Wonkbook: Meet Alan Krueger
Matthews is writing Wonkbook while Ezra is traveling.
Five in the morning
1) Alan Krueger is the new head of the CEA, reports David Wessel: "President Barack Obama on Monday plans to nominate Princeton University's Alan Krueger to be chairman of the White House Council of Economic Advisers, a White House official said. If confirmed by the Senate, Mr. Krueger, a labor economist, is likely to provide a voice inside the administration for more-aggressive government action to bring down unemployment and, particularly, to address long-term joblessness. Mr. Krueger, 50 years old, returned to Princeton a year ago after serving as assistant Treasury secretary for economic policy during the first two years of the Obama administration--which means he has recently cleared the sometimes treacherous Senate confirmation process. He would succeed Austan Goolsbee, who left earlier this month to reclaim his teaching post at the University of Chicago."
2) Ben Bernanke offered few hints of future Fed policy in his big speech Friday, reports Neil Irwin: "Federal Reserve Chairman Ben S. Bernanke chided Congress on Friday for its contentious approach to the national debt, saying the brinksmanship displayed by lawmakers could endanger the U.S. economy...Speaking at an annual conference of central bankers and economists in Jackson Hole, he warned that, 'similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.' Even as he underlined the prominent part that Congress can play in fostering -- or jeopardizing -- the nation’s economic health, Bernanke gave no sign that the Fed, for its part, was preparing to take new steps to bolster the flagging recovery."
3) Hurricane Irene could provide a short-term economic boost, reports Josh Boak: "The power outages and shuttered airports may stop the engines of commerce for several days, but Hurricane Irene might have provided some short-term economic stimulus as billions of dollars will likely be spent to repair the damage to the East Coast over the weekend. Cumberland Advisors Chairman David Kotok saw the storm as likely jolting employment in construction, an industry paralyzed by the bursting of the real estate bubble in 2008...Embedded within those projections are questions about whether Congress and President Barack Obama can set aside recent hostilities to make sure there is sufficient cash for the Federal Emergency Management Agency’s disaster relief fund. After blizzards struck last winter and tornadoes this spring, the fund has less than $1 billion available, which means that Congress might have to approve supplemental appropriations."
4) A government shutdown battle this fall is looking unlikely, reports Carl Hulse: "Eager to avoid another round of budget brinksmanship, Congressional leaders hope that a little-noted spending agreement tucked into the debt limit deal reached this month can head off any threat of a government shutdown as the federal fiscal year draws to a close in September...House and Senate leaders also used the measure to establish federal spending limits for the next two years. Lawmakers are still likely to clash over just how the money is parceled out to various agencies and the Pentagon. But members of both parties say the bipartisan compromise on overall spending makes it unlikely that an impasse will push Congress back to the brink of closing the government in a repeat of the April showdown that ended just hours before federal money ran out. The current fiscal year ends Sept. 30."
5) The Fed's internal debates are out of step with those of economists, writes David Leonhardt: "IF you were to conduct a survey of the country’s top economists, you would find a fair number who did not believe that the Federal Reserve should be taking more aggressive steps to help the economy...But you would also find a sizable group of economists who thought the Fed could and should do far more than it was doing. This group, known as doves, tilts liberal, though it includes conservatives as well. If anything, it can probably claim a larger number of big-name economists...than the camp that believes the Fed has done too much. You would never know this, however, from listening to the public debate among Federal Reserve officials. That debate is much narrower. On one side are people like Ben S. Bernanke, the Fed chairman, who defend both what the Fed has done and what it hasn’t done. On the other side are the so-called inflation hawks, who say the Fed has been far too aggressive."
Night vision interlude: Yeah Yeah Yeahs play "Down Boy" live and in the dark.
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Still to come: Consumer fears are hurting the recovery; states are outsourcing Medicaid; Republicans plan to target regulations after the recess ends; why global warming may have contributed to Hurricane Irene; and a dog tries valiantly to go to sleep.
Consumer fears are holding back the recovery, reports Peter Whoriskey: "The once sturdy optimism of Americans appears to have crumbled, according to one key measure. Breaking from precedent, Americans no longer believe they will make more money next year than this year, according to the University of Michigan’s Surveys of Consumers. These expectations used to rebound after recessions; this time they didn’t. This crisis of confidence, a departure from long-standing expectations of rising American prosperity, is spurring millions of small consumer decisions that collectively determine whether businesses should expand, and in turn whether the recovery will continue to falter...Consumer spending reports have slumped -- just a little each month, but the acceleration of the recovery was gone. One of the key reasons appears to be that American consumers are nervous."
Per capita growth fell last quarter, reports Sudeep Reddy: "The economy expanded at a slower pace in the second quarter than previously estimated, the government said Friday, indicating economic output per person shrank in the first half of 2011. U.S. gross domestic product, the broadest measure of goods and services produced, increased at a 1% annual rate during the second quarter, below the 1.3% the Commerce Department estimated a month ago. That followed a 0.4% pace in the first three months of the year. Corporate profits remained strong in the second quarter despite higher costs and slower growth facing many firms...The latest figures show the U.S. economy treading water in the first half of the year, before confidence collapsed amid market turmoil and the nation's debt debate. The pace of economic growth wasn't enough to keep up with the expanding population--marking a contraction in GDP per person."
Banks are tightening up, reports Eric Dash: "Battered by a weak economy, the nation’s biggest banks are cutting jobs, consolidating businesses and scrambling for new sources of income in anticipation of a fundamentally altered financial landscape requiring leaner operations. Bank executives and analysts had expected a temporary drop in profits in the aftermath of the 2008 financial crisis. But a deeper jolt did not materialize as trillions of dollars in federal aid helped prop up the banks and revive the industry. Now, however, as government lifelines fade and a second recession seems increasingly possible, banks are finding growth constrained. They are bracing for a slowdown in lending and trading, with higher fees for consumers as well as lower investment returns amid tighter regulations. Profits and revenues are slipping to the levels of 2004 and 2005, before the housing bubble."
The government can't bind itself into making good policy, writes Richard Thaler: "The only reason to expect commitments being made now to have any effect is that they change the status quo: Congress has to act to undo them. But that puts these plans on exactly the same footing as the so-called Bush tax cuts that are scheduled to expire at year-end, 2012. Those cuts will expire unless Congress changes its mind....Instead of creating jobs now and improving our infrastructure for the rest of the century, Congress is debating futile resolutions about future chastity. The bottom line is that in matters of governmental self-control there is no real substitute for willpower. If we want to balance the budget over time we are going to have to elect adults to Congress who are prepared to invest now in our country’s future and then, when the economy picks up, take the necessary steps to get spending in line with revenue. The question is whether politicians who act like adults can win elections."
Bank consolidation is dangerous, writes Steven Pearlstein: "The White House and Republicans never liked that idea. Instead, they pushed through a less heavy-handed approach that capped the growth of the four largest banks, each of which now has more than $1 trillion in assets, while imposing on them slightly higher capital requirements to offset their 'too big to fail' advantage in attracting capital and deposits. Now the ink is barely dry on the Dodd-Frank Act and big regional banks, prodded by Wall Street dealmakers and analysts, are once again in merger and acquisition mode. And if regulators let it happen, you can bet your 'Citi Never Sleeps' coffee mug that the next wave of consolidation will produce even more trillion-dollar banks in five years...Bank consolidation is like a drug -- the more you do, the more you want to do. At some point the rest of us have to do the Nancy Reagan thing and just say no."
American manufacturing doesn't need to die, writes Jon Gertner: "For decades, the federal government has generally resisted throwing its weight --and its money -- behind particular industries. If the market was killing manufacturing jobs, it was pointless to fight it. The government wasn’t in the business of picking winners...Even as governments in China and Japan offered aid to industries they deemed important, factories in the United States closed or moved abroad...Galvanized by the potential double payoff of skilled, blue-collar jobs and a dynamic clean-energy industry -- the administration has tried to buck the tide with lithium-ion batteries. It had to start almost from scratch. In 2009, the U.S. made less than 2 percent of the world’s lithium-ion batteries. By 2015, the Department of Energy projects that, thanks mostly to the government’s recent largess, the United States will have the capacity to produce 40 percent of them."
Adorable animals sleeping adorably interlude: Ziggy the Shar Pei tries, fails to sleep.
States are increasingly outsourcing Medicaid to private insurers, reports Christopher Weaver: "In August, [Texas] picked five health plans in South Texas to oversee care for people such as Espinoza who are enrolled in Medicaid, the state-federal program for the poor. This scenario is playing out across the country as states increasingly turn to private insurers to rein in the cost of Medicaid. But Medicaid managed care is a risky business. Many new enrollees are older and sicker than the people health plans typically cover. The political environment is fierce, and insurers face resistance from physicians, hospitals and perhaps patients. The federal health law calls for a huge expansion of the Medicaid program in 2014 -- a potential bonanza for insurers if the law survives court challenges and opposition by Republican contenders for the White House."
States are doing better than the federal government at enrolling people in high-risk pools, reports Julian Pecquet: "States are doing a much better job than the federal government at getting sick people enrolled in the healthcare reform law's high-risk pools, according to a new report. As of April 30, the Government Accountability Office found, the 27 states that operate their own pools had enrolled 15,781 people with pre-existing conditions. The federally-operated pool for the 23 other states and the District of Columbia, by contrast, only had 5,673 enrollees. The report, requested by Senate Health, Education, Labor and Pensions (HELP) Committee ranking member Mike Enzi (R-Wyo.), found three main reasons for the low enrollment figures: the requirement that enrollees be uninsured for six months prior to applying; premiums that can be unaffordable to many; and a lack of awareness about the program."
Medicare managed care doesn't lower costs, reports Sarah Kliff: "The National Bureau of Economic Research published this month the first national report on Medicaid managed care and cost savings. It’s verdict: moving Medicaid recipients into managed care 'did not lead to lower Medicaid spending during the 1991 to 2003 period.'...Why not? One possible explanation has to do with Medicaid’s provider reimbursement rates, which tend to be low. The NBER study suggests that rates are low enough that private insurers couldn’t negotiate a similar payment. Any decrease in utilization would have to be massive to generate a cost saving. To be sure, some states did show cost savings...The NBER study found that those places have at least one thing in common: they tend to already spend more on their Medicaid programs in the first place, reimbursing health providers at a higher rate."
The GOP is going to focus on repealing regulations after the recess, reports Paul Kane: "House Republicans are planning votes for almost every week this fall in an effort to repeal environmental and labor requirements on business that they say have hampered job growth. With everyone from President Obama to his Republican challengers in the 2012 campaign focusing on ways to spur economic growth, House Republicans will roll out plans Monday to fight regulations from the National Labor Relations Board, pollution rules handed down by the Environmental Protection Agency and regulations that affect health plans for small businesses. In addition, the lawmakers plan to urge a 20 percent tax deduction for small businesses...The effort to cut regulations, which House Speaker John A. Boehner (R-Ohio) alerted Obama to in a letter on Friday, is likely to meet stiff resistance from the Democrat-controlled Senate." Rick Perry still thinks Social Security is a Ponzi scheme, reports Peggy Fikac: "Riding high in the polls, Gov. Rick Perry rode into Iowa on Saturday with tough talk on President Obama, the economy and foreign policy and a declaration that Social Security is not only a Ponzi scheme but a 'monstrous lie' for younger people...Asked by a woman in the crowd about Social Security being viewed as an entitlement program, Perry reiterated the suggestion in his anti-Washington book, Fed Up!, that the program amounts to a Ponzi scheme. 'It is a Ponzi scheme for these young people. The idea that they're working and paying into Social Security today, that the current program is going to be there for them, is a lie,' Perry said. 'It is a monstrous lie on this generation, and we can't do that to them.'"
Republicans are threatening voting rights, writes Rep. John Lewis: "Despite decades of progress, this year’s Republican-backed wave of voting restrictions has demonstrated that the fundamental right to vote is still subject to partisan manipulation. The most common new requirement, that citizens obtain and display unexpired government-issued photo identification before entering the voting booth, was advanced in 35 states and passed by Republican legislatures in Alabama, Minnesota, Missouri and nine other states -- despite the fact that as many as 25 percent of African-Americans lack acceptable identification. Having fought for voting rights as a student, I am especially troubled that these laws disproportionately affect young voters. Students at state universities in Wisconsin cannot vote using their current IDs (because the new law requires the cards to have signatures, which those do not)."
Hurricane hijinks interlude: People play soccer and hockey in the middle of Time Square.
Global warming is partly to blame for Hurricane Irene, writes Bill McKibben: "If your oceanfront condo turns into an ocean-dwelling condo, you’ve got global warming in part to thank. We’ve always had hurricanes--and droughts and floods. We’ve just never had so much crazy weather all at once. Even before Irene, the U.S. had already set a record in 2011 for the most billion-dollar weather disasters. Recently, JFK airport marked its all-time rainfall record, on the same day that many Southwest cities set new records for most days above 100°. As carbon traps more heat in the atmosphere, it expresses itself in ever more violent weather. If you don’t believe the scientists, then ask the insurance industry. Munich Re, one of the world’s largest insurers, summed up its record payouts from the record-hot year of 2010: “This rise cannot be explained without global warming.”
Wind farms are starting to threaten birds, reports Darryl Fears: "As the Obama administration pushes to develop enough wind power to provide 20 percent of America’s energy by 2030, some bird advocates worry that the grim discovery of the eagles this month will be a far more common occurrence. Windmills kill nearly half a million birds a year, according to a Fish and Wildlife estimate. The American Bird Conservancy projected that the number could more than double in 20 years if the administration realizes its goal for wind power. The American Wind Energy Association, which represents the industry, disputes the conservancy’s projection, and also the current Fish and Wildlife count, saying the current bird kill is about 150,000 annually...Wind farms currently kill far fewer birds than the estimated 100 million that fly into glass buildings, or up to 500 million killed yearly by cats."
We need the Keystone Xl pipeline, writes Robert Samuelson: "Environmentalists are outraged. They’ve made Keystone into a cause celebre. Sit-ins outside the White House have led to arrests. For President Obama to approve the pipeline would be regarded by his environmental supporters as a complete betrayal. Actually, the reality is more complex. If Obama rejects the pipeline, he would -- perversely -- increase greenhouse gas emissions. Canada has made clear that it will proceed with oil sands development regardless of the American decision. If the United States doesn’t want the oil, China and other Asian countries do. Pipelines would be built to the West Coast. Transporting the oil by tanker to Asia would almost certainly create more emissions than moving it by pipeline to closer U.S. markets. Next, oil sands’ greenhouse gases are exaggerated. Despite high per-barrel emissions, the cumulative total is not large."