Documente Academic
Documente Profesional
Documente Cultură
DDI 2008 SS
Fadi
Index
Contents
Index................................................................................................................................................1
BIZ CON 1NC................................................................................................................................4
BIZ CON 1NC................................................................................................................................5
Bizcon Uniqueness.........................................................................................................................6
Bizcon Uniqueness.........................................................................................................................7
Bizcon Uniqueness.........................................................................................................................8
Bizcon Uniqueness.........................................................................................................................9
Investor Con Stable......................................................................................................................10
Investor Con High........................................................................................................................11
Investor Con High- Mortgage Lenders......................................................................................12
Investor Con Stable......................................................................................................................13
Invester Con Brink......................................................................................................................14
Consumer Confidence Stable......................................................................................................15
Link- RPS.....................................................................................................................................16
.......................................................................................................................................................17
Link- Regulations.........................................................................................................................17
Link – Regulations.......................................................................................................................18
Link – Regulations.......................................................................................................................19
Link – Regulations.......................................................................................................................20
Link – Regulations.......................................................................................................................21
Link – Regulations.......................................................................................................................22
Links- Mandates..........................................................................................................................23
Links- Emission Reductions........................................................................................................24
Link- Emissions Reductions........................................................................................................25
Link- Emissions Reduction.........................................................................................................26
Links- Regulations Cause Blackouts..........................................................................................27
Link – Kills Investment...............................................................................................................28
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WSJ (Wall Street Journal), 7-15-08, “The Multifront War Over Investor Confidence”,
http://online.wsj.com/article/SB121610307854153963.html?mod=googlenews_wsj
That seemed to help, at least temporarily, since investors yesterday bought $3 billion in short-term debt in a Freddie
auction that drew more bids than usual and thus allowed the company to offer lower yields and keep down its
borrowing costs, as The Wall Street Journal notes. This confidence stems from the powerful promise Treasury
Secretary Henry Paulson essentially made to back Fannie and Freddie on Sunday, however much he expressed a
preference for keeping their shareholder-owned structures. As BusinessWeek's Michael Mandel argues, the two
seem to be "on the inevitable road to being bailed out, nationalized, and shrunk," since the placement of "the full
faith and credit of the U.S. government behind two private financial companies" can't be undone. Still, if Mr.
Paulson's weekend moves helped shore up short-term confidence in Fannie and Freddie's ability to keep pumping
money into the housing market, they didn't solve long-term worries about their capitalization, the Journal says. The
rescue of Fannie and Freddie came "after Wall Street executives and foreign central bankers told Washington that
any further erosion of confidence could have a cascading effect around the world," officials tell the New York
Times. And yet, the start-and-stop market cascades tied to the mortgage crisis that began early last year were at it
again today. Yesterday's fall in U.S. banking stocks today is translating into hefty losses in Shanghai, Singapore,
Hong Kong and Japan, and in London, Frankfurt and Paris, too. The dollar reached a new low against the euro,
which was buying more than $1.60, and U.S. stock futures are down ahead of the market open in New York.
In our view, many firms at present fear a quadrant 1 scenario. They do not invest in developing green capabilities
because of the high uncertainty regarding leveraging effects associated with these investments. In many cases it is,
for example, unclear ( a ) how government regulation, both in terms of command and control regulations and
market-based instruments will evolve over time, ( b ) to what extent the impact of ‘green consumerism’ will
increase in terms of affecting purchasing decisions of buyers, ( c ) what the industry standards and benchmarks will
be in the area of environmental protection. This is consist- ent with Jaffe’s analysis, which demonstrated the
benefit of waiting to make irreversible invest- ments in clean technologies until better technol- ogies become
available ( Jaffe et al, 1995 ).
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John Braithwaite, Australian Research Council Federation fellow, 2004, The Annals of The American Academy of Political
and Social Science, March, “Emancipation and Hope,” Lexis
The challenge of designing institutions that simultaneously engender emanci- pation 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).
But what if it can’t? What if the global economy stagnates—or even shrink 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.
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Bizcon Uniqueness
One of the key findings of the survey is that American respondents are more confident in today’s market (37.7%) than their non-American
counterparts (28%). More respondents from non-U.S. companies (33.9%) said their confidence was lowest during the past five years compared to their American
counterparts (25.5%). Stephen Coelen, managing director of the World Institute for Strategic Economic Research (WISER), developed the algorithm used to create the
index. “We formulated the survey questions in order to measure both current levels of confidence and changes in confidence over time,” he said. “The result is a new
and unique perspective on global business confidence as it relates to key economic factors.” The Index is published by ThinkGlobal Inc. in partnership with WISER,
The Center for International Business Education Research (CIBER) at the University of Connecticut and Commercial News USA. “The Global Business
Confidence Index survey is designed to measure the business “confidence” of U.S. exporters as well as importers of products and
services from the United States,” said Gregory Sandler, president of ThinkGlobal Inc., publisher of the index. “The survey data will be updated quarterly, and
the results will allow us to gauge global business perceptions about the current condition of the world economy, as well as historical trends and anticipated changes.”
According to the Index, the overall confidence in the world economy increased by 35 points during the past two years, and is projected
to continue increasing before leveling off in 2009. More than one-third of survey respondents (34.5%) said their confidence in world markets
is higher today than it has been during the past five years, and 43.6% said their confidence in the market was lowest three to five years
ago. Both U.S. and non-U.S. respondents ranked the U.S. exchange rate as the most significant factor affecting confidence. In addition to measuring levels of
confidence, The Global Business Confidence Index also measures key factors that affect changes in confidence over time and identified variations in perceptions
between U.S. and non-U.S. respondents. “Knowing what influences confidence is not the same as knowing what factors make the level of confidence grow or shrink,”
said Coelen. “We analyzed what factors influenced the increase or decrease in confidence to see the relative importance of various potential influences. While the
exchange rate is an important factor in the level of confidence, it does not appear to be an important factor in determining the movement of the Index.” Overall, the
Index shows that U.S. business confidence in the global economy increased more rapidly than non-U.S. confidence during the past
five years. Conversely, non-U.S. confidence is projected to increase more rapidly during the next five years.
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Bizcon Uniqueness
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Bizcon Uniqueness
Business confidence and the stock market are rising now, reports are coming
in of a stronger than expected month
Major U.S. stock indexes finished higher on Friday, getting an injection of investor optimism about the economy on better-than-
expected durable goods orders and new home sales figures, with added support from another drop in oil prices.
On Friday, the Dow Jones industrial average closed 21.41 points, or 0.19%, higher at 11,370.69. The broader S&P 500 gained 5.22 points, or 0.42%, to
finish at 1,257.76. The tech-heavy Nasdaq composite index was up 30.42 points, or 1.33%, at 2,310.53. Helping to fuel gains was Thursday's selloff,
which provided investors with an opportunity to buy stocks at sharply reduced prices. But weakness in Fannie Mae (FNM), Freddie Mac (FRE),
Wachovia (WB) and some other names held the market in check, S&P MarketScope said. On the New York Stock Exchange, 18 stocks were higher for every 13 that
traded lower, while on the Nasdaq the ratio was 17-11 positive. Oil prices resumed their decline on Friday as bigger supplies are flowing in from
Saudi oil fields and due to growing confidence in ample supplies amid an absence of adverse weather conditions. August WTI crude oil
futures settled ng $2.23 lower at $123.26 a barrel on Friday.
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Bizcon Uniqueness
Nearly 78 percent of owners and managers of small businesses say their companies are either growing as planned or at a
faster pace than forecast at the beginning of the year, according to results of a Business Confidence Survey released
today by Administaff (NYSE:ASF), a leading provider of human-resources services for small and medium-sized businesses.
Survey respondents also are actively filling open positions with 44 percent saying they are hiring full-time employees
and 11 percent planning to bring in part-timers. Administaff also released compensation data compiled from its client base
of more than 6,000 small and medium-sized businesses throughout the country. A comparison of first-quarter data against the
same period in 2007 shows that average compensation is up 4.9 percent and average commissions have increased 6.8
percent. In addition, overtime pay is running 9.5 percent of regular pay.
Business confidence is rising, as companies are holding a more optimistic outlook for the second half of 2007, according to
the Taiwan Institute for Economic Research (TIER). TIER based these conclusions on the results of its latest survey of the
manufacturing and service sectors. Nearly 50% of the surveyed manufacturers said that they were "optimistic" about
economic performance in the second half of the year. The survey was presented at a meeting hosted by TIER president
David Hong and researcher Chen Miao. As organizations such as the UK's Economist Intelligence Unit (EIU) and the United
Nations have revised their economic growth forecasts upwards, the global economy should remain strong, which means
Taiwan will continue to maintain strong exports, said Chen. Although manufacturers were less positive about business
performance in April in comparison to March, they held an optimistic outlook for the next three to six months -- the
percentage of manufacturers who said they were "positive" about their business outlook rose from 44.3% to 49.2%,
according to Chen.
National City's monthly business confidence survey hit a record low in June, helped along by growing gloom in its
territories affected by recent flooding, the bank said. Only 57.8 percent of respondents expressed confidence in the
economy, down from more than 60 percent in May, National City said in a news release. States affected by flooding had
the largest drops: Missouri's economic outlook results fell to 59 percent from 77.4 percent over the month; Illinois' to 61.7
percent from 71.2 percent; and Indiana's to 66.9 percent from 70.7 percent.
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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Falling oil prices were the tonic the stock market needed Tuesday to turn a negative opening into modest gains. The August crude contract, which was
due to expire Tuesday, fell $3.79, to $127.25 a barrel. The drop was partly attributed to evidence that Tropical Storm Dolly will miss major oil
and gas installations in the Gulf of Mexico. In a broader sense, demand destruction brought on by the expectation of a slowing global economy has been to
blame for the recent decline of crude. The September contract, which saw much of the action on Tuesday, settled at $128.42. The dollar was stronger, with the
euro down to $1.5779 from $1.5899 late Monday, after President Charles Plosser of the Federal Reserve Bank of Philadelphia said the U.S. central bank needs to
reverse course on monetary policy and start hiking its short-term interest rate sooner rather than later. Meanwhile, Treasury Secretary Henry Paulson said the stability of
government-sponsored enterprises Fannie Mae and Freddie Mac are crucial to the recovery of the housing market. (See "Paulson Calls For Confidence.") Investors
were also pulling out of bonds, as the 10-year note yield reached up as high as 4.12%, from 4.07% Monday. On July 15, the yield closed at
3.87%.
The American Securitization Forum is coming together to try and restore currently shaky investor
confidence through the Project RESTORE initiative
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Washington Post, 7/17/08. “Stocks Rebound Despite Big Jump In June Inflation; Financial Shares Post Double-Digit Gains,” Lexis
Other prices were also up in June, indicating that high prices for oil and other commodities are working their way through the
economy. Transportation costs were up 3.8 percent last month; rents and the cost of education and other services rose briskly, too. Overall, core inflation -- which
excludes food and energy -- increased 0.3 percent in June, a substantial increase over the previous four months. But investors, buoyed by the Wells Fargo
news, brushed off the inflation report and streamed to buy up stocks that were at the lowest level in years. The S&P 500 Banks Index rose 23
percent, the biggest jump since September 1989. Share prices of Fannie Mae and Freddie Mac more than erased steep losses from
Tuesday, with Fannie Mae surging 31 percent and Freddie Mac rising 30 percent. Shares of Washington Mutual, the largest U.S. savings and loan, jumped
25 percent, while J.P. Morgan Chase and Bank of America, the nation's largest commercial banks, climbed 16 and 22 percent, respectively.
Wachovia, which holds more deposits from Washington area residents than any other commercial bank, gained 16 percent. Wells Fargo reported a second-quarter
profit of $1.75 billion, or about 53 cents a share. That was 21 percent lower than its profit in the corresponding quarter a year earlier but exceeded the
expectations of most Wall Street analysts, who had predicted a profit of 50 cents a share. Even more encouraging to investors was the company's
announcement that it would raise its dividend 10 percent, a move that reaffirmed a positive long-term outlook.
US investors are becoming optimistic after a drop in oil prices and higher-than-expected bank profits
The International Herald Tribune, 7/17/08. “Stocks rise in U.S. and Europe as oil declines;
MARKET ROUNDUP,” Lexis
U.S. and European stocks rose Wednesday after oil prices fell sharply on news of an unexpected leap in U.S. crude supplies last week and after a big
American bank posted surprisingly strong results. All told, the events helped to ease investor fears about the battered financial sector.
Spot gold prices tumbled about 2 percent as crude oil slid and the dollar extended gains after the Federal Reserve chairman, Ben Bernanke, Ben Bernanke said that
under certain conditions currency intervention might be warranted. Shares in the beaten-down financial sector surged. The S&P financial index rose 6.3 percent, while
the KBW banks index gained 9.4 percent. Not all the news was positive. Data showed U.S. consumer price inflation accelerated to an annual rate of 5 percent in June -
well above economists' forecasts - and U.S. government debt prices fell sharply. U.S. crude oil futures fell more than 4 percent after a U.S. government agency reported
a surprise increase in import levels, causing crude prices to chalk up the biggest two-day loss in percentage terms since January 2007. While the two-day drop in the
price of oil of almost $15 only brought crude to a three-week low, the fall was enough to help Wall Street indexes rally about 2 percent in
late trading. Equity markets had slipped entirely into bear-market territory earlier in the week. An index of top European shares also closed higher, a day after hitting
a three-year closing low. Stronger-than-expected quarterly results by Wells Fargo, one of the biggest U.S. banks, helped turn a sour mood
on Wall Street that has seen banking shares slide to decade lows as the sector looks for still more capital after record infusions.
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Maurna Desmond, Forbes writer, 7-14-08, “Investors Still Shy Of Fannie & Freddie”,
http://www.forbes.com/home/2008/07/14/fannie-freddie-gse-markets-econ-cx_md_0714markets11.html
Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) surged Monday morning, but
then cooled after news that the Federal Government announced a three-pronged plan on Sunday to ensure that the two
government-backed lenders, which own or guarantee roughly $5.3 trillion or half of all outstanding U.S. mortgage debt, are
able to continue operating. The government's action turns an implicit government guarantor into an explicit one, and boosted
investor confidence, at least initially. Freddie was down 1.4%, or 11 cents, to $7.64 and Fannie added 2.8%, or 29 cents, to
$10.54 by noon in New York.
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The Guardian, (Reuters), 7-14-08, “US pledge fails to lift cloud over Fannie, Freddie”,
http://www.guardian.co.uk/business/feedarticle/7651704
The Treasury Department is seeking Congressional approval for a temporary increase in the credit line it provided for Fannie
and Freddie. Its size is to be determined by Paulson, who told the Fed not to lend to Fannie and Freddie until they exhaust their
Treasury credit lines. Debt buyers seemed confident in the mortgage agencies. Monday's $3 billion debt sale from Freddie drew
stronger demand than a similar one on July 7. Fannie announced that it will sell $3 billion worth of debt on Wednesday. While
Monday's debt auction was routine, it was viewed as a key test of market appetite following last week's stock sell-off. Freddie's
treasurer said the sale was "business as usual," and he did not perceive a crisis of investor confidence.
State Street, “INVESTOR CONFIDENCE INDEX RISES FROM 72.3 TO 81.0 IN MAY ”,
http://pr.statestreet.com/us/en/20080520_1.html, May 20th, 2008
Global Investor Confidence rose by 8.7 points to 81.0 from a revised April level of 72.3. North American investors were the key
drivers of this, as their risk appetite increased by 8.0 points from 77.0 to 85.0. In other regions, the confidence levels saw
negligible changes from the previous month, with European investor confidence falling by 0.5 points to 76.3 and Asian investor
confidence rose by 0.2 to 86.4.
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WSJ (Wall Street Journal), 7-15-08, “The Multifront War Over Investor Confidence”,
http://online.wsj.com/article/SB121610307854153963.html?mod=googlenews_wsj
That seemed to help, at least temporarily, since investors yesterday bought $3 billion in short-term debt in a Freddie auction
that drew more bids than usual and thus allowed the company to offer lower yields and keep down its borrowing costs, as The
Wall Street Journal notes. This confidence stems from the powerful promise Treasury Secretary Henry Paulson essentially
made to back Fannie and Freddie on Sunday, however much he expressed a preference for keeping their shareholder-owned
structures. As BusinessWeek's Michael Mandel argues, the two seem to be "on the inevitable road to being bailed out,
nationalized, and shrunk," since the placement of "the full faith and credit of the U.S. government behind two private financial
companies" can't be undone. Still, if Mr. Paulson's weekend moves helped shore up short-term confidence in Fannie and
Freddie's ability to keep pumping money into the housing market, they didn't solve long-term worries about their capitalization,
the Journal says. The rescue of Fannie and Freddie came "after Wall Street executives and foreign central bankers told
Washington that any further erosion of confidence could have a cascading effect around the world," officials tell the New York
Times. And yet, the start-and-stop market cascades tied to the mortgage crisis that began early last year were at it again today.
Yesterday's fall in U.S. banking stocks today is translating into hefty losses in Shanghai, Singapore, Hong Kong and Japan, and
in London, Frankfurt and Paris, too. The dollar reached a new low against the euro, which was buying more than $1.60, and
U.S. stock futures are down ahead of the market open in New York.
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Business World, 5/23/08. “Special Feature: Consumer Loans; Consumer spending on the rise” Lexis
The United States may be experiencing a slump, but local consumer spending is going the opposite direction. With improved consumer
confidence, the low interest rate environment and overseas workers' remittances, consumer spending is definitely going
uphill.Remittances particularly supported the robust consumer confidence in the country as total dollar remittances totaled $14.4 billion last year, up
13.2% year-on-year. It was also higher than the forecast $14.3 billion level.
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Link- RPS
Unlike the leading RPS proposals, the PTC is a proven means of actually getting renewable generation built and brought on-line. The current PTC is due to expire on
December 31, 2008. In the past, the short-term, start-and-stop nature of the tax credit has dissuaded utilities, developers, manufacturers,
and investors from maximizing the potential of renewable technologies and resources, where they are available. Extending the credit for at
least five years will give the private sector the stability necessary to plan and finance renewable energy projects. The nation's electric utility companies support the
development and greater use of renewable energy sources. Renewables, along with the full range of other climate-friendly technologies--including
nuclear, energy efficiency, clean coal, carbon capture and storage, and plug-in electric hybrids--must be a part of the industry's long-
term approach to meeting the country's steadily growing demand for electricity. But renewables must be encouraged where they make
economic sense. For this reason, a federal mandate that forces all states to generate an arbitrary amount of electricity from them,
regardless of states' individual resources, is bad for electricity customers and providers alike.
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Link- Regulations
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Link – Regulations
Regulation causes businesses to fear litigation, shattering confidence
Glenn Hubbard, Dean of the Columbia School of Business, “REDUCING REGULATION AND LITIGATION
WHILE ENHANCING SHAREHOLDER RIGHTS WILL IMPROVE THE COMPETITIVENESS OF U.S.
CAPITAL MARKETS”, http://www.capmktsreg.org/pdfs/Summary_11.30interimreport.pdf, 2008
The evidence suggests that balance does need to be restored. A substantial portion of the erosion in U.S. markets global and
internal competitiveness – and the only factors over which U.S. policymakers have control – relates to insufficiently
coordinated, costly and/or excessive market regulation and enforcement, public and private. Regulatory requirements for
complying with Section 404 of the Sarbanes-Oxley Act cost companies, on average, $4.36 million in the first year – a stiff price
for most public companies and a significant burden for small ones, particularly first time market entrants. Nearly open-ended
responsibility of auditors in complying with Section 404 has made an already consolidation-shriveled profession virtually
uninsurable for this work. Insufficiently coordinated state and federal enforcement laws and activities have led to state
authorities driving matters that are more national in scope. Improper criminalization of entire companies has sometimes
forced them out of business, eliminating thousands of innocent employees’ jobs. Private enforcement in the form of
securities law class action suits (which do not exist outside the U.S.) resulted in $150 million of liabilities in 1995. By 2004,
this had exploded to $3.5 billion – a figure that does not even include an additional $4.74 billion of penalties assessed by US
public enforcement bodies.
Gary Banks, Chairman Productivity Commission, ‘03 “Reducing the business costs of regulation”,
http://www.pc.gov.au/__data/assets/pdf_file/0017/7802/cs20030320.pdf
It is an established fact that the burden of regulation falls more heavily on small businesses; not because they are more heavily
regulated, but because they have the least capacity to cope. Operators or managers of smaller businesses are less likely to have
specialist staff with detailed knowledge of regulations or taxation matters. Regulations are more likely to be dealt with by
prime decision-makers, distracting them from their core role. The costs of such managerial diversion are very difficult to
assess, but are potentially large. The Small Business Deregulation Taskforce found that, among other things: • small businesses
often do not understand their compliance obligations; • unnecessary delays in processing and approvals, and duplication of
information requirements, were resulting in lost time; and • inconsistency in administrative interpretation can result in
uncertainty about processes and outcomes, which impact adversely on business confidence.
Strict regulations and taxes deter investment and decrease growth and jobs – Canada proves
The Fraser Institute, Canadian Economic Journal, 10/20/99. “Mining Policy: the Good, the Bad and the Ugly,”
http://oldfraser.lexi.net/publications/forum/1998/december/mining_policy.html
Most regions in Canada are blessed with a geology that is attractive for mining. Unfortunately, some of those same regions are
burdened with cumbersome, restrictive policies that reduce their overall investment attractiveness. If Canada wants to maintain a
healthy mining industry, it cannot afford to be complacent about its policy climate because countries around the world are now
competing to attract mining dollars to their jurisdictions. Anti-business policy climates deter investment, reduce economic growth, and
cost jobs. As some Canadian jurisdictions have determined, the formula for encouraging investment and prosperity is not complicated.
It does not require complex plans to create jobs and manage the economy. Rather, it requires eliminating onerous regulations,
simplifying permit processes so they are timely and efficient, lowering taxes, and eliminating uncertainty about expropriation without
compensation.
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Link – Regulations
Lowered taxes and regulations key to economy – CEOs agree
Chief Executive. 7/10/08. “CEOs Portray a Dismal Forecast for the U.S.,” PR Newswire, Lexis.
http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4174871779&format=GNBFI&so
rt=BOOLEAN&startDocNo=1&resultsUrlKey=29_T4174871782&cisb=22_T4174871781&treeMax=true&treeWidth=0&csi=8054&
docNo=14
MONTVALE, N.J., July 10 /PRNewswire/ -- With the economy overtaking Iraq as one of the main issues this election year, Chief
Executive magazine conducted a survey among CEOs between June 13 and June 27 in an effort to gauge CEO sentiment on the
direction of the U.S. economy. CEOs were asked which policy position they think the U.S. should take to increase or maintain
American competitiveness as well as questions on which countries will generate the highest number of jobs and where the top paying
jobs will be in the future.
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.
The evidence suggests that balance does need to be restored. A substantial portion of the erosion in U.S. markets global and
internal competitiveness – and the only factors over which U.S. policymakers have control – relates to insufficiently
coordinated, costly and/or excessive market regulation and enforcement, public and private. Regulatory requirements for
complying with Section 404 of the Sarbanes-Oxley Act cost companies, on average, $4.36 million in the first year – a stiff price
for most public companies and a significant burden for small ones, particularly first time market entrants. Nearly open-ended
responsibility of auditors in complying with Section 404 has made an already consolidation-shriveled profession virtually
uninsurable for this work. Insufficiently coordinated state and federal enforcement laws and activities have led to state
authorities driving matters that are more national in scope. Improper criminalization of entire companies has sometimes
forced them out of business, eliminating thousands of innocent employees’ jobs. Private enforcement in the form of
securities law class action suits (which do not exist outside the U.S.) resulted in $150 million of liabilities in 1995. By 2004,
this had exploded to $3.5 billion – a figure that does not even include an additional $4.74 billion of penalties assessed by US
public enforcement bodies.
Wayne Gray, Dept of Economics, Clark Univ, 1993, “ENVIRONMENTAL REGULATION AND MANUFACTURING
PRODUCTIVITY AT THE PLANT LEVEL” National Bureau of Economic Research, Working Paper Series, No. 4321, p.4.
Regulation may also increase the uncertainty faced by firms, affecting their decisions in a variety of ways. Viscusi (1983) discusses
the role of uncertainty about future regulations (and hence about the future profitability of the firm) in reducing a firm's investment, or
at least in postponing the investment until the uncertainty is resolved. Hoerger, Beamer, and Hanson (1983) point out that new
product development could be affected by uncertainty about future regulation of new products. Development of new production
processes could also be hindered by uncertainty about future regulations, as current regulatory requirements are generally designed
with existing production processes in mind.
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Link – Regulations
Michael Greenstone, Dept Economics – MIT, 2002 [“The Impacts of Environmental Regulations on Industrial Activity: Evidence
from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures,” Journal of Political Economy, vol. 110, no. 6]
http://www.journals.uchicago.edu/doi/abs/10.1086/342808
This paper provides new evidence that environmental regulations re- strict industrial activity. I find that in the first 15 years after the
CAAAs became law (1972–87), nonattainment counties (relative to attainment ones) lost approximately 590,000 jobs, $37 billion in
capital stock, and $75 billion (1987 dollars) of output in polluting industries. Although these estimates are not derived from a
randomized experiment and therefore cannot meet a strict definition of causality, they provide robust evidence that these regulations
deter the growth of polluters. In the first place, the findings are derived from the most comprehensive data available on clean air
regulations and manufacturing activity. Second, the preferred statistical model for plant-level growth controls for all permanent plant
characteristics, unrestricted industry shocks, and un- restricted county shocks. Third, the effects are robust across a variety of
specifications. Finally, the regulation effects are evident across three different measures of manufacturing activity and a wide range of
pol- luting industries. The federal standards for ozone and particulates were tightened re- cently, causing a substantial increase in the
number of nonattainment counties.39 The balance of evidence from this paper suggests that the new nonattainment counties will
experience reductions in employment, investment, and shipments in polluting industries. To gain a clearer understanding of whether
it is worthwhile to incur the costs associated with these reductions, it is crucial to understand the regulations’ effec- tiveness at
cleaning the air and the benefits of cleaner air. Recent re- search finds that these policies are effective at reducing concentrations of
air pollution and that cleaner air, particularly reductions in TSPs, provides substantial monetary benefits to homeowners and reduced
in- fant mortality rates (Smith and Huang 1995; Henderson 1996; Chay and Greenstone 2000, 2002a, 2002b). Regardless of whether
these pol- icies pass or fail a cost-benefit test, this paper’s findings undermine the contention that environmental regulations are
costless or even benefi- cial for the regulated.
Government regulation causes investors to wait to invest – uncertain about the future of the laws and the company
Alain Verbeke, Director of MBA Studies - Solvay Business School, University of Brussels, 4 Dec 1998. [“Corporate strategies and
environmental regulations: an organizing framework,” Strategic Management Journal, Volume 19 Issue 4, Pages 363 – 375]
In our view, many firms at present fear a quadrant 1 scenario. They do not invest in developing green capabilities because of the high
uncertainty regarding leveraging effects associated with these investments. In many cases it is, for example, unclear ( a ) how
government regulation, both in terms of command and control regulations and market-based instruments will evolve over time, ( b )
to what extent the impact of ‘green consumerism’ will increase in terms of affecting purchasing decisions of buyers, ( c ) what the
industry standards and benchmarks will be in the area of environmental protection. This is consist- ent with Jaffe’s analysis, which
demonstrated the benefit of waiting to make irreversible invest- ments in clean technologies until better technol- ogies become
available ( Jaffe et al, 1995 ).
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Link – Regulations
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Link – Regulations
Legal brawls magnify costs of government mandates
Pietro Nivola, senior fellow in the Brookings Governmental Studies Program, Winter 1996, Brookings Review, p.20 (BLUEOC1603)
For Sheer contentiousness, however, the process of social regulation in the United States seems hard to top. It is not unusual for
decisions, buffeted by legal contestation, to remain in limbo for years. Regulated interests spend lavishly on lawyers and lobbyists.
Their machinations are met by the counter-suits and counter-lobbying of organized advocacy groups, frequently armed with statutory
private rights of action that few, if any, other governments would countenance. Caught in the middle of the legal brawls, not a few
dazed entrepreneurs wait indefinitely for the next shoe to drop before making desirable investments.
Businesses fear environmental policy – regulations raise the price of their products
Patrick Bernhagen, Department of Politics and International Relations - University of Aberdeen, 8/15/05. “Business Political Power:
Economic Voting, Information Asymmetry, and Environmental Policy in 19 OECD Countries,”
http://convention2.allacademic.com/getfile.php?file=apsa05_proceeding/2005-10-06/40383/apsa05_proceeding_40383.pdf
For the purpose of empirically assessing the sources of business political influence, I focus on the area of environmental regulation.
Aiming to reduce negative externalities flowing from the actions of citizens and businesses, environmental regulation virtually always
has cost implications for business (Golub 1998, 1). At the macroeconomic level, environmental policy is blamed for reducing
industrial productivity (Christiansen and Haveman 1981). Increasing sensitivity to global economic compe- tition and budgetary
constraints makes governments wary of any form of regulation which might threaten economic growth, foreign investment, export
markets, and em- ployment creation. Regulations requiring firms to reduce emissions, increase recy- cling, pay more for energy, or
switch to more expensive fuels and input materials all raise the final price of their products, with the result that “green” states lose
markets to “dirty” states that lack similar environmental standards (Golub 1998, 4). This ar- gument is frequently hammered home by
business. Criticizing the British govern- ment’s target of a twenty-percent reduction of greenhouse gas emissions by 2010, for
example, the director-general of the Confederation of British Industry (CBI), Digby Jones, recently complained, “if our action is not
matched by similar efforts from the rest of the world, we will undermine the competitiveness of British companies for no real
environmental gain.” 2 Indeed, the CBI accepts that, to some degree, it has op- posed every one of approximately 250 EU
environmental directives passed. over the past twenty years. 3 To the extent that governments share this perception of the
environment-competitiveness nexus, they are induced to engage in a ‘race to the bot- tom’ or ‘ecological dumping’ (Golub 1998, 4).
Businesses fear environmental policy – regulations raise the price of their products
Patrick Bernhagen, Department of Politics and International Relations - University of Aberdeen, 8/15/05. “Business Political Power:
Economic Voting, Information Asymmetry, and Environmental Policy in 19 OECD Countries,”
http://convention2.allacademic.com/getfile.php?file=apsa05_proceeding/2005-10-06/40383/apsa05_proceeding_40383.pdf
For the purpose of empirically assessing the sources of business political influence, I focus on the area of environmental regulation. Aiming to reduce negative
externalities flowing from the actions of citizens and businesses, environmental regulation virtually always has cost implications for business (Golub 1998, 1). At the
macroeconomic level, environmental policy is blamed for reducing industrial productivity (Christiansen and Haveman 1981). Increasing
sensitivity to global economic compe- tition and budgetary constraints makes governments wary of any form of regulation which
might threaten economic growth, foreign investment, export markets, and em- ployment creation. Regulations requiring firms to
reduce emissions, increase recy- cling, pay more for energy, or switch to more expensive fuels and input materials all raise the final
price of their products, with the result that “green” states lose markets to “dirty” states that lack similar environmental standards (Golub 1998, 4). This ar- gument
is frequently hammered home by business. Criticizing the British govern- ment’s target of a twenty-percent reduction of greenhouse gas emissions by 2010, for
example, the director-general of the Confederation of British Industry (CBI), Digby Jones, recently complained, “if our action is not matched by similar efforts from the
rest of the world, we will undermine the competitiveness of British companies for no real environmental gain.” 2 Indeed, the CBI accepts that, to some degree, it has
op- posed every one of approximately 250 EU environmental directives passed. over the past twenty years. 3 To the extent that governments share this perception of the
environment-competitiveness nexus, they are induced to engage in a ‘race to the bot- tom’ or ‘ecological dumping’ (Golub 1998, 4).
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Links- Mandates
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Studies on the Kyoto Protocol show that ANY method of reducing emissions would indiscriminately
annihilate key sectors of the economy
Raymond Keating, Chief Economist of the Small Business Survival Committee, June 4, 1998,
http://republicans.smbiz.house.gov/hearings/105th/1998/980604/keating.asp
On behalf of the Small Business Survival Committee (SBSC) and its more than 40,000 members across the nation, I appreciate the opportunity to offer the
following comments regarding the potential impact of the Kyoto Protocol, or "Global Warming Treaty," agreed to this past December by the Clinton Administration
in Kyoto, Japan. SBSC is an advocacy and information organization that supports policies which promote the survival and growth of the entrepreneurial sector of
our economy. As I will more fully explain in a moment, SBSC opposes the Global Warming Treaty for several reasons, but primarily due to the crushing
costs that would be imposed on businesses of all sizes and in practically all industries, as well as on consumers and the economy in general. As most
studies of the Global Warming Treaty indicate -- whether performed by private industry or by the Clinton Administration itself -- this treaty will be an
indiscriminate killer of businesses and jobs. And this will be the case no matter what the means utilized to reduce so-called "greenhouse gas emissions" --
primarily CO2 -- that is, whether through higher taxes, increased regulations, an emissions "cap and trade" system, or some combination of these options.
Like other Americans, we also have other concerns about this treaty, such as national security implications, the fact that it is based on, to be generous, debatable
science, the exclusion of "developing" nations, the foreign aid and transfer of wealth implications among nations, as well as the often secretive and at times
misleading methods used by the Clinton Administration in seeking to advance its global climate policies.
CO2 is the fuel of the global economy – reductions in emissions would devastate the economy
Lewis,
Senior Fellow at the Competitive Enterprise Institute, and Bourne et. al, Director of the Energy and Environment Task Force, 2004
(Marlo and Sandy, http://www.cei.org/gencon/025,03801.cfm, Jan 9)
A study in the November 1, 2002 issue of Science magazine examined possible technology options that might be used in coming decades to stabilize atmospheric
CO2 concentrations.13 Such options include wind and solar energy, nuclear fission and fusion, biomass fuels, efficiency improvements, carbon sequestration, and
hydrogen fuel cells. The report found that, "All these approaches currently have severe deficiencies that limit their ability to stabilize global climate." It specifically
disagreed with the Intergovernmental Panel on Climate Change's assessment that, "known technological options could achieve a broad range of atmospheric CO2
stabilization levels, such as 550 ppm, 450 ppm or below over the next 100 years." As the study noted, world energy demand could triple by 2050. Yet, "Energy
sources that can produce 100 to 300 percent of present world power consumption without greenhouse emissions do not exist operationally or as pilot plants."
The bottom line: "CO2 is a combustion product vital to how civilization is powered; it cannot be regulated away." Given current and foreseeable technological
capabilities, any serious attempt to stabilize CO2 levels via regulation would be economically devastating and, thus, politically unsustainable.
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Any meaningful reduction in carbon emissions would cause a protracted U.S. economic depression
Raymond Keating, Chief Economist of the Small Business Survival Committee, June 4, 1998,
http://republicans.smbiz.house.gov/hearings/105th/1998/980604/keating.asp
The author shows that altering the carbon/energy ratio or the development of new technologies will not come close to being enough to reduce carbon emissions.
Indeed, continued economic growth and capital stock renewal will ensure that carbon levels continue rising. The author notes only two avenues that will allow
the U.S. to meet its Kyoto Protocol goals: "A decline in GDP of about 4 percent per year would reduce the demand for energy and thereby carbon emissions
sufficient to achieve the Kyoto target. Alternatively, an increase in the price of energy of about 12 percent per year for a ten year period also would achieve the
Kyoto target. " He concludes: "Either of these changes would impose unacceptable costs on the American economy." To say the least. According to these
estimates, in effect, an extended U.S. economic depression would be necessary in order to meet Kyoto Protocol goals. * A DRI-McGraw Hill study by Dr.
Lawrence Horowitz found the following: * a $100 per ton carbon tax could lower emission levels close to 1990 levels by 2010 and would cost the economy
$203 billion annually in lost output; * $200 per ton carbon tax would be required to reduce emissions below 1990 levels, and would cost the economy $350
billion in lost products and services; * annual job losses from 1995 to 2010 under a $100 per ton carbon tax would hit 520,000, and would leap to 1.1
million annually under a $200 per ton carbon tax; * gasoline prices could jump by as much as 60 cents per gallon, and electricity costs could increase by 50
percent, and home heating oil by 50-100 percent. * Resources Data International Inc. (RDI) was retained last year by Peabody Holding Company Inc., reportedly
the world's largest private coal producer, to study the economic impact of a new global warming treaty. RDI estimated that a $100 per ton carbon tax imposed
in order to reduce CO2 emissions to 1990 levels would: * limit the annual growth rate in the supply of electricity between 1995 and 2015 to0.83% from a
projected 1.45%; * place up to $1.314 trillion, or 14% of GDP, at risk in 2010 and up to $16.823 trillion cumulatively from 2005 to 2015. RDI estimates
that any kind of CO2 trading program would mimic the effects of a carbon tax, with the federal government collecting at least $133 billion annually.
The U.S. economy is dependent on fossil fuels – taking away carbon is like taking a guitar away from
Hendrix
Sebastian Oberthur, Senior fellow at Ecologic, and Hermann Ott, head of the climate policy division at the Wuppertal Institute, 1999 (The Kyoto
Protocol: International Climate Change Policy for the 21st Century, p. 19)
Outweighing these positive forces is the country's pattern of economic and societal development, which has relied heavily on the availability
of low-price energy, making the US one of the most energy intensive economies in the OECD. As Steve Rayner put it, "the history of US
energy demand and the existing resources infrastructure and institutions make the US economy as dependent upon fossil fuel as a
heroin addict is on the needle".25 Because of the very high energy intensity associated with American technology and lifestyles, low-costs means of saving
energy and reducing GHG emissions are in fact abundant.21 Nevertheless, the perception (furthered by some for obvious political reasons) that reducing C02
emissions would be exorbitantly costly has been comparatively widespread in the US.
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Reducing CO2 in the squo would lead to a massive debt that wouldn’t be
repaid until 2100, leaving potential for a century long depression
But what are those costs? If you listen to opponents of action against climate change,
the American economy will be brought to its knees by such
efforts. The Chamber of Commerce, for instance, says the bill would cost 3.4 million Americans their jobs; the nation's gross domestic
product, now about $13 trillion, would drop to $12 trillion; and American consumers would pay as much as $6 trillion more because
of higher prices for gas, heating oil, and many other goods. Other economic projections put the total price tag for preventing
dangerous climate change at up to $20 trillion.Yet a new analysis from McKinsey & Co. not only pegs the price tag for making substantial cuts at just a few
billion dollars, it also shows that at least 40% of the reductions bring actual savings to the economy, not costs. Long-Term Forecasts Are Less Reliable Why the big
difference? First consider the numbers used by the opponents. Typically, they come from large-scale mathematical models of the economy. These models look at
the economy from the top down. They try to calculate the effects of changes such as rising energy costs or financial penalties for
carbon emissions. These models are widely used to predict short-term changes in the economy. But longer-term forecasts are less
accurate because of their increasing reliance on the initial assumptions. For example, the final result varies dramatically depending on the
assumptions about the pace of innovation. If the model assumes that development of new forms of renewable energy will continue at the same rate as before carbon
emission limits were enacted (when the financial incentives for development were lower), then cutting carbon emissions will be costly. But if you assume that an added
financial incentive, such as a price on carbon emissions, will increase the pace of innovation and the development of new technologies, then meeting the limits will be
cheaper. And if the model discounts the future benefits of avoiding the dangers of warming in terms of their present value, it will also predict higher overall costs.
Different Conclusions Are Possible Yet even with these inherent limitations, many of the models suggest that the ultimate cost of slowing global warming is reasonable.
Stanford University climatologist Stephen Schneider, for instance, has analyzed one of the most prominent models, from Yale's William Nordhaus. According to
Nordhaus' results, stabilizing the climate would be "unimaginably expensive—$20 trillion," Schneider says. But the $20 trillion hit to
the economy isn't immediate. Instead, that's the calculated cost in the year 2100, Schneider says, not now. What does that really mean? Schneider
ran the numbers, assuming the economy grows at about 2% per year. The seemingly huge $20 trillion price tag works out to "a one-year delay in being 500% richer," he
says. In other words, paying the price to reduce climate change would mean Americans would have to wait until 2101 to be as rich as
they otherwise would have been in 2100. To Schneider, that's a minuscule price to pay for saving the planet from the dangers of global warming. "Are you out
of your mind? Who wouldn't take that?" he says.
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ICAEW (Institute of Chartered Accountants in England & Wales), 5-9-08, “Business confidence still fragile says ICAEW/Orange
UK survey”, http://www.icaew.com/index.cfm?route=135719
The latest ICAEW- Orange UK Business Confidence Monitor shows that while forecasts for GDP and profit growth have increased
this quarter, almost half of the finance professionals surveyed are worried about the growing burdens of tax and regulation, leading
them to invest less in the economy and so endanger long term prospects for economic growth. Despite rising profit forecasts for the
fourth quarter in a row (6.3 per cent), firms in the UK predict that they will increase their capital investment budgets at a lower rate
than they did over the past year, from 3.0 per cent last year, down to 2.2 per cent over the coming 12 months. This suggests that
businesses are not as confident about investing capital in the UK. Eric Anstee, Chief Executive of the ICAEW, said: “While the BCM
shows the economy is moving in the right direction, the longer term economic outlook looks fragile. A lack of business investment
could play an important role in weakening economic growth further down the road, especially if world economic imbalances start to
unravel. I would urge the Government to revisit its taxation and regulatory regimes to renew confidence among businesses of all sizes
which, despite higher profit growth expectations and rising confidence, remain nervous of further investment.”
Susan Lee writing for Consumers’ Research Magazine, Aug. 1996, “How Government Menaces Our Economic Health”, vol. 79
no. 8, pp. 16-17
Who Pays for All This? In general, the cost of regulating is initially expressed as a cost of doing business. Okay, but who pays this
tariff? We all do, in one way or another. Consider a standard situation in which a law requires certain practices to be followed in
hiring or procedures to be used to assure product quality. The former will raise costs by forcing employers to expand their job
search and fill out forms to prove comp1ianc the latter will raise costs by requiring changes in the production process. Sometimes,
firms can pass these costs to consumers, making them pay more; sometimes, firms can’t pass them along at all, so they will have
lower profits, which means that owners or shareholders foot the bill. But, often, employers pass these costs down the line with
lower wages and salaries. Other times, when costs cannot be directly passed off to employees, employers will respond by either
hiring fewer people or laying off those already employed. Either way, higher business costs from regulation will result in lower
wages and/or higher unemployment.
Excessive regulation also discourages investment in domestic business: Why plop a factory down on regulated soil when
unregulated opportunities beckon abroad? Moreover, the threat of regulatory changes creates uncertainty, which scares investors,
who then demand higher returns, and tends to make planning horizons more short term.
Further, regulation stymies innovation. This has been especially true in the drug ind medical- device industry. Long approval
periods shorten the effective patent time for the results of expensive research and development and thus diminish returns on
discoveries without lowering risk. A larger gap between risk and return renders many research and development projects too
unprofitable to undertake. And last, all of the above make it harder for domestic firms to compete in international markets in which
many foreign-based firms do not have to contend with the effects of excessive regulation.
Tobias Madden, Regional Economist FedGazette, Fed Reserve Bank of Minneapolis, Jan. ‘08 “Mixed bag for 2008”,
http://www.minneapolisfed.org/pubs/fedgaz/08-01/poll.cfm
The biggest challenges facing businesses are securing workers and complying with government regulation. “We have been in such
an incredibly tight labor market,” a Montana manufacturer said. Over half of all respondents expect a challenging time finding
workers. Leaders from the agricultural and retail sectors have the hardest time securing workers. About three-quarters of the
Dakota respondents expect finding workers as a challenge or a serious challenge, compared with only 23 percent of the
respondents from the U.P. About half of all respondents see government regulation as a challenge. The respondents from the
finance, insurance and real estate sector expect the toughest government regulation. “Regulation by state and national government
will hamper investment and growth seriously,” said a financial services respondent from the U.P.
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Regulation hurts growth – limits innovation and diverts attention from key
areas
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Link - Litigation
Hawkish lawyers make government regulation a unique arena for increased
litigation
Lisa Rickard, Prez U.S. Chamber of Commerce Institute for Legal Reform, 2007, “Trial lawyers storm capitol”,
http://thehill.com/letters/clean-reliable-cost-effective-nuclear-power-none-of-these-2007-10-05.html
America needs more lawsuits. That’s the message hundreds of plaintiffs’ trial lawyers from across the country have taken to
Capitol Hill this week in lobbying Congress to make it easier to bring more lawsuits. It isn’t surprising. The plaintiffs’ bar has
been chomping at the bit since last November’s elections. “We are going to get things done,” declared the treasurer of the
Association of Trial Lawyers of America at the time. (They’ve since changed their name to the “American Association for
Justice.”) One thing that you can say for the plaintiffs’ trial lawyers association: They haven’t disappointed their members.
They’ve been working hard. No bill has been too big or too small not to slip in a liability-expanding provision. Passing the farm
bill? Invalidate arbitration agreements in meat-packer and producer contracts, so that more business disputes become lawsuits. Or,
better yet, why don’t we outlaw arbitration in all contracts so that the only realistic way to resolve disputes is with a lawsuit?
Reauthorizing Food and Drug Administration funding? Perfect opportunity to take away the federal government’s uniform
consumer protection powers and allow for 50 different sets of food and drug laws — and while they’re at it, open the door to
thousands of state lawsuits for years to come. Or how about a bill funding the war on terror? Why don’t we allow each state to
enact its own set of security laws and regulations? The more sets of confusing government regulations, the more the likelihood
of lawsuits. At every turn, the plaintiffs’ trial lawyers are looking to cash in on Capitol Hill. They’ve bragged to their membership
that their political donations helped to elect this Congress. Now they want a return favor, asking for plaintiffs’ trial lawyer
earmarks that give them the ability to bring more lawsuits.
Robert A. Kagan, senior associate at the Carnegie Endowment for International Peace, and Lee Axelrad, senior research
associate with the UC Berkeley Center for the Study of Law & Society ’97, “Adversarial Legalism: International Perspective” in
“Comparative Disadvantages? Social Regulations and the Global Economy” Ed. Pietro S. Nivola. Published by Brookings Institute
Press, pp. 163
It seems reasonably clear that U.S. adversarial legalism generates higher costs than do some alternative modes of governance.
Yet there is little evidence in the policy areas covered by our research that the higher expenditures imposed by the system yield
better environmental protection, more safety, and so on than the results that prevail in other sophisticated democracies In other
words, our comparative interviews with corporate officials suggest that a significant share of the costs of U.S. adversarial
legalism is not fully offset by its benefits. We proceed by identifying several categories of such costs, then by reviewing the
comparative literature on the subject and reporting conclusions from our interviews with multinational enterprises. At the end
we return to the question of whether adversarial legalism confers adequate compensatory benefits.
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Link - Litigation
Litigation kills investor confidence – trials damage the image of companies
David Cid, President of Salus International, '3. Interviewed by Wanja Eric Naef http://www.iwar.org.uk/infocon /espionage-cid.htm
The first line of defence is really protection. Once you have to go to the United States Attorney's Office and say someone stole this information from us the damage has
already been done. So the EEA provides a disincentive for someone to do that, but it really does not help the company per se. The criminal courts are the kinds
of places where you are not made whole, you simply punish the person who did something bad. On the civil side there is the possibility of
recovering damages and you may recoup monetarily, but again the process of litigation takes forever, it is embarrassing to the company and it can
cause loss of faith of stockholders and other investors. So, there is really nothing good about having a serious information compromise. The EEA is an
important facet of our society's response to this sort of thing, but it is really not a solution and it is really not the best option available to a company. Once you need
to go to criminal trial you have already been seriously damaged.
Paul Lanoie, Development Director, HEC Montreal. 1/1/94. “The market response to environmental incidents in Canada: a theoretical
and empirical analysis.” Southern Economic Journal. Vol. 60, No. 3
There is a growing concern that regulations that promote safety (e.g., automobile safety and product safety) may have little impact on the level of risk associated with
the utilization of such products |21; 29~. A similar concern has been recently raised with respect to regulations that promote safety in the workplace |12~. A reason often
advocated to explain this phenomenon is the lack of adequate enforcement mechanisms. In particular, it is often argued that fines imposed on agents not
complying with these regulations are not severe enough to have a deterrence effect |30~. With respect to the enforcement of the Ontario
Environmental Protection Act (R.S.O. 1980, c. 141), Saxe writes that "the majority of fines were too low to act as effective deterrents" |23, 104~. However, some
authors have challenged this view in showing that the market provides additional monetary incentives for firms to comply with the regulations by punishing non-
complying firms through lower stock market prices. For example, some analyses have shown that public announcements of lawsuits against
American firms not complying with workplace safety |8~, product safety |31~ and environmental regulations |19~ have caused significant drops
of the equity value of these firms. In this last study, it was found that the announcement of lawsuits against firms violating the American
Resource Conservation and Recovery Act (RCRA 1976) had a significant negative impact on their equity value on the day of the
announcement, while announcements of suit settlements (e.g., fines) had no effect. In most studies, authors argue that the reductions in stock prices have some
deterrence effect on firms.
Anthony Q. Fletcher, A.B. Columbia U, ‘95 “Curing Crib Death: Emerging Growth Companies, Nuisance Suits, And
Congressional Proposals for Securities Litigation Reform”, Harvard Journal on Legislation
32 Harv. J. on Legis.
Third, litigation raises the potential of irreparable harm to a company’s reputation. In fact, consumer attitudes may be so adversely
affected upon the initiation of a class action shareholder suit that some consumers may begin to view a particular product and its entire
industry negatively.47 Since most consumer purchases involve potential repeat customers, a class action suit may significantly stifle future revenues.48
Litigation has the potential to damage a company’s reputation, and consequently may deter both consumer and investor interest.
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Pollution management causes huge shareholder losses – companies held accountable for all cleanup costs and become more
susceptible to future lawsuits
Michael Muoghalu, Director of MBA Program, Pittsburgh State University. 10/90. “Hazardous Waste Lawsuits, Stockholder Returns, and Deterrence,” Southern
Economic Journal, Vol. 57 Issue 2, p357
Table II presents the return information for the Pollution Management, Others, and Petrochemical industry subsamples. Pollution Management firms suffer the
largest shareholder losses, 6.249 percent (z = -6.716). The large losses are not surprising for a number of reasons. First, under the Superfund Act, Pollution
Management firms can be held liable for all cleanup costs at dump sites they control, even if they generate none of the waste products.
Second, a lawsuit at one location may increase the probability of additional lawsuits by increasing regulatory and public awareness of
the firm’s practices. Third, the increased awareness of the firm’s practices may cause client firms, fearing a joint liability, to seek
other disposal options. Another possible factor in explaining the abnormal returns is the small size (in terms of assets, market values, and cash flows) of Pollution
Management firms relative to other firms in the study.
DANIEL TINKELMAN, Assoc. Prof – Accounting, Pace University, Et al, 2007. “Using the Event Study Methodology to Measure
the Social Costs of Litigation - A Re Examination Using Cases from the Automobile Industry.” Review of Law & Economics, Vol. 3
Issue 2, p1-42. (co-authored by: SURESH GOVINDARAJ, associate prof - Accounting, Business Ethics & Information Systems, State
University of New Jersey and PICHENG LEE, associate prof – Accounting, Pace University)
In a comprehensive study extending prior research, Prince and Rubin (2002) use the event study methodology, and find negative
market reaction to a sample of 15 initial filings of product liability litigation and 29 other litigation events against U.S. automakers
between 1973 and 1995. They conclude that the event study methodology is a useful way to measure the costs of litigation. In
contrast, after examination of a new sample of 144 initial filing events and 465 other litigation events for six major automobile firms
from 1985 to 2000, and after re-examining Prince and Rubin’s data, we find that the market reaction to all but the most extreme and
infrequent events is generally not significant. We suggest that the event study methodology may not generally be useful to study the
social costs of litigation, but may be useful for unexpected abnormal litigation events where the potential liabilities (including
reputation and other losses triggered by litigation) may far exceed the legal liability reserves set up by firms. We find mixed results
for the market impact of litigation against a competitor. When a product liability lawsuit is first filed against a U.S. firm, the market
values of the Japanese firms significantly decline. When a Japanese firm is sued for product liability, the U.S. firms register a
significant increase in market value. However, these spillover results have to be interpreted with caution because of small sample
sizes and possible confounding events.
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Link- Permits
Increased carbon taxes destroy business confidence, SQUO still relies on fossil
fuels
Carbon rationing hurts consumers – will be excluded from permit feeding frenzy
Brian Mannix, associate administrator of the Environmental Protection Agency’s Office of Policy, Economics, and Innovation,
10/9/03. “A Mountain of Money,” http://www.alec.org/am/pdf/energy/mountain-of-money.pdf
Once rationing is imposed and the price of energy goes up, there will be many more claimants getting in line. Can the government
refuse to give C-rations to schools? To hospitals? To the armed forces? To local police departments? To mass transit? To
manufacturers facing foreign competition? The average consumer will have no place in this contest, except as a victim. The politics
of carbon rationing cannot be understood by looking just at theories of climate change or at the serious economic losses that rationing
would cause. Rationing will extract tens to hundreds of billions of dollars of revenue per yearfrom consumers, and the fate of that
revenue is what will drive political decisions. Advocates of rationing argue that we should start a program with modest goals. But
once a feeding frenzy for C-rations begins, modesty, and restraint will be very scarce indeed.
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Binding emission caps will cripple a critical sector of US economy and exports and causing massive job
outsourcing
Stone chairman, president and CEO of Stone Container Co. ’98 – Roger “A Call for Common Sense” Global Climate Change, A senior Level
Debate at the Intersection of Economics, Strategy, Technology, Science, Politics, and International Negotiation p. 141
As we all know, the first UN Framework Convention on Climate Change issued a call on the developed nations to voluntarily reduce greenhouse gases to
1990 levels by the year 2000. As I understand it, the current U.S. position now calls for mandated emissions reduction targets and timetables; we heard that today.
This would be accomplished primarily, I think, by setting a cap on energy consumption and may also lead to new taxes on both energy and carbon emissions
as well as impose excessive energy efficiency standards and perhaps severely re strict the way we manage our nation’s working forests. Massive changes
such as these could permanently cripple our pulp and paper industry. A carbon tax could increase our direct costs by as much as 150 percent over the next
eighteen years and raise manufacturing costs by up to 14 percent. And if credit is not given to the use of biomass fuels, manufacturing costs could rise as much as
30 percent. Indirect costs would probably be higher than that 30 percent number. I don’t think it takes a scientist or a Kellogg School graduate to understand the
impact of a 30 percent hike in manufacturing costs. Paper mills could permanently close, thousands of jobs would probably be lost, and our position as the
world’s leading paper producer would surely deteriorate, if not vanish.
As an industry, paper’s payroll is about $26 billion a year, and we ex port goods worth more than $11.5 billion. In fact, our exports represent more than 2 percent of
all U.S. exports. From our perspective it would be just plain silly to jeopardize all of this based on a theory founded on poor or inexact science or someone’s
complex social or environmental agenda, using the false issue of climate change. What’s worse is that the jobs lost in the United States—and I think this is
referred to as some thing that has to be negotiated—will move to the developing nations that are aggressively expanding their pulp and paper capacity,
nations such as Malaysia, Thailand, Indonesia, and Brazil. These countries are not a part of the climate change equation as I understand it. And this means
that, at the moment, they are not required to reduce their CO emissions, nor do they subscribe to the practice of sustainable forestry. They are free to cut
their virgin tropical or rain forests at unsustainable levels. So what would the net effect of all this be? Well, the way we see it is that it will lead to an
increase in CO emissions on a worldwide basis and a loss of forests rich in biodiversity. Clearly this is not a level playing field, and we see no
environmental benefit in this scenario. In my opinion the loss of thousands of jobs to overseas countries that follow no environmental standard, frankly, is
absurd.
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Binding emissions reductions would devastate six U.S. industries critical to the global economy: paper,
iron and steel manufacturing, petroleum refining, aluminum, chemical and cement manufacturing
Mulchay executive vice president and CEO of Northern Indiana Public Service Company ’98 – Patrick “The Importance of
Flexibility Implemented Through Voluntary Commitments to Reduce Greenhouse Gas Emissions” Global Climate Change, A senior
Level Debate at the Intersection of Economics, Strategy, Technology, Science, Politics, and International Negotiation p. 87-8
A U.S. Department of Energy study analyzed the potential economic impacts of increased energy prices on energy-intensive
industries, assuming that new greenhouse gas control policies will constrain only industrialized countries and that any
emissions control mechanism—from new energy taxes to emissions standards and tradable emissions permits—will drive up
energy costs to some degree. According to the study, rising energy prices driven by new climate commitments could have a
crushing effect on six U.S. industries: paper and allied products, iron and steel manufacturing, petroleum refining, aluminum production, chemical
manufacturing, and cement manufacturing. Increased energy costs from emissions mandates could devastate the U.S. steel industry (which has already invested
heavily in energy efficiency and pollution control technologies), without bringing a significant de crease in worldwide energy-related emissions from
steelmaking. Production will simply be shifted to developing countries and may possibly lead to higher levels of overall pollution due to lower standards in
those countries. This issue highlights the necessity for the thoughtful application of binding agreements for all nations—developing and developed. Energy
costs account for approximately one-third of the cost of making steel. Almost half of the electricity NIPSCO generates is de livered to the steel industry.
Steelmaking facilities in northern Indiana have invested substantially in the past decade to improve their efficiency, both in production and in energy use.
Primary Energy, a subsidiary of NIPSCO Industries, is developing cogeneration projects with several of our steelmaking customers. These projects will
contribute significantly to NIPSCO’s greenhouse gas reductions. In 1998 three Primary Energy cogeneration projects will go on-line at Inland, U.S. Steel, and
National Steel, displacing nearly one million metric tons of NIPSCO’s carbon dioxide emissions. Sensible decision making on the greenhouse gas
issue should involve a careful balancing of costs and benefits. However, this is complicated by the global effects of greenhouse
gas concentrations in the atmosphere, the long-term consequences and short-term costs associated with the issue, and the global
economy and tension between developed and developing nations.
Cap-and-trade would also have a nasty effect on consumers’ power bills. Say there’s a very hot summer week in California. Utilities
would have to shovel more coal to produce more juice, causing their emissions to rise sharply. To offset the carbon, they would have
to buy more credits, and the heavy demand would cause credit prices to skyrocket. The utilities would then pass those costs on to their
customers, meaning that power bills might vary sharply from one month to the next.
That kind of price volatility, which has been endemic to both the American and European cap-and-trade systems, doesn’t just hurt
consumers. It actually discourages innovation, because in times when power demand is low, power costs are low, and there is little
incentive to come up with cleaner technologies. Entrepreneurs and venture capitalists prefer stable prices so they can calculate
whether they can make enough money by building a solar-powered mousetrap to make up for the cost of producing it.
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The statistical evidence suggests that there exists a significant negative linear relationship between FDI of the US chemical and metal
industries and the strin- gency of environmental regulation in a foreign host country. In general, lax environmental policy tends to
attract more capital inflow from the US for pollu- tion intensive industries. Viewed differently, tough environmental regulations
would tend to impede or discourage FDI from these industries. Since chemicals and primary metals are probably the most polluting of
all industries, this result may have implications for the relationship between environmental regulations and capital movements for
other polluting industries. Also, this finding provides indirect support to the “pollution haven” hypothesis, which postulates that
devel- oping countries may utilize lenient environmental regulations as a strategy to compete for the investment of polluting industry
from developed countries. This result is strengthened by our inability to find a similar effect for other sectors for which pollution is
less of a problem – electrical and non-electrical machinery, transportation equipment and food products.
Foreign investment has empirically decreased because of strict regulations and taxes
Department of the Treasury, 5/10/07. “An Open Economy is Vital to United States Prosperity,”
http://www.ustreas.gov/press/releases/hp395.htm
At $1.9 trillion, the total stock of FDI in the United States in 2005 was equivalent to 15% of U.S. GDP. Foreign investment in the
U.S. is the ultimate vote of confidence in our economy. It signals a long-term belief in the strength of our markets and the skill of our
workforce.
*
In the last few years, the United States has not received as high a share of total worldwide FDI as it did before 2000. This trend
could be due to the growth of opportunities in emerging markets, burdensome U.S. legal, regulatory and corporate tax regimes, or the
misperception that the United States is no longer open to foreign direct investments.
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Fall out in one sector means that decline will spillover domestically also
affecting consumer confidence, housing market decline proves
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Lack of Business confidence in the financial sector spills over into the overall economy,
UK proves
The euro fell to a one-week low against the dollar on Thursday after a survey showed German corporate sentiment deteriorated by
more than expected in April, heightening concerns over the health of the eurozone economy. The Ifo German business climate index fell from 104.80 in March
to 102.40 in April, its weakest level since January 2006 and below forecasts for a reading of 104.3.The survey fuelled fears that the problems emanating
from the financial sector were set to spill over into the region's real economy.
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Lack of consumer confidence spills over to the credit card sector slowly
draining the economy
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Thomas Dalsgaard et al, Principal Administrator - Economics Department of the OECD, 2002. “ONGOING CHANGES IN THE
BUSINESS CYCLE – EVIDENCE AND CAUSES,” Société Universitaire Européenne de Recherches Financières,
http://www.suerf.org/download/studies/study20.pdf
There may be a number of causes behind increased share price correlations across countries. Financial integration and reduced
divergencies in macroeconomic policies are examples with repercussions throughout the economies. Others relate to global
developments in individual sectors driving correlations. An example could be technological change. In this case, increased cross-
country correlations would be driven by the sectors where such common technological change took place. Thus, the news driving
share price co-movements would tend to be industry-specific and increased aggregate correlation across countries would be the result
of increasingly correlated news in some industries. In the alternative case of economy-wide developments driving share price
correlations, the news driving increased correlation should be spread over all industries. Conditional variances of share price returns
may be considered aproxy indicator of risk, which again is affected by the arrival of new information. Thus, if conditional variances
have become more highly correlated in some sectors but not in others, this may suggest that the news driving share prices in the
former sectors have had amore global character, possibly as aresult of common technological developments. To shed light on this,
time-varying conditional variances of equity returns have been estimated for the G7 countries using aGARCH technique. Bilateral
correlations of conditional variances have subsequently been calculated for country pairs and the averages taken over all such country
pairs. This has been done for two sub-periods since 1973 and for anumber of sectors (Table 3). The results indicate an increased
correlation of total market volatility (or risk) driven, in particular, by the ITsector and more generally TMTshares (note that non-
cyclical services include the Telecom industry) as well as the financial sector. Given that major technological breakthroughs, product
developments and internationalisation have taken place in the TMTand financial sectors (where considerable deregulation and
liberalisation has taken place since early and mid 1980s) it is perhaps not surprising that the shocks affecting these industries transmit
more globally. Also, in light of the “new economy”, the results seem to be consistent with the hypothesis that common technology
shocks, spurred by rapid expansion of information and communication technology, may have been the main driving force in
concurrent asset price developments across borders.
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Globalization means U.S. biz con spills over – effects other nations’ growth
F&D (Finance & Development, a quarterly mag of the IMF), 2005, “Economic Spillovers”, September 2005, Volume 42, Number 3
But just how large is the impact of external economic conditions on a country’s growth? And as the world economy becomes
more integrated, has the importance of growth spillovers increased? We undertook three studies to try to answer these
questions. One study analyzed trade-related growth spillover in over 100 industrial and developing countries. The other two
studies sought to assess the impact of the United States and South Africa on the growth of other countries. Our results show
that economic conditions in trading partners do in fact matter significantly for growth. After controlling for other growth
determinants, we found that a country’s economic growth is positively influenced by both the growth rate and relative income
level of its trading partners. Our findings also suggest that countries benefit relatively more if their trading partners grow faster
than they themselves do and are richer. And we found evidence that some countries are indeed engines of global or regional
growth: the impact of the United States is significant in many countries around the world, and South Africa matters for
economic growth in the rest of Africa. In all three cases, we found the estimated impact of growth spillovers to be relatively
large. It has been larger in recent decades and for open economies, implying that international spillover effects may increase in
importance as globalization continues. What theory tells us Economic conditions abroad—including growth rates and income levels—are thought to
influence a country’s growth through several channels. * The most obvious channel is trade linkages: a rise in trading partners’ growth leads to an increase
in their demand for imports, which then contributes directly to an increase in the net exports of the home country. And the positive implications of trade for
economic growth are not limited to countries that run surpluses, since countries can benefit from technology transfers and other efficiency gains associated
with international trade (Coe and Helpman, 1995). * With growing foreign direct and portfolio investment, the spillover effects of trading partners may also
be transmitted through financial linkages. * Finally, there may be indirect effects, with business and consumer confidence in major countries
influencing confidence in other countries.
Growth of world econ tied to U.S. biz con and consumer con
UNECE (United Nations Economic Commission for Europe), ’02, “2002 - United States: leading the global recovery
Western Europe: moderate growth prospects”, http://www.unece.org/press/pr2002/02gen12e.htm
"An important risk to the forecast recovery in Europe and other regions of the world economy is its dependence on a sustained
and gradually strengthening expansion of domestic demand in the United States," said Mrs. Schmögnerová. This is expected to
stimulate domestic activity in the rest of the world, including Europe, via exports and the spillover effects from increasing
business and consumer confidence in the United States.
The internationalization of the market means business confidence spills over globally
Thomas Dalsgaard et al, Principal Administrator - Economics Department of the OECD, 2002. “ONGOING CHANGES IN THE
BUSINESS CYCLE – EVIDENCE AND CAUSES,” Société Universitaire Européenne de Recherches Financières,
http://www.suerf.org/download/studies/study20.pdf
A further, much more speculative, channel for greater synchronisation is the internationalisation of enterprises – over and above the effect
it may have on synchronisation of share prices as discussed in Box 4. For example, to the extent enterprises are multinational, the need to retrench because of
developments in one market may cause cut-backs in activities in other countries, and viceversain case of buoyant conditions.38 It is difficult to get apicture of the
potential importance of such effects. However, foreign direct investment flows have expanded strongly in recent years pointing to apotentially
rising influence of this channel (Figure 22). The transmission of cyclical fluctuations over time may conceivably also be affected by
“soft” factors such as confidence. Even if more tangible influences such as linkages viatrade and asset prices may determine the
overall magnitude of international transmission, its timing could well be influenced by confidence. Indeed, over the decade of the
1990sthere has been avery high correlation between indicators of business confidence and share prices in many countries, notably the
United States. Although causality remains uncertain, this may conceivably have speeded up the impact of share price developments
by directly affecting the “animal spirits” of investors. Nevertheless, despite closer correlation of equity returns over the last two decades, it is not obvious
that cross-country correlations of confidence indicators have increased in any systematic manner.
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Patrick Bernhagen, Department of Politics and International Relations - University of Aberdeen, 8/15/05. “Business Political Power:
Economic Voting, Information Asymmetry, and Environmental Policy in 19 OECD Countries,”
http://convention2.allacademic.com/getfile.php?file=apsa05_proceeding/2005-10-06/40383/apsa05_proceeding_40383.pdf
The negative link between environmental protection and economic performance is neither clear nor undisputed. While environmental
pioneers may suffer short-term economic disadvantages in international competition, early movers in the area of environmental
protection will be at an advantage in competition for innovative technologies (J?nicke 1992, 52). At the level of the individual firm,
however, no matter what society-wide benefits and even the long-term benefits to the firm there may be, envi- ronmental policies add
considerable compliance costs to firms. This may lead to cut- backs in research and development efforts, limit the innovative efforts of
firms, or even endanger their general profitability. As a result, firms will generally tend to em- phasize the costs of environmental
policy, while underestimating the benefits and op- pose environmental policy which they perceive to place them at a competitive
disad- vantage. Exceptions are cases where firms can achieve protectionist benefits through stricter environmental policies. In
practice, however, these are rather rare (Murphy 2004)
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Yuquing Xing, professor of economics at Graduate School of International Relations, International University of Japan, 4/18/01, “Do
Lax Environmental Regulations Attract Foreign Investment?” Environmental and Resource Economics, ,
http://www.springerlink.com/index/3JUUUG48YY29QHMU.pdf
To correctly interpret our findings, one should keep in mind that the environ- mental variable is only one of the determinants of the
FDI. Our empirical study only identifies the impact of environmental regulations on capital outflows and reveals the role of
environmental regulations in the decision-making of the FDI of polluting industries. It would not be appropriate to conclude that
environ- mental regulation alone can decide the direction of FDI flow for a polluting industry. We have no convincing evidence that
the environmental variable domi- nates other determinants in the process of determining FDI of a polluting industry. However, to the
extent that the environmental policy gap between developing and developed countries widens, more capital investment associated
with polluting industries can be expected to flow to countries with lax environmental regulation. This could result in a significant
migration of polluting industry to “pollution havens”. The flight of polluting industries may cause economic problems such as
unemployment in the short run for the country exporting capital, and may also expedite environment degradation of host countries. In
addition, the migra- tion of polluting industries only changes the geographic location of pollution generation. If the pollution is
undepleted and can spill over borders (via rivers, aquifers, precipitation or air movement), the reduction of the pollution at the
country with strict environmental regulations may be at least partially offset by an increase in pollution in other countries. Thus the
free mobility of capital asso- ciated with polluting industries may undermine noncooperative efforts at pollution control.
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AT: No Flight
Skeptics of industrial flight are wrong – their studies focus on goods flow, not capital flow
Yuquing Xing, professor of economics at Graduate School of International Relations, International University of Japan, 4/18/01, “Do
Lax Environmental Regulations Attract Foreign Investment?” Environmental and Resource Economics, ,
http://www.springerlink.com/index/3JUUUG48YY29QHMU.pdf
An alternative view, without as much theoretical justification, is that environ- mental regulations have no effect on plant location. The
basic argument is either that cost effects are so small as to be negligible or that increased environ- mental quality is reflected in
reduced employee compensation. Without regulation, employees would have to be paid more to live and work in polluted conditions.
Thus in equilibrium, the total costs will be the same. Using the later argument, one would still expect to see particularly polluting
industries moving to loca- tions endowed with a clean environment (perhaps temporarily) and with weaker environmental
regulations. The empirical literature to date supports the view that environmental regulations do not matter.2
While empirical studies of the industrial flight/pollution haven hypotheses have been illuminating, their shortcomings suggest that the
question has not yet been fully answered. One problem with previous empirical studies is that the endo- genous variable, intended to
track the effects of environmental regulations, is unsatisfactory. For instance, Low and Yeates (1992) use a country’s share of
production in total world trade of pollution-intensive products as a proxy for specialization in polluting goods. This is a coarse
measure of specialization. Such a variable is determined by a wide variety of factors in addition to the strictness of environmental
regulations. Furthermore, it is capital flow, not goods flow, which should be most affected by differential environmental regulations.
Only in the long run will a country’s production mix reflect capital movements induced by differential environmental regulations.
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Jim Lee, Professor of Economics at Texas A&M University-Corpus Christi, Oct. ‘02 “What is the role of consumer confidence in the
business cycle, and how does it affect the economy?”,
http://64.233.167.104/search?q=cache:jViVBhE4T_0J:www.tracer2.com/admin/uploadedPublications/181_tlmrexpert0210.pdf+consu
mer+confidence+key+to+economy&hl=en&ct=clnk&cd=22&gl=us
Consumers play a major role in the economy. This is because consumer spending accounts for two-thirds of U.S. output. Since
households’ economic outlook affects their spending behavior, their expectations influence the direction of economic activity in
the business cycle. Consumer confidence, or optimism about the overall economy, is commonly referred to as “animal spirits”
after a famous economist, John Maynard Keynes. Keynes asserted that the Great Depression of the 1930s was largely
attributable to a collapse of public confidence, which led to dramatic declines in consumer and business spending. Today,
consumer confidence receives a great deal of media attention. Rising consumer confidence is widely interpreted as a precursor
to higher future household spending. It is therefore a leading indicator of the overall economy. If consumers are more
optimistic about the economy, they will tend to spend more, especially on durable goods and other large purchases. A higher
overall demand for goods and services will subsequently lead to higher output and employment.
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Sue Kirchhoff and Barbara Hegenbaugh, 2004, USA Today, “What's worrying business? Confidence erodes across industries”,
http://www.usatoday.com/educate/college/careers/news12.htm
Business investment and hiring are key to sustained economic growth, as consumer spending growth slows from its heady
pace. While corporate profits and spending have ramped up, economists are nervous about one key element -- confidence.
Business confidence has eroded since spring, according to several surveys. On Monday, economic consulting firm
Economy.com said its weekly survey of business owners showed declines were widespread, both geographically and across
industries. The U.S. index is off 25% from its peak earlier this summer. How business executives see the world is key for the
economy because it can influence decisions on hiring and investing. Nervousness is likely one reason hiring has been patchy
this year, spiking in March but growing less rapidly since then.
John Braithwaite, Australian Research Council Federation fellow, 2004, The Annals of The American Academy of Political
and Social Science, March, “Emancipation and Hope,” Lexis
The challenge of designing institutions that simultaneously engender emanci- pation 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).
Trying to jump-start the economy by reducing interest rates even further is like pushing on a string. Despite the fact that
the Federal Reserve has lowered the federal funds rate to 1.75%, its lowest level in 40 years, the Index of Leading Economic
Indicators (the measure used to gauge the future health of the economy) has declined for four consecutive months. Why
is the economy so anemic? One major reason is declining consumer and business confidence. Think of it this way:
Suppose you decide to make a major purchase, such as a house or automobile. If the price has been determined, two additional
factors are likely to figure prominently in your decision to make the purchase. The first factor is the interest rate, which is
nothing more than the cost of borrowing money. The second factor is how confident you are about your future earnings.
For example, if you are concerned about job security, you are not likely to make the purchase, no matter how low
interest rates might be. The same logic holds for business owners deciding whether to undertake a new investment.
While interest rates are important because they affect the total return on capital invested, if business owners are pessimistic
about future economic activity, even low interest rates will not be attractive enough to make them invest.
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So the pendulum has swung. Stocks that once traded at sky-high prices are now cautiously valued. Investors have grown weary of
significant losses, and are now wary of a marketplace where the information provided cannot be trusted.
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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USINFO, 2/12/07. “Foreign Investment in U.S. Benefits Economy, Bush Advisers Say,” http://www.america.gov/st/washfile-
english/2007/February/20070212165404AKllennoCcM0.7061731.html
Washington -- Foreign direct investment in the United States benefits the U.S. economy by stimulating growth, generating jobs for
U.S. workers, promoting research and development, and financing the current account deficit, say President Bush’s key economic
advisers.
Recently, foreign direct investment in the United States has stagnated, according to the annual Economic Report of the President
released February 12. The share of employment credited to foreign investment declined slightly between 2000 and 2004 and the share
of foreign investment in the U.S. capital account has declined since 1999.
The current account deficit is the broadest measure of U.S. transactions with the rest of the world. The U.S. capital account is the flow
of money both into the United States and from the United States for investment, grants and loans.
Department of the Treasury, 5/10/07. “An Open Economy is Vital to United States Prosperity,”
http://www.ustreas.gov/press/releases/hp395.htm
Foreign firms in the U.S. account for 5.7% of U.S. economic output, as well as 10% of all investment in plant and equipment in
the United States.
*
Foreign firms in the U.S. re-invested $48.6 billion (45% of their income) back into the U.S. economy in 2004. This investment
furthers innovation and promotes economic growth.
*
Foreign firms generate 19% of U.S. exports ($153.9 billion in 2006). This contribution is greater than their overall percentage of
U.S. economic output, which means they are doing more than their share to help improve the U.S. trade balance.
*
Foreign firms in the U.S. generate a disproportionate share of national R&D spending (13%, totaling $29.9 billion). This spending
strengthens U.S. global competitiveness in pharmaceuticals, high-tech, and other key sectors and produces innovative products that
help to improve our standard of living.
*
The economic benefits generated by inflows of foreign capital help strengthen economic leadership. In the late 1980s and early
1990s, some pointed with alarm to Japanese purchases of U.S. assets, fearing they foreshadowed the Japanese overtaking our
economic leadership. Twenty years later, the resulting jobs and economic growth show those fears were misplaced.
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were to decide, for whatever reason, to cease buying Treasury securities and to liquidate those they own, the dollar
would collapse and the US would experience an unprecedented economic shock. Were this to happen, the world would
witness the end of American hegemony.
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AT: RegulationsCompetitiveness
All the evidence goes the other way – no empirical evidence that regulations stimulate competitiveness
Robert N. Stavins, Assoc Prof – Public Policy, Harvard, 1994. [“The Challenge of Going Green,” Harvard Business Review, Vol. 72
Issue 4, p37-48]
The picture is bleaker still for the tenet that environmental regulation stimulates innovation and competitiveness. Not a single
empirical analysis lends convincing support to this view. Indeed, several studies offer important, if indirect, evidence to the contrary.
Natural skepticism regarding this regulatory free lunch should remain unabated.
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Trying to jump-start the economy by reducing interest rates even further is like pushing on a string. Despite the fact that
the Federal Reserve has lowered the federal funds rate to 1.75%, its lowest level in 40 years, the Index of Leading Economic
Indicators (the measure used to gauge the future health of the economy) has declined for four consecutive months. Why
is the economy so anemic? One major reason is declining consumer and business confidence. Think of it this way:
Suppose you decide to make a major purchase, such as a house or automobile. If the price has been determined, two additional
factors are likely to figure prominently in your decision to make the purchase. The first factor is the interest rate, which is
nothing more than the cost of borrowing money. The second factor is how confident you are about your future earnings.
For example, if you are concerned about job security, you are not likely to make the purchase, no matter how low
interest rates might be. The same logic holds for business owners deciding whether to undertake a new investment.
While interest rates are important because they affect the total return on capital invested, if business owners are pessimistic
about future economic activity, even low interest rates will not be attractive enough to make them invest.
Thomas D. Boston, heads Boston Research Group in Atlanta & member of the Black Enterprise Board of Economists, 1-1-03,
“Confidence is key: economist cites the importance of business outlook to recovery”,
Think of it this way: Suppose you decide to make a major purchase, such as a house or automobile. If the price has been
determined, two additional factors are likely to figure prominently in your decision to make the purchase. The first factor is the
interest rate, which is nothing more than the cost of borrowing money. The second factor is how confident you are about your
future earnings. For example, if you are concerned about job security, you are not likely to make the purchase, no matter how low
interest rates might be. The same logic holds for business owners deciding whether to undertake a new investment. While interest
rates are important because they affect the total return on capital invested, if business owners are pessimistic about future
economic activity, even low interest rates will not be attractive enough to make them invest. Over the past year, business owners
have been more wary than consumers, so investments have lagged. Fortunately, consumer spending has carried the economy
forward--even though consumers are facing record levels of debt. But the situation has changed over the last three months. The
growing number of job losses has caused consumers to become cautious. As a result, if the economy is to improve, investment
must pick up. But low interest rates alone will not get the job done. Rather, the key index to watch is business confidence. The
Gazelle Index, a survey of 350 of the nation's fastest growing black-owned businesses as measured by workforce growth rates,
took a sharp drop, from 67.7 to 49.5, between the second and third quarters. An index value below 50 indicates that business
owners are more negative than positive about economic conditions. Why is the index value important? When business leaders are
concerned about the economy, they reduce hiring, which contributes to higher unemployment rates.
Business investment is the dominant factor – biz con dictates the direction of
the economy
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cutbacks in corporate capital spending are indeed an ominous indicator. The PMI, or Purchasing Managers Index, is a
representation of the progress in corporate spending.
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Indo-Pak war
The situation now is much, much worse as more factors combine to suggest that foreign investors and trust in the U.S.
economy might soon be a thing of the past. Your pension is at risk today and your home may be at risk in six months to a
year. One economic analyst has suggested that a nuclear exchange between India and Pakistan might be the perfect
cover for the biggest financial wipe out in human history. I think that an ill-conceived and risky invasion of Iraq might
serve the same purpose. From consumer confidence, to corporate accounting, to the dollar, to gold, to foreign capital
flight, to pension fund wipe outs, to the derivative bubble, to debt, there is not a single economic indicator that is not
flashing red. The warnings are as clear, explicit and well-documented as were the warnings received by the U.S. government
throughout summer 2001 that a terrorist attack against the World Trade Center would take place during the week of Sept. 9
using hijacked airliners from United and American airlines. Nothing was done to prevent that and apparently nothing is being
done now in spite of the fact that $4.2 trillion of your money has been stolen right in front of your eyes.
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Roger G. Noll, professor of economics emeritus at Stanford University and a Senior Fellow at the Stanford Institute for Economic
Policy Research, ’97, “Internationalizing Regulatory Reform” in “Comparative Disadvantages? Social Regulations and the Global
Economy” Ed. Pietro S. Nivola. Published by Brookings Institute Press, pp. 332-333
The international consequence of incentive-based environmental regulatory reforms is to reallocate production among nations in a
manner that reduces total social costs. These reforms reduce compliance costs for industries that need to control harmful pollutants. As
a result, the relative price of the products of these industries falls, and if their products are traded these industries gain a larger share of
the world market. In some cases, the principal effect is to substitute domestic production for exports that appeared attractive only
because they were produced in a less costly regulatory environment, and in other cases it is to increase exports of the industries that
experience lower regulatory compliance costs. In all cases, all prices and exchange rates will adjust so that some other industries
experience some compensating adjustment in net imports, and total trade can either rise or fall. But in all cases, the net effect is an
increase in world productivity and income as production moves to areas where the true social costs are lowest.
Christian E. Weller, Fellow at the Center for American Progress and an Associate Professor of Public Policy at the University of
Massachusetts Boston, and Amanda Logan, Research Associate at the Center, 3-5-08, “Slowing Productivity Growth Requires
Boosting Business Investment”, http://www.americanprogress.org/issues/2008/03/slow_productivity.html
The Labor Department reported this morning that worker productivity increased at an annual rate of just 1.9 percent in the
fourth quarter of last year, the slowest pace since the first quarter of last year. This also marks the third year in a row that
productivity growth fell below the crucial 2 percent-mark. In our report last year, “Ignoring Productivity at Our Peril,” we
examined the likelihood of a general slowdown in productivity and economic growth in the fourth quarter and what that would
mean to U.S. economic competitiveness over the course of 2008. As we pointed out in the report, worker productivity is a key
component of economic growth and stability. Over the past seven years, economic growth has largely been driven by consumer
spending, which is unsustainable in the long run because of the low personal savings rate, slow income growth, and high
household financial debt financing consumption. Despite record profit levels, many companies have chosen to use their money
in ways other than investing directly in growing their businesses’ overall productivity—and we are seeing the results. More
business investment can lead to higher future productivity growth via an enlarged capital base. The rewards of higher
productivity growth come in the form of more money for workers to spend on consumption items. This extra money will
provide businesses with an incentive to invest more in their buildings and equipment, thereby laying the foundation for even
higher productivity in the future.
The virtuous cycle of higher investment, rising productivity growth, and growing income helped lift almost all economic boats
in the 1990s. From 1995 to 2000, productivity grew at an annual rate of 2.5 percent, which some researchers have attributed to
investments in better technology such as hardware and software. Under the right circumstances, this translates into higher
living standards in an expanding economy. Boosting business investment to overcome indications of a vicious productivity
cycle taking hold in our economy would have positive effects for the economy both in the short term and the long term. In the
immediate future, faster investment growth could give the economy a much-needed boost as consumer spending has slowed in
the wake of a massive debt run-up and as households concentrate on repaying their record-level debt. Over the long term, faster
investment growth could also help lay a stronger foundation for innovation—the key but elusive measure of our nation’s
overall competitive advantage in the global economy. But businesses will not invest unless incomes rise faster, which means
policymakers need to ensure that workers can see more gains from a growing economy in the form of faster job growth and
higher wage growth. At the same time, policymakers must create additional incentives for companies to invest in new
technologies appropriate for a creative U.S. economy that remains on the cutting edge of global innovation. Our colleagues at
the Center for American Progress have detailed how the next administration and Congress can begin to chart this new course in
our “Progressive Growth” series of papers. It’s time we got started.
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Table I also reports the abnormal returns around the settlements of hazardous waste lawsuits. No statistically significant abnormal
performances occur during the event window. The lack of abnormal returns indicates that the announcement of court
decisions/settlements provides no new systematic information to investors. To check whether the lack of significant returns was a
result of suits with positive returns canceling those with negative returns, the settlements were individually examined for abnormal
returns. Only 4 firms in the sample of 74 show significant abnormal returns during the two-day event interval (2 positive and 2
negative), which is fewer than would be expected randomly at the 90 percent confidence level. Given the lack of statistically
significant abnormal returns, no further analysis of lawsuit settlements is conducted.
Squo solves their impacts – biz con fluctuates in the business cycle, it will
eventually be restored
The world economic market overall is uncertain at this stage, but all cycles - good and bad - come to an end. "But I
think that the country's macro-economic policies remain strong and despite a number of external global factors - like
the much-publicized subprime mortgage crisis and credit crunch faced by many countries - we should be heading for
less choppy waters as we approach the third and fourth quarters of next year," added Mokoena. "Also, as we head
towards the 2010 soccer World Cup I believe a more positive business sentiment will start emerging. Consumers and
companies just need to fine-tune their current business strategies and ensure they are well placed to weather the storm.
Those companies that plan for the business upturn now are the ones that are really going to shine.”
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Unfortunately, small business economic confidence is at an all-time low. In fact, confidence indicators were down in every single
category of the survey. "With prices rising, especially gas and food, just about everybody is feeling the squeeze," says, Discover
business credit card director Ryan Scully. "People are starting to change their habits and cut back. For small business owners
who are seeing profits go down as a result, that means they have less to invest in finding new business," Scully added
Confidence low now – investors are preparing for low earnings and high oil prices
Glenn Mumford, staff writer - Australian Financial Review 6/24/08. “Testing times for investor confidence,” Australian Financial
Review. Factiva
Equities here and in the United States are in the process of building a major base, but recent market weakness has certainly provided a
key test of this belief. The fact that the local market’s forward price-earnings ratio has moved to less than 12 times - with the major
banks and resource companies registering at less than 10 times - suggests investors are pricing in either a new wave of negative
earnings revisions or a sustained bout of inflation-inspired P/E compression. The rising oil price will be significant in all this, and
local resources companies will be required to support the general market. This week could also see a resolution of iron ore pricing
negotiations for BHP Billiton and Rio Tinto. Do we bounce or do we dive? I’m sticking with the first option, but a lot will depend on
the oil price. Expect a volatile week.
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The survey of 2,000 businesses, conducted by Telstra's directories arm Sensis, found confidence had fallen 16 points in the
three months to October to 43 per cent. The decline in confidence is the biggest fall in the survey's 14-year history. The
author of the Sensis Business Index, economist Christena Singh, said businesses were concerned about the outlook for
workplace relations as well as a possible change in leadership. "What we are finding is that small businesses are telling us that
their confidence has been impacted quite dramatically in the lead up to the election," Ms Singh said. "The main factors
influencing that are a potential change of government, with the key issues small businesses are looking at being
industrial relations and economic management ."We have been picking up strong economic conditions for the past few
years really from small businesses and they are concerned there might be some change there."
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Although business confidence is decreasing, it fluctuates in a cycle meaning it will eventually be restored
The Business Report, “Drop in business confidence part of a cycle”, http://www.fastmoving.co.za/news-archive/sa-
economy/drop-in-business-confidence-part-of-a-cycle, July 8th, 2008
The world economic market overall is uncertain at this stage, but all cycles - good and bad - come to an end. "But I
think that the country's macro-economic policies remain strong and despite a number of external global factors - like
the much-publicized subprime mortgage crisis and credit crunch faced by many countries - we should be heading for
less choppy waters as we approach the third and fourth quarters of next year," added Mokoena. "Also, as we head
towards the 2010 soccer World Cup I believe a more positive business sentiment will start emerging. Consumers and
companies just need to fine-tune their current business strategies and ensure they are well placed to weather the storm.
Those companies that plan for the business upturn now are the ones that are really going to shine.”
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National City (NYSE: NCC) contacted business managers in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio and Pennsylvania,
and asked them two questions: Business outlook and hiring plans indices are calculated by adding the percentage of total positive
responses and half of the neutral responses. The composite index is calculated by averaging the outlook and hiring plans indices.
Respondents contacted in June said they feared ripple effects of recent Midwestern flooding, including higher food prices.
"Natural disasters seldom prove as damaging to economic growth as their first impressions," National City chief economist
Richard DeKaser said in a news release. "The impact of flooding on agriculture, however, is different as crop cycles, which are
measured in years, are not readily recouped. "In Louisville, 55.4 percent of business managers expressed optimism about the
economy, compared with 81.3 percent a year earlier. In Kentucky, 71.6 percent expressed optimism, down from 83.3 percent in
June 2007. In Indiana, 66.9 percent expressed optimism, down from 80.4 percent a year earlier.
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Banking crisis ensures business confidence remains low – tight credit market
William Rees-Mogg, The Times UK, 7-14-08, “This recession could easily tip into a depression”,
http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article4326794.ece
The present recession has some characteristics which make me think that it will be a relatively long one. The recession is centred on
banking and property. In an ordinary recession, one has to wait for consumers to regain their confidence, which, in turn restores the
confidence of business. Now one has to wait for the bankers as well. At present, banks are too anxious even to lend to each other, let
alone to expand consumer credit or business loans.
Business confidence levels across the Gulf continued to fall in the second quarter, as inflation, high oil prices and
staffing problems dampened sentiment, the HSBC Gulf Business Confidence Index has revealed.The survey, released on
Sunday, found that while the general mood of Gulf business people remained buoyant, levels of business confidence had
maintained their downward trend of the past 18 months. Overall, the Business Confidence Index dipped to a mark of 94
from the benchmark 100 set in February 2007 when HSBC started the index. The index dropped from 96.8 in the first
quarter of this year.
"In the short term, these events do imply a greater measure of financial restraint on economic growth as credit becomes more
expensive and difficult to obtain." Already there are signs that it is getting harder to sell bonds linked to credit cards and
car loans, and there are worries that spreads on corporate bonds are tightening. The tightening of credit will hurt
economic growth because in the US consumers have borrowed heavily to fund their consumption. The latest figures
indicate that consumer and business confidence is slumping both in the US and Europe as worries about the effects of the
credit crunch grow.
B&T Weekly, Australian News Magazine, 6/13/08. “Forum paints retail at a crossroads,” Factiva
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.
But while we haven't fallen off the cliff, local retailers can't afford to be complacent. Recent consumer confidence surveys indicate
mounting concern, while retail market darlings like Harvey Norman, David Jones and JB Hi Fi are cautious about weakening
consumer demand.
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Reuters, 12/18/07. “Market woes, oil, forex to curb euro zone growth-EU,” Factiva
BRUSSELS, Dec 18 (Reuters) - The global credit crunch, created by uncertainty about the size of losses in the U.S. mortgage market,
will curb euro zone economic growth in coming quarters, the European Commission said on Tuesday.
Financial market estimates showed losses related to rising default rates in the U.S. mortgage market could reach $250-500 Billion
compared to an earlier range of $50-100 billion, the EU executive said in a quarterly report.
Euro zone growth was also at risk from high oil prices and the strong euro, it said, but added that activity would be supported by
robust employment and record-high corporate profitability.
"Tighter financing conditions, reduced confidence in the aftermath of the financial market turmoil and rising inflation, among other
factors, will weigh on growth in the next few quarters," the report said.
It said the global credit crunch would affect growth through higher market lending rates, lower consumer and business confidence and
reduced consumption in the United States.
Starting with the Enron Corp. bankruptcy filing on December 2, 2001, the United States gas and power trading business has
sustained one blow after another. Credit downgrades, accounting scandals, governmental investigations, falling stock prices,
indictments and guilty pleas have been reported in the news for months. The companies involved have included many well-
respected energy trading companies. Throughout the energy trading business, few companies with gas and power trading
operations have been spared reputational harm and economic loss. There has been a loss of confidence in the entire business,
which emerged less than a decade ago. Rapid growth, inadequate credit and risk management controls, a poorly designed
California energy market and the Enron bankruptcy all contributed to this loss of confidence.
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A key measure of consumer confidence dropped in June to the fifth lowest reading ever, as Americans grew more
concerned about their jobs and rising food and fuel prices .The New York-based research group Conference Board said
Tuesday that its Consumer Confidence Index dropped to 50.4 from a revised 58.1 in May. The reading was the lowest
since February 1992, when it was 47.3.Economists had expected the index to decline to 56, according to
Briefing.com.Lynn Franco, director of the Conference Board, said the report is an indication that the economy is "stuck in
low gear."
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Washington Post, 7/15/08. “Bush Expresses Confidence in Economy; Bernanke Cites Long List of Problems,”
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/15/AR2008071500999.html?hpid=topnews
Wall Street was lower again today, with major U.S. indexes off as much as 1.5 percent in early trading. Asian and European markets
both fell overnight.
Bernanke spoke at a time of uncertainty on a number of fronts. Despite a recent series of Fed actions to cut interest rate and keep cash
flowing among banks and financial companies, U.S. growth remains sluggish and employers have eliminated jobs for six months in a
row. Meanwhile, rising prices for energy, food and a list of commodities has made for an "unusually uncertain" outlook for inflation,
Bernanke said.
As a result, "accurately assessing and appropriately balancing the risks to the outlook for growth and inflation is a significant
challenge for monetary policy makers," Bernanke said. "Given the high degree of uncertainty, monetary policy makers will need to
carefully assess incoming information bearing on the outlook for both inflation and growth . . . In light of the increase in upside
inflation risk, we must be particularly alert" to evidence of higher long-term inflation expectations.
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BOYD ERMAN, The Globe and Mail's capital markets reporter, 7/12/08. “Good timing: Feds avoid Fannie-style mortgage freefall,”
The Globe and Mail, Lexis
That criticism misses a larger point, something that Fannie Mae and Freddie Mac are making painfully clear in the United States: The
housing market depends not just on the confidence and borrowing ability of people interested in trading up from a bungalow to a two-
storey with an ensuite Jacuzzi and a great room. It depends on investor confidence and the borrowing ability of the giant government-
backed lenders that really fund mortgages. In the United States, that investor confidence is gone and the ability of Freddie and Fannie
to borrow may follow. That's an unprecedented threat to the housing market, which is saying something given what the United States
has already been through. Freddie and Fannie are federally chartered companies created to help homeowners by purchasing the
mortgages that banks make, freeing up banks to make even more. With the implicit backing of the U.S. government, Fannie and
Freddie could borrow cheaply in the bond market to finance mortgage purchases. Until recently, that is. Investors are shying away and
borrowing costs have shot up relative to government bonds. Investors are worried about the highest delinquency rates on mortgages in
at least three decades. Many of those mortgages have terms like zero-down and 40-year amortizations. If those terms sound familiar,
it's perhaps because Canadian banks had been advertising them lately.
The Globe and Mail, Canadian News, 5/31/08. “THREE STATS YOU JUST CAN'T BE WITHOUT ON A SATURDAY: THE
WEEK IN ECONOMICS,” Lexis
"In the U.S., consumer confidence is in freefall," he says. Confidence is falling faster now than between 2001 and 2003, when the
United States was enduring a high-tech meltdown, a mild recession and a major terrorist attack. European confidence peaked a year
ago and has plunged since then, especially in Britain. Japan's confidence levels peaked in 2006, but are now at recessionary levels.
Confidence in Canada is sliding too.
Consumers in these countries account for about 50 per cent of world production, he says. "The prognosis for near-term world
economic growth is not encouraging."
Business confidence is higher, but is also eroding in Europe, Japan, and particularly in the United States.
"Confidence is arguably most important when conditions slow," Mr. Hall warns. "Pessimism sells, it spreads rapidly, and can be self-
fulfilling. A significant lapse of confidence can even erode parts of the economy that are not drowning in the excesses created by a
protracted period of prosperity."
Consumer confidence is at its lowest since 1992 – decreasing growth and home prices
Conference Board reports US consumer confidence fell to 50.4 in June from 58.1 in May, for lowest reading since 1992; second-
quarter growth is expected to be around 0.9%; latest evidence of slumping growth and tumbling home prices suggests Americans'
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willingness to keep spending is being tested, making economic contraction more likely; Federal Reserve faced with economic
weakness is likely to keep interest rate steady at 2%; graphs (L)
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Consumer Con Low
Consumer confidence is at its lowest since 1982 – high fuel and food prices and decreasing incomes
LA Times, 4/26/08. “Consumer confidence hits 26-year low, survey says,” Lexis
U.S. consumer confidence fell for a third straight month in April, hitting its weakest level in 26 years on heightened worries over
inflation and the sagging housing market, a survey showed Friday. The Reuters/University of Michigan Surveys of Consumers said its
final index of confidence for April fell deeper into recessionary territory, to 62.6 from 69.5 in March and below economists' median
expectation of 63.2 in a Reuters poll. The April result is the lowest since March 1982's 62.0, when the "stagflationary" period of low
growth and high inflation was still an issue for many Americans. "More consumers reported that their personal financial situation had
worsened than any time since 1982 due to high fuel and food prices as well as shrinking income gains and widespread reports of
declines in home values," the survey said. "Never before in the long history of the surveys have so many consumers reported hearing
news of unfavorable economic development as in the April survey." Nearly 9 in 10 consumers thought the economy was now in
recession, Reuters/University of Michigan said. Although a tax rebate will bolster consumer spending, consumers favor "by a wide
margin" using the rebate to repay debt and to add to their savings, according to the surveys.
Investor and consumer confidence low now – uncertainties about interest rates
National Post (Canada), 6/25/08. “U.S. traders await Fed decision,” Lexis
Stock markets in the United States fell yesterday, on concerns about the economy after a report showed consumer confidence hit a 16-
year low and as a profit warning from United Parcel Service (UPS/NYSE) stoked fears about corporate results.
But trading volume was thin, with investors hesitant to place any big bets as they wait to see whether or not the Federal Reserve keeps
interest rates on hold as expected today.
Consumer confidence is the lowest in 28 years – high petrol and food prices
The Sunday Times, 7/13/08. “Oil and credit woes fuel long summer of discontent,” Lexis
This is the summer of our discontent. Only 14% of Americans are satisfied with the way things are going in the United States, the
lowest figure recorded by Gallup's pollsters since they began asking that question almost 15 years ago. Consumer confidence is at its
lowest level in 28 years, according to the respected Reuters/University of Michigan survey. And not many Americans are expecting
things to improve soon. "Consumers' economic outlook is so bleak that the Expectations Index has reached a new all-time low,"
reports the Conference Board. In part this pervasive gloom is due to petrol prices that have passed the $4-per-gallon (about 53p a litre)
level. In part it is the result of the squeeze soaring food prices are putting on consumers' wallets.
The Globe and Mail (Canada), 6/26/08. “Fed seems paralyzed by effect of energy prices on big picture,” Lexis
BCA noted that global expenditures on energy are approaching levels not seen since the early 1980s - and said the last time the "oil
drag" on consumers reached these levels, "the world economy veered off into a deep recession."
While the industrialized world's economy is less energy-intensive than it was a generation ago, and global fiscal and monetary
conditions are in much better shape, soaring energy costs are nevertheless a major threat to already fragile consumers (especially in
the U.S.), who are a key driver of global economic activity and who have already been battered by slumping housing and credit
markets.
As this week's U.S. Conference Board consumer confidence report showed, high energy costs are pushing them off the deep end.
Merrill Lynch economist David Rosenberg called the report "arguably the worst" in the 40 years the Conference Board has been
tracking consumer moods.
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G. Bruce Doern, Professor, School of Public Policy and Administration - Carleton University,
8/2004. “REGULATION AND ENVIRONMENTAL TECHNOLOGIES:KEY ISSUES AND
CHALLENGES,” http://www.huss.ex.ac.uk/politics/research/readingroom/DoernNRTEE.doc
After looking at the U.S. studies, Olewiler concluded in 1994 that they “give little evidence of environmental regulation having
any impact on investment in new plants or on patterns of international trade” (Olewiler, 1994, p. 87). But Olewiler also
immediately cautioned that there may well be greater impacts once 1980s and 1990s data was included and examined either at
an aggregate level or in particular industrial sectors. When adding very limited Canadian data on Canadian Pollution
Abatement Costs (PACs) to the 1994 picture, this study cautioned the reader on the limited nature of the Canadian data and the
problems of comparing it to the U.S. Nonetheless, one aspect of the Canadian data on PACs in the late 1980s was that
“Canadian PACs for pollution- intensive industries may be as much as three times those for similar U.S. industries” (Olewiler,
1994, p. 112). On an overall basis, Olewiler concluded, however, that “the available evidence suggests that international
investment flows have been relatively unresponsive to differences in environmental regulation across countries. A similar story
exists for differential regulations within countries. Other factor input costs are in general much more important, even for
pollution-intensive industries” (Olewiler, 1994, p. 111). Other studies also brought out similar conclusions (Dasgupta, Roy and
Wheeler, 1995; Jaffe, et.al., 1995; Vogel, 1998).
Michael Muoghalu, Director of MBA Program, Pittsburgh State University. 10/90. “Hazardous Waste Lawsuits, Stockholder Returns,
and Deterrence,” Southern Economic Journal, Vol. 57 Issue 2, p357
Table I also reports the abnormal returns around the settlements of hazardous waste lawsuits. No statistically significant abnormal
performances occur during the event window. The lack of abnormal returns indicates that the announcement of court
decisions/settlements provides no new systematic information to investors. To check whether the lack of significant returns was a
result of suits with positive returns canceling those with negative returns, the settlements were individually examined for abnormal
returns. Only 4 firms in the sample of 74 show significant abnormal returns during the two-day event interval (2 positive and 2
negative), which is fewer than would be expected randomly at the 90 percent confidence level. Given the lack of statistically
significant abnormal returns, no further analysis of lawsuit settlements is conducted.
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Conditional logit analysis indicates that Chinese-sourced equity joint ventures in highly polluting industries are deterred by relatively
stringent pollution regulation. This finding is consistent with the behavior described in the pollution haven hypothesis, though it
contradicts the notion that the pollution havens are created by industrial country investors. In contrast, equity joint ventures from
non-Chinese sources are actually attracted to provinces with more stringent environmental regulations, regardless of pollution-
intensity--the opposite of the pollution haven hypothesis. This attraction also holds for Chinese equity investment in low and medium
pollution-intenstive industries, though to a lesser extent. Even after accounting for the possibility of a nested decision, environmental
stringency still significantly attracts non-Chinese equity investment, while significantly deterring only Chinese equity investment in
highly pollution-intensive activities. In all specifications, corrections for the degree of state ownership reduce the size of the pollution
levy effects, but do not alter their effects or significance.
Stanley J. Feldman, Associate Professor of Finance at Bentley College, et al, 1996. “Does Improving a Firm’s Environmental
Management System and Environmental Performance Result in a Higher Stock Price?” Journal of Investing, (co-authored by Peter A.
Soyka, and Paul Ameer)
We have just completed a thorough evalu- ation of our ideas using real-world data on more than 300 of the largest public com-
panies in the U.S., and have produced results that validate our hypothesis. As suggested by financial theory, we have computed
changes in systematic risk for each firm over two time periods, and related these to a number of financial and environmental
variables using multiple regression analysis. We constructed our analysis to explain as much of the vari- ability in observed
systematic risk as pos- sible using factors suggested by finance theory and empirical observation. Using this approach, we were able
to isolate and quantify the effects of several environ- mental management and environmental performance measures that have both
practical and statistical significance. Our work suggests that environmental improvements such as those we have eval- uated might
lead to a substantial reduction in the perceived risk of a firm, with an accompanying increase in a public compa- ny’s stock price,
of perhaps five percent.
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Roger G. Noll, professor of economics emeritus at Stanford University and a Senior Fellow at the Stanford Institute for Economic
Policy Research, ’97, “Internationalizing Regulatory Reform” in “Comparative Disadvantages? Social Regulations and the Global
Economy” Ed. Pietro S. Nivola. Published by Brookings Institute Press, pp. 332-333
The international consequence of incentive-based environmental regulatory reforms is to reallocate production among nations in a
manner that reduces total social costs. These reforms reduce compliance costs for industries that need to control harmful pollutants. As
a result, the relative price of the products of these industries falls, and if their products are traded these industries gain a larger share of
the world market. In some cases, the principal effect is to substitute domestic production for exports that appeared attractive only
because they were produced in a less costly regulatory environment, and in other cases it is to increase exports of the industries that
experience lower regulatory compliance costs. In all cases, all prices and exchange rates will adjust so that some other industries
experience some compensating adjustment in net imports, and total trade can either rise or fall. But in all cases, the net effect is an
increase in world productivity and income as production moves to areas where the true social costs are lowest.
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Core prices, which exclude food and energy, were up 0.2%. Energy prices surged 4.4% during the month, the biggest rise
since November. That was driven by a 5.7% spike in gasoline prices during the month, also the biggest rise since
November. Consumer prices rose 4.2% compared with this time last year, the biggest rise since January. Julian Jessop at
Capital Economics said: "The latest US inflation data are not bad enough to panic the Fed into an early rate hike (not
while unemployment is soaring and the financial system is still creaking) but there is little good news here either. "Unless oil
prices drop back sharply soon, headline inflation is likely to remain uncomfortably high at around 4.0-4.5% until the
final months of the year."
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Impact Defense
Small Business confidence has been decreasing for months, it’s a try a die for
the affirmative
In the poll of over 9,000 business owners, nearly 90% said government policy was making already crippling business costs, such as
the escalating price of fuel, even worse. The overall assessment of the government’s performance on small business issues was even
more damning – 96% of respondents said they were dissatisfied when asked the question “Are you satisfied that the government is
currently taking the right decisions in the interests of small businesses?”
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