Welcome to Wonkbook, Ezra Klein and Evan Soltas’s morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.
RCP Obama vs. Romney: Obama +1.5%; 7-day change: Obama -1.5%.
RCP Obama approval: 48.3%; 7-day change: +0.3%.
Intrade percent chance of Obama win: 57.5%; 7-day change: +0.6%.
Top story: Fiscal cliff would send economy tumbling
A failure to avert the fiscal cliff will cause a recession. ”The U.S. economy is hurtling toward a recession if Congress fails to avert a series of tax hikes and budget cuts due in January, the Congressional Budget Office said Wednesday, warning that a fiscal impasse would have consequences even more dire than previously forecast…[T]he agency foresees a stronger contraction of 2.9 percent in gross domestic product, ‘similar in magnitude to the recession of the early 1990s.’” Steven Mufson and Lori Montgomery in The Washington Post.
Read: A new report from the Congressional Budget Office, which includes the forecasted economic impact of the fiscal cliff: “The deficit will shrink to an estimated $641 billion in fiscal year 2013 (or 4.0 percent of GDP), almost $500 billion less than the shortfall in 2012. Such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession, with real GDP declining by 0.5 percent between the fourth quarter of 2012 and the fourth quarter of 2013 and the unemployment rate rising to about 9 percent in the second half of calendar year 2013.”
Charts, graphs, and data points, oh my: The fiscal cliff, visualized.
@jimtankersley: And let’s be clear: Senate Dems and House R’s aren’t doing anything close to what’s necc to reach a deal/avert cliff disaster.
2013 to be anemic year for economy, fiscal cliff or not. ”The most distressing aspect of the Congressional Budget Office’s outlook for 2013 isn’t the fact that the U.S. economy will fall into recession if the ‘fiscal cliff’ of looming tax increases and spending cuts becomes reality…No, the most distressing aspect of the report by the nonpartisan CBO, released Wednesday, is that it forecasts that even if we don’t dive off the “fiscal cliff” — and optimists believe even a divided Congress won’t allow that to happen — we still will experience anemic growth in 2013…In the CBO’s view, avoiding the ‘fiscal cliff’ results in real gross domestic product growth of only 1.7% between the fourth quarter of 2012 and the fourth quarter of 2013. And the unemployment rate would stand at an unhealthy 8% or so when 2013 comes to a close.”Neal Lipschutz in The Wall Street Journal.
@davidmwessel: CBO: Potential output in 2022 will be about 1.5% lower in 2022 than it would have been without the Great Recession. weakness.
It’s possible to reduce the debt without blowing up the economy. ”Fortunately, it’s possible for policymakers to address the cliff in a way that prevents economic harm in the short-run without undermining medium-term debt reduction goals. As the Committee for a Responsible Federal Budget shows in this graph, the largest negative economic effect comes from the budget cuts in the debt ceiling deal, whereas the overwhelming share of the deficit reduction benefits of doing nothing come from the expiration of the Bush tax cuts. This implies that you can put together a deal where policies that keep the economy afloat at lower cost are extended and those whose budget cost outweighs their economic benefits are allowed to expire. For instance, I found using CBO multipliers that letting all the Bush tax cuts expire but extending current spending and the payroll tax holiday reduces GDP by about 1 percent — a big number, but much less than the 3.9 percent decline from doing nothing altogether.” Dylan Matthews in The Washington Post.
The Fed seems increasingly likely to act to contain the fallout. ”The Federal Reserve sent its strongest signal yet that it is preparing new steps to bolster the economic recovery, saying measures would be needed fairly soon unless growth substantially and convincingly picks up. Minutes released Wednesday from the Fed’s July 31-Aug. 1 policy meeting suggested that a new round of bond buying, known as quantitative easing, was high on its list of options…[T]he Fed minutes left little doubt that a clear consensus was building at the meeting for a move.” Jon Hilsenrath and Kristina Peterson in The Wall Street Journal.
@greg_ip: Oh goodie, Fed watchers will soon have something else to interpret: the ” FOMC consensus forecast,” now in beta testing.
The key excerpt of the Fed’s minutes: ”Many members expected that at the end of 2014, the unemployment rate would still be well above their estimates of its longer-term normal rate and that inflation would be at or below the Committee’s longer-run objective of 2 percent. A number of them indicated that additional accommodation could help foster a more rapid improvement in labor market conditions in an environment in which price pressures were likely to be subdued. Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” Dylan Matthews in The Washington Post.
@delong: Shorter Fed: “Members judged monetary accommodation warranted unless a substantial strengthening in economic recovery”
IP: Beware the fiscal clifflet. ”Even if the Bush tax cuts are extended and the sequester delayed, a huge amount of fiscal drag remains in place. They include the expiration of the payroll tax cut, the expiration of extended unemployment insurance benefits, imposition of a new 3.8% Medicare investment tax on the wealthy, and the bite to discretionary spending embedded in the Budget Control Act and prior continuing resolutions. ISI Group projects $220 billion of fiscal tightening in 2013, or 1.4% of GDP. JPMorgan, noting that many Recovery Act programmes are rolling off at the same time, puts the hit at a slightly higher $266 billion, or 1.7% of GDP. The IMF reckons fiscal policy will tighten more in America next year than in Spain, Italy or Portugal. Though smaller than the full fiscal cliff, the fiscal clifflet still poses a significant headwind to the economy.” Greg Ip in The Economist.
COBURN: Ryan is not the radical liberals make him out to be. ”No one in Congress has done more to offer specific solutions to our fiscal challenges than Paul Ryan. He also has demonstrated the rarest and most important trait in politics—moral courage. Just as ludicrous as blaming Paul Ryan for Washington’s impasse is the assault against the Romney-Ryan ticket on Medicare…What is radical in 2012 is not Paul Ryan’s vision but the lengths to which his critics will go to avoid dealing with the national debt. By picking Mr. Ryan as his vice president, Mr. Romney has given America the debate it deserves, and a team that can succeed.” Tom Coburn in The Wall Street Journal.
KLEIN: Romney manages to take the substance out of data. ”I pine for Ross Perot’s campaign. Not the candidate himself, though he had his charms. But the charts and graphs. He was, to my knowledge, the only serious (though the word can be debated) candidate to use charts and graphs in a U.S. presidential campaign. His success might have seeded the use of bar graphs and ‘Y’ axes in subsequent races. Yet again and again, I’ve been disappointed. Until Aug. 16 when Republican candidate Mitt Romney opened a rare news conference by breaking out a whiteboard and uttering five of my favorite words: ‘I’ve prepared a small chart.’ The subject was the differences between Romney’s Medicare plan and President Barack Obama’s. Instead of a graph, Romney’s chart featured a 2×2 matrix — basically, a box with four squares that’s heavily used in MBA courses and, interestingly, in political messaging seminars — that he said would ‘bring as much clarity as possible.’ I followed his talk carefully. But, ashamed as I am to admit it, I remain confused.” Ezra Klein in Bloomberg.
ROVE: Undecideds, not just the base, still matter. ”Conventional wisdom holds that with such a small number of voters still undecided, this presidential contest is a base election like 2004, with both candidates focused on turning out their respective party’s hard-core supporters. Like much conventional wisdom, there’s some truth in this. But it’s far from the complete story…[T]here are nearly as many undecided voters today as in other recent elections…[And] some voters are weakly committed to their choice and could flip.” Karl Rove in The Wall Street Journal.
HARRISON: In defense of big banks. ”Banks aren’t always popular even in the best of times, but the anger of recent years is unprecedented. The anger, while understandable, has fueled the misguided idea that we should break up the nation’s largest banks…The problem is that every part of this argument is based on a fallacy…The first fallacy is that the emergence of large, universal banks — combining commercial banking with investment banking — was an artificial or unnatural development…The consolidation that took place was driven by the market’s needs and represented an evolution toward greater efficiency in banking.” William B. Harrison in The New York Times.
WILKINSON: Can Catholics and Ayn Rand readers get along? ”U.S. Representative Paul Ryan, Mitt Romney’s running mate on the Republican presidential ticket, has said that Ayn Rand, the author of ‘The Fountainhead’ and ‘Atlas Shrugged,’ lit the inner fire that led him to public service…Trouble is, Rand was a staunch atheist, and Ryan is a conservative Roman Catholic. When a few of Rand’s incendiary comments about religion were lobbed his way, he repudiated her aggressive secularism…Why didn’t his robust Catholicism reject all of objectivism — Rand’s name for her philosophy — as a virulent strain of heresy?” Will Wilkinson in Bloomberg.
Top long reads
Everything you’ve heard about failing schools is wrong. “Overall, the last 10 years have revealed that while Big Data can make our questions more sophisticated, it doesn’t necessarily lead to Big Answers. The push to improve scores has left behind traditional assessments that, research indicates, work better to gauge performance: classroom work and homework, teachers’ grades and quizzes, the opinions of students and parents about a school.” Kristina Rizga in Mother Jones.
Thursday music rewind interlude: Buffalo Springfield playing “For What It’s Worth” and “Mr. Soul” on the “Hollywood Palace” TV program in 1967.
Got tips, additions, or comments? E-mail me.
Still to come: The worst decade for the American middle class; specialists providing primary care is an unnecessary driver of health care costs; Scalia says Court is collegial; Romney energy plan announced today; and how a computer can detect what makes Paris, well, Parisian.
This is Greece’s ‘last chance’ to prove commitment to austerity, official says. ”Speaking after a meeting with Greek Prime Minister Antonis Samaras, Eurogroup chief Jean-Claude Juncker said Greece must step up its efforts to cut its budget deficit and enact economic overhauls. ‘As far as the immediate future is concerned, the ball is in the Greek court,’ he said. ‘In fact this is the last chance and Greek citizens have to know this.’…Greece appears to be standing on the brink of a potential euro exit after two bailout attempts and a massive debt restructuring have failed to bring its debt back to sustainable levels.” Alkman Granitsas and Costas Paris in The Wall Street Journal.
The 2000s were the worst decade ‘in modern history’ for the American middle class. ”America’s middle class suffered its worst decade in modern history during the 2000s as net worth and wages declined, according to a report from the Pew Research Center…Median household income for America’s middle class fell from $72,956 in 2001 to $69,487 in 2010, the report said…While all sectors of society experienced a decline in income, the middle class is the only one that also got smaller. It shrank from 61 per cent of adults in 1971 to 51 per cent last year.” Anna Fifield in The Financial Times.
@lindajkillian: Middle class shrinks and loses net worth over last decade. They blame Congress the most, banks second.
Suddenly, good news from the housing sector seems the new rule. ”Sales of existing homes rose in July and prices continued to climb from a year ago, the latest signals that the nation’s housing market has begun to slowly regain its footing. Data released Wednesday by the National Association of Realtors showed that existing-home sales rose 2.3 percent in July to an annual rate of 4.47 million units. Nationally, the median price of resold homes was $187,300, up 9.4 percent from a year earlier.” Brady Dennis in The Washington Post.
Extreme weather interlude: The drought’s effect on the Mississippi River as seen from space.
Heavy dependence on specialists drives up medical costs. ”File this under reasons our health care system is expensive: 41 percent of our most basic health care needs, the fevers and colds we all get, are taken care of by higher-paid specialty doctors…59 percent of those with primary care needs, the people in the runny nose group, were seen by a primary care doctor. Forty-one percent sought out care at a specialist…[P]rimary care doctors earn a $69 hourly rate, compared to the $92 per hour and $85 per hour that surgeons and ob-gyns earn, respectively.” Sarah Kliff in The Washington Post.
Obamacare pilot project moves to next stage. ”Federal health officials are moving forward with a plan to reward healthcare providers that improve services for Medicare patients. The four-year project will be administered by the Medicare agency’s Innovation Center, a creation of the 2010 healthcare law that seeks to reduce costs and improve healthcare delivery. The center’s latest effort aims to foster well coordinated primary care within Medicare. The Medicare agency announced that it has selected the 500 medical practices that will participate. They will receive about $20 per beneficiary per month in exchange for providing new services. “ Elise Viebeck in The Hill.
Chart: Who opposes abortion even under circumstances of rape? ”While about half of American voters identify themselves as as antiabortion, a full 75 percent thought abortion should be legal in cases of rape or incest…Only 20 percent of Americans believed abortion should be illegal in all situations…In certain demographics, however, the number stands much higher…The highest rates of support are among the demographics you’d probably expect: those who identify as extremely conservative and those who view the Bible as the word of God. Even among those who identify as liberal, however, there is a small faction that shares this viewpoint. It’s also interesting to note that opposition to abortion in cases of rape is higher among women then men.” Sarah Kliff in The Washington Post.
@ErinBurnett: We called all 5 female Republican Senate members. NONE would deny abortions in the case of rape or incest. 3 of them are “pro-choice”.
Does Medicare Advantage cost more or less? ”Medicare Advantage is the private alternative to the traditional insurance program for seniors. It covers 11.7 million Americans. Some argue that it’s less expensive than the public programs. Others say it’s more expensive. It would be very hard for both of these things to be true…Starting in 2004, Medicare Advantage began paying private plans a higher per-enrollee cost than the public program. It was true then and, as you can see here, has been pretty true ever since…But that’s not the case that James Capretta and Yuval Levin made this week. They argue that Medicare Advantage plans are less expensive, citing an Aug. 1 study in the Journal of the American Medical Association…How, exactly, can private Medicare plans be less expensive for seniors but more expensive for the government?…Right now, the federal government pays private plans are well beyond the actual cost of providing benefits.” Sarah Kliff in The Washington Post.
@afrakt: So, health plan competition seems to work, so long as “work” doesn’t include “likely to make you healthier.”
In an interview, Scalia says Supreme Court justices remain on good terms. ”In a rare extended interview Wednesday Justice Antonin Scalia said that despite recent contentious decisions, the Supreme Court remained a collegial place to work. Scalia said when he writes tough opinions criticizing his fellow justices, he fully expects them to respond in full. ‘The next day she’ll be zinging me’ Scalia said, referring to his close friend on the high court Justice Ruth Bader-Ginsburg. ‘It’s equal opportunity zingers.’” Joshua Altman in The Hill.
A hurricane threatens the GOP convention. ”The bad weather, still a tropical storm in the Atlantic, has convention planners and emergency officials tracking the weather closely and reviewing contingency plans in case it tracks toward Tampa, where the Republican convention begins on Monday…In Tampa this year, where some Republican delegates and officials are already gathered for pre-convention activities, the possibility of a hurricane was the subject of a good deal of worry and not a small amount of gallows humor.” Nia-Malika Henderson and Rosalind S. Helderman in The Washington Post.
@TheStalwart: Postponing the convention would probably be good for the Republicans if they got it so they could bat last, after the Democrats
Nevadans lose ability to cast vote for ‘none.’ ”Voters in Nevada will have to make an actual choice, a federal judge there ruled on Wednesday. To combat voter apathy after Watergate, Nevada essentially institutionalized the protest vote, allowing voters to choose ‘none of these candidates’ in elections for statewide and presidential candidates. But the ruling, by Judge Robert C. Jones of the United States District Court in Nevada, means it is almost certain to be left off the November ballot — which may help the Republican Party. Mr. Jones ruled that because ‘none’ can never win, offering that option on the ballot is unconstitutional.” Sarah Wheaton in The New York Times.
@TheStalwart: In the old days, the idea that None Of The Above could actually ‘win’ (thus making an office go unfilled) was promoted by libertarians.
SEC stalls on money market fund reform. ”The chairwoman of the Securities and Exchange Commission, Mary L. Schapiro, had wanted to bring her vision for regulating money-market mutual funds to a vote as early as next week. But Ms. Schapiro acknowledged Wednesday evening that three of the five commissioners were opposed to her plan and said she was calling off the vote…Her decision is at least a short-term victory for the financial industry, which has sunk millions of dollars into lobbying against her plan…Until the financial crisis, money market funds were considered a dull, low-return corner of the markets. But most of the nation’s top financial regulators had expressed concerns that the sector is one of the most vulnerable parts of the American financial system.” Nathaniel Popper in The New York Times.
@MattZeitlin: If no new regs, money market funds are a good test of the “no substantial reforms and legal prohibition against bailouts” strategy
Incredible data analysis interlude: Computer scientists figure out ‘what makes Paris look like Paris’ using Google Street View database.
Romney energy plan to go big on new drilling. ”Mitt Romney plans to unveil an energy plan Thursday morning in Hobbs, N.M., that would allow states more control over the development of energy resources on federal lands within their borders, as well as aggressively expand offshore oil and gas drilling…The Romney campaign released the proposal, complete with a 21-page white paper, Wednesday evening as part of an overall energy plan that includes granting states more regulatory power over drilling on federal lands, revitalizing the nuclear power industry, and approving the Keystone XL pipeline to carry more Canadian oil to refineries in the United States.” Clifford Krauss and Ashley Parker in The New York Times.
New disclosures required for oil firms. ”Oil and mining groups with US listings will be forced to disclose details of their payments to foreign governments after US regulators rejected most of the industry’s efforts to water down new transparency rules. The rules, intended to combat corruption and help make rulers of resource-rich nations more accountable to their people, will affect companies such as ExxonMobil, BP and Rio Tinto…The rules, narrowly adopted on Wednesday by the Securities and Exchange Commission, were called for under the 2010 Dodd-Frank Act on US financial reform.” Shahien Nasiripour and Tom Burgis in The Financial Times.
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