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Monday, February 24, 2014

Tuesday: Case-Shiller and FHFA House Prices, Richmond Fed

by Calculated Risk on 2/24/2014 09:13:00 PM

An excellent article from Jared Bernstein: Lessons From the Recovery Act. A few excerpts:

A deeper understanding of the economic damage should have prevented the precipitous pivot away from stimulus toward deficit reduction.
One of my key complaints was that policy pivoted to austerity way too soon.  I never understood why infrastructure spending was only on "shovel ready" programs.  Since recoveries from financial crisis recessions are always sluggish, the investments in infrastructure could have been significantly higher and over a longer period.
[I]in those days I learned the power of the single worst analogy I know: “just as families have to tighten their belts in tough times, so does the government.” It’s not just that this is wrong; it’s that it’s backward. When families are tightening, government (including the Federal Reserve) must loosen, and vice versa. But the phrase, uttered by no less than the president himself at times, makes so much folksy sense that it too infected the policy and precipitated the pivot.
Absolutely correct. Every time I hear this - including from President Obama - I cringe. And more:
About one-third of the stimulus package went to tax cuts. There’s an excellent political rationale for that apportionment, but particularly given the diagnosis noted above, tax cuts’ bang-for-buck in terms of jobs is less than optimal. First, for the cuts to stimulate the economy, recipients have to spend the extra money, not save it. In a deleveraging cycle, that’s a heavier lift. Second, when they do spend the money, they need to spend it on domestic goods. So there’s a lot of potential leakage.

It’s also the case that one-quarter of the tax cuts went to relief from the alternative minimum tax that would have happened anyway, so that part wasn’t even stimulus (which by definition means new spending or tax cuts).
I've argued before that even though the stimulus package was an obvious success, some parts of the package (like certain tax cuts) were not very effective. The debate now should be on how well each part of the package performed.

• At 9:00 AM ET, the S&P/Case-Shiller House Price Index for December. Although this is the December report, it is really a 3 month average of October, November and December. The consensus is for a 13.3% year-over-year increase in the Composite 20 index (NSA) for December. The Zillow forecast is for the Composite 20 to increase 13.5% year-over-year, and for prices to increase 0.7% month-to-month seasonally adjusted.

• Also at 9:00 AM, the FHFA House Price Index for December 2013. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.4% increase.

• Also at 9:00 AM, the Chemical Activity Barometer (CAB) for January from the American Chemistry Council. This appears to be a leading economic indicator.

• At 10:00 AM, the Conference Board's consumer confidence index for February. The consensus is for the index to decrease to 80.0 from 80.7.

• Also at 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for February