Spending Daily January 31, 2013

Spending Daily January 31, 2013

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Spending Daily | January 31, 2013

Unions “turning sour” Over New Health Care Law
The Wall Street Journal reports, “Labor unions enthusiastically backed the Obama administration’s health-care overhaul when it was up for debate. Now that the law is rolling out, some are turning sour. Union leaders say many of the law’s requirements will drive up the costs for their health-care plans and make unionized workers less competitive. Among other things, the law eliminates the caps on medical benefits and prescription drugs used as cost-containment measures in many health-care plans. It also allows children to stay on their parents’ plans until they turn 26. To offset that, the nation’s largest labor groups want their lower-paid members to be able to get federal insurance subsidies while remaining on their plans. In the law, these subsidies were designed only for low-income workers without employer coverage as a way to help them buy private insurance. … Top officers at the International Brotherhood of Teamsters, the AFL-CIO and other large labor groups plan to keep pressing the Obama administration to expand the federal subsidies to these jointly run plans, warning that unionized employers may otherwise drop coverage.”

Some Families to be Unable to Afford Insurance Due to Health Care Law “Glitch”
The Associated Press reports, “Some families could get priced out of health insurance due to what’s being called a glitch in President Barack Obama’s overhaul law. IRS regulations issued Wednesday failed to fix the problem as liberal backers of the president’s plan had hoped. As a result, some families that can’t afford the employer coverage that they are offered on the job will not be able to get financial assistance from the government to buy private health insurance on their own. How many people will be affected is unclear. The Obama administration says its hands were tied by the way Congress wrote the law. Officials said the administration tried to mitigate the impact. Families that can’t get coverage because of the glitch will not face a tax penalty for remaining uninsured, the IRS rules said.”

Debt Ceiling: Senate Expected to Allow $450 Billion In New Debt
The Associated Press reports, “The Senate is poised to permit the government to borrow hundreds of billions of dollars more to meet its obligations, putting off one Washington showdown even as others loom in coming weeks. The measure would suspend the $16.4 trillion limit on federal borrowing through May 18, allowing about $450 billion in new debt to be added to the federal ledger, according to an estimate by the Bipartisan Policy Center. The Republican-controlled House passed the legislation last week. A successful Senate vote would send the measure to President Barack Obama, who is expected to sign it into law immediately.”

Higher Taxes and Deficit Spending Put “Crippling Drag” On U.S. Economy
Forbes reports, “The U.S. economy unexpectedly shrank in the fourth quarter, according to preliminary Commerce Dept. estimates released today, as a 15% decline indefense spending overshadowed strong increases in fixed investment and personal income. It would be easy to chalk up the reversal in GDP growth to cutbacks in government spending, but buried within the report are signs of more troubleahead. One big example: Personal income rose $253 billion, or 7.9%, in the fourth quarter but most of that was due to increased dividends, salaries and bonuses designed to escape the higher taxes that kicked in Jan. 1.Those higher taxes, combined with uncontrolled deficit spending, will put a crippling drag on the U.S. economy going forward, according to Van Hoisington and Lacy Hunt of Hoisington Investment Management. They estimate higher taxes will suck $250billion, or 2.6%, from personal income this year and have an even larger effect on the overall economy.”

U.S. Jobless Claims Rose to 38,000 Last Week
According to Bloomberg, “Claims for U.S. unemployment benefits increased more than forecast last week, nearly erasing a slide in the prior two weeks and reflecting the difficulty of adjusting the figures for swings at the start of a year. Initial jobless claims rose 38,000 in the week ended Jan. 26, the most since Nov. 10, to 368,000, the Labor Department reported today in Washington. Economists forecast 350,000 filings, according to the Bloomberg survey median. The increase followed a combined 45,000 drop in the prior two weeks.”

Economic Contraction Means More Fed Action, “Risk On, Baby”
The Wall Street Journal editorializes, “The federal government reported Wednesday that the U.S. economy shrank in the last quarter of 2012, but not to worry. The report is better than it sounds, the stock market is rocking, and in any event the Federal Reserve will take the news as another reason to keep both feet pressed firmly on the monetary accelerator. Bad economy=more Fed cowbell=higher stock prices. Risk on, baby. … The government spending decline deserves a word because the Keynesians are using it to call for more ‘stimulus.’ Thus the spending blitz of 2009-2010 gave a fillip to GDP, though not a sustainable one. The Keynesians now decry the very spending cliff they created. The real story is that the Keynesians promised that the stimulus would kick-start the economy to a higher growth plane. It hasn’t. Growth has sputtered in each of the last three years, and for all of 2012 was only 2.2%. That’s barely above 1.8% in 2011, which was below 2.4% in 2010. The biggestloser in all of this should be the notion that temporary bursts of government spending can produce durable economic expansions.”

GOP Willing to See Defense Cuts Take Place 
David Rodgers writes for POLITICO, “On a hot July night six months ago, 89 House Republicans joined more dovish Democrats to do the unusual for Washington: cut $1.1 billion from the GOP’s proposed budget for defense in 2013. Then came Hurricane Sandy and the New Year’s Day tax bill, and as many as 157 House Republicans voted Jan. 15 to endorse a much bigger cut, taking nearly $10 billion from the Pentagon to help pay for disaster aid. It was a huge swing by any measure and one followed this week by a Monday night Senate vote in which the overwhelming majority of Republicans endorsed their own across-the-board defense cut worth tens of billions of dollars over the next nine years. … House Republicans seem determined to let the cuts take effect if only as payback to President Barack Obama for humiliating them over taxes. The White House and Senate Democrats are so far feigning indifference.”

“Corporations fear big tax hikes in White House budget”
Reuters reports, “Corporations fear they will be the main course on a menu calling for hundreds of billions of dollars in new tax revenue that President Barack Obama is expected to seek in his annual budget proposal, expected within weeks. Fresh off a political win that raised tax rates on the affluent and averted the so-called ‘fiscal cliff,’ Obama is not likely to back away from past proposals he has sought to close tax loopholes and raise taxes on many big companies, said former advisers to the president.”

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