Movement in Budget Impasse

Social Security and taxes will be at the forefront of government discussions over a deficit deal as Congress continues seeking a proposal that will allow the U.S. government to meet its August 2 deadline for repayment of debt obligations.

Taxes have been the greatest 'stumbling block' keeping government discussions from formalizing a deficit deal. As the article states, "Until now, Republicans have rejected any tax increases, while Democrats have insisted on including some."

Compromise is likely to occur in the coming weeks as Congress seeks to develop a long-term plan that will fuel further economic recovery.

Wall Street Journal, July 7, 2011
Movement in Budget Impasse

A Quantitative Assessment

The QE2 program ends today after eight months and $600 billion in treasury bond purchases. Following the program, mortgage rates remain at all-time lows, corporate borrowing rates have decreased, and U.S. stock markets have reacted positively. Based on these measurements the program was successful, however U.S. fiscal debt debates and debt worries in Europe may interfere with the program’s long-term success.

Wall Street Journal, June 30, 2011
A Quantitative Assessment of QE2

Obama Joins Debt Talks

President Obama’s focus in the U.S. debt debate will be an end to tax breaks for wealthy income taxpayers. The president’s tax break focus would have the greatest impact on corporate-jet owners, hedge-fund managers, and oil companies.

Wall Street Journal, June 25, 2011
Obama Targets Tax Breaks

Federal Reserve Policy Meeting Recap

Following a two day policy meeting the Federal Reserve announced no change in the discount rate and an expected ending to their QE2 bond buying program. The Federal Reserve also revised down U.S. economic growth rates as noted below:

The economy is now expected to expand at a rate of around 2.7% to 2.9% this year and 3.3% to 3.7% in 2012. That is below estimates given after the last meeting in April for growth of 3.1% to 3.3% in 2011 and 3.5% to 4.2% next year.

Ben Bernanke also held his second press conference today recapping the two day meeting. Of note, it seems deflation risks have become less of a factor following the QE2 bond buying program. Core inflation projections for 2011 can be found below:

The 2011 projection for underlying inflation—stripping out volatile food and energy costs—was raised to between 1.5% and 1.8% from April's forecast of 1.3% to 1.6%.

Wall Street Journal, June 22, 2011
Fed on Hold Amid Slow Recovery

U.S. Stocks Rise on Hopes for Greece

Wall Street Journal, June 21, 2011
U.S. Stocks Rise on Hopes for Greece

Europe Wrangles Over Greece

Wall Street Journal, June 20, 2011
Europe Wrangles Over Greece

Greek Debt Concerns Further Weaken the Euro

Wall Street Journal, June 16, 2011
Extreme Bets Versus Euro Rise