Friday, March 5, 2010

Economic Events of the Week

Friday March 5 - Employment Situation and Consumer Credit

e21 Exclusive
Reconciliation and the Misuse of Senate Procedures

Front Page News
Dealing with Budget Deficits: Who Pays the Bill? (The Economist)

Washington Update
Obama Takes Health Care Deadline to Democrats (New York Times)
House Clears Jobs Bill, Sends It Back To Senate For Sign-Off (Congress Daily)

Financial Markets News
Greece Leaps One Key Hurdle (Wall Street Journal)

Editorials and Commentaries
Health Reform That Won't Break The Bank (Orszag and DeParle in Washington Post)
Obama's Gamble on Health Care (Financial Times Editorial)
The President vs. Health-Care Reform (Jenkins in Wall Street Journal)

e21 Exclusive

Reconciliation and the Misuse of Senate Procedures

On Wednesday, President Obama gave a heavily anticipated speech about his vision for the future of health care reform, both in terms of substance and procedure. One of the primary takeaways (that has those inside the beltway chattering) is that the President’s suggested using reconciliation procedures to pass the health care legislation – a move that would require only a simple majority vote rather than the seemingly insurmountable 60-vote hurdle faced by “regular” legislation.

Front Page News

Dealing with Budget Deficits: Who Pays the Bill? (The Economist)

In the past some governments have dealt with debts by walking away from them. Iceland is voting on a milder form of that solution this weekend. The graver threat this time is that countries are tempted to diminish their debts through higher inflation. But that would be a dangerous option to adopt and may not even be possible, given that markets can see such policies coming and demand higher bond yields. Whichever path governments choose will be hard. As a period of loose credit gives way to an era of austerity, the social cohesion of many nations will be put to the test. Not all countries will pass. Over the next few years the careers of many politicians will be made and broken in the bond market.

Washington Update

Obama Takes Health Care Deadline to Democrats (New York Times)

President Obama, beginning a full-court press for his health care overhaul, met Thursday with insurance industry executives and House Democrats as party leaders on Capitol Hill struggled to figure out whether they could meet the president’s timetable for enacting legislation within a few weeks. The president spent the afternoon in back-to-back private sessions with two separate groups of House Democrats: liberals and members of the various minority caucuses, many of whom are uncomfortable with the bill because it lacks a “public option,” or government-backed insurance plan; and leaders of the centrist New Democrat Coalition.

Congress Daily reports that Obama "appeared to win over progressives...but discussions with moderate House Democrats are not going as smoothly" while the Washington Post suggests that the position of antiabortion Democrats in the House may determine whether legislation passes.

House Clears Jobs Bill, Sends It Back To Senate For Sign-Off (Congress Daily)

Financial Markets News

Greece Leaps One Key Hurdle (Wall Street Journal)

Greece survived a key test by raising €5 billion ($6.85 billion) in a bond sale, but investors warned that a looming wave of debt auctions by other European countries could make it difficult for Athens to raise the rest of the money it needs. The sale suggests that the European Union's strategy for dealing with the Greek crisis by relying on rhetoric instead of direct intervention is working. What most concerns European officials is that Greece's woes could spread to other countries and banks on the euro zone's periphery, endangering the common currency. For more, the Washington Post details the risks a Greek failure carries for the United States.

Editorials and Commentaries

Health Reform That Won't Break The Bank (Orszag and DeParle in Washington Post)

The president's plan represents an important step toward long-term fiscal sustainability. Some skeptics have claimed that the $100 billion in deficit reduction the president's plan would achieve over the next decade is mere gimmickry because the legislation would pay for only six years of coverage expansions with 10 years of budgetary offsets. Now, it's certainly a time-honored Washington budget gimmick to pay for just a few years of costs with many years of savings. But if that were the course being taken, we would expect to see a large hole at the end of the first decade and ever-larger deficits in the second. Instead, the savings in the president's plan grow faster than the costs over time, generating greater deficit reduction with each passing year -- roughly $1 trillion, all told, in the second decade.

Obama's Gamble on Health Care (Financial Times Editorial)

President Barack Obama has called on Democrats in Congress to push ahead with healthcare reform through reconciliation – a procedure that evades the Senate’s filibuster rule, so that passing the combined House-Senate measure will require only a simple majority in the upper house. The move is a gamble. On the whole it is justified, but Mr Obama is at fault for letting things come to this. Mr Obama has a good case to make. If he had started making it earlier,the odds of success in this venture would be higher, and his presidency would not be in peril.

The President vs. Health-Care Reform (Jenkins in Wall Street Journal)

Let us flip back to an epic series of Senate Finance hearings in 1992. They represented a remarkable meeting of minds across a broad swath of health-care wonks and economists (not interest groups) that the original sin was the exclusion of employer-provided health insurance from taxable income—imposed carelessly by the IRS in 1943 so defense contractors could compete for workers without transgressing Roosevelt-era wage and price controls. Everybody knows this turned "insurance" into something else. Call it prepaid health care, as Milton Friedman did. Call it a giant tax Laundromat for the nation's private health spending.

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