Wednesday, February 8, 2012

JEC Hearing: "Bolstering the Economy: Helping American Families by Reauthorizing the Payroll Tax Cut and UI Benefits"



"Mr. Chairman, thank you for holding today’s hearing. I agree with you that this committee must examine the whole picture – understanding both the benefits of extending the payroll tax cut and long-term unemployment benefits and their unintended consequences.

There is a strong bipartisan consensus in Congress to extend both of these expiring provisions through the end of this year. However, serious differences remain over how we should pay for these expensive extensions and whether we should reform the Unemployment Insurance program.

As popular as the payroll tax holiday may be, economists disagree about its effectiveness as an economic stimulus. However, economists agree that Social Security faces serious and growing cash-flow deficits. Diverting one-sixth of payroll tax revenue away from the Social Security revenue stream creates a significant sinkhole that exacerbates Social Security’s cash-flow problems. Non-cash accounting transfers from the General Fund cannot alleviate these cash-flow problems. Last year, the U.S. government had to borrow $142 billion from investors – including foreign countries like China – to pay Social Security benefits to our seniors.

Congress must fill this sinkhole to ensure that we will be able to pay promised Social Security benefits. That’s why House Republicans are insisting that Congress must offset any loss of payroll tax revenue with actual cash savings in other areas of the government, not accounting gimmicks. House Republicans will protect this vital program from debilitating cash diversions with common sense savings that have had strong bipartisan support.
As for unemployment, clearly the economic policies of the Obama Administration did not produce the vigorous recovery, for which hardworking taxpayers hoped. Tens of millions of Americans are struggling to make ends meet. Millions can’t find a full-time job, and millions more can’t find any job at all. Even worse, other millions have simply given up and stopped looking for work, leaving us with the lowest workforce participation rate in nearly three decades...."

Opening Statement
Representative Kevin Brady
Vice Chairman
Joint Economic Committee

See the entire statement on the JECRepublicans website here

General Economics

News                                                                                                                             
Bloomberg | China May Invest Tens of Billions of Euros to Assist Europe, Academic Says
China may “move shortly” to help Europe resolve its debt crisis by providing an investment of as much as 100 billion euros ($132 billion), said Yuan Gangming, an economist at the Chinese Academy of Social Sciences.
FOX News | Consumer borrowing rose $19.3 billion in December
Americans accelerated their borrowing in December for the second straight month, running up more credit card debt and taking out loans to buy cars and attend school.
WSJ | Oil and Gas Boom Lifts U.S. Economy
There is no oil and gas production in Idaho, but that doesn't mean the U.S. energy boom has bypassed this bedroom community west of Boise.
Bloomberg | Tie U.S. Recovery Program to Economy Indicators
According to early forecasts, the U.S. economy should already have recovered from the financial crisis. Despite some recent encouraging news, though, we still don’t know when things will be back to normal.
Gallup | U.S. Economic Confidence Climbs for Fifth Straight Month
Americans' confidence in the economy improved for the fifth month in a row in January, with Gallup's Economic Confidence Index reaching -27, its highest point since May of last year. Americans, however, are not yet as confident as they were a year ago.

Econ Comments & Analysis                                                                                            
Heritage Foundation | The 2012 Index of Dependence on Government
Virtually no issue so dominates the current public policy debate as the future financial health of the U.S. government. Americans are haunted by the specter of enormously growing mountains of debt that suck the economic and social vitality out of this country.
Mercatus Center | Blueprint for Regulatory Reform
Congress is taking a closer look at the balance between the burden and benefits of regulation and what reforms could embed the principles of good regulatory decision-making in agencies.
WSJ | Europe's Carbon Trade War
On Monday, Beijing forbade its carriers from complying with this frequent-flyer-in-reverse scheme. Brussels immediately responded by insisting that noncomplying airlines will face large fines, and even bans on operating in Europe.
Investors | The Burden Of Federal Rules: Our Other Trillion-Dollar Debt
With Obama's delayed 2013 spending budget likely to approach $4 trillion in outlays, it seems apparent that for both spending and regulation, politicians do need to take the federal government's rocks off the lawn of enterprise and job creation.
Heritage Foundation | Average Federal Aid Passes Average Disposable Income
The Index reports Americans who rely on government receive an average $32,748 worth of benefits, surpassing the average American’s disposable personal income of $32,446.

Blogs                                                                                                                             
WSJ | Falling U.S. Share of Trade Not Due to Competitiveness Problems
New research published by the New York Fed Tuesday argues the U.S. isn’t suffering as badly on the trade front as many now believe.
CATO | Unemployment Insurance Fraud: Chile Has Solution
The Washington Post reports that 90 D.C. city employees and 40 former employees are being investigated for grabbing UI benefits to which they were not entitled. The cost of this fraud has been about $800,000 since 2009.
Calculated Risk | MBA: Refinance activity increases as mortgage rates fall to record low
The Refinance Index increased 9.4 percent from the previous week. The seasonally adjusted Purchase Index increased 0.1 percent from one week earlier.
Atlantic | Will the Government Put Money Market Funds Out of Business?
Immediately after Lehman Brothers failed, a money market mutual fund called Reserve Primary "broke the buck"--it did not have enough money in its coffers to pay the shareholders what they'd had.  
Library of Economics | Break the Buck!
Regulators are completing a controversial proposal to shore up the $2.7 trillion money-market fund industry

Health Care

News                                                                                                                             
National Journal | Health Care Quality Experiments Working, House Ways and Means Told
Private payers who are inching away from the traditional fee-for-service payment model for health care told a House Ways and Means Subcommittee on Tuesday that their experiments have begun to yield cost savings and could provide insights to help public health programs save money.

Econ Comments & Analysis                                                                                            
Washington Times | An evolutionary and natural choice for Medicare reform
The more you know about Medicare, the more obvious, the more commonsense, and the more familiar reform becomes.

Monetary

News                                                                                                                             
CNBC | Fed Will 'Protect the US' From Europe's Crisis: Bernanke
"We are in frequent contact with European authorities, and we will continue to monitor the situation closely and take every available step to protect the U.S. financial system and the economy,'' Bernanke told the Senate Budget Committee.
Real Clear Markets | Having Wrecked the Banks, the Feds Target Money Funds
Though the interim years make the late ‘90s increasingly hazy, back then cash management via money market funds was a fairly simple concept.

Econ Comments & Analysis                                                                                            
Market Watch | Bernanke looks past January jobs report
Federal Reserve Board Chairman Ben Bernanke did not throw the spotlight Tuesday on last week’s surprisingly strong January unemployment report, sticking to his forecast only moderate growth ahead.

Blogs                                                                                                                             
CATO | Bernanke’s Anti-Stimulus
One of the direct results of the Federal Reserve’s zero interest rate policies has been a massive reduction in interest income going to households. Since 2008, household interest income has fallen by about $400 billion annually.

Taxes

News                                                                                                                             
Politico | Payroll-tax-cut panel starting to look like supercommittee?
Tensions over the payroll tax extension escalated in Congress on Tuesday as lawmakers waded into the most contentious — and vexing — issue of all: how to pay for the $160 billion package.
National Journal | House Republicans Say They Are United On Payroll Tax-Cut Holiday
“These accusations again about the fact that we’re divided as a country, that we’re divided as Republicans, nothing could be further from the truth,” House Majority Leader Eric Cantor, R-Va., maintained on Tuesday morning. “We are united.”
NY Times | Pennsylvania Set to Allow Local Taxes on Shale Gas
The Pennsylvania Senate on Tuesday passed legislation that would authorize a tax on the shale gas industry and set uniform standards for development, changes that critics said would leave many municipalities with little control over the use of their land.

Employment

Econ Comments & Analysis                                                                                            
Washington Times | Bad news buried, Obama boasts
President Obama seized upon last week’s improved jobs report as “more good news” on the economy, though the true unemployment rate never made the headlines.
Mercatus Center | Freedom Is Key to Creating Jobs, Not Stimulus Spending
On Friday, the U.S. Bureau of Labor Statistics reported the addition of 243,000 jobs in January, and the unemployment rate dropped to 8.3 percent. This is good news, but there are still millions of people searching for work who can’t find it

Blogs                                                                                                                             
Calculated Risk | No Labor Force Participation Rebound in Sight
This is a key point. Some of the recent decline in the participation rate was expected due to demographics (mostly aging of the population), but most analysts expected some rebound in the participation rate this year as the economy (hopefully) improves.

Budget

News                                                                                                                             
Irish Times | Europe's debt continues to rise
The 27-nation European Union's total government debt rose slightly to 82.2 per cent of economic output in the third quarter of 2011, statistics agency Eurostat said today, while debt in the 17-nation euro zone declined to 87.4 per cent of output.
Washington Times | Student debt often leads to bankruptcy, lawyers find
A report released Tuesday by the National Association of Consumer Bankruptcy Attorneys (NACBA) shows that more and more graduates and parents are turning to bankruptcy as their final option to deal with mounting debt.
Market Watch | Greek bailout hopes rise amid ECB concession
Talks between Greece and international creditors over a second bailout stretched past yet another deadline, but appeared to be moving toward a conclusion Wednesday after the European Central Bank reportedly agreed to exchange Greek government bonds at less than face value in an effort to further reduce the nation’s debt load.
National Journal | Finance Approves $9.6 Billion for Transportation Bill
The Senate Finance Committee approved legislation on Tuesday funding a $9.6 billion, two-year surface-transportation bill.

Econ Comments & Analysis                                                                                            
CBO | Monthly Budget Review
The federal government accumulated a budget deficit of $349 billion in the first four months of fiscal year 2012, CBO estimates, $70 billion less than the shortfall recorded for the same period last year.