Tag Archives: Existing Home Sales

Economists usually do it with models, so it's rare in economics to be able to conduct a laboratory experiment. Currently, though, we're watching two experiments in different corners of the world that support the idea that stimulus works to repair a troubled economy and austerity doesn't. Japan and the eurozone are, through their actions, demonstrating how economies can move in opposite directions with Japan's stimulus plan succeeding and the eurozone's austerity program failing.

What do you do when you find out Santa Claus doesn't exist? That's the situation former vice presidential candidate/House Budget Committee Chair/potential presidential candidate Rep. Paul Ryan (R-Wisconsin) faces now that the study which provided him with the academic support for budget cuts (aimed principally at so-called entitlements) has been undermined. Harvard economists Carmen M. Reinhart and Kenneth Rogoff in 2010 published a research paper which held that for countries with debt loads equivalent to or greater than 90 percent of annual economic output, ""median growth rates fall by 1 percent, and average growth falls considerably more.""

The explanation from the National Association of Realtors (NAR) for the drop in the Pending Home Sales Index (PHSI) for February has to be viewed with a jaundiced eye. According to the NAR, the PHSI dropped because of the low inventory of homes for sale. Of course, that wasn't offered as an explanation one month earlier, when the inventory of homes for sale dropped to its lowest level since December 1999 and the PHSI increased. But when the PHSI fell in February, and the inventory of homes for sale increased, the still-low inventory became a convenient excuse.

One of the most interesting results of poring through economic data reports is that the details often tell a different story than the headline. The recent report on retail sales is a case in point. While the vast majority of commentators were impressed with a strong 1.1 percent month-over-month increase in overall sales, those who scratched the surface were rewarded for their efforts by learning more than half of the month-over-month increase came from an increase in gasoline station sales as prices. In addition, coverage of the recent report on housing permits and starts was dominated by the increase in both permits and starts. A closer look at the permit-starts data revealed another important phenomenon: a shift from single-family to multifamily construction.

It's been two weeks since the dreaded sequester took effect, and so far, the only casualty has been the White House tour. There actually have been some positives, with both parties presenting budgets. However, both the GOP budget and the Democratic plan have one major similarity: Each is dead on arrival and destined to at best be a one-house budget, which leaves the country back where it was. Setting a target for practical balance would bring us closer to reducing the deficit and with less pain.

The sad fact of the budget sequestration being played out in Washington is how avoidable it was. The sadder fact is that however temporary it might prove to be--and that appears from a distance to be more of a wish than a forecast--it will affect real people, and not well. The effects of sequestration go beyond the impact of jobs loss because defense or other contractors are not hired or because federal workers are furloughed. The effects will put even more homeowners at risk of delinquency, or worse, foreclosure, just at a time when the housing sector is recovering.

President Obama unleashed a predictable firestorm when he proposed during the State of the Union address that the minimum wage be increased to $9.00 an hour from the current $7.25. The reactions were expected: conservative economists criticizing the suggestion while progressives either endorsed it outright or noted the proposal was less than the $9.50 minimum wage proposed by then-candidate Obama.

President Obama faces a budget obstacle in his plans to rebuild crumbling bridges and address other pressing infrastructure needs. Unlike many governments, the United States does not have a separate budget for capital spending, which means each tax dollar is as likely to go to the construction of, say, a courthouse, as it is to paying the salary of a judge or court clerk who works there. What would having a separate capital budget do for the country? For starters, it would rationalize our spending and make it more difficult for lawmakers to lard up spending bills with long-term projects.