Housing Sales Increase As Trump Faces Obstacles To Economic Growth
May 15, 2017
House Budget chair pushing for changes to Medicaid payments; Housing Sales Increase in First Quarter at Fastest Pace in a Decade; Trump Administration faces obstacles to goal of 3% annual economic growth.
- House Budget chair pushing for changes to Medicaid payments. House Budget Committee Chairwoman Rep. Diane Black (R-Tenn.) says she wants to push for a change in the Medicaid reimbursement rate in the upcoming budget resolution “to ensure that Medicaid dollars are used to properly support our most vulnerable conditions.” Black believes that the Medicaid has a “faulty foundation,” claiming that states receive more federal dollars “to cover able-bodied adults above the poverty line who are on Medicaid than they do to support children and the disabled who are well below the poverty line.” According to the Kaiser Family Foundation, Medicaid cost $553.5 billion in fiscal year 2016. On Friday, Speaker Paul Ryan (R-Wis.) said the new budget resolution would include reforms to Medicare as well. House Republicans are also considering cuts to “means-tested” mandatory spending, or welfare programs, as they look to cut spending. The Government Accountability Office reported earlier in the month that U.S. fiscal spending is on an unsustainable path and most annual spending is concentrated in mandatory spending programs including Social Security, Medicare and Medicaid. [The Hill]
Economic Indicators & News
- Housing Sales Increase in First Quarter at Fastest Pace in a Decade. Home sales in the first quarter of 2017 grew at their fastest pace in a decade, indicating that rising prices and slightly higher mortgage rates have not deterred home buyers from rushing into the market. According to the National Association of Realtors, total existing-home sales climbed 1.4% in the quarter to a seasonally adjusted annual rate of 5.62 million, the highest since the first quarter of 2007. Meanwhile, the national median home price jumped 6.9% from the same quarter a year earlier to $232,100, the sharpest price gain in nearly two years. Housing demand remains strong as millennials enter the housing market, yet that trend could change as higher prices weigh on affordability, particularly if interest rates rise. When accounting for population growth, the pace of home sales today reflects what economists consider a normal market like that of the early 2000s, when the pace of sales was just under 5 million homes a year. The pace of sales hit its maximum at roughly 6.2 million in 2005, at the peak of the housing bubble. Price growth, which remains subdued compared with during the housing bubble years, is also increasing as well. [WSJ]
- Trump Administration faces obstacles to goal of 3% annual economic growth. President Trump has a goal of delivering 3% to 4% economic growth year after year, in line with the growth the U.S. saw during the 1980s and 1990s. However, according to the Wall Street Journal, two obstacles stand in the way: the work force isn’t producing enough new workers, and the productivity of those working is not growing fast enough. In the long term, an economy can’t expand faster than the combined growth rates of its working population and their output per hour. According to economists’ projections for the next decade, that combined number is about 1.8%, which is also the long-run growth rate projected for the economy by Federal Reserve officials. As the Baby Boomer generation ages, the growth of the working age population (ages 25-54) has slowed. At the same time, productivity growth has fallen in recent years, reflecting weaker investment and innovation. The workforce is projected to expand at 0.5% annually over the next decade and productivity is projected to expand at 1.3%, for an overall growth of 1.8%. [WSJ]