Wonkbook: The payroll tax cut looks done for

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Wonkbook dashboard

RCP Obama vs. Romney: Obama +4.1%; 7-day change: Obama +2.2%.

RCP Obama approval: 49.3%; 7-day change: -0.3.

Intrade percent chance of Obama win: 75.5; 7-day change: +7.5%.

Top story: What comes next in economic policy

Bye bye, payroll tax cut? "Regardless of who wins the presidential election in November or what compromises Congress strikes in the lame-duck session to keep the economy from automatic tax increases and spending cuts, 160 million American wage earners will probably see their tax bills jump after Jan. 1. That is when the temporary payroll tax holiday ends...The payroll tax holiday this year has reduced workers’ tax on wages up to $110,100 to 4.2 percent from 6.2 percent. In 2012 that translated into a $700 tax cut for a person making $35,000 a year and a $2,202 tax cut for workers making $110,100 and up." Annie Lowrey in The New York Times.

Americans are determined to move ahead, but their view of the economy is pessimistic. "Although an overwhelming majority of Americans still define the U.S. as 'the land of opportunity,' nearly as many agree that getting ahead is more difficult for workers today than it was for previous generations. Only about one in five Americans say they have been able to get ahead consistently in their lives; many more say they have moved forward somewhat but faced intermittent reversals. And while a plurality of adults believe they have more opportunity to advance than their parents did, Americans are much more uncertain that the next generation will have greater opportunities than their own—with whites far more pessimistic than minorities." Ronald Brownstein in The National Journal.

@JimPethokoukis: What is evidence economy on right track? Depressed job market stagnant, incomes flat to down, 2012 worse than 2011. 2013 recession looming

The 'carried interest' exemption also looks like it is done for. "Private equity fund managers are so worried about changes to the way their income is taxed in the US that some are trying to rewrite agreements with investors to protect themselves against any cut in take-home remuneration...Carried interest is taxed at the 15 per cent rate for all capital gains but the Obama administration has proposed changes that would see carried interest charged at the same rate as income, typically 35 per cent." Anna Fifield and Dan McCrum in The Financial Times.

@mattyglesias: The bizarre "carried interest" tax loophole was a golden opportunity for Romney to shake the etch-a-sketch toward the center.

Obama is looking to line up another Treasury secretary for the second term. "If re-elected, President Barack Obama is expected to move quickly in November to nominate a new Treasury secretary, and that person could play a key role negotiating with Congress about the looming 'fiscal cliff' of tax increases and spending cuts, people familiar with the planning said. The two people most frequently mentioned by current and former administration officials as likely successors to Treasury Secretary Timothy Geithner, who wants to leave the post, are White House Chief of Staff Jacob Lew and Clinton administration Chief of Staff Erskine Bowles." Damian Paletta in The Wall Street Journal.

LEONHARDT: Obamanomics, a counterhistory. "We can never know for sure what the past four years would have been like if the administration and the Fed had been more worried about the economy. But my reading of the evidence -- and some former Obama aides agree -- points strongly to the idea that the misjudging of the downturn did affect policy and ultimately the economy. Mr. Obama’s biggest mistake as president has not been the story he told the country about the economy. It’s the story he and his advisers told themselves." David Leonhardt in The New York Times.

KRUGMAN: 2012 is a referendum on the social safety net. "Voters are, in effect, being asked to deliver a verdict on the legacy of the New Deal and the Great Society, on Social Security, Medicare and, yes, Obamacare, which represents an extension of that legacy. Will they vote for politicians who want to replace Medicare with Vouchercare, who denounce Social Security as “collectivist” (as Paul Ryan once did), who dismiss those who turn to social insurance programs as people unwilling to take responsibility for their lives? If the polls are any indication, the result of that referendum will be a clear reassertion of support for the safety net, and a clear rejection of politicians who want to return us to the Gilded Age." Paul Krugman in The New York Times.

@AlecMacGillis: Romney calls MA universal health care a sign of his "empathy"; Ryan calls safety net a "hammock" that harms people. And voters are confused.

DOUTHAT: Obama'a lead is a sign of voters' pessimism. "Remember that the economy is growing, however slowly, and most working-age Americans do have jobs. (A Bureau of Labor Statistics reassessmentjust found that there are now — finally — more Americans employed than when Barack Obama took office.) It turns out that dreadfully slow growth isn’t nearly as politically damaging as decline, because voters can adapt to stagnation, and approach it as a kind of grim “new normal” rather than a disaster requiring an immediate response. Over the last two years, then, what still felt like an economic crisis during the 2010 midterms has become a grim-but-bearable status quo." Ross Douthat in The New York Times.

Top op-eds

DOLE: Life after losing. "In Washington, losing an election is viewed as a sort of death. But instead of bringing food to the house, a few neighbors and some in the media stick a microphone in your face and ask, 'Did you cost Ford the White House?' Twenty years after Ford and I lost the White House to Jimmy Carter and Walter Mondale, I was the one pointing fingers — at myself. Then, for a long time after my loss to Bill Clinton in 1996, I would lie awake nights wondering what I could have done to change the outcome. Did we rely too much on the Republican base, letting cultural issues define us in a harsh light and driving away independents and suburban voters?" Bob Dole in The Washington Post.

KLEINKE: The conservative case for Obamacare. "Clear away all the demagogy and scare tactics, and Obamacare is, at its core, Romneycare across state lines...The real problem with the health care plan — for Mr. Romney and the Republicans in general — is that political credit for it goes to Mr. Obama. Now, Mr. Romney is in a terrible fix trying to spin his way out of this paradox and tear down something he knows is right — something for which he ought to be taking great political credit of his own." J.D. Kleinke in The New York Times.

RATTNER: We need death panels. "Well, maybe not death panels, exactly, but unless we start allocating health care resources more prudently — rationing, by its proper name — the exploding cost of Medicare will swamp the federal budget. But in the pantheon of toxic issues — the famous “third rails” of American politics — none stands taller than overtly acknowledging that elderly Americans are not entitled to every conceivable medical procedure or pharmaceutical." Steve Rattner in The New York Times.

CROVITZ: Congress' failure to enact high-skilled immigration reform is idiotic. "[T]he United States engages in a kind of human sacrifice, refusing to let technologists and scientists stay after they earn advanced degrees from top U.S. universities. Earlier this month, Congress missed its latest chance to open the doors to the best-educated and most-needed workers...Political leaders of both parties say they agree with the approach first defined by venture capitalist John Doerr in 2008 as a reform to 'staple a green card to the diploma of anybody who graduates with a degree in the physical sciences in the U.S.'...There's no debate about the importance of skilled immigrants. Between 1995 and 2005, foreign-born and technically trained entrepreneurs founded half the firms in Silicon Valley...Companies are now even willing to pay a new tax for permission to hire skilled workers. At a Brookings Institution event last week, Microsoft proposed more open borders in exchange for employers paying $10,000 per visa and $15,000 per green card. The company estimates this would raise $500 million the federal government could then give to school districts to boost scientific education in the U.S." L. Gordon Crovitz in The Wall Street Journal.

DIONNE: At the debates, what needs to happen. "In this week’s debate, Mitt Romney has too much to do. President Obama has a great deal to lose. Romney’s is the most difficult position. Obama’s is the most dangerous. Romney needs to use the Denver encounter to reverse the slide he has found himself in since the party conventions. While Republican partisans claim that many of the public polls survey too many Democrats and are thus casting Romney as further behind than he is, the behavior of the Romney campaign suggests it does not believe this. Many of its recent strategic moves have smacked of damage control and appear to reflect an understanding that if the campaign stays on its current trajectory, Obama will prevail." E.J. Dionne in The Washington Post.

@pourmecoffee: Obama should at least consider debate strategy where he keeps calling him Willard and Romney warns to cut it out and then they fight.

KLEIN: The end of Obama's audacity. "If you had to sum up Barack Obama’s 2008 campaign in one word, you might have picked the word 'audacity.'...If you were going to pick a single word to define President Obama’s reelection campaign, you definitely would not settle on 'audacity.'...Obama’s campaign is trying to make the president look smaller than he is, to underplay their accomplishments and, in particular, the scope of their policies...The Obama team knows all that, of course. There’s a reason they’re playing down the audacity of their first term and deemphasizing the policies that they think would do the most to help in a second. The American people, their research shows, are tired of audacity and skeptical of big ideas." Ezra Klein in The Washington Post.

PEARLSTEIN: A manifesto for the entitled. "I am a corporate chief executive. I am a business owner. I am a private-equity fund manager. I am the misunderstood superhero of American capitalism, single-handedly creating wealth and prosperity despite all the obstacles put in my way by employees, government and the media. I am a job creator and I am entitled.I am entitled to complain about the economy even when my stock price, my portfolio and my profits are at record levels. I am entitled to a healthy and well-educated workforce, a modern and efficient transportation system and protection for my person and property, just as I am entitled to demonize the government workers who provide them. I am entitled to complain bitterly about taxes that are always too high, even when they are at record lows." Steven Pearlstein in The Washington Post.

Top long reads

The economists who run video game worlds. "Inflation can be a headache for any central banker. But it takes a certain type of economist to know what to do when a belligerent spaceship fleet attacks an interstellar trading post, causing mineral prices to surge across the galaxy. Eyjólfur Guðmundsson is just that economist. Working for the Icelandic company CCP Games, he oversees the virtual economy of the massively multiplayer video game Eve Online. Within this world, players build their own spaceships and traverse a galaxy of 7,500 star systems. They buy and sell raw materials, creating their own fluctuating markets. They speculate on commodities. They form trade coalitions and banks. It’s a sprawling economy, with more than 400,000 players participating in its virtual market — more people, in fact, than live in Iceland. Inflation, deflation and even recessions can occur. Which is why, from his office in Reyjkjavik, Guðmundsson leads a team of eight analysts poring over reams of data to make sure everything in Eve Online is running smoothly. His job bears more than a passing resemblance to that of Ben Bernanke, who oversees the U.S. economy from the Federal Reserve." Brad Plumer in The Washington Post.

Stereotypes interlude: Hysterical maps of European stereotypes.

Got tips, additions, or comments? E-mail me.

Economy

Here comes the data. "Data to be released include the I.S.M. manufacturing index for September and construction spending for August (Monday); A.D.P. employment for September, I.S.M. service index for September (Wednesday); weekly jobless claims (Thursday); and unemployment for September and consumer credit for August (Friday)." The New York Times.

As global economic growth cools, trade is slowing. "Global trade is stalling, dimming prospects that exports will buoy the U.S. economy in the coming months...The World Trade Organization just projected the global volume of trade in goods would expand only 2.5% this year, down from 5% last year and nearly 14% growth in 2010. A Dutch government agency, the CPB Netherlands Bureau for Economic Policy Analysis, estimates it fell outright in June and July...Exports have accounted for almost half of U.S. growth during this recovery, compared with an average of 12% of growth in economic cycles over the past four decades."Sudeep Reddy and Alex Frangos in The Wall Street Journal.

But QE3 may provide a boost to emerging markets. "With these emerging markets now suffering their own growth ills, Fed stimulus has the potential to help, not hurt...In essence, emerging markets are rowing in the same direction as the Fed, loosening policy at the same time. As interest rates fall everywhere, the effect on currencies is subdued, so central banks feel less pain...For emerging economies that still turn to the U.S. as their top customer, what will make QE3 popular in the end is if it works to get the world's largest economy humming again." Alex Frangos in The Wall Street Journal.

@Goldfarb: Impressive: GS says QE3 might lift GDP by .75 percentage points.

Want some U.S. government debt? Treasury auction this week. "The Treasury’s schedule of financing this week includes Monday’s regular weekly auction of new three- and six-month bills and an auction of four-week bills on Tuesday. At the close of the New York cash market on Friday, the rate on the outstanding three-month bill was 0.09 percent. The rate on the six-month issue was 0.13 percent, and the rate on the four-week issue was 0.06 percent." The New York Times.

Karma interlude: This is what happens when American Airlines tries to mess with author Gary Shteyngart, who captures 'disgruntled airline traveler' better than any of us.

Health Care

The policy spotlight turns to Arkansas. Really. "On Monday, Arkansas will kick off a program to reduce its Medicaid costs and improve care through a partnership with its largest private insurance companies...The Health Care Payment Improvement Initiative is a shared-savings plan that begins to move the state and private insurance market away from a traditional fee-for-service payment system, to one in which providers are paid based on how well they deliver care and manage their costs. But it isn't a move toward managed-care, either. Instead, it's taking the health care delivery system that is already in place and adding new incentives and accountability. This concept, one of the first of its kind -- especially on this scale -- got the Centers for Medicare and Medicaid Services' go-ahead earlier this month." Shefali S. Kulkarni in Kaiser Health News.

Domestic Policy

The technical details of a financial reform you really need to understand. "Accounting rule makers are on the verge of rolling back a widely assailed provision that counterintuitively adds to U.S. banks' profits when their debt looks riskier to investors and penalizes them when it looks safer. The provision -- known as the debt or debit value adjustment, or DVA -- has come under increasing fire as major banks posted quarterly results whipsawed by big gains one quarter and big losses the next as the market value of their own debt fluctuated...The Financial Accounting Standards Board, which sets U.S. accounting standards, tentatively agreed in June to strip the changes out of net-income calculations, which would prevent the DVA swings from affecting banks' marquee earnings numbers any longer. The board is expected to formally propose the move by the end of the year— none too soon, in the view of some banking observers." Michael Rapoport in The Wall Street Journal.

The party which wants to crack down on 'voter fraud' might have just committed some. "The number of Florida counties reporting suspicious voter registration forms connected to Strategic Allied Consulting, the firm hired by the state Republican Party to sign up new voters, has grown to 10, officials said, as local election supervisors continue to search their forms for questionable signatures, addresses or other identifiers."Lizette Alvarez in The New York Times.

In case you were wondering interlude: Firing a pistol underwater.

Energy

Fusion funding, meet Congress. "For more than 50 years, physicists have been eager to achieve controlled fusion, an elusive goal that could potentially offer a boundless and inexpensive source of energy. To do so, American scientists have built a giant laser, now the size of a football stadium, that takes target practice on specks of fuel smaller than peppercorns. The device, operating since 1993, has so far cost taxpayers more than $5 billion, making it one of the most expensive federally financed science projects ever. But so far, it has not worked. Unfortunately, the due date is Sunday, the last day of the fiscal year. And Congress, which would need to allocate more money to keep the project alive, is going to want some explanations." William J. Broad in The New York Times.

N.Y. Gov. Andrew Cuomo is backing away from fracking. "A few months after Gov. Andrew M. Cuomo was poised to approve hydraulic fracturing in several struggling New York counties, his administration is reversing course and starting the regulatory process over, garnering praise from environmental groups and stirring anger among industry executives and upstate landowners. Ten days ago, after nearly four years of review by state regulators, the governor bowed to entreaties from environmentalists to conduct another study, this one an examination of potential impacts on public health. Neither the governor nor other state officials have given any indication of how long the study might take." Danny Hakim in The New York Times.

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