Wonkbook: The story driving 2012

at 07:24 AM ET, 04/29/2011

The most important story in the 2012 election is not Donald Trump, or the White House’s inexplicable decision to feed the birther madness, or whether Haley Barbour or Mitch Daniels enters the race. It’s jobs and GDP growth. And yesterday, the news was bad. GDP growth was 1.8 percent in the first quarter: disappointing under normal circumstances and crushing during a recovery. Weekly jobless claims, meanwhile, hit a three-month high. And high gas prices tend to trick people into thinking inflation, which is actually worryingly low, is out of control, further adding to their concerns.

Now, the quarterly GDP growth data, and the weekly jobs numbers, bounce around. A bad result in either category doesn’t mean we won’t have a good year. And gas prices are high because of demand from China and other developing nations, but they’re also high because of turmoil in the Middle East, so we may see them come down as, hopefully, the chaos in Libya subsides. But all of it means we have even more ground to make up. And that means growing and adding jobs at a rate far faster than anything we’ve seen for any sustained period of time over the last two years. So far as presidential elections are concerned, it’s always the economy, stupid, and right now, the economy isn’t looking particularly good. If you’re wondering why Obama’s poll numbers seem to be slumping, that’s the place to start.

Five in the morning

1) A number of Senate Democrats are threatening to vote against debt limit increase, reports Peter Wallsten: “A growing number of Democrats are threatening to defy the White House over the national debt, joining Republican calls for deficit cuts as a requirement for consenting to lift the country’s borrowing limit...The push-back has come in recent days from Sens. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, and Joe Manchin (D-W.Va.), a freshman who is running for reelection next year. Sen. Mark Pryor (D-Ark.) told constituents during the Easter recess that he would not vote to lift the debt limit without a ‘real and meaningful commitment to debt reduction.’ Even Sen. Amy Klobuchar (D-Minn.), generally a stalwart White House ally, is undecided on the issue and is ‘hopeful’ that a debt-ceiling bill can be attached to a measure to cut the federal deficit, said her spokesman, Linden Zakula.”

2) Economic growth has hit a snag, reports Neil Irwin: “The economy’s growth slowed at the start of the year, according to new data that show the recovery is so weak that it doesn’t take much to knock it off its stride. Severe winter weather, a dip in defense spending and higher energy prices all slowed the growth of gross domestic product in the January-through-March quarter. The good news is that economists consider all those factors to be temporary events that don’t pose a long-term threat...The 1.8 percent pace of increase in gross domestic product in the first quarter, according to a Commerce Department report Thursday, is down from a 3.1 percent gain in the final months of 2010. It is also lower than the level of growth that, over time, would be expected to drive down joblessness.”

3) A Senate vote on stripping oil industry tax breaks could come next week, report Neil King and Stephen Power: “Senate Majority Leader Harry Reid (D., Nev.) is pushing to hold a vote on the longstanding tax incentives as early as next week, a call echoed by the Democrats’ House leader, Rep. Nancy Pelosi of California. The odds appeared slim that a package eliminating the tax breaks would pass, but Democrats were eager to box Republicans into votes that would paint them as favoring tax incentives for oil companies. Senate Finance Committee Chairman Max Baucus of Montana released the outline of a plan to cut breaks affecting the country’s five biggest oil companies and to impose new levies on operators in the Gulf of Mexico, while protecting allowances for smaller operators. The plan would eliminate less than the $4 billion in oil-industry breaks President Barack Obama targeted in his 2012 budget.”

But...

John Boehner won’t hold a vote on eliminating oil subsidies, reports Mike Lillis: “As the country’s largest oil companies report near-record profits, the office of House Speaker John Boehner (R-Ohio) rejected on Thursday Democratic calls to consider legislation eliminating billions of dollars in tax breaks for the same corporations. ‘The Speaker wants to increase the supply of American energy to lower gas prices and create millions of American jobs,’ Boehner spokesman Michael Steel said in an email. ‘Raising taxes will not do that.’ Boehner said on Monday that oil companies should pay their fair share of taxes and that the industry did not need at least one of the subsidies Democrats want to terminate. But he started walking those comments back in the same interview, and his spokesman’s statement continued the rearguard action.”

4) Policymakers don’t really care about a falling dollar, report Sudeep Reddy and Jon Hilsenrath: “The U.S. dollar fell Thursday to its lowest point since the summer of 2008, but officials aren’t showing signs that they are alarmed by the currency’s descent or acting to stem it. In recent days, the nation’s top two economic policy makers--Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner--have publicly expressed their desire for a strong dollar. But there is little indication of a change in policy from either the Fed or Treasury--or in underlying economic conditions--that would alter the currency’s downward course. The dollar has dropped almost 8% against a trade-weighted basket of currencies this year. Though Mr. Bernanke said in his first-ever news conference Wednesday that he wanted a strong currency, the Fed said it will leave interest rates at very low levels for now.”

5) New Defense Secretary Leon Panetta reiterated his desire to cut spending, reports John Bennett: “President Obama’s pick to lead the Pentagon made clear Thursday that he intends to continue cost-cutting efforts begun last year by Defense Secretary Robert Gates. CIA Director Leon Panetta, whom Obama plans to shift to the Pentagon, vowed to maintain the strongest military in the world. But, speaking at a White House briefing announcing Obama’s new national-security team, he sent a message to the defense establishment: The Pentagon will be ‘disciplined’ in spending federal funds under his watch. ‘It is time for tough choices,’ Panetta said...Defense insiders and congressional sources say Panetta is uniquely qualified to oversee a decline in annual Defense budgets, noting he is a former House Budget Committee chairman and director of the Office of Management and Budget.”

Retro live video interlude: Weezer plays “My Name Is Jonas” live in 1994.

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Still to come: Congress is spending a lot of time on big business’ swipe fee concerns; Mitch McConnell wants a Senate vote on Obama’s budget; Obama’s Medicare chief defends health reform’s Medicare cuts; Bob Corker is stumping for his spending cap plan John Boehner won’t hold a vote on cutting oil subsidies; and a chinchilla waddles upright.

Economy

Jobless claims are at a three-month high, reports Bob Willis: “New applications for unemployment benefits in the U.S. unexpectedly rose last week to the highest level in three months, a sign progress in the labor market may be stalling. Jobless claims increased by 25,000 to 429,000 in the week ended April 23, the most since late January, Labor Department figures showed today in Washington. The government anticipates a drop in unadjusted applications during the Good Friday holiday week, something that didn’t happen this year, a Labor Department spokesman said. The report also showed the number of people on unemployment benefit rolls and those receiving extended payments dropped, a sign the jobless rate may fall in coming months.”

Banks are being forced to clean up their foreclosures, reports Ruth Simon: “The clock is ticking for the biggest U.S. banks to revamp their foreclosure practices. Under orders from U.S. regulators, 14 financial institutions have until mid-June to lay out plans to clean up their mortgage-servicing operations--and another 60 days to make the changes. It will be a daunting, expensive chore despite the work done since the foreclosure mess erupted last fall. J.P. Morgan Chase Co. said it would take a $1.1 billion charge related to the consent order and other servicing-cost increases...On Thursday, Fannie Mae, Freddie Mac and their federal regulator rolled out new guidelines designed to encourage more successful modifications while preventing foreclosures from dragging on.”

Congress is bending over backwards to arbitrate a fight between banks and retailers, report Zack Carter and Ryan Grim: “Last year’s financial reform bill ordered the Federal Reserve to crack down on debit card swipe fees, a $16 billion pool of money from which $8 billion flows to just 10 banks. As a concession to Wall Street, credit card fees were left unscathed... The swipe fee spat is generating huge business for K Street: A full 118 ex-government officials and aides are currently registered to lobby on behalf of banks in the fee fight, according to data compiled for this story by the Sunlight Foundation, a nonpartisan research group. Retailers have signed up at least 124 revolving-door lobbyists...One out of every five American children lives in poverty. Yet the most consuming issue in Washington -- according to members of Congress, Hill staffers, lobbyists and Treasury officials -- is determining how to slice up the $16 billion debit-card swipe fee pie for corporations.”

Chrysler is set to repay government debts: http://bit.ly/kqlHSe

Sen. Bob Corker is on the campaign trail for his proposed debt limit compromise, reports Manu Raju: “As [Sen. Bob Corker’s] barnstormed this conservative state over the spring break, he’s trying to cut to the chase, pitching an ambitious bill to create a mandatory cap on federal spending as part of a deal to raise the $14.3 trillion debt ceiling. It’s a message that’s catching on: More and more Republicans are calling for hard caps on spending and moderate Democrats -- desperate for a palatable way to vote to increase the debt limit -- are starting to buck White House officials who are lobbying Democratic senators to oppose Corker’s bill...Corker has presented a slide show entitled ‘America’s Debt Crisis’ 56 times throughout the state in what amounts to a one-man debt limit road show that stretches from the Great Smoky Mountains in the east to Memphis in the west.”

Mitch McConnell wants a Senate vote on Obama’s budget, reports Meredith Shiner: “Senate Republicans want a side-by-side vote on President Barack Obama’s 2012 budget alongside Rep. Paul Ryan’s House approved plan -- the latest sign that more gridlock is ahead for this Congress. Minority Leader Mitch McConnell (R-Ky.) said Thursday the Senate will vote on the proposal Obama submitted to Congress in February. The plan has been roundly dismissed by Republicans. It’s in part outdated now after Obama retooled his spending message in a recent speech. ‘I understand that the [Majority Leader Harry Reid] would like to have a vote on the House-passed Ryan budget and we will. But we’ll have a vote on the president’s budget at the same time,’ McConnell said.”

The Fed needs to get real about unemployment, writes Paul Krugman: “The only way to make sense of Mr. Bernanke’s aversion to further action is to say that he’s deathly afraid of overshooting the inflation target, while being far less worried about undershooting -- even though doing too little means condemning millions of Americans to the nightmare of long-term unemployment. What’s going on here? My interpretation is that Mr. Bernanke is allowing himself to be bullied by the inflationistas: the people who keep seeing runaway inflation just around the corner and are undeterred by the fact that they keep on being wrong. Lately the inflationistas have seized on rising oil prices as evidence in their favor, even though -- as Mr. Bernanke himself pointed out -- these prices have nothing to do with Fed policy.”

Slower Chinese growth could hurt growth here in the US, writes Floyd Norris: “There could be a sign of possible problems in, of all places, China. China’s steel prices, which had been rising rapidly, started to slide in mid-February. They bounced back for a week after the earthquake and tsunami in Japan, but have slipped since then...A steel analyst I have trusted for many years, Michelle Applebaum, the managing partner of Steel Market Intelligence, an equity research firm, cautioned me against leaping to conclusions, but added that if the decline in Chinese prices continued, ‘then, of course, it would be indicative that their rate of growth is slowing.’ China, she said, is ‘growing in a very steel-intensive way.’...Think of China as the primary engine of world growth and Europe as a brake. The world may not grow much if that engine starts to stutter before the old primary engine -- the United States -- starts to rev up.”

Voters care about jobs, not the deficit, but all they hear about in Washington is the deficit, not jobs, writes Greg Sargent: “A recent New York Times poll [found] that amid rising economic pessimism, only a paltry 29 percent think a major reduction in the deficit would create more jobs. No one is saying the deficit isn’t a valid topic of conversation. But we’re increasing caught in a ‘Beltway Deficit Feedback Loop,’ in which the relentless bipartisan focus on that one topic to the exclusion of others is leading more and more people to tell pollsters they’re worried about it. That in turn reinforces a sense among public officials that it should continue to be their number one focus. And people aren’t hearing anyone talk to them about the economy, even though it’s far more likely than the deficit to influence their vote next year.”

Adorable animals walking upright interlude: A chinchilla waddles toward food.

Health Care

The Affordable Care Act is the right way to reform Medicare, writes Donald Berwick: “The Partnership for Patients is investing up to $1 billion to help health-care professionals learn about and implement proven methods for improving patient safety. Reducing medical injuries and complications for patients will save lives and prevent suffering; it’s also a smart way to reduce costs... Last month, we announced another effort that will reduce costs by improving care: a proposed set of rules for doctors, hospitals and other providers who want to work together as Accountable Care Organizations, or ACOs. ACOs will coordinate better care for patients, improving communication and reducing duplicative tests and procedures that hassle patients and do them no good at all...Under President Obama’s framework, we will hold down Medicare cost growth, improve the quality of care for seniors, and save an additional $340 billion for taxpayers in the next decade.”

Domestic Policy

HUD is a government agency that knows what it’s doing, writes David Brooks: “I spent some time this week at the Department of Housing and Urban Development... The secretary, Shaun Donovan, was trained as an engineer and is a numbers guy. He learned from his experience as New York City’s housing commissioner that you can’t fight social problems like crime and homelessness unless you have good data. So he helped create a program called HUDStat, which tracks homelessness among veterans and the results of the various efforts to combat it... The career workers at the meeting were impressive. They made short, highly informed presentations and answered arcane questions about legislative history. They had achieved a herculean task of getting two government agencies to agree on a single data set, a single methodology and a single progress report.”

Superhero movie interlude: The first trailer for X-Men: First Class .

Energy

Greenhouse gas emissions are slowing, reports John Broder: “Even if the United States takes no explicit action to regulate greenhouse gases, emissions of carbon dioxide and other climate-altering substances will grow slowly over the next two decades, not returning to 2005 levels until 2027, according to a new projection from the Energy Information Administration, the research branch of the Energy Department. Carbon dioxide emissions fell by 3 percent in 2008 and 7 percent in 2009, largely because of the recession. But even as economic activity picks up, emissions will grow at a modest pace because of growing use of renewable technologies and fuels, improved energy efficiency, slower growth in demand for electricity and the growing substitution of natural gas for coal in power production, the agency reports in its annual energy outlook.”

Paul Ryan is open to cutting oil subsidies, reports Andrew Restuccia: “House Budget Committee Chairman Paul Ryan (R-Wis.) opened the door Thursday to supporting a plan to eliminate oil industry tax breaks even as House Speaker John Boehner (R-Ohio) and other Republicans have distanced themselves from the proposal. ‘The House-passed FY2012 budget resolution clearly states that as part of an overall corporate tax reform, tax loopholes and deductions for all corporations should be scaled back or eliminated entirely. That obviously includes oil companies,’ Ryan spokesman Conor Sweeney told The Hill in an email. Ryan’s budget resolution, Sweeney notes, also calls for eliminating tax breaks for clean energy technologies and expanding domestic oil and gas production.”

ExxonMobil asks you to not hate them just because they’re rich: http://politi.co/mItiUb

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.

 
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