The Daily Dish 2.21.13
With the sequester just 8 days from becoming reality, some in Washington "have marked March 1 as a day of reckoning," as the Washington Examiner puts it. The Wall Street Journal notes that "Federal Reserve officials, not surprisingly, are worried about the budget wars consuming Congress." The Washington Post explains that "the cuts would be severe and unsparing."
Reality looks a bit different. As DHE explains "the sequester is an $85 billion cut in a $3.6 trillion annual budget in a $16 trillion economy. That's a small cut in a huge pie. The economy is growing at about $630 billion per year. For the sequester to wipe out economic growth -- as liberals are now implying -- it would have to create roughly 7 times its size in economic impact…By the same logic, the stimulus would've added an additional 5.6 trillion in GDP. Perhaps if that had been true we would not be having this debate today."
Yes, "the sequester is still a bad idea. It should be replaced. America needs a 'big deal' on deficit reduction that addresses mandatory spending." But the sequester is not that. It's fulfilling a promise to cut spending, and in the absence of an alternate spending-reduction plan (not a tax increase) the sequester is "a bad idea whose time has come."
On our radar: Weekly Jobless Claims from Dept. of Labor, Real Earnings from BLS, and Consumer Price Index from BLS at 8:30 AM.
Doug's Daily Economic Outlook
The strength of the household sector will be a central determinant of economic growth in 2013, and there have been recent causes for worry. Consumer confidence took a dip at the end of 2012 (and rebounded very so slightly in January), while the policies in the fiscal cliff imposed higher payroll and income taxes. Today's data will include three important readings on income growth early in 2013. First out are new claims for unemployment insurance, a bellwether of job creation, followed by data on earnings and consumer price inflation.
Taken in combination, these indicators will shed some light on the jobs, pay and prices for consumers. An explosion in consumer spending is hardly needed for a solid 2013 -- business investment spending and housing construction are far more crucial components of the potential upside, and there will be data today from the Philly Fed and National Association of Realtors to shed light on these -- but real weakness in the 2/3 of overall spending generated by households will be hard to overcome.
The near-term growth prospects have been clouded by policy battles in Washington, shifts in consumer and business confidence, and fluctuating global growth prospects. As the budget outlook clarifies over the next several months -- hopefully in the form of a substantial agreement to pare back explosive entitlement spending over the next decade -- the outlook for 2013 and beyond will become clearer as well.
What We're Reading
Federal Furloughs Would Hit Around April 1 -- Federal workers are expected to begin taking unpaid leave by late March or early April if the government absorbs $85 billion in spending cuts set to start March 1, according to estimates from different agencies. Even though the process begins March 1, many federal agencies must notify employees 30 days before beginning furloughs. That means the eventual impact of the cuts at many agencies could be slow-moving and give Congress and the White House more time to negotiate an alternative to the cuts -- something both sides say they favor. (WSJ)
G.O.P. Is Resisting Obama Pressure on Tax Increase -- House Republicans, shrugging off rising pressure from President Obama, are resolutely opposing new tax increases to head off $85 billion in across-the-board spending reductions, all but ensuring the cuts will go into force March 1 and probably remain in place for months, if not longer. (NY Times)
U.S. issues final word on essential benefits under 'Obamacare' -- The Obama administration on Wednesday issued its long-awaited final rule on what states and insurers must do to provide the essential health benefits required in the individual and small-group market beginning in 2014 under the healthcare reform law. A cornerstone of President Barack Obama's plan to enhance the breadth of healthcare coverage in the United States, the mandate allows the 50 U.S. states a role in identifying benefit requirements and grants insurers a phased-in accreditation process for plans sold on federal healthcare exchanges. (Reuters)
In Reversal, Florida to Take Health Law's Medicaid Expansion -- Gov. Rick Scott of Florida reversed himself on Wednesday and announced that he would expand his state's Medicaid program to cover the poor, becoming the latest -- and, perhaps, most prominent -- Republican critic of President Obama's health care law to decide to put it into effect. It was an about-face for Mr. Scott, a former businessman who entreated politics as a critic of Mr. Obama's health care proposals. (NY Times)
Non-judicial foreclosures get delayed for a reason -- The foreclosure process is notorious for taking time, especially over the last 12 to 18 months, but for some states using a non-judicial process, the cause of delays may be different than a judicial foreclosure but still take up some time. (Housingwire)
Teacher Survey Shows Record Low Job Satisfaction In 2012 -- Teachers' job satisfaction has declined 23 percentage points in the five years since 2008, according to the long-running survey of educators and principals. Only 39 percent of teachers reported they were very satisfied, the least since 1987, the survey showed. The percentage of teachers who said they were very satisfied dropped five percentage points in 2012. (HuffPo)
Also From the Forum
The Week in Regulation: February 11-15 -- For the first week in 2013, regulatory costs declined, by $16 million. Despite the drop in costs, driven by EPA's Portland Cement amendments, regulators published more than 3.2 million paperwork burden hours. Dodd-Frank added more than 1.6 million to the paperwork tally this week. (Breakdown here)