As a new year approaches, the Federal Reserve announced it will start tapering its bond purchases.  The Fed has used the unconventional strategy in an attempt to stimulate economic activity in the wake of the Great Recession.
Through the program, the Fed has purchased about $4 trillion in Treasury obligations and mortgage-backed securities, currently at the rate of $85 billion per month, in three rounds of “quantitative easing.”  The initial reduction of $10 billion will take place in January 2014.
Why did the Fed decide to begin the taper?  What will be the impact on the financial markets?
To answer the questions, one should understand the Fed’s motives, criticized by many observers, for the purchases. Critics believe the large-scale printing of money will lead to inflation as the economy fully recovers.
Because other approaches had failed, the Fed used the unprecedented measure as a last resort. The intent was to provide liquidity to the financial system to stimulate the economy and lower long-term interest rates.  Through this action, both long- and short-term rates have been at all-time lows.
At this point, the only announced reduction will take place in January.  But others could occur as the policy-setting Federal Open Market Committee (FOMC) meets during the year.  The FOMC, comprising the seven Fed governors and five district bank presidents, is scheduled to meet eight times in 2014.  If it should decide to reduce purchases by $10 billion at each meeting, the program would terminate by the end of 2014.
The immediate impact on the financial markets was significant. As the decision was announced, the Dow-Jones Industrial Average surged to an all-time high.
The markets inferred from the Fed’s action that the economy is finally experiencing some growth. And this is borne out by the jump of 4.1 percent in gross domestic product for the third quarter of 2013 and significantly lower unemployment in November.
In the long run, much will depend upon the Fed’s actions during the year. If the purchases continue to taper off, long-term interest rates could rise if anxiety about inflation affects investors.
Short-term rates will not increase until the economy is strong enough – and unemployment  low enough – for the Fed to hike the federal funds rate.

Wayne Curtis, Ph.D., is a former superintendent of Alabama banks and Troy University business school dean. He is retired from the board of directors of First United Security Bank.  Email him at wccurtis39@gmail.com.

 The two most important issues that the state of Alabama will be facing in 2014 are education and job creation. These two issues are usually tied together because education is so critical to getting a good job, as well as recruiting and growing business.
But education and job creation are also connected to two other important issues: gaming and a statewide lottery.
Gaming and the lottery have been issues in Alabama politics for decades now, and they still have not been resolved.
I have frequently and publicly been in support of establishing a statewide lottery. Estimates from the Legislative Fiscal Office show that we could bring in $250 million for our schools from a lottery.
Alabamians are already spending millions of dollars on a statewide lottery. We are just doing it in other states. Tennessee, Georgia and Florida all have their own lottery and are more than happy to take our money and spend it on their children’s education.
Mississippi does not have a state lottery, but their casinos in Philadelphia are certainly making money off of customers from Alabama. And the Indian gaming facilities in Alabama are reporting record growth in gaming revenues.
The time has come to let the people of Alabama decide the fate of gaming and a statewide lottery. This is a commitment Gov. Bentley made in 2010 when he said, “I believe the people of Alabama need to decide at the ballot box on a YES or NO vote whether to allow gambling or abolish all forms of gambling.” And I am asking the leadership in Montgomery to honor that commitment.
State leaders in Montgomery have tried to go around the voters and use the courts to determine the fate of gaming. I think that is wrong. This is a democracy, and we need to let the people decide.
That is why I will reintroduce legislation this year that will allow the voters to decide if we will create a state lottery. Under my bill, the revenue brought in from the lottery will only be used for education, with $50 million being used to put a school resource officer (i.e., security guard) in every public school while the rest of the revenue will be used to provide scholarships to students who make the A/B Honor Roll. These scholarships can help our children afford an education at any university, two-year college or technical school of their choice.
It is also time to decide – once and for all – if we will allow facilities like VictoryLand to continue to operate, and if we will enter into a compact with the Indians on their gaming facilities.
Currently, the state of Alabama has not entered into a compact with the Poarch Creeck Indians. The Indian’s gaming facilities are permitted under federal law, but because the state does not have a compact with them, we are missing out on millions of dollars that could go toward our schools, economic development and other state needs.
We need to negotiate a fair compact that allows the Indians to continue their operations but also guarantees that the state benefits as well.
And by going after VictoryLand and other legal gaming facilities, the only thing the state has done is eliminate jobs and prevent these facilities from paying taxes and creating more jobs.
It is time to resolve these issues once and for all. It is time to move forward and for state leaders to keep their promise to the people of Alabama. It is time to let the people vote!
Rep. Craig Ford is a Democrat from Gadsden and the Minority Leader in the Alabama House of Representatives.

By Steve Flowers

With each passing day it becomes less likely that Gov. Robert Bentley will get any serious opposition in his reelection bid. We are only five months away from the June 3, 2014 GOP primary. It would be very difficult for someone to mount a significant challenge to the popular incumbent in that time span.
It also appears that Sen. Jeff Sessions and Attorney General Luther Strange will have smooth sailing towards their reelections. Young Boozer and John McMillan also appear to be headed towards reelection to second terms as Treasurer and Agriculture Commissioner.
Under our state constitution, the aforementioned statewide incumbents are term limited after two four-year terms. However, U.S. Senator Jeff Sessions has no limitations on the number of six-year terms he serves. This lack of competition portends a quiet and dull 2014 election year. This is disappointing to those of us who thrive on following political races. Therefore, political pundits will begin their speculation of who will follow Gov. Bentley as governor in 2018.
Political junkies are already thinking about the 2018 races since the 2014 contests will be sleepers. All four of the major constitutional officeholders will have to move up or out. That means that speculation will obviously focus on Luther Strange, Kay Ivey, Young Boozer and John McMillan as possible entrants into the 2018 horse races.
None of the four could be called spring chickens. McMillan and Ivey will be over 70. Strange and Boozer will be in their mid-60s. However, by today’s standards that is not old. Therefore, if they have the fire in the belly for a chase at the brass ring their age should not be a deterrent.
One major player, who has opted out of the 2014 races, is Speaker of the House Mike Hubbard. Some Goat Hill observers say he would lose power moving from his position as Czar of the House of Representatives.
Meanwhile, most of the action surrounding next year’s elections will center on Hubbard’s legislative election activities. It is expected that the legislative races will be the best contests in 2014. Hubbard has amassed his power and control of the House of Representatives by garnering the money doled out by lobbyists and special interest groups. He has corralled the lobbyists to give the money to him or his PACs and he doles it out to his friends and loyal subjects.
The state has become so divided when it comes to partisan allegiances and voting patterns that it is fairly predictable whether a Republican or Democrat will occupy a House or Senate seat in the legislature for the foreseeable future. The legislative lines were drawn two years ago for the upcoming 2014 elections. They will be in effect for the remainder of the decade. These district lines are designed to keep the GOP in control of both the State House and State Senate by about a two to one majority.
There are only a handful of seats that will be in play on a partisan battle basis. The districts are drawn to provide for 65 safe Republican seats and 35 safe Democratic seats in the House. There are about five seats that could go either way. If they split, it remains a two to one Republican advantage. The Senate is drawn about the same way. It is designed to be a 25 to 10 Republican advantage in the upper chamber. There are only three or four seats that are in play on a partisan basis.
Therefore, the liveliest challenges next year will probably be within the GOP ranks. There will be intraparty battles to see who sits in these solidly safe Republican seats. Hubbard may attempt to purge some districts that have not totally followed his reactionary orders.
This super majority Republican legislature has emasculated the only Democratic friendly organization, the Alabama Education Association, during this quadrennium. They have driven daggers into the heart and soul of this once vaunted union. In three short years, they rolled back 30 years of union accomplishments under the leadership of the legendary King of Goat Hill, Dr. Paul Hubbert.
It will be interesting to see whether the AEA will roll over and play dead or fight back. If Hubbert were still in charge, my guess is that he would fight back with a vengeance. His approach would be to strike strategically within the GOP primary.

See you next week.

Steve Flowers is Alabama’s leading political columnist. His column appears weekly in more than 70 Alabama newspapers. Steve served 16 years in the state legislature. He may be reached at www.steveflowers.us.