The Daily Dish 1.7.13
Good Morning --
Speaker Boehner and Leader McConnell emphasized a new bottom line this weekend for the upcoming debt debate, reiterating the fact that it is out-of-control spending that continues to bring the economy to the brink. The Wall Street Journal reports that "Republicans won't accept further tax increases in coming budget and debt negotiations." Appearing on ABC's This Week, Leader McConnell "said tax revenue is 'absolutely' off the table as part of any coming negotiations." And "Boehner, in an interview with The Wall Street Journal editorial page to be published Monday, also said the GOP wouldn't agree to any more tax increases in the next two years."
Reuters reports that "Republicans want big spending cuts in programs including Medicare healthcare for the elderly and the Social Security pension program as a condition for raising the U.S. borrowing limit." Nevertheless, "President Barack Obama has said he will not negotiate over the debt ceiling, arguing that Congress must pay the bills for spending it has already approved."
In less than two months Congress and the president will be faced with the debt limit, the sequester, and the soon-to-expire continuing resolution funding government. While this trifecta has yet to be named, the Dish participated in Politico's Ben White's game on Twitter in search of a new name, offering "Crash Ceiling" and "Debt Deja vu" to the mix.
Doug's Daily Economic Outlook
Having negotiated the fiscal cliff, Americans are now facing three key fiscal events in in March. On March 1st the sequester (originally slated to occur January 2) will impose across-the-board cuts in defense and non-defense federal spending. Later, March 27, the "continuing resolution" -- the legislation providing funding for the federal government -- will expire. Only by passing new legislation will funding continue and a government shutdown be avoided.
However, most of the focus is on the need to raise the federal debt ceiling, an event that apparently can be put off to somewhere in March. There should be no disagreement that it is necessary to raise the debt ceiling (see, for example, here). And there should be no disagreement about the need to reform the entitlement programs that are fueling the projected red ink. But there are legitimate policy debates about the best ways to reform those programs and control future spending.
The bottom line is that the real focus is not on raising the debt ceiling. It will be on the legislation that will accompany the debt ceiling increase and which will be focused on controlling the rise in future debt. And make no mistake, the president's rhetoric notwithstanding, there will not be a so-called "clean" debt increase (i.e., on with no accompanying debt control). As shown by AAF budget expert Gordon Gray clean debt increases are the exception. Of the past 14 permanent increases in the debt ceiling, 11 have been accompanied by legislation related to the deficit or debt. There will be voices arguing that such a legislative package is "politicizing" the debt ceiling increase. Unfortunately, those assertions are simply not supported by the facts.
What We're Reading
Economic Reports for the Week Ahead -- Data to be released this week includes consumer credit for November (Tuesday); weekly jobless claims and wholesale trade inventories for November (Thursday); and the trade deficit for November and import prices for December (Friday). (NY Times)
Is the Fed Doing Enough -- or Too Much -- to Aid Recovery? -- The Federal Reserve's decision to tie interest-rate increases to specific unemployment and inflation levels will likely be only a temporary part of its tool kid, central-bank insiders say. Those levels are "mostly tailored to the specific situation we are in," Federal Reserve Bank of St. Louis President James Bullard said in an interview at the Economic Association's annual meeting here. (WSJ)
Debating Whether Economy's Best Years Are Behind It -- After three years of anemic growth, the U.S. economy is confronting the nagging question of whether its best years are behind it. Economists have long worried that an aging population and rising health-care costs could crimp growth in the 21st century. Now a host of other problems -- including a still-fragile baking system, growing income inequality, lagging education levels and excessive government debt -- are making the problem worse, said several economists gathered here for the annual meeting of the American Economic Association. (WSJ)
New Iran sanctions target industry in bid for deal curing nuclear program -- New U.S. sanctions have broadened the front in the West's escalating economic conflict with Iran, targeting large swaths of the country's industrial infrastructure even as Iranian leaders are indicating a willingness to resume negotiations on the country's nuclear program. With Iran's economy already reeling from previous sanctions, the new measures passed by Congress and signed by President Obama last week are intended to deliver powerful blows agains key industries ranging from shipping and ports-management to the government-controlled news media, congressional officials and economic experts say. (WaPo)
Rules for Lenders Relaxed -- Global banking regulators watered down a key element of their plan for creating a safe financial system, giving ground to banks that argued the rules were unworkable and financially risky. The Basel Committee on Banking Supervision, a group of the world's top regulators and central bankers, said Sunday that it agreed to relax a rule designed to ensure that big banks are able to weather financial crises without running short of cash. (WSJ)
Analysis: Obama may turn Medicare reform into wider health debate -- President Barack Obama could seek common ground with Republicans in the looming battle over Medicare spending by broadening the debate over entitlement reform to encompass the spiraling healthcare costs that confront a wide range of Americans. In recent public remarks the president has identified the U.S. healthcare system's sky-high price tag - by far the highest in the world - as a driving force for Medicare reform. (Reuters)
Deal in Foreclosure Case Is Imminent, Officials Say -- A $10 billion settlement to resolve claims of foreclosure abuses by 14 major lenders is expected to be announced as early as Monday, several people with knowledge of the discussions said on Sunday. The settlement comes after weeks of negotiations between federal regulators and the banks, and covers abuses like flawed paperwork and botched loan modifications, said these people, who spoke on condition of anonymity because the deal had not been made public. (NY Times)
Also From the Forum
Regulatory Calendar: Administration Releases 2013 Regulatory Plan -- According to initial projections, the administration's "Unified Agenda" contains $123.2 billion in possible regulatory costs for 2013 and at least 13 million paperwork burden hours. (Full breakdown here)