Wonkbook: The Federal Reserve Board is at full capacity for the first time since 2006
Karl Singer is writing Wonkbook this week while Ezra is on vacation.
RCP Obama vs. Romney: Obama +2.0%; 7-day change: Obama +0.3%.
RCP Obama approval: 48.0%; 7-day change: -0.7%.
1) The Federal Reserve Board is at full capacity for the first time since 2006. "With the swearing in of a seventh Federal Reserve board member, the panel is operating at full strength for the first time since 2006, amplifying the activist stamp of President Barack Obama. Mr. Obama appointed six of the seven, including naming Fed Chairman Ben Bernanke to his second term. His picks for the central bank's board--and the demands of steering the economy from the brink of financial collapse--have pushed the Fed to adopt easy money policies to spur growth and to write new rules aimed at making the financial system safer. Fed governors also have prodded federal agencies and Congress to do more to help heal the housing market, sparking criticism that they have strayed beyond their mandate. Mr. Bernanke on Wednesday swore in the board's seventh member, former Harvard economics professor Jeremy Stein." Kristina Peterson in The Wall Street Journal.
@davidmwessel: And then there were seven: Jeremy Stein sworn in as Fed governor today.
@BCAppelbaum: Swearing-in of two new Fed governors means there will now probably be 12 votes against additional stimulus at June FOMC.
2) Congress is running out of time on several bills. "President Barack Obama asked Congress to pass bills to keep student loan interest rates from doubling, prevent domestic abuse and fund the nation’s highway system. But never underestimate Congress’s ability to fumble a can’t-miss play...Lawmakers are already hearing from voters that failing to pass a student loan bill will be another hit to their families’ strained finances. But two competing, partisan versions of the legislation failed in the Senate last week...The Violence Against Women Act, meanwhile, is caught up in a constitutional bind. The Senate legislation included a spending increase, but all revenue measures have to originate in the House...Top aides are less than pleased with a conference committee’s progress negotiating the highway measure. That means it’s likely -- once again -- that Congress will have to pass a short-term stopgap to fund the nation’s infrastructure projects...The clock is ticking. Highway funding will begin to run dry, and student loan interest rates will double on July 1." Jake Sherman and John Bresnahan in Politico.
3) The U.S. slapped tariffs on Chinese wind turbines. "Chinese manufacturers of towers for wind turbines received unfair subsidies and must now pay duties of 13.7 to 26 percent, the Commerce Department said on Wednesday in a preliminary decision in a case brought by four American manufacturers of the towers. The decision, the third trade case decided this year in favor of American wind and solar manufacturers, will be followed by another in the coming weeks on whether Chinese companies engaged in dumping the towers in the United States at prices below the cost of making them. This month, the Commerce Department said China was dumping solar panels in the American market and imposed duties of 31 percent on the imports, adding to earlier duties imposed under a department ruling that China unfairly subsidized its solar manufacturers...American imports of Chinese towers reached $222 million last year, according to the Commerce Department." Matthew Wald in The New York Times.
4) A bill to repeal the medical device tax is gaining momentum. "Makers of medical devices are gaining some momentum in a vigorous campaign to persuade Congress to scrap a tax imposed on their industry by the 2010 health-care law. A bill to void the tax sponsored by Rep. Erik Paulsen (R-Minn.) will be marked up in the House Ways and Means Committee Thursday. Republican House leaders say a floor vote could be scheduled as soon as next week...Whether the bill ultimately succeeds could depend on how House Republicans choose to pay for it. Congressional budget scorers estimate the tax -- which takes effect Jan. 1 and was intended to help pay for the health-care law -- will raise nearly $30 billion in revenue from 2013 through 2022. The method Republicans choose to replace those funds, which must be announced before the House vote, could make the difference between passing the bill largely along party lines, or with a level of bipartisan support that could give the proposal a boost in the Democratic-majority Senate." N.C. Aizenman in The Washington Post.
5) The House passed the FDA user fee bill. "The House of Representatives on Wednesday approved a bill that helps fund the Food and Drug Administration and gives it new authority to prevent drug shortages and speed reviews of medical devices. Passed by a vote of 387-5, the bill also helps ensure the safety of drugs imported from abroad by collecting higher fees from companies to fund FDA inspections of foreign facilities, and gives drugmakers incentives to make antibiotics for conditions where few treatments exist. The Senate passed its own version of the bill last week with a near-unanimous vote, and leaders from both sides of Congress must now meet to iron out any differences. House leaders said they are aiming to agree on a final bill by July 4. The main purpose of the bill is to reauthorize fees from makers of drugs and devices that help speed FDA evaluation of new medical products. These so-called 'user fees' could make up nearly half of the FDA's proposed $4.5 billion budget next year, according to a plan from President Barack Obama." Anna Yukhananov in Reuters.
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1) YGLESIAS: A global recession may be coming. "America is still recovering from the Great Recession and Europe is melting down, yet from a global perspective, the economy has never been as healthy or prosperous. The world economy enjoyed amazing growth from 2002-08, took a small dip in 2009, and then went back to growing. Sadly the good news seems to be coming to an end in Brazil, China, and India, and that’s horrible news for us...The Chinese growth dynamo that rescued the world economy after the financial crisis isn’t going to reappear this time around. That means the stakes as Europe confronts the ongoing meltdown of its banks and America faces the prospect of a new debt ceiling standoff are higher than ever. The bad economic news of 2008-09 came with the major silver lining that growth continued in the places that needed it most. This time around, if the rich countries can’t get our act together, the whole world will spiral into recession." Matthew Yglesias in Slate.
2) ZINGALES: Competition can lessen inequality. "The U.S. middle class is squeezed by the rising costs of college education and health care, and an economy that increasingly rewards only superstars. Fixing these problems requires introducing greater competition into each area...Reducing the cost of health care and college would make increasing economic inequality in the U.S. less painful but wouldn’t attenuate it. To take a step in that direction requires fixing corporate governance, including the attendant problems of outsize executive pay, heavy lobbying, malfeasance, opaque management and cronyism...The way to fix this is to appoint board members who are accountable to the shareholders...Currently this isn’t possible because of regulation introduced by the Securities and Exchange Commission to prevent politics from affecting corporate decisions...As is often the case, a good reason provides cover for a bad one: protecting the incumbent managers from competition." Luigi Zingales in Bloomberg.
3) MILLER: America needs to do a better job of recruiting and training our teachers. "The top performing school systems in the world have strong teachers unions at the heart of their education establishment. This fact is rarely discussed (or even noted) in reform circles. Yet anyone who’s intellectually honest and cares about improving our schools has to acknowledge it. The United States is an outlier in having such deeply adversarial, dysfunctional labor-management relations in schooling. Why is this? My hypothesis runs as follows: The chief educational strategy of top-performing nations such as Finland, Singapore and South Korea is to recruit talent from the top third of the academic cohort into the teaching profession and to train them in selective, prestigious institutions to succeed on the job. In the United States, by contrast, we recruit teachers mostly from the middle and (especially for poor schools) bottom third and train them mostly in open-enrollment institutions that by all accounts do shoddy work." Matt Miller in The Washington Post.
4) CHUBB AND MOE: Online education will make higher education better. "Over the long term, online technology promises historic improvements in the quality of and access to higher education. The fact is, students do not need to be on campus at Harvard or MIT to experience some of the key benefits of an elite education. Moreover, colleges and universities, whatever their status, do not need to put a professor in every classroom. One Nobel laureate can literally teach a million students, and for a very reasonable tuition price. Online education will lead to the substitution of technology (which is cheap) for labor (which is expensive)--as has happened in every other industry--making schools much more productive...Higher education will be transformed by technology--and for the better. Elite players and upstarts, not-for-profits and for-profits, will compete for students, government funds and investment in pursuit of the future blend of service that works for their respective institutions and for the students each aims to serve." John Chubb and Terry Moe in The Wall Street Journal.
5) REICH: Austerity and falling wages is a losing combination. "What if Europe and the US converged on a set of economic policies that brought out the worst in both - European fiscal austerity combined with a declining share of total income going to workers? Given political realities on both sides of the Atlantic, it is entirely possible. So far, the US has avoided the kind of budget cuts that have pushed much of Europe into recession. Growth on this side of the pond is expected to be around 2.4 per cent this year. And jobs are recovering, albeit painfully slowly. ..If Europe were to move towards structural reforms that create a labour market similar to America’s while pursuing fiscal austerity, while America embraces fiscal austerity as US corporations continue to shrink payrolls, we are likely to experience the same results on both sides of the Atlantic. Real wages will decline, we will have less economic security and our public services will be diminished. That is not sustainable, economically or politically." Robert Reich in The Financial Times.
Top long reads
Annie Lowrey profiles Dennis Kelleher and his fight for stronger regulation of banks: "Sitting in a corner office high above K Street here, Dennis M. Kelleher, one of the most powerful lobbyists on financial regulatory reform, looks every bit the corporate lawyer and high-ranking Senate aide he formerly was: tailored suit, quick smile, assertive tone. But Mr. Kelleher does not work for banks. He works against them...Mr. Kelleher is the president of Better Markets, a nonprofit organization that pushes for a stringent interpretation of the Dodd-Frank financial regulatory law, which passed in 2010 but whose specific rules and regulations are currently the focus of an intense, complex and expensive behind-the-scenes battle. Think of Better Markets as Occupy Wall Street’s suit-wearing cousin. Mr. Kelleher, a Harvard Law School alumnus and a former partner at Skadden, Arps, Slate, Meagher & Flom -- is a wisecracking, fast-talking operator who just happens to think that banks would devastate the economy if given the chance."
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Still to come: College grads cluster; debt isn't holding back doctors from primary care; a DREAM Act alternative in the House; hard times for battery companies; and a cat takes a stroll down its fridge.
College graduates are increasingly clustering together. "Dayton sits on one side of a growing divide among American cities, in which a small number of metro areas vacuum up a large number of college graduates, and the rest struggle to keep those they have. The winners are metro areas like Raleigh, N.C., San Francisco and Stamford, Conn., where more than 40 percent of the adult residents have college degrees. The Raleigh area has a booming technology sector and several major research universities; San Francisco has been a magnet for college graduates for decades; and metropolitan Stamford draws highly educated workers from white-collar professions in New York like finance. Metro areas like Bakersfield, Calif., Lakeland, Fla., and Youngstown, Ohio, where less than a fifth of the adult residents have college degrees, are being left behind. The divide shows signs of widening as college graduates gravitate to places with many other college graduates and the atmosphere that creates." Sabrina Tavernise in The New York Times.
@DLeonhardt: Avg jobless rate in metro areas where 1/3+ of adults are college grads: 7.5%. & where less than 1/6 are: 10.5%.
Democrats are considering pushing for a clean debt limit increase. "Democrats are grappling with how to approach another standoff with Republicans over raising the debt limit after abandoning demands for a 'clean' increase last time around. In talks last year, Democrats campaigned vigorously for a debt-ceiling increase that was not paired with spending cuts or deficit reduction, only to drop the demand when the deadline for default approached in early August...Republicans, led by House Speaker John Boehner (R-Ohio), have laid out clear conditions for the next debt-limit vote: Any increase needs to be paired with a greater amount of spending cuts or reforms. Boehner’s unequivocal demand has created a dilemma for Democrats, who must decide whether to renew their call for a clean boost, or instead demand that the debt increase be paired with a 'balanced' deficit-reduction deal that combines spending cuts and higher revenues." Peter Schroeder and Bernie Becker in The Hill.
It's unclear where the money for a Spanish bailout would come from. "As Spain’s deepening financial problems make a European bailout a more distinct possibility, a looming question is where the money will come from. Spain is the euro zone’s fourth-largest economy, after Germany, France and Italy, and the cost of a rescue would strain the resources of Europe’s new 700 billion euros ($867 billion) bailout fund that is to become available this summer...Mr. Rajoy’s administration has been floating the idea of engineering a bailout by other means. These include getting Europe’s rescue fund to provide money directly to the country’s banks or to buy Spanish government bonds on the open market, without Europe’s demanding new levels of scrutiny and tough payback conditions. Economists estimate that if Spain were forced out of the bond markets by its high borrowing costs and had to rely on funds from Europe and the International Monetary Fund to survive, the cost could reach 500 billion euros over several years." Landon Thomas Jr. in The New York Times.
The White House continues to threaten vetos of GOP spending bills. "The White House on Thursday threatened to veto a military spending bill that is slated to come to the House floor this week. The Obama administration said it is able to accept most of the Military Construction and Veterans Affairs bill, but has adopted a policy of rejecting all 12 House annual appropriations bills until Republicans abandon their budget, authored by Rep. Paul Ryan (R-Wis.). It has also threatened to veto a Commerce and Justice spending bill that the House passed earlier in May. The House GOP budget would cut 2013 spending by an additional $19 billion compared to the caps in last August’s debt-ceiling deal, while also raising defense spending...The Senate is proceeding to consider spending bills based on the August debt-ceiling deal. The competing approaches make it likely that a continuing resolution will be needed to extend current policies before the fiscal year ends on Sept. 30." Erik Wasson in The Hill.
Ireland votes today on the eurozone fiscal treaty. "Linked by a common currency but not a common economy, the crisis-battered euro-zone nations are facing a pivotal choice: Either move more closely together or risk their currency union breaking apart. But are European voters -- some in nations divided by centuries of rivalries -- willing to take that leap toward closer integration? The fiercely independent Irish are about to offer a window into the answer. From the emerald hills of Donegal to the shores of Cork, the Irish go to the polls Thursday in a referendum on a regionwide fiscal treaty inked in January that would impose strict limits on budget deficits and debt. European governments that ratify the treaty will effectively surrender a measure of sovereignty over two of their most sacred economic rights -- how much they can borrow and how much they can spend -- to the bureaucrats in the region’s administrative capital of Brussels." Anthony Faiola in The Washington Post.
Obama signed an extension of the Export-Import Bank into law. "President Obama signed a bill on Wednesday that extends the life of the Export-Import Bank through 2014...Mr. Obama paid tribute to Congressional leaders who brokered the deal to preserve the bank, which was in jeopardy after Tea Party-aligned conservatives in the House and Senate seized on the need for reauthorization as a chance to mothball an agency they say is a purveyor of welfare to big corporations...In the House, the Republican leader, Representative Eric Cantor of Virginia, reached a deal with the minority whip, Representative Steny Hoyer of Maryland, under which the bank’s lending limit would be increased to $140 billion over three years, from the current $100 billion. In return, the bank will be subject to new auditing and reporting requirements, which critics said would help ensure that it did not waste taxpayer dollars...Until this year, the reauthorization of the bank, which dates to the 1930s, had been a routine exercise." Mark Landler in The New York Times.
Kids covering Robyn interlude: Lennon and Maisy cover "Call Your Girlfriend" with help from butter containers.
Medical school debt may not be holding back primary care. "The high cost of medical school often gets tossed around as a key reason why doctors don’t go into primary care jobs, instead choosing specialties such as radiology and surgery that prove more lucrative. When physicians graduate with an average of $161,290 in debt, it’s hard to see money not factoring into career decisions. While this narrative makes sense, there’s one major flaw: It doesn’t seem to be true...National data on medical student debt find that those with a high debt burden are actually more likely to go into the less lucrative primary care fields than doctors who hold no loans at all. 'For private schools, odds of choosing primary care increases as debt increases, with those having no debt (and no scholarships) less likely to choose primary care,' researchers at the Robert Graham Center concluded in a 2009 report." Sarah Kliff in The Washington Post.
@ezraklein: This undermines the idea that doctors are rushing into specialties to pay down the debt they accumulate in med school.
A DREAM Act alternative was introduced in the House. "A Republican congressman introduced alternative immigration legislation to the DREAM Act on Wednesday. The Studying Towards Residency Status Act, introduced by Rep. David Rivera (R-Fla.), offers young immigrants living in the country illegally a chance to be granted non-immigrant status for five years if they meet certain criteria. They must have entered the U.S. before they were 16, have lived in the country for five consecutive years, earned a high school diploma and been accepted to a 4-year institution of higher learning. The bill is meant as an alternative to Sen. Dick Durbin's (D-Ill.) Development, Relief and Education for Alien Minors (DREAM) Act, which provides a pathway to citizenship for illegal immigrants provided they have demonstrated good moral character and are working toward completing a degree at a college or university or serving in the military." Daniel Strauss in The Hill.
The Obama administration is pushing for more action on veteran homelessness. "An Obama administration effort to end veteran homelessness by 2015 requires more urgency, the secretaries of the departments of Veterans Affairs and Housing and Urban Development said Wednesday...The number of homeless veterans found during point-in-time counts dropped 12 percent from 2010 to 2011, a decrease that Donovan attributed to the government’s embrace of the 'housing first' strategy...More than 30,000 veterans have been housed through the HUD-VASH program, which combines housing vouchers issued by HUD with VA case management and clinical services. HUD’s 2013 budget includes an additional $75 million for HUD-VASH, an increase of about 15 percent...A new, comprehensive Homeless Veterans Registry several years in the making will be rolled out this summer and will help researchers study the causes of homelessness and what keeps the homeless on the streets" Steve Vogel in The Washington Post.
Supercat interlude: A cat walks down a refrigerator.
U.S. natural gas exports are on hold. "The Obama administration is telling Japan and other allied countries they will have to wait before moving forward on plans to buy American natural gas, people involved in the talks said. A dramatic increase in U.S. natural-gas production has led several U.S. companies, including Sempra Energy and Dominion Resources Inc., to seek permits from the Department of Energy to export gas to countries that lack free-trade agreements with the U.S. Exxon Mobil Corp. Chief Executive Rex Tillerson said Wednesday his company was looking at exporting from the U.S. Gulf Coast and Canada. Sempra and Dominion are working with Japanese partners that want to import the gas as their country looks for new power sources...But the U.S. has told Japan, a leading military ally in the Pacific, it will have to wait, in large part because of the political sensitivities, participants in the talks said." Tennille Tracy in The Wall Street Journal.
Electric car battery companies are struggling. "Since 2009, the Obama administration has awarded more than $1 billion to American companies to make advanced batteries for electric vehicles. Halfway to a six-year goal of producing one million electric and plug-in hybrid vehicles, auto makers are barely at 50,000 cars. The money funded nine battery plants--scattered across the U.S. from Michigan to Pennsylvania and Florida--that have few customers, operate well below capacity and, so far, have created less than a third of the jobs promised by 2015. Customers including start-up Fisker Automotive Inc. and auto makers like General Motors Co. that urged the funding have struggled to produce and sell battery-powered cars...What happened? The U.S. provided grants that tied the battery makers to aggressive timetables, requiring each to achieve production and staffing targets that would supply tens of thousands of vehicles a year. But those production timetables weren't linked to market demand." Mike Ramsey in The Wall Street Journal.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.