Subject: Obamacare taxes, challenges for the Yellen Fed (AEI Economics Ledger) If you have trouble reading

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SOTU reactions
It glossed over the jobs crisis. Michael Strain: “The president called on Congress to extend unemployment benefits, and Congress should heed the president’s call. But other than that, and the aforementioned pledge, the president barely mentioned our unemployment crisis. Given that it is arguably our country’s most serious and immediate social and economic problem, the fact that the president continues to avoid it is deeply troubling.” Retirees aren’t headed for the poor house. Andrew Biggs and Sylvester Schieber: “There is a widespread perception that most Americans are inadequately prepared for retirement. The story pushed by pundits and policy makers is that the shift over the past 30 years from defined-benefit pensions to defined-contribution savings plans such as 401(k)s has dramatically reduced retirement income to supplement the benefits provided by Social Security. . . . Nevertheless, the story about the declining income prospects of retirees is not true.” The minimum-wage hike for federal contractors is good news for the tea party. Stan Veuger: “By voluntarily paying higher prices for some goods and services the federal government procures, without clamoring for new appropriations, Obama is effectively reducing the size of government. Paying prices that are 40 percent higher than before, without the corresponding massive budget expansion, brings down the amount of goods and services acquired by almost 30 percent.” The evidence is weak for populism. Jim Pethokoukis: “The superstar economists of the Equality of Opportunity Project find American upward mobility getting no better or worse for decades. As the EOP study puts it: ‘Children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s.’”

Tax season begins
Republicans’ lower-taxing alternative to Obamacare. James Capretta: “[Republicans’] plan would repeal the entirety of the Obamacare tax hikes. That, by itself, would represent one of the largest tax cuts in American history. When Obamacare was enacted, the Congressional Budget Office (CBO) estimated the net Obamacare tax hike at $525 billion over a decade. The estimate now is that the total tax hike will be around $1 trillion over the next ten years. Senators Burr, Coburn, and Hatch would wipe this entire tax increase off the books.” Unpopular companies singled out for tax treatment. Kevin Hassett and Alan Viard: “Almost two years ago, we warned against ongoing efforts to undermine the rule of law by singling out unpopular taxpayers for disadvantageous tax rules that don’t apply to anyone else. Recent efforts have targeted five companies — BP, Chevron, ConocoPhillips, ExxonMobil, and Shell — for special tax increases that would apply to no other companies. Apparently, no bad idea ever dies.” AUDIO — The future of corporate tax reform

The Fed continues to taper

NEW RESEARCH — Endogeneity: Why policy and antibiotics fail. John Makin: “Quantitative easing (QE) and fiscal stimulus are becoming less effective. Why is that? The reason is the same as the reason that antibiotics, overused in an attempt to cure infections including common colds, are becoming less and less effective with more intensive use: endogeneity.” The good and the bad for Yellen. Phillip Swagel: “The good news for Janet Yellen is that she will take the reins at the Federal Reserve on Saturday with inflationary pressures subdued and the United States economy finally in an upswing . . . the difficult part for Ms. Yellen is that she faces a new set of challenges involving not just monetary policy but also broader questions regarding the role of the Fed.” Twelve predictions about the future of the Fed. Alex Pollock: “The Fed’s lender-of-last-resource function, or the ability to create ‘elastic currency’ in a crisis, will continue to be necessary for at least another 100 years . . . in the intermediate term the Federal Reserve will be insolvent on a mark-to-market basis . . . there will be a ‘Federal Reserve Reform Act’ of 2000-something and/or 2100-something, at least once or twice, in the Fed’s second century.”

Spotlight on housing
NEW RESEARCH — Homeownership rate remains unchanged despite loosening of credit standards. Edward Pinto: “The homeownership rate, as reported by the US Census Bureau, stands today at 65.3 percent. When adjusted for the millions of homeowners who are seriously delinquent, the rate drops to 62.7 percent. This is virtually unchanged from the rate of 61.9 percent in 1960, notwithstanding a dramatic loosening of lending standards over the last 50-plus years.” NEW RELEASE — Mortgage Risk Index (January). Edward Pinto:: “2013 saw substantially increasing credit risk for Fannie Mae, Freddie Mac, FHA, and the Rural Housing Service (RHS) as reported by the National Mortgage Risk Index for home purchase loans (NMRI-P) published by the AEI International Center on Housing Risk.”

In other news
Download the free AEI book of the week! Privatizing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks by Peter Wallison, Bert Ely, and Thomas Stanton Crisis in Greece continues. Desmond Lachman: “A growing chorus of senior European policymakers, including ECB President Mario Draghi and European Commission President Jose Barroso, keep reassuring us that the worst phase of the Euro crisis is over. They also keep telling us that there is now no risk of any country leaving the Euro. Evidently they are not paying much attention to the recent worsening in political and economic developments in Greece. For those developments are now very much heightening the risk that we will again be talking about Greece leaving the Euro before the year is out.” NEW RESEARCH — Tech policy lacks well-rounded experts. Richard Bennett: “Technology policy is especially difficult because it combines four complex disciplines: law, economics, engineering, and policy analysis. Very few people have comprehensive backgrounds in all four fields, so they tend to rely on the judgments of people with stronger grounding. But policy advocates often misstate facts in their own areas of expertise, either intentionally or as a result of subconscious bias.”

Mark your calendar
2.6 Jobless claims estimate 2.7 January employment situation data released 2.12 AEI event: Banks and governments: What’s the deal? 2.18 AEI event: The Detroit bankruptcy: Conflicts and implications

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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. If you were forwarded this message, click here to subscribe to AEI newsletters. Click here to unsubscribe or manage your subscriptions. American Enterprise Institute for Public Policy Research | 1150 Seventeenth Street, NW, Washington, DC 20036 | 202.862.5800 | www.aei.org