Wonkbook: Payroll tax cut deal nears
Karl Singer is writing Wonkbook while Ezra is traveling.
1) A tentative deal extending payroll tax cuts and unemployment benefits was reached, report Paul Kane and David Nakamura:"Congressional negotiators reached a tentative deal Tuesday to extend a payroll tax holiday, unemployment benefits and Medicare payment rates for doctors, while finding more than $50 billion in cuts to reduce the effect on the federal deficit. While President Obama and congressional leaders publicly jousted over the negotiations, senior Democrats and Republicans worked behind the scenes toward a compromise that would extend the tax and unemployment benefits through the year. A deal also would mean that doctors would not see a drop in rates paid by Medicare, according to senior aides in both parties. Lawmakers and aides stressed that final details are still being ironed out -- including which cuts would be used to finance the unemployment and Medicare provision -- but they were optimistic that a broad deal would be announced Wednesday and approved by Friday."
2) Some European leaders are considering allowing a Greek default, report Joshua Chaffin, Peter Spiegel and Gerrit Weisman:"Eurozone officials have called off an emergency meeting of finance ministers to approve a vital €130bn bail-out for Athens amid a growing fight among the country’s European creditors about the merits of allowing Greece to go bankrupt...Olli Rehn, the European Commission’s top economics official, warned there would be 'devastating consequences' if Greece defaulted, and pleaded for eurozone governments to approve the bail-out quickly. Officials said Mr. Rehn has support from the European Central Bank and the French government. But a group of eurozone governments, particularly those that retain triple-A credit ratings, has lost faith Greece will ever deliver its end of the bargain. Hardline officials in Germany, the Netherlands and Finland are increasingly urging a Greek default."
3) Without growth Greece's debt may be insurmountable, reports Howard Schneider:"Amid growing concern about the country’s plight, new data published by the Greek statistical agency on Tuesday showed that the economy, reeling from government spending cuts and other austerity measures, shrunk by about 6.8 percent last year. That rate of contraction outpaced estimates made by the International Monetary Fund just a few weeks ago. The new program depends heavily on Greece returning to economic growth. Yet with a potential Greek default on its debts only weeks away, European and IMF leaders are expected to march ahead with the new loans regardless...Even if the program stays on track, Greece’s outstanding debt will remain among the highest in the world for years to come. After peaking at around 160 percent of annual economic output in 2011, the program aims for Greece’s debt to fall to 120 percent of gross domestic product in 2020."
4) The Obama administration will propose a $5 billion competition to improve teaching, reports Stephanie Banchero:"The Obama administration will propose Wednesday a $5 billion competition aimed at overhauling how America's teachers are trained, paid and granted tenure, the latest sign of the growing focus on the quality of teaching in public schools. The competition--modeled after President Barack Obama's Race to the Top education initiative--would reward states that adopt overhauls favored by the administration, such as raising the bar to get into colleges of education, paying teachers based on student achievement and granting tenure only after proof of successful teaching, according to administration officials. Secretary of Education Arne Duncan will unveil the plan during a town-hall meeting Wednesday, officials said, and will call on states to work with teachers unions and colleges of education to overhaul the teaching profession, which has faced withering criticism in recent years. The plan also calls on states and school districts to pay teachers more and adopt incentives to retain the best teachers, especially in hard-to-staff schools."
5) Mitt Romney defended his support of letting the auto industry go bankrupt, reports Michael Shear: "Mitt Romney on Tuesday moved to shore up support in his boyhood home of Michigan, preparing a new television commercial and writing an opinion article defending his 2008 position to let the auto industry go bankrupt...Mr. Romney also sought to highlight his connections to Michigan in the opinion article published in The Detroit News on Tuesday, while also deflecting potential criticism about his opposition to federal loans to rescue the auto industry...Mr. Romney says he always favored what he calls a 'managed bankruptcy' for the auto companies that would have allowed the businesses to restructure and emerge stronger than before. He criticized Mr. Obama for choosing what he called a 'bailout' of the industry that benefited big labor unions."
@Austan_Goolsbee: Hold on here. He opposed any gov $ and w/o that, bankruptcy meant liquidation. Period.
1) Greece illustrates the structural problems of the eurozone, writes Martin Wolf:"Why does Greece - a country with little more than 2 per cent of the eurozone’s gross domestic product - cause such headaches? On a daily basis, people living as far apart as Beijing and Washington read stories of promises not kept and conditions not met. Would it not be better, they must wonder, to let Greece default and exit from the eurozone, rather than persist in paying such attention to its largely self-inflicted plight?...What does the Greek epic tell us about the eurozone? Greece itself, though an important irritant, cannot be decisive for the future of the currency area. Yet the fact that this small, economically weak and chronically mismanaged country has been able to cause such difficulty also indicates the fragility of the structure."
2) The U.S. should back action in Europe, writes Edwin Truman:"Currently, the United States is discouraging the International Monetary Fund and its non-European members from promising additional financial assistance to Europe. The American posture is understandable and, at one level, sensible. With our own debt and deficit problems, we and other countries can be forgiven for feeling that it not up to us to extricate Europe from its mistakes and excesses. President Obama, facing a tough re-election fight, is hardly in a position to offer financial aid to Europe. Just as Washington wants Europe to do more to enhance its political and military security, so is it appropriate to demand that Europe do more on its own with respect to its economic and financial security. But policy passivity risks exacerbating the European crisis and its macroeconomic effects. The United States must show more leadership. First, it must be bolder and more public in setting conditions on Europe’s loan programs. Then, if Europe finally responds convincingly, the United States should rally the rest of the world in a supporting role."
3) The deficit debate looms over the budget, writes Peter Orszag: "In the short run, we should continue to support the economy, which is finally showing some glimmers of life, with additional stimulus. The apparent breakthrough on extending the payroll-tax holiday, which is scheduled to expire at the end of this month, is encouraging from this perspective. President Barack Obama’s budget proposes even more short-term support for the economy. And although the additional measures -- more spending on roads, bridges and other infrastructure projects, for example -- may not be enacted this year, the administration deserves kudos for continuing to propose them...Whenever possible, we should tie additional stimulus to economic indicators -- for example, the unemployment rate or the employment-to-population ratio -- rather than trying to guess precisely when the support will no longer be needed."
4) Creative destruction is the key to restarting growth, writes Glenn Hubbard: "President Barack Obama said in his State of the Union that the US needs an economy 'built to last'. Unfortunately, in his populist rhetoric, Mr Obama missed an opportunity to tee up the conversation the US must have during this election season: How do we restart dynamism in our economy, delivering productivity growth and raising living standards?...'Creative destruction', the other form of innovation, is also vital. It is important to recognise that net job creation is the difference between job creation and job destruction. In dynamic economies, both creation and destruction are high. In the 20 years before the financial crisis, annual job creation was 17 per cent of employment and annual job destruction was 15 per cent, according to John Haltiwanger of the University of Maryland."
5) Rising spending on the elderly is redefining the nature of government, writes Robert Samuelson: "The unveiling of President Obama’s federal budget for 2013 involves two big stories. The first concerns deficits and debt, which have gotten plenty of attention. Although Obama characterizes his budget as restrained and responsible, the federal debt will grow 68 percent over the next decade to $19.5 trillion in 2022. But the second story has gotten only modest attention. It is how spending on the elderly is slowly and inexorably crowding out the rest of government -- and creating enormous pressures for future, steep tax increases. We are redefining the nature of government without consciously thinking about it or debating it. Spending on almost everything else government does -- defense, education, national parks, highway construction and much more -- is either being squeezed or, almost certainly, soon will be."
@jbarro: We can fix our long term fiscal problems while doing very little or even nothing to Social Security. Cuts from Medicare are inevitable.
90s rock interlude: Pavement plays "In the Mouth a Desert" live.
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Still to come: Retail sales fell short of expectations; the individual mandate is a conservative idea; Saturday mail would end under Obama's budget; coal is on its way out; and a monkey and a dog wrestle.
U.S. retail sales rose less than expected in January, report Conor Dougherty and Dana Mattioli:"U.S. consumers boosted their spending only moderately last month and appeared to cut back in some key categories, underscoring the tentative nature of an economic recovery that has generated an uneven upturn in shopping. Retail sales rose 0.4% in January, the government said, only about half the increase from December that many economists anticipated. Overall sales were held down by a sharp drop in car sales, which conflicts with reports from car companies that business was brisk on their lots in January. One possible explanation is that car companies sold more vehicles to businesses last month, which don't count as retail sales to consumers. The drop also might result from lower prices as car makers sought to entice buyers or clear inventory."
Small business optimism increased again, reports Kathleen Madigan:"Small-business owner confidence in January rose for a fifth consecutive month, but that hasn’t translated into more jobs, according to data released Tuesday. The National Federation of Independent Business‘s small-business optimism index rose 0.1 point to 93.9 in January from 93.8 in December. It was the fifth consecutive increase. Ignoring the spike posted last January and February, the latest index is at its highest reading since December 2007, when the U.S. was slipping into recession. The better sentiment didn’t translate into expansive business decisions. 'Owners became less pessimistic about the outlook for business conditions and real sales growth, but that optimism did not show up in hiring or spending for more inventories,' the NFIB said."
New growth numbers are challenging European backing of austerity, reports Brian Blackstone, Stelios Bouras and Cassell Bryan-Low:"Economic output in Greece and Portugal plunged last year, according to figures released on Tuesday, challenging the prevailing European view that fiscal belt-tightening will foster growth. Greek gross domestic product fell 7% in the fourth quarter from the year-earlier period, the country's statistics agency said, bringing the total GDP drop since the end of 2007 to more than 16%...Portugal's decline was milder last quarter--2.7% from a year earlier. But the downturn is accelerating. GDP fell 5.3% in the fourth quarter from the third, at an annualized rate, or 1.3% on a quarterly basis. Portugal's economy is expected by some economists to contract as much as 3.5% this year. The steep contractions are fueling criticism of the strict austerity policies adopted across Europe's periphery in response to the debt crisis."
The Obama administration is preparing a plan for corporate-tax overhaul, report Jeffrey Sparshott and Siobhan Hughes: "The Treasury Department in the coming weeks will propose new corporate-tax rules that cut rates while eliminating many loopholes, measures meant to simplify the code while increasing the number of companies that contribute to government coffers. 'We're going to propose a broad reform that will lower rates, broaden the base and eliminate or wipe out...dozens and dozens and dozens of special tax preferences for businesses,' Treasury Secretary Timothy Geithner said Tuesday at a Senate Finance Committee hearing. Mr. Geithner spoke one day after President Barack Obama released a $3.8 trillion budget calling for new taxes on the wealthy, a restructured tax code and short-term spending measures."
@AnnieLowrey: Sec. Geithner at Senate Finance: We are “drawn to this position reluctantly,” but no way to balance the budget without revenue increases.
Engineering interlude: An origami robot is powered only by air.
The health insurance mandate is rooted in conservative thinking, reports Michael Cooper:"It can be difficult to remember now, given the ferocity with which many Republicans assail it as an attack on freedom, but the provision in President Obama’s health care law requiring all Americans to buy health insurance has its roots in conservative thinking. The concept that people should be required to buy health coverage was fleshed out more than two decades ago by a number of conservative economists, embraced by scholars at conservative research groups, including the Heritage Foundation and the American Enterprise Institute, and championed, for a time, by Republicans in the Senate. The individual mandate, as it is known, was seen then as a conservative alternative to some of the health care approaches favored by liberals -- like creating a national health service or requiring employers to provide health coverage."
The Obama administration's contraception compromise has split critics, reports Laurie Goodstein:"The near-unified front led by the nation’s Roman Catholic bishops to oppose a mandate for employers to cover birth control has now crumbled amid the compromise plan that the Obama administration offered last week to accommodate religious institutions. The leaders of several large Catholic organizations that work directly on poverty, health care and education have welcomed the president’s plan as a workable compromise that has the potential to protect religious freedom while allowing employees who request it to have contraceptives covered by their insurance plans. The bishops, however, have continued to voice strong objections to the White House plan. And they have taken it one step further, arguing that individual Catholics who own businesses should not have to provide birth control to their employees in their health insurance coverage."
@mattyglesias: I'll consider it a Valentine's Day miracle if gridlock blocks the "must pass"-but-noone-can-explain-why-it's-a-good-idea "doc fix".
Obama's budget would end Saturday mail, reports Ed O'Keefe: "President Obama’s budget proposal supports allowing the U.S. Postal Service to end Saturday mail deliveries, raise the price of stamps above the rate of inflation and recalculate how it plans to pay for the future retirements of postal workers...Postal Service officials said last week that the agency lost $3.3 billion in the quarter that ended in December. While the Postal Service generated $200 million in profit from mail deliveries, $3.1 billion in obligations required by law to prefund future worker retirements -- a charge unique to USPS -- offset the gains and resulted in the overall loss. In the budget plan released Monday, the White House proposed relaxing those payments by allowing the Postal Service to include fewer employees in the payments and to make the payments over a longer period of time. Obama also backed an end to Saturday mail deliveries and proposed granting USPS the authority to raise the price of stamps beyond the rate of inflation, if necessary."
Obama signed long-term funding for the FAA, reports Ashley Halsey III: "After 23 funding extensions and a two-week partial shutdown of the Federal Aviation Administration in the summer, President Obama signed into law Tuesday a long-term funding bill for the nation’s aviation system. The law provides $63.4 billion for the FAA over four years. With long-term federal commitments in place, aviation experts say the pace of progress toward a new $42 billion system that could revolutionize air travel should quicken. Airlines that are expected to invest up to $10 billion of their own in the complex navigation system known as NextGen were reluctant to commit as the FAA lurched from one short-term to funding extension to the next since the last long-term bill expired in 2007."
Interspecies friendship interlude: A monkey plays with a dog.
@drgrist: If there's one thing that solves all our problems (climate/econ/security/political), it's more/bigger/faster/cheaper renewables.
Coal's future looks bleak, reports Erica Martinson: "Coal’s victory dance after the death of cap and trade may prove to be short-lived. The industry landed a huge victory in 2010 with the demise of climate change legislation. But despite that win, and the Obama administration’s vocal support for an 'all in' energy policy that includes a mix of new and traditional energy resources, a variety of forces is pushing coal back to the brink. Among the forces at play are federal power plant regulations that are more costly for coal than for other fuels, a barrage of environmentalist litigation hitting individual coal plants, and stiff competition from a glut of inexpensive domestic natural gas that is facing less aggressive attention from the EPA. Other factors include rising coal prices for power plants amid increasing transportation costs and industry pressures from countries like China. Coal is still the top dog in the U.S. power supply, serving as the fuel for about 45 percent of U.S. electricity. But the Energy Information Administration has predicted that coal’s share of the U.S. market will drop to 39 percent by 2035, assuming no changes in legislation or regulations."
Venture capitalists are playing a big role in the Energy Department, report Carol Leonning and Joe Stephens: "Sanjay Wagle was a venture capitalist and Barack Obama fundraiser in 2008, rallying support through a group he headed known as Clean Tech for Obama. Shortly after Obama’s election, he left his California firm to join the Energy Department, just as the administration embarked on a massive program to stimulate the economy with federal investments in clean-technology firms...During the next three years, the department provided $2.4 billion in public funding to clean-energy companies in which Wagle’s former firm, Vantage Point Venture Partners, had invested, a Washington Post analysis found. Overall, the Post found that $3.9 billion in federal grants and financing flowed to 21 companies backed by firms with connections to five Obama administration staffers and advisers."
The White House threatened to veto the House transportation bill, reports Burgess Everett: "The Obama administration blasted the House’s five-year transportation proposal Tuesday and issued the White House’s first veto threat of the year. The White House cited its unhappiness with many of the transportation provisions in the much-criticized $260 billion bill, along with GOP-backed energy language that includes an attempt to hasten approval for the Keystone XL pipeline. 'Because this bill jeopardizes safety, weakens environmental and labor protections, and fails to make the investments needed to strengthen the nation’s roads, bridges, rail, and transit systems, the president’s senior advisers would recommend that he veto this legislation,' read the White House’s statement of administration policy."
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.