The Daily Dish: 1.9.13

CNBC reports that "small-business owners' confidence was virtually flat in December, as entrepreneurs still expect business conditions to worsen in the next six months." In short, the fiscal cliff deal did very little to instill confidence or certainty among business owners. Reuters notes that "the IMF will maintain its 2013 economic growth forecast at 2.1 percent…but looming debt ceiling negotiations and sequestration pose risks." 

Roll Call reported yesterday that "the Obama administration's fiscal 2014 budget is widely expected to arrive late on Capitol HIll, possibly not until sometime in March, primarily as a result of uncertainty created by fiscal cliff negotiations." This has become the norm in Washington, that is if you even bother with a budget. The Senate has not passed a budget in 1,351 days and the U.S. has accumulated $5.279 trillion in new debt in that time.  It's no wonder that skepticism about the future of the U.S. economy is the new normal. 

Another delay from the fiscal cliff deal? Tax season. The Wall Street Journal notes that the IRS "would delay the start of its 2013 tax-filing season for most filers until Jan. 30, about a week later than previously scheduled." Coincidentally, "the delay could help the federal government a bit, however, by postponing the day when it runs out of cash to pay all its bills."

Doug's Daily Economic Outlook

Jeff Lacker, President of the Federal Reserve Bank of Richmond, warned that it would damage the economy if Congress looks like it won’t raise the debt ceiling in a timely fashion. It is now widely accepted that the uncertainty over fiscal policy is damaging the economic environment.  But the same question likely arises over Fed policy.

Recently, apparent disagreement at the Fed arose over how quickly it would cease its program of extraordinary asset purchases, and more generally the Fed has emphasized "forward guidance" on the path of monetary policy.  The problem is that the Fed is no better at projecting economic growth than the rest of us.  An examination of the forecasts released by the Fed shows that it failed to foresee the recession (no news there), missed the 2009 recovery and has overestimated growth since.  In light of this, how much credence should any investor place in a commitment to begin moving toward normal monetary policy at the end of 2013, 2014, or any time?

The reality is that fiscal and monetary policy are in disarray as a legacy of a decade of extreme activism, with little economic benefit to show for it.  The more quickly fiscal policy is put on a sustainable, pro-growth track; monetary policy follows by ending the massive purchase of securities; and both cease to attempt to fine-tune the economy, the better.

What We're Reading

U.S. December budget deficit $1 billion, CBO says -- The U.S. government ran a budget deficit of $1 billion in December, the Congressional Budget Office estimated on Tuesday, brining the total shortfall for the first quarter of fiscal 2013 to $293 billion. The December deficit was $85 billion less than the same month in 2011. Receipts in December 2012 were about $30 billion more than in 2011, and spending was $55 billion lower. The Treasury Department will report the official monthly budget numbers on Friday. (MarketWatch) 

Limiting corporate tax deferral could raise $114 billion: CBO -- If U.S. corporations' ability to defer taxation of their foreign profits were limited, as the White House favors, tens of billions of dollars in new government revenue could be raised over a decade, congressional researchers said on Tuesday. In a report that could fuel the debate about how to tax U.S. multinational companies, the Congressional Budget Office said changes of the sort backed by the White House "would boost both efficiency and tax revenues," raising about $114 billion in 10 years. (Reuters) 

Americans Get Moving Amid Torpid Recovery -- Americans began striking out of greener pastures at a pace not seen since before the recession crippled job prospects, hobbled home sales and kept may stuck in place. About 3.9% of the population, or 11.8 million people, moved to a different country in 2011, new Census figures show. That was the highest level since before the recession, and up from 3.5% in 2010 and 2009 -- the lowest level since the government began the tally in 1948. (WSJ) 

Consumer Debt Rises on Cars and Education -- American consumers borrowed more in November to buy cars and attend school, but the stayed cautious about using their credit cards. The Federal Reserve said Tuesday that consumers increased their borrowing in November by $16 billion from October to a seasonally adjusted record of $2.77 trillion. Borrowing that covers autos and student loans increased $15.2 billion. A category that measures credit card debt rose just $817 million. (NY Times) 

US cities with the highest and lowest unemployment -- The Labor Department said Tuesday that rates fell in November from October in 215 of the 372 largest metro areas. Rates were unchanged in 33 and rose in 124. (AP) 

Corker plans new bill on entitlement reform -- Sen. Bob Corker (R-Tenn.) said Tuesday he would take a stab at entitlement reform in a new bill to be introduced later this onto, saying some effort needs to be made in the absence of leadership from President Obama. (The Hill) 

Also From the Forum

The Fallacy of the "Clean" Debt Limit Increase -- In the last 20 years, the United States has enacted 17 increases in the debt limit. Of those 17 incases, 3 were stop-gap measures: a temporary increases with a scheduled fall-back in the absence of superseding increase, and two increases that allowed for uninterrupted operations of the Social Security program. Of the remaining 14 "permanent" increases, all but 3 were either passed as part of other legislation or pursuant to a now repealed rule that precluded a vote in the House of Representatives, the so-called "Gephardt Rule." (History here) 

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)