Busy getting ready for Milken Institute presentation on tax reform this AM (I’ll post bullet points later), but a few pieces in the AM papers caught my (bleary, still-on-other-coast-time) eye:
–If opeds against the “wisdom” of austerity ruled the day, Merkel, Cameron, et al would be crying “Uncle Keynes” by now. Romer in yesterday’s NYT, Summers today, Krugman a few times a day. I completely agree with the economics, and the evidence is alarmingly strong. The problem, in Europe as here, is politics. Politicians are responding to their constituents, who they believe a) have lost faith in stimulus and b) want governments to spend less, not more. Of course, it’s times like this that call for strong leadership and guidance, explaining to people the logic in the articles above in compelling language. What’s notable is that recent events—see French election—suggest that the reality of just how wrong these austerity measures are right now is beginning to change views. There’s an opening for braver, smarter politics.
–Nice piece by Jonathan Cohn summarizing Romney-nomics. Key takeaways: a) the next president is going to have to address the on-going short-term demand contraction and Gov Romney’s plans preclude that; b) supply-side tax cuts for wealthy and spending cuts for low-income programs with worsen inequality and increase poverty.
–The WSJ thinks the housing market is finally…bumping along the bottom. I think that’s about right, but two caveats: a) there are still millions of distressed sales—foreclosures and short sales—in the pipeline, and b) “bumping along the bottom” means housing stops hurting the recovery, it doesn’t mean it helps it. An ongoing problem for us has been that the traditional interest rate mechanisms, including low mortgage rates, have had less traction in this recovery and a big reason for that is the housing overhang.
Those of us who track these data pay attention to the third figure below—looking for a divergence between price movements in distressed and non-distressed sales. If you squint, you can see it, but I expect that difference to grow larger in coming months, and, as the share of distressed sales decline, that’s a positive development for overall prices, housing wealth, and the broader recovery.