Happy Friday –
If you’re not a Nats fan already, it’s about time you jumped on the wagon.
Last week’s announcement from the Fed regarding QE3 provided very little details. The Washington Post reports that “consensus is growing at the Federal Reserve that the central bank should declare that it wants to reduce unemployment to a specific level before withdrawing the unprecedented stimulus it has injected into the economy over the past few years.” Minneapolis Fed President Narayana Kocherlakota suggested that “the Fed should keep rates low until the jobless rate drops to 5.5 percent.”
It’s unlikely we will see that kind of jobless rate anytime soon. Yesterday’s weekly jobless claims “held near two-month highs last week, suggestion some weakening in labor market conditions. Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 382,000.”
Meanwhile, House will vote today on the Stop the War on Coal Act. This wraps up a week that began with an announcement from the country’s second largest coal producer, Alpha Natural Resources, that due to “a stricter regulatory regime,” they were restructuring – ultimately eliminating 1,200 jobs over the next year. AAF reports that nearly 12,000 coal-related jobs have been, or are scheduled to be, eliminated as a direct affect of regulations – the equivalent of reducing last month’s jobs report by 1/8.
Doug’s Daily Economic Outlook
The debate over the Affordable Care Act rages on. But aside from its questionable merits as health policy, the Act has important economic consequences. After all, health care constitutes 1/6th of the U.S. economy, so reform of health care unquestionably has important implications. Viewed from that perspective, the Act's heavy dose of centralized planning and control (the comparative effectiveness institute, innovation center, payment advisory board, etc.) are a strong step in the wrong direction for 16 percent of GDP. But the $500 billion in new taxes on investment income, medical devices, health insurers, health insurance, and others cannot be considered pro-growth economic policy. Neither can be the expansion of one entitlement spending program (Medicaid) and the creation of a a new one (insurance subsidies), at a time when entitlement-driven debt is the biggest economic threat. But most importantly, the 18 month time-out from economic recovery devoted to passage of the ACA is one of the greatest economic missteps of our time. The recovery has been subpar in part because economic policy has not been the top focus, and in part because the policies actually adopted have been misguided.
What We’re Reading
Leading Economic Gauge Dips; Philly Fed Index Shrinks – A measure of U. S. economic activity declined in August for the second time in three months, suggesting the economy remains weak. The Conference Board said its index of leading indicators, designed to forecast future economic activity, dipped 0.1 percent in August after rising 0.5 percent in July and dropping 0.5 percent in June….The Philadelphia Federal Reserve Bank said its business activity index rose to minus 1.9 from minus 7.1 in August, topping economists’ expectations for minus 4 according to a Reuters poll. (CNBC)
Corporate Loopholes in Tax Law Targeted – Microsoft Corp. and Hewlett-Packard Co. used accounting strategies to hold down their U.S. tax bills while shifting profits in and out of the country, according to a Senate subcommittee investigating how multinational companies exploit the intricate U.S. corporate-tax code. Senate investigators said much of the activity appears to comply with the letter of current tax regulations, though they regard some of the practices used by H-P as potentially abusive and subject to challenge. Both tech giants said their strategies are legal. (WSJ)
No U.S. Senate vote seen on muni adviser bill before elections – Municipalities and their financial advisers may have to wait until after the November elections for the U.S. Senate to consider legislation that more clearly defines who must comply with new, tougher regulations. Senate Majority Leader Harry Reid will not schedule a roll-call vote on a House-passed bill clarifying the definition of municipal advisers before Congress leaves Washington at the weekend to concentration on re-election campaigns, a Senate Democratic leadership aide said on Thursday. (Reuters)
Senate JPMorgan Probe Said to Seek Tougher Volker Rule – A U.S. Senate panel probing the multibillion-dollar trading loss by JPMorgan Chase & Co. plans to unveil its findings at a hearing this year to press regulators to tighten the Volcker rule, according to three people briefed on the matter. (Bloomberg)
Rising Home Values Repair Balance Sheets – A strengthened housing market is lifting property values and helping Americans repair their balance sheets, a trend that could spur the economy by making households more willing to spend. The value of Americans’ real-estate holdings jumped about $400 billion, or 2.1%, to $19.1 trillion, in the second quarter, the Federal Reserve said Thursday, the highest level since the final three months of 2008. (WSJ)
Rethinking the Classroom: Obama’s overhaul of public education – In 3 ½ years in office, President Obama has set in motion a broad overhaul of public education from kindergarten through high school, largely bypassing Congress and inducing states to adopt landmark changes that none of his predecessors attempted. (WaPo)
Also From the Forum
President Obama’s $488 Billion Regulatory Burden – Using GAO’s “Major Rules Reports,” we found that the Administration has published, at minimum, $488 billion in new regulations – exceeding GDP growth over the past three quarters ($442 billion). In FY 2010 alone, based on White House data, there were 8.8 billion hours of federal paperwork. This figure jumps by 1.5 billion to 10.38 billion hours – thanks in large part to Dodd-Frank and the Affordable Care Act. To put this increase in perspective, it would require 771,999 full-time employees just to complete this much red tape in one year. Or, in the same amount of time, workers could construct 220 Empire State Buildings. (Analysis here)
Coal Week on Capitol Hill – On Friday the House will vote on the Stop the War on Coal Act, seeking to limit the ability of executive agencies to promulgate certain environmental rules that would adversely affect employment and productivity. Nearly 12,000 coal-related jobs have been, or are scheduled to be, eliminated as a direct affect of regulations. (Blog here)