House Approves Tax Bill; Health Care Spending Hit Record Low in 2013

Policy Watch

• The House of Representatives passed a bill extending temporary tax incentives for businesses, individuals, and nonprofit organizations in a bipartisan vote of 376-48. Specifically, the temporary provisions include extensions of the earned income tax credit, the child tax credit, and write-offs for teachers’ classroom-supply purchases, state and local sales taxes, and business research. Congress has been perpetually adding to and renewing these temporary credits over the past 30 years in two-year intervals, though this 2014 extension will only be for one year. To make all of the current tax provisions permanent, however, would cost nearly $1 trillion over 10 years, according to the Congressional Budget Office. The bill is likely to be passed by the Senate and is supported by President Obama. [WSJ]

Economic Indicators

• Initial jobless claims fell 17,000 to 297,000 during the week ending November 29, though the 4-week average was pushed up 4,750 to 299,000. Continuing claims rose 39,000 to 2.362 million. The market consensus prior to the announcement was for 295,000 initial jobless claims for the week. [DOL]
• U.S. health care spending increased by 3.6% in 2013, the lowest annual growth rate since the federal government began collecting data in 1960. Spending growth in 2013 fell from the 4.1% rise in 2012, while spending as a share of GDP remained unchanged at 17.4%. Of the $2.9 trillion spent in the health care sector, $936.9 billion was for hospital care, $586.7 billion for physicians and clinical services, and $271.1 billion for prescription drugs. Private insurance enrollment grew by 0.7% in 2013, though private insurance rolls were still below pre-recession levels. The Centers for Medicare and Medicaid Services anticipates that health care spending will swell to $5.2 trillion in 2023, when it will account for 19.3% of the economy, based on projections using 2012 data. [WaPo]
• The Bank of England’s Monetary Policy Committee kept interest rates unchanged at 0.5% due to lingering low inflation and a weak global economic outlook, despite strong 3% GDP growth in the UK. Meanwhile, British Finance Minister George Osborne announced that public spending as a share of economic output will be lowered to its lowest level in 80 years, while the Office for Budget Responsibility forecasts slower growth in 2015 and 2016 at 2.4% and 2.2%, respectively. The Bank of England has not changed interest rates in six years. [Reuters]