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A Quick Look at Bloomberg News's Opinion Section for April 10, 2012

U.S. HEADED TOWARDS OVERDUE (IF MODERATE) RECESSION: A. Gary Shilling:
For several months, I’ve been forecasting a recession in the U.S. this year,
arguing that weakened consumer spending -- the key to the economic outlook
-- would tip the economy back into a downturn. But what about recent
positive data and markets? Do they affect my forecast? […] Personal-income
growth continues to be weak -- up just 0.2 percent in February -- meaning
this recent exuberant consumer spending is being fueled largely by increased
debt and tapping of savings. At the same time, pay per employee is rising
slowly and continues to fall in real terms. So increased job growth remains
the key to any increases in real household after-tax income, which declined
in February for a second straight month and gained a mere 0.3 percent,
compared with February 2011. […] With the house-price collapse and the
earlier huge withdrawal of home equity, consumers can no longer use their
homes as leverage for oversized spending. The profligate postwar babies need
to save for retirement, and they can. Many are in their 50s, their
peak-income years. Their offspring’s tuition bills have disappeared with
graduations and, if their kids are like our four, they no longer have as
many smashed-up cars to replace. Also, those with jobs should be encouraged
to step up saving for contingencies, due to employment uncertainty. […]
Links:
1. http://us2.campaign-archive1.com/?u=98bac6cd6075b07f398b277fa&id=60f67d303d&e=002874f745

Consumer spending is the only major source of strength in the U.S. economy
this year. State and local-government spending remains depressed because of
deficit woes and underfunded pension plans. Housing suffers from excess
inventories and may face a further 20 percent drop in prices. Excess
capacity restrains capital spending. Recent inventory building appears
involuntary. So consumer retrenchment will tip the balance toward a moderate
and overdue recession. [Link.]
Links:
2. http://bloom.bg/HCtbko

SUSHI POISONING REMINDER THAT FOOD SYSTEM NEEDS OVERHAUL -- Bloomberg View
editorial: “Reports last week of a salmonella outbreak, possibly related to
sushi, serve as a timely reminder of why the Obama administration must
expedite a plan to modernize the country’s food-safety regulations, which
haven’t been updated since the Great Depression. So far, more than 100
people in 19 states have been stricken, all by an unusual strain of the
bacteria known as salmonella Barielly. […] The Obama administration was a
strong supporter of more stringent regulation following the outbreak of
salmonella from tainted peanut butter in 2009, so the delay in putting the
law in place is troubling. Perhaps the bureaucratic wheels are turning
slower than usual; perhaps the White House doesn’t want to be accused of
adding “job-killing regulations” in an election year.

The OMB is confronting a math problem: Carrying out the law would require
additional funding for the Food and Drug Administration, the agency that
drafted the rules and would be charged with overseeing and enforcing the
law. With little support in Washington for increasing spending, the OMB is
searching for ways to offset the agency’s need for more money. As an
alternative to paying for the FDA’s increased workload through the federal
budget, the Obama administration proposed imposing so-called user fees of
$220 million on an industry with more than $1 trillion in sales. Those fees
would require Congressional approval. Though the amount seems comparatively
trivial, the food industry opposes them and they stand little chance of
passage.

Food-borne illness costs the U.S. as much as $77 billion a year in medical
treatment, lost productivity and reduced sales of products implicated in
contamination episodes, according to an analysis by a former FDA economist.
… The food industry would prefer that the costs of more vigilant regulation
fall to the American taxpayer. But in light of the harm that food poisoning
causes to victims, the economy and the industry itself, the Obama
administration should press forward with building support for user fees.
[Link.]
Links:
3. http://bloom.bg/HUo7U3

ILLINOIS IS PENSION BASKET CASE YOU FORGOT ABOUT by Josh Barro: “Rod
Blagojevich is in prison. But the worst things the former governor did to
Illinois weren’t even illegal. […] The teachers’ fund is one of the
country’s worst-financed statewide pension systems, reporting that it is
only 47 percent funded. […] Closing the TRS funding gap -- and the gap at
the State Retirement Systems of Illinois, which is only 36 percent funded --
will depend on taxpayers’ willingness to start paying far more than they
ever did for pensions. And as the TRS statement makes clear, that is far
from a sure bet, meaning that pensioners may see their benefits cut. […]

No individual is more personally responsible for allowing this to happen
than Rod Blagojevich, who became governor in 2003 and who was impeached in
2009. Illinois is not unique because it has struggled to manage its budget
in the recession; many states have similarly failed to act responsibly in
the last four years. It is much more notable as a place that let its fiscal
problems spiral out of control while the economy was strong, leaving an
unusually daunting mess for lawmakers to clean up in the recession.”
[Link.]
Links:
4. http://bloom.bg/Iov0Tt

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