• 2010 law, in which the 2001-2003 tax cuts are all in effect;

• The law scheduled to take effect in 2011, in which essentially all of the 2001-2003 tax cuts have expired; and

• The proposals that would take effect in 2011 under President Obama’s Budget. The budget includes numerous features, of which the most prominent is that  the tax cuts would continue for incomes up to $200,000 (individual) or $250,000 (joint), but almost all of the tax cuts at higher income levels would expire.

Users can create their own taxpayer profiles or can select from any of six sample households.

If you are interested, please try it out.

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(Note: A barrel of oil has roughly 6 times the energy content of a MMBtu of natural gas. If the fuels were perfect substitutes, oil prices would thus tend to be about 6 times natural gas prices. In practice, however, the ease of using oil for making gasoline makes oil more valuable. As a result, oil has usually traded higher.)

The unusual pricing of the last two years reflects two factors. First, there has been a dramatic–and welcome–expansion in domestic natural gas supplies. That’s driven natural gas prices down to less than $4 per MMBtu at yesterday’s close. Second, there is limited opportunity for energy users–utilities, businesses, and homeowners–to switch from oil to natural gas. Years ago, such switching linked oil and natural gas prices relatively closely. But today those prices appear largely decoupled.

All of which poses an important question for investors, forecasters, and industry planners: Will historical relationships eventually reassert themselves, perhaps by longer-term fuel switching by utilities and transportation fleets to natural gas? Or is this time really different, with old pricing relationships no longer relevant?

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Carloads (think bulk materials like coal, grains, minerals, and chemicals plus autos) are up about 6% over 2009:

Intermodal traffic (think trailers and containers) is up almost 20%, thus returning to 2008 levels:

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(As you may recall, the U-6 measure includes the officially unemployed, marginally attached workers, and those who are working part-time but want full-time work.)

Both the headline unemployment rate (U-3) and the underemployment rate (U-6) are below their peaks of late 2009, but have basically been moving sideways. That’s much better than the sharp increases in 2008 and most of 2009. But we have a very long way to go.

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Last month I pointed out one, small silver lining in the original GDP report: every major category of demand had increased. That is still true in the revised data, although structures just squeaked by with a miniscule 0.01 percentage point contribution to overall growth:

Investment showed particular strength. Business investment in equipment and software (E&S) grew at a 25% pace, thus adding about 1.5 percentage points to overall GDP growth. Boosted by the end (hopefully permanent) of the new homebuyer tax credit, housing investment grew at a bubble-like 27% pace (adding about 0.6 percentage points to GDP).

Despite solid growth in disposable incomes–up 4.4% adjusted for inflation–consumer spending grew at only a 2.0% pace.  As a result, the saving rate increased to 6.1%, compared with 5.5% in the first quarter.

And then there are imports. As I’ve discussed before, BEA calculates GDP by adding up all the components of demand for U.S. products–consumers, businesses, governments, and export markets–and then subtracting the portion of that demand that is supplied by imports. That means that any growth in imports appears as though it subtracts from overall economic growth.

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Researchers at the San Francisco Fed took a crack at this question a few weeks ago. Their answer? It depends.

When they used a traditional model based on the leading economic indicators, the probability of a second dip turned out to be about 25% over the next two years (the blue line). When they dropped one indicator from their model, that probability doubled to about 50% (the red line).

That important indicator is the yield spread–the difference between the 10-year Treasury interest rate and federal funds rate. In recent decades, the yield spread has done a terrific job at anticipating recessions. When the federal funds rate has risen above the 10-year rate, the economy has invariably fallen into recession.

As I noted briefly the other day, the relative steepness of today’s yield curve (10-year rate about 2.5 percentage points above the fed funds rate) thus suggests, by itself, that renewed recession is unlikely, despite recent weak economic data. On the other hand, there are reasons to believe that this time things are different (usually a scary phrase). After all, fed funds rate has been pushed down almost to zero and yet the economy no longer appears to be responding. That’s exactly the logic that inspired the SF Fed researchers to try their model without the yield spread.

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And what, you may ask, is financial oppression? Speaking from the perspective of investors in sovereign debt, Mares defines it as “imposing on creditors real rates of return that are negative or artificially low.” Which doesn’t require outright default. Instead, it

[C]an take other forms: repaying debt in devalued money (e.g., through unanticipated inflation), taxation or regulatory incentives on institutions to purchase government debt at uneconomic prices.

Mares sees sovereign creditors as tempting targets when over-indebted governments decide which of their many fiscal promises they can’t keep.  After all, elderly pensioners cast more votes than coupon-clipping bond holders. And he thinks current low yields provide little protection against that threat.

His piece is definitely worth a read if you want to consider a bearish view on U.S. and European sovereign credit.

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CBO now estimates that ARRA will cost $814 billion from 2009 through 2019. That’s up from the original $787 billion estimate, but down from the revised, $862 billion estimate released in January.

Spending exceeded original expectations because both unemployment and food prices rose more than anticipated, driving up the cost of extended unemployment benefits and expanded food stamp benefits. On the other hand, spending estimates have come down because “recently enacted legislation rescinded some of the funds appropriated in ARRA and limited the period in which higher payments under the Supplemental Nutrition Assistance Program [formerly known as food stamps] will be available.” (CBO did not update estimates for the tax provisions in ARRA.)

For a discussion of why the $814 billion figure (formerly known as the $862 billion figure or the $787 billion figure) is not really the right measure of stimulus, see this post.

On a related note: Earlier today, CBO released an updated analysis of the economic effects of ARRA. It estimates that ARRA reduced unemployment in the current quarter by 0.8 to 2.0 percentage points. In other words, without that stimulus CBO believes that the unemployment rate today would be between 10.3 percent and 11.5 percent, not the 9.5 percent reported in July.

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Over the past few years, peer-to-peer services and video have gobbled up an increasing share of traffic, while he “traditional” web — you know, surfing from site to site, reading your favorite blog about economics, finance, and life, etc. — has been declining.

Chris Anderson cites this as evidence of the pending death of the web. To which there is only one thing to say: wait a minute buster. Just because the web’s share of total bits and bytes is falling doesn’t mean it’s dying. Maybe it’s just that the other services are growing more rapidly.

One of the benefits of being off the grid for a week-plus is that other commentators have already had the same thought and have tracked down the relevant data. Kudos to Rob Beschizza at BoingBoing for charting the data in absolute terms.

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Here it is. (I hope the link still works; if not, I will fix it once I get back on the grid.)

Keeping with the spirit of the event, I spoke about “Fiscal Policy in Interesting Times.” And with that title, I simply had to mention the famous curse, “May you live in interesting times.”

As the helpful folks at Wikipedia point out, chances are good that this curse originated in England or the United States not, as often alleged, China. Regardless of its origin, it’s still an excellent curse, which I remember my mom invoking often in my childhood (rhetorically, I should note, not at me). For an audience of policy researchers, however, it’s a curse with a silver lining. We may not want interesting things to happen (financial crises, trillion-dollar deficits, 9.5% unemployment, etc.), but they do increase the odds that policymakers, journalists, and the public will pay attention to what we are saying (whether they should is a separate question …).

What makes today particularly interesting is that we face lots of uncertainty and major challenges. That a potent mix. We know less about what’s going on than usual, but we are playing for bigger stakes. Case in point: Fed Chairman Ben Bernanke’s recent statement about the outlook being “unusually uncertain” while the economy still struggles to heal from the financial crisis. Is it a rebound or a relapse? I fear it may be the latter, but we just don’t know.

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