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Friday, March 23, 2012

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Economic Events of the Week

Friday – New Home Sales

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Story of the Day
The Need for Corporate Tax Reform (DMarron.com)

Washington Update
Health Law Slow to Win Favor (Wall Street Journal)
What Happens if the Health Care Law is Overturned? (Washington Post)
Ryan Says Proposed Tax Overhaul Could End Deficit Sooner Than CBO Estimate (CQ)

Market Talk
US Sales of New Homes Probably Climbed to One Year High (Bloomberg)

Editorials & Opinions
ObamaCare: The Reckoning (Charles Krauthammer in Washington Post)
Scrap the Affordable Care Act (Douglas Holtz-Eakin in USA Today)
Liberty and ObamaCare (Wall Street Journal Editorial)
Ryan’s Budget Plan: Dessert First, Vegetables Later (Ruth Marcus in Washington Post)

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Story of the Day

The Need for Corporate Tax Reform (DMarron.com)

April 1 is often a day for pranks. In the tax world, however, it will mark something more serious. Barring another Fukushima Daiichi-like catastrophe (which delayed its plans last year), Japan will cut its corporate tax rate by five percentage points. That move will leave the United States with the highest corporate tax rate in the developed world: 39.2 percent when you add state and local taxes to the 35 percent federal rate. The corporate income tax is a particularly problematic way to collect tax revenues. Corporate taxes are often more harmful for economic growth than ones on personal income or consumption, as noted in a recent study by the Organization for Economic Cooperation and Development. Moreover, a high corporate rate is an invitation for US multinationals to play games with their accounting, locating profits overseas while reporting as many tax-deductible expenses as possible here at home. That’s why there’s a growing bipartisan consensus that the federal rate needs to come down.


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Washington Update

Health Law Slow to Win Favor (Wall Street Journal)

When the health-care overhaul became law after a bitter debate, many Democrats predicted Americans would grow to like it as they started enjoying some of the early benefits. The day after the president signed the bill into law, which happened exactly two years ago, an average of major polls collated by the website Real Clear Politics showed 50.4% of Americans opposed. This week, that had changed only by a tenth of a percentage point, ticking up to 50.5%. The health law remains a tough sell for reasons that go beyond the drumbeat from Republicans for its repeal and questions about its constitutionality that will be debated next week at the Supreme Court. Several of the law's early pieces, designed to win public support, haven't worked as well in the real world as on paper and have irked even some of the Americans they were designed to help.

What Happens if the Health Care Law is Overturned? (Washington Post)

Since the 2010 health-care bill became law two years ago Friday, it has launched fundamental changes to Medicaid, Medicare and the private health-insurance system relied on by millions of Americans. Its most transformative — and controversial — provisions are not set to take effect until 2014, but a complex web of new rules has already extended coverage and expanded benefits across the country. So what happens to the existing provisions if the Supreme Court, which will hear challenges to the law next week, ultimately decides to go with its most sweeping option: overturning the law in its entirety? The answer depends on where you live, who you work for and how you get your insurance.

Ryan Says Proposed Tax Overhaul Could End Deficit Sooner Than CBO Estimate (CQ)

House Budget Committee Chairman Paul D. Ryan on Thursday offered details to back up his claim that a House budget resolution could lead to a balanced budget in as little as seven years as a result of economic growth generated by a tax overhaul. Introducing the fiscal 2013 budget resolution on Tuesday, the Wisconsin Republican said the tax and spending framework could erase the deficit in far less time than the 26 years projected by the Congressional Budget Office through faster economic growth than the agency anticipates. Ryan on Thursday released what GOP staff called an analysis or an “exercise” — but not a formal score — suggesting if the tax system were overhauled as recommended in the proposal, higher federal revenues could result in a balanced budget between 2019 and 2025.


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Market Talk

US Sales of New Homes Probably Climbed to One Year High (Bloomberg)

Purchases of new homes in the U.S. probably rose in February to the highest level in more than a year, economists said before a report today. Sales, tabulated when contracts are signed, climbed 1.3 percent to a 325,000 annual pace, the fastest since December 2010, according to the median estimate in a Bloomberg News survey of 78 economists. That would mark the fifth gain in six months. Affordability is increasing as hiring picks up, incomes grow, home prices steady and mortgage rates hold near record lows. At the same time, builders face increasing competition from foreclosures, which are hurting all property values.


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Editorials & Opinions

ObamaCare: The Reckoning (Charles Krauthammer in Washington Post)

Obamacare dominated the 2010 midterms, driving its Democratic authors to a historic electoral shellacking. But since then, the issue has slipped quietly underground. Now it’s back, summoned to the national stage by the confluence of three disparate events: the release of new Congressional Budget Office cost estimates, the approach of Supreme Court hearings on the law’s constitutionality and the issuance of a compulsory contraception mandate. Obamacare was carefully constructed to manipulate the standard 10-year cost projections of the CBO. Because benefits would not fully kick in for four years, President Obama could trumpet 10-year gross costs of less than $1 trillion — $938 billion to be exact. But now that the near-costless years 2010 and 2011 have elapsed, the true 10-year price tag comes into focus. From 2013 through 2022, the CBO reports, the costs of Obamacare come to $1.76 trillion — almost twice the phony original number. It gets worse.

Scrap the Affordable Care Act (Douglas Holtz-Eakin in USA Today)

It's time to scrap the Affordable Care Act and try again. One thing hasn't changed: There continues to be bipartisan agreement that the U.S. health care system is riddled with overuse, underuse, and misuse of therapies; senseless inefficiencies; and inadequate opportunities for affordable insurance. The U.S. needs real health care reform. But the ACA is a dramatic step in the wrong direction. It's bad economics. Americans will be unable to enjoy quality health care or insurance, or anything else, without adequate incomes. At a time when growth is anemic, it is senseless to festoon the businesses small and large with $500 billion in new taxes and 10,000 pages of burdensome regulations that will cost firms $12 billion to comply.

Liberty and ObamaCare (Wall Street Journal Editorial)

Few legal cases in the modern era are as consequential, or as defining, as the challenges to the Patient Protection and Affordable Care Act that the Supreme Court hears beginning Monday. The powers that the Obama Administration is claiming change the structure of the American government as it has existed for 225 years. Thus has the health-care law provoked an unprecedented and unnecessary constitutional showdown that endangers individual liberty. It is a remarkable moment. The High Court has scheduled the longest oral arguments in nearly a half-century: five and a half hours, spread over three days. Yet Democrats, the liberal legal establishment and the press corps spent most of 2010 and 2011 deriding the government of limited and enumerated powers of Article I as a quaint artifact of the 18th century. Now even President Obama and his staff seem to grasp their constitutional gamble.

Ryan’s Budget Plan: Dessert First, Vegetables Later (Ruth Marcus in Washington Post)

Lower the rates, broaden the base. Everyone agrees that such tax reform is a good idea, and the first half of that equation is simple enough. Pick a number, any number. Paul Ryan’s numbers, as it happens, are 10 and 25. The House Budget Committee chairman’s new framework proposes collapsing the current six tax brackets (top rate, 35 percent) into two, with rates of 10 percent and 25 percent. Ryan would also lower the corporate tax from 35 percent to 25 percent — all, he says, without losing any revenue. “We’re saying, get rid of the tax shelters, get rid of the loopholes, lower tax rates for everybody,” Ryan said in unveiling his plan. Sounds great, right? But the second half of the tax reform equation is the tricky part, which helps explain why the appealing precision of Ryan’s tax brackets is not matched by any detail about what loopholes he would close.


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