Wonkbook: Euro deal
Ezra is on vacation until November 7th.
1) European leaders have finally struck a deal, reports Howard Schneider: "European leaders moved early Thursday to stem the debt crisis gripping the continent by agreeing to a plan that imposes steep losses on investors holding troubled Greek bonds and boosts the firepower of the region’s bailout fund to at least a trillion dollars. After marathon negotiations that continued well past midnight, European leaders said banks and other major investors in Greek bonds agreed to take losses of up to 50 percent. This concession was meant to help prevent the Greek government from defaulting on bills it cannot pay and avoid an even costlier shock to the European financial system. The losses are much larger than private investors accepted under a deal this summer. Since then, Greece’s economy has steadily eroded, making it even harder for the government to repay its bonds."
2) Democrats have unveiled their debt panel plan, report Lori Montgomery and Rosalind Helderman: "Democrats made the first move in a closed-door meeting this week, pressing the bipartisan panel to pursue a far-reaching deal to slice $3 trillion from the federal budget over the next decade through an equal mix of spending cuts and new revenue. The proposal calls for significant cuts to health and retirement programs, as well as $1.3 trillion in new taxes...Baucus, who chairs the Senate Finance Committee, offered to cut as much as $500 billion from Medicare and other health programs and to adopt a less generous measure of inflation to calculate Social Security benefits, according to aides familiar with the talks. He also called for as much as $300 billion in new measures aimed at stimulating the flagging economy. Republicans quickly rejected that offer. Senior aides called the tax and stimulus provisions unacceptable."
3) The Fed is considering setting an explicit inflation target, reports Robin Harding: "A long and contentious debate on communications is set to occupy most of the Federal Reserve’s time when it meets on Tuesday and Wednesday next week. Big changes to monetary policy are relatively unlikely - not least because waiting will bring greater clarity on congressional tax and spending plans for 2012 - but there is a growing sense of urgency about improving communication. Three different issues are tangled together. The first is whether to clarify the Fed’s goal by agreeing on a clear inflation objective. Second is explaining how the Fed is likely to change policy in the future to reach that goal. Third is whether to use communication to ease policy now with, for example, a pledge to keep rates low until unemployment falls to 7 or 7.5 per cent."
4) Head housing regulator Edward DeMarco is brushing off criticism, reports Joseph Williams: "Depending on whom you ask, federal housing finance czar Edward DeMarco, described as the most powerful man in Washington housing policy, is preventing a desperately needed rebound of the national housing market -- or is instituting long-overdue fiscal discipline to the government’s role in the mortgage market...Democrats, for example, have wanted him fired because he resisted proposals to use Fannie and Freddie as a lifeline for underwater homeowners by writing down or, in some cases, writing off billions in federally backed loans...But DeMarco insists he’s unfazed...Sweeping plans to help homeowners 'did not meet our responsibilities as conservator. That doesn’t mean principal forgiveness might not be appropriate...but it does not meet our mandate.'"
But DeMarco could back a milder housing aid plan: http://bit.ly/rKRoEC
1) Mitt Romney's ideological commitments aren't particularly fixed, writes Ezra Klein: "Romney has just enough in his gubernatorial record, and does just enough on the campaign trail, to signal that maybe, deep down, he doesn’t believe any of it. After all, he didn’t just pass an individual mandate in Massachusetts. In June 2009, he said 'the right way to proceed' on health reform would be the Wyden-Bennett bill, which included a national individual mandate. In 2005, Romney said he believed the world is getting warmer and called cap-and-trade 'good for business.'...perhaps Romney isn’t two-faced at all. Perhaps it’s just one face. Romney is a small-'d' democrat. Whatever his constituency believes, that’s what he champions...The question it raises is who Romney’s constituency will be if he wins the presidency. The country? His party?"
2) Republicans' inequality-denial makes no sense, writes Jonathan Chait: "'Equality of opportunity' bears no relation to the reality of the American economy or any economy. Parents can benefit their children by giving them money, better schools, better home environments, tutoring, camp, and other advantages. Opportunity is overwhelmingly unequal. One result is that rich kids perform far better in school than poor kids. But that is not the only result. Poor kids who beat the odds and get high test scores are less likely to complete college than rich kids with middling or even low test scores. Poor kids who beat those odds and graduate from college are still less likely to grow up to be rich than rich kids who did not graduate from college. I'm not sure if there's a perfect solution, but pretty sure Ryan's plan to slash Pell Grants is not going to help."
3) Occupy Wall Street can save capitalism from itself, writes Nick Kristof: "When I lived in Asia and covered the financial crisis there in the late 1990s, American government officials spoke scathingly about 'crony capitalism' in the region...The American critique of the Asian crisis was correct. The countries involved were nominally capitalist but needed major reforms to create accountability and competitive markets. Something similar is true today of the United States...So, yes, we face a threat to our capitalist system. But it’s not coming from half-naked anarchists manning the barricades at Occupy Wall Street protests. Rather, it comes from pinstriped apologists for a financial system that glides along without enough of the discipline of failure and that produces soaring inequality, socialist bank bailouts and unaccountable executives."
4) Republicans should accept revenue increases, writes Martin Feldstein: "Republicans argue that the national debt’s growth should be limited only by cutting government spending. Although some cuts in traditional outlays should be part of efforts to rein in spending, this approach should be supplemented by reducing 'tax expenditures' - the special features of the tax code that subsidize health care, mortgage borrowing, local-government taxes, etc. Limiting tax expenditures could reduce the annual deficit by as much as 2% of GDP, thereby reducing the debt-to-GDP ratio in 2021 by more than 25 percentage points. Republicans generally reject this form of spending reduction, because it results in additional tax revenue. While this method does indeed increase total revenue, the economic effect of limiting tax expenditures is the same as it is under any other method of cutting spending on those programs."
Alt-country interlude: Old 97's play "Time Bomb."
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Still to come: Forecasters expect higher growth soon; Romney's record on health costs is coming in for criticism; we probably won't get a budget on time; Congress' Solyndra probe is heating up; and an uncomfortable conversation between Johnny Depp and Ricky Gervais.
Forecasters expect higher growth, reports Neil Irwin: "Forecasters expect that when the Commerce Department releases its first estimate of the number, gross domestic product will have risen at a 2.5 percent annual rate in the third quarter. That would be the highest growth rate in a year and would trump the 0.7 percent average pace over the first half of this year...Still, the 2.5 percent expectation reflects an economy that, for all its challenges, doesn’t appear to be falling off a cliff. Although it shows the diminished economic expectations of the post-crisis age, it implies that the economy is growing only about as fast as it is capable of in the longer term. But it’s not fast enough to claw out of the deep hole of 9 percent unemployment. In other words, even the best quarter for gains in a year -- and one that benefited from some one-time factors -- isn’t strong enough to bring down unemployment meaningfully."
The SEC is watering down its disclosure rules, reports David Hilzenrath: "The Securities and Exchange Commission adopted a new set of disclosure rules for hedge funds, private equity funds and other private money managers Wednesday, but it backed off on several of the tougher requirements it had originally proposed. The agency also exempted many firms from the new rules, saying they will apply only to those with at least $150 million under management. SEC Chairman Mary Schapiro said the agency was taking heed of responses to a draft of the rules issued this year. Members of the financial industry had protested that the SEC’s proposal would have imposed unreasonable costs and burdens. Their objections carried special weight because a federal appeals court recently overturned a different SEC initiative on the grounds that the agency paid too little attention to corporate concerns and did not adequately assess the costs."
Top Freddie Mac officials are stepping down, reports Zachary Goldfarb: "The chief executive and the chairman of Freddie Mac both said Wednesday that they intend to step down, in a shake-up that comes just as the government-backed mortgage finance company is being tasked to play a major role in a new plan to help struggling homeowners. Chief Executive Charles E. Haldeman Jr., a former mutual fund executive who has led the company since July 2009, will leave the McLean-based firm sometime next year. Board Chairman John A. Koskinen, a former Clinton administration official who has led Freddie’s board since September 2008, will step down in February. Others leaving are board members Robert R. Glauber, a former financial regulator, and Laurence E. Hirsch, an investor."
Inside the media interlude: How Occupy Wall Street headlines are brainstormed.
Massachusetts health costs are being used against Romney, reports Jennifer Haberkorn: "Mitt Romney’s health care albatross isn’t just the similarity between his Massachusetts health care overhaul and President Barack Obama’s health reform law. It’s also the fact that Massachusetts still has the highest health costs in the country -- even after the reforms Romney signed into law as governor. It’s a problem his Republican challengers are beginning to use against him, and it’s yet another health care issue that could keep him on the defensive in the primaries. But if he is the Republican nominee, it is unlikely to be a significant issue in the general election -- in part because Obama can’t claim that his plan has gotten health costs under control, either."
The Supreme Court will decide which health care cases to hear next month, reports Sarah Kliff: "The Supreme Court will announce the results of its conference by Nov. 14. This won’t be a verdict on the health reform law. But it does have the potential to tell us a decent amount about the factors that will shape the verdict. As SCOTUSblog notes, the Justices will have to decide which, if any cases, they want to take up. Right now, six challenges have piled up on their desk, all from different jurisdictions and with different histories. In the Nov. 10 conference, the Justices will examine five of those (the sixth isn’t ready yet). When they look over the cases, the Justices will look at what issues they’re ready to opine on: while most of the focus has centered on the mandated purchase of health insurance, some cases challenge other issues, like the health reform law’s Medicaid expansion."
There's little chance a budget will be produced on time, reports Rosalind Helderman: "Three weeks into the fiscal year that began Oct. 1 and with a hard-fought short-term funding measure in place that will expire Nov. 18, the government is a month from again facing the possibility of a shutdown. With the House in recess last week and the Senate away this week, it is expected the chambers will find it difficult to agree by the deadline on a spending plan to last through September. That could mean adopting another short-term measure in November and forcing another debate about spending at its expiration. And there is no guarantee that process will not break down along the way -- as it did in April and September -- again forcing high-drama votes with the continued operation of the government hanging in the balance."
The amount of war savings the supercommittee can count is shrinking, reports David Rogers: "The Congressional Budget Office giveth -- and taketh away. When Senate Majority Leader Harry Reid was looking for quick savings in August, the CBO stepped in and validated more than $1 trillion in potential deficit reduction over the next decade if Congress were to cap future war funding for Iraq and Afghanistan. But with a new fiscal year under way this month, CBO Director Douglas Elmendorf said Wednesday that the agency’s 10-year projection had dropped by $440 billion as a result of new defense benchmarks set for 2012. That’s a 44 percent swing in a matter of months and could complicate the work of the 12 member House-Senate supercommittee charged with coming up with a $1.2 trillion deficit-reduction plan by Nov. 23."
Obama unveiled his student debt relief plan yesterday, report David Nakamura and Scott Wilson: "President Obama announced Wednesday that he will authorize changes in federal policy to make college loans more affordable and easier to repay for millions of economically trapped borrowers. The president’s plan, which he will impose by executive authority, is aimed at addressing a sector of the credit market that has become increasingly problematic in the bad economy and that gained renewed attention through the Occupy Wall Street movement, which has made student-loan relief one of its objectives. The initiative was also an effort to reach out to a voting bloc that was crucial to Obama’s winning 2008 coalition, a bloc that he will need next year as well."
The bad economy is taking a toll on the young, writes David Wessel: "Things are worse for the young. The unemployment rate for recent college grads is 10.7%. More than 14% of Americans between 25 and 34 (5.9 million in all) are living with their parents, up significantly from before the recession. Nearly a quarter of them have bachelor's degrees. Having a college degree no longer guarantees a rising wage or a shot at the American dream. That is contributing to a widespread sense that the U.S. economy isn't working any longer for the bulk of Americans. Two-thirds of those polled by The Wall Street Journal--two-thirds!--said they aren't confident life for their children's generation will be better than it has been for them. This loss of confidence is corrosive."
TV clip interlude: Johnny Depp confronts Ricky Gervais on Life's Too Short.
The Solyndra investigation is heating up, reports Darren Samuelsohn: "House Republicans probing Solyndra have privately interviewed at least seven Energy Department career officials central to different critical phases of the controversial $535 million loan guarantee, a source familiar with the investigation tells POLITICO. The highest-ranking DOE official questioned to date by the Energy and Commerce Oversight and Investigations Subcommittee aides is Jonathan Silver, the former chief operating officer of the Loan Program Office. Republicans also have met four times with Susan Richardson, the loan program office's chief counsel and author of a controversial February 2011 legal memo clearing the way for private investors to get first dibs ahead of taxpayers on $75 million if the California solar company went bankrupt."
BP is coming back to the Gulf, reports Darren Goode: "BP is coming back to the Gulf of Mexico. The Interior Department on Wednesday announced it has granted BP its first deepwater drilling permit since last year’s oil spill. The permit awarded by the Bureau of Safety and Environmental Enforcement is for an exploratory well in the Keathley Canyon map area, located about 246 miles south of Lafayette, La. The granting of the permit is the latest sign that the British oil giant is climbing back from the political abyss. The embattled company’s political action committee is almost on pace to match what it donated at the federal level during the 2008 presidential election cycle. Between March and August, BP’s PAC made more than $50,000 in federal-level campaign contributions, ranking it among the cycle’s more generous donors."
Closing credits: Dylan Matthews is a student at Harvard and a researcher at The Washington Post. Wonkbook is compiled and produced with help from Michelle Williams.