A report to be released Monday by the Transportation Department shows that over the past seven months, Americans have reduced their driving by more than 40 billion miles. Because of high gasoline prices, they drove 3.7% fewer miles in May than they did a year earlier, the report says, more than double the 1.8% drop-off seen in April.

 

The cutback furthers many U.S. policy goals, such as reducing oil consumption and curbing emissions. But, coupled with a rapid shift away from gas-guzzling vehicles, it also means consumers are paying less in federal fuel taxes, which go largely to help finance highway and mass-transit systems. As a result, many such projects may have to be pared down or eliminated.

 

Full articles here…

“In its 95-year history, the Fed has never made a clear statement of its policy for dealing with failures. Sometimes it offered assistance to keep the bank or investment bank afloat. Other times it closed the institution. Troubled institutions have no way to know in advance whether they will be saved or strangled. The absence of a clear policy statement increases uncertainty and encourages problem institutions to demand loans and assistance. Large banks ask Congress to pressure the regulators. Taxpayers pay for the mistakes.”

It’s an excellent piece. Read full article here from WSJ.

As gasoline soars past the $4-a-gallon mark, police chiefs in towns and cities across the country are ordering their officers out of the car and onto their feet in a budgetary scramble.

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Chief Jones budgeted about $60,000 for fuel in the fiscal year that ended last month; the department spent $94,000. This year, he budgeted $163,000 — a large line item in a budget of $3.8 million.

The Houston Police Department exceeded its gasoline budget of $8.7 million last year and expects to spend $11.3 million this year. San Diego, which budgets fuel costs citywide, already expects to exceed its budget for the fiscal year that started July 1 by $1.5 million.

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But if the experience of the last 20 years is any guide, the prospect for the economy isn’t V-shaped, it’s L-ish: rather than springing back, we’ll have a prolonged period of flat or at best slowly improving performance.

Let’s start with housing.

According to the widely used Case-Shiller index, average U.S. home prices fell 17 percent over the past year. Yet we’re in the process of deflating a huge housing bubble, and housing prices probably still have a long way to fall.

Specifically, real home prices, that is, prices adjusted for inflation in the rest of the economy, went up more than 70 percent from 2000 to 2006. Since then they’ve come way down — but they’re still more than 30 percent above the 2000 level.

Should we expect prices to fall all the way back? Well, in the late 1980s, Los Angeles experienced a large localized housing bubble: real home prices rose about 50 percent before the bubble popped. Home prices then proceeded to fall by a quarter, which combined with ongoing inflation brought real housing prices right back to their prebubble level.

And here’s the thing: this process took more than five years — L.A. home prices didn’t bottom out until the mid-1990s. If the current housing slump runs on the same schedule, we won’t be seeing a recovery until 2011 or later.

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