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The new budget deal

Five reasons the GOP may support the Ryan-Murray deal. Kevin Hassett: The Ryan-Murray budget deal makes a trade that most Republicans would likely prefer not to make. It balances higher spending in the near term against longer-term reductions that, combined with increases in user fees, will reduce the deficit over ten years. But since promised future reductions can be reversed, Republicans are being asked to trade certain cuts today for uncertain cuts down the road. Still, many Republicans might rationally choose to do so, for five reasons. What the budget deal means for the president. Stan Veuger: The budget deal reached by Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash., will probably not help President Obama, as it will keep the president and his acolytes from playing their Republicans-are-terrorists card, at least for the time being.

Unemployment insurance is about to expire

Extend unemployment insurance, and then some. Michael Strain: It is easy to see why the Democrats on the House Ways and Means Committee want to continue funding extended UI benefits for the long-term unemployed. And, if for no other reason than the limited time before EUC expires, extending the program is the prudent course. But conservatives should want to do more than the left has suggested. To throw money at the problem and be done with it is not the answer. The long-term unemployed need help to get back on their feet, to earn their own success, to flourish. AEI scholars talk unemployment insurance and minimum wage. Natalie Scholl: The US is in a jobs crisis. Eleven million people are out of work, and many working are having trouble making ends meet. This bad situation could get worse in the next month. Unemployment benefits will expire by the end of the year if not extended, meaning millions could see an immediate end to their benefits. Right now, President Obama is pushing the need to increase the minimum wage to help families at the poverty line. Heres what AEI scholars have said about how to best help those in need of a job. More than the minimum wage. Michael Strain: A Gallup poll conducted last month found that 76 percent of respondents would vote to increase the minimum wage to $9 per hour. Perhaps theres wisdom in crowds, but not this time. Those 76 percent of Americans are wrong. Conservatives should definitely support government action to help the working poor, but increasing the minimum wage isnt the answer.

Trickle-down economics
Two versions of history. Jim Pethokoukis: Many Americans recall the 1980s as the beginning of an improbable Long Boom when pro-market polices reversed what at the time had seemed like unstoppable economic decline. Obama, however, described the Reagan revolution as the moment when the postwar social contract began to unravel and trickle-down ideology became more permanent, leading to

decades of dangerously unbalanced economic growth. The rich got even richer as middle-class incomes stagnated. The Age of Inequality had begun. NEW RESEARCH Developments in the dynamic fiscal policy literature. Kevin Hassett and Aspen Gorry: In 1987, Alan J. Auerbach and Laurence J. Kotlikoff opened up a new, major area of research into the long-run effects of fiscal policy on the economy. Their work was one of the first efforts to fully explore researchers ability to analyze highly complex dynamic economic models through the use of modern computers. They developed a framework that could estimate the impact of fiscal policy on capital formation and economic growth.

Reviving manufacturing
TESTIMONY Reviving manufacturing. Stan Veuger: Most of the recent resurgence of manufacturing in the United States has been highly capital intensive. That is, output is increasing without much hiring. This has been true for decades, is mostly a product of technological progress, and does not appear to be a trend that is about to reverse. I believe that there is a variety of ways in which to address or at least alleviate some of the problems often attributed to the decline of manufacturing in the United States. None of these are cure-alls, but some of them, though possibly politically difficult, are more genuinely beneficial than others, including corporate tax reform and entitlement reform. TESTIMONY The importance of Chinese subsidies. Derek Scissors: Manufacturing is now a global activity and foreign actions play a role. Among the many global factors, the single most important is Chinese subsidies. The People's Republic of China's (PRC) manufacturing sector is the only one of comparable size to the U.S. It is driven by government intervention, rather than genuine commercial competition, and this intervention harms American manufacturing companies and workers.

The search for stability

NEW RESEARCH Only a private sector housing finance market can produce stability. Peter Wallison: US government backing for the housing finance market has consistently produced cycles of boom and bust. The reason is clear: only sound underwriting standards can produce a mortgage market with defaults of less than 1 percent, but the government has repeatedly encouraged the loosening or abandonment of standards. Pensions must be on the table. Andrew Biggs: Public employee pensions pose increasing risks to state and local budgets. Nationwide, public pensions are underfunded by $4 trillion or more, a figure that exceeds the explicit debt owed by cities and states. Greece is still falling apart. Desmond Lachman: A troubling indication that Greece may now be on a collision course with its official creditors was the Greek governments recent presentation of its 2014 budget without the blessing of either Brussels or the International Monetary Fund. According to the IMF, Greeces 2014 budget has an unfinanced gap of around 1.5 billion.

In other news
MUST-READ When the Internet spying debate began in earnest The real reason for filibuster reform. Kevin Hassett: Obama said that over the past five years, weve seen an unprecedented pattern of obstruction in Congress thats prevented too much of the American peoples business from getting done. . . . Todays pattern of obstruction just isnt normal. If we have learned anything about this president, it is that his factual assertions need to be scrutinized.

Mark your calendar

12.18 FOMC meeting announcement and Bernanke press conference 12.18 AEI Event: Opening markets, unlocking opportunity: Senator Jeff Flake on trade promotion in

Congress 12.19 Jobless claims

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