Wonkbook: What’s $125 billion in disposable income between friends?

October 19, 2012

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.

Wonkbook dashboard

RCP Obama vs. Romney: Romney +1.0%; 7-day change: Romney +0.3%.

RCP Obama approval: 49.4%; 7-day change: -0.3%.

Intrade percent chance of Obama win: 62.5%; 7-day change: -0.2%.

Wonkbook's Number of the Day: JPMorgan "downgraded its GDP growth forecast for the first quarter from 1.5 percent to just 1 percent and revised its second quarter forecast from 2.25 percent to 1.5 percent." Why? Because they think Congress will let the payroll tax cut expire, which will “will reduce U.S. disposable income by $125 billion."

Top story: How to avert the 'fiscal cliff'

‘Accelerated regular order’: Three boring words that could avert the fiscal cliff. "[H]ow could you possibly get a sweeping plan to reform spending, taxes, and entitlement through a paralyzed Congress that has already failed so many times to come to an agreement? The Bipartisan Policy Center thinks it has the answer...It would require Congress to follow what’s called 'accelerated regular order': It would suspend the use of the filibuster on the big deficit-reduction legislation, strictly limiting the time for debate. It would also let the Congressional committees work on the individual pieces of the legislation." Suzy Khimm in The Washington Post.

@sarahkliff: RT @garykarr Every story I read about the fiscal cliff I secretly think it could be the black sheep brother of @sarahkliff.

CEOs warn Obama, Congress to avoid ‘fiscal cliff’. "The largest U.S. financial firms warned Thursday of dire consequences if Washington fails to head off year-end tax hikes and spending cuts, saying they could jolt the economy into recession and prompt a new and dangerous downgrade of the U.S. credit rating...On Thursday, 15 of the nation’s largest financial companies warned President Obama and Congress in a letter that interest rates could spike significantly if policymakers do not agree to stop the series of automatic tax hikes and spending cuts and replace them with a long-term plan to tame the federal debt." Zachary A. Goldfarb in The Washington Post.

@MattZeitlin: ...The candidates' respective gameplans/red lines for the fiscal cliff are SUPER important. NO mention

Officials: Obama ready to veto a bill blocking ‘fiscal cliff’ without tax hike for rich. "President Obama is prepared to veto legislation to block year-end tax hikes and spending cuts, collectively known as the 'fiscal cliff,' unless Republicans bow to his demand to raise tax rates for the wealthy, administration officials said. Freed from the political and economic constraints that have tied his hands in the past, Obama is ready to play hardball with Republicans, who have so far successfully resisted a deal to tame the debt that includes higher taxes, Obama’s allies say." Lori Montgomery in The Washington Post.

JPMorgan: If the payroll tax cut falls -- part of the fiscal cliff -- so does growth. "A few months ago, JPMorgan thought there was a chance that the payroll tax holiday would be extended as part of a fiscal cliff deal. Now it doesn’t think the tax cut stands a chance of surviving—to the serious detriment of the economy next year...It’s downgraded its GDP growth forecast for the first quarter from 1.5 percent to just 1 percent and revised its second quarter forecast from 2.25 percent to 1.5 percent." Suzy Khimm in The Washington Post.

@ObsoleteDogma: Local TV news just said the government needs to agree to a "deficit-reduction package" to prevent defense cuts in fiscal cliff #facepalm

AARP: Please, let payroll taxes go up. "The AARP thinks it’s time for American taxpayers to pony up. The advocacy group for seniors opposes any further extension of the Social Security payroll tax holiday, which is scheduled to expire on Dec. 31, when the rest of the fiscal cliff goes into effect...When Congress agreed to extend payroll taxes by another year in 2011, it did so by replacing the lost funds with general revenue for the first time in history. That addressed some policymakers’ concerns about the Social Security Trust Fund’s insolvency. But it was a worrisome step for the AARP and other Social Security advocates, who believed it undermined the entitlement program’s protected status, lumping it in with a general budget that could be subject to future cuts and trade-offs." Suzy Khimm in The Washington Post.

@blakehounshell: Obama can't really say much about his second-term economic agenda because it involves inside-baseball stuff about the fiscal cliff.

When did we decide the Bush tax cuts don't cost money? "Remember: The Bush tax cuts expire at the end of this year. All of them. If we’re going to extend them, it requires new legislation. The Joint Tax Committee will tell Congress, correctly, that that legislation will cost trillions of dollars. But pretty much everyone in Washington has agreed to pretend that that’s not the case. They’ve all decided to treat the budget as if the Bush tax cuts have already been made permanent. This is true for everything Obama says. When you hear him talk about his intention to raise a trillion dollars by ending the Bush tax cuts for the rich? That’s a calculation that assumes the Bush tax cuts have already been made permanent. If you don’t assume that, then Obama’s plan isn’t a tax increase of a trillion dollars. It’s a tax cut of trillions of dollars. This is also true for everything Romney says. The arguments about his $5 trillion tax cut and whether or not he’ll pay for it are all assuming the Bush tax cuts have already been made permanent. But if Romney has to start by making the Bush tax cuts permanent, he’ll be signing trillions of dollars of tax cuts into law before he even gets to his own tax cuts." Ezra Klein in The Washington Post.

U.S. to get downgraded amid fiscal ‘theater,’ Pimco says. "The sovereign credit rating of the U.S. will be cut as 'fiscal theater' plays out in the world’s biggest economy, according to Pacific Investment Management Co., which runs the world’s largest bond fund. 'The U.S. will get downgraded, it’s a question of when,' Scott Mather, Pimco’s head of global portfolio management, said today in Wellington. 'It depends on what the end of the year looks like, but it could be fairly soon after that.'" Tracy Withers in Bloomberg.

KLEIN: Obama’s plan is to push Republicans off the fiscal cliff. "If the Obama administration were to really lay out their plans, they would go something like this. In November, President Obama will reiterate, clearly and firmly, that he will veto any attempts to extend the high-income tax cuts or lift the big, dumb spending cuts without finding equivalent savings elsewhere...I’ve called this the GOP’s dual-trigger nightmare. It’s bad for the economy, but it also effectively ends our deficits with a mix of tax increases and spending cuts more progressive than anything any Democrat has dared propose. Republicans absolutely can’t let it happen. But the only way they can stop it from happening is to make a deal...Where in the first term, the hope was that they could reach out, talk through the issues, and come to an agreement, the plan for the second is to push the Republican Party off the fiscal cliff, and then force them to reach out in order to get pulled back up." Ezra Klein in The Washington Post.

Top op-eds

GERSON: Liberalism's shrinking agenda. "In its heyday -- say, the 1960s -- American liberalism had an obvious identity. It was ambitious, reformist and frankly moral in its appeal to a common good that included minorities and the poor...After four years of Barack Obama and two clarifying presidential debates, it is extraordinary how shrunken liberalism has become...Taken together, Obama’s proposals have little ambition or thematic coherence. They add up to the Marginally Greater Society...It is more the protection of accumulated interests than the application of creative reform to new problems. In the place of idealism, there is often anger...America was better off because liberals called attention to those in the dawn, the twilight and the shadows of life. And U.S. politics is worse off because liberalism has become a shadow of its former self."Michael Gerson in The Washington Post.

SMITH: America's talent deficit. "Many American companies are now creating more jobs for which they can't find qualified applicants than jobs for which they can. Thus the economy faces a paradox: Too many Americans can't find jobs, yet too many companies can't fill open positions. There are too few Americans with the necessary science, technology, engineering and math skills to meet companies' demand...According to the U.S. Bureau of Labor Statistics, the U.S. this year will create some 120,000 new jobs requiring at least a bachelor's degree in computer science. But all of our colleges and universities put together will produce only 40,000 new bachelor's degrees in computer science." Brad Smith in The Wall Street Journal.

BROOKS: A sad green story. "The period around 2003 was the golden spring of green technology. John McCain and Joe Lieberman introduced a bipartisan bill to curb global warming. I got my first ride in a Prius from a conservative foreign policy hawk who said that these new technologies were going to help us end our dependence on Middle Eastern despots. You’d go to Silicon Valley and all the venture capitalists, it seemed, were rushing into clean tech. From that date on the story begins to get a little sadder...The biggest blow to green tech has come from the marketplace itself. Fossil fuel technology has advanced more quickly than renewables technology. People used to worry that the world would soon run out of oil, but few worry about that now. Shale gas, meanwhile, has become the current hot, revolutionary fuel of the future...All in all, the once bright green future is looking grimmer. Green tech is decidedly less glamorous, tarnished by political and technological disappointments." David Brooks in The New York Times.

@bdomenech: If Chicago's going to drop something heavy on Romney, I think their window is closing to do it.

KRUGMAN: The Romney plan which never was. "Mitt Romney talks a lot about jobs. But does he have a plan to create any?...[A] candidate with a real plan to make things better could make a strong case for his election. But Mr. Romney, it turns out, doesn’t have a plan; he’s just faking it...Mr. Romney’s campaign is telling lies: claiming that its numbers add up when they don’t, claiming that independent studies support its position when those studies do no such thing...To summarize, then, the true Romney plan is to create an economic boom through the sheer power of Mr. Romney’s personal awesomeness. But the campaign doesn’t dare say that, for fear that voters would (rightly) consider it ridiculous." Paul Krugman in The New York Times.

Actually pretty funny interlude: Obama, Romney playfully roast each other at Alfred E. Smith Dinner.

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

Still to come: Europe moving forward with single banking regulator; the 'priceless' gains possible through health reform; Defense of Marriage Act found unconstitutional by a federal appeals court; looking for an icebreaker on Arctic conversation; and Amazon reviews for binders now reference Romney's remark.

Economy

European leaders agree to create single banking regulator. "European leaders agreed early Friday to institute a single regulator with broad oversight over banks in the 17-nation euro zone, a step toward binding the countries’ economies more tightly together. The banking supervisor would have final say over the behavior of roughly 6,000 banks in the euro zone...But the plan would take full effect by the beginning of 2014, later than had been anticipated just weeks ago and on a time frame that may not be quick enough to allay market fears that Europe’s banks and governments could drag one another down if any of them get in trouble. The regulator would delegate supervision of smaller banks to national oversight." Michael Birnbaum in The Washington Post.

Obama's record on jobs. "With the economy struggling through one of the weakest recoveries on record and employers adding jobs at a slower rate than a year ago, projections are that the country’s jobless rate will not return to normal levels for years to come...Analysts call continuing high levels of joblessness a prime factor in the income and wealth declines that have continued for most Americans even after the recession ended. Obama, who came into office promising to bolster the middle class and reduce inequality, has presided over a turbulent economy that so far has done neither." Michael A. Fletcher in The Washington Post.

@JimPethokoukis: Barclays: US jobless claims distorted from beginning-of-quarter volatility; we forecast a 125k gain in October payrolls

Initial jobless claims rose. "The number of U.S. workers filing applications for jobless benefits rebounded last week, though numbers so far this month have been distorted by technical factors. Initial jobless claims -- which are a measure of layoffs -- were up by 46,000 to a seasonally adjusted 388,000 in the week ended Oct. 13, the Labor Department said Thursday." Sarah Portlock and Jeffrey Sparshott in The Wall Street Journal.

The Fed is in standby mode as its next meeting nears. "At their September meeting, Federal Reserve policy makers administered an array of tonics designed to revitalize the ailing economic recovery. Their meeting next week is likely to be more of a checkup...They aren't expected to launch any new policies when they meet Oct. 23 and 24, just two weeks before the U.S. elections. Rather, policy makers likely will agree to continue the bond purchases and another program, called Operation Twist, in which the central bank has been buying $45 billion in long-term Treasury bonds every month and funding the purchases with proceeds from sales of short-term Treasurys. Both programs aim to lower long-term interest rates to spur spending, investment and hiring." Kristina Peterson and Michael S. Derby in The Wall Street Journal.

@SteveChapman13: Republicans accuse Fed of debasing currency, but US-euro exchange rate virtually unchanged under Obama.

The big banks are a mess. "The biggest U.S. banks have released their latest quarterly financials, and the results for the third quarter were, well, so-so...But that 'meh' picture of the health of the major banks masks some deep turmoil within. And what the reports have in common is that they show how the biggest global banks still haven’t figured out what their business should be in a post-crisis world...All of these banks are still grappling with the costs of the bad lending during the boom years before the crisis. They also are trying to determine how big they ought to be in a world where they cannot rely on such a large ratio of borrowed money (thanks to Basel III capital requirements), run some lucrative side businesses (thanks to the Volcker Rule that tries to stop proprietary trading)." Neil Irwin in The Washington Post.

Friday music interlude: Jackson Browne, "Doctor My Eyes.".

Health Care

Drug stores can give you a flu shot. What about other vaccines? "Flu shots have become a mainstay for pharmacies, with 18.4 percent of the vaccinations now delivered at places like Walgreen’s and CVS. The number of pharmacists trained to deliver vaccines has boomed, from 40,000 in 2007 to 150,000 in 2011. Given that pharmacists already deliver flu shots, should they be giving other vaccines, for conditions like shingles? Or whooping cough?...[D]octors’ groups tend to oppose expansions of pharmacist vaccination powers...At the same time, retail looks to be the way of the future in health care. Pharmacies keep building out the health services they offer; patients turn continue to turn up in growing numbers. The convenience factor looks to be pushing the system in this direction." Sarah Kliff in The Washington Post.

The 'priceless' gains of health reform. "During election season, presidential candidates invariably defend their policies in terms of dollars or jobs: Barack Obama’s health care plan will save a family so much on insurance; his green energy investments will create so many jobs. Mitt Romney’s voucher plan will reduce Medicare’s costs. Yet some of the greatest welfare impacts of these policies can’t be priced. Obamacare eliminates much of the anxiety that hangs over every uninsured worker who worries about a financially crippling disease or injury. That surely must raise welfare." Greg Ip in The Economist.

Domestic Policy

Study shows 33 percent spending increase in federal poverty programs. "A new study by the nonpartisan Congressional Research Service finds that federal spending on anti-poverty programs has increased 33 percent since 2008, when President Obama was elected. The study, commissioned by Senate Budget Committee ranking member Jeff Sessions (R-Ala.), included traditional welfare, food stamps, Medicaid, Pell grants and 80 other federal programs but excluded veterans assistance programs. Together, the federal government spent $746 billion in 2011 on these programs in 2011, up from $563 billion in 2008." Erik Wasson in The Hill.

A federal appeals court struck down the Defense of Marriage Act. "A federal appeals court on Thursday ruled that gay Americans are a class of people who deserve the same kinds of constitutional protections as many other victims of discrimination. The 2-to-1 ruling, by the Court of Appeals for the Second Circuit in New York, came as the panel struck down the federal law prohibiting federal recognition of same-sex marriage. It is the first time that a federal appeals court has applied this level of constitutional protection — known as heightened scrutiny — to those unions. The case is now considered by some legal scholars to be the leading candidate for a Supreme Court review of the same-sex marriage issue. Thursday’s decision was the second by a federal appeals court striking down the Defense of Marriage Act. Now the case, Windsor v. United States, could be considered by the Supreme Court, or the court could choose other cases in its pipeline concerning same-sex marriage." John Schwartz in The New York Times.

@chrislhayes: Obama decision not to defend DOMA was always the right call, but looking better and better....

How strong is the safety net? Depends where you live. "[S]ates vary widely in how generous they make certain state-federal partnership programs like food stamps and Medicaid. And the variation within block grant programs, like Temporary Assistance for Needy Families (TANF, or welfare) is bigger still...None of this is especially surprising. People in blue states, by definition, vote for Democrats, who tend to pass more expansive social legislation." Dylan Matthews in The Washington Post.

Irresponsible budgeting in DC. "Pretty much everything you have heard about taxes in this entire election starts from the same premise: It assumes the Bush tax cuts don’t cost any money. Remember: The Bush tax cuts expire at the end of this year. All of them. If we’re going to extend them, it requires new legislation. The Joint Tax Committee will tell Congress, correctly, that that legislation will cost trillions of dollars. But pretty much everyone in Washington has agreed to pretend that that’s not the case. They’ve all decided to treat the budget as if the Bush tax cuts have already been made permanent. This is true for everything Obama says. When you hear him talk about his intention to raise a trillion dollars by ending the Bush tax cuts for the rich? That’s a calculation that assumes the Bush tax cuts have already been made permanent. If you don’t assume that, then Obama’s plan isn’t a tax increase of a trillion dollars. It’s a tax cut of trillions of dollars." Ezra Klein in The Washington Post.

Echoes of "binders full of women" interlude: Amazon reviews for "binders" (full of women) are funnier than Romney's original gaffe.

Energy

Are U.S. taxpayers subsidizing Asia’s coal use? "There’s a lot of coal buried beneath public lands in the United States. And, for decades, the federal government has offered mining companies access to those lands on generous terms -- some might say too generous. Lately, however, more and more of that cheap coal has been getting shipped off to places like Asia, as Americans switch to natural gas for their electricity...[B]ack when coal provided half the electricity in the United States, this wasn’t a glaring political issue. If Powder River Basin coal was leased out too cheaply, American consumers still reaped the benefits. But the energy landscape has shifted." Brad Plumer in The Washington Post.

Climate change disappeared from the debates. Now only if it could disappear from Earth that easily. "[N]either President Obama nor Mitt Romney had anything to say about climate change during the second presidential debate Tuesday...[N]othing about this warming planet of ours. Nothing about the summer’s droughts or wildfires or the rapidly melting Arctic...Though it’s also true that back in 2008 there were two candidates eager to talk about the subject, and in 2012 there are two candidates eager to talk about anything but." Brad Plumer in The Washington Post.

@pourmecoffee: Hard to imagine we won't look back on these three debates with no serious discussion of climate change as an embarrassment.

Coal, a burning political issue. "Coal has improbably risen to become one of the top issues of the presidential campaign, with dueling ads about coal in swing states and attacks by each candidate on the other's position. The battle is escalating even though coal employment is just a shadow of what it was a few decades ago and its use in power generation is steadily declining, from 48% of U.S. electricity in 2008 to 38% in the 12 months ended July 2012. The industry retains outsize importance in part because of its operations in the contested states of Ohio, Virginia and Pennsylvania." Keith Johnson in The Wall Street Journal.

@chrislhayes: As it happens, the real War on Coal is being waged by an entity known as Natural Gas Companies.

Clinton: Rules of road needed to prevent Arctic ‘catastrophe’. "Secretary of State Hillary Clinton said Thursday that international collaboration will be vital as melting sea ice opens up new shipping and oil-and-gas drilling opportunities in the Arctic...Climate change is altering the Arctic terrain and nations are jockeying for access. Arctic sea ice coverage reached its lowest level on record in September." Ben German in The Hill.

Owners of hybrids are shy of gas stations. "Although electric vehicles have not taken off as some had hoped, there are now enough of them on the road that some behavioral differences between drivers of all-electric models and plug-in hybrids have become evident, in addition to those between E.V. users and owners of conventional models...Some of the early findings are not unexpected, said Colin Read, ECOtality’s vice president for corporate development. People who have chargers at home tend to use them more than those at restaurants and stores, for example. Generally they load up at night, and the cars often stay plugged in far longer than is needed to fill the battery to cover the amount of driving they will do." Diane Cardwell in The New York Times.

Wonkbook is produced with help from Michelle Williams.

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