess was contained. Boy, were they wrong. More than a year after the crisis first flared, the financial industry, and with it the broader economy, seems to be caught in a vicious circle. As home prices sink, people are falling behind on their mortgages in growing numbers. As more homeowners run into trouble, banks must write off even more loans. And as the bad loans mount, financial companies are increasingly unable or unwilling to extend credit, making it even harder to buy homes or expand businesses. This process is playing out painfully on Wall Street, where on Monday the stock market rounded out its worst 12-month run since the spring of 2003, when the
United States invaded Iraq and the market was beginning a tenuous recovery from the bursting of the technology bubble. The Standard & Poor’s 500-stock index is down 12.8 percent for the first half of the year. The index just had its worst June (down 8.6 percent) since 1930 (down 16.5 percent). The Dow Jones industrial average is off 14.4 percent for the first half of the year. Financial shares keep falling. Even as the broader market posted a small gain on Monday, shares of banks and brokerage firms in the S.& P. 500 fell 2.1 percent, to a five-year low. Lehman Brothers, which has been struggling to persuade investors that it can survive as an independent firm, fell 11 percent Monday, bringing its loss for the year to nearly 70 percent. “Eventually, the financial sector’s troubles will be communicated to the rest of the economy,” said Douglas M. Peta, market strategist at J.& W. Seligman and Company in New York. “As there is less investment available that restrains consumer spending, it restrains corporate spending.” One measure already signals that the woes of the financial system are straining the economy. In the last 13 weeks, total bank loans, leases and securities holdings have fallen at an annual rate of 9.1 percent, its fastest decline since 1973, when the data was first collected, according to Jan Hatzius, chief domestic economist at Goldman Sachs. Even as the Federal Reserve and the government have tried to reinvigorate the economy with lower short-term interest rates and tax rebates, rates on mortgages and corporate loans have climbed to their highest levels this year. The average interest rate on a 30-year fixed rate home loan was 6.45 percent last week, up from 6 percent at the start of the year. Investment-grade corporate bonds are yielding 6.2 percent, up from 5.7 percent at the start of the year. Until recently, “we haven’t had the sense that we had the downward spiral in anything other than housing,” said Jane Caron, chief economic strategist at Dwight Asset Management, a bond-trading firm based in Burlington, Vt. “What I am worried about is that we are headed in a direction where those negative feedback loops expand and intensify.” That cycle will not be broken, Ms. Caron and other analysts say, until the decline in home prices slows significantly or ends, allowing the market to tally the full cost of the recent credit binge and restoring confidence among bankers and investors. Some analysts see tentative signs that the fall in housing may be ebbing. Sales of existing homes have flattened in recent months and home prices fell a little less in April than they did in March on a monthover-month basis. But both trends could easily reverse, as they have after previous upswings. “We could reach a bottom in housing at the end of this year and have some growth in the second half of 2009,” Ms. Caron said, “but that requires the economic backdrop to remain no worse than it currently is.”

2

UMKC SDI 2008 Starter Pack

Economy

Economy 1nc
Without reigning in spending, the dollar will spiral out of control and investors will stop financing the US debt, leading to a disastrous economic decline. The Washington Times December 8 2004
Foreign investors, who have been the biggest buyers of our debt, are losing trust in the integrity of our fiscal policy. They see the U.S. budget process as virtually out of control. They see us running the largest current account deficit of all time. In response, they have begun selling the dollar and shifting their money elsewhere, with potentially devastating effects for American investors. To head off a crisis and restore trust in America's finances, a first step is return to a complete "pay as you go" budget process which will keep the budget hole from getting any deeper. This would reassure foreign and domestic investors and help prevent further damage. Under our current system, Congress can spend all it wants with no immediate
consequences. Only last month, Congress passed a $388 billion appropriations bill and increased the debt limit by $800 billion, meaning the federal government can now borrow up to $8.2 trillion with no plan for repaying it. It seems clear the federal budget process is largely broken, but Congress continues record spending on the cuff. In contrast, with honest pay-as-you-go accounting in the budget process, also known as "pay-go," every time the government proposes spending more money or cutting more income, it would have to find equivalent savings or revenues in the budget to finance the proposals. This is both fair and non-partisan. Reasonable, responsible members on both sides of the aisle understand honest budgeting is good for America, no matter who is in charge. It was originally instituted in 1990 under George H.W. Bush and helped achieve the fiscal responsibility and budget surpluses under both Republican and Democratic administrations. It worked then. It can work again. But time is short. The dollar has already fallen to a 4 1/2-year low against the Japanese yen, an 8-year low against a basket of currencies and an all-time low against the euro. Foreign investors have already reduced sharply their purchases of U.S. government securities and are now net sellers of U.S. stocks. Next, U.S. investors, seeking to avoid losses, may do the same. To stabilize the dollar for the long term and protect our country's financial future, Congress and

the administration must move swiftly to prevent further deficit deterioration. They must account for all their spending, whether on tax cuts, more programs or expanded entitlements. The dollar's decline is not some distant crisis on the far horizon. It is
here and now. Indeed, investors don't have to wait until the next election to protest the federal government's runaway deficit spending policies that are endangering their investments. Nor need they go to Washington and pound on decision-makers' desks. They only have to pick up the phone or click on a mouse and issue one four-letter command: "Sell." That single act can send a very strong message to the White House and Congress: "Unless you change your ways, we won't buy your dollars, and we won't buy your bonds. We may even turn net sellers." Let's hope the government gets its house in order with no massive financial crisis. But without swift and responsible leadership from Congress and the president, it soon may be too late to prevent the most dangerous decline in decades.

Global economic decline will bring Armageddon. Lt. Col Tom Bearden (PhD Nuclear Engineering) April 25 2000
http://www.cheniere.org/correspondence/042500%20-%20modified.htm 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.

3

UMKC SDI 2008 Starter Pack

Economy

Economy High
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 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
But 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 manufacturing and tradeable service industries that are benefiting from the cheap dollar. And thus far the troubles in US banking and
these are employed in cyclically sensitive jobs related to mortgages or wholesale finance. 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

. 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
industrial production, employment, real income and wholesale-retail trade 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 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.
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

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 he U.S. factory sector -- excluding automakers -- isn't doing too badly either. Believe it or 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
The fact is that quarter-to-quarter, are most telling.) Thanks to the weaker dollar, t 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 As for the stock market, 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.
rise (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.

4

UMKC SDI 2008 Starter Pack

Economy

No Recession
The US is out of any type of recessionary trend. The Australian, “Consumer boom shows US out of the woods” June 19, 2008 p. ln
Until this month, sceptics could predict that trouble lay ahead for the US when consumers finally realised their credit had run out. But the strong consumer response to the $US110 billion tax rebate program changes the balance of this argument. With the 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.

US is rebounding but remains somewhat fragile. The International Herald Tribune, Jennifer Ablan, “Recession is still a possibility” June 17, 2008 p. ln
The acute phase of the crisis in financial markets could be over, marked by the near collapse of Bear Stearns, but the fallout leaves the United States vulnerable to recession. The vicious combination of the tighter lending standards in the banking industry, rooted in the monstrous rise in mortgage defaults, and falling U.S. home prices could continue into 2009. That could eat into already slowing economic growth and push the United States into a recession, albeit one that might be mild yet last longer than the eight-month-long recession of 2001,
speakers at the Reuters Investment Outlook Summit said last week in New York. ''We have fundamental uncertainty about what is going to happen with house prices,'' Martin Feldstein, head of the influential National Bureau of Economic Research, told the summit session. Those words are hardly comforting. Earlier this year, Ben Bernanke, chairman of the U.S. Federal Reserve, warned that consumers were bearing the brunt of the effects of the current downturn because housing wealth had been tied strongly to spending and their homes were their biggest assets. The morass in the U.S. housing market has also resulted in more than $300 billion of write-downs at financial institutions globally so far. Banks have been huge holders of risky securities tied to the appreciation or depreciation of housing prices. This week, Lehman Brothers raised $6 billion to bolster its balance sheet, not to mention investor confidence, reflecting the pain that remains ahead. Who would have considered that the Fed would aggressively cut rates, ''and in addition to that, create all these special facilities for the investment and securities industry, and yet we're still in the state that we're in,'' said Greg Peters, head of global credit strategy at Morgan Stanley in New York. ''That is nothing short of astounding.'' Feldstein said that house prices probably needed to fall another 15 percent to unwind the frothy gains produced during a bubble in the earlier part of the decade, but that there was no guarantee that they would stop falling when they reached that point. ''I don't think that that is an unreasonable proposition to put forward,'' Tad Rivelle, chief investment officer of Metropolitan West Asset Management, said, referring to Feldstein's projection. ''Housing is not an asset class that is easily deleveraged. It takes a long time.'' Investors like Rivelle, whose MetWest oversees $27 billion in assets, are finding that various types of mortgage-backed securities are pricing in far more bad news than they should. ''A lot of the subprime mortgage market is very attractively priced if you are talking about top of the capital structure front-end cash flows,'' he said. ''The marketplace has so tarnished the name of 'subprime' that you can find securities that I think under almost any type of condition are going to produce 10 or 20 percent internal rate of returns.'' He has been a purchaser of the safest part of a subprime bond that typically gets paid off in full, even in foreclosure. ''Even if there was a substantial and rapid rise in foreclosures and delinquencies in these deals, the rub is the servicer sells the property and generates some amount of cash in the process,'' Rivelle said. This cash flow gets directed to these triple-A securities, causing them to be repaid at an accelerated rate, he added. ''We're

now getting back within normal bands,'' the Goldman Sachs senior global strategist, Abby Joseph Cohen, said during the conference. ''Not for every asset, not for every market, but we're beginning to see that markets are pricing things in a way that there is demand for them at the new price. And that's an indication that things are unseizing.'' Henry Kaufman, president of a financial consulting firm, said that the United States was past the halfway mark in the credit cycle, but that ''we have a considerable ways to go.'' Louis Crandall, chief economist at Wrightson ICAP, said, ''We are past a couple of points of extreme fragility and risk'' in the crisis, but any progression might not be linear.

5

UMKC SDI 2008 Starter Pack

Economy

Economy high
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
But is America really in recession? Experts seem to think so, including Alan Greenspan, Warren Buffet, George Soros 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 are employed in cyclically sensitive jobs related to mortgages or wholesale finance. These two sectors between them employ far fewer people than the 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 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. With the 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.

6

UMKC SDI 2008 Starter Pack

Economy

Generic Links
Unpredictable policy changes ruin confidence and deter investment. *Gender Paraphrased* PR Newswire November 15 1993
"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 new projects, and investment in plant and machinery than any misguided political dogma. "Business[people]men invest in their businesses and take risks in new ventures 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."

New energy policies will hurt economic growth The Energy Journal January 1 2004
The possibility that R & D aimed at increasing energy efficiency diverts funds from economic growth is consistent with the causal relations identified by the VECM. The elements of [alpha] indicate that the third cointegrating relation loads into the [DELTA]GDP equation (Table 7). This result indicates that energy prices "Granger cause" GDP (Granger, 1969). That is, higher energy prices slow GDP. This result is consistent with those generated by Hamilton (1983), who finds that sharp increases in real oil prices "Granger cause" recessions in the US economy during the post war period. A causal relation that runs from energy prices to GDP implies that carbon taxes and/or tradable permits will slow economic activity. The negative macroeconomic effects of higher energy prices are reinforced by lower energy use. The elements of [alpha] indicate that the second cointegrating relation loads into the [DELTA]GDP equation (Table 6). This indicates that energy use "Granger causes" GDP. This result is consistent with analyses of the causal relation between US economic activity and energy use that account for energy quality (Stern, 2000). A causal relation that runs from energy use to GDP indicates that efforts to reduce carbon emissions by reducing energy use will slow economic activity.

7

UMKC SDI 2008 Starter Pack

Economy

Nuke Power Cost Money
Both advocates and critics agree that the government will subsidize any new plants. Chicago Tribune January 20 2005
Nuclear industry advocates and critics agree on almost nothing, but both sides say that if nuclear power is to return, major taxpayer subsidy will be necessary. In its so-far-unsuccessful efforts to pass an energy bill, the Bush administration has

a

proposed subsidizing construction of new plants, and some in the industry are pressing for loan guarantees of up to 80 percent of the cost of construction, contending that commercial lenders remain too wary. Officials say it is impossible to determine now how much money the industry would need to build even a handful of new facilities. Exelon's plant at Zion cost $2 billion, adjusted for inflation, when it was built in 1973, and critics say the money could be better spent developing renewable
energy sources such as wind power and clean-coal technology.

Government eats insurance costs for the nuclear industry, costing billions each year. Mark Zepezauer and Arthur Naiman 1996 Take The Rich Off Welfare,
http://www.thirdworldtraveler.com/Corporate_Welfare/Nuclear_Subsidies.html The insurance subsidy Since 1959, the government has also limited the liability of nuclear utilities for damage caused by accidents. Until 1988, the utilities were only responsible for the first $560 million per accident; then the limit was raised to $7 billion. But $7 billion wouldn't begin to cover the costs of a core meltdown, or even a near meltdown like Chernobyl. That accident's total costs are estimated at $358 billion-not to mention the 125,000 deaths the Ukrainian government figures it has caused. The Energy Information Administration calculates that if nuclear utilities were required to buy insurance coverage above that $7 billion on the open market, it would cost almost $28 million per reactor, for a total annual subsidy of $3 billion. (Even if it could pay its own way, the risks of nuclear power far outweigh its benefits. But that's the subject for another book.)

Investors will never put money into nuclear- subsidies will be necessary. Dashka Slater September 2001 “Free-Market Fallout - construction and operational costs of nuclear power
plants”, Sierra Magazine, http://www.findarticles.com/p/articles/mi_m1525/is_5_86/ai_77279545 Deregulation changed the nuclear power equation for good. "In this new competitive generation market, investors don't have any guarantees that the construction costs will ever be recouped," explains Jerry Taylor of the Cato Institute, a libertarian think tank. "No matter how many subsidies we throw at this technology, we're not going to tempt many investors to build nuclear power plants when cheaper alternatives are in front of them." Taylor is not someone you'd expect to see dissing nuclear power; his
bio on Cato's Web site notes that he is an outspoken critic of federal regulations, environmental "doomsaying," and energy-conservation mandates. But as a strict free-marketeer, he thinks conservatives have "a soft spot in their heads" when it comes to nukes. "If nuclear power can pay for itself over time, then it doesn't need any government help, welfare, subsidy, or anything else," he says. "It seems clear to me that were it not for large and historically important federal subsidies, there wouldn't be a single nuclear power plant in the United States." So can the Bush administration's love affair with the atom persuade investors to ignore the technology's inherent financial liabilities? Most observers don't think so. "Show me the orders for plants," says Sherry. "Show me a utility or an unregulated power producer willing to risk capital of the magnitude we're talking about. I'll believe it when I see it."

The industry refuses to develop plants without subsidies. Chicago Tribune January 20 2005
Nuclear power advocates

make clear that the electric power industry will not pay for new plants. They say the government must subsidize construction costs. "The financial risk is considered too high," said Carl Crawford, a spokesman for Entergy. "It's just too great a risk for any single company." Nustart has already won a commitment of $260 million
from the Energy Department to complete plant design, said Marilyn Kray, president of the consortium and an Exelon executive. "Our original request was for $400 million," Kray said. She said the industry needs a subsidy for the first nuclear plants it builds, but would not require taxpayer assistance for the plants that would follow. Adding to the uncertainty of the cost of a new plant is the distinct possibility of cost overruns. For example, CUB said the existing Clinton nuclear plant was supposed to cost $430 million, but it wound up costing 10 times that much.

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UMKC SDI 2008 Starter Pack

Economy

Subsidy Link
Subsidies distort the market and stifle the job growth necessary to a strong economy. The Union Leader August 15, 2003
Sununu, however, said, "Sound energy policy should remain free from harsh mandates and government subsidies that distort energy markets, stifle job growth and hurt our nation's economy. While the Senate Energy Bill included some provisions that would be helpful to New Hampshire and the nation -- in particular a ban on MtBE -- other measures, including a massive ethanol mandate and excessive package of subsidies for private industry, made the legislation unacceptable. "Payouts and tax breaks for private industry -- industry that should demonstrate marketability without using taxpayer dollars -- does not achieve the fairness, equity and efficiency that this country's economy needs to stay strong," Sununu said.

Subsidized conservation is harmful to the economy. Robert L. Bradley (president of the Institute for Energy Research) August 27, 1997,
http://www.cato.org/pubs/pas/pa-280.htm Environmental tradeoffs aside, economic problems threaten the future of utility-provided, ratepayer-subsidized DSM. The law of diminishing returns suggests that the supply of negawatts is a depletable resource. Declining benefit/cost ratios of utility DSM programs are a fact of life in California, [224] not to mention other states. The debate is really about how great the cost savings overestimates have been, not about how much cost-effective energy conservation really remains. Of note are two particularly rigorous studies by the Illinois Commerce Commission and the DOE's Energy Information Administration. [225] The former examined the full costs of state natural gas DSM-type programs from their inception in 1985 through 1994. The commission found that no program showed benefits greater than costs. [226] In fact, most programs demonstrated benefits that were a mere 25 percent of costs. The second study examined the total costs and benefits of DSM programs nationwide. The Energy Information Administration concluded that, from 1991 to 1995, approximately $12 billion (nominal) was spent on DSM programs that yielded 215.6 billion kWh of energy savings. Yet the cost of DSM programs over that period averaged 5.58 cents per kWh. Over that same period, however, fossil fuels produced electricity at 2.35 cents per kWh. Thus, subsidized energy conservation was twice as expensive as generated power, much of which came from facilities with unused available capacity (such as in California). [227] If there were ever an economic honeymoon period for ratepayer-subsidized energy efficiency (and most academic and many professional economists doubt that there was ever an efficient phase of DSM based on empirical investigation and the pure logic of consumer choice), [228] those days have passed.

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UMKC SDI 2008 Starter Pack

Economy

Economy Low
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.

The economy is in a recession and getting worse. Edmund Conway, Economics Editor The Daily Telegraph (LONDON), “Fed poised to cut US rates again as recession looms” March 10, 2008 p. ln
The head of the American institution which declares whether the economy is officially shrinking said he thought the US is in recession. Martin Feldstein, of the National Bureau of Economic Research, said: "On the basis of the available evidence, I would say we are in recession. But numbers get revised. And the delayed effects of the monetary and tax stimulus could kick in and pull the economy back on to a growth path.'' The US economy has deteriorated far faster than most mainstream economists predicted. Only a year ago there were few who were openly forecasting a recession. Now the vast majority of investment bank analysts have acknowledged that the economy is in technical recession, facing at least two quarters of economic contraction. The major US stock market indices are all at their lowest level since 2006, and many analysts expect further sharp falls.

Economy is low – the fed can’t fix it. MarketWatch, Greg Robb, “Most recent economic data 'pointing down' Havard's Feldstein” May 29, 2008 p. ln
The most recent data show that the U.S. economy is shrinking, said prominent economist Martin Feldstein. "I would say the indicators in general are pointing down...virtually every indicator is headed down," Feldstein said in a television interview. The economy stumbled in April after recovering a bit in March, he said. The sharpest drop in growth came in February, he added. Feldstein said the Fed wasn't going to move short-term interest rates in either direction in the short-term. Cutting rates isn't an option because low rates are not working well in the credit crunch, while hiking rates to combat inflation would simply be a "mistake," he said. Slack in the economy will keep core inflation from rising significantly, he said.

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UMKC SDI 2008 Starter Pack

Economy

Economy low
The economy is heading for an unprecedented downturn. The New York Times, David Leonhardt, “Worries That the Good Times Were a Mirage” January 23, 2008
The great moderation now seems to have depended -- in part -- on a huge speculative bubble, first in stocks and then real estate, that hid the economy's rough edges. Everyone from first-time home buyers to Wall Street chief executives made bets they did not fully understand, and then spent money as if those bets couldn't go bad. For the past 16 years, American consumers have increased their overall spending every single quarter, which is almost twice as long as any previous streak. Now, some worry, comes the payback. Martin Feldstein, the eminence grise of Republican economists, says he is concerned that the economy ''could slip into a recession and that the recession could be a long, deep, severe one.'' In Monday's Democratic presidential debate, Barack Obama made the same argument: ''We could be sliding into an extraordinary recession,'' he said. In the next breath, of course, Mr. Obama suggested that the right policies might still help, while Mr. Feldstein has said that a recession isn't yet a sure thing. And much of the great moderation is real. Computers allow managers to run their businesses more efficiently and avoid some of the wild swings. The Fed and central banks in other countries have learned from their past mistakes. But a recession is now more likely than not. It may well have started already. The Philadelphia Fed reported Tuesday that the economy shrunk in 23 states last month, including Ohio, Missouri and Arizona, and was stagnant in seven others. California and Florida, with their plunging home values, may soon join the recession list. The bigger question is how severe the recession will be if it does come to pass. The last two, in 1990-1 and 2001, have been rather mild, which is a crucial part of the great moderation mystique. There are three reasons, though, to think the next recession may not be. First, Wall Street hasn't yet come clean. Even after last week, when JPMorgan Chase and Wells Fargo announced big losses in their consumer credit businesses, financial service firms have still probably gone public with less than half of their mortgage-related losses, according to Moody'sEconomy.com. They're not being dishonest; they just haven't untangled all of their complex investments. ''Part of the big uncertainty,'' Raghuram G. Rajan, former chief economist at the International Monetary Fund, said, ''is where the bodies are buried.'' As Mr. Rajan pointed out, this situation is more severe than the crisis involving Long Term Capital Management in the late 1990s. That was a case in which a limited set of bad investments, largely at one firm, had the potential to drive down the value of other firms' holdings in the short term. Those firms then might have stopped lending money because they no longer had the capital to do so. But their own balance sheets were largely healthy. This time, the firms are facing real losses, which will almost certainly curtail lending, and economic growth, this year. The second problem is that real estate and stocks remain fairly expensive. This shows just how big the bubbles were: despite the recent declines, stock prices and home values have still not returned to historical norms. David Rosenberg, a Merrill Lynch economist, says that the stock market is overvalued by 10 percent relative to corporate earnings and interest rates. And remember that stocks usually fall more than they should during a bear market, much as they rise more than they should during a bull market. The situation with house prices looks worse. Until 2000, the relationship between house prices and rents remained fairly steady. The same could be said about house prices relative to household incomes and mortgage rates. But the boom of the last decade changed this entirely. For prices to return to the old norm, they would still need to fall 30 percent across much of Florida, California and the Southwest and about 20 percent in the Northeast. This could happen quickly, or prices could remain stagnant for years while incomes and rents caught up. Cheaper stocks and houses will benefit many people -- namely those who don't yet own a home and still have most of their 401(k) investing in front of them. But the price declines will also lead directly to the third big economic problem. Consumer spending kept on rising for the last 16 years largely because families tapped into their newfound wealth, often taking out loans to supplement their income. This increase in debt -- as a recent study co-written by the vice chairman of the Fed dryly put it -- ''is not likely to be repeated.'' So just as rising asset values cushioned the last two downturns, falling values could aggravate the next one.

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UMKC SDI 2008 Starter Pack

Economy

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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