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Friday, June 29, 2012

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Economic Events of the Week

FridayPersonal Income and Outlays

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Story of the Day
Health Care Fight Heads to Ballot Box (CQ)

Washington Update
Health Care Ruling: GOPers Pounce on SCOTUS Tax Talk (Politico)

Market Talk
Kansas City Fed Reports Slowing Manufacturing Activity (The Wall Street Journal)
US Jobless Struggle As Economy Grows 1.9% (Financial Times)
Personal Spending In U.S. Probably Stalled On Smaller Job Gains (Bloomberg)
A QE Timeline (Calculated Risk Blog)

Editorials & Opinions
Who Will Pay the ObamaCare Uninsured Tax? (Keith Hennessey Blog)
It's Up to the Voters Now (The Wall Street Journal Editorial)
The Umpire Strikes Back (Dana Milbank in The Washington Post)

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Story of the Day

Health Care Fight Heads to Ballot Box (CQ)

Once the Supreme Court announced that the health care law is not going away, House Republicans immediately scheduled a vote to repeal it. But that’s about as far as the GOP will be able to take it this year. Instead, Republican lawmakers will turn the goal of overturning what they call “Obamacare” into one of their top campaign themes, making the case that the only way to get rid of the law is to give them House and Senate majorities and put Mitt Romney in the White House. “I think the real outcome of today’s decision is to strengthen our resolve to make sure that this law is in fact repealed,” House Speaker John A. Boehner, R-Ohio, said after the court made its ruling Thursday morning. “We’re going to work every single day between now and Election Day, and the American people then will get an opportunity to make their decision on Election Day, because elections have consequences.” The Republicans plan to start quickly by bringing a bill to repeal the entire law to the House floor on July 11, just after returning from the July Fourth recess.


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Washington Update

Health Care Ruling: GOPers Pounce on SCOTUS Tax Talk (Politico)

The Supreme Court handed Republicans a gift-wrapped talking point Thursday that could haunt Democrats through November by decreeing that the health care law’s individual mandate is actually a tax increase. It’s a silver lining for the right, which was otherwise dealt a massive blow by the Obama administration’s big win in court on Thursday morning. It took no time at all for critics to start piling on. Everyone from tea party stars to establishmentarians to possible 2016 presidential contenders seized on the tax language in the Supreme Court’s 5-4 majority opinion, which included Chief Justice John Roberts. “‘Obamacare’ raises taxes on the American people by approximately $500 billion,” said Mitt Romney, the presumptive Republican presidential nominee. “‘Obamacare’ cuts Medicare by approximately $500 billion. And even with those cuts, and tax increases, ‘Obamacare’ adds trillions to our deficits and to our national debt and pushes those obligations on to coming generations.”


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Market Talk

Kansas City Fed Reports Slowing Manufacturing Activity (The Wall Street Journal)

Manufacturing activity in the Federal Reserve Bank of Kansas City‘s district is slowing sharply this month as reports on business conditions retreat after showing strength in May, according to a report released by the bank Thursday. The Kansas City Fed’s manufacturing composite index–an average of the indexes covering production, new orders, employment, delivery times and raw-materials inventories–fell to 3 in June retracing a rebound to 9 in May up from 3 in April. Readings above zero denote expansion. On a year-over-year comparison, the composite index dropped to 24 from 27. Uncertainty was evident in the survey responses although production remains positive, the report said.

US Jobless Struggle As Economy Grows 1.9% (Financial Times)

The US economy grew at an annualised rate of 1.9 per cent in the first quarter of 2012, as the world’s largest economy battles with a less robust pace of consumer spending and export growth, while fresh jobless claims data failed to alleviate concerns. The Bureau of Economic Analysis left its final estimate of first-quarter GDP growth unchanged from the previous forecast, in line with expectations. In the fourth quarter of 2011, real GDP increased 3 per cent. Meanwhile, fresh data on the US labour market failed to lift sentiment. The number of Americans who filed for unemployment insurance fell slightly last week but remained at high levels, failing to signal any major improvement in the jobs market. First-time claims for jobless benefits fell 6,000 to 386,000 in the week ending June 23, US labour department data showed. The previous week’s reading was revised up to 392,000 from 387,000, matching an April figure as the steepest of 2012. Analysts surveyed by Bloomberg had expected claims to fall to 385,000.

Personal Spending In U.S. Probably Stalled On Smaller Job Gains (Bloomberg)

Consumer spending in the U.S. probably stalled in May as slower job growth and subdued wage gains prompted Americans to cut back, economists said before a report today. Household purchases, which account for about 70 percent of the economy, were unchanged after a 0.3 percent gain in April, according to the median estimate of 75 economists surveyed by Bloomberg News. Another report may show consumer sentiment dropped in June to a six-month low. Merchants from CarMax Inc. to Red Robin Gourmet Burgers Inc. are feeling the pinch of restrained household incomes tied to a jobless rate that’s exceeded 8 percent for 40 straight months. While gasoline prices are less of a burden on Americans, the absence of bigger employment gains will make it tough for spending and the expansion to accelerate.

A QE Timeline (Calculated Risk Blog)

By request, here is an updated timeline of QE (and Twist operations): November 25, 2008: Press Release: $100 Billion GSE direct obligations, $500 billion in MBS; December 16, 2008 FOMC Statement: Evaluating benefits of purchasing longer-term Treasury Securities;  January 28, 2009: FOMC Statement: FOMC Stands Ready to expand program; March 18, 2009: FOMC Statement: Expand MBS program to $1.25 trillion, buy up to $300 billion of longer-term Treasury securities; March 31, 2010: QE1 purchases were completed at the end of Q1 2010; August 27, 2010: Fed Chairman Ben Bernanke hints at QE2: Analysis: Bernanke paves the way for QE2...


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Editorials & Opinions

Who Will Pay the ObamaCare Uninsured Tax? (Keith Hennessey Blog)

Now that the Supreme Court has upheld the constitutionality of the Affordable Care Act, who will pay the tax for not having health insurance? CBO answered this in April 2010. They projected that in 2016, when the mandate is in effect and the tax is fully phased in, there will still be 21 million uninsured people.  This belies the advertised “universal coverage” label. Oversimplifying a bit, for most people the tax in 2016 will be $750 per adult and $375 per kid. But while 21 million people will be uninsured, CBO said “the majority of them will not be subject to penalty.” That’s an understatement.

It's Up to the Voters Now (The Wall Street Journal Editorial)

If there is a modicum of hope in Chief Justice John Roberts's inglorious one-man opinion Thursday, it is that Americans were reminded again that they cannot count on others to protect their liberty. Certainly judges aren't reliable. They can be turned by the pressure of the media and the whims of vanity. If Americans want to repeal ObamaCare, their only recourse is to demand it at the ballot box in November. The Affordable Care Act is more unpopular now than when it passed, yet it will grind on toward implementation in a second Obama term. The President made that clear in his remarks Thursday, deploying the usual half-truths he used to jam the law through Congress. He continued to claim that no one will lose his current health insurance, though millions are sure to do so as they are dropped from business coverage and tossed into Medicaid or government exchanges. The great irony is that Mr. Obama still couldn't bring himself to admit that the purchase mandate is a "tax," though that is the only logic by which the Chief Justice upheld it. (See above.) Mr. Obama referred to it instead with the euphemism that individuals must "take the responsibility to buy health insurance."

The Umpire Strikes Back (Dana Milbank in The Washington Post)

John Roberts was the first justice to appear from behind the curtains when the buzzer sounded in the Supreme Court chamber at 10 a.m. sharp. He forced a tight grin and scanned the audience, which, on this historic day, included several members of Congress and retired Justice John Paul Stevens. The only hint of what was afoot came from Justice Antonin Scalia, who, taking his place at the chief justice’s right, bowed his head as if in mourning. “I have the opinion in NFIB v. Sebelius ,” Roberts announced matter-of-factly, as if stating that he was about to admit a new crop of lawyers to the Supreme Court Bar. His words were so measured and his delivery so calm that 14 minutes elapsed before he signaled which way the decision had gone — by answering those who wanted to declare the Obama health-care law unconstitutional with these two dreaded words: “we disagree.” In the audience, Sen. Orrin Hatch (R-Utah), an opponent of the law, folded his arms across his chest, his mouth slightly agape. Sen. John Barrasso (R-Wyo.) put his chin in his hand. Rep. Tom Price (R-Ga.), a leader of House conservatives, shook his head. Scalia was reclining in his chair, staring blankly. Justice Clarence Thomas was practically horizontal. Roberts explained why he had sided with the four liberal justices: not because he thought the health-care law was “good policy” but because there wasn’t a constitutional reason to invalidate the individual mandate at the core of the law. “We possess neither the expertise nor the prerogative to make policy judgments,” he wrote in his majority opinion, which he read in part from the bench. “Those decisions are entrusted to our nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.”


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