Photograph by John Moore/Getty Images

Mexican immigrants work on a housing construction site on May 3, 2013 in Denver, Colorado.

A Social Security Administration analysis says the Senate’s bipartisan immigration proposal would boost U.S. tax revenue, create jobs and increase the gross domestic product over the next 10 years.

Stephen Gross, chief actuary for the agency, says the bill would have a “substantial positive effect” on the economy, in a letter to Florida Sen. Marco Rubio, a Republican who helped draft the legislation and requested the analysis.

The analysis, released today, may aid backers of the legislation, which has been criticized by opponents as a drain on the U.S. economy. A report released earlier this week by the Republican-leaning Heritage Foundation said that creating a path to citizenship for about 11 million undocumented immigrants now in the U.S. would cost taxpayers $6.3 trillion over five decades.

According to the Social Security Administration, the bill would add more than $275 billion in revenue to Social Security and Medicare, increase the gross domestic product by 1.63 percent and add more than 3 million jobs over the next decade.

The Senate Judiciary Committee tomorrow plans to begin considering hundreds of amendments to the legislation.

“The timing couldn’t be better,” said Frank Sharry, executive director of immigrant-rights group America’s Voice in
Washington. “It’s a game changer.”

Original post is Social Security Report ‘Game-Changer’ for Immigration Bill by Political Capital.

Photograph by Nati Harnik/AP Photo

Employees load a washer and dryer into customer’s car at the loading docks of Nebraska Furniture Mart in Omaha, Neb.

That’s the annualized rate at which the U.S. economy grew in the first quarter, according to an estimate by the Commerce Department’s Bureau of Economic Analysis.

The figure refers to the rise in the gross domestic product — the value of goods and services produced. It’s a major gauge of the health of the economy.

GDP grew by 0.4 percent in the fourth quarter of 2012 and by 3.1 percent in that year’s third quarter.

“Consumer spending, accounting for about 70 percent of the economy, climbed at a 3.2 percent pace in the first quarter, the most since the fourth quarter of 2010,” Bloomberg’s Shobhana Chandra reported.

A drop in defense spending hampered growth. Defense spending fell at an 11.5 percent annualized rate in the fourth quarter.

Original post is Bloomberg by the Numbers: 2.5% by Political Capital.

Photograph by Scott Eells/Bloomberg

A welder welding the frame of a modular housing unit at the Brooklyn Navy Yard in the Brooklyn borough of New York.

The lower-than-expected reading this morning for U.S. economic growth in the first quarter has revealed a few victims even as growth picked up — among them, factories.

“Manufacturing activity remains weak relative to the larger economy,” in part due to federal budget cuts and tax increases, Chad Moutray, chief economist at the National Association of Manufacturers, said in a statement after the GDP release. “We need to get back to a position where the manufacturing sector is once again making significant contributions to output and employment. This means that we need higher GDP growth to get back on track.”

The U.S. economy grew less than forecast in the first quarter as a drop in defense outlays undercut the biggest increase in consumer spending in two years. Business investment also slowed. GDP rose at a 2.5 percent annual rate, lower than forecast, after a 0.4 percent fourth-quarter advance, according to the Commerce Department data.

The GDP figures cap a week of slumping production data, including readings from the Kansas City and Richmond Federal Reserve banks showing contraction in those regions. The Markit Economics preliminary index of U.S. manufacturing fell to 52 in April from a final reading of 54.6 a month earlier, the London-based group said earlier this week.

Disappointing April production figures from the Euro zone, Germany and China are also weighing on the U.S., Scott Anderson, chief economist at Bank of the West in San Francisco, said in a research note.

“The data suggest the U.S. economy is participating in a synchronized global manufacturing slowdown,” Anderson said.

Next week will bring results from the Dallas Federal Reserve, Chicago’s business barometer and the Institute for Supply Management’s manufacturing survey. This will confirm if things are indeed turning for the worse.

Original post is Behind the Growth: Manufacturing Lags by Political Capital.

Photograph by Scott Eells/Bloomberg

The National Debt Clock in New York.

The biggest single reason for higher projected U.S. tax receipts over the next decade has absolutely nothing to do with the rate increases on top earners that took effect last month.

That’s only responsible for raising taxes by 0.2 percent of the gross domestic product, according to Congressional Budget Office data released today.

What’s much larger can be traced to “bracket creep.”

Income increases faster than the inflation adjustments in the tax brackets, pushing more and more income into higher brackets.

That creepy effect, CBO says, will increase government revenues by 0.9 percent of GDP.

At least it’s not the late 1970s, when taxpayers faced a combination of double-digit inflation and tax brackets that didn’t automatically adjust.

Original post is ‘Bracket Creep:’ Gov’t Money-Maker by Political Capital.

Photograph by Andrew Harrer/Bloomberg

Contractors lay down flooring at a construction site in Lorton, Virginia.

Timing is everything.

Before Election Day, it was reported that the nation’s unemployment fell below 8 percent for the first time in nearly four years.

After Inauguration Day, it’s reported that  the economy contracted, with the nation’s gross domestic product dropping at an annual rate of 0.1 percent in the fourth quarter of 2012, its worst performance since the second quarter of 2009, when the world’s largest economy was still in recession. And a remarkable swing from the third-quarter growth of 3.1 percent.

President Barack Obama rode to re-election in November with a sizable Electoral College majority in an election that was said to be inextricably linked to the health of economy. It turns out the economy was in a stall during that fourth quarter of 2012.

Behind these numbers, there were gains. Consumer spending grew during the quarter. Home sales are rebounding.

“Consumer confidence has been rising, and consumer spending has been rising, but there’s more work to do,” White House press secretary Jay Carney said in his press briefing today, “and our economy is facing a major headwind.”

“I don’t think any time you see a reduction in economic growth that it’s good news, but I think we need to understand what lies underneath it, the sharp drop in particular in defense spending, which is consistent with what we know has been going on in preparation for the possibility of sequester” of Defense Department and other discretionary spending,’ Carney said. “That was the case towards the end of the year when sequester was supposed to kick in on Jan. 1.”

“The broader point, I think, is that — and I think there’s been some reporting to reflect this — that there are — there remain even within this report indications whether it’s housing or consumer spending or business investment that we continue to be poised for positive economic growth and job creation,” he said. “And we need to make sure that in Washington we are not taking actions that undercut that progress that we have been making and can continue to make and will continue to make.”

Democratic activist Brad Woodhouse noted that one economist put the bad news-good news mix this way:

Paul Ashworth at Capital Economics called it “The best-looking contraction in U.S. GDP you’ll ever see.” wapo.st/VnIaCt

— Brad Woodhouse (@woodhouseb) January 30, 2013

The re-elected president’s popularity is up again, at its highest level since his first year in office.

Timing still is everything.

And this president’s party has a lot of time — four more years — to deliver a GDP that looks good on Election Day 2016.

Original post is Obama’s Economy: Timing Everything by Political Capital.

Photograph by Munir uz Zaman/AFP via Getty Images

U.S. Army soldiers attached to 2nd platoon, C troop, 1st Squadron (Airborne), 91st U.S Cavalry Regiment, 173rd Airborne Brigade Combat Team operating under NATO sponsored International Security Assistance Force (ISAF) looks through his rifle as a Medevac helicopter takes off during a patrol near Baraki Barak base in Logar Province on Oct. 13, 2012. T

Written with Richard Rubin

Just as the U.S. gross domestic product is taking a hit from lower defense budgets, federal spending cuts viewed as unthinkable a few months ago — $1.2 trillion falling heavily on the Pentagon — are seen as likely to happen starting March 1.

What’s known as budget sequestration, designed to be so draconian that it would push Democrats and Republicans to compromise on taxes and spending, has hardened the parties’ positions. If the cuts occur, they would require $600 billion in across-the-board military spending reductions over a decade that Defense Secretary Leon Panetta called “devastating.”

House Republican leaders, weakened by Obama’s re-election and Democratic gains in the House and Senate, are resigned to accepting the cuts rather than risking a deal with Obama that would mean higher taxes. Democrats see little political benefit in accepting Republican offers to forestall the reductions in exchange for cuts to entitlement programs such as Medicare.

“I want to make sure we save that money,” said Senator Lamar Alexander, a Tennessee Republican. “I’m not going to vote to change it unless we replace it.”

Alan Krueger, chairman of Obama’s Council of Economic Advisers, said the decline in GDP underscores the need for legislation that does away with the automatic spending cuts “to avoid self-inflicted wounds to the economy.”

Congress must “move toward a sustainable federal budget in a responsible way that balances revenue and spending, and replaces the sequester, while making critical investments in the economy that promote growth and job creation and protect our most vulnerable citizens,” Krueger said in an e-mailed statement.

Today’s economic report may not change the underlying political standoff that has prevented Congress from avoiding sequestration.

See the full report on defense cuts and the GDP at Bloomberg.com.

Original post is Defense Cuts: Unavoidable, Despite GDP Contraction Pinned on Defense? by Political Capital.

Photograph by Sam Hodgson/Bloomberg

Workers build a house in Rancho Santa Fe, California.

That’s how much economists predict the U.S. GDP will expand in 2013, according to the median of 86 projections compiled by Bloomberg.

Growth will slow down from 2.2 percent in 2012, as the federal government seeks to rein in its budget deficit through spending cuts and tax increases. Even if the impact of the so-called fiscal cliff is ultimately blunted, Congress already has agreed on discretionary spending reductions that may curb economic growth somewhat.

With assistance from Rich Miller.

Original post is Bloomberg by the Numbers: 2% by Political Capital.

Photograph by Roger Wollenberg/Getty Images

Speaker of the House John Boehner, Senate Majority Leader Harry Reid, House Minority Leader Nancy Pelosi, and Senate Minority Leader Mitch McConnell emerge from the White House on Nov. 16, 2012.

One might think, given all the debate over tax increases and spending cuts and averting a “fiscal cliff” at year’s end, that the White House’s pursuit of a $4-trillion, 10-year solution suggests the government’s habit of deficit spending could be cured.

One might be wrong.

“It will take almost $6 trillion in deficit reduction during the next decade to make a minimum down payment that puts the nation on a sounder fiscal footing.”

This is the conclusion of a Bloomberg Government study that examines the ratio of federal debt to the nation’s gross domestic product.

That ratio stands at about 73 percent today.

The “most likely” package to come out of the negotiations over averting the fiscal cliff of automatic tax increases and spending cuts scheduled at year’s end — that $4 trillion agreement — would allow the ratio of debt to GDP to grow to 80.2 percent, the BGov study shows. The study, written by BGov Director of Research Robert Litan and three other analysts, shows that it would require a $5.9-trillion, 10-year deficit reduction plan to hold the debt-to-GDP ratio at today’s level.

And holding course is not the most prudent course.

“`A 60 percent debt-to-GDP ratio is considered the financially sound level for countries to maintain,” Litan and company write. That would require a $9-trillion plan, more than double what’s likely to come out of the cliff talks.

Original post is Fiscal Cliff Deal No Deficit Solution by Political Capital.

Photograph by Andrew Harrer/Bloomberg

Shoppers at the Fair Oaks Mall in Fairfax, Virginia.

The latest figures on third-quarter economic growth are best described by a cliché: The devil is in the details.

Gross domestic product accelerated to a 2.7 percent annual rate, revised upward from a 2 percent pace previously reported by the Commerce Department and well above the 1.3 percent gain in the second quarter of 2012.

That sounds like an impressive performance — and would have been a widely noticed number before Nov. 6, when it turned out that a reported 2 percent growth in GDP was good enough for President Barack Obama’s re-election.

A closer look at the report shows consumer spending, the biggest part of the economy, was revised downward to a 1.4 percent pace, the slowest in more than a year. Moreover, a big chunk of the pickup in growth came from a stronger-than-projected buildup of inventories, which poses a potential headwind for this quarter.

Wage gains also were revised downward for the past two quarters, helping explain why American consumers may have restrained purchases and hardly encouraging for the outlook in coming months unless the labor market begins to show faster Among the other not-so-rosy details, business investment in equipment and software fell instead of being unchanged last quarter, the GDP revisions showed. And while exports expanded, the pace was the weakest in three years. That leaves housing as the one silver lining: growth in residential investment almost matched the previous estimate.

In short, the picture is much weaker once we get past the headline GDP number. Economists, in research notes today, echoed the sobering view. “Upgrade now, downgrade later,” wrote Credit Suisse’s Jonathan Basile, underscoring the risk of slower growth this quarter. Deutsche Bank Securities Inc.’s Joseph LaVorgna said he was “troubled by the mix,” and Daniel Silver at JPMorgan Chase & Co. noted there’s “not much to celebrate.”

Original post is GDP Pushed Up — Yet Look Closer by Political Capital.

Photograph by Sam Hodgson/Bloomberg

The Otay Mesa Port of Entry in San Diego, California.

The nation’s gross domestic product grew by 2 percent in the last quarter.

The Obama White House hailed this as “further evidence that the economy is moving in the right direction” — Council  of Economic Advisers Chairman Alan Krueger’s words in a blog-posting.

Republican challenger Mitt Romney called it disappointing — Obama inherited an economic problem, Romney said campaigning in Ohio today, but  “what he did with what he inherited made the problem worse.”

Bloomberg data show that good growth generally favors the incumbent in a re-election campaign, or the candidate of the incumbent’s party:

Obama’s numbers: GDP grew by 1.3 percent in the second quarter of 2012, and 2 percent in the third quarter.

The recent record of GDP and elections:

– GDP grew 1.3 percent in Republican George W. Bush’s second quarter of 2008, and fell by 3.7 percent in his third quarter. Obama won the White House in a contest with Republican John McCain.

– GDP grew by 2.6 percent in Bush’s second quarter of 2004, and 3 percent in his third quarter. Bush beat Democrat John Kerry.

– GDP grew by 8 percent in Democrat Bill Clinton’s second quarter of  2000, and by 0.3 percent in his third quarter. Vice President Al Gore lost to Bush.

– GDP grew by 7.1 percent in Clinton’s second quarter of 1996, and 3.5 percent in his third quarter. Clinton beat Bob Dole.

–  GDP grew by 4.3 percent in Republican George H.W. Bush’s second quarter of 1992, and by 4.2 percent in his third quarter. He lost to Clinton.

– GDP grew by 5.2 percent in Republican Ronald Reagan’s second quarter of 1988, and by 2.1 percent in his third quarter. His vice president, the first Bush, beat Democrat Michael Dukakis.

Two percent was good enough for Reagan’s party in 1988.

Nov. 6 will tell whether it’s good enough for Obama’s in 2012.

with thanks to Bloomberg’s Chris Middleton for the data.

Original post is GDP and Presidential Elections: 2 Pct Worked for Reagan’s Party by Political Capital.