Wonkbook: Everything you need to know about 2012′s final presidential debate

October 23, 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 +0.4%; 7-day change: Romney -0.3%.

RCP Obama approval: 49.3%; 7-day change: -0.5%.

Intrade percent chance of Obama win: 60.9%; 7-day change: -1.8%.

Wonkbook's Number of the Day: 30%. In CBS News' instant poll following the debate, 53 percent of 500 voters said Obama won, as compared to 23 percent who named Romney as the winner. That 30 percent margin of victory was the largest seen in any poll since the first debate, when Romney ran a 42 percent margin in the CNN instant poll.

Other instant polls, however, do not show quite as fat a margin for the president. CNN put him 8 points above his challenger; Google put him 10 points ahead. As FiveThirtyEight's Nate Silver writes below, last night's debate is not as likely to lead to a big Obama bounce with only two weeks left of the race to go before Election Day.

Many political commentators said Romney struggled to define his positions or land criticisms against Obama, who himself managed to deliver a few memorable lines and direct attacks on the Romney approach to foreign policy. The debate, however, was not nearly as unbalanced as the first, and few will emerge from this debate asking Romney "what happened?" quite as they did to Obama after Denver.

From foreign-policy wonks, there was a lot of disapproval about the narrowness of the debate. Whole continents went almost entirely unmentioned -- not the least of which, Europe and its fiscal and monetary troubles -- whereas the Middle East and China were picked over in extreme detail. (This parallels complaints about housing, for one topic, not showing up in the prior two presidential debates.)

Today, Wonkbook summarizes what you need to know about 2012's final presidential debate on foreign policy: the key remarks of the greatest importance to the race; the initial polling results; the broader policy context; facts from the issues of the evening; and the takeaway conclusions.

Top story: Everything you need to know about 2012's final presidential debate

In the final debate on foreign policy, Obama kept Romney on his heels. "President Obama and Mitt Romney clashed repeatedly over foreign policy here Monday night, with the president arguing assertively that Romney has lacked the consistency or clarity of vision to lead the country while the Republican nominee charged that Obama has been weak and ineffective in the face of growing turmoil in the world. The two candidates differed most sharply over the president’s handling of the uprisings in the Middle East, his efforts to prevent Iran from obtaining nuclear weapons and his treatment of Israel...Romney appeared cautious, especially during the early stages of the debate, but grew more assertive as the evening went on. Throughout the debate, Obama seemed eager and ready to take the fight to his opponent, drawing on his experience to draw contrasts with the challenger." Dan Balz and David Nakamura in The Washington Post.

@blakehounshell: Bottom line: Obama wins tonight, but not at all clear how it affects the actual race. Does it disrupt Romney's upward trajectory?

Read: The full transcript of the final presidential debate of 2012.

Watch: The full video of the debate.

Or maybe watch instead: Just 4 memorable moments.

Obama and Romney found substantial common ground. "Republican Mitt Romney entered Monday night’s debate on foreign policy with the goal of presenting himself as a competent, plausible alternative to President Obama as commander in chief. But Romney appeared to cede many positions to Obama, moving closer to the president on a range of issues and presenting them in a softer way." Scott Wilson in The Washington Post.

@shadihamid: Clear Romney wasn't able to settle on a particular foreign policy vision. Pro-democracy/anti-Islamist contradiction is especially jarring.

But you might not have been able to tell, amid the quibbling. "President Obama and Mitt Romney wrapped up a series of defining debates on Monday night with a bristling exchange over America’s place in the world as each sought to portray the other as an unreliable commander in chief in a dangerous era...Mr. Obama went on offense from the start, lacerating his challenger for articulating a set of 'wrong and reckless' policies that he called incoherent. While less aggressive, Mr. Romney pressed back, accusing the president of failing to assert American interests and values in the world to deal with a 'rising tide of chaos.'...Chopping the air with his hand, Mr. Obama came armed with a host of zingers, at times lecturing and even mocking Mr. Romney on the details of certain policies, hoping to expose his challenger as an uninformed pretender at the risk of coming across himself as condescending. Mr. Romney sat stiffly, his hands before him, back ramrod." Peter Baker and Helene Cooper in The New York Times.

@MichaelSLinden: New theory for why Romney spent all night praising Obama's foreign policy: he's hoping to succeed Hillary at State.

Snap polls: Obama won foreign policy debate. "Snap polls from CNN and CBS News gave President Obama the victory in the foreign policy debate. In the CNN-ORC poll, 48 percent of voters said Obama won; 40 percent said Romney did. The CBS poll of uncommitted voters was more dramatic: Obama took 53 percent, Romney took 23 percent, and another 24 percent called it a tie." Rachel Weiner in The Washington Post.

@DLeonhardt: Intrade odds say that Obama won the 3d debate in a rout -- and that debate is unlikely to have much effect on the race.

SILVER: Obama is unlikely to get a big debate bounce. But even a small one could matter. "[A]eraging the results from the CBS News, CNN and Google polls, which conducted surveys after all three presidential debates along with the one between the vice-presidential candidates, puts Mr. Obama’s margin at 16 points. That compares favorably to Mr. Obama’s average 10-point margin after the second debate, and Vice President Joseph R. Biden’s 6-point margin against Representative Paul Ryan, but is smaller than Mr. Romney’s average 29-point win in Denver...It is tempting to split the difference, and assume that Mr. Obama might get a 1- or 2-point bounce in the polls, but there are some mitigating factors. The pace of the debate was slow, and it was competing against high-profile baseball and football games, which may have kept viewership down. Voters have more information about the candidates than they did before the first debate, meanwhile, which means that their additional impressions of the candidates could make less difference at the margin. Historically, the bounces following the third presidential debate, in the years when one was held, were smaller than after the first two. Finally, the subject of the debate, foreign policy, is not as important to most voters as economic policy." Nate Silver in The New York Times.

The Internets react: What Twitter said last night.

@BrendanNyhan: Unspun take: Foreign policy feels like a sideshow to core election issues. Obama's adoption of much of Bush FP leaves Romney little room

The Fix's Chris Cillizza explains: Winners and losers from the final presidential debate.

@bdomenech: This is not Mitt Romney's fault. It's the fault of a foreign policy divide on the right which no one wants to talk about publicly.

This was somewhat of a role reversal from the first debate. "Monday night’s debate provided an odd role reversal that made Mr. Romney seem on the defensive, particularly because he at times stuttered and sputtered in his haste to make his points. He pronounced foreign names and countries correctly, but also carefully, worried perhaps that a mispronunciation would sink his credibility. Usually, it is Mr. Obama who seems professorial and long-winded. There were long moments when Mr. Romney made the president sound succinct and sharp-edged. Perhaps trying to demonstrate the breadth of his knowledge, Mr. Romney careened from Iran to Poland to China to Latin America to Greece to balanced budgets. He delivered a long lecture on the strategic importance of Pakistan that was the same as Mr. Obama’s position." Alessandra Stanley in The New York Times.

@EJDionne: Liberal spin: Obama killing him. Conservative spin: Romney looks statesmanlike.

Fact-checking and policy contexts

Wonkblog explains: Footnoting the final debate.

On China and currency manipulation: "Odds are that Mitt Romney’s promise to brand China a 'currency manipulator' will figure heavily in tonight’s foreign policy debate...[I]t is, at this point, an out-of-date argument... It’s missing the substantial improvements China has made in recent years, and the role that other actors now play in global currency manipulation...China is not the world’s worst currency manipulator, or even particularly close to it...China is getting much better. They’ve allowed their currency to rise substantially in recent years... Calling someone a 'currency manipulator' doesn’t trigger some magical process that leads to them no longer manipulating their currency. On its own, its nothing but an international insult...Many experts think calling China a 'currency manipulator' will backfire. China, at times, seems to run a pride-based foreign policy. If the rest of the world demands they do something, they simply refuse to do it." Ezra Klein in The Washington Post.

On Osama bin Laden: "Obama claimed Romney said he would not move heaven and earth to get Osman bin Laden. The Obama campiagn has made far too much out of this comment." Glenn Kessler in The Washington Post.

On the 'apology tour': "Mitt Romney repeated his claim that President Obama took an 'apology tour' around the world early in his term. Obama called that a 'whopper.' Obama is right -- every fact checker has said the so-called ‘apology tour' did not happen." Glenn Kessler in The Washington Post.

On the Navy: "Mitt Romney asserted that this is smallest Navy since 1917. Obama had a ready retort: 'We also have fewer horses and bayonets.' In other words, it makes no sense to compare the firepower of a modern, nuclear-powered aircraft carrier with a battleship circa 1916...In other words, this is an apples-and-oranges comparison...The current level of ships, 285 in fiscal 2011, is actually not even the lowest since 1916. The historical list shows that the lowest ship force was reached during the Bush administration, when the number of ships fell to 278 in 2007...[T]he Navy in place at the end of a first Romney term would be Obama’s Navy." Glenn Kessler in The Washington Post.

On Iraq: "Mitt Romney has the better part of this argument...Obama did try to get a status of forces agreement, but could not get an agreement with the government of Iraq. So now he stresses the fact that he has removed all troops from Iraq, while knocking Romney for supporting what he originally had hoped to achieve." Glenn Kessler in The Washington Post.

On Iran: "Mitt Romney said that Obama was 'silent' on the protests in Iran but that is not quite correct. Obama’s response was initially muted -- in part out of caution and also because he was preserving the ability to relaunch negotiations over Iran’s nuclear program...Some commentators criticized Obama for making relatively weak remarks but U.S. official argued that he was trying to avoid having the Iranian government claim that the protests were the work of American intrigue." Glenn Kessler in The Washington Post.

Special geography fact-check: Is Syria 'Iran's route to the sea'? "Mitt Romney repeated his contention that Syria is Iran’s route to the sea. This is a puzzling claim, considering that Syria shares no border with Iran -- Iraq and Turkey are in the way — and that Iran has about 1,500 miles of coastline along the Persian Gulf and Gulf of Oman, leading to the Arabian Sea. The Fact Checker column has looked into this before." Glenn Kessler in The Washington Post.

On the role of Russia for Romney: “[Obama]: 'A few months ago, when you were asked what’s the biggest geopolitical threat facing America, you said Russia.' This is what Mitt Romney said in a March 26 interview with Wolf Blitzer of CNN: 'This is without question our No. 1 geopolitical foe...Well, I’m saying in terms of a geopolitical opponent, the nation that lines up with the world’s worst actors. Of course, the greatest threat that the world faces is a nuclear Iran. A nuclear North Korea is already troubling enough.'" Rachel Weiner in The Washington Post.

On promises of lower unemployment: "Romney likes to claim that Obama promised to get the unemployment down to 5.4 percent by 2012, but it is not as simple as that...efore Obama took the oath of office, two aides, Christina Romer, the nominee to head the Council of Economic Advisers, and Jared Bernstein, an incoming economic adviser to Vice President-elect Biden, wrote a 14-page report that attempted to assess the impact of a possible $775 billion stimulus package and how much of a difference it would make compared to doing nothing. Thus, it was not an official government assessment or even an analysis of an actual plan that had passed Congress. Page 4 of the report included a chart that showed that unemployment would peak at 8 percent in 2009, compared to 9 percent in 2010 if nothing was done. For 2012, the report suggested the unemployment rate would be 5.4 percent after stimulus. But the report also contained numerous caveats and warnings because, after all, it was merely a projection." Glenn Kessler in The Washington Post.

On defense spending and cuts: "The [debt ceiling] impasse was ended with bipartisan passage of the Budget Control Act of 2011, which cut spending by nearly $1 trillion over 10 years by setting new budget caps for 'security' and 'nonsecurity' discretionary spending...Romney has also since said that Republican leaders made a mistake in agreeing to this deal. So why blame Obama for the defense cuts? [After negotiations,] they settled on security spending (pain for Republicans) balanced by nonsecurity spending (pain for Democrats)." Glenn Kessler in The Washington Post.

Opinion on the debate

KLEIN: We shouldn’t have a ‘foreign policy’ debate. "The first presidential debate focused on 'domestic policy.' Tonight’s presidential debate will focus on 'foreign policy.' I’m going to focus on the fact that this distinction is ridiculous. Washington’s definitions of 'domestic policy' and 'foreign policy' haven’t kept up with the real world. When you hear the term 'domestic policy' in the Beltway, it means economic policy, health-care reform, financial regulation, energy. 'Foreign policy' means, broadly speaking, our policy towards the countries we are already at war with, or are considered likely to eventually go to war with. But the actual policies don’t break down so neatly." Ezra Klein in The Washington Post.

SIMON: This was a serious Romney defeat. "At age 65, Mitt Romney probably thought he was done with school. But he got schooled by Obama on foreign policy at what will be their last meeting before Election Day. Romney wasn’t terrible. But he was on the defensive for much of the evening, a fine sheen of sweat popped put on his forehead long before the debate ended, and - - worst of all - - Romney was repeatedly forced to say he agreed with Obama on policy after policy. This may not have been so bad, but Obama chose a good evening to be good...Even when Romney tried prepared lines that had worked so well in his debate prep sessions, things still went wrong...And Obama’s prepared lines had a boom-lowering quality to them." Roger Simon in Politico.

@esoltas: Romney making two mutually exclusive arguments tonight: (1) I agree with Obama, (2) Obama is doing things wrong.

PONNURU: It's still 'advantage Romney'. "[B]both candidates at the debate were acting as though Romney is in the lead. Obama launched attack after attack on Romney to bring him back down to his level. Romney generally refused to engage in the hope of looking presidential. Each time Romney was asked a question, he went with the answer that made him look thoughtful and grown-up rather than the one that would score the most points against Obama." Ramesh Ponnuru in Bloomberg.

@RobinBew: Pretty even #US debate. #Romney shows more centrist foreign policy, but #Obama plays on his experience. No winner, no difference to vote.

BARRO: Most of the globe was not invited to the debate. "Mitt Romney was in the odd position tonight of arguing that President Barack Obama’s foreign policy is a failure, while advocating a substantially similar one...From Libya to Afghanistan to China, Romney sketched out positions virtually indistinguishable from the president’s. In some cases, that meant abandoning his past positions...Obama seemed to delight in pointing out the changes, saying repeatedly that Romney has been 'all over the map' on foreign policy issues and couldn’t be trusted to provide steady leadership. He also repeatedly thanked the governor for endorsing his foreign policy actions...The biggest problem with this debate, as with the previous ones, is what wasn’t discussed. There was no discussion of Europe or sub-Saharan Africa and only a brief mention of Latin America by Romney. The candidates did not discuss immigration, the drug war, global health, climate change or the international financial system." Josh Barro in Bloomberg.

@dandrezner: You know, Romney will win this thing if it turns out that all bayonet production was outsourced to China.

YGLESIAS: The misguided economics of the foreign policy debate. "[H]ere were five big malign economic policy themes I saw tonight...Foreign policy is all about angry Muslims...The Middle East first came into the U.S. foreign-policy focus precisely because its oil was economically important. But these days, the various conflicts in the Middle East often seem to have eaten the entire field of vision of American foreign policy. In the real world, the internal politics of the eurozone have more of an impact on the life of a typical American than the internal politics of Northern Mali...The budget deficit imperils our national security: Romney kicked this off by quoting Admiral Mullen saying the budget deficit is the biggest threat to American national security...This is totally wrong and, indeed, thinking about national security highlights the extent to which deficits are wildly overblown as a problem...We must stanch the tide of inexpensive Chinese goods: Obama bragged, not for the first time, about his policy of taxing low-cost Chinese tires in order to discourage Americans from buying them to help save the jobs of incumbent American tire-makers. This policy saved about 1,200 jobs at a cost to consumers of about $1.1 billion." Matthew Yglesias in Slate.

@esoltas: Most economic studies show that the tire WTO case was a bad idea, that the benefits were narrow and costs broad.

STEPHENS: Mitt was a plausible foreign policy alternative. "Mitt Romney needed to pass the usual tests for Republican presidential candidates in his debate Monday night with President Obama. There was the Ford test (alternatively known as the Palin/Cain/Perry test): Would Mr. Romney say something so obviously misinformed, so manifestly silly, so revealingly ignorant as to disqualify him from serious consideration as a prospective commander-in-chief? He said nothing of the sort. There was the Goldwater test (unfairly named, but reputations are stubborn things): Did Mr. Romney make pronouncements so belligerent as to make ordinary people fear for their children's safety...And there was the Bush test (not unfairly named but mistakenly understood to mean ideology when it ought to be about consistency): Would Mr. Romney find a deft way to define his foreign policy as something other than a retread of the 43rd president—but also as something defensible, distinctive, and (not least) identifiably Republican?" Bret Stephens in The Wall Street Journal.

@blakehounshell: Kind of surprised that Romney didn't lay a glove on Obama on Syria. Should have been better prepared.

SLAUGHTER: The world in our image. "[T]he lasting impression of the debate, certainly for anyone watching in the rest of the world, is just how narrowly Americans define foreign policy. Neither candidate mentioned NATO. Indeed, neither candidate mentioned the European Union or the Eurozone crisis...Moving east, the candidates barely mentioned a single country in East Asia other than China. There was only the briefest reference to Japan (our closest ally in Asia) by the moderator and a single mention of North Korea (another very dangerous nuclear power). Indonesia, the largest Muslim country in the world, didn’t come up. For that matter, there was no reference to India (a mere billion people)...This really wasn’t a debate about foreign policy or world affairs. It was the projection of the American electoral map onto the globe. All discussion of Israel and Islam was targeted at Florida; all discussion of China was targeted at Ohio." Anne-Marie Slaughter in The New York Times.

@mattyglesias: Romney continually fails to explain why his administration would be something other than a return to failed Bush policies.

SARGENT: Peacenik Mitt gets pummeled. "Tonight, America was introduced to Peacenik Mitt -- and watched him take a pummeling. I don’t know how much this will impact the overall dynamic of the race -- it may not matter much at all -- but it’s hard to see this as a good night for Romney. Romney didn’t take many of the shots he was expected to take -- while Obama landed a number of very hard blows on Romney early on." Greg Sargent in The Washington Post.

@sahilkapur: Conservatives cheering Romney's leap to the center probably reflects the realization that Obama isn't quite the hapless goner they thought.

BRUNI: Romney struggled on foreign policy. "[Romney] had an odd color and odder sheen, that of a man without Dramamine on a rickety boat in threatening seas. Obama repeatedly reminded television viewers that he alone was familiar with the responsibilities of the commander in chief. He clearly wanted Romney’s experience as a mere governor to sound, in comparison, like a job running a curbside lemonade stand. And though Romney perspired and occasionally stammered, he wouldn’t surrender." Frank Bruni in The New York Times.

@AlecMacGillis: Disagreement emerging: was Romney underwhelming because he was playing it safe, or because he is simply less steady on this ground?

DREZNER: Romney's message of peace may work well for undecided voters. "After a year of very hot and bellicose rhetoric, the governor sounded different tonight. He argued that 'we can’t kill our way out of' the problems in the Middle East. He averred that 'we want a peaceful planet.' He explicitly stated he didn’t want to get involved militarily in Syria. Romney said the sanctions in Iran were working. He praised the president on numerous fronts -- Afghanistan and Pakistan in particular. He even talked about China as a partner before bashing its trade policies. To be fair, the governor has said some of this before, but tonight the emphasis was on diplomacy and peace, not brute force. In doing all this, Romney was trying to allay the fears of undecided voters who are wary of expending more blood and treasure overseas. Romney’s sotto voce message was that he would be a hot-headed, trigger-happy cowboy -- like the Last Republican President Who Shall Not Be Named. For undecided voters who are clearly sick of foreign wars, this could be very soothing indeed." Daniel W. Drezner in The New York Times.

Top op-eds

ROMER: The fiscal stimulus, flawed but valuable. "As a former member of President Obama’s economic team, I have a soft spot for the fiscal stimulus legislation he signed just a month after his inauguration. But I’m also an empirical economist who’s spent a career trying to estimate the effects of monetary and fiscal policy. So let me put on my empiricist’s hat and evaluate what we know about the legislation’s effects...Two careful studies have looked at the relationship between this formulaic spending and employment. Both find that states that received more money fared substantially better. This is the strongest direct evidence that the Recovery Act contributed to employment growth. Based on the estimated size of the effect, the studies suggest that the act created more than three million jobs. Another study using a related method finds noticeably smaller effects. Even it, however, suggests that about a million jobs were created, and that estimate doesn’t include the effects of the act’s tax cuts." Christina D. Romer in The New York Times.

VEDDER: Why is college enrollment dropping? "Parents who are desperately trying to get their children into a top school may not believe this: U.S. higher education enrollments this fall might be lower -- perhaps significantly so at some institutions -- than they were a year ago...The huge decreases in the number of students in the past couple of years have been at for-profit universities. They have been hit by stricter federal regulations...There are five possible reasons cited for dropping enrollments...First, the population of 18-year-olds is in decline...Second, some admissions officials have been arguing that the turnaround of the economy is working to lower the numbers. It is true that enrollments are somewhat anti-cyclical. When the economy tanks, young people and even older adults who are unable to get jobs head to college...Last and possibly most important, concern appears to be rising about the rate of return on college investments. One estimate is that as many as 53 percent of recent college graduates are either unemployed or have relatively low-paying, low-skilled jobs." Richard Vedder in Bloomberg.

YERGIN: Natural gas as economic stimulus. "Shale gas alone is now 10% of the overall U.S. energy supply...So far more than 1.7 million jobs are the result, according to a report titled 'America's New Energy Future,' released Tuesday by my research firm, IHS...The number of jobs could rise to three million by 2020. The energy revolution will add an estimated $62 billion to federal and state revenues this year...Domestically, growing natural gas supplies provide a foundation for a manufacturing renaissance, at least for industries for which energy is an important feedstock or where energy costs are significant. Chemical companies have been leaving the U.S. for years in the search for lower-cost countries in which to operate. Now they are planning to invest billions of dollars in new factories in this country because of inexpensive and relatively stable natural gas prices." Daniel Yergin in The Wall Street Journal.

PONNURU: The case against an Obama second term. "It’s not an accident that in the past few weeks, President Barack Obama’s campaign has spent a lot of time talking about bizarre trivia such as Mitt Romney’s plans for Big Bird. Obama can’t run on the attractive new initiatives he intends to pursue in his second term: He doesn’t have any. He can’t run on his major legislative accomplishments, either. The stimulus and the health-care overhaul are both unpopular -- and for good reason. Judged on his record, the president deserves to lose re-election...These aren’t the only reasons to oppose Obama’s re- election, of course. There is also his disturbing pattern of rewriting laws to suit his preferences when Congress doesn’t oblige him -- something he has done on immigration, welfare and health care. Then there are his positions on abortion and the courts, which many people, including me, abhor." Ramesh Ponnuru in Bloomberg.

STEVENSON AND WOLFERS: What Romney doesn't get about families. "Romney’s statements suggest he believes parenthood is a condition that afflicts only women, requiring employers to make special arrangements for them. Moms and dads alike should be outraged. He’s ignoring decades of progress in gender roles and the challenges men face in balancing their work and home lives...If Romney has managed to miss this transformation of one of society’s most fundamental institutions, one wonders what else he doesn’t know." Betsey Stevenson and Justin Wolfers in Bloomberg.

Top long reads

Jane Mayer studies the origins of the voter-fraud myth: "Hans von Spakovsky. A Republican lawyer who served in the Bush Administration, he is now a senior legal fellow at the Heritage Foundation, the conservative think tank...on Spakovsky, who frequently appears on Fox News, is the co-author, with the columnist John Fund, of the recent book 'Who’s Counting?,' which argues that America is facing an electoral-security crisis...Mainstream election experts say that Spakovsky has had an improbably large impact."

Aquatic interlude: Whales can mimic human speech. Amazing.

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

Still to come: 65 percent of housing markets are still worse off than before the bust; how abortion access has been receding; what does Romney want to do with all his defense spending; who might lead the Departments of Energy and Interior next; and meet Mark Clayton, the worst major-party candidate of 2012.

Economy

Your week ahead in economic data. "Data to be released will include new home sales for September (Wednesday); weekly jobless claims, durable goods for September and pending home sales for September (Thursday); and third-quarter gross domestic product and the Thomson Reuters/University of Michigan consumer sentiment index for October (Friday)." The New York Times.

Housing picture: 65 percent of markets worse off than before the bust. "[A]ccording to a new analysis released Monday by the research firm RealtyTrac...[looking] at how housing markets in 919 counties across the country have fared since 2008, based on such factors as changes in home prices, unemployment rates and foreclosure activity. The result: 65 percent of those communities were worse off than they were in 2008." Brady Dennis in The Washington Post.

Economists Michael Greenstone and Adam Looney on wages in America. "[T]here has been a lot of talk about the stagnating wages of American male workers. Using conventional methods of analysis, the data show that the median earnings for prime-age (25-64) working men have declined slightly from 1970 to 2010, falling by 4 percent after adjusting for inflation. This finding of stagnant wages is unsettling, but also quite misleading. For one thing, this statistic includes only men who have jobs...When we consider all working-age men, including those who are not working, the real earnings of the median male have actually declined by 19 percent since 1970. This means that the median man in 2010 earned as much as the median man did in 1964 -- nearly a half century ago. Men with less education face an even bleaker picture; earnings for the median man with a high school diploma and no further schooling fell by 41 percent from 1970 to 2010." Michael Greenstone and Adam Looney in The New York Times.

JPMorgan's chief U.S. economist Michael Feroli on the Fed's next moves. "Among the world’s central banks, the U.S. Federal Reserve’s signal corps has been the most active in sending out and refining its message. The logical next step is to specify numerical thresholds that will govern the Fed’s deliberations on the timing of its first rate increase since June 2006. More to the point, numerical thresholds will probably involve stating employment and inflation values that would need to be met before the Fed considers raising rates...Make no mistake: The immediate benefit of establishing these thresholds would likely be minimal...Over time the benefits could be large, including more stable, predictable policy- setting that would automatically adjust to ensure interest rates are geared toward getting the economy back to work." Michael Feroli in Bloomberg.

How the 2012 presidential election will affect the Fed. "The next significant event for monetary policy is not the Federal Reserve’s meeting Tuesday and Wednesday, which is likely to pass quietly, but the presidential election two weeks later. Mitt Romney, the Republican nominee, has said that he opposes the Fed’s efforts to stimulate the economy as ineffective and inflationary. And as president, he has promised to appoint a new Fed chairman. The term of the current chairman, Ben S. Bernanke, runs through early 2014. But the impact could be immediate as investors revise their assumptions about the future...Such a reversal would be welcomed by critics who argue that the Fed’s efforts are undermining economic stability, and mourned by supporters who say more must be done to revive economic growth." Binyamin Appelbaum in The New York Times.

How an improving economy makes new Fed policies more potent. "Even leaving aside that some other indicators of the economy’s recent performance aren’t so hot (particularly measures of business investment and hiring), the uptick in growth could make the Fed’s decision even more potent...[W]ith the new assurances from the Fed, bond markets don’t seem to be as jittery as they once were...The way to interpret it is investors aren’t so worried that a few months of good news are going to bring a sudden onset of tight money." Neil Irwin in The Washington Post.

At European Central Bank, new thinking about what ails euro-zone economies. "Initially, it was politicians from cash-strapped countries and a handful of economists who maintained that a few individual European countries such as Italy and Spain were being unfairly burdened because global investors were fearful about the euro zone’s fate as a whole. But that argument has found a wider audience in recent months and provided the European Central Bank with a justification for its dramatic shift in how it approaches the euro zone’s problems. After years of reluctance, ECB officials say they will spend as much money as necessary to control runaway interest rates and stabilize conditions in euro-zone countries...By linking the surge in Italian and Spanish interest rates to causes outside the control of local officials, the ECB could justify an initiative that might otherwise have been impossible in a continent divided between struggling countries in southern Europe and more successful ones to the north." Howard Schneider in The Washington Post.

How low interest rates have affected banks. "Superlow U.S. interest rates are squeezing bank profits, complicating the industry's nascent recovery from the financial crisis. An important gauge of lending profitability, known as net interest margin, has dropped to its lowest level in three years. The measure tracks how much banks earn when they borrow from depositors and then lend or invest those funds. The squeeze is the flip side of the Federal Reserve Board's four-year effort to revive the sluggish U.S. economy." Dan Fitzpatrick in The Wall Street Journal.

The Onion interlude: A humorous take on the foreign-policy debate..

Health Care

Medicare settlement eases rules for patients. "Tens of thousands of people with chronic conditions and disabilities may find it easier to qualify for Medicare coverage of potentially costly home health care, skilled nursing home stays and outpatient therapy under policy changes planned by the Obama administration. In a proposed settlement of a nationwide class-action lawsuit, the administration has agreed to scrap a decades-old practice that required many beneficiaries to show a likelihood of medical or functional improvement before Medicare would pay for skilled nursing and therapy services. Under the agreement, which amounts to a significant change in Medicare coverage rules, Medicare will pay for such services if they are needed to 'maintain the patient’s current condition or prevent or slow further deterioration,' regardless of whether the patient’s condition is expected to improve." Robert Pear in The New York Times.

Poll finds broad support for contraception access. "Vast majorities of Americans support access to contraception, according to a new poll commissioned by the National Campaign to Prevent Teen and Unplanned Pregnancy. The survey found widespread support for the thrust of President Obama's contraception mandate, which a recent Gallup poll indicated is a winning issue with female voters. American adults also overwhelmingly believe that lawmakers who oppose abortion should support contraception, according to Monday's poll. Seventy percent of those surveyed said insurance companies should provide contraception without charging a copay or deductible." Sam Baker in The Hill.

Abortion may be legal, but very difficult in many states; in past 2 years, 41 set new limits. "It’s legal to get an abortion in America, but in many places it is hard and getting harder. Just this year, 17 states set new limits on abortion; 24 did last year, according to the Guttmacher Institute, a pro-abortion rights nonprofit whose numbers are widely respected. In several states with the most restrictive laws, the number of abortions has fallen slightly, pleasing abortion opponents who say the laws are working." The Associated Press.

Domestic Policy

The consequences of tax-shifting from sales to income. "The University of Michigan’s Nathan Seegert took a look at how state taxes and revenues have changed since the 1950s, and found that they’ve become much more volatile over time. And because states are required to have balanced budgets, this has lead to a lot of volatility in state spending as well...[S]tates are messing around with their tax rates, and in particular their income and corporate tax rates, a whole lot, and have started to rely much more on income taxes than on sales taxes, which tend to be more volatile in terms of revenue... Seegert concludes that this shift toward taxing income rather than sales accounts for most of the increased variability in tax revenue, and thus in state spending. That should be concerning both to right-leaning folks who worry about uncertainty, as well as to Keynesians who worry that drops in revenue, and thus spending, during recessions can exacerbate the economic pain at the state level." Dylan Matthews in The Washington Post.

Romney wants to increase defense spending by $2 trillion. But what will he use it for? "For all the apology tour nonsense and despite the bitter squabbling over the attacks in Libya, it’s actually been a bit hard to figure out where Mitt Romney actually disagrees with President Obama on foreign policy...There’s one exception though. Defense spending. Here Romney’s been pretty specific. It’s right there on his Web site. He wants, he says, to give defense spending 'a floor of 4 percent of GDP.' Compared to Obama’s proposals, and the military’s current requests, that’s an increase of $2 trillion over the next decade. That’s a huge amount of money...Romney’s not said exactly what he wants to do with it. He wants to add 100,000 soldiers and accelerate shipbuilding, but that doesn’t come to $2 trillion." Ezra Klein in The Washington Post.

Consumers: Fiscal cliff? What fiscal cliff? "Politicians, economists and now CEOs are sounding the alarm over 'taxmaggedon' and its potential impact on the near-term economy. But all indications seem to suggest that ordinary consumers aren’t terribly concerned, even if they are aware of the economic uncertainty on the horizon. A new forecast from the National Retail Federation is predicting that holiday sales will increase 4.1 percent...That’s not to say that consumers are completely unaware or unconcerned about what’s at stake in the next few months. About 64 percent of consumers say that the current state of political and economic uncertainty is affecting their overall spending plans. And a little more than half -- 56.6 percent -- say there are aware of the fiscal cliff." Suzy Khimm in The Washington Post.

Is the CBO too optimistic about the damage from the fiscal cliff? "Let’s assume that the United States jumps right off the fiscal cliff next year...How much damage would that inflict on the U.S. economy?. Back in August, the Congressional Budget Office predicted that the nation would endure some short-lived, relatively mild pain. The U.S. economy would go into a shallow recession in the first half of 2013 — shrinking about 0.5 percent over the year — before roaring back. According to CBO, the economy would then grow at a rapid clip of 4.3 percent per year between 2014 and 2017. And, as a bonus, America’s short-term deficit problem would mostly vanish. That doesn’t sound too apocalyptic. But CBO’s forecasts are also a bit puzzling. Over in Europe, heavy austerity appears to have crippled growth in countries like Spain and Greece. What’s more, the International Monetary Fund recently released a report conceding that tax hikes and spending cuts can inflict far more damage on weak economies than previously thought. Is it possible that CBO might be understating the damage from the fiscal cliff?" Brad Plumer in The Washington Post.

Funny or sad interlude: Democratic candidate for TN Senator, Mark Clayton, who may be the worst candidate of 2012.

Energy

Who might lead Energy, Interior and EPA under Romney, Obama. "Although neither Barack Obama nor Mitt Romney has specifically said who would lead the departments of Energy and Interior and the Environmental Protection Agency under their watches, the candidates have given some signals about the kinds of people they would choose...Energy experts widely predict Obama and Romney would look to governors and lawmakers from the West in filling the top job at the Interior Department, which oversees oil drilling, recreation, grazing and other activities on federal lands and waters." Jennifer A. Dlouhy in Fuel Fix.

Insight: Is Ohio's energy boom going bust?. "Dozens of wells drilled this year across rural Ohio are quietly pumping out the answer to the U.S. energy industry's most loaded question: Is the Utica shale formation, touted as a potentially $500 billion frontier, a boom or a bust? Yet the answer is likely to remain concealed for some time...That's because Ohio is one of the nation's least transparent states when it comes to energy data - a distinction the industry worked to maintain this year, according to a review of legislative documents and interviews with state and industry officials...In Ohio, companies control the flow of information, and their selective disclosure is creating doubts about Utica's ultimate bounty. It remains unclear whether the Utica will be a major winner for companies who have invested billions of dollars leasing land and drilling there, and for the state's finances, or if it will turn out to be a relative flop." Edward McAllister and Selam Gebrekidan in Reuters.

Missing from the debate: energy. "If North America is set to become a major oil producer, how does that affect U.S. foreign policy? U.S. oil imports have been shrinking during the Obama years, thanks to booming crude production in places like North Dakota and rising fuel efficiency. Romney, meanwhile, is vowing to push for 'North American energy independence' by 2020. It’s not clear that he can achieve this, but let’s give him the benefit of the doubt for a second. If North America does become a major world oil producer and manages to shrink its imports, would that change U.S. foreign policy at all? Plenty of experts have argued that the U.S. economy will still be vulnerable to turmoil in the Middle East for years to come, that there’s no way to detach ourselves from the global oil markets even if we did become energy independent. But what do the candidates think about this?" Brad Plumer in The Washington Post.

Wonkbook is produced with help from Michelle Williams.

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Sarah Kliff · October 22, 2012