Economic Daily Outlook




Budget Feud Erupts Again

Republicans are likely to unveil a budget plan next week that will cut 2013 federal spending below the level the two parties negotiated last August, prompting Democrats to complain that they are reneging on the agreement.

GOP leaders respond that the figure, reached after tough talks and sacrifices by both sides, always was intended as an upper limit, not an ironclad amount.

Tax Reform vital for economy: former policymakers

Tax reform and infrastructure investment are essential to rebuilding the U.S. economy, former U.S. policymakers said on Wednesday.

Paul Volcker, who headed the Federal Reserve in the early 1980s, advocated bold steps to overhaul the taxation system for both corporations and individuals and it should be on a scale even more ambitious than the rate reductions seen in the 1980s.



Bernanke Aims to Reassure Community Banks on Dodd-Frank

Federal Reserve Chairman Ben Bernanke assured community banks Wednesday that they aren’t the intended target of many new regulations largely aimed at bigger banks.

Speaking at a Independent Community Bankers of America convention, Bernanke stressed that the Fed wants to make sure that new Dodd-Frank regulations don’t deal an unfair blow to small banks, according to his prepared remarks. Rules on capital, liquidity and risk management should principally apply to large institutions, he said.

SEC Cracks Down on Pre-IPO Trading

Federal regulators are cracking down on an obscure but booming market for trading shares in companies before they go public.

The Securities and Exchange Commission brought charges against two money managers, alleging they misled and overcharged investors on funds formed to buy shares of Facebook Inc., Twitter Inc. and other social-media companies.



State lawmakers blast House GOP’s medical malpractice reform bill

The nation’s leading advocacy group for state lawmakers wrote to House leaders on Wednesday to share their “strong, bipartisan opposition” to federal medical malpractice reform because it would infringe upon states’ rights.

House Republicans are seeking to pass a tort reform bill capping non-economic damages at $250,000 next week as a way to pay for repealing the health reform law’s Medicare cost-cutting board. The bill to repeal the Independent Payment Advisory Board (IPAB) has broad support from healthcare groups and some Democrats, but tort reform legislation is more controversial.

OPINION: Reopening the Debate Over How to Pay for Long-Term Care Services

Since last year’s demise of the CLASS Act, those of us worried about how the U.S. will finance the long-term care needs of the frail elderly and younger adults with disabilities have been looking for an opportunity to reopen the issue. Today, in a small first step in that direction, about two dozen state and federal officials, advocates, insurance company executives, and researchers met privately for almost six hours to exchange ideas.

The group wants to keep a low profile and asked me not to identify any of the participants. And they are very far apart on important questions. But they agreed on some key issues: The nation is poorly prepared to face the high cost of long-term care and the current system (built on Medicaid, out of pocket payments, and a handful of consumers who own private long-term care insurance) is not sustainable.



Clouds Hover Near Solar Firms

The U.S. solar-energy industry enjoyed a banner year in 2011, with a record amount of generating capacity installed, but the outlook is clouded by uncertainty over federal support and a possible trade war with China over solar-power components.

Last year the U.S. installed 1,855 megawatts of solar capacity, more than twice as much as in 2010, according to the Solar Energy Industries Association, a trade group. The big growth in installations was driven by rapidly falling solar-panel prices and other costs, which make solar more competitive with traditional sources of electricity, and by the year-end expiration of a federal subsidy, which compelled many companies to finish projects to take advantage of the aid.

EDITORIAL: Hope for a Good Transportation Bill

Against heavy odds, Congress may yet produce a decent national transportation bill that would make needed investments in roads, bridges and mass transit without undermining environmental protections or providing handouts to big polluters.

The Senate gave hope of a such an outcome when it approved on Wednesday a two-year reauthorization bill that would funnel $109 billion to states and communities for mass transit and bridge-and-road projects, many of which have been deferred for years. The Senate majority leader, Harry Reid, mustered enough votes to defeat several destructive amendments while approving a very good one.



OPINION: The Bill for ObamaLoans

Speaking of March Madness, the annual college basketball tourney has nothing on college financing. A recent report from the Federal Reserve Bank of New York has the disturbing details for taxpayers.

Thanks to President Obama, the government now stands behind almost the entire student-loan market. That debt pile is expanding fast and it turns out the borrowers are less reliable than advertised.



Lockheed urges action on U.S. debt before election

Lockheed Martin Corp (LMT.N), the largest U.S. weapons maker, on Wednesday urged Congress to act quickly to avert an additional $500 billion in defense cuts that would begin in January, warning that uncertainty about the future was dampening investment and hiring across the industry.

Lockheed Chief Executive Bob Stevens told the Senate Aerospace Caucus on Wednesday the very threat of the cuts — which would double $487 billion in cuts already planned for the next decade — was already having a chilling effect on industry.


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