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Wonkbook: U.S. economy may be better off than thought

at 07:47 AM ET, 03/30/2012

Karl Singer is writing Wonkbook while Ezra is traveling.

Top stories


Employee Rodgers Stephenson brazes a bicycle frame at the Worksman Cycles production facility in the Queens borough of New York on March 26, 2012. (Scott Eells - BLOOMBERG)
1) The economy may have grown more than previously thought. "The US grew at an annualised rate of 4.4 per cent in the fourth quarter of 2011, according to an alternative measure of output, suggesting the world’s largest economy may be healthier than previously thought. The rapid rise in gross domestic income compares with lower estimates for growth in gross domestic product. The Bureau of Economic Analysis left its estimate of fourth-quarter GDP growth unchanged at 3 per cent. The strength of the GDI number may explain a gap between the recent strength of the labour market and an apparent sluggishness of output and demand that has puzzled the US Federal Reserve. GDI measures all the wages and profits in the economy whereas GDP measures all of the spending. In theory, the two should be the same because every dollar of spending should be matched by a dollar of wages, profits or other income. Measurement errors mean that GDI and GDP often differ from quarter to quarter but over time they tend to converge." Robin Harding in The Financial Times.

@davidmwessel: Gross Domestic INCOME up 4.4% in Q4 vs. 2.6% in Q3 vs GDP increases of 3.0% & 1.8%

@justinwolfers: The BEA v BLS puzzle is largely solved: GDI growth was fast enough to explain rapid jobs growth. Historically, GDP revises toward GDI.

2) Congress passed a highway bill extension. "Congress dug itself out of a hole of its own creation by clearing a transportation extension Thursday...The Senate cleared the bill by voice vote, following on the heels of House passage, 266-158. Lawmakers have now given themselves a three-month window to come to some kind of agreement on a longer-term transportation bill...The ultimate endgame for the long-term bill is as unclear as ever, particularly since Sen. Mary Landrieu (D-La.) announced that she will object to moving any more transportation extensions this year. And the need for another extension seems likely, given the difficulties the House has had moving anything at all and the complexities inherent in negotiating a transportation bill. To meet that time frame, the House would have to regroup, pass a bill and work through a conference agreement with the Senate. A close examination of the congressional calendar pushes the goal line even farther away. Within that three-month time span, the House will be in session for just 31 legislative days, the Senate for just 45." Kathryn Wolfe in Politico.

3) House GOP leaders may move major tax votes to before Election Day. "The tax debate cometh -- and sooner than you think. House Republican leaders are privately considering moving a politically hot debate on tax cuts to before Election Day, according to aides and GOP lawmakers who have been involved in conversations...A slew of tax cuts first enacted under President George W. Bush are set to expire at the end of 2012 and soar to pre-2001 levels, including the individual tax rates for all Americans...Republican leaders are also weighing whether to take up a number of other tax credits and rebates -- loopholes in the Tax Code known as tax extenders -- that favor certain industries. While GOP leaders are unlikely to move forward on an extension of the individual tax rates before November, there is growing support among rank-and-file House Republicans to force a showdown with Democrats and the White House over the other tax provisions." John Bresnahan and Jake Sherman in Politico.

4) Obama has developed a more expansive view of executive power. "When he ran for president, Barack Obama promised to roll back President George W. Bush's use of executive power, a defining point of the Bush presidency. The pledge was part of a broader pitch about Mr. Obama's governing style, which he said would focus on solving problems in a pragmatic, cooperative way. The allure of executive power, it turns out, is hard to resist. Most every chief executive has found ways to escape the shackles of the legislature and expand the power of the presidency. Three years into his first term, Mr. Obama has developed his own expansive view of going it alone, asserting new executive powers and challenging members of Congress in both parties...Traditionally, clashes about executive power have centered on national security and foreign policy...What's unusual about Mr. Obama is that he also has used executive power to press his domestic agenda." Laura Meckler in The Wall Street Journal.

5) The House cleared Ryan's budget on a party line vote. "The House of Representatives on Thursday approved a $3.5 trillion budget plan proposed by Rep. Paul Ryan (R-Wis.) on a 228 to 191 vote, largely along party lines...The Ryan plan, which proposes cutting tax rates and a dramatic revamping of Medicare to curb costs for future retirees, faces all but certain rejection in the Senate but will frame the parties’ election-year debate on fiscal issues. The plan cuts $5.3 trillion over the next decade -- entirely through deep cuts in entitlements and agency spending. The House vote breakdown was 228 Republicans in favor, and 181 Democrats and 10 Republicans opposed. After the vote, Republicans ground out press releases praising the vote for proposing 'real solutions' to improve the economy. Democrats responded with a round of statements decrying the GOP effort to revamp Medicare...In many ways, the bitter debate and lopsided vote were a repeat of a House debate over a Ryan plan introduced a year ago." Rosalind Helderman and Paul Kane in The Washington Post.

@brianbeutler: House GOP votes to replace Medicare with Obamacare in the hope that the Supreme Court will throw the whole thing out.

@morningmoneyben: So Ryan got not one single Dem vote? Not one? Yowzers.

Top op-eds

1) COHN: The legitimacy of the Supreme Court is at stake. "Before this week, the well-being of tens of millions of Americans was at stake in the lawsuits challenging the Affordable Care Act. Now something else is at stake, too: The legitimacy of the Supreme Court...Even now, I have trouble wrapping my mind around what I saw in the courtroom this week and what a majority of the justices may be contemplating. Kennedy’s second question, the one that so unnerved supports of the law, was whether the government had 'a heavy burden of justification to show authorization under the Constitution.' But the heavy burden in this case is on the justices threatening to strike down health care reform. They have not met it. Rarely in American history has the Court struck down laws in decisions that would have such quick, widespread impact. In the modern era, only two cases come to mind: Brown v. Board of Education and Roe v. Wade." Jonathan Cohn in The New Republic.

2) KRUGMAN: The Supreme Court's conservatives seem to want to strike down health care reform. "Nobody knows what the Supreme Court will decide with regard to the Affordable Care Act. But, after this week’s hearings, it seems quite possible that the court will strike down the 'mandate' -- the requirement that individuals purchase health insurance -- and maybe the whole law. Removing the mandate would make the law much less workable, while striking down the whole thing would mean denying health coverage to 30 million or more Americans. Given the stakes, one might have expected all the court’s members to be very careful in speaking about both health care realities and legal precedents. In reality, however, the second day of hearings suggested that the justices most hostile to the law don’t understand, or choose not to understand, how insurance works. And the third day was, in a way, even worse, as antireform justices appeared to embrace any argument, no matter how flimsy, that they could use to kill reform." Paul Krugman in The New York Times.

3) GERSON: Paul Ryan has made it safe to talk about reforming Medicare. "The first time Rep. Paul Ryan presented his budget, it was supposed to be fatal for the GOP. Ryan, after all, was not only touching the entitlement third rail but also licking it. Even to some ideological allies, it seemed like a dangerous dare. Now he has dared again. And the absence of an apocalypse is a victory of sorts. Americans are not suddenly enthusiastic about Medicare reform. But Ryan has made a sophisticated case for its necessity. His proposals have been generally embraced by congressional Republicans and the GOP’s likely presidential candidate. If Mitt Romney manages to win, the presentation of Ryan’s budget in 2013 would kick off a momentous national debate on the size and role of government...Ryan’s proposals to move toward a premium-support system in Medicare and a block-grant system in Medicaid are controversial, and he has modified them in response to criticism. But their seriousness stands alone." Michael Gerson in The Washington Post.

4) BOWLES: There's reason for optimism on cutting the deficit. "With Washington mired in partisan gridlock, presidential candidates promising tax cuts with no specific revenue offsets, and no agreement on reforms and reductions in entitlement spending, Americans are understandably worried about the nation's rising debt. Yet I'm still hopeful we'll address the nation's long-term fiscal problems...The terms of the fiscal debate have fundamentally changed in ways that make lasting progress on the debt far more likely. It was just two years ago that Congress balked at creating a bipartisan fiscal commission. Mr. Obama stepped forward on his own to establish one. After the commission issued its report, 'A Moment of Truth,' the president used its plan as the framework for his budget negotiations with House Speaker John Boehner. Subsequently the president has incorporated recommendations from our commission into his budgets including real, specific policies to limit tax expenditures." Erskine Bowles in The Wall Street Journal.

5) RATTNER: Taxes are the best way to achieve our energy goals. "America still lacks anything resembling a comprehensive energy strategy...With growing demand, limited production capacity and tensions with Iran pushing up global prices, all oil-importing countries should implement sensible measures to curb the need for petroleum products. Every barrel of imported oil represents a financial transfer to oil-exporting countries, draining wealth from the consuming nations. The most important point for Americans is any mention of - let alone support for - the most powerful and effective way of achieving the twin goals of greater efficiency and less consumption of oil: tax. For decades, European countries have employed stiff excise taxes to hold down their use of petrol. Britain, for example, imposes tax of about $4 per gallon, nearly 10 times US levels. America, whose petrol use comprises about half of its crude oil consumption, could do the same, while rebating the additional tax collections to consumers." Steven Rattner in The Financial Times.

@jbarro: People are much more comfortable with the government shaping behavior by giving out money than taking it away, but they shouldn't be

Folk rock interlude: Ani DiFranco plays "Revelling" live on KCRW.

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Still to come: The Ryan budget heads to the committees; the SCOTUS votes on healthcare; pushback against ranking teacher training; the Senate won't repeal tax breaks for oil; and a eagle, a fox, and a cat hang out.

Economy

The mild winter was a only a small part of recent job gains. "America's warmest winter in 12 years has helped the U.S. job market, but most economists see weather as a relatively minor factor in explaining recent strides in employment. This winter was the fourth warmest in the U.S. since records began in 1895, according to the National Oceanic and Atmospheric Administration. Many economists say warmer weather makes an economy grow faster, by, for instance, allowing construction projects to continue and avoiding production shutdowns that often result from storms. Yet now that spring has arrived, the economy continues to show signs of encouraging--albeit slow--growth. On Thursday, the Labor Department reported that the number of Americans filing new applications for unemployment benefits dropped to a near-four-year low last week, continuing a trend that has brought jobless claims down sharply in recent months." Neil Shah in The Wall Street Journal.

The debate over the Ryan budget heads to committees. "With their budget in hand, House Republicans now face an intense two months of committee activity in which spending cuts must be fleshed out together with a quick-strike deficit-reduction package intended to substitute for automatic reductions from defense in January. Thursday’s 228-191 vote was the show of party unity that the leadership wanted most. But it was also a devil’s bargain: appeasing the right by walking away from the August debt accords but inviting another October shutdown fight with Senate Democrats unless the House alters course. When lawmakers return in mid-April from their spring recess, House and Senate Appropriations committees will have to write their annual spending bills using two sets of instructions -- instead of one as envisioned under the Budget Control Act. And the Republican resolution gives six other House committees an April 27 deadline to come up with an additional $261 billion in 10-year savings to forestall a January sequester from defense -- also under the BCA." David Rogers in Politico.

The Senate confirmed some key financial regulators. "The US Senate has confirmed the nominations of four proposed bank regulators, finally allowing a former state regulator to take over the office overseeing the largest US banks and a fiery critic of Wall Street to take a powerful position supervising the possible dismantling of troubled US financial institutions. Thomas Curry, who previously regulated state banks in Massachusetts before joining the board of the Federal Deposit Insurance Corp, will assume the top post at the Office of the Comptroller of the Currency. He replaces John Walsh, the agency’s acting chief who two years ago took over the OCC and guided the agency through the Dodd-Frank financial reform law and the so-called 'robosigning' scandal that engulfed America’s biggest lenders. Thomas Hoenig, the former president of the Federal Reserve Bank of Kansas City, will become the vice-chairman of the FDIC." Shahien Nasirpour in The Financial Times.

A group of Senate Republicans are pushing for Export-Import Bank reauthorization. "A solid bloc of Senate Republicans, led by South Carolina’s Lindsey Graham, began a renewed push Thursday for action on Export-Import Bank legislation that fell victim to partisan maneuvering last week when the GOP denied Democrats the votes needed to cut off debate. Graham and 25 colleagues have now signed a letter to Majority Leader Harry Reid (D-Nev.) urging action and implicitly signaling their support for cloture if needed once votes 'on amendments related to the bill’s subject matter' are dealt with in a 'brief period of time.'...No action is expected until Congress returns next month from its spring recess, which begins this weekend. But the clock is ticking for the bank, which expects to hit its exposure cap in May and will see its authorization expire before June 1." David Rogers in Politico.

For the first time ever the World Bank is considering more than one candidate for its top job. "For the first time, the World Bank is considering more than one candidate for its five-year presidency -- a change that reflects the fast-growing clout of emerging economies, even as it raises questions over whether that change is coming quickly enough. Experts say that victory is all but assured for the American nominee, Jim Yong Kim, the president of Dartmouth College and an expert in global health. But emerging and developing economies are rallying behind Ngozi Okonjo-Iweala, the 57-year-old Nigerian finance minister, and José Antonio Ocampo, the former Colombian finance minister and high-ranking United Nations official, who is 59. The World Bank’s 25-member board will interview all three candidates in the coming weeks and plans to announce its new president by the I.M.F.-World Bank meetings in mid-April. Robert B. Zoellick, the current president, will step down at the end of June." Annie Lowrey in The New York Times.

If you're happy and you know it... tell the government! "Amid a wave of research on the subject, the federal government is seeking ways to measure what some have called gross national happiness. Funded by the U.S. Department of Health and Human Services, a panel of experts in psychology and economics, including Nobel laureate Daniel Kahneman, began convening in December to try to define reliable measures of 'subjective well-being.' If successful, these could become official statistics. The idea of the government tallying personal feelings might seem frivolous -- or impossibly difficult. For decades, after all, the world has gotten by with gauging a nation’s quality of life on the basis of its GDP, or gross domestic product, the sum of its economic output. But economists and others have long recognized that GDP, a dollars and cents measure, doesn’t count everything that might be considered important when assessing living conditions." Peter Whoriskey in The Washington Post.

@justinwolfers: To reiterate, there are two equally true economic narratives: 1. The economy sucks. 2. It is improving. Policy is more about #1 than #2.

Robots are creepy interlude: A robot hand that imitates a handshake.

Health Care

The Supreme Court will decide the health care case long before they tell the public their choice. "If the usual process occurs, the justices of the Supreme Court will gather around a large rectangular table Friday morning and, one by one, cast their votes on the constitutionality of President Obama’s health-care law. They will let the rest of us know the outcome in due time. It can take years for a controversy to reach the court and months for the justices to write the opinions that lay out the legal frameworks for their decisions. But they move with surprising speed to vote on cases they have heard, almost always within days of oral arguments. Then -- silence. In a town where secrets are hard to keep, the Supreme Court is a striking outlier. The justices and their clerks know the outcome of cases almost immediately, but it’s rare for rulings to become known before the justices announce them." Robert Barnes in The Washington Post.

Domestic Policy

Tech companies want to talk about web privacy in private. "Technology companies want to talk with the government about protecting privacy on the Internet. They just want those talks to be private. Representatives of advertising companies, Internet sites and technology companies told a House subcommittee on Thursday that they thought Internet privacy policies, including Do Not Track options, should be created through an 'open and transparent' process, as two government agencies have recommended. But openness is relative. 'If this process takes the form of a public discussion, industry participants will be looking over their shoulders or sitting on their hands instead of offering bold ideas for workable solutions,' said Jonathan Zuck, president of the Association for Competitive Technology...The Commerce Department and the Federal Trade Commission, which are encouraging companies to be more open with consumers about their privacy policies, say that any such talks should be accessible to, if not include, Internet users." Edward Wyatt and Tanzina Vega in The New York Times.

Some education colleges are resisting an effort to rate them. "A nonprofit advocacy group is pushing colleges of education to participate in an effort to rate their teacher-preparation programs, but many of the schools are balking, arguing the project is flawed. The nation's 1,400 colleges of education have been criticized by the Obama administration and others for lax admission standards, unfocused curriculum and failure to provide enough real-life classroom training. States must evaluate teacher-prep programs, but standards are so weak that only 31 of 1,400 programs were rated subpar in 2010, the latest data available, according to the U.S. Department of Education. The National Council on Teacher Quality, a nonpartisan group, seeks to come up with more rigorous ratings for undergraduate education programs but is running into opposition from the schools, which say the ratings fail to measure graduates' effectiveness in the classroom and rely too heavily on assessing course syllabi." Stephanie Banchero in The Wall Street Journal.

Interspecies friendship interlude: A bald eagle, a fox, and a cat hang out on the porch.

Energy

Fracking and coal are on a collision course. "Now that the EPA has set limits on carbon-dioxide emissions from new power plants, there are basically two options left for generating electricity from fossil fuels in the future. First are modern natural-gas plants, which can easily meet the EPA’s standards. Second, in theory, are coal-fired plants that can capture their carbon and store it deep underground. But these two technologies could find themselves on a collision course, according to Thomas Elliot and Michael Celia of Princeton. Here’s the problem: One day, utilities might figure out a cost-effective way to capture the carbon-dioxide emitted from coal plants and store it in geological formations deep underground. But this can only work if there’s a layer of hard, impermeable caprock above the storage areas -- so that the carbon can’t leech out into the air. And the current natural-gas boom makes that task much harder." Brad Plumer in The Washington Post.

The Senate GOP blocked an effort to end tax breaks for oil companies. "The Senate blocked an effort to end billions of dollars in tax breaks for the oil industry, brushing aside President Obama's argument that the five big oil companies were doing 'just fine' while consumers were struggling with painfully high gasoline prices. The measure to kill the industry tax preferences failed on a 51-47 procedural vote Thursday. It needed 60 votes to overcome a Republican-led filibuster that was supported by some Democrats from oil-rich states. Both parties used the election-year debate to try to deflect voter anger about steep pump prices. Democrats repeatedly pointed to big oil company profits as evidence that the industry no longer needs federal subsidies, while Republicans argued that the tax breaks would encourage continued oil-drilling development and griped that the industry was being unfairly targeted." Lisa Mascaro and Christi Parsons in The Los Angles Times.

@MilesGrant: A majority of the Senate votes to repeal Big Oil tax giveaways, so the bill fails. #SenateHate

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

 
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