Subject: Back to work, tax reform, big banks (AEI Economics Ledger) If you have trouble reading this

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Back to work
TESTIMONY How to improve prospects of low-income Americans. Robert Doar: My experience in New York City leads me to suggest that strengthening work requirements in means-tested social services; rewarding work by enhancing programs that support Americans working at low wages; being honest about the benefits of marriage for children and minimizing the impacts of policies that discourage it; promoting proven programs for young men and young parents; and advancing policies that strengthen the economy and connect Americans to work are the best ways to give struggling Americans a hand up . The unemployment trap. Kevin Hassett: Extended unemployment benefits lower workers incentives to search for jobs and to take jobs that may not be a perfect fit, and they may also lower firms incentives to hire new workers. It might seem intuitive that these incentives sometimes lead workers to delay their return to work, but many on the left dispute this. There is, however, a long line of literature demonstrating that unemployment insurance (UI) extends the duration of unemployment spells. More equality, less work. Michael Strain: CBO has confirmed what many economists already knew: Obamacare has both positive and negative features. On the plus side, more people can afford health insurance, and fewer workers feel trapped in jobs they hate because they rely on the company for care. On the negative side, the insurance subsidies impose high marginal income tax rates that discourage work. (There are other plusses and minuses as well, of course. RESEARCH Has growth helped the poor? Aparna Mathur: In many developed countries such as the United States, economic growth has not resulted in a significant decline in poverty rates. At the same time, by most measures, income inequality has widened considerably since the early 1980s. What policies can these countries follow to make growth more inclusive? EVENT VIDEO Minimum wage or earned income tax credit: Which helps the poor more?

Tax reform
Suddenly, an opening for tax reform. Phill Gramm and Mike Solon: Two major hurdles remain: the president's position that he would rather lose federal revenues and economic growth than unfairly lower tax rates, and Democrats' misplaced perception of the importance of the inequality debate to their efforts to hold the Senate. What to make of Dave Camps bank tax. Alex Pollock: Whatever your views on the merits of an asset tax, if you are going to do it, it makes no sense to leave out Fannie and Freddie. No one can honestly deny that Fannie and Freddie are systemically important: this is not an issue about which reasonable people can disagree. Their total assets are $3.3 trillion and $2 trillion, respectively.

Big banks and big regulators

Congress should curb FSOCs power. Peter Wallison: Unless the power of the FSOC is curbed by Congress, and soon, we may see many of the largest non-bank firms in the US financial system brought under the control of the FSOC and ultimately the Fed. The challenges with regulating big banks. James Pethokoukis: The biggest banks have become even bigger since the financial crisis, the financial industry more concentrated. On the surface, at least, it seems banks are acting as if the too big to fail safety net continues to exist. The bigger they get, the more likely it is that they can benefit from a government backstop in a crisis. No banking crisis in China. Derek Scissors: China cannot have a Lehman moment. Its financial system does not work the way America's (or Japan's or Italy's) does. In fact, it is not clear how China can suffer any sort of acute financial crisis. And it is extremely unlikely that, if such a crisis did occur, it would do lasting harm to the global financial system.

Housing finance
NEW RESEARCH Housing risk watch. Edward Pinto: The latest National Mortgage Risk Index for home purchase loans shows that low-risk loans accounted for only 42.2 percent of home mortgages extended in January 2014, down from 45.4 percent in December 2013 and 46.4 percent in August 2013 (the starting date for this series). Loan risk is at a higher level than is conducive to long-run market stability. AUDIO Briefing call on the National Mortgage Risk Index with Edward Pinto and Stephen Oliner Fannie and Freddie are not OK. Jon Entine: Fannie Mae reported an annual profit of $84 billion for $2013. Under the terms of the 2008 rescue, all of the profits will be sent to the Treasury. Fannies smaller rival, Freddie Mac is also set to confirm its astounding rebound next week. Its a surprisi ng turn of events and a windfall for the governmentbut potentially a looming disaster for shareholders who may lose billions for standing by the beleaguered organizations.

In other news
NEW WORKING PAPER How people vote. Stan Veuger and Tim Ganser: Do [voters] simply vote for their preferred party? Or do they target electoral outcomes and derive their vote in a more strategic manner? . . . Here, we have the strategic voter's decision-making process in a plurality system in a nutshell: he votes for that one of the two leading candidates whose policy position he likes better. TESTIMONY An examination of competition in the wireless market. Roslyn Layton: Americas success and leadership in the wireless sector is dependent on a variety of competing mobile technologies. Americans benefit from this competition through a wide range of mobile services, applications, and devices provided with network subscriptions that offer value for money. EVENT VIDEO The retirement crisis: A statistical mirage?

Mark your calendar

2.28 GDP report released 3.6 Jobless claims released 3.7 Employment situation released 3.13 AEI Event! From poverty to prosperity: A conversation with Bill Gates

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Read more from the American Enterprise Institute economic policy team at www.aei.org/economics. Contact Abby at abby.mccloskey@aei.org if you have questions for the economics team. Sign up for a weekly copy of the LEDGER here. If you were forwarded this message, click here to subscribe to AEI newsletters. Click here to unsubscribe or manage your subscriptions. American Enterprise Institute for Public Policy Research | 1150 Seventeenth Street, NW, Washington, DC 20036 | 202.862.5800 | www.aei.org