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The Ledger 03/28/14

The Ledger 03/28/14

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A weekly snapshot of news, views, and economic cues from AEI's Economic Policy team
A weekly snapshot of news, views, and economic cues from AEI's Economic Policy team

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Published by: American Enterprise Institute on Mar 27, 2014
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03/27/2014

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Subject: Map of cities most impacted by the minimum wage (AEI Economics Ledger) If you have trouble reading this message, click here to view it as a web page. 
Creating greater opportunity
Why a national minimum wage is unfair for low-cost cities. 
“When the
federal government imposes that same uniform national minimum wage of $10.10 per hour on a low-cost, low-wage labor market like Pueblo, that wage will be far above the appropriate wage for that community based on local market conditions and the relatively low cost of living, and the results could be
disastrous.”
 
 
MUST-SEE MAP
Fighting poverty the Bloomberg way. 
: “
Combine that strong economy with welfare programs that both require and reward work and you have a recipe for dramatically reducing the number of people on cash welfare. On the day Mayor Bloomberg left office, cash welfare was down 25% from when he took office, and down more than 70% from the peak welfare use in 1994 before the Giuliani
administration started imposing work requirements in welfare.”
 
IN CASE YOU MISSED IT
 Another missed ACA deadline
The individual mandate goes poof. 
The individual mandate had the least effect on those it was supposed to encourage to gain coverage
 the uninsured. McKinsey & Co. surveys found that a little over one-quarter of people signing up for coverage last month were previously uninsured. Goldman Sachs analysts estimate that about 1 million uninsured Americans will sign up for the Obamacare exchanges before open enrollment ends. For perspective, that's about 2
percent of the 48 million uninsured.”
 
Without the mandate, cost savings disappear. 
: “
By driving more people-particularly the young-into health insurance, the mandate was supposed to achieve near-universal coverage at a
reasonable
 cost. But that assumes individuals believe that the tax penalty they would pay for failing to
buy insurance is large enough to force compliance.”
 
Fairness and innovation sapped by central power. 
: “
The lesson to be drawn here is that a law as consequential as health care reform should not be written in a way that allows the executive to effectively rewrite it in an ad hoc and discriminatory manner. It invites bending the rules and pushing
legal boundaries for political reasons.”
 
Ukraine and elsewhere
Ukraine aid held hostage for IMF reform. 
: “
Next week, Treasury Secretary Jack Lew will make his case before the House Financial Service Committee for linking IMF reform to U.S. bilateral aid for Ukraine. If the past is any guide, he will do so by putting forward a set of disingenuous
arguments in favor of his case.”
 
Are foreign pharmacies safe? 
Findings from our paper suggest that private certification agencies play an active role in both the demand and supply of online drugs. From consumer 
s’
 
perspective, foreign websites offer significant cost savings relative to US websites, and these savings
attract US customers despite the FDA warning about risks of buying from overseas.”
 
Housing risk keeps rising
Housing risk high, in spite of QM. 
 
Stable housing markets depend on the preponderance of loans being low risk
ones that are unlikely to default even under stress. In February, only 43 percent of home purchase loans were rated low risk, raising serious questions about the ability of
much of today’s loan production to withstand a stress event.
 FHA is especially vulnerable in this regard,
with less than 2 percent of its recent insured loans rated as low risk.”
 
New data show mortgage risk continues to rise, especially in California. 
“AEI experts report on risk ratings for federal agency mortgages securitized in February
2014, review trends for the NMRI series, and for the first time, release metro-level Mortgage Risk Indices
for selected California metro areas.”
 
 
AUDIO
Johnson-Crapo bill fails to protect taxpayers. 
: “
The bill, as was the case with Fannie and Freddie, would encourage too much of the wrong kind of debt for our economy
debt that bids up existing housing assets and the land they sit on, creating a temporary wealth effect and a crowding out of capital investment needed for a productive and growing economy and jobs growth. Worse, the result will be
another artificial housing boom and consequent bust.”
 
Long-term homeownership trends. 
: “By 2010, home ownership was back down to 67%.
Continuing down, it fell to 65% in 2013, close to where it had been in 1980. Overall, looking across the bubble rise and fall, there has been a 40-year plateau in the mid-60% range, during which time the U.S.
has experienced two housing finance disasters.”
 
In other news
Netflix wants the benefits of the Internet with none of the costs. 
: “
Netflix appears to want consumers to pay for both their own connections and Netflix's connections. Moreover, depending on the pricing plans of the broadband providers, lots of consumers who are not Netflix subscribers will be
subsidizing its business. Shouldn't Netflix subscribers pay Netflix's costs?”
 
Is inequality an outgrowth of capitalism? 
: “Thomas Piketty is making a different
and broader argument, one that intentionally rises to the level of grand theory: Embedded within the very fabric of capitalism is a powerful force pushing in the direction of rising inequality. The income generated from owning capital (everything from real estate to financial assets to intellectual property) tends to
exceed the rate of economic growth.”
 
Mark your calendar
3.31
AEI Event: 
AEI Event: 
4.3 Jobless claims released 4.4 March employment numbers
Keep up with AEIecon
Get up-to-the-minute updates on Twitter  @AEIecon.  Read more from the American Enterprise Institute economic policy team at www.aei.org/economics. Contact Abby at abby.mccloskey@aei.org if you have questions for the economics team.
 Sign up for a weekly copy of the LEDGER here. 

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