Economic Daily Outlook




Fed Officials Weigh Rules-Based Policy That Stay Flexible (Bloomberg Businessweek)

By Steve Matthews and Jeff Kearns

Federal Reserve officials are struggling to find consensus on a policy rule that’s predictable to investors yet flexible enough to adjust to shifts in the economy or markets.

Vice Chairman Janet Yellen and Philadelphia Fed President Charles Plosser this month said rules like one created by Stanford University’s John B. Taylor may help central bankers avoid the impression that they are improvising. “Setting monetary policy in a systematic or rule-like manner leads to better economic outcomes,” Plosser said in an April 12 speech.

Fed officials can’t afford to surprise investors and cause a market disruption that impedes growth or spurs inflation, said former St. Louis Fed President William Poole. At the same time, any policy rule risks tying the hands of Fed officials should the economy suddenly veer from their forecasts.

The policy-setting panel will probably repeat in a statement today that subdued inflation and economic slack will result in “exceptionally low” interest rates through at least late 2014, economists said. The statement is due around 12:30 p.m. in Washington.

The Fed at 2 p.m. will release policy makers’ forecasts for growth, unemployment, inflation and the appropriate path of the federal funds rate over the next several years. Chairman Ben S. Bernanke plans to hold a press conference at 2:15 p.m.



Labor Board Meets Rising Resistance (Wall Street Journal)

By Melanie Trottman

Resistance to new National Labor Relations Board regulations and to the legitimacy of some NLRB members could make it harder for the Obama administration to change federal labor policies.

In recent weeks, a federal appeals court halted a new NLRB requirement that employers hang a poster informing workers of their right to join a union, and a soda bottler the board ruled against in a union dispute brought a lawsuit saying the ruling is moot.

On Tuesday, the Democratic-controlled Senate rejected a measure to overturn a new NLRB regulation that would speed union-organizing elections by preventing employers from completing legal challenges until after the voting.

The measure, advanced by Sen. Mike Enzi (R., Wyo.) and defeated largely on party lines, underscores how the Obama administration’s labor policies are becoming fodder for a battle over jobs and the economy that is shaping November’s elections. The administration Monday had warned that the president’s senior advisers would recommend he veto the Senate measure to “ensure that workers deciding if they wish to be represented by a union have a fair vote in a reasonable amount of time.” The regulatory changes to elections are effective Monday but could still be reversed by courts.



Disability Insurance Causes Pain (The New York Times)

By Eduardo Porter

Every year, when the trustees of Social Security and Medicare publish their report on the programs’ finances they set off a round of partisan bickering about the solvency of the twin programs covering pensions and health care for retired Americans.

Every year, a vitally important issue gets lost in the din: disability insurance payments, which account for almost $1 out of every $5 spent by Social Security, are growing out of control.

Disability insurance takes too many workers out of the job market prematurely. It reduces their lifetime income and, to top it off, slows economic growth. Yet in contrast to the heated arguments about Social Security and Medicare, fixing the disability problem inspires hardly any discussion.

The trustees reported Monday that the government made $128.9 billion in insurance payments to 10.6 million disabled workers and their family members last year, 25 percent more than it received from payroll taxes.

On top of that, five million adults received $33 billion worth of disability benefits from the Supplemental Security Income program for poor Americans. Medicare spent more than $90 billion on benefits for disabled workers, who are eligible for the government health insurance after two years on disability, regardless of their age. And Medicaid spent $110 billion more on the poor disabled.

The disability program offers essential support for disabled workers — many of whom have no chance of holding another job. Some of its growth reflects changes in the population: we are growing older and becoming fragile with age. Similarly, disability rates among women should be expected to rise because more of them entered the work force.

But these factors account for only a small share of the growing cost. They fail to explain why the rolls of the disabled are expanding rapidly for men of all ages, even though Americans are generally in better health.



Hatch looks to free up House-passed energy bills in Senate (The Hill)

By Pete Kasperowicz

Sen. Orrin Hatch (R-Utah) on Wednesday is expected to introduce an omnibus energy/federal land use bill combining several bills that have passed the House over the last year, but have stalled in the Senate due to Democratic opposition. These include bills calling for drilling in the Gulf of Mexico and ending what Republicans say is a moratorium on offshore drilling, as well as bills limiting Environmental Protection Agency (EPA) regulations.

Rep. Steve Pearce (R-N.M.) said Hatch’s bill would be titled the West Act, and would combine all of these bills that Republicans say would expand energy production, reduce federal authority over government-owned lands in the western part of the country, and create jobs.

“He’s going to lump them together and push them out,” Pearce said Tuesday evening on the House floor. A spokeswoman for Hatch confirmed late Tuesday that Hatch would likely introduce the bill on Wednesday.

According to Pearce, Hatch’s bill would include language found in three energy bills the House passed in May 2011. These are the Putting the Gulf of Mexico back to Work act (H.R. 1229), the Restarting American Offshore Leasing Now act (H.R. 1230), and the Reversing President Obama’s Offshore Moratorium act (H.R. 1231).

Also included will be the Jobs and Energy Permitting act (H.R. 2021), which passed last June. That will would make it easier for drilling in the Outer Continental Shelf to comply with the Clean Air Act.



Obama takes his student loan pitch to campuses in North Carolina, Colorado (The Washington Post)

By Amy Gardner

President Obama reached out to crucial young voters here and in Chapel Hill, N.C., on Tuesday with a promise to keep college affordable, in the first two of three campus appearances in battleground states this week spotlighting this key voting group.

Speaking to capacity crowds at the University of North Carolina’s flagship campus and later in the day at the University of Colorado, Obama made his case that congressional leaders must take action before July to prevent interest rates on federal student loans from doubling. On Wednesday, the president will give a similar address at the University of Iowa.

“College education is one of the best investments America can make for our future,” Obama said in Chapel Hill. “This is important for all of us. We can’t price most Americans out of a college education. We can’t make higher education a luxury. It’s an economic imperative. Every American should be able to afford it. So that’s why I’m here.”

Obama and the presumptive Republican nominee, Mitt Romney, now agree that student loan rates should remain low. Both are, not coincidentally, also ferociously courting young voters, who turned out overwhelmingly for Obama four years ago but are less enthusiastic about politics, and more worried about their futures, today.



Afghan war is ending, says White House (The Hill)

By Jeremy Herb and Arnie Parnes

The Obama administration will push in the coming weeks and months the message that the war in Afghanistan is ending.

It’s a campaign pitch that will be trumpeted at next month’s NATO summit in Chicago, where international leaders are expected to sign off on an agreement with Afghanistan’s government that would establish a continued U.S. role in the country after security is handed over to local forces in 2014.

A senior administration official told reporters this week that the U.S. transition from Afghanistan is the most important message the White House will be telegraphing as it moves into the general election. The official acknowledged Americans are weary of the war and said voters want the administration to focus on issues back home, especially concerning the economy.

The message has obvious political benefits for the White House, given the public’s tiring of two major wars. Obama ran as the candidate who would end the Iraq war and focus on Afghanistan.