Bsw Biz Con Da

Spartan Debate Institute Business Confidence DA – V. 1.0

Burk/Stone/Walters lab 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 Business Confidence DA – V. 1.0

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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 antibusiness 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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Spartan Debate Institute Business Confidence DA – V. 1.0

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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 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. But what if it can't?

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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 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. York Mercantile Exchange.

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

decline in oil added to the optimism in early afternoon

U.S. economic activity. But the 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 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 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.

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

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 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

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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 no.html

http://www.usnews.com/blogs/capital-commerce/2008/7/16/mental-recession-maybe-economic-recession-

Bruce Kasman over at JPMorgan, and he still doesn't think the economy is going to fall into 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 One the smartest guys I know is

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 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.

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

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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 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. Myers

Regulations Kill Biz Con- they kill investment Heritage Foundation Reports January 2002

l/n

Overly 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. Freedom to Operate a Business (Low Regulatory Burden). Countries must maintain an open environment for business.

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 lewis040403.asp

“Nix the Energy Bill” http://www.nationalreview.com/comment/comment-

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-anddemand 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 capand-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, help Dems on energy

2007 HEADLINE: Friend vs. friend battles don't

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 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 interpretation, automakers claim it supports their position that

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 energyefficient 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 midcap 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 onehalf 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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I/L – US economy key to global economy 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 playing "The Price is Right" and start up a new round of "Saving Private Ryan." thing about depressions. They aren't just bad for your 401(k).

Economic Collapse causes extinction Beardon,

2000 http://www.cheniere.org/correspondence/042500%20-%20modified.htm

Lt Col. PhD, 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 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 worsen.

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 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. impossible.

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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” If

The global economic crisis of 1997-98 is indeed a historic event. 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, could plunge the entire world into a major depression. More than that, it could challenge the strength of the international political system and test 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 most dangerous--since the Second World War. This isn't just an economic meltdown in a few emerging markets. It's one that

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 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. for a recession--or anything like it. On this they may be simply following the form book.

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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 July 13, 2008

Spivak, Currency Strategists [email protected] HEADLINE: Will The Dollar Buckle? DailyFX

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 coldeyed, 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. Writedowns 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 numbercrunching 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-opedcx_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 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. Stability and resilience characterised 2005.

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, station opens in Broward County

2008 HEADLINE: Flex-fuel gas

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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