HAPPY HOLIDAYS! HEALTH, HAPPINESS, PEACE
House Speaker Boehner, facing a rebellion in his party, abandoned his plan to avert tax increases for most Americans, throwing budget negotiations into disarray and bringing the prospect of tumbling over the fiscal cliff into sudden focus.
After pulling his bill without taking a formal vote, Mr. Boehner unexpectedly disbanded the House until after Christmas, leaving behind uncertainty about whether Congress and President Barack Obama would be able to avoid $500 billion in spending cuts and tax increases that begin in January.
House Republicans’ refusal to go along with Mr. Boehner’s tax plan represents a rebuke to the speaker that raises questions about his ability to lead his party in further budget negotiations with Mr. Obama. Negotiations between the White House and Mr. Boehner are at a standstill. (…)
White House press secretary Jay Carney said the president will pursue with Congress a budget deal, one that would prioritize extending current tax rates for households making under $250,000 a year.
The Senate is expected to be in session Friday, then recess until Thursday Dec. 27. (…)
“I did my part. They’ve done nothing,” said Mr. Boehner. “Frankly, I’m convinced that the president is unwilling to stand up to his own party on the big issues that face our country.” (…)
Teetering on the Cliff (WSJ)
(…) To put this in raw political terms, Mr. Boehner offered to break a core GOP principle on taxes and Mr. Obama offered him nothing he could take back to his rank-and-file in return. Mr. Boehner is a political leader, not a dictator, and he needs to persuade Members, not beat them into submission.
(…) (Obama) has treated the talks as an extension of the election campaign, traveling around the country at rally-style events at which he berates Republicans for not accepting his terms of surrender. Grant gave Lee more at Appomattox. (…)
The best scenario for the economy now would be for Mr. Obama to offer to extend all the tax rates for six months and start negotiating anew in January. That would give everyone the chance to decompress and back down from the barricades.
The alternative is a de minimis deal, perhaps negotiated in the Senate, that lessened some of the tax-increase damage and then the House might follow. But that still means a big tax increase and months of trench warfare on spending. The media can revel in the GOP’s woes, but the buck still stops with the President.
Enjoy the Republicans’ debacle, but don’t read too much into it (Washington Post)
(…) what comes next depends on what the House leadership learned from this debacle. It could be that they have some 125 or so members perfectly willing to vote for a major deal; if so, the deal that Obama and Boehner were reportedly close to earlier this week could wind up returning even before January 1. Or it could be that what liberals have been saying all along turned out to be true: A plan with an identical result will count to the people who matter in the GOP as a dreaded tax increase if it’s done now, but suddenly it will count as a tax cut if it’s done after Jan. 1, when the current tax rates expire.
If that’s the case, we’re going over the cliff, but a deal could be reached and pass in early January. Or, finally, it could be that what Republicans really want is to never take a vote to confirm the next tax rates, and would rather (as was suggested a while ago) just allow the Senate bill (which would raise rates only for households making over $250,000) to pass — if necessary by voting “present” and letting Democrats supply the votes.
All of these outcomes were plausible before; all that’s changed is the GOP got (another) black eye, and — perhaps — the leadership learned more about the preferences of Republican members.
The bottom line remains that some sort of bill to prevent middle-class taxes from going up and the sequester going ahead — as well as renewing the AMT patch and the Medicare “doc fix” – is virtually certain sooner or later, on slightly better or worse terms. This isn’t like when a party is trying to pass a bill which, if it fails, just goes away. And it’s not even, at least in my view, something with a firm deadline and immediate, devastating, consequences; this won’t lead to a government shutdown.
So I won’t predict the next step, but other than everyone having good fun at the expense of the House Republican leadership — and no question, Boehner and the rest deserve it — it’s just not clear that tonight’s fiasco will change anything.
What now, Mr. President?
Personal consumption expenditures—which measure purchases ranging from cars and clothes to health care and travel—increased 0.4% in November, the Commerce Department said Friday.
When inflation is factored in, consumer spending rose 0.6% in November after falling 0.2% in October.
Personal incomes, meanwhile, rose 0.6% in November, the biggest jump in nine months.
The Commerce Department Friday said that the price index for personal consumption expenditures, the Fed’s preferred gauge for inflation, increased 1.4% year-over-year in November. The Fed targets a level of around 2%.
On a monthly basis, the index fell 0.2% as energy prices tumbled. The price index for energy goods and services was down 4.4%.
The closely watched core PCE index, which excludes volatile food and energy prices, rose 1.5% on a year-over-year basis in November.
Existing homes sold at a seasonally adjusted annual rate of 5.04 million units in November, the National Association of Realtors said Thursday. That marks a 5.9% gain from the previous month and a 14.5% increase from one year ago. (Chart from Haver Analytics)
The number of homes for sale fell from one year ago to 2.03 million, which is the lowest level since the end of 2001.
Condominium sales, which were hit hard during the housing slump amid heavy overbuilding, were up by 33% from one year ago, driven by higher sales in the South, particularly in Washington, Atlanta and Florida. Condos, which have accounted for around 10% of all home sales this year, are “beginning to catch up” with other gains in the single-family market, said NAR Chief Economist Lawrence Yun.
Prices in October rose by 0.5% from September and by 5.6% from one year ago, according to a separate report Thursday by the Federal Housing Finance Agency. That was the largest year-over-year gain since 2006.
Distressed homes accounted for 22% of November sales (12% were foreclosures and 10% were short sales), down from 24% in October and 29% in November 2011. Foreclosures sold for an average discount of 20% below market value in November, while short sales were discounted 16%.
First-time buyers accounted for 30% of purchases in November, down from 31% in October and 35% in November 2011.
All-cash sales were at 30% of transactions in November, up slightly from 29% in October and 28% in November 2011. Investors, who account for most cash sales, purchased 19% of homes in November, little changed from 20% in October; they were 19% in November 2011.
DURABLE GOODS ORDERS RISE
Overall orders for durable goods were up 0.7% last month from October to a seasonally adjusted $220.94 billion, Commerce said. Orders in October rose a revised 1.1%.
Declining demand for civilian and defense aircraft last month were offset by more orders for machinery and motor vehicles and parts.
A key measure of business investment—nondefense capital goods orders excluding aircraft—rose 2.7% in November.
Excluding transportation, November orders were up 1.6%.
Excluding defense, durable orders rose 0.8% in November.
Unfilled orders, a sign of future demand, increased 0.1%. Shipments of durable goods rose 1.5%, while inventories were up 0.2% in November.
The Leading Economic Indicator index from the Conference Board declined 0.2% during November following a 0.3% October gain, initially estimated at 0.2%. Fifty percent of the component series had a positive influence on the index last month. A steeper interest rate yield curve, more building permits, a longer workweek and the leading credit index had the largest positive influences. These were offset by more initial claims for unemployment insurance, lower stock prices, a lower ISM new orders index and lower consumer expectations for business & economic conditions.
Statistics Canada says the pace of annual inflation fell sharply last month to the lowest level more than three years.The agency says prices were up 0.8 per cent year-to-year in November, down from 1.2 per cent increases in each of October and September.
Core inflation slowed to 1.2% from 1.3%.
CHINA FLASH MNI SURVEY UP STRONGLY IN DECEMBER
The Index dropped from 53.8 in November to 52.2 in December but ISI’s seasonal adjustment shows an actual jump from 52.2 to 58.0.