Wonkbook: The election is over. Now the fiscal cliff begins.

November 8, 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's Number of the Day: “The nonwhite share of the presidential electorate has increased every four years since 1992, growing by an average of 2 percentage points per election," says political scientist Alan Abramowitz. Here's what that means: If the 1988 electorate had featured the same demographics as the 2008 electorate, Michael Dukakis would’ve been elected president. If it had featured the same demographics as the 2012 electorate, he would've won big. More here.

Top story: With election over, fiscal cliff negotiations begin

25 problems for the second term: The postal service, the farm bill, cybersecurity, etc..

But the 'fiscal cliff' looks to be the first priority. "The day after a hard-fought election that left Barack Obama in the White House and control of Congress divided between the two parties, the nation's political leaders promised to try to avoid year-end spending cuts and tax increases that threaten to push the U.S. back into recession...But the pressure is on. Deep, automatic federal-spending cuts and tax increases—a combination widely known as the 'fiscal clif'--will hit in January unless Mr. Obama and Congress agree to some other way to reduce the budget deficit....Going over the cliff, economists say, would not only risk another recession, but would intensify anxiety about the dysfunction of the U.S. political system...To tackle the fiscal cliff, Mr. Obama is expected to initiate a new round of talks with leaders of Congress. The goal would be a 'grand bargain' combining higher taxes and money-saving changes to federal benefit programs." Naftali Bendavid, Damian Paletta, and David Wessel in The Wall Street Journal.

@grossdm: Hubris watch: my wife this a.m. "Now Obama is going to save the fiscal situation and go down as one of the greatest presidents ever"

Senate Majority Leader Harry Reid says let the 'cliff' negotiations begin. "Senate Majority Leader Harry M. Reid (D-Nev.) offered a carrot-and-stick approach to congressional Republicans on Wednesday, vowing to 'dance' with his counterparts in bipartisan cooperation, but pledging to 'fight' them with rules changes if they tried to unilaterally obstruct President Obama’s second term. Following elections that gave his party unexpected gains in the Senate, Reid said voters had delivered a message that the two parties need to work together...Reid reiterated his demand for a 'balanced approach' that would include allowing the George W. Bush-era cuts to expire for the wealthy, which could bring in up to $800 billion in new revenue over the next decade." Paul Kane in The Washington Post.

@AlecMacGillis: Next time reporters ask him about his mandate, Obama should reply that, open-minded as he is, he prefers Michelle, thank you very much.

And Speaker of the House John Boehner says federal tax revenue increases are on the table. "Quickly pivoting the political conversation from President Obama’s reelection to Washington’s looming budget battles, House Speaker John A. Boehner on Wednesday offered a potential path to compromise, saying Republicans are 'willing to accept new revenue' to tame the soaring national debt and avert an ugly battle over the approaching 'fiscal cliff.'...'For purposes of forging a bipartisan agreement that begins to solve the problem, we’re willing to accept new revenue, under the right conditions.'..." Lori Montgomery in The Washington Post.

@Reddy: John Boehner took Obama’s election-night happy talk & ran with it. “Let’s challenge ourselves to find the common ground that has eluded us.”

So do tax hikes on the rich happen next? "Does Obama’s win last night mean tax hikes for the rich are on their way? That’s what leading Democrats and liberal supporters of the president are saying this morning: The president and victorious congressional Democrats campaigned heavily on raising taxes on the wealthy, and voters approved of that message, so Democrats should strengthen their push to let the Bush cuts for upper-income households expire, they say...Not so fast, says the business community. On a conference call Wednesday morning, leading industry lobbyists said that the president’s mandate was to demonstrate leadership by being willing to work with the opposition, rather than draw a line in the sand on Bush tax cuts for the wealthy." Suzy Khimm in The Washington Post.

@RameshPonnuru: Boehner said Obama was open in earlier talks to a top tax rate below the current 35. Had that been reported earlier?

MILBANK: Boehner wants to bargain. But will the House GOP let him? "After Mitt Romney’s defeat on Tuesday, John Boehner is the undisputed leader of the Republican Party. Pity him...President Obama’s reelection and the Democrats’ successful defense of their Senate majority have put the House speaker in a vise. Squeezing him on one side are the tea party conservatives and their ilk, dominant in the House Republican majority, who say Romney lost because he was too accommodating and moderate. Squeezing him on the other side is a Democratic president who campaigned for the rich to pay a higher share of taxes...Boehner sounds as though he’s ready to pick up hammer and nail. But will his fellow Republicans stop kicking?" Dana Milbank in The Washington Post.

BOWLES: Make a deficit deal now. "[B]oth sides will have to move beyond contentious electoral politics and come together in the spirit of good governance to replace the abrupt and mindless spending cuts and tax increases set to take effect Jan. 1 with a gradual and intelligent deficit reduction plan...We already have the blueprints. It’s the type of bipartisan package toward which the fiscal commission I co-chaired with former senator Alan Simpson, the Domenici-Rivlin group, the Senate’s 'Gang of Six' and the Obama-Boehner negotiations all worked. It’s a package large enough to put the debt on a clear downward path, relative to the economy, and designed well enough to promote, rather than disrupt, economic growth. It’s a package that includes real spending cuts and structural entitlement reforms to make Social Security solvent while slowing the growth of federal health spending while protecting vulnerable populations. And it’s a package that institutes fundamental tax reform that simplifies the code and encourages economic growth by cutting spending in the tax code to reduce rates and generate additional revenue for deficit reduction." Erskine Bowles in The Washington Post.

CBPP: $2 trillion in further deficit-reduction would be sufficient to stabilize debt over the next decade

IGNATIUS: Obama, go bold. "Barack Obama will be getting advice by the boatload over the next few weeks, but the best guidance may be what emerges from Caro’s biography 'The Passage of Power': Think big. Find strategies and pressure points that can break the gridlock in Congress...Surprise your adversaries with bold moves and concessions that create new space on which to govern...Think big. Take risks. Get it done. Maybe someone should slip a note in Obama’s desk drawer that asks: What would Lyndon Johnson have done to make it happen?" David Ignatius in The Washington Post.

WESSEL: An economic to-do list. "The items marked 'urgent' on the president's economic to-do list are overwhelming. The temptation must be to start at the top and work down: Avert the fiscal cliff, fill pending cabinet vacancies, reach out to China's new leaders, cajole Europe into avoiding economic suicide...[A]fter savoring his re-election, President Barack Obama would be wise to consider a few things that will matter to American prosperity over the next decade. With the global financial system melting down in 2009, he didn't have that luxury at the start of his first term. Now he does. Here are four items on the long-term to-do list." David Wessel in The Wall Street Journal.

Top op-eds

KLEIN: Romney's biggest mistake. "The key conceptual mistake that the Romney campaign, the Republican Party and many pundits made in this race was assuming that the 2008 electorate was the one-off result of extraordinary dissatisfaction over George W. Bush and excitement over Barack Obama. Absent that excitement, they figured, the electorate would settle back to what Dick Morris called “normal levels,” which is to say, more white people and fewer young people. What actually happened was that the 2008 election was partly the result of excitement and anger but partly the result of long-term demographic trends benefiting the Democratic Party. And though the 2012 election didn’t feature quite the same level of organic mobilization on the Democratic side, it did feature four more years of that demographic change — and that backfilled some of what was lost by a less inspired electorate. " Ezra Klein in The Washington Post.

YGLESIAS: Actually, the GOP's problems run deeper than that. "Pundits are quickly turning to immigration to explain the Republicans’ Latino problem and to offer a possible cure, but the reality is that the rot cuts much deeper. The GOP doesn’t have a problem with Latino voters per se. Rather, it has a problem with a broad spectrum of voters who simply don’t feel that it’s speaking to their economic concerns. The GOP has an economic agenda tilted strongly to the benefit of elites, and it has preserved support for that agenda -- even though it disserves the majority of GOP voters -- with implicit racial politics." Matt Yglesias in Slate.

@jamespoulos: If GOP doesn't go big on civil liberties now, Obama will symbolically pivot and the jig really will be up

DUENWALD: Could a carbon tax happen next? "Coal power was a widespread loser in yesterday’s election. Despite singing its praises as loudly as possible, Mitt Romney was unable to use his support for coal to defeat Barack Obama in Virginia and Ohio...It looks as if the U.S. may be uniting around an increasingly realistic view of the health, environmental and climate costs of burning coal. Add in the economic forces acting against coal at a time of low natural-gas prices, and there’s reason to think policy makers might now be encouraged to enact a tax on carbon emissions as part of a broader tax-reform package to help reduce the deficit. Such a tax would raise revenue even as it lowered the cost of treating asthma and heart attacks, cleaning the air and dealing with drought and sea-level rise caused by emissions- induced climate change." Mary Duenwald in Bloomberg.

KLEIN: Is filibuster reform in the cards? "In 2008, Barack Obama promised to change the way Washington works. In 2013, we might actually see that change. But it won’t be because of Obama. It will be because a critical mass of senators -- perhaps even including some Republicans -- decide enough is enough: It’s time to rein in the filibuster...Filibusters used to be relatively rare. There were more filibusters between 2009 and 2010 than there were in the 1950s, 1960s, and 1970s combined...Today, the filibuster isn’t used to defend minority rights or ensure debate. Rather, the filibuster is simply a rule that the minority party uses to require a 60-vote supermajority to get anything done in the United States Senate. That’s not how it was meant to be." Ezra Klein in Bloomberg.

@maggiepolitico: A top Romney bundler: "We had no message and we gave it to the worst communicator in the world."

WILL: The status quo wins. "Voters littered the political landscape with contradictions between their loudly articulated discontents and their observable behavior...For only the second time -- the first was the Virginia dynasty of the third, fourth and fifth presidents, Thomas Jefferson, James Madison and James Monroe -- there will be three consecutive two-term presidents. A nation vocally disgusted with the status quo has reinforced it by ratifying existing control of the executive branch and both halves of the legislative branch. After three consecutive 'wave' elections in which a party gained at least 20 House seats, and at a moment when approval of Congress has risen -- yes, risen -- to 21 percent, voters ratified Republican control of the House, keeping in place those excoriated as obstructionists by the president the voters retained. Come January, Washington will be much as it has been, only more so." George F. Will in The Washington Post.

2012 in the rear view mirror interlude: The election in graphs.

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

Still to come: how will the economy look in the second term; Republicans set to capitulate on Obamacare; marijuana and gay marriage win big; the energy outlook for coal, natural gas, and alternatives; and handicapping the 2016 presidential field.

Economy

Consumers slow borrowing. "U.S. consumers' overall borrowing expanded in September but at a slower pace than the previous month, a sign consumers may be pulling back on their credit card purchases. The total outstanding dollar amount of credit card, auto and other loans—excluding home loans—increased from August by a seasonally adjusted $11.36 billion to $2.737 trillion, a Federal Reserve report showed Wednesday. But credit card lending declined by more than 4%. Consumer credit rose at a 5% annualized rate in September, after expanding more than 8% the previous month. The gains came after consumer credit contracted for the first time in nearly a year in July." Sarah Portlock and Alan Zibel in The Wall Street Journal.

@MichaelMandel: How fast can the U.S. really grow? If Obama wants to leave a legacy, that should be his main focus for the next four years.

Obama win means continuity of monetary policy. "President Barack Obama's election-night victory means the Federal Reserve's easy-money policies are likely to continue until the economy strengthens significantly. The central bank has said it expects to keep short-term interest rates near zero at least until mid-2015 and Mr. Obama is unlikely to want to change that. Though presidents can't influence the politically independent central bank directly, they do shape its decisions by making appointments to the Fed's seven-member board, subject to Senate confirmation. Mr. Obama already has left his stamp on the Fed by reappointing Ben Bernanke chairman of the board and appointing five of the other six members. The president's re-election means he will nominate a successor to Mr. Bernanke, who is expected to step down when his term as chairman ends in January 2014." Kristina Peterson and Jon Hilsenrath in The Wall Street Journal.

Home prices rise 7.6% year-over-year. "The median price for an existing single-family home was $186,000 in the third quarter, up 7.6% from a year earlier and the largest year-over-year growth since 2006, according to a report Wednesday from the National Association of Realtors. More cities saw gains. Single-family home prices rose in 120 of 149 metropolitan areas tracked by the NAR, up from 110 in the second quarter and 39 in the year-ago period. Many of the sharpest home-price rebounds have been in markets hard hit by the real estate bust." Conor Dougherty in The Wall Street Journal.

First-term headwinds look set to turn. "Victory has given Barack Obama a happy opportunity: the chance to write himself a positive economic legacy. The headwinds that buffeted Mr Obama’s first term -- financial crisis, falling house prices and consumers paying off debt -- are set to become tailwinds in his second term. Based on current Federal Reserve forecasts, by 2015 Mr Obama should be presiding over an economy growing at 3 per cent or more, with unemployment well below 7 per cent." Robin Harding in the Financial Times.

Karl Rove interlude: A moment for the ages.

Health Care

Conservatives wave white flag in Obamacare fight. "President Obama’s reelection, and an expanded Democratic majority in the Senate, dealt the final blow to Republicans’ hope for repealing the Affordable Care Act. And though conservatives still say the law will be a disaster once it’s fully implemented, they’re finally acknowledging that it will, in fact, be fully implemented...The Wall Street Journal’s conservative editorial page also admitted defeat Wednesday." Sam Baker in The Hill.

Analysis: 20 states will run their health-law exchanges. "Twenty states will operate their own insurance exchanges in 2014 under President Obama's healthcare law, according to a new analysis. Avalere Health released its estimate after Obama won a second term on Tuesday, a victory that all but ensures the Affordable Care Act's future. Governors have a choice as to whether to implement the law's exchanges or leave the task to the federal government. A third option is a 'partnership' model in which the state and federal government jointly manage the marketplace. According to Avalere, 13 states are likely to use the partnership model, while more than a third will default to a federally run exchange." Elise Viebeck in The Hill.

Obamacare extends health benefits to 30 million. But what if people don’t sign up?. "Millions of Americans will be eligible for subsidized health insurance under the Affordable Care Act, starting in 2014. Most of those people, however, have absolutely no idea that they’re qualified to sign up...The CBO estimates that the health reform law will cover 30 million more Americans in 2022. But it also predicts that 30 million Americans will remain uninsured. Some will be illegal immigrants, who aren’t eligible for the reform law’s insurance subsidies. About 6 million are expected to live in states that do not participate in the Medicaid expansion. That still leaves millions of Americans eligible for benefits but not enrolled. The CBO, for example, expects that nearly 6 million of those newly-eligible for Medicaid just won’t sign up for the program."Sarah Kliff in The Washington Post.

Cantor wants to get rid of Medicare advisory board. "House Republicans will take aim at President Obama's divisive Medicare cost-cutting board during the new Congress, Rep. Eric Cantor (R-Va.) wrote Wednesday...IPAB is tasked with cutting Medicare reimbursement rates when the program's per-person spending becomes too great. Conservatives have long argued that the 15-member panel will bring about de facto rationing as Medicare providers limit their services in response to cuts." Elise Viebeck in The Hill.

Should U.S. territories get healthcare law coverage? "A House Democrat from the U.S. Virgin Islands has proposed legislation that would expand a key part of the 2010 healthcare law to U.S. territories. The bill, from Del. Donna Christensen (D), would expand the insurance program for people with pre-existing conditions to her territory and others like Puerto Rico and Guam." Pete Kasperowicz in The Hill.

Domestic Policy

Big gains for marijuana legalization and gay marriage in ballot measures. "Marijuana legalization referenda won big in Colorado (with 54.5 percent supporting at last tally) and Washington (55.4 percent) but fell short in Oregon, trailing by about 10 points at press. Massachusetts, which has already decriminalized recreational use of marijuana, passed an initiative fully legalizing medical use...Four states considered same-sex marriage ballot referenda on Tuesday, and at least three of them ended up siding with gay rights advocates on the issue. In Maryland, voters ratified the same-sex marriage law signed earlier in the year in that state; a measure to legalize same-sex marriage was leaning ahead in Washington state as of 12:30 p.m. Wednesday. Maine reversed a 2009 vote that prevented same-sex marriage from being legalized and Minnesota rejected a state constitutional amendment banning it." Dylan Matthews in The Washington Post.

Interview: Ruy Texeira on demographic change in 2012.

2016 interlude: So The Fix's Chris Cillizza handicaps the presidential field.

Energy

Gas prices are going down, down, down. "[A]round the country, and even in states affected by Sandy, another trend has arisen, with gas prices dropping dramatically pretty much everywhere. According to Reuters, gas prices nationally decreased nearly 21¢ over the two-week span ending November 2. That’s the steepest dip measured since 2008, when demand for gasoline plummeted amid the onset of the Great Recession." Brad Tuttle in Time.

Environmental regs to go forward in Obama second term. "President Obama’s reelection, along with key wins by Senate Democrats, ensures that the federal government will press ahead with efforts to promote renewable energy and energy efficiency and to curb greenhouse gas emissions linked to climate change...The Environmental Protection Agency will continue to issue regulations curbing fossil fuel production and promoting energy efficiency, according to people who have spoken with senior administration officials but asked not to be identified. Within the next few months, the agency will probably finalize the first carbon standard for new power plants, along with tighter restrictions on soot emissions from all utilities. By the end of next year, the agency, which is conducting a study of the environmental impact of hydraulic fracturing, will probably impose some federal standards on the operations that are driving the country’s natural gas boom. It could consider imposing tighter fuel efficiency standards on heavy-duty trucks, according to several environmentalists." Juliet Eilperin and Steven Mufson in The Washington Post.

Coal squeals within regulatory vise. "Energy producers braced for tighter regulation in President Barack Obama's second term, with coal companies expecting more emissions restrictions and drillers anticipating less access to federal land even as his platform promotes energy independence...Shares of U.S. coal companies plunged on Wednesday. Arch Coal and Alpha Natural Resources ended trade down more than 12 percent, while Peabody Energy closed 9.6 percent lower." Nichola Groom and Braden Reddall in Reuters.

Natural gas exports may take a while. "The president likely will take far longer to decide whether the United States should export its newfound shale oil and gas bounty. Opponents warn that exports would spike fuel costs for consumers and undermine a domestic manufacturing recovery...The Energy Department this year delayed a study on the economic effects of gas exports. But even if the study eventually projects limited effects, allowing the shipments would be a difficult decision for any president." Nichola Groom and Braden Reddall in Reuters.

House Energy Sub-cmte. looking for leader. "Reshuffling in the House Energy and Commerce Committee is leaving a key subcommittee post up for grabs. The chairmanship for the committee’s Oversight and Investigations subcommittee is open; current Chairman Cliff Stearns (R-Fla.) will not return to Congress after losing a primary battle...The subcommittee is key for energy issues, as it handled the House probe of the $535 million federal loan guarantee to now-bankrupt solar panel maker Solyndra." Zack Colman in The Hill.

U.S. trade commission upholds solar-panel tariffs. "When the United States International Trade Commission decided on Wednesday to uphold tariffs of about 24 to 36 percent on most solar panels imported from China, the case’s proponents claimed a major victory. Domestic solar manufacturers said the duties, to be in place for five years, would make up for unfair business practices by Chinese companies that had harmed the domestic market and allow homegrown companies to hire more workers and thrive...The Commerce Department had imposed the tariffs earlier this year after finding that Chinese solar companies had received unfair subsidies from their government and dumped solar cells below costs. But whether the duties can help save the American solar industry is a matter of some dispute." Diane Cardwell in The Washington Post.

Wonkbook is produced with help from Michelle Williams.

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