A weekly snapshot of news, views, and economic cues from AEI's Economic Policy Team
April 12, 2013
QUICK FACTS: THE PRESIDENT'S BUDGET
The president's FY2014 budget aims to reduce the deficit to 1.7 percent of GDP by 2023.
Notable aspects: shovel-ready stimulus, taxing high-income earners via the Buffet Rule, raisingthe minimum wage to $9, taxing IRAs, creating more pre-K programs, raising cigarette taxes,switching to a chained CPI, and more.
***MUST SEE:KEVIN HASSETT PUTS THE PRESIDENT'S BUDGET IN CHARTS THAT EXPLAIN IT
:"No one believes the $1.4 trillion phantom savings number"…
:"The President is saying, if you save too much, I'm going to punish you"…
e for a big deal this year"…
Alan Viard:"It will reduce the deficit relative to the baseline, butnot as much as the Senate Democrat budget or House Republican budget."
REMEMBER, RAISING THE MINIMUM WAGE TO $9 IS A BAD IDEA.
Mike Strain and Kevin Hassett:
"Why not support increasing the minimum wage? Because it will make it more expensive for businessesto hire young and low-skill workers at a time of crisis-level unemployment."
TRANSITION IS KEY IN TAX REFORM.
Alex Brill:"It is quite possible that a generous set of transition
rules could wipe out a significant amount of the economic benefit that tax reform could offer."
FROM THE AEI ARCHIVES: THE CASE FOR A CHAINED CPI (2011).
Alan Viard:"Many supporters of
switching to the chained CPI have justified the switch on the grounds that the CPI is a more accurate
measure of inflation… The real case for switching to the chained CPI is that it offers an opportunity for
bipartisan agreement to reduce entitlement spending."
THE FED IS BLOWING A NEW HOUSING BUBBLE.
Ed Pinto:"The increase in house prices is not
being driven by a broad-based improvement in the economy's fundamentals. Instead, the Fed's lower rates are simply being capitalized into higher home prices."
FHA NUMBERS MASK THE TRUE RISK OF DEFAULT.
Joseph Gyourko:"My research finds that the
true impact of a borrower becoming unemployed on its probability of default is about 100 times greater than FHA estimates."
CYPRUS "BAIL IN" IS NO BETTER THAN A "BAIL OUT."
John Makin:"The recent collapse of Cypriot
banks included 'bail ins' for investors. This was described as making investors pay for bad bankinginstead of taxpayers bailing out the banks. Headlines notwithstanding, depositors and taxpayers are oftenthe very same people."
GIVE ME THE EURO OR GIVE ME...
Daniel Hanson:"Despite major resentment of the conditions
imposed on Cyprus, beleaguered president Nicos Anastasiades has specifically spurned abandoning theeuro as 'gambling with the country's future.'"
DODD-FRANK IS CONSTRICTING CONSUMER CREDIT.
Abby McCloskey:"Last week, President
Obama called on banks to increase lending. Banks don't need that call -- the president's regulatorsdo. Tighter lending is the unintentional but direct result of the Dodd-Frank Act and the Obamaadministration's own priorities."