Economic Daily Outlook



OPINION: Republicans and Fiscal Responsibility (Simon Johnson)

The United States has a great deal of public debt outstanding – and a future trajectory that is sobering (see this recent presentation by Doug Elmendorf, director of the Congressional Budget Office). Yet the four remaining contenders for the Republican nomination are competing for primary votes, in part, with proposals that would – under realistic assumptions – worsen the budget deficit and further increase the dangers associated with excessive federal government debt.

Politicians of all stripes and in almost all countries claim to be “fiscally responsible.” You always need to strip away the rhetoric and look at exactly what they are proposing.

Bernanke warns of slow progress ahead on jobs

Federal Reserve Chairman Ben Bernanke on Wednesday offered a tempered view of the U.S. economy, pouring cold water on the notion that recent upbeat signs herald a stronger recovery.

Bernanke told Congress that unless growth accelerated, the unacceptably high U.S. unemployment rate would not keep dropping.

But he stopped short of signaling further Fed bond purchases, dashing the hopes of some traders in financial markets who were betting on more monetary stimulus.



Bernanke: ‘Volker Rule’ Won’t Be Set by July

Regulators likely won’t have the so-called Volcker rule ready by the July deadline set by the 2010 U.S. financial overhaul, Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday.

“I don’t think it’ll be ready for July,” Mr. Bernanke said during an appearance before the House Financial Services Committee. “We have a lot of very difficult issues to go through. So I don’t know the exact date, but we’ll obviously be working on it as fast as we can.”

Perhaps the most controversial provision of the Dodd-Frank financial law, the Volcker rule will restrict banks from trading with their own money. The rule is named for former Fed Chairman Paul Volcker, who first pitched the idea of banning banks from making bets on financial markets, known as proprietary trading



OPINION: Ryan’s Medicare Revolution (Fred Barnes)

Over the past year, an entitlement revolution has taken place on Capitol Hill. It has gotten relatively little attention from the media. Yet its implications for the budget deficit and the health care of senior citizens are enormous.

The revolution involves Medicare, the health-care program for the elderly and the single biggest cause of America’s looming debt crisis. Reform of Medicare would be achieved by a policy known as “premium support.” It would bring consumer choice and spending restraint to the beleaguered program.

You may not have heard of premium support. But thanks to the efforts of Paul Ryan, the Republican chairman of the House Budget Committee, it is now the leading alternative to current, fee-for-service Medicare. Indeed, it is the only credible alternative.

McConnell to skip healthcare reform repeal votes until after election

Senate Republican Leader Mitch McConnell (Ky.) told his colleagues this week that he does not want to vote again on repealing President Obama’s healthcare reform law until after the November elections.

The GOP’s game plan on healthcare is politically sensitive because influential conservative activists have called for repeated votes on repeal. But many Republicans on Capitol Hill want to focus on other issues in the coming months, most notably gas prices and the economy.



Obama to demand Capital Hill vote on killing oil tax breaks

President Barack Obama intends to press lawmakers Thursday to quickly strip billions of dollars in oil industry tax breaks, remarks that will come during his second energy-themed speech in two weeks aimed at blunting GOP attacks over gasoline prices.

Obama will speak Thursday afternoon at Nashua Community College in the swing state of New Hampshire.

“In Nashua, the President will . . . reiterate his call to repeal the unwarranted $4 billion in annual subsides handed out to oil and gas companies, and will urge Congress to take a vote on the repeal in the coming weeks,” a White House official said ahead of Obama’s remarks.



Schools Try to Match the Jobless With 3.4 Million Jobs

EVER since the deep recession hit four years ago, many colleges have been rethinking their continuing education programs, straining to figure out how best to help the many unemployed Americans who have looked to them as a lifeline.

With the unemployment rate still stubbornly high, this rethinking has led to a powerful trend in which many schools, whether prestigious state universities or workhorse community colleges, are trying harder than ever to tailor their continuing-education offerings to where the job openings are — and where the jobs of tomorrow will be.



Euro-Zone Data Disappoints

The euro zone’s unemployment rate rose to a near 15-year high in January, while the annual rate of inflation in the currency area also picked up.

Meanwhile, euro-zone manufacturing activity contracted again in February, dragged lower by weaker performances in the countries at the heart of the region’s debt crisis.

People enter an employment agency in Berlin. The euro zone’s unemployment rate rose to 10.7% in January, the highest since the single currency’s inception.

This triple blow for the euro-zone economy underlines the difficulties policy makers face in restoring growth in the face of austerity programs designed to cut high levels of government debt.

The combination of more people without work and rising consumer prices eating into real incomes suggests consumer spending is likely to make only a modest contribution to growth in the months ahead, leaving the currency area heavily reliant on exports.

Defense budget hearing: Lots to learn for those who pay attention

Congressional hearings on the defense budget can be a bore, and there are so many of them — 11 so far this week.

But seeing them or reading transcripts provides both information and a feel for how the destinies of senior civilian officials and top-ranking Defense Department officials are controlled by legislators, be they knowledgeable or not.

Did you know, for example, that it costs $850,000 to maintain a single soldier for a year in Afghanistan?

Defense Department Comptroller Robert Hale offered that figure Monday at a Senate Budget Committee hearing where Defense Secretary Leon Panetta was the main witness. Hale explained that the number included special allowances for being there, the money spent for supporting other coalition forces and even a share for costs of the organization that produces protective devices used to discover improvised explosive devices.