Wonkbook: Moody's debt limit warning
Matthews is writing Wonkbook while Ezra is on vacation.
Five in the morning
1) Moody's says it may downgrade US debt if the debt limit isn't increased, report Zachary Goldfarb and Felicia Sonmez: "Moody’s Investors Service warned Thursday that it may soon downgrade the U.S. credit rating because of mounting concerns that the government will default, adding new urgency to negotiations between President Obama and congressional Republicans over the nation’s debt. Moody’s, one of the premier credit-rating agencies, said that political gamesmanship over raising the government’s $14.3 trillion debt ceiling has been worse than expected. If progress toward increasing the limit isn’t made by mid-July, Moody’s said it would take another step toward reducing the country’s top-of-the-line AAA rating by putting the United States under review for a possible downgrade."
2) The US is selling off its remaining stake in Chrysler, reports Peter Whoriskey: "The U.S. Treasury announced Thursday night that it has reached an agreement to fully withdraw from its ownership stake and other investments in Chrysler and that it will recapture most of the $12.5 billion it has put into the automaker’s rescue. The United States will sell its 6 percent equity stake in the company to the Italian automaker Fiat, which already has a stake in the company and whose chief, Sergio Marchionne, now runs Chrysler. The transaction is expected to allow Fiat to take a majority stake in the fabled U.S. brand. With that sale and other related transactions, the United States will have recovered $11.2 billion, or about 90 percent of the rescue money."
3) It's do-or-die time for many Obama nominees, report Abby Phillip and Josh Gerstein: "It’s crunch time for the White House to get key executive branch jobs filled before the end of President Barack Obama’s first term. Dozens of top posts in both the executive branch and the judiciary remain vacant, while some of those who started near the beginning of the administration are bailing out. Nominees who aren’t confirmed by the Senate by the end of this year likely will become tangled in election-year politics, given Republican hopes of taking the White House, the Senate or both. If Obama wants a good shot at getting his nominees through this year, Hill veterans say, names need to reach the Senate by the summer recess. Adding to the heightened urgency for action: Many of the unfilled posts deal with Obama’s major policy priorities, including financial regulatory reform, immigration and health care."
4) Today's jobs report will indicate how much the economy's backsliding, reports Neil Irwin: "After a string of disappointing reports on the economy in recent weeks, Friday will be an acid test on whether the recovery can endure, as the Labor Department releases its May unemployment report. One of the few bright spots in the economic picture in the past three months has been solid and steady job creation by the private sector. Private employers added an average of more than 250,000 positions to their payrolls during that time...But some analysts are now predicting even slower job creation. If the May jobs numbers disappoint -- particularly if job creation skids to fewer than 100,000 positions added -- it would deflate remaining optimism that the economy is in a solid and self-sustaining expansion."
5) A meeting with Tim Geithner didn't satisfy the House GOP rank and file, report Jake Sherman and Marin Cogan: "House Republican freshmen emerged from a closed meeting with Treasury Secretary Timothy Geithner with much of the same frustration they had after the White House meeting yesterday, saying they do not expect a plan from the White House on massive spending cuts to accompany the debt hike. The hang-up from Republican newbies mirrored the concern from leadership -- that President Barack Obama has not put forth a plan to raise the debt ceiling. Rep. Tim Scott, a South Carolina Republican who is a member of the GOP leadership, said, 'We need the specificity and the details from the other side for us to have a serious conversation about any increase in the debt ceiling.'"
Swedish pop video interlude: Robyn's "Call Your Girlfriend".
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Still to come: Tim Geithner and his European counterpart are at odds on bank regulation; House Democrats want Obama to hold firm against Medicare cuts; there's a new White House Counsel; energy companies are influencing public school curricula; and the best motivational speech you've ever seen a grade schooler give.
Tim Geithner and his European counterpart have split on bank regulation, reports Deborah Solomon: "Top U.S. and European policy makers continued wrangling on Thursday over global efforts to prevent another financial crisis, including the best way to ensure banks have enough capital to withstand potential losses. In a private meeting at the U.S. Treasury Department, Treasury Secretary Timothy Geithner told Michel Barnier, the European Commissioner for Internal Market and Services, that Europe needs to perform rigorous "stress tests" on its banks and ensure they have adequate capital cushions to survive financial problems, according to people familiar with the meeting...Another area of disagreement concerns banker pay. Mr. Barnier told Mr. Geithner the U.S. should impose stricter curbs on bonuses."
Goldman Sachs has been subpoenaed over its role in the financial crisis, reports David Hilzenrath: "A prosecutor in New York has subpoenaed Wall Street powerhouse Goldman Sachs for information related to the financial crisis, a person familiar with the development said Thursday. The broad request from the Manhattan district attorney, issued last month, stems from an April report by Senate investigators that accused Goldman Sachs of abusive behavior, according to the source. The report said Goldman Sachs contributed to the financial crisis, partly by designing mortgage-related investments that enabled the firm to profit while its clients lost money."
The economy's bad, but it's as bad as expected, writes Annie Lowrey: "At the very least, the news is not really news. Most analyses of the kind of recession we are having--the kind that follows a massive financial crisis and an asset-price bubble that led to too much leverage throughout the economy--indicate that things should be pretty bad right now. They're correct. The IMF, for instance, warned as far back as 2009 that the 'combination of financial crisis and a globally synchronized downturn is likely to result in an unusually severe and long-lasting recession.' Economists Carmen Reinhart and Ken Rogoff, who have studied 800 years of recessions and panics, concur. 'I would say we're right on track,' Reinhart says. 'Yes, the recovery looks long, but that's because we haven't had a financial crisis this severe since World War II.'"
The US is set to repeat the mistake of 1937, writes Paul Krugman: "Earlier this week, the Federal Reserve Bank of New York published a blog post about the 'mistake of 1937,' the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post’s author (with whom I have done research) points out, economic conditions today -- with output growing, some prices rising, but unemployment still very high -- bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake?...In important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a 'pivot' away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data."
Both parties should get behind the Gang of Six, write Alan Simpson and Erskine Bowles: "The remaining members of the Gang of Six have said they will go forward with their proposal if there is support for it among their colleagues. Many rank-and-file senators have said they share the nation’s frustration with gridlock and expressed support in concept for a comprehensive plan. This is exactly why a bipartisan group of 64 senators wrote to President Obama urging action on a comprehensive deficit reduction plan, and it is why members of that group must now stand up and do what’s right. The time for action is now. Members of both parties and both houses must publicly support the work of the Gang of Six. This is the time for heroes."
Adorable children joyriding interlude: Two kids drift in a Power Wheels toy car.
House Democrats are urging Obama to take Medicare off the table for a debt deal, reports Abby Phillip: "House Democrats pressed President Barack Obama on Thursday to keep his word and stand firm on Medicare as negotiations with Republicans over raising the debt ceiling heat up. Multiple Democrats said entitlement programs were a key topic during their meeting with the president at the White House on Thursday afternoon. They also said that taxes were 'on the table' in the debt negotiations. 'We must preserve Medicare, we must protect Medicaid, and we must have revenue raising,' said House Minority Whip Steny Hoyer (D-Md.) after the White House event. Minority Leader Nancy Pelosi, who opposed renewing the Bush-era tax cuts for the wealthy in December, also said raising taxes you should be part of a deal."
Hospitals are upset about accountable care organization rules, reports Anna Wilde Mathews: "Hospitals and doctors are pushing back against an Obama administration initiative that urges them to create new organizations to coordinate the care of groups of Medicare patients. The voluntary program seeks to save money and improve treatment. But the health-care providers say the rules proposed for the initiative are too onerous and the financial incentives too weak, and that they will participate only if the program gets a major revamp. The deadline for response to the proposal is June 6, but health-care providers have already been unusually vocal in their complaints. 'It's pretty much a nonstarter as structured,' said Anders M. Gilberg, an official at the Medical Group Management Association."
White House Counsel Bob Bauer is headed to the campaign, report Josh Gerstein and Jennifer Epstein: "White House Counsel Bob Bauer will step down from his post and return to private practice, where he will assist President Barack Obama’s reelection campaign, the White House announced Thursday. Kathryn Ruemmler, the current principal deputy counsel to the president, will take Bauer’s place when he returns to the Washington office of the Perkins Coie law firm. Bauer will resume the role he had during Obama’s 2008 presidential run, serving as general counsel to the campaign and to the Democratic National Committee, and as personal lawyer to Obama, the White House said...Bauer, who will leave the White House at the end of June, was named White House counsel in November 2009 when Gregory Craig resigned after serving less than a year in the job."
Ohio is facing another union battle, reports Kris Maher: "Organized labor is bringing 10,000 volunteers and a $25 million budget to the latest round of the union-rights fight in Ohio, pushing an effort to repeal a new state law reining in public-employee unions. Unions argue that Republicans overreached this spring when they passed Senate Bill 5, boosting health-care and pension contributions for the state's 360,000 public employees and taking away most of their legislated collective-bargaining rights. The state and regional Democratic Party is offering technical assistance and support to the repeal effort, recruiting thousands of volunteers, providing voter lists for canvassers and helping with fund raising."
New for-profit college rules are significantly lighter than originally proposed, reports Libby Nelson: "After 10 months, more than 100 meetings with for-profit colleges and other stakeholders and 90,000 written comments, the Education Department today formally unveiled its second attempt to craft a new system for determining whether vocational programs prepare their graduates for 'gainful employment.' Like the highly controversial draft rules that the department proposed last July, the final rules focus on the amount of debt that students in for-profit and certificate programs take on, and on their prospects for paying it off. The final regulations offer colleges significantly more leeway, lowering the required debt-to-income ratios and giving institutions more chances to improve before they lose eligibility for federal financial aid."
A European E. coli outbreak shows the US' vulnerability, reports Lyndsey Layton: "The bacterium that has killed more than a dozen Europeans, sickened nearly 2,000 more and raised international alarms would be legal if it were found on meat or poultry in the United States. If the bacterium were to contaminate fruits or vegetables grown here, there would be no way to prevent an outbreak, because farmers and processors are not required to test for the pathogen before the food heads to supermarkets. 'If somehow this strain got into that same environment and spread rapidly, it would represent a major disaster in terms of the U.S. food industry and risk to humans,' said J. Glenn Morris, a former official with the U.S. Department of Agriculture who directs the Emerging Pathogens Institute at the University of Florida."
Reducing obesity is an economic imperative, write Christy Glass, Steven Haas, and Eric Reither: "Obesity affects not only health but also economic outcomes: overweight people have less success in the job market and make less money over the course of their careers than slimmer people. The problem is particularly acute for overweight women, because they are significantly less likely to complete college. We arrived at this conclusion after examining data from a project that tracks more than 10,000 people who graduated from Wisconsin high schools in 1957. From career entry to retirement, overweight men experienced no barriers to getting hired and promoted. But heavier women worked in jobs that had lower earnings and social status and required less education than their thinner female peers."
Adorable children telling you to achieve your dreams interlude: A little kid gives a motivational speech about learning to ride your bike.
Public school curricula are being shaped by energy companies, reports Kevin Sieff: "Eager to burnish its reputation, the energy industry is spending significant sums of money on education in communities with sensitive coal, natural gas and oil exploration projects. The industry aims to teach students about its contributions to local economies and counter criticism from environmental groups. These outreach efforts have drawn scrutiny after news in May that Scholastic, the world’s largest publisher of children’s books, distributed fourth-grade curriculum materials funded by the American Coal Foundation. The 'United States of Energy' lesson plan, which the foundation paid $300,000 to develop, went to 66,000 fourth-grade teachers in 2009."
Dylan Matthews is a student at Harvard and a researcher at The Washington Post. Wonkbook is compiled and produced with help from Michelle Williams.