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Spartan Debate Institute Burk/Stone/Walters labBusiness Confidence DA V. 1.0 2008 - 2009

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A. Uniqueness Business confidence is strong-small business prove.

Austin Business Journal, June 5, 2008, Survey finds most small business owners optimistic about rest of 08, Online,http://www.bizjournals.com/austin/stories/2008/06/02/daily37.html, accessed 6/27/08.

Nearly 78 percent of owners and managers of small businesses say their companies will meet or surpass growthexpectations this year, according to a national survey. The business confidence survey was conducted in May viaKingwood-based Administaff Inc.'s database of more than 6,000 small and mid-sized businesses. About 44 percent of thecompanies surveyed are hiring full-time employees, while 11 percent plan to add part-timers. Respondents stated average compensation is up 4.9

percent from the same time a year ago, while average commissions have increased 6.8 percent. The survey found business owners and managersare willing to fight to keep valued employees. To accomplish that, more than half of the respondents said they are turning to pay increases or

providing workers with new challenges or responsibilities. More than 26 percent of the employers plan to increase salaries this year, according tothe survey, while 50 percent will maintain current wage levels. Sixty-four percent expect overtime to remain about the same. More than 60

percent of the companies cited the economy as their most serious concern in 2008, followed by 52 percent who said finding ways to controloperating costs was their principal challenge. Forty percent were most concerned with hiring the right employees. The majority of survey

participants expressed guarded confidence in the current business climate.

B. Links

The entire economy perceives new environmental regulations as the beginning of an anti-business campaign-the plan ripples through the economySchwartz 92Confronting Climate Change: Risks implications and Responses ed. By Mintzer pg. 283

There are many impediments to environmental reformsbut the principal obstacles, particularly inthe UnitedStates are psychological and philosophical rather than economic. While European corporations tend to treat environmentalregulations as a part of the operating environment,US business leaders seem to share a residual feeling thatenvironmental regulations are part of an anti-business, anti-progress political agenda. Richard Darman, Director of theFederal Office of Management and Budget, articulated this paranoia when he argued that the goal of US policy was not to make theworld safe for green vegetable. This prejudicecoupled with the short-term orientation of the investment communityand a naturally adversarial business environmenthas resulted in suspicion towards environmental issues.

Restricting consumption kills the global economy- multiple industries and nations will bedevastated by the plan causing wars and destruction of civilization.Gelbspan dec 95 Harpers magazine vol 291 pg. 31 ebscohost

That resistance is understandable, given the immensity of the stakes. The energy industries now constitute the largestsingle enterprise known to mankind. Moreover, they are indivisible from automobile, farming, shipping, air freight,and banking interests, as well as from the governments dependent on oil revenues for their very existence. Withannual sales in excess of one trillion dollars and daily sales of more than two billion dollars, the oil industry alonesupports the economies of the Middle East and large segments of the economies of Russia, Mexico, Venezuela,

Nigeria, Indonesia, Norway, and Great Britain. Begin to enforce restriction on the consumption of oil and coal, andthe effects on the global economy--unemployment, depression, social breakdown, and war--might lay waste to whatwe have come to call civilization. It is no wonder that for the last five or six years many of the world's politicians

and most of the world's news media have been promoting the perception that the worries about the weather areoverwrought.

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C. Impacts

Recession results when business confidence declinesBraithwaite march 2004 592 annals 79

The challenge of designing institutions that simultaneously engender emancipation and hope is addressed within the assumption of economic

institutions that are fundamentally capitalist. This contemporary global context gives more force to the hope nexus because we knowcapitalism thrives on hope. When business confidence collapses, capitalist economies head for recession. Thisdependenceon hope is of quite general import;business leaders must have hope for the future before they will build newfactories;consumers need confidence before they will buy what the factories make; investors need confidence before theywill buy shares in the company that builds the factory;bankers need confidence to lend money to build thefactory; scientists need confidence to innovate with new technologies in the hope that a capitalist will come alongand market their invention. Keynes's ([1936]1981) General Theory of Employment, Interest and Money lamented the theoreticalneglect of "animal spirits" of hope ("spontaneous optimism rather than . . . mathematical expectation" (p. 161) in the discipline of economics,a neglect that continues to this day (see also Barbalet 1993).

US economic decline leads to a worldwide decline

Lawrence Kudlow 1996 The Washington Times p. A14

And what's good for America is good for the rest of the world. U.S.economic policy, its markets, its economy, andits currency, all stand at the epicenter of the global economy. So do our free-market and pro-democracy values. When the UnitedStates errs, as it did in the late '60s and '70s, the global economy suffers. When the United States recovers, as it has during the '80s (helped byBritain's Margaret Thatcher) and '90s, so has the wealth of virtually all the other nations.

Economic decline causes global nuclear war

Mead 92[Walter Russel, fellow, Council on Foreign Relations, New perspectives quarterly, summer pp. 28]

But what if it can't? What if the global economy stagnates - or even shrinks? In that case, we will face a new period ofinternational 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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Uniqueness- Business Confidence High

Economy recovering now and business confidence increasingTim Paradis Associated Press Online July 17, 2008Stocks surge as falling energy prices bolster mood BYLINE: By, AP Business Writer

Wall Street surged Thursday, extending its rally into a second session as tumbling energy pricesbolstered an already upbeat moodthat followed stronger-than-expected quarterly reports from big names like JPMorgan Chase & Co. and United Technologies Corp. The DowJones industrial average rose nearly 200 points as oil fell more than $3 and brought its three-day decline to morethan $13 a barrel. Investors got a double dose of good news that helped alleviate weeks of angst about the economy.Three components of the Dow industrials JPMorgan Chase, United Technologies and Coca-Cola Co. issued comments that generally indicated that their businesses are holding up despite sometimes difficult economic conditions.

The reports appeared to let investors put aside some of their worst fears about the economy. Still, Wall Street has had some up periods in thepast few months as optimism grew only to fall back into a downturn as worries about the financial sector and the economy have welled back up. "There were some better-than-exp ected numbers out of the banks. I think we're maybegetting a little bit of a sigh of relief rally. Things had gotten so scary there for a few days," said Denis Amato, chief investment officer at Ancora Advisors in Cleveland. Meanwhile, light, sweet crude fell $3.35 to $131.25 on the New

York Mercantile Exchange. Oil fell more than $4 Wednesday and more than $6 Tuesday, offering investors some hope thatperhaps commodity prices will begin to decline. And natural gas prices fell sharply after the Energy Departmentsaid domestic stockpiles rose last week, but remain below recent years' levels. Prices dropped 71.3 cents to $10.68 per 1,000 cubic feet. A sustained drop in energycosts particularly oil would be welcome news for nearly all parts of the economy. Consumers have been hard-pressed by higher fuel and food costs.Wall Street is worried they will pare their spending on discretionary items to make room in their budgets for the higher-priced necessities. A pullback could be troublesome as consumer spending accounts for more than two-thirds of

U.S. economic activity. But the decline in oil added to the optimism in early afternoon trading. The Dow rose 185.72, or 1.65 percent, to 11,425.00. The Dow on Wednesdaysurged 276 points, or 2.5 percent, logging its best daily gain in three months. Broader stock indicators also rose. The Standard & Poor's 500 index advanced 15.83 , or 1.27 percent, to 1,261.19, an d the Nasdaq composite index rose

29.93, or 1.31 percent, to 2,314.78. Advancing issues outpaced decline rs by more than 2 to 1 on the New York Stock Exchange, where volu me came to 1.03 billion shares. Stocks soared Wednesdayafter better-than-expected quarterly results from Wells Fargo & Co. helped ease some of investors' worries about thehealth of the banking sector. Wall Street has grown concerned that souring mortgage debt would force some banks to go under. Bo nd prices showed steep declines Thursday as investors turned away fromthe safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.01 percent from 3.94 percent late Wednesday. The dollar was mixed against other major currencies, whilegold prices rose. Wall Street also appeared placated by economic figures. A Commerce Department report show ed construction of homes and apartments rose in June by 9.1 percent. The gain follows a change in New York laws that

has given a boost to apartment building. Construction of single-family homes fell by 5.3 percent to the slowest pace in 17 years. Applications for building permits, one indicator offuture activity, rose by 11.6 percent. The Labor Department reported that the number of newly laid-off people seeking unemployment benefits rose by 18,000 last week to 366,000. However, theincrease was below the number economists expected. Investors appeared undeterred by a reading from the Philadelphia Federal Reserve showing another decrease in regional manufacturing. In corporate news, JPMorgan Chaseposted a 53 percent decline in its second-quarter earnings as mortgage and other loan defaults worsened , but the decline in profits wasn't as steep as Wall Street had feared and the stock rose $3.48, or 10 percent, to $39.42. Amongother financials gaining, Fannie Mae and Freddie Mac jumped after Fitch Ratings affirmed long-term issuer default ratings on the government-chartered mortgage giants. Fitch cut Fannie's preferred stock rating and put Freddie's onwatch for a possible downgrade. Fannie rose $1.90, or 21 percent, to $11.15, wh ile Freddie rose $1.65, or 24 percent, to $8.48. United Technologies rose $3.37, or 5.5 percent, to $64.48 after post ing an 11 percent increase in itssecond-quarter profit. The maker of everything from jet engines to ventilation systems reported strong growth at its Otis elevator and Carrier air conditioner divisions. The company also raised its full-year forecast for revenue and per-share earnings. Coca-Cola's second-qua rter earnings fell 23 percent as the world's largest beverage company earned $1.42 billion. While the company's revenue and earnings excluding items topped expectations, analysts said volumegrowth was lighter than expected. The stock fell $2.14, or 4.1 percent, to $50.20. The Russell 2000 index of smaller companies rose 5.43, or 0.79 percent, to 692.18. Overseas, Japan's Nikkei stock average closed up 1.00 percent.Britain's FTSE 100 jumped 2.63 percent, Germany's DAX index rose 1.88 percent, and France's CAC-40 surged 2.76 percent.

Business confidence is rising and the mood is improvingThomson Financial News Super Focus,June 4,2008HEADLINE: Global risks tilted to downside, but inflation aconcern - Moody's Economy.com

A deteriorating outlook and tight credit conditions continue to weigh on firms, but Moody's Economy.com weekly Survey ofBusiness Confidence shows the mood improved markedly during May. Though sentiment across the globe remainsmeasurably weaker than prior to the subprime financial shock last summer, rising confidence is nevertheless a

positive development.

Business confidence is stable and has been improving since April.Moodys Economy.com July 14 2008https://www.economy.com/home/login/ds_proLogin.asp?script_name=/dismal/pro/release.asp&r=usa_dsbc&src=economy_survey_landing

Global business confidence has remained in a tight range since late May, consistent with a global economy that isbarely growing. Developed economies, including the U.S., Europe and Japan, are contracting moderately, while most developingeconomies are expanding moderately. This is an improvement since late April, however, when global business confidence fell toa record low. The most measurable improvement has been among real estate operations, financial servicescompanies, and business service firms.These firms are still dour, but not nearly so. As has been the case for the past year, themost negative responses are to the broad questions concerning present conditions and the outlook.

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Small businesses and multinationals are gaining strength-multiple reasons.Paul R.La Monica, (Editor CNN Money), June 6, 2008, Corporate America is getting nervous, Online,http://money.cnn.com/2008/06/06/markets/thebuzz/?postversion=2008060610, accessed 6/27/08.

And according to Vistage's Pastor, he said more and more small and mid-sized businesses are increasing theirbusinesses abroad, lured by a weaker dollar, stronger growth overseas and the relative ease of reachinginternational customers via the Web. Along those lines, many large multinational corporations have been holding

up reasonably well because they have stronger growth opportunities outside of the United States. Plus, many ofthem have relatively low debt loads and lots of cash to keep them afloat.

Business confidence is rising; positive developments in the status quo.

Japan Economic Newswire June 3, 2008HEADLINE: Dollar inches up in mid-104 yen range in Tokyo morning deals

Positive news on the dollar front,such as the U.S. Institute for Supply Management's business confidence data,was mostly ignoredas investors remained sensitive to negative news.On Monday, the ISM said that business confidenceamong manufacturers cameto 49.6 in May, slightly higher than the average market estimate of 48.5.

Business confidence stable- executives are forecasting a leveling of the economy-confidence

isnt tanked.Paul R.La Monica, (Editor CNN Money), June 6, 2008, Corporate America is getting nervous, Online,http://money.cnn.com/2008/06/06/markets/thebuzz/?postversion=2008060610, accessed 6/27/08.

Pastor also said that corporate confidence, while low, is not declining precipitously. He said this may suggest thatCEOs think the economy, while not ready yet to turn a corner, is not going to plunge significantly from here. Theexecutives surveyed by Dice shared that sentiment. "The majority of companies do not appear to be forecasting adire turn for the worse any time soon," Melland said in the report.

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AT-Low hiring proves business confidence low

Businesses are slow on hiring because they cant find qualified candidates, not because ofeconomic concerns.Paul R.La Monica, (Editor CNN Money), June 6, 2008, Corporate America is getting nervous, Online,http://money.cnn.com/2008/06/06/markets/thebuzz/?postversion=2008060610, accessed 6/27/08.According to the Dice survey, 52% of new hires are receiving salaries that are higher than a year ago while 45% ofnew hires are getting paid about the same. That's a good sign. Given how rapidly food and gas prices rising, it'scrucial that workers continue to see wage increases. "The weakness in the employment market is not impactingcompensation. In many categories, this still is a tight labor market and companies realize they have to paycompetitive wages and take into account the cost of living," Melland said in an interview. In addition, nearly 60%of those surveyed by Dice said that the main reason it's taking them longer to fill positions is because it's harder tofind qualified candidates, not because they are cutting back due to the economy. "Interestingly, the major reason forthe extended period to hire people isn't concern about the economy or a lack of urgency to fill a position. It's findingthe right people," the Dice report said.

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Economy high

US economy to grow and recover significantly in the next year-IMF forecasts proveSwann 7/17/08(Christopher. Ph.D. in Economics, University of Virginia,Assistant Professor, Department of Economics, UNC Greensboro, 2004 -) http://www.financialpost.com/story.html?id=661896

July 17 (Bloomberg) -- The International Monetary Fund raised its forecast for global economic growth this yearandwarned rich and poor countries alike that higher interest rates may be necessary to combat rising inflation.

The world economy will expand 4.1 percent this year, faster than the 3.7 percent pace projected in April, the fundsaid in a report released today in Washington. The IMF raised growth forecasts for six of the Group of Seven industrial nations, with only Canada's economy downgraded. The outlooks forChina, Brazil, Russia and India were also lifted. A global slowdown in growth tied to tightening credit in the first quarter was less severethan expected, the IMF said. The fund said inflation is a mounting threat and lifted its forecasts for price increases in both developing and advanced economies.``Inflation is a rising concern and will constrain the policyresponse to slower growth,'' the IMF said in its latest World Economic Outlook. In many emerging markets, the fund said ``monetary policy needs to be tightened, combined with greater fiscal restraint and, in some cases, with moreflexible exchange-rate management in order to reverse the recent build-up in inflation.'' Expansions in the developing world are ``expected to lose steam,'' the fund said.

For industrial nations, the fund said the ``the case for policy tightening in these economies is stronger than before the recent oil price increase.'' The IMF projects the U.S. economy willgrow 1.3 percent in 2008, up from a forecast of 0.5 percent in April. This was the largest increase in the forecast ofany of the group of seven leading industrial nations.U.S. Fed PolicyNext year the U.S. will expand by 0.8 percent, compared with its previous prediction of 0.6 percent,the IMF said.Federal Reserve policy makers on June 25 kept their benchmark interest-rate target at 2 percent and, in a statement, said ``the upside risks to inflation and inflation expectations have increased.''In the euro zone, growth this year will be 1.7 percent, higher that the 1.4 percent expansion forecast three months ago, led by a faster expansion in Germany, the IMF said. A jump in consumer prices prompted the European Central

Bank to raise its key interest rate to a seven-year high of 4.25 percent this month.

There is no recession sectors have declined but consumer growth and other areas have theUS economy looking okay.The Times (London), Anatole Kaletsky, Two sliding sectors do not a US recession make June 16, 2008 p. ln

But is America really in recession? Experts seem to think so, including Alan Greenspan, Warren Buffet, George Sorosand Martin Feldstein, the chairman of the National Bureau of Economic Research (NBER), the academic committee in Boston that determines business cycle dates. But where is the evidence for this belief?To be sure, housing and finance, two important parts of the economy, are in serious trouble. Yet housing now accounts for only 3.5 per cent of GDP, down from a peak of 6.5per cent two years ago, so most of the pain has already been felt there (in contrast to the situation in Britain and Europe). The financial sector is bigger, employing 5.9 per cent of American workers, but only a small proportion of

these are employed in cyclically sensitive jobs related to mortgages or wholesale finance. These two sectors between them employ far fewer people than themanufacturing and tradeable service industries that are benefiting from the cheap dollar. And thus far the troubles in US banking andconstruction have been almost exactly offset by gains in America's booming international trade. There is a world of difference between a dislocation confined to only one or two parts of the economy, such as housing and finance,and a generalised economic decline. Remember the official definition of recession devised by the NBER: "A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in

industrial production, employment, real income and wholesale-retail trade . A recession influences the economy broadly and is not confined to onesector." The difference between a general recession and a sectoral slowdown is not just a semantic quibble. For businessesand workers, a slowdown is a period of weak growth, modest job losses and disappointing profits; a recession is marked by mass unemployment and widespread

bankruptcies. For the financial markets, the two have totally opposite implications. In a recession, share prices collapse and the only safe assets are government bonds; in a slowdown, there are big shifts in relativeperformance between stock market sectors, but equities generally do well (as they did in the late 1990s and late 1980s) while safety first bond investors suffer enormous losses, as they did in 1994-95 and 1986 87.What,then, is the evidence of America moving into recession? Looking at the statistics used by the NBER, there is littleor none - at least so far. GDP has continued to grow, albeit slowly, in the past two quarters and almost certainlywill accelerate in the current quarter because of booming exports; industrial production has been positive, as havereal income and whole-retail trad e. Employment has fallen slightly, but by nowhere near as much as in the mildest of past recessions. Reliable high-frequency indicators, such as the monthlypurchasing managers' surveys, point to continuation of modest growth. Most importantly, consumer spending has remained robust. American consumers, far from cuttingback to bare essentials as was expected by bearish commentators after the credit crunch, are actually increasing their spending. The evidence of this, contained in the strong retail sales figures for May published last Thursday, wasby far the most important economic news of the past few weeks. Yet these figures received almost no media coverage and little market attention. Yet May's retail sales figures revealed a picture completely at odds with conventionalwisdom about the US economy. Despite the jump in energy prices and the related collapse in measures of consumer confidence, retail sales rose by 1.1 per cent on the month, the strongest gain since last November. Sales adjustedfor inflation and excluding food and energy also showed gains much stronger than expected. Also April's sales, initially thought to have fallen, were revised upwards to show a significant gain - and the two-month average of thesevolatile figures suggested that growth in the US consumer economy is now similar to the rate a year ago, before the sub-prime crisis and credit crunch. This conclusion is not based on one set of good retail sales statistics, butincludes stronger-than-expected recent figures on industry sales, stocks, imports, exports, purchasing managers' surveys and even home sales. But in saying this, am I not forgetting about the dreadful employment figures publishedlast Friday, which triggered the collapse of the dollar I mentioned at the start? Not at all. Despite the shock-horror headlines about a terrifying leap in unemployment from 5 to 5.5 per cent, employment figures for May were quitestrong and fully consistent with the message of economic acceleration. Rates of unemployment are irrelevant in timing the economic cycle, since they are a lagging indicator, turning some six to nine months after the economy as awhole. Meanwhile, the job creation figures, which do reflect current economic conditions, showed a modest decline of 49,000 in payroll employment, exactly in line with expectations and consistent with the economy growing atabout 1.5 per cent, just slightly below the 2 per cent trend rate of productivity growth. Of course May's strong retail sales were due in part to the tax rebates of $600 to $2,000 per household from the US Treasury from last month.

Many analysts, therefore, dismissed the gains as misleading. But this was the wrong response. The role of tax cuts in boosting consumer spending is a reason for optimism, not scepticism, about the economic outlook. The taxrebates were designed to boost consumer spending and that is why we have always expected (in line with the Fed and the US Treasury) to see economic recovery from this summer. Retail sales figures have now shown that the UStax cuts are working as planned. They will temporarily boost consumption - and by the time that this temporary tax boost runs out around Christmas, the US economy will be starting to enjoy the benefits of lower interest rates,operating with a lag of 12 to 18 months. In much of this discussion, my optimism on US economic statistics has been qualified by the weasel words "so far". But this can change. Until this month, sceptics could predict that trouble

lay ahead for America once consumers finally realised that their credit had run out. But the strong consumer response to the $110 billion tax rebate programme changes the balance of this argument. With therebates flowing into bank accounts and boosting real disposable incomes, the period of greatest risk for the USeconomy has passed. For the next two quarters, disposable incomes will rise at an annualised rate of 8 per cent or more and, given the normal lags between money appearing in bank accounts and flowing intoshop tills, the tax rebates will guarantee decently strong retail spending between now and Christmas - maybe a temporary consumer boom. If there were going to be a US recession inresponse to the credit crisis, it would have started by now. So let me stick my neck out and say withoutqualification - the US economy is out of the woods.

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No recession now 3 reasons proveJames Pethokoukis Mental Recession? Maybe. Economic Recession? No July 16, 200803:21 PM ET | | Permanent Link http://www.usnews.com/blogs/capital-commerce/2008/7/16/mental-recession-maybe-economic-recession-no.html

One the smartest guys I know is Bruce Kasman over at JPMorgan, and he still doesn't think the economy is going to fall intorecession, much a less a severe, 1982-style downturn. (Neither, by the way, does the Fed.) Rather, he sees the economy muddlingalong with 1 percent GDP growth in the second half. Here are his three reasons:1) Profit margins at nonfinancial companies remain healthy. "This is a testament to the fact that firms have produced strong

productivity gainsestimated to have risen at a 2.5% pace in 1H08."2) Trade remains strong. "This is related to the decline in the dollar and the composition of US exports which is concentrated in agricultural

products, industrial supplies, and capital equipmentitems that remain in demand by rapidly growing emerging market economies."3) Businesses will have to rebuild their inventories. "Apparently, retailers and manufacturers are using the lift todemand from rebate spending and strong exports in 2Q08in which final sales grew at a faster than 3% cliptoclear their shelves. In addition, the agricultural sector is experiencing a forced inventory drawdown due to floods and bad weatherconditions. This destocking is holding back our estimate of 2Q08 growth to 2.2%. But it will add significantly to growth in the coming quarters. Itshould be noted that only twice in the last three decadesat the end of 2001 and 1982did firms destock at the pace seen in 1H08. In both these

previous cases, a stabilization in stockbuilding contributed more than 1.5 percentage points to growth over the following two quarters."

Economy high now.Investor's Business Daily, What Recession? June 2, 2008 p. lnThe fact is that real GDP, viewed on a year-over-year basis, increased 2.5% in this year's first quarter -- the same as in last year's fourth. (Year-over-year comparisons, notquarter-to-quarter, are most telling.) Thanks to the weaker dollar, the U.S. factory sector -- excluding automakers -- isn't doing too badly either. Believe it ornot, we're in the middle of an export boom, with double-digit gains posted the last 16 months in a row. Last week's revision of first-quarter (month-to-month) GDP growth to 0.9% from0.6% was due almost entirely to trade. And despite the slowdown in the overall economy, industrial output is still up 1.3% so far thisyear -- not a sign of disaster. As for jobs, it's true that, since the start of the year, some 220,000 nonfarm positions have been shed. But even that is moderating. In April, analysts expected nearly 80,000 jobs would be lost; thereality was a far-smaller 20,000. And year over year, the number of jobs is still rising. This is key, since we've never had a recession in which jobs kept growing. Yes, unemployment at 5% is up a little more than half a percentagepoint from its cyclical low. But it's also below the 5.4% average for the last 20 years. In any other year, this would be called dangerously low. And though weak, aggregate hours worked, another key indicator, are also still on the

rise. Even some of the most troubled parts of the economy show signs of bottoming. New-home sales surprised everyone by rising last month(though they're still off sharply from a year ago). Core inflation remains a tame 2%. And real disposable personal income -- what you keep after taxes -- is growing at a 1.6% rate. As for the stock market,it still looks like it bottomed two months ago. In short, while a recession is still possible, it hasn't happened yet --and every day that passes makes it less likely, not more. Don't get us wrong, the current gloom is not without reason. But it's just that: gloom, not reality. Fact is, we'restill in an expansion, albeit a weak one. And with last year's Fed rate cuts about to kick in and continued stimulus

from President Bush's tax rebate and cuts, we could see a surprisingly strong economy later this year.

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AT: Regulations coming

Bush administration is denouncing regulations now, automakers think they have won bigvictories

David Shepardson / Detroit News Washington Bureau Saturday, July 12, 2008http://www.detnews.com/apps/pbcs.dll/article?AID=/20080712/AUTO01/807120350Carmakers can claim victory -- for now

WASHINGTON -- Automakers scored a major victory Friday after the White House and several Cabinet agenciesdenounced the recommendations of career staff experts at the Environmental Protection Agency for limiting vehicletailpipe emissions.

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Links Regulations hurt business

Environmental Regulations impose significant costs on businesses

Pollack 1998 52 Tax Law 81 The Tax Lawyer l/n

Businesses in the United States incur significant economic costs when complying with the vast array ofgovernmentalregulationsenacted since the 1960s and 1970s.n1Among the most expensiveof the new "social regulations" are those implementing federal and stateenvironmental policy. n2 Pervasive environmental regulation is now a recognized, although not necessarily welcome, fact of doing business in the United States. For many sectors of theeconomy --particularly, the chemical and petroleum industries -- state and federal environmental regulation reachesvirtually every level of business activity. While not all businesses so directly confront the plethora of rules and regulations enacted to protect the environment, for those that do, the cost ofcompliance can be staggering. Even for those industries not directly subject to the environmental statutes, this form ofregulation imposes "hidden" or indirect outlays as thecost of compliance is built into the price of chemical and petroleum products used generally by American industry.In this way, the costs of environmental compliance and remedial programs constitute a significant financial cost forvirtually every sector of domestic industry. An excellent analysis of the new "social regulation" that characterized federal activity during the 1960s and 1970s (as contrasted with theregulatory agencies created during the New Deal) is presented by Richard Harris and Sidney Milkis: "Whereas the New Deal focused on economic issues, major initiatives during the 1970s involved the federal government directly inso-called quality of life issues such as safety in the workplace, affirmative action, pollutioncontrol, and consumer protection."

"Of all the new social regulation, that dealing with environmental regulation imposed the highest compliance costson business firms." In those sectors of the economy where environmental regulation is a direct and visible cost of doing business, most decision makers have integrated this cost into the overall scope of theirfinancial planning and into the price structure of their products. However, even those familiar with the nature and magnitude of the costs of environmental regulation need to understand better the income tax consequences of such

expenditures. The tax considerations should be considered within the context of the current and long-term tax planning of the business entity as a whole. Yet remarkably, it is common for businesses to enter into consent agreementswith the Environmental Protection Agency ("EPA") or settlements with other parties in environmental litigation involving millions of dollars without adequately considering or anticipating the tax consequences of their actions. This Article focuses on the major federal income tax issues related to the costs imposed on American businesses by federal environmental regulation. Manufacturing concerns, rea l estate developers, and even passive investors inreal estate syndications may find themselves facing potential liabilities and ultimately may be required to expend significant sums to comply with environmental statutes. This Article will evaluate the tax implications flowing from themost common and important "environmental transactions" -- by which is meant those transactions required or mandated under the federal environmental statutes.

Governments regulation and mandates about climate undermine business confidenceClyde W. Barrow, Journal of Economic Issues, Vol 38, 1998, State theory and the dependency principle: an institutionalist critique of the

business climate concept., accessed July 17, 2008,http://www.questia.com/googleScholar.qst;jsessionid=L1KpvHbjJM1bbYs92gTzMnSZ2pDRpVdL3d5vCyQ3V95Kz22ZcG0V!897753496?docId=5001345710

Interestingly, even though the dependency principle has been formulated by liberal and radical state theorists, its explanatory power relies on the assumption that policies such as increased state expenditures, high taxes,

business mandates, environmental regulations, and pro-labor legislation systematically undermine businessconfidence and therefore lead to an unfavorable business climate. Conversely, it is assumed that low state

expenditures, low taxes, the absence of mandates, weak environmental protections, and right-to-work legislation willsustain business confidence and therefore promote a favorable business climate. Thus, paradoxically, as Block [1987, chap. 9] has recently observed, theexplanatory power of the dependency principle rests on the belief that the neoclassical model accurately conceptualizes what business firms and capitalists need from the state (i.e., to be left alone). Hence, a laissez-fairemodel of the capitalist economy has become a cornerstone in the construction of radical state theory over the lasttwo decades.Moreover, this foundation has rendered radical state theory practically useless against neo-conservative demands to "roll back the welfare state" and against assertions that "socialism is dead" even in its mostmoderate forms.(4) As Amy Beth Bridges observes, such a concept makes it virtually "impossible to conceive of a state functioning against the interests of the bourgeoisie . . . short of removing the basis of their power, that is, controlof the means of production" [1973, 173]. Consequently, this view leaves us with policy options that evidently are restricted to the antinomies of laissez-faire capitalism or a command economy such as communism

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Regulations kill growth and send a negative signal to businesses about future prospects

Kemp 2001 Washington Times l/n

Even as the world faces the threat of a global economic downturn, government regulators here and abroad go about the business of destroyingwealth, jobs and opportunity, and stifling business and technological innovation. The regulatory burden has to be relaxed quickly, and the UnitedStates has to lead the way. Regulations are a tax on the way we live, work and do business in the same way that theincome tax and tariffs are. To sustain long-run economic growth, we must not only get tax and monetary policy right but also regulatory

policy. Government regulation has a legitimate and important role to play in modern society (although arguably less so in the Internet Age), butfew regulations really pass the simple test of cost-effectiveness. Even well-intentioned regulations can cost lives. Fuel economystandards, for example, have driven automakers to build lighter, more efficient cars that give a lot less crash protection and cause literallythousands of deaths per year. Regulatory overkill, therefore, is about much more than just dollars. The latest edition of "10,000Commandments," a comprehensive analysis of regulatory costs in the United States put together by Wayne Crews of the Competitive EnterpriseInstitute, demonstrates that regulations cost our nation $788 billion in the year 2000 alone, or 7.9 percent of GDP. In human terms, Mr. Crews

points out that "regulatory costs now exceed spending for every item in the average family's after-tax budget," morethan for medical costs, food or transportation. Based on 1998 tax data, regulations cost the typical family of four $7,410. Theunchecked growth of regulation on both the national and global level not only distorts economic decision-making, itdemoralizes entrepreneurs and innovators in every field of endeavor. When the European Union's Mario Monti, for

example, can block the G.E.-Honeywell merger just to protect competitors in the European market, it sends a signal to

businesses large and small that they had better worship more often at the altar of global regulation. When the United States prescribes arbitrarynew efficiency standards for appliances like washers and air conditioners, it forces manufacturers large and small to work toward that particulardesign goal, not other product improvements that makelife better for us all.

Regulations upset unpredictability which is key to business confidence

Universal News Service 11-15-1993 l/n

" Predictability is the mother of confidence,and we want government to provide a steady, growing economic environment in which we can develop our businesses with that confidence,"the CBI conference in Harrogate was told today (Monday) by Clive Thompson, chairman of the SE Region and group chief executiveof the Rentokil Group. He added: "We in the CBI are no longer on the outside looking in - we're right on the inside. But being on the inside demands we express our views responsibly and completely. It is insufficient to put thebusiness view in isolation without thought or concern for the requiremen ts of the other parts of the econo my.

"We cannot ignore the demands of health, education, social services and transport on the public purse. Clearly, tax revenuedirected towards business means less resources for other important requirements in the economy. Recognition brings responsibility."He went on to advocate government focusing on creating an environment in which business couldcreate success."We don't want radical changes of policy and direction much loved by politicians. Peaks and troughs have done more to wipe out the confidence so necessary for investment in research and development, speculative

new projects, and investment in plant and machinery than any misguided political dogma."Businessmen invest in their businesses and take risks in new venturesif they believe they will be working in a business friendly environment. Confidence is the key, and for those whohave to invest in the future, predictability is the mother of that confidence."

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Regulations increase costs to businesses and collapses business confidence

Myers 11/11/2002 Macleans l/n

Myers: It also increases the cost of doing business, and that's not a good thing. We want to encourage companies torestructure to actually reduce emissions, so we should be thinking about commercializing strategies for existing

renewable resource technologies and new renewal energies so we can take advantage. What's happening in fuel-celltechnology is the typical Canadian story. While we're investing heavily in research and development, thecommercialization and testing are being done in the United States. That's where the economic opportunities willcome.Hornung: How serious is the competitive concern really? One economic model says the impact of Kyoto on oil isgoing to be three cents a barrel. That's not going to cause someone to leave the country. There's a difference

between short-term competitiveness and long-term. We know that investing and becomingmore efficient actuallybenefit us in the long run. We know that as we move down the Kyoto road to the next stages, the demands forreductions in greenhouse gas emissions are only going to increase. Looking at a future marketplace, weknow there's going to be a demand for people who can provide goods and services with less of an environmental

penalty. So making those investments will only improve your competitiveness in the longer term.Myers: Well, I wouldn't underestimate the competitiveness problem. Before we talk about the long term, we

have to make sure companies are going to be around for the long term. Profit margins are pretty thin right now in

the middle of an economic slowdown. If we're going to increase the cost of doing business -- with no tax incentivesthat could make it easier for industry to adjust -- then the signal we're sending out is going to affect investmentdecisions, and the impact could be quite large. This means a loss of productionfrom Canada to the United States orMexico, and that just means we'll be exporting greenhouse gas emissions to other countries. That certainly doesn't

benefit the environment.

Regulations Kill Biz Con- they kill investment

Heritage Foundation Reports January 2002 l/n

Freedom to Operate a Business (Low Regulatory Burden). Countries must maintain an open environment for business. Overlyburdensome regulations can deter trade and investment. Investors may choose not to enter a country because

of the difficulties involved in opening a business or because the cost of doing business in that country is excessive.Countries must maintain simple licensing procedures, apply regulations uniformly, and be nondiscriminatory in theirtreatment of foreign-owned business.

American business leaders hate regulations

PR Newswire July 10, 2008HEADLINE: CEOs Portray a Dismal Forecast for the U.S.;China to Overtake the U.S. in terms of Job Generation; U.S. will Still Hold theHighest Paying Jobs; Future of the U.S. Economy will Depend on Lower Taxes, Lower Regulation Privatized Education and Free TradeDATELINE: MONTVALE, N.J. July 10

An overwhelming majority of American CEOs believe that in order to create thehighest paying jobs and maintain theU.S.' economic competitiveness, the government needs to reducetaxes and regulation, privatize education and removerestrictions on trade.

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Links Consumption declines hurt business

A cutoff of oil consumption would collapse the world economy.Alexanders Gas & Oil Connections November 10, 2001

For three decades, Americans have only haphazardly tried to fortify themselves against a catastrophic cut-off of oilfrom the Middle East, which accounts for about a third of world production and two-thirds of known reserves.Little seems to have changed in the past month, although the terrorism highlighted our vulnerability. Oil is barely

part of the discussion. Over the past 30 years, we have suffered Middle East supply disruptions caused by the YomKippur War of 1973, the fall of the shah of Iran in 1979 and Iraq's invasion of Kuwait in 1990. We have fought onewar for access to oil -- the Persian Gulf War. How many times do we have to be hit before we pay attention? Noone can foresee what might lead to a huge supply shutdown or whether the present attack on Afghanistan mighttrigger disastrous changes. A collapse of the Saudi regime? A change in its policy? Massivesabotage of pipelines?Another Arab-Israeli war? Take your pick. Even if we avoid trouble now, the threat will remain. In 2000 theUnited States imported 53 % of its oil; almost a quarter of that came from the Persian Gulf. Weaning ourselvesfrom Middle Eastern oil would still leave us vulnerable, because much of the rest of the industrial world -- Europe,Japan, Asia -- needs it. Without it, the world economy would collapse. Of course, countries that have oil can't

benefit from it unless they sell it. The trouble is they can sell it on their terms, which might include a large measure

of political or economic blackmail.

Attempts to stymie oil dependence raise costs for everyone.Raymond Keating, June 4, 2008, Depressing energy policies, The Washington Times, Online, Lexis, accessed 6/27/08.

Make no mistake, when politicians talk about abandoning fossil fuels, that's not just lofty rhetoric, it's loopy. Forexample, the Energy Information Administration says 85 percent of U.S. energy demand in 2006 was met throughoil (39.7 percent), natural gas (22.4 percent), and coal (22.6 percent). That's not expected to change much by 2030,with EIA projections at 80 percent of our energy coming from fossil fuels - again, oil (34.9 percent), natural gas (19.8

percent), and coal (25.3 percent). And the International Energy Agency expects global energy demand met by fossil fuels to rise from 81percent in 2005 to 82 percent in 2030. Barring some dramatic revolution, the U.S. and world economies will be reliant onfossil fuels for the foreseeable future. Given that reality, we need a far different energy agenda. For example, rather than trying tostymie oil and gas production through higher taxes, Congress and the White House need to act to eliminate unnecessary tax andregulatory costs on energy firms. Most critically, government lands and offshore areas must be opened up to energy exploration anddevelopment. The American Petroleum Institute reports: "Federal lands hold an estimated 656 trillion cubic feet of recoverable natural gas,enough to meet the natural gas heating needs of 60 million households for 160 years (approximately 60 million households in the United Statesare heated by natural gas). Federal lands also hold an estimated 112 billion barrels of recoverable oil, enough to produce gasoline for 60 millioncars and fuel oil for 3.1 million households for 60 years." But the government has placed much of this off-limits. That's simply bad

policymaking that raises energy costs for everyone. Politicians closing their eyes and crossing their fingers, while pandering to andperpetuating economic ignorance regarding energy, does not make for sound policy. Congress needs to look at the hard realities, andact accordingly. If our elected officials do not make economically sound energy policy decisions, then high energy costs will persist, therebykeeping consumers, entrepreneurs and our economy down in the dumps.

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Specific Links - Flex Fuel

Auto manufacturers dislike flex fuel mandates

Cato@LibertyJanuary 31, 2008HEADLINE: Flex-Fuel Nonsense

In short, there's a good reason why auto companies aren't popping flex-fuelcapabilities into every engineconsumers don't seem willing to spend the $100extra for that extra. Well, to be precise, most consumers don't seem thatinterested. Some are in fact buying flex-fueled vehicles right now 4 million such vehicles are thought to be on the road at present and dozens ofmodels are on sale right now. But some of us aren't willing to fork over the extra money for the option to use those fuels over the lifetime of ournew car. Should Congress override consumer preferences in that regard? No. Given the high cost of alternatives, consumers are not actingirrationally when they say "no thanks" to flex-fueled vehicles.Would auto companies be advantaged by a flex-fuel mandate? Mr. May thinks so, but auto executives tend todisagree. My guess is that Mr. May knows less about their business than they do.If and when alternative fuels are cheaper than gasoline, you can rest assured that consumers will increase their demand for flex-fueled vehiclesand that auto makers will supply them out of simple interest in profit. Government mandates are not necessary.

Auto industry opposes moves toward more flex fuel technology

Esquire December 1, 2007HEADLINE: Occam's Oilman; Four ways to solve the energy crisis. Four reasons why Gal Luft is the mosthated man in Riyadh, Detroit, and Des Moines.

"These are only four of many common-sense opportunities throughout the economy, butwe're not taking advantage ofthem, because thereisn't a sustainable market for alternative fuels.Yet. Which brings us back to step one: flex-fuel technology.Get thatand the other three will take care of themselves. There will be stiff opposition from the oil, corn, and auto lobbies. Therealways is. But let's hope that Washington can step up for a change. Because once you take politics out of the energy policy, you get verydifferent-and much better-results."

Business would oppose regulations for flex fuels cars because they would have to raiseprices, which might anger consumers

Linda McQuaig, Toronto Star The Toronto Star January 22, 2008 HEADLINE: Elites love to pig out on energyIt's not even clear that the changes would have to impact the public that negatively. Auto manufacturers say that tough fuelefficiency requirements wouldforce them to spend more, pushing up car prices by thousands of dollars.In fact, auto manufacturers are constantly spending large sums on improving engine technology. The question iswhere they apply these technological advances.

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Specific Links Tradable Permits

Tradable Permits cause corporate scandals

Marlo Lewis April 4, 2003 Nix the Energy Bill http://www.nationalreview.com/comment/comment-lewis040403.asp

Transferable credits increase the risk of future Enron-type scandals. Firms might "earn" credits by not producingthings, outsourcing production, shifting facilities overseas, or "avoiding" hypothetical future emissions. A market insuch dubious assets will be fertile soil for creative accounting.

Corporate scandal causes economic collapse

Philip Gotthelf October 10, 2002 http://www.gold-eagle.com/gold_digest_02/consensus101402.html

Further, we see incentives to mislead one arm in favor of the other. A good stock recommendation insures continuingbanking relationships. The investor becomes a sacrificial lamb. Yet, we read that our economy is based uponconsumerism. By sacrificing the individual investor, these institutions have placed the entire economy at risk.

Wealth evaporation has slowed economic growth that, in turn, depletes wealth which, in turn, slows the economy.This is the cycle.I am not unique in my discovery of investor sentiment. "What's next?" As corporate scandal and Street dishonestymake headlines, the public's confidence turns to despair. This is hardly an environment for a recovery. Lackingfundamental encouragement, traders await technical confirmation of a bottom. Hopes hang on every rally. However,the overall complexion is extremely weak.

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Specific links CAF standards

Auto lobbies oppose mandates like fuel efficiency in cars because they think they threatenjobs

Kevin G. Hall,McClatchy Newspapers Charleston Gazette (West Virginia) December 2,2007HEADLINE: Friend vs. friend battles don'thelp Dems on energy

The United Autoworkers Union is opposing environmentalists' attempts toimpose higher fuel-efficiency standards because auto manufacturers insistthat the standards would threaten manufacturing jobs.

CAF standards will have grave economic consequences on business.Gerry Rogers 2002the real caf numbers

The irony of the name calling by both sides is that each had a legitimate point to make, and ironically, each used excerpts from a recently

completed study by the National Academy of Sciences (NAS) to bolster their case for their respective positions. The study, now a matter of public

record and available online at www.nap.edu/catalog/10172.html, paints a complex but realistic picture of the social, economic, technical, safetyand political issues that have become interwoyen with the CAFE standard in the 27 years since its inception. Because the report is open to

interpretation, automakers claim it supports their position that raising CAFE arbitrarily will have grave economic consequenceon the domestic auto industry, have little effect on actual fuel consumption and that higher mileage numbers are nottechnologically practical without market incentive. Lawmakers hone in on the report's list of promising technologies, concludingthat workable technology exists that can boost economy by 50 percent.

Despite initial acceptance of environmental policies, US automakers have been successfullyopposing regulationsZaleski 2007 Zaleski, Sarah, (Biofuels Market Analyst, United Nations Conference on Trade and Development [Researched emergingnational biofuel developments, markets, and trade flows throughout the world. Assessed the viability of foreign direct investment for renewable

energy projects in developing countries. Examined side effects of biofuel expansion including commodity pricing, food security, and rural jobcreation], Congressional Affairs Staff, Pew Center on Global Climate Change [Educated over 250 individual Congressional offices on climatechange policy and the potential for policy. Inventoried and evaluated private sector climate programs while communicating relevant informationto legislators. Analyzed the politics and implications of the 2005 Energy Bill and its related amendments]). "Labor/Environmental Alliances."

Nicholas School of the Environment and Earth Sciences ( 24-May-2007): 9.

In 2001, Corporate Average Fuel Efficiency (CAFE) standards made their way to the Congressional floorforthe first time since their inception decades earlier. The push to strengthen the standards was met byfierce opposition from U.S. automakers who, in turn, enlisted the political pull of the UAW to thwart theirtightening. Interestingly, the UAW supported the initial CAFE standards in 1975 in hopes that the measure wouldhelp keep U.S. automobiles competitive in an energy-constrained world. However, the shrinking membership of theUAW was swayed by industry which warned of the massive job losses that would occur if CAFE standards wereincreased. Needless to say, CAFE standards remain unchanged still today.

CAF standards hurt companies and competitivenessCollier, 10-24-04San Francisco Chronicle

Old habits die hard among Detroit's automakers. While Ford and GM have introduced some gasoline-saving hybrid cars, theycontinue to emphasize larger gas-guzzling models and sport utility vehicles -- because the American public likes them and because the profitmargin is higher than on the smaller vehicles favored by their Japanese competitors. U.S. auto companies and the United Auto Workers unionhave opposed a tightening of fuel-efficiency standards because they say Japanese firms would derive most of the benefit and Americanworkers might lose jobs. Because Michigan, where the industry is headquartered, is considered a swing state in the presidential campaign,Kerry has dropped his support for mandatory increases in mileage standards (known as the Corporate Average Fuel Economy standards, orCAFE) favoring instead voluntary improvements.

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CAF standards will cost billions and eliminate thousands of jobs

Detroit News, 10-17-04

Kerry is one of the Big Three's most hostile critics in Washington, D.C. In 2002, he introducedlegislation that would have raisedcorporate average fuel economy standards (CAFE) to 36 miles per gallon from 24 mpg. The Energy Information

Administration estimated Kerry's proposalwould have eliminated 450,000 jobs and resulted in $170 billion of losteconomic output. Kerry's fuel economy increase would have hit Michigan's economy especially hard because GeneralMotors, Ford and Chrysler depend more on the profits from low-mileage sport utility vehicles, pickups andminivans than their foreign competitors. This reliance on light trucks is directly tied to the enormous labor costsassociated with paying United Auto Workers wages, health benefitsand pensions. Detroit can't cover its labor costs by selling sedans. It needs the profitsfrom light trucks to compete with foreignnameplates that employ nonunionworkers.

Recognizing the economic pain Kerry's proposal would have brought to Michigan, the UAW and Democratic Sens. Carl Levin

and Debbie Stabenow fought to kill it. Levin noted the CAFE increase would benefit foreign carmakers at theexpense of the Big Three. Levin's case was bolstered by a study conducted by the Competitive EnterpriseInstitute thatfound Kerry's proposal would have reduced GM's annual profits by $3.8 billion, Ford's $3.4 billion and Chrysler's $1.9 billion,while increasing foreign profits a combined $4.4 billion.

Such losses would have accelerated the push of foreign automakers to grab more U.S. market share and hindered the BigThree from meeting their UAW pension obligations.

CAF standards will have a devastating economic impact on the auto industry

Washington Times, 7-29-03

The Senate will begin debating fuel-efficiency standards today aftercompletingvotes involving trade policy and a fewfederal judge nominees. Sen. Richard J. Durbin, Illinois Democrat, wants to mandate that automakerscreate and sell vehicles that average 40 miles per gallon by 2014, a hugeincrease over today'saverage of 25 miles per gallon. Mr. Durbin also hasoffered an amendment that would impose a tax oncars that fail to meet thosestandards - as much as $7,700 if a vehicle falls 14 miles per gallon short ofthe goal. "The Durbin amendments on [corporate average fuel economy] standards would have adevastating impact on the automobile industry," said Sen. James M.Inhofe, Oklahoma Republican.

CAF standards will hurt the US economy. Fuel efficiency costs consumers andautomakers billions. Consumers will buy fewer cars.

Greenwire, 4-29-04

But automakers said the solution is not in government mandates. "If we address this issue by adding a lot ofcost to vehicles, or by forcing consumers into vehicles they don't really want to buy, let's face it -- we'regoing tosell fewer cars and trucks, hurt our own competitive position and hurt the U.S.economy," said General Motors Chief Executive Officer Rick Wagoner in a speechearlier this year (Danny Hakim, New York Times, April 29). A Congressional Budget Office study released in January said evena modestincrease in fuel economy standards for cars and trucks could cost consumers and

automakers as much as $3.6 billion. Increasing fuel economy standards under the existing CAFEprogram would be the costliest route to gasoline savings, CBOsaid, saddling consumers and producerswith an additional $3.6 billion in costs, the equivalent of adding $228 to the price of every new vehicle sold. Currently,fuel economy regulations require fleetwide averages of 27.5 mpg for cars and 20.7 mpg for light trucks (Greenwire, Jan. 8)

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Regulation Spillover

Imposition of environmental regulations will lead to a free-fall of regulatory activitythreatening all businessSally

Pipes andBenjamin

Zycher 2k3Attorneys General versus the EPAwww.pacificresearch.org

Pipes is President and CEO of Pacific Research Institute and Zycher is a sr. fellow at the Pacific Research Institute

These studies are not directly applicable to the Attorneys General Petitions, which attempt to force federalregulations of carbon dioxide emissions from vehicles only. At the same time the available literature still is relevant,in that the imposition of such controls on vehicles inexorably would lead to similar controls on many stationary (andother mobile) sources. Once the environmental principle is concededthat limits on carbon dioxide emissions areappropriateit would be impossible politically to prevent this expansion of regulatory activity. More broadly, oncethe policy question shifts from whether to impose carbon dioxide regulations to the extent of such regulations, a

political freefall would result. Regulatory policy can be used to create winners offering political support for anextension of the regulatory program. The prospect of an emissions trading program, in which relatively energy-efficient firms and industries can sell some of their emissions permits to others, is only one prominent example ofthis phenomenon. And so just as there is no such thing as slight pregnancy, there will be no program of carbondioxide emissions limits and attendant coststhat remains limited to vehicles, powerplants, or other narrowly

defined sectors. Once regulatory policy embarks down that road, it will find no exits.

Environmental regulations crush business confidence. All sectors of the economy areaffected.William G.Laffer, III 2/16/1993Backgrounder #926 http://www.heritage.org/research/regulation/BG926.cfm

Regulation in one part of the economy can have an impact in other areas.For example, a recent study by economistsMichael Hazilla of American University and Raymond Kopp of Resources for the Future, a Washington, D.C.-based research groupspecializing in environmental issues, found that environmental regulations had reduced employment in the finance, insurance, and realestate industries by 2.64 percent as of 1990. (Michael Hazilla and Raymond J. Kopp, "Social Cost of Environmental Quality Regulations:A General Equilibrium Analysis," Journal of Political Economy, Vol. 98, No. 4 (1990), p. 869.) This occurred despite the fact that theseindustries produce no pollution themselves and thus did not incur the direct cost of pollution abatement equipment. Hazilla and Koppfound thatall sectors of the economy are affected by environmental regulations, because such regulations cause

the cost of inputs to the production process such as labor, raw materials, and electricity to rise, and causesavings, investment and capital formation to fall.

Plan will embolden alarmists and lead to a cascade of regulation threatening industry

Marlo Lewis, Jr. (sr. fellow at the Competitive Enterprise Institute), 2k3 its a gas http://www.cei.org/gencon/019%2C03735.cfm

But if we do not know enough to establish a planetary limit on emissions, we do not know enough to establish carbon intensity targets either.Absent real knowledge of the level at which carbon dioxide concentrations must be stabilized, there is no scientific basis for setting eitheremission limits or intensity targets.Mandating carbon intensity reductions would embolden rather than appease pro-Kyoto alarmists, whowould see the scheme for what it is the crossing of a legal and policy Rubicon. From then on, debatewould not be over whether to suppress carbon-based energy, but over how much to suppress it.

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AT: Plan saves money

There are big short term costs, their link turns are long term

Cramton and Kerr 1999 http://www.cramton.umd.edu/papers1995-1999/99ee-distributional-effects-of-carbon-regulation.pdf

Three groups ultimately bear costs: consumers, workers (owners of human capital), and capital owners, especiallycurrent owners of physical capital. Consumers suffer loss of consumer surplus, workers suffer a fall in income,and capital owners suffer a fall in the value of their capital. The legal incidence of the regulation does not affect

prices or cost bearing. Increased costs, due to the need to purchase a permit or pay a tax, are passed forward toconsumers, and backward to factor suppliers, capital owners and workers. How the prices throughout the economyadjust depends on the elasticities of supply and demand at all levels in the economy. Prices will rise most where

behavior is most inelastic. In Figure 1 we illustrate one possibility. The relatively inelastic demander faces a largeprice increase while the elastic supplier only suffers a small price decrease. Given a set of consumption pricechanges, consumers will bear costs in proportion to their expenditures on goods produced using fossil fuels.In the short run, fossil-fuel specific capital stocks such as oil-fired electric utilities, and the human capital andlocation of workers in industries such as coal mining, will tend to be inelastic. Thus capital owners and workers willsuffer high short term costs. How these price changes translate into distributional effects depends on the distributionof ownership of physical and human capital. The effects on physical capital will be diffused across manyshareholders when the companies are publicly owned. The effects on workers tend to be heavily concentrated inrelatively few individuals and communities. In the long run, capital is mobile and workers will make appropriatechoices of education and location. This will lower their costs as well as total costs. How long this requires dependson the rate of obsolescence of capital and how quickly individuals and communities can adjust. The outlook forsome coal mining areas is not promising. After capital and labor have adjusted, consumers bear the ongoing costs of carbon regulation.

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I/L Business Confidence Key to Economy

Loss of Confidence crashes the economy

Financial Express Jan. 3, 2003 l/n

I do not subscribe to the view that a systemic arrangement of law, regulations & standards, by itself could guaranteegood corporate governance; nor do corporate failures of the nature that we have seen,negate the merits of freemarket - in fact they are an integral part of it.'Off-balance sheet' transactions which are opaque to investing publicare not because of inadequate accounting standards, they are in spite of them. Certainly, when corporate giantscollapse, the earth sha-kes under them. Moreimportantly, business confidence plummets, which is extremely badfor economic growth of the country. There can be little argument that it is necessary to prevent cataclysmic failuresand if they are a result of poor corporate governance, it is no doubt necessary to address the issue. Strangely, theresponse to this situation, from Governments including that of the United States, have been reminiscent of the wayIndian bureaucracy had dealt with systemic failures in the past: enact more law; regulate more. Whilst it iscertainly necessary to detect the crevices through which dishonest corporate behaviour leaks past the protectivesheath of regulatory framework, it is my sincere belief that this response might not provide a durable solution; itmight even be somewhat counter-productive, as it has happened in the present context.

Confidence is critical- single events can trigger irrational herd mentality plunging theeconomy into a recession

ChristopherDow 1999 National Institute Economic Review January 1999 l/n

This analysis, as will be seen, emphasises the importance at all stages of changes in what may alternatively be called consumer-businessexpectations, or changes in the mood, or confidence, of consumers and firms. The nature ofconsumers' and firms' reactions is seen to depend not, as in neo-classical accounts, on rational responses todependable knowledge about the future; but rather on unreasoning responses to events in a situation where the futurecan be discerned at best only very imperfectly. The predominant mechanisms are seen to be not equilibrium-seekingmechanisms (comparable to an automatic governor on a machine), but rather to the lurches of herd behaviour. Thissuggests that macroeconomics should in future give more weight to analysis of crowd behaviour. That is also

relevant to the relation between government and the individual, and hence to possibilities of political action tocontrol recessions.

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Business confidence key to the economy

PR Newswire 8/6/2002 l/n

Speaking on some of the foremost challenges facing the nation's capital markets today, Mr. Sodano remarked that,"We have seen corporate scandals, politics, public policy issues and world terrorism quickly erode investor

confidence and witnessed the impact it has had on the economy.""These events can have a devastating effect on a company's access to capital markets, especially small- and mid-cap companies. Small companies are often our nation' s principle source of job creation and future economic growth,and clearly this is a sector we do not want to see fail," continued Mr. Sodano. "Wall Street and Congress havealready begun to respond to the growing crisis of confidence, including the Amex," said Mr. Sodano. "It is criticalthat we restore investor confidence in the markets. The Amex has established a framework for the development ofnew corporate governance rules. It is our goal to establish rules that ensure accountability, transparency andoversight while also recognizing the importance of diversity and critical needs of companies atdifferent stages of development."

"The global economy is changing rapidly and it is increasingly more important that the rules governing our nation's capital markets are on a competitive and level playing field with the rest of the world. We live in an age of delicateeconomic equilibrium. Bound together in a global economy -- every action we take can result in reverberations inthe far corners of the earth. As a nation, we need to accelerate our efforts to reach agreement on a set of common

global accounting standards. Restoring investor confidence is paramount," concluded Mr. Sodano.

Business confidence is the motor of economic growth.Arthur F. Burns (recipient of the AEI Francis Boyer Award for 1978) 1/1/2000http://www.aei.org/publications/pubID.15232,filter.all/pub_detail.asp

The learning process that has thus been going on in our country is to me a basic reason for viewing our economic future with optimism.Education may proceed slowly, but economic mistakes do not go unnoticed indefinitely in a vital democracy such as ours.Responsible citizens have gradually learned that our striving for a better society must be disciplined by prudence. They have learned that our

productivity must increase faster if we are to remain a great nation, that governmental regulation can be overdone, that persistent federaldeficits release forces of inflation, that inflation has been sapping our nation's strength, and that inflation cannot be brought to an end withoutmaking some economic sacrifices. They have learned also that confidence is still the main driving force of our economy andthat business confidence in particular requires sustained governmental policies for encouraging initiative,enterprise, and investment.

Business confidence is key to growth

Lawrence Whitman 2k2 WebMemo #135 The Heritage Foundationhttp://www.heritage.org/Research/Regulation/wm135.cfm

Confidence on the part of consumers, investors and business owners is an integral part to the economy. And the greater theconfidence people have across the spectrum, the greater the chance for economic growth going forward. That'swhy it's important for the President to hear the views of people, ordinary people as well as CEO's and academics, and for the President to get outin front and lead on this issue, and inspire confidence in people. NACHMAN:So this "feel good" stuff, no matter how ephemeral it is, can be meaningful in the economic reality, correct?WHITMAN:It's not just that it's ephemeral,it's what some economists have called "animal spirit." It's what people perceive about thefuture as well as the present that effects their behavior now.

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Investor Confidence Key to Economy

DeFeo 2002 Philip D. DeFeo Chairman and Chief Executive Officer Pacific Exchange, Inc. June 19http://www.pacificex.com/news/pub_state/pub_state_investor_confidence.html

As long as investors do not trust the financial system, investment performance will lag economicperformance. Lacking confidence, they will overweight risk, discount values and potentialreturns, and shy away from committing new capital to the market. I believe this can and will actas a brake on essential capital formation. I believe will weaken and slow both the economicrecovery and long-term growth.

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I/L Small Business key to economy

Small Business Are The Only Thing That Has Kept The Us Economy AfloatThey AreKey

FDCH 5/19/1998Overview of the Importance of Small Business in the United States Economy The United States has a strong and vital economyenvied by the world.We encourage entrepreneurship and the creation of businesses in order to drive our free market system.Currently,there are 23.3 million small businesses in the United States, the vast majority of which are very small, but all of which haveaspirations to grow.Our small business community continues to maintain and sustain our economy. A number of small

business trends are affecting our economy: * Small firms created virtually all of the net new jobs between 1992 and 1996 (seeattached chart). While the Fortune 500's share of U.S. employment has declined steadily since 1968, small business entrepreneurs have filled thegap (see attached chart). * It is estimated that the fastest growing segment of the small business community, called "gazelles" by many analysts,numbers 300,000 businesses. * Our country is experiencing a major "information revolution" similar to the earlier industrial revolution-propelled,at least initially, by small businesses. Our service-based industries are boorning, with the information and technology sectors growing at an

accelerated rate (see attached chart). *Small businesses are taking advantage of the global marketplace. A recent studycompleted for the Office of Advocacy shows that small businesses are exporting at a much greater rate than ever before. 3 Every year, oureconomy experiences dynamic changes through the births and terminations of businesses. Last year a record 884,609firms with employees were created. In contrast, only 54,027 business-related bankruptcies-- primarily liquidations under Chapter 7-- were filed. 4

A high rate of business formation and dissolution is characteristic of a dynamic economy.Our nation's economy is characterized bythis dynamic and by the special role played by small business entrepreneurs to sustain overall growth.

Small Businesses Are Key To Economic Recovery

FNS 5/20/1998Small business is the backbone of this nation's economy. It has been one of the driving forces behind this country's

past economic growth and will continue to be a major factor as we move into the 21st century. According to theSBA, "small businesses are responsible for 75 percent of the new jobs in the economy and employ more than one-half of the workforce.' Currently, small business is our largest employer and over 30 percent of all small businessesare owned and operated by veterans.

Small businesses drive the economy

Raymond Keating,Chief Economic of the Small Business Survival Committee, FDCH, June 4,1998

BACKGROUND Make no mistake, government-imposed costs inflict considerable harm on smaller enterprises.Small businesses often operate on tight margins, struggling to stay alive month to month and year to year. This is

perhaps best illustrated by the fact that more than half of new businesses fail or reorganize within five years, asnoted by the U.S. Small Business Administration (SBA). At the same time, however, small businesses have long

proven to be the wellspring of innovation, invention and job creation in our economy. In any given year, smallerbusinesses also account from anywhere from two-thirds to more than 100 percent (large firms often shed more jobsthan they create) of net job creation. So, these high-risk ventures are critical to the economy. Unfortunately,increased government-imposed costs weigh heavily around the necks of entrepreneurs. For example, according to an

SBA study, the annual per employee costs of federal regulations range from $2,979 for businesses with 500 or moreemployees to $5,195 for businesses with 20 to 499 employees to $5,532 for businesses with fewer than 20employees. Regulatory economist Thomas Hopkins estimates that the real costs of federal regulations are expectedto rise by more than 30 percent between 1988 and 2000. Starting up and investing in businesses are high-riskventures. If government imposes weighty taxes and regulations, then fewer enterprises will be created, fewer willsurvive, and job creation will wane. If implemented, the Kyoto Protocol would guarantee that governmental burdenson entrepreneurs -- indeed, on businesses of all sizes -- would continue to rise, thereby damaging economic growthand job creation.

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I/L US Business Confidence key to the world economy

A fall in U.S. business confidence will affect the global economy.Trevor Greetham (Director of asset allocation for Fidelity International), January 25, 2007, America will lead they way,Online, Lexis, accessed 6/27/08.

US consumer strength has been a major driving force for global economic growth and has acted as a power supplyfor the rapid economic development of China and other emerging markets in the past few years. With US house pricesfalling, fears of a weaker US consumer demand and a fall in business confidence could become more prevalent. For a softlanding in the US and world economy, there needs to be significant rate cuts from the Federal Reserve and lower mortgage rates. This,in turn, hinges on the path of inflation.

Confidence in US key to the economy

Julian Jessop April 16, 2003 Business Times l/n

With the military phase of the crisis in Iraq virtually over, investor focus has shifted back to economic fundamentals and corporate earnings.Events on Friday showed how fragile market sentiment still is. Despite strong US retail sales and consumer confidence data, the positive responsewas short-lived. The big worry is that any post-war bounce in the global economy will prove to be temporary too.

The US will be pivotal. Europe remains too weak to be an engine of world recovery. Indeed, when theInternational Monetary Fund (IMF) revised its 2003 forecasts last week, the largest cuts were to forecasts forgrowth in the Euro zone. These economies are now expected to grow by only 1.1 per cent this year. (As recently asSeptember, the IMF was forecasting growth of 2.3 per cent.) Even the European Commission agrees, forecastinggrowth of 1 per cent.

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I/L US economy key to global economy

US economy key to the world economyWall Street Journal January 22, 2008; A Global Selloff Page A18http://online.wsj.com/article/SB120096124830205037.html?mod=opinion_main_commentaries

What was that about "decoupling"? There has been lots of hopeful talk in recent months that European and Asianeconomies are starting to free themselves from dependence on growth in the U.S. Well, not so fast. Yesterday's routin global stocks showed once again that as America goes, so goes the rest of the global economy.While U.S. markets were off for Martin Luther King Day, the world numbers were dismal after last week's U.S.turmoil. Hong Kong's bourse fell 5.5%, its worst day since September 12, 2001. India fell 7.4%, Tokyo 3.9%, Seoul 2.9%, Singapore 6%. EvenShanghai's A-shares market, which often bucks foreign trends thanks to capital controls, slid 5.1%. Europe followed Asia's lead. The DAX, theGerman blue chip index, plunged 7.2%. London's FTSE closed down 5.5% and the French CAC-40 fell 6.8%. Fears of a U.S. recession appearedto be the common theme.The economies of Europe and Asia continue to be tightly bound to America's. Taking goods and services together,the European Union and U.S. account for the largest bilateral trade relationship in the world, illustrating theireconomic interdependence and common risks. Europe's well-developed financial system has already shown it isn't immune to U.S.subprime contagion, which is also contributing to investor jitters.

US downturn brings down the rest of the worldBusiness Week 9-24-2001 l/n

A U.S. downturn will have repercussions all around the world. With Japanimploding economically, Asia in trouble, and Europe struggling, a recession in the U.S. wouldremove the last remaining source of demand from the globaleconomy. ''It's like throwing cold water on any prospects for a recovery,'' says Chang Il Hyung, senior vice-president of South Korea's Samsung Electronics Co., the world's largest memory chipmaker. With people around the globewatchingcarnage in New York, consumer confidence and business investment could be hit

everywhere. ''Since the global economy is interwoven through trade and investment, all of us will be worse off,''says Sung Won Sohn, chief economist at Wells Fargo & Co.

U.S. decline goes global.Eric Pfanner 1/10/2003 International Herald Tribune http://www.iht.com/articles/2003/01/10/a11_21.php

The global economy piggybacks on the United States, benefiting when America breaks into a run and sufferingwhen the U.S. pace wanes.

United States Fall Would Collapse The Global Economy

FrancescoSisci 2002,Asia Times, THE AMERICAN EMPIRE: Part 3: The fear within, October 18,http://www.atimes.com/atimes/Middle_East/DJ18Ak02.html

The implosion orfall of the US would have been bad news not only for Europe, but for the rest of theworld. A cowering,wounded United States would have precipitated a global economic downturn, dragging down all emerging markets,China's included, and would have created a huge vacuum of power that no one could fill. This in turn could have brought about chaos fordeveloped and developing nations, with the only benefit going to the ultimate producers of energy and fundamentalist faiths such as WahhabiIslam. Incidentally, both happen to reside in the same place - Saudi Arabia

The u.s economy is key to the world economy.

Roberts 2003 [Michael, Writer , The World Economy After Iraq, April 27, accessed @http://www.marxist.com/Economy/world_econ_afteriraq.htmlvia google on 7/26/06]

And the US is the key to the world economy. If the US catches a cold, then the rest of the world will catch SevereAcute Respiratory Syndrome (SARS). Already European business surveys point to an economy that is teetering onre

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