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Wonkbook's Number of the Day: 4.79 million. That's the seasonally adjusted annual rate of existing homes sold in October, according to a story by Nick Timiraos in The Wall Street Journal. That's a 2.1 percent gain from September and a 10.9 percent gain year-over-year. The housing market has seen significant strengthening in the last few months across a broad panel of indicators. For more on housing markets and the U.S. economy, see Wonkbook's "Economy" section below.
Top story: Round 1 was taxes. Round 2 is entitlements. Get ready.
Think the fight over taxes is bad? Just wait until we get to entitlements. "The fight over the Bush tax cuts may be the biggest stumbling block to averting the austerity crisis. But it isn’t the only one. If Republicans do agree to a deal on tax revenue, it will be on the condition that Congress and the White House will also make major cuts to spending to reduce the deficit as well, presumably focused on the entitlement side. That’s the second big fight that could hold up a deal, particularly as Republicans and Democrats are far from agreeing on what would even be an acceptable overall level of cuts, much less how they would target entitlement programs." Suzy Khimm in The Washington Post.
@pourmecoffee: Fiscal cliff should have been Congress couldn't go home for holidays. Less jittery markets. Guaranteed results.
Entitlement reform will divide Democrats. "With deficit talks kicking off in earnest, Democrats are divided on the magnitude of changes they would accept when it comes to overhauling Medicare and other safety-net programs. The party is split between those who would agree to major adjustments, including increasing premiums for wealthier beneficiaries and raising Medicare's eligibility age, and those who rule out such moves altogether. In the middle is a group that would tolerate some cuts as long as they didn't hit beneficiaries directly." Naftali Bendavid and Janet Hook in The Wall Street Journal.
@mattyglesias: It seems like sending congress home so nobody’s yammering about the fiscal cliff is good enough to lift markets.
What does Wall Street know that Washington fails to see? "Wall Street is signaling confidence that lawmakers will strike a deal to avoid the 'fiscal cliff,' baffling Washington insiders, who see less reason for optimism. Stocks began to make a comeback Friday after President Obama and congressional leaders suggested that talks on the cliff’s spending cuts and tax increases were off to an auspicious start." Erik Wasson and Bernie Becker in The Hill.
@hillhulse: Pew: More follow fiscal cliff story closely than Petraeus scandal. Hard to believe, but maybe tax policy is finally sexy.
How the GOP might learn to love the sequester. "Fresh off his re-election, President Obama may appear to be holding all the cards as he begins to negotiate a way around the so-called fiscal cliff. But GOP lawmakers hold valuable leverage if they're willing to embrace the idea that cutting defense spending is preferable to tax increases. This means embracing the sequester, which demands more than $1 trillion in reduced spending over the next decade." James Freeman in The Wall Street Journal.
@Neil_Irwin: We shall long remember the fiscal cliff naming wars of 2012, when roving bands of econobloggers battled over best term for austerapocalypse.
KLEIN: To tax now or later?. "President Obama says that he strongly opposes any extension, even a temporary one, for the Bush tax cuts for income over $250,000. If we want to do tax reform, his position is that we first let those tax cuts expire, so that revenue is in the bank, and then we start reforming the tax code from there. House Speaker John Boehner is circulating a plan to agree to some general revenue and spending targets, pass legislation to delay all the end-of-the-year austerity, and then get to work on the details. This is going to be the central sticking point of the next month: Obama wants to tax now. Boehner wants to promise to tax later." Ezra Klein in The Washington Post.
@mattyglesias: Remember the fiscal cliff? Wasn’t that a big deal last week?
SOLTAS: A gentler slope for the 'fiscal cliff.' "The cause of our cliff problem rests in the commingling of responsibility between fiscal and monetary policy in managing the economic recovery. A more mature way of doing business would charge the Fed with stabilizing demand in the short run and Congress with a structural environment conducive to the social welfare and economic growth over the long run. The U.S. is doing neither well right now...The austerity the fiscal cliff would achieve in one fell swoop would best be done gradually. Such an approach would be more in line with the real danger in our public finances, the combination of structurally low federal revenue and long-term increases in planned spending." Evan Soltas in Bloomberg.
@TheStalwart: Based on the politics of the moment, there doesn't seem to be any good reason why the majority of the Fiscal Cliff can't at least be pushed
COHN: Let all the tax cuts expire. "[R]aising taxes on the wealthy will probably not be sufficient to solve our fiscal problems. If we are serious about living up to our financial commitments -- in particular, the guarantees of financial security in retirement and provision of basic health care to all -- then eventually we will need more revenue. There are lots of ways to do this...[One is to] let all of the Bush tax cuts expire, so that everybody -- not just the wealthy -- go back to paying what they did during the Clinton era." Jonathan Cohn in The New Republic.
PONNURU: Republicans' leverage against tax hikes. "Did you think the election was going to end uncertainty over the future course of U.S. economic policy? Dream on. There are at least three ways the standoff over the 'fiscal cliff' -- the automatic spending cuts and tax increases set to start in January -- could play out...Republicans will also be able to point to a long list of news stories quoting Democrats to the effect that going over the cliff, and raising taxes on the middle class, would be fine because it would help them get their way. Republicans may thus have some leverage after all." Ramesh Ponnuru in Bloomberg.
SEIB: Yes, but the president has the leverage advantage. "Any negotiator will tell you that the key in a bargaining session is knowing at the outset who has leverage, and where it comes from. So it is in the great deficit-cutting showdown now under way between President Barack Obama and congressional Republicans. The problem the GOP faces is relatively simple: In the aftermath of the election, the leverage in this negotiation has shifted, slightly but perceptibly, toward the president." Gerald F. Seib in The Wall Street Journal.
SUNSTEIN: Our broken confirmation process. "The U.S. Senate confirmation process is badly broken. In fact it is a disgrace. It needs to be fixed. There is no time like the present...An unfortunate consequence of Senate obstructionism is that important offices can remain unfilled for long periods. An entire presidential term is just four years, and many high-level appointees end up serving for less than that. If the Senate delays confirmation for six months or more, a significant chunk of an appointee’s total time in office is lost...The confirmation process also has a damaging effect on the president’s thinking. His question can’t only be, 'Who would be the best person for the job?' It must also be, 'In light of the ugliness and stupidity of the confirmation process, who is going to get through?'" Cass R. Sunstein in Bloomberg.
YGLESIAS: The case of the missing policy memo. "A Friday afternoon policy memo is not normally the sort of thing that gets one’s heart racing, but 'Three Myths About Copyright Law and Where To Start To Fix It' was an exception. It offered a bracing attack on the conventional wisdom about intellectual property that’s dominated Congress for decades mounted a vibrant defense of competition, and advocated regulation aimed at consumers rather than incumbent copyright owners. Even more amazing was the source. The memo went out on the letterhead of the Republican Study Committee." Matthew Yglesias in Slate.
GERSON: Reviving socioeconomic mobility is a policy priority. "The retreating economic tide also exposed some barnacled problems that had existed under the surface for a generation. As Americans have grown dramatically more productive, technology has replaced many jobs and globalization has put downward pressure on wages. So middle-class Americans work harder for stagnant incomes in an economy with fewer employment opportunities. This is our economic challenge in all its disturbing complexity: not just failed financial institutions but strained social trust; not just an economic dip but a loss of faith in upward mobility." Michael Gerson in The Washington Post.
BROOKS: The future for conservatives. "If you listened to the Republican candidates this year, you heard a conventional set of arguments. But if you go online, you can find a vibrant and increasingly influential center-right conversation. Most of the young writers and bloggers in this conversation intermingle, but they can be grouped, for clarity’s sake, around a few hot spots." David Brooks in The New York Times.
SOLTAS: The U.S. should walk the talk on free trade. "One of the greatest ironies of the 2012 presidential campaigns was that both candidates framed the U.S. as a champion of free trade under assault from malevolent "cheaters." In fact, the U.S. is basically the world's biggest loner. Trade accounted for about 29.2 percent of U.S. economic activity in 2010. That makes the U.S. the most closed of all developed nations according to 'trade intensity,' which is calculated as the sum of exports and imports, divided by gross domestic product. Only one other developed nation came close: Japan, whose domestic markets have long been seen as practically impenetrable to foreign companies. Every other major economic power has nearly double the trade intensity of the U.S." Evan Soltas in Bloomberg.
Top long reads
Jill Lepore writes a history of income taxes: "Both the Sixteenth Amendment, which granted Congress the right to levy an income tax, and the Federal Reserve will be a hundred years old in 2013. Hoopla is not anticipated. Not especially controversial a century ago, the tax and the bank lie at the core of a now popular account of American history in which 1913 was a disaster, the original 'fiscal cliff.' This year, the Republican Party platform included a call for the Federal Reserve to be audited, and a provision for the Sixteenth Amendment to be repealed."
Kris Newby profiles 'health care rebels': "The CERC [Clinical Excellence Research Center at the Stanford School of Medicine] is led by Arnold Milstein, MD, the center’s director and a professor of medicine. The 2-year-old center’s mission is to find more affordable ways to deliver better medical care to the sickest of our population who consume the bulk of the country’s health-care spending. The CERC team takes aim at the unintentional wastefulness of the U.S. medical system, which is by far the most expensive in the world, yet is ranked 37th in quality of care. In Milstein’s opinion -- forged after 25 years as a health-care advisor to Fortune 100 companies, three White House administrations and Congress -- there is no quick fix. Our country needs to safely improve the value of its health-care system by at least 2.5 percent per year, every year, in order to align health spending with national income growth. Anything less means more uninsured people, higher taxes and, eventually, fiscal Armageddon."
Alexis C. Madrigal explains how the nerds went marching in on Obama's 2012 campaign effort: "Narwhal was the code name for the data platform that underpinned the campaign and let it track voters and volunteers...Narwhal wasn't an app for a smartphone. It was the architecture of the company's sophisticated data operation. Narwhal unified what Obama for America knew about voters, canvassers, event-goers, and phone-bankers, and it did it in real time."
Adorable animals interlude: Dogs teaching chemistry.
Got tips, additions, or comments? E-mail me.
The housing recovery keeps on rollin'. "Sales of previously owned homes were stronger than expected in October, putting them on track to hit their highest annual level since 2007. Existing homes sold at a seasonally adjusted annual rate of 4.79 million units in October, the second-highest level of the year and up 2.1% from September, the National Association of Realtors said Monday. October's level represented a 10.9% gain from a year earlier and was the 16th consecutive month of year-over-year home-sales gains. Prices are rising amid sharp declines in the number of homes listed for sale. Just 2.14 million homes were for sale at the end of October, down 22% from one year ago to the lowest level in a decade, according to NAR estimates...The national median home price rose by 11.1% from one year ago in October to $178,600, according to the NAR." Nick Timiraos in The Wall Street Journal.
Banks: We've given $26b in relief so far. "The nation’s biggest banks provided more than $26 billion in relief to struggling homeowners between March 1 and Sept. 30, as part of a settlement earlier this year with state and federal officials over widespread foreclosure abuses, according to numbers released Monday. Joseph A. Smith Jr., the former North Carolina banking commissioner hired by the government to ensure the banks follow through on their promises, reported that more than 300,000 homeowners have benefitted so far, for an average of roughly $84,385 per borrower." Brady Dennis in The Washington Post.
American manufacturing is coming back. Manufacturing jobs aren’t. "The discussion of American manufacturing is often a muddled one, steeped in nostalgia for a bygone era and accompanied by a certain misty-eyed conviction that it is a sector in ceaseless decline. A new study from the McKinsey Global Institute published Monday morning adds some welcome clarity. In 184 pages, the in-house think tank of the global consulting giant presents a picture of manufacturing as among the most dynamic sectors of the U.S. and global economies, driving higher productivity and standards of living. But it also shows that what we usually think of as a traditional manufacturing job isn’t coming back." Neil Irwin in The Washington Post.
Investors think we're going to avoid the austerity crisis. "Hopes that lawmakers in Washington will reach an agreement on taxes and spending gave investors new confidence and drove stock indexes to their best day in two months. Investors have spent a tense few weeks since the election watching for smoke signals out of the nation's capital for indications that Democrats and Republicans are nearing a compromise. On Monday, they found reason for optimism." Jonathan Cheng in The Wall Street Journal.
Music recommendations interlude: Michael Jackson, "Rock With You," Off the Wall, 1979.
Health panel supports broad HIV tests. "A government health panel on Monday for the first time recommended testing for the human immunodeficiency virus for all Americans aged 15 to 65, in an effort to slow its spread...The panel's recommendation is significant because, if finalized, private insurers would have to pay for the test. Past recommendations haven't always been embraced by doctors. But in this instance, the weight of medical evidence has already been trending in favor of screening and earlier treatment of people with HIV." Thomas M. Burton and Betsy McKay in The Wall Street Journal.
Study: Medicaid, private insurance give same access to health care. "The Government Accountability Office recently took a deep dive into the Medicaid program. What it found was surprising: Medicaid beneficiaries tend to have nearly as good access to medical care as those on private coverage, despite the public program generally offering doctors lower payments...There is a relatively big gap in dental care. That probably has to do with the number of states that do not include dental coverage in their benefit package. When it came to medical care and prescription medicine though, Medicaid patients reported no more challenges finding doctors than those on private coverage." Sarah Kliff in The Washington Post.
Read: The GAO's report on Medicaid.
Judge grants company injunction against health-care law contraception efforts. "A federal judge on Friday temporarily prevented the Obama administration from forcing a Christian publishing company to provide its employees with certain contraceptives under the new health-care law. U.S. District Judge Reggie Walton granted a preliminary injunction sought by Tyndale House Publishers, which does not want to provide employees with contraceptives that it equates with abortion. At issue are contraceptives such as Plan B and intrauterine devices. If a woman is already pregnant, the Plan B pill has no effect. It prevents ovulation or fertilization of an egg, and according to the medical definition, pregnancy does not begin until a fertilized egg implants itself into the wall of the uterus. The Plan B pill may be able to prevent a fertilized egg from attaching to the uterus. IUDs mainly work by blocking sperm but may also have the same uterus effect. To Tyndale, these methods are morally no different from abortion." Frederic J. Frommer in The Washington Post.
Bipartisan bill would widen exemption from health insurance mandate. "New legislation would allow people an exemption from the healthcare mandate by filing an affidavit with the IRS. Those seeking the exemption would be required to tell the IRS that they don't have insurance because of their religious beliefs. If those seeking the exemption later used healthcare services under the law, they would lose their eligibility for the exemption from buying insurance and would have to pay a penalty." Pete Kasperowicz in The Hill.
How the nation's most populous state is dealing with the insurance exchange's launch. "Nearly every day, worried Californians call a Pacoima hotline asking what lies ahead in healthcare reform: Do I have to get private insurance? Will I lose my Medi-Cal? How much will it cost? When does it start?...Federal officials have a lot riding on the California effort. How the state's insurance exchange fares will be an important test of President Obama's healthcare law at a time when many Republican-led states are resisting implementation. California leaders also hope they can harness the purchasing power of the exchange to improve patient care and make healthcare more affordable. All of that, however, depends on getting enough people -- healthy and unhealthy, uninsured and insured -- to enroll. If that doesn't happen, the state could lose billions in federal dollars and insurance premiums could soar." Anna Gorman and Chad Terhune in The Los Angeles Times.
Report: FDA needs improvement. "The Food and Drug Administration’s mandate is too important to be compromised by a clunky personnel system...Among the Partnership [for Public Service]’s recommendations are that the FDA should develop targeted recruitment and talent pipelines and speed hiring; invest in career training and develop clear career paths for science, technology, engineering, mathematics and medicine employees; and address high rates of attrition in certain areas, including pharmacy and consumer safety." Joe Davidson in The Washington Post.
Why Papa John's got a good deal on health care in Obamacare. "The health-care law’s treatment of larger employers is almost laughably complicated... Employers don’t need to offer health care, and they don’t need to pay for most of the cost of their employee’s health care, but if their employees are taking advantage of public subsidies, then the employer should have to pay a penalty equal to about 1/8th the cost of the average employer-provided health-insurance plan." Ezra Klein in The Washington Post.
Oklahoma rejects health exchange. "Add Oklahoma to the list of Republican-led states that won't implement the key feature of President Obama's healthcare law. Gov. Mary Fallin said Monday that she won't set up a state-based insurance exchange -- a new portal where people who don't get insurance through their employers can shop for coverage, often with help from a federal subsidy." Sam Baker in The Hill.
The Republican re-think
'What, me cause 2012 defeat?' Conservatives reject blame. "Evangelical leaders and conservative activists have a simple message for establishment Republicans about Mitt Romney’s failed presidential bid: We told you so. After nearly two weeks of listening to GOP officials pledge to assert greater control over the party and its most strident voices in the wake of Romney’s loss, grass-roots activists have begun to fight back, saying that they are not to blame for the party’s losses in November." Paul Kane and Rosalind S. Helderman in The Washington Post.
Grover Norquist and his pledge are under pressure. "Some prominent Republicans -- among them House Speaker John Boehner, publisher Bill Kristol and Sen. Bob Corker -- have been making noise about the need for the GOP to be flexible about raising taxes. But the keeper of the Pledge is not concerned. Grover Norquist, the party’s Prefect of the Congregation for the Doctrine of the Faith, says he sees no chance of Republicans going squishy." Dana Milbank in The Washington Post.
Rubio thinks age of planet is 'one of the great mysteries'. "GQ [magazine]: How old do you think the earth is?...[Rubio:] 'I'm not a scientist, man. I can tell you what recorded history says, I can tell you what the Bible says, but I think that's a dispute amongst theologians and I think it has nothing to do with the gross domestic product or economic growth of the United States. I think the age of the universe has zero to do with how our economy is going to grow. I'm not a scientist. I don't think I'm qualified to answer a question like that. At the end of the day, I think there are multiple theories out there on how the universe was created and I think this is a country where people should have the opportunity to teach them all. I think parents should be able to teach their kids what their faith says, what science says. Whether the Earth was created in 7 days, or 7 actual eras, I'm not sure we'll ever be able to answer that. It's one of the great mysteries.'" Michael Hainey in GQ.
The GOP argument for immigration reform is revived. "Republicans calling for immigration reform are reviving an old message to make their case: It’s all about the economy...Legalizing undocumented immigrants will make them pay more taxes, earn higher wages and bring an underground demographic of workers into the official American economy...In recasting the debate to be about economics, these Republicans are sending a clear signal that they’re siding with the business arm of the GOP rather than the immigration hawks who appeal more to raw emotion when it comes to undocumented immigrants." Seung Min Kim and Scott Wong in Politico.
Surprise! Americans actually agree on immigration. "Ongoing research that MIT’s Jens Hainmueller and I have conducted shows that among voters, there is a striking level of agreement about which immigrants to admit to the U.S. In a nationally representative survey conducted in December of 2011 and January of 2012, we asked respondents to look at pairs of hypothetical immigrants to the U.S. and then indicate which of the two they wanted to see admitted...One might have expected that immigrants’ countries of origin would play a sizable role in Americans’ preferences. But that’s not what we found. If they have other pieces of information about an immigrant, Americans don’t rely much on an immigrant’s birthplace. Instead, they put substantial weight on the immigrant’s education and profession." Dan Hopkins in The Washington Post.
What's a 'dark pool,' and why you need to know what it is. "Trading of US equities on “dark pools” has grown by almost a half in the past three years to account for nearly a third of total market volume, according to research that underscores the challenge facing international regulators. The shift from transparent public exchanges has highlighted growing concern among asset managers and global regulators about off-exchange trading, where prices are reported only after deals are executed...[A]uthorities in the US, Europe and Australia are considering tighter regulation of such alternative trading venues amid fears that they could further fragment trading and dent the integrity of public markets." Philip Stafford in The Financial Times.
As deadline approaches, regulators face mounting concerns over crowdfunding rules. "Ever since the president signed the JOBS Act in April, entrepreneurs and investors have been buzzing about the promise of new paths to start-up capital. But the clock is ticking for the regulators charged with implementing the law, and with little more than a month left before their deadline, several key questions remain unanswered...[T]he agency still must determine which rules will give entrepreneurs access to as many potential investors as possible without sacrificing the protections meant to help people avoid fraudulent business propositions. For instance, regulators are still working on ways to ensure investors are educated on how to evaluate crowdfunding proposals and how to monitor the amount of money investors are pouring into companies through online portals." J. D. Harrison in The Washington Post.
CIA climate-change unit closes its doors. "With the U.S. intelligence budget shrinking, the CIA has quietly shut down its Center on Climate Change and National Security -- a project that was launched with the support of Leon Panetta when he led the agency, but that drew sharp criticism from some Republicans in Congress...The CIA launched the climate change center in September 2009 after a spate of reports linking climate change and national security that drew interest from some members of Congress seeking political action on climate change...Analysts at the center worked to develop warning software that combined regional climate projections with political and demographic information, and held climate war games looking at what might happen in extreme scenarios, such as if rapid glacial melt caused the ocean's major currents to shut down." Annie Snider in Greenwire.
The Wyden-Murkowski partnership and the future of energy policy. "Sens. Ron Wyden and Lisa Murkowski drew applause as they shook hands onstage Thursday -- an early step in a partnership that could steer U.S. energy policy in unpredictable ways...Even rumors are reflecting the new reality: Murkowski’s aides quickly shot down speculation that she was considering endorsing a carbon tax. But she said that’s almost par for the course amid heightened expectations that the next Congress will bring more action to the panel." Darren Goode in Politico.
We’re on pace for 4°C of global warming. Here’s why that terrifies the World Bank. "Over the years at the U.N. climate talks, the goal has been to keep future global warming below 2°C. But as those talks have faltered, emissions have kept rising, and that 2°C goal is now looking increasingly out of reach. Lately, the conversation has shifted toward how to deal with 3°C of warming. Or 4°C. Or potentially more." Brad Plumer in The Washington Post.
Shell, Swiss Re want ‘unambiguous price on carbon’. "Over 100 corporations including Royal Dutch Shell, food and consumer products giant Unilever, and the big re-insurer Swiss Re called Monday for a 'clear, transparent and unambiguous price on carbon emissions.' Their joint statement arrives ahead of the next round of United Nations climate talks in Doha, Qatar, that gets under way in late November...Other companies signing the statement include Kodak, KPMG, EDF Energy, Alstom, Statoil and many others." Ben German in The Hill.
Can we hold back floodwaters with a balloon? "The idea is a simple one: rather than retrofitting tunnels with metal floodgates or other expensive structures, the project aims to use a relatively cheap inflatable plug to hold back floodwaters...The idea has been in development for more than five years -- this test was the 21st -- and Dr. Fortune says there are at least a few more years of testing and design work ahead. If the plugs are shown to be effective, they will be made available to transit systems around the country; at least initially, they are expected to cost about $400,000 each." Henry Fountain in The New York Timess.
A new push for Atlantic drilling. "One of the most significant energy issues facing President Barack Obama in his second term is whether to allow oil drilling off the coast of the Atlantic, where production has been off-limits for decades. The energy industry, eager to find out how much oil and natural gas exists under the Atlantic sea floor, already is pushing the administration to allow seismic companies to survey the area. If granted approval, the companies could begin mapping the ocean's resources as early as next year." Tennille Tracy in The Wall Street Journal.
Environmental advocates optimistic on second term. "Enviros are popping champagne bottles (and then, of course, recycling them) after the elections. Now they’re hoping the successes they saw in knocking off foes and electing friends will help them prove that being environmentally friendly pays off at the polls -- and adds heft to their second-term policy agenda." Emily Heil in The Washington Post.
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