Despite budget cuts of $85 billion that began in March under the sequester, the economy soared past economists’ expectations of 1.0 percent to 1.7 percent in the second quarter, the Commerce Department reported on Wednesday.
The fresh data shows consumer spending rose 1.8 percent and business investment increased by 9 percent this spring and summer. The numbers runs counter to the assumption of some policy experts that the budget cuts would undermine the economic recovery.
However, it wasn’t all good news. The Commerce Department revised its first quarter GDP figures down to 1.1 percent from 1.8 percent. The generally positive economic data comes before the Federal Reserve’s second of two meetings this week that could produce a hint as to when the central bank will begin scaling back its QE 3 bond buying program. - Read more at Marketwatch
WHY OBAMA’S PLAN IS NOT A TAX CUT
The “Grand Bargain” proposal that President Obama unveiled on Tuesday was mistaken as a tax cut when in fact it “amounts to a small, temporary tax increase to fund a small spending program,” Business Insider’s Josh Barro writes. “But many media accounts give the impression that Obama proposed a tax cut which Republicans are spurning…. Obama proposed a corporate tax overhaul that would cut the corporate tax rate from 35 percent to 28 percent. He would also greatly expand the corporate tax base…. These reforms would mean, in the long run, that the U.S. collects about as much corporate tax as it does under the current system…But in the first few years, the broad base would actually be designed so that revenue would go up. Obama wants to spend this money on infrastructure, community colleges, and promoting manufacturing.” Read more at Business Insider
OBAMA IS ‘SO OVER’ REPUBLICANS
President Obama meets with congressional Democrats on Capitol Hill this morning to rally the troops before the August recess and make another pitch to bypass Republicans with a spate of executive actions and orders on issues like voting rights, health care, job creation, the economy, climate change and immigration. Politico’s Edward-Isaac Dovere writes, “The president is done caring about congressional Republicans calling him a dictator. Or calling him at all … administration officials and advisers say what’s ahead will be more extensive and frequent than previous efforts …. Eventually, executive actions and orders will be unveiled as part of the economic agenda Obama began hinting at in his speeches last week, addressing things like mortgage refinancing and restructuring — which is about as extensive as the White House expects things to get.” Read more at Politico
COULD LARRY SUMMERS EVEN GET CONFIRMED?
Jim Messina, a former top adviser to President Obama, thinks so. That’s despite a wave of opposition to the possibility that the Harvard economics professor and one-time Treasury Secretary will be nominated to succeed Ben Bernanke as Federal Reserve Chairman. “Some political handicappers suggest that Summers is too divisive and would cause a rift with the liberal wing of the party,” says Politico. “These people say it would be too hard to get the 60 votes needed to push Summers through the Senate and that [Fed Vice Chairman Janet] Yellen — widely respected, deeply experienced and with a far lower profile — would be a decidedly easier lift.” Messina told Politico, “I think it is absolutely clear that Larry Summers could be confirmed by the United States Senate. And all of the tough nominations [in the first term] were under my purview, so I think have a little credibility on that front.” Read more at Politico