Economic Daily Outlook




Housing prices fell in December, continue to hurt economic recovery

The nation’s home prices have fallen to their lowest level since 2002, according to a private report, casting a troubling shadow over what has otherwise been a brightening economic recovery.

Although analysts have been nervously eyeing rising oil prices and Europe’s struggling economy, Tuesday’s S&P/Case-Shiller index of property values report offered a sobering reminder that the still-shaky housing market remains one of the most potent threats to a robust recovery.

In December, the index fell 4 percent from a year earlier, after decreasing 3.9 percent in November. The decline was reported one day after another measure showed an encouraging increase in the number of people signing contracts to buy previously owned homes.

The continued trouble in the housing market has proved to be among the most vexing problems in the economic downturn. Even as the stock market has reached a four-year high, the unemployment rate has declined sharply and consumer confidence has perked up, housing remains problematic, putting a damper on economic growth.



Volker urges more reform beyond trading curbs

Former U.S. Federal Reserve chairman Paul Volcker, who lent his name to historic restrictions on banks’ financial market trading, says regulators should not back down in imposing the curbs and that additional reforms to markets are necessary.

“There is a group of banks that don’t like it. They would like to have some freer action to do what they want to do as in the past — you get some opposition to it,” Volcker told reporters at a financial markets conference in Abu Dhabi on Wednesday.

“They shouldn’t be fighting the concept of the rule. The rule against speculative trading is practically doable.”

The “Volcker Rule” is a section of the U.S. Dodd-Frank financial oversight law which bans banks from trading for profit with their own funds. It is due to take effect in July; Volcker championed the idea but did not write the legislation, which was authored by senators.



House Republicans launch their effort to repeal the healthcare reform law’s cost-cutting board on Wednesday with a markup in the Energy and Commerce Health subcommittee. The bipartisan bill — 17 Democrats have co-sponsored it — is expected to sail through, with even ranking member Frank Pallone Jr. (D-N.J.) planning to vote in favor, according to CQ HealthBeat.

House Budget Committee Chairman Paul Ryan opened up Tuesday’s hearing on Medicare’s solvency with an attack on the Independent Payment Advisory Board, or IPAB (Healthwatch has more on that here). And Ways and Means Health Chairman Wally Herger (R-Calif.) announced he’s holding a hearing on the IPAB next Tuesday.

Who’s health care’s key SCOTUS vote?

The Obama administration needs to win over at least one conservative Supreme Court justice to save its health care reform law and it’s pulling out the stops to get one.

Administration lawyers have peppered their briefs with citations to opinions written by Anthony Kennedy and Antonin Scalia, they’ve seized on the arguments made by one of Scalia’s most beloved former clerks and their allies in legal circles have talked up how a decision upholding the Affordable Care Act would play into John Roberts’s legacy as chief justice.

A long shot? Maybe, but it’s the only shot the administration has on a court dominated 5-4 by conservatives.


Worried Dems pressing Obama on gas prices

Congressional Democrats are ramping up pressure on President Obama to tap the Strategic Petroleum Reserve (SPR) to prevent rising gas prices from threatening the economy and their election-year prospects.

They are growing anxious that the price of fuel could reverse their political fortunes, which had been improving due to signs of growth in the economy.

Republicans have hammered Democrats on the price spike, repeatedly noting that gas prices — now at $3.72 per gallon for regular — have doubled since Obama won the White House.


GOP legislators in the House approve bills lessening federal reach into schools

Republican lawmakers on a House committee, after hours of pointed debate with their Democratic counterparts, approved two bills Tuesday that would shrink the federal government’s involvement in education.

“I would get the federal government completely out of the education business if I could,” said Rep. Virginia Foxx (R-N.C.), hours before the straight party-line votes. “But this goes in the right direction.”

Most observers consider it unlikely that Congress will pass a new education law, which it has been trying to do for five years, until after the November election. A Senate committee approved bipartisan legislation last year, but that bill has yet to come to the floor.


U.S. Sees Iran Attacks as Likely if Israel Strikes

American officials who have assessed the likely Iranian responses to any attack by Israel on its nuclear program believe that Iran would retaliate by launching missiles on Israel and terrorist-style attacks on United States civilian and military personnel overseas.

While a missile retaliation against Israel would be virtually certain, according to these assessments, Iran would also be likely to try to calibrate its response against American targets so as not to give the United States a rationale for taking military action that could permanently cripple Tehran’s nuclear program. “The Iranians have been pretty good masters of escalation control,” said Gen. James E. Cartwright, now retired, who as the top officer at Strategic Command and as vice chairman of the Joint Chiefs of Staff participated in war games involving both deterrence and retaliation on potential adversaries like Iran.

The Iranian targets, General Cartwright and other American analysts believe, would include petroleum infrastructure in the Persian Gulf, and American troops in Afghanistan, where Iran has been accused of shipping explosives to local insurgent forces.

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