Wednesday, July 27, 2011

Joint Economic Committee hearing on Maximizing America’s Prosperity: How Fiscal Rules Can Restrain Federal Overspending



"The United States is on the precipice of a financial crisis because Washington spends too much relative to the size of our economy. Under President Obama, federal spending has grown far beyond the ability of our tax system to generate revenues from American families and businesses sufficient to pay for Washington’s overspending. The resulting large budget deficits are causing an unsustainable accumulation of federal debt.

Business investment in new buildings, equipment, and software drives job creation, not federal spending. Today, both large corporations and entrepreneurs are not investing because of uncertainty. They fear higher taxes and new burdensome regulations. Consequently, job creation is anemic, the unemployment rate remains stubbornly high, and American families are suffering...

Overspending cannot be cured by a so-called “balanced approach.” A study, Spend Less, Owe Less, Grow the Economy, published by JEC Republican staff on March 15, 2011, found that successful fiscal consolidations by our global competitors were composed of at least 85 percent spending reductions with additional revenues largely from non-tax sources such as asset sales. Balanced approaches that included both spending reductions and tax increases failed in other countries."


Vice Chairman
Kevin Brady's
Opening Statement


See Full Opening Statement Here

General Economics

News                                                                                                                             
Market Watch | New single-family home sales fall 1% in June
Sales of new single-family homes fell 1.0% in June as purchases in the Northeast dropped to the lowest level since the government began tracking the data in 1973.
National Journal | Insiders: Revenue Sharing and Offshore Drilling Reform Inextricably Linked
Adding a lucrative financial incentive for coastal states that allow energy production off their shores would greatly enhance prospects of congressional passage of a bill to strengthen rules on offshore-drilling safety, National Journal’s Energy and Environment Insiders say. Still, Insiders are pessimistic that Congress would pass any such plan.
Market Watch | U.S. durable-goods orders fall 2.1% in June
Weaker orders for airplanes and automobiles translated into a steeper-than-forecast 2.1% decline in durable-goods orders in June, the Commerce Department estimated Wednesday.
Bloomberg | Growth Slowed in 8 of 12 U.S. Regions: Fed
The Federal Reserve said the economy grew at a slower pace in more parts of the country since the beginning of June as shoppers restrained spending and factory production eased.

Econ Comments                                                                                                             
AEI: American | Government Housing Policy: The Sine Qua Non of the Financial Crisis
How did the financial system accumulate an unprecedented number of risky mortgages?
CNN: Money | The American Dream slips even further out of reach
Add stagnant wages to a list of woes hitting American families struggling for a life that was better than their parents had.
National Journal | Moody’s Economist Says Ratings Downgrade Wouldn't Be 'End of the World'
Asked whether it was the state of the economy or Congress’s inability to come together on a deal that was really threatening the credit rating, Zandi said on the Early Show: “The latter. This is just a political decision, right? We are a very large nation. We’re a very prosperous nation. We can pay our bills.”
Minyanville | How the US Economy Would Benefit From a Real Alternative Energy Policy
So far, the United States has positioned itself to be behind history on what could be a very promising industry for a stumbling economy.
Source | Soros's Regulatory Hedge
Another victim of Dodd-Frank.
NYT | How a Debt Downgrade May Affect Consumers
This is not yet one of those stuff-your-money-in-a-mattress moments.

Blogs                                                                                                                             
Heritage Foundation | Welfare Spending Under the Boehner Plan
Bob Greenstein of the Center on Budget and Policy Priorities claims that the Boehner budget is a form of “class warfare.” He says that “if enacted, it would produce the greatest increase in poverty and hardship produced by any law in modern U.S. history.”

Reports                                                                                                                         
NBER | How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-century GI Bills
The sharpest increase in U.S. home ownership over the last century occurred between 1940 and 1960, associated primarily with a decrease in the age at first ownership. To shed light on the contribution of several coincident large-scale government interventions in housing finance, I examine veterans' home loan benefits provided under the postwar GI Bills.
RCM: Wells Fargo | Consumer Confidence Posts Surprising Rise in July
Contrary to other sentiment indicators recently, the Conference Board’s index of consumer confidence edged up in July. The number of people expecting their situation to improve in six months rose.

Taxes

News                                                                                                                             
National Journal | 'Fair Tax' Faces Bipartisan Opposition From Ways and Means
The partisan battle over raising the debt limit may be reaching a critical level, but House Ways and Means Committee members found common skepticism on Tuesday on a conservative plan to restructure the tax code around a flat sales tax.

Econ Comments                                                                                                             
AEI | Waxman-Rockefeller Tax Is a Bad Deal for Senior Citizens
President Barack Obama and key congressional Democrats want a better deal on prescription drugs sold to seniors. But if they get it, seniors will pay billions of dollars more for their medicines.
WSJ | Robin Hood Can't Lead Us Out of the Debt Hole
Obama's obsession with higher tax rates on the rich is not helpful.

Blogs                                                                                                                             
ThinkMarkets | Tax Baseline Key to Debt Fight
But even if there are no new obligations, taxes are primed to go up. That baseline, biased in favor of a growing tax burden, is key to proposed deals and will no doubt remain the pivotal point in budget negotiations long after the current debt ceiling is broached.

Health Care

News                                                                                                                             
National Journal | Insurance Exchanges Will Lead to Fights With State Legislatures
When it comes to getting health insurance exchanges up and running, there’s no question that states have a lot of work to do between now and 2014. But the heaviest lifting might come between state health officials and legislatures, experts said on Wednesday.
National Journal | Medicare Deficit Cost-Savers Don’t Help the Big Picture
Increasing the Medicare eligibility age from 65 to 67 or increasing the co-pays or the deductibles seniors have to pay—both items included as cost-savers in various deficit-reduction plans—don’t solve the big problem: stemming the rising cost of health care, the experts said on Tuesday.

Blogs                                                                                                                             
Heritage Foundation | Making Obamacare Bureaucrats Play by the Rules
Laws set norms to regulate conduct. Obamacare, like most major laws, does not really do this. Instead, it authorizes administrators to make laws, insofar as they make the rules and regulations to govern our conduct. The public will not know the full implications of Obamacare until after unelected—and usually unknown—agency officials make the rules.

Monetary

Econ Comments                                                                                                             
Bloomberg | Bernanke May Need to Stay ‘Above Politics’ in Debt Standoff
The central banker would risk angering politicians and roiling markets should he get involved in talks, recommend a specific tax and spending plan or repeat the force of his 2008 pleas for a financial rescue, members of Congress from both parties said.
Market Watch | Fed’s Hoenig criticizes easy-money policy
The retiring president of the Kansas City Federal Reserve told U.S. lawmakers on Tuesday that the central bank’s aggressive efforts to help the economy might be hurting it instead.

Employment

News                                                                                                                             
WSJ | U.S. Business Leaders Press Senate Panel for More Work Visas
U.S. business leaders on Tuesday urged a Senate panel to implement immigration-law changes that would allow companies to hire more highly skilled workers.
CNN Money | Employers to hike pay, but only for a select few
Despite ongoing economic uncertainty, companies are betting on their best workers -- and are willing to pay more to prove it, according to a report Wednesday.
WSJ | CEOs in Their Own Words: Don't Plan on Much Hiring
The CEOs are speaking. And the message isn't encouraging: Don't expect many new U.S. jobs anytime soon.

Econ Comments                                                                                                             
Washington Times | GHEI: Obamacare, a death panel for jobs
Government health care takeover imperils economic recovery
Cato Institute | Solving the Long-Term Jobs Problem
The problem today is that government policy is impeding innovation and job creation.

Blogs                                                                                                                             
American: Enterprise Blog | Solving the Long-Term Jobs Problem
Stimulus has failed. It’s time to unleash entrepreneurs in the new commanding heights of the economy: healthcare and education.

Budget

News                                                                                                                             
Washington Times | ‘Wiggle room’ seen on Aug. 2 debt deadline
For one, federal revenues came in stronger than expected in recent weeks, giving the Treasury an extra $14 billion in cash to spend on Social Security and other payments after Aug. 2, one analysis found.
WSJ | Companies Bracing for U.S. Default
The unthinkable is finally becoming reality for U.S. companies, who are beginning to take real steps to prepare for the possibility of a U.S. debt default.
CNN Money | Betting $4.8 billion on a U.S. default
A small camp of investors are betting that the U.S. government will default on its debt, and they're putting $4.8 billion of their chips on the table.
WSJ | Facing a Hit Over Debt in Alabama
In a move to avoid the largest municipal bankruptcy in U.S. history, holders of more than $3 billion in debt issued by Jefferson County, Ala., are working on a rescue that would leave them with steep losses.

Econ Comments                                                                                                             
Washington Times | BIRNBAUM: Devilish details of the debt debate
Cutting spending is easy in the abstract but hard when people gripe.
Daily Caller | Cut, Cap and Balance: Seven reasons the GOP must hold the line
The passage of “Cut, Cap and Balance” in the House of Representatives is a game-changer. It is also the ground on which the GOP must stand, fight and win, especially now that a July 18-21 CNN poll shows that two-thirds of Americans support the House’s approach.
WSJ | For Obama, Golden Opportunity Is Fading
President Aimed to Broker Grand Deficit-Reduction Deal but Now Finds Himself Scrambling to Marshal Public Opinion.
Politico | Why we need 'Cut, Cap, and Balance'
The debt is our problem, not the debt limit. The consequences of not aggressively attacking it now are severe.
Cato Institute | Some Austerity
The Reid plan would theoretically cut spending by $2.7 trillion over ten years. Even if that were true, it would still allow our national debt to increase by some $10 trillion over the next decade.
Barron's | A Fate Worse Than Debt
Downgrade may pose as great a threat as a U.S. default if Washington destroys Hamilton's legacy.
WSJ | The GOP's Reality Test
Republicans who oppose Boehner's debt deal are playing into Obama's hands.

Blogs                                                                                                                             
NRO: The Corner | The Size of Our Debt and Why It Matters
Basically, while it is true that raising the debt ceiling soon will allow Treasury to continue to pay all of its bills (most of them stemming from past spending and commitments), it won’t address our inability to pay our future bills and avoid future default.

Reports                                                                                                                         
CBO | Analysis of the Impact on the Deficit of the Budget Control Act of 2011 as Proposed in the Senate
The Congressional Budget Office (CBO) has estimated the impact on the deficit of the Budget Control Act of 2011, as proposed in the Senate on July 25, 2011.
CBO | Analysis of the Impact on the Deficit of the Budget Control Act of 2011 as Proposed in the House
The Congressional Budget Office has estimated the impact on the deficit of the Budget Control Act of 2011, as posted on the Web site of the Committee on Rules on July 25, 2011.