Wonkbook: ‘Supercommittee’, assemble!
With nine of the 12 "supercommittee" members named, there's an awful lot of effort being sunk into predicting how each individual member will contribute to the whole. John Kerry is a liberal, so he'll likely resist anything without taxes, but he's also a dealmaker and a defense wonk, so he'll probably push for a compromise. Every Republican on the committee signed Norquist's pledge, but Dave Camp is a veteran legislator with a deep and abiding interest in tax reform. Pat Toomey is a hardline conservative, but he's also a huge Harry Potter fan, and so he can perhaps be convinced if the Harry Potter Alliance puts sufficient pressure on him.
Okay, that last one isn't true, at least as far as I know. But odds are that the other analyses aren't likely to be particularly predictive, either. You could have lost a lot of money over the past few years betting that individual groups of legislators would be able to do anything the party leadership didn't want done. The Gang of Six didn't reach a bipartisan health-care reform deal, and the second Gang of Six never got a vote for its debt proposals. The Wyden-Bennett team wasn't able to get its health plan off the ground and the Fiscal Commission couldn't find enough votes to actually issue an official recommendation.
In general, the only thing that's worked -- and it hasn't worked particularly well -- are negotiations between the leadership of the two parties. Mitch McConnell and Joe Biden managed to craft both the tax deal and the debt-ceiling deal. John Boehner, Harry Reid and the White House managed to avert a government shutdown. Barack Obama and John Boehner almost struck a $4 trillion debt deal.
That's likely to be the way this goes, too. The supercommittee members won't negotiate in a vacuum. They'll negotiate in consultation with their party leadership (in the case of Senators Jon Kyl and Patty Murray, they are their party's leadership). And so whether the supercommittee succeeds will depend less on the individual opinions of the members than on whether the leadership of the two parties wants and can accept a deal.
Of course, there's a good argument that even if the supercommittee succeeds, Congress will have failed. As mega-investor Bill Gross writes in today's Washington Post, "While our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease -- it is a symptom. Lack of aggregate demand or, to put it simply, insufficient consumption and investment is the disease." Fixing debt without doing anything about aggregate demand -- which is to say, "jobs" -- is not going to be enough. Which is why anyone optimistic about the supercommittee should be interested in Rep. John Larson's proposal to form a similarly empowered commission charged with proposing action on the jobs crisis.
Five in the morning
1) Three-fourths of supercommittee is now in place, report Paul Kane and Felicia Sonmez: "Of the nine members announced so far, eight voted for the debt-ceiling deal that rescued the country from the brink of default, which suggests at least the possibility that the 12-member panel will be able to reach a bipartisan agreement on future spending cuts. The one announced panel member to oppose the debt compromise is Sen. Patrick J. Toomey (R-Pa.). The other eight are Republican Sens. Jon Kyl (Ariz.) and Rob Portman (Ohio), Republican Reps. Jeb Hensarling (Tex.), Dave Camp (Mich.) and Fred Upton (Mich.), and Democratic Sens. Patty Murray (Wash.), Max Baucus (Mont.) and John F. Kerry (Mass.). Murray and Hensarling are co-chairs...House Minority Leader Nancy Pelosi (D-Calif.) is expected to fill the final three slots any day, and she is believed to be leaning toward establishment veterans."
@joshgreenman tweets an idea that will make the supercommittee a roaring success: "Let the Supercommittee split .1% of the debt reductions they achieve."
2) The US has bigger problems than its debt, writes Bill Gross: "While our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease -- it is a symptom. Lack of aggregate demand or, to put it simply, insufficient consumption and investment is the disease. Debt has been simply an abused sovereign and private market antidote to sustain it. We and our global market competitors are and have been experiencing a lack of aggregate demand for several decades. It is now only visibly coming to a head, as the magic elixir of leverage is drained and exhausted...The president and Congress must recognize that an AA-plus country, to remain AA-plus, must focus on growth, not debt reduction, in the short term. We have a debt problem -- but primarily a crisis of aggregate demand."
@RBReich agrees: "Ongoing DC blather -- who's on "supercommittee" & how 10-yr debt will be cut -- is diverting attention from current jobs crisis."
But what if there was a supercommittee for jobs? That's what House Democratic Caucus Chairman John Larson wants.
3) The Euro debt crisis is looking like 2008 all over again, reports Nelson Schwartz: "Traders compare the threat from Greece that prompted the sovereign debt crisis a year ago to Bear Stearns, whose fall in March 2008 was a dress rehearsal for the broader crisis that followed six months later. For these would-be Cassandras, the huge debt loads of Italy and Spain are now equivalent to Lehman and A.I.G., institutions whose downfalls threatened the stability of the entire system. In an ominous echo of 2008, European bank stocks on Wednesday fell 10 percent or more -- and banks in Europe are beginning to hoard cash, crimping the interbank loans that keep the global financial system operating smoothly. While borrowing costs for banks in the United States and Britain have crept up only slightly recently, borrowing costs for Continental banks that lend to one another have doubled since the end of July."
4) The White House is making another run at fixing the housing market, reports Brad Plumer: "Of all the problems plaguing the U.S. housing market right now, two stand out. First, there’s a glut of foreclosed properties out there putting downward pressure on home prices — and that weak housing market, as we’ve seen, is putting a damper on economic growth. At the same time, there’s an undersupply of rental units, which is causing rents to increase faster than inflation in places like San Jose, Washington, D.C., Seattle, New York, Houston, and elsewhere. Is there a way to address both of those problems at once? Possibly. Consider that Fannie Mae, Freddie Mac, and the Federal Housing Administration now own some 250,000 foreclosed homes — roughly half of the total number of unsold, repossessed properties out there. There are also another 800,000 or so homes in some stage of foreclosure that are backed by the agencies. So what if the government took these properties off the residential housing market and instead sold them off in bulk to private investors, who would be required to convert them into rental units? On Wednesday, the Obama administration announced plans to do just that. The ultimate goal would be to stabilize the housing market and bring down rents at the same time. And conveniently, the move wouldn’t require a vote in Congress."
5) The Fed did more on Tuesday than many realize, writes Justin Wolfers: "Many market commentators are disappointed that the Fed didn’t announce 'QE3'--a renewed round of quantitative easing. But they shouldn’t be. The Fed still chose to reduce long-term interest rates, they just decided to do it with a different tool. They figured that if you can’t reduce short-term interest rates further, you should reduce 'em for longer. That’s what the Fed was promising, when they said they expect to keep their short-term rate at 'exceptionally low levels for the federal funds rate at least through mid-2013.' What does this do? Keeping short-term interest rates lower for longer will also reduce long-term interest rates. And that’s the main game. It has already worked--perhaps even more reliably than following QE2. The interest rate on two-year bonds is down to virtually zero, and the 10-year interest rate is down to 2.2 percent."
Old covering new interlude: Weezer play "Pumped Up Kicks" by Foster the People live.
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Still to come: Obama and Bernanke had what was presumably an extremely depressing meeting yesterday; the House GOP is going hard against health care reform waivers; state educational standards lag behind federal ones; Harry Reid promises movement on energy; and a puppy is utterly perplexed by a lime.
Obama met with Ben Bernanke yesterday, reports Sam Youngman: "President Obama and his economic team met Wednesday with Federal Reserve Chairman Ben Bernanke as volatility continued to haunt the markets. Obama, Bernanke, Treasury Secretary Tim Geithner, National Economic Council Chairman Gene Sperling and White House chief of staff Bill Daley huddled in the Oval Office 'to discuss the economy and global recovery,' the White House said in a statement...Obama and Bernanke, in their third meeting this year, did discuss the critical economic situation in Europe. Obama’s meeting with Bernanke comes one day after the central bank’s Federal Open Market Committee announced it expected to keep a key interest rate near zero through the presidential election and into mid-2013...White House officials described Obama’s sit-down with Bernanke as a regular, periodic meeting the president has with the chairman."
The administration's mortgage modification program is still not showing much progress, reports Arthur Delaney: "Fewer homeowners entered preliminary mortgage modifications under the Obama administration's signature foreclosure prevention initiative in June than in any month since April 2009, according to government data released Friday. June saw just 15,000 new trial modifications under the initiative, which the administration confirmed was the smallest number of any month almost since the program launched. (The administration said some June modifications may not have been reported yet. More than 30,000 trial modifications were converted to permanent ones in June.) Since the Home Affordable Modification Program launched in the months following President Obama's inauguration, nearly 870,000 struggling homeowners have been kicked out of the initiative, while just 657,044 remain in permanent modifications."
Rating agencies spend millions lobbying the same government they rate, reports Dan Eggen: "S&P’s parent company, McGraw-Hill, has spent more than $11 million on lobbying over the past 15 years, including at least $1 million on S&P-related legislation, according to an analysis of federal disclosure records by the Sunlight Foundation. The firm’s employees have also given more than $500,000 in contributions to federal candidates since 1989, primarily to Democrats, the analysis shows. The numbers underscore the unusual political position occupied by S&P and the country’s two other top rating firms, Moody’s Investors Service and Fitch Ratings. Each company issues judgments on government creditworthiness that can move markets while lobbying the government for policies favorable to its core businesses."
We need to get serious on infrastructure, write Ed Rendell and Scott Smith: "As recently as 2005, the World Economic Forum ranked the U.S. No. 1 in infrastructure economic competitiveness. Today, the U.S. is ranked 15th. This is not a surprise considering that the U.S. spends only 1.7% of its gross domestic product on transportation infrastructure while Canada spends 4% and China spends 9%. Even as the global recession has forced cutbacks in government spending, other countries continue to invest significantly more than the U.S. to expand and update their transportation networks. China has invested $3.3 trillion since 2000, for example, and recently announced another $105.2 billion for 23 new infrastructure projects. Brazil has invested $240 billion since 2008, with another $340 billion committed for the next three years. The result? China is now home to six of the world's 10 busiest ports—while the U.S. isn't home to one. Brazil's Açu Superport is larger than the island of Manhattan, with state-of-the-art highway, pipeline and conveyor-belt capacity to ease the transfer of raw materials onto ships heading to China."
Obama's been too weak, writes Matt Miller: "Yes, other forces may be 'responsible' for the bad news. But in the end a president has the most power to shape the debate. How could Obama have let the entirely foreseeable debt-ceiling standoff turn into a hostage drama? Why didn’t he have the spine to say “send me a clean debt limit increase or I’ll raise it myself and see you in court”? How could he leave us in a position where every future debt-limit hike now becomes an occasion for blackmail? And where Chinese officials can blithely say that 'the U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone'?"
Vintage ad interlude: A 1970s PSA warns of the evils of pay TV.
The House GOP is investigating health care reform waivers, reports Sam Baker: "House Republicans on Wednesday threatened to use a 'compulsory process' if the Health and Human Services Department doesn’t voluntarily turn over more documents about controversial waivers from part of the healthcare reform law. Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, said HHS has not answered questions about the waiver process or provided all of the records he requested while investigating the issue. In a letter to HHS, Issa questioned the department's assertion that it had always intended to stop issuing new waivers beginning in September. HHS said the cutoff provided a full year for companies to seek an initial one-year waiver, which can be extended through 2014."
There are three simple things Medicare could do to cut costs, writes John Goodman: "First, all over the country there are walk-in, free-standing emergency-care clinics that post prices and usually deliver high-quality care. Because these services arose for cash-paying patients outside of the health-insurance system, their prices are free-market prices...Medicare should allow enrollees to obtain care at almost all of these places, and it should pay the posted prices...Second, Medicare should allow enrollees to take advantage of commercial telephone and email services. TelaDoc offers telephone consultations with physicians at a price that is probably lower than the same service delivered by a nurse at a walk-in clinic...Finally, Medicare should encourage physicians to repackage and reprice their services in ways that are good for the doctor, good for the patient, and good for Medicare."
States have watered down their education standards, reports Stephanie Banchero: "Eight states have raised their standards for passing elementary-school math and reading tests in recent years, but these states and most others still fall below national benchmarks, according to a federal report released Wednesday. The data help explain the disconnect between the relatively high pass rates on many state tests and the low scores on the national exams, known as the National Assessment of Educational Progress. In fourth-grade reading, for example, 35 states set passing bars that are below the 'basic' level on the national NAEP exam. 'Basic' means students have a satisfactory understanding of material, as opposed to 'proficient,' which means they have a solid grasp of it. Massachusetts is the only state to set its bar at 'proficient'--and that was only in fourth- and eighth-grade math."
Arizona's immigration fight has reached the Supreme Court, reports Miriam Jordan: "Arizona Gov. Jan Brewer appealed to the U.S. Supreme Court Wednesday to overturn a ruling that blocked key elements of the state's controversial immigration enforcement law. The filing came just before a deadline to contest a district court's decision that, among other things, barred police from enforcing a provision in the law--called SB1070--that would allow them to ask individuals about their immigration status. Ms. Brewer, a Republican, lost her first appeal in April when the Ninth Circuit Court of Appeals rejected her request to overturn the decision, saying SB1070 pre-empts the federal government's constitutional role in regulating immigration. State lawyers justified their appeal to the Supreme Court on the grounds that the border state has had to cope with illegal immigration in the absence of federal action."
The US political system doesn't work with strongly polarized parties, writes Ezra Klein: "Compared with other political systems in other industrialized democracies, our system is unusually reliant on consensus and resistant to action. In many countries, there’s no such thing as 'divided government,' where one party controls the executive branch and the other runs the legislature. Nor is there a filibuster, a debt ceiling, or, to go back to one of the primary impediments to action of the civil rights era, a House Rules Committee. It’s simply easier for governments elsewhere to get things done...The old theory was that the right answers to policy problems would, by virtue of seeming right, command enough consensus in Washington to clear the system’s hurdles. That may have worked well enough in recent decades, when the system was less polarized and the parties were far better at working together. It seems naive in 2011."
Adorable animals with strange phobias interlude: A puppy is alternately intrigued and terrified by a lime.
Senate Democrats will focus on energy after the recess, reports Andrew Restuccia: "Senate Majority Leader Harry Reid (D-Nev.) said Wednesday that Democrats hope to make energy one of their 'signature issues' when Congress returns from its summer recess next month. 'One of the things at the top of the list is energy jobs, and we’re going to see if we can get some cooperation from Republicans so we can make that one of our signature issues over the next couple of months,' Reid told reporters Wednesday on a conference call....Asked if the legislation might be based on bills considered by the Senate Energy and Natural Resources Committee, Reid demurred. He touted what he called bipartisan cooperation on the panel, but did not say whether he would bring energy legislation considered by the committee to the floor."
The Obama administration okayed the country's biggest solar project, reports Ryan Tracy: "The Interior Secretary Wednesday approved the highest capacity solar-panel plant ever constructed on public-owned land. The approval cleared a permitting hurdle for First Solar Inc.'s 550-megawatt Desert Sunlight project, which needed to pass an environmental review from the Interior Department because it is being built on federal land...First Solar will supply thin-film photovoltaic solar panels, build, and operate the project, but is looking to sell it to a new owner and hasn't yet announced a buyer. It sold an Arizona solar farm last week to NRG Energy under a similar arrangement after the Energy Department finalized a loan guarantee for that project. A $1.88 billion federal loan guarantee for Desert Sunlight is still pending. The Energy Department offered the guarantee in June, contingent on certain conditions."
An Energy Department panel wants new anti-fracking rules, reports Deborah Solomon: "The use of hydraulic fracturing to drill for natural gas poses risks to air and water quality, and should be subject to tighter rules and more disclosure, an advisory panel to the Department of Energy said in a report to be released Thursday. The report, commissioned by President Barack Obama, stops short of recommending specific state or federal regulations, but says public concern about the practice known as 'fracking' could undermine an important and growing source of U.S. energy. To help assuage those concerns, the panel is urging tighter restrictions on air emissions, disclosure of all pollutants released and chemicals used in the drilling process, and further study of whether natural-gas exploration contaminates drinking water."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.