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: 60. That's the percentage of Americans who say that they have a "strong" opinion, whether in favor or against, the policy agenda of President Barack Obama. It's a 30-30 split.
Wonkblog's Graphs of the Day: The State of the Union speeches keep getting longer and longer, and the State of the Union in graphs.
Wonkbook's Top 5 Stories: 1) The reaction to the State of the Union; and detailed looks at 2) education policy, particularly preschool; 3) minimum-wage laws; 4) climate and energy policy, particularly cap-and-trade; and 5) manufacturing and federal support.
1) Top story: The policies behind the State of the Union
What Obama talked about in last night's State of the Union. "Three months after his convincing reelection victory, the president returned to the economic issues that dominated much of his first term. With a theme of strengthening the middle class, he proposed creating more jobs by investing in clean energy and creating new 'manufacturing innovation institutes,' as well as spending more public money on education and improving the nation’s infrastructure. He also proposed an increase in the federal minimum wage." Jerry Markon in The Washington Post.
Watch: The video of Obama's speech.
Watch: The video of Rubio's speech.
Explainers: You should read Wonkblog's detailed footnotes to the State of the Union, an issue-by-issue quotation breakdown of the speech, and Chris Cillizza's 5 takeaways. The Washington Post.
Themes: Enhancing equality of opportunity. "President Obama’s State of the Union address on Tuesday sounded like a familiar speech touting the economic importance of a thriving middle class. But behind his proposals is a desire to tackle a much less widely accepted phenomenon: a growing inequality of opportunity...Obama and his advisers have been sounding the alarm that the poor and middle class may have less chance to advance up the economic ladder than they did a generation or two ago." Zachary A. Goldfarb in The Washington Post.
...The need for 'smarter government.' "In his first State of the Union address since winning re-election, Mr. Obama offered an expansive second-term agenda focused heavily on the economy and jobs." Michael D. Shear in The New York Times.
@dandrezner: Obama is pushing the competitiveness theme really hard. All about making the U.S. the best place to do business compared to rest of world.
...Going beyond austerity. "Just about every argument in Washington since the 2010 midterm elections, which returned control of the House to Republicans, has centered on reducing the federal deficit. On Tuesday night, President Obama leaned into his second term by declaring that a single-minded focus on deficit reduction would jeopardize the nation’s future. And he sounded an urgent call to rebuild...The time has come, Obama indicated, to pivot away from the politics of austerity." Philip Rucker and Karen Tumulty in The Washington Post.
Who wrote this speech? "With top speechwriter Jon Favreau leaving the White House, deputy director of speechwriting Cody Keenan is transitioning into the lead role. His first big task — President Obama’s State of the Union Tuesday night...Keenan has written some of Obama’s most memorable speeches, including the president’s January 2011 speech at the memorial for victims of the Tucson shooting." Rachel Weiner in The Washington Post.
Explainer: 4 reasons why State of the Union speeches don't matter much. Brad Plumer in The Washington Post.
He addressed a deeply divided nation. "Just over half of the public (52 percent) has a favorable view of the policies Obama will pursue in his second term, while 43 percent regard them unfavorably. Fully six in 10 hold 'strongly' positive (30 percent) or strongly negative views (30 percent) of Obama’s policy agenda — a remarkable level of passion given that it is less than one month since his second term inauguration." Scott Clement and Peyton M. Craighill in The Washington Post.
Explainers: The mixed record on following through with policy proposals in the State of the Union. Jennifer Epstein in Politico. Here are five promises kept, and five broken. Wonkblog in The Washington Post.
What Rubio had to say in response. "Republicans chose Sen. Marco Rubio (R-Fla.), a fresh new face of the party, to respond to President Obama’s State of the Union address on Tuesday. But if the messenger was new, the message Rubio offered was back-to-basics, a re-commitment of the party to traditional conservative notions of economic growth." Rosalind S. Helderman in The Washington Post.
Crowd-watching: Who sat in Michelle Obama's State of the Union box. Ezra Klein in The Washington Post.
KLEIN: An ambitious speech. "That was an incredibly ambitious speech. Imagine, for a moment, that President Obama managed to pass every policy he proposed tonight...America would be a noticeably different country...In some ways, what was most noticeable about the speech was what wasn’t in it: Nothing. It was difficult to come up with a single policy favored by Obama’s party but left out of this speech. The speech included the politically possible and the politically implausible. It had the poll-tested policies, like small tweaks to encourage manufacturing jobs, and policies that have a tougher time in the polls, like putting a price on carbon." Ezra Klein in The Washington Post.
@noamschieber: Obama's overall message tonight: There's all this reasonable stuff just waiting to get done. Who are these crazy people who won't sign on?
GREEN: This was a wish list. "[I]ts signature characteristic wasn’t threats or arm-twisting, but Obama’s repeatedly imploring Congress to vote on the whole array of issues he laid out: gun legislation, climate legislation, alternatives to the sequester, universal preschool, and on and on — it was a long list...What many of these policies share in common is that they’re designed to help the minorities, immigrants, young people, and suburban women who made up Obama’s electoral coalition. Partly as a result, they’re also unlikely to get very far in Congress." Joshua Green in Bloomberg Businessweek.
#US SoU address restates election pledges, action on sequester, guns. GOP response uncompromising but tone mellower than we expected.
GROSS: A pivot to the left. "What does it take for a Democratic president to start talking like a Democrat about economic issues? Two big presidential election wins, apparently...Last November, the electorate firmly expressed its preference for left-of-center economic policies over the right-of-center approach of cutting taxes for the rich and assuming everybody else will generally benefit. Today, the nation effectively got the economic speech it voted for." Daniel Gross in The Daily Beast.
@JohnJHarwood: SOTU underscored single most important thing about how Obama intends to deal w/Republicans in 2nd term: no more backing up - stand and fight
SOLTAS: Obama and the rubble. "President Barack Obama's State of the Union address posed its most interesting question in the first few moments: Can his administration break free of the challenges of recession? Or will it be weighed down for another four years? 'We have cleared away the rubble of crisis,' the president said. Yet in the policy landscape he went on to describe, plenty of rubble remained. The Obama agenda, if this speech is any guide, continues to be defined by fiscal issues and deficit reduction. That created a sharp contrast with his second inaugural address, which presented a more expansively liberal program, made for a post-crisis, post-conflict era... [T]he discontinuity between the two speeches, just three weeks apart, was striking." Evan Soltas in Bloomberg.
@anatadmati: "We cleared the rubble of the crisis." Obama does not know (or want to know) about unhealthy banking system and sad state of its reform.
STEVENSON: A case for government. "[Obama was] building a broader argument that the nation needs to shift away from the focus on shrinking the government that has dominated politics for the past several years and toward a modestly more activist agenda aimed at tackling persistent inequality and the dislocating forces of a globalized, technology-driven economy." Richard W. Stevenson in The New York Times.
SARGENT: Obama the emboldened. "It laid out a progressive economic blueprint that was focused heavily on nuts-and-bolts policy ideas and rooted in a much more basic call for economic fairness, shared sacrifice in bringing down the deficit, and aggressive government action to help struggling Americans gain access to the middle class...His speech built on the Inaugural address in the sense that it continued to reshape the conversation around the priorities of these core groups — only with a more direct focus on the economy." Greg Sargent in The Washington Post.
MILLER: Progressives must say this is not enough. "Still, taking a longer view, it’s hard not to think something is deeply awry. Even if Obama’s agenda becomes law, after eight years of the most progressive president in memory, America will still be a country in which work is less well-rewarded, college is far costlier, and poor children’s life chances more limited by accident of birth than in virtually every other wealthy nation. American exceptionalism indeed." Matt Miller in The Washington Post.
FOURNIER: Nothing big, bold about it. "Rather than go big and bold, President Obama settled Tuesday night for incremental and pragmatic...The agenda he discussed Tuesday night was a mixture of old proposals and new ones fashioned on the cheap, bowing to the obstinacy of his GOP rivals and the brutal fiscal reality of the times...Obama may suspect that that his legacy is already in place or in motion, and that precious little can be added to it." Ron Fournier in National Journal.
MILBANK: It's ritual, not policymaking. "President Obama leads the Democratic side of the chamber to a series of standing ovations for proposals that everybody knows won’t become law. Republicans show their seriousness of purpose by smirking or making stony faces." Dana Milbank in The Washington Post.
BARRO: Rubio 'savior' claims don't hold water. "Time magazine says Senator Marco Rubio is going to save the Republican Party. It's wrong. The response Rubio gave to President Barack Obama’s State of the Union speech offered little that was new or interesting...This is the case that Mitt Romney made against Obama in the 2012 election. It’s the case that Republican Senate candidates made all over the country. It is a case for trickle-down economics. And it is a case that Americans have rejected." Josh Barro in Bloomberg.
Music recommendations interlude: The Pretenders, "Back on the Chain Gang," 1982.
MOBARAK: The immigration-innovation connection. "Talented people across the world are attracted to the institutions that the United States has carefully cultivated to support innovation...Attracting talented people to the United States and allowing them to interact with the innovative universities and companies creates similar efficiency gains that can be a win-win for the source countries and for the United States." A. Mushfiq Mobarak in The New York Times.
PERI: More on the economic benefits of immigration. "Most of the undocumented are already working. Probably with legal status they will be able to obtain somewhat higher wages, 5% to 10% higher, most studies say, and consume and spend more...The really significant payoff will be when newly legal immigrants are more willing to invest in training, and to move between employers as they participate fully in the economy and feel more certain about their future. The younger among them will be more likely to pursue an education." Giovanni Peri in The Wall Street Journal.
PORTER: Want jobs? Grab a shovel. "What power does the government have to pull the economy out of its rut? How much do tax cuts or spending programs stimulate growth?...The Congressional Budget Office’s calculations suggest caution. It estimates that the administration’s fiscal stimulus produced about $1 of economic output for every $1 in stimulus, on average." Eduardo Porter in The New York Times.
ORSZAG: More college grads? More growth. "More graduates would mean lower inequality, because the wage premium for a college degree would be reduced by the additional supply. And it would mean higher national income, because better-educated workers are, on average, more productive." Peter R. Orszag in Bloomberg.
THOMPSON AND KING: Background checks are a no-brainer. "Imagine if it were the Transportation Security Administration’s policy to let four out of 10 people bypass security at the airport. And imagine if TSA let passengers choose whether they’d go through security. Federal law prohibits this because if it didn’t, criminals, terrorists and others who are intent to do harm would easily slip through the cracks and board any plane they wanted. With guns, there is no such law. It is estimated that four out of 10 gun buyers do not go through a background check when purchasing a firearm." Reps. Mike Thompson and Peter King in Politico.
Sloths interlude: They are the 'Ryan Lochtes' of the animal kingdom. Now you know.
2) The education policies it would take to implement Obama's vision
Why Obama's universal preschool program proposal is a potentially huge deal. "More affluent families tend to get their kids into decent day cares and nursery schools; less affluent families do not. But poor kids are the ones who need good care the most. Research suggests the first few years and particularly the first two years are critical for the development of intellectual and behavioral skills. Providing low-income kids with access to decent, affordable preschool can help make up for what they're not getting already. It can also help families—not just poor families, but middle-income families—pay for the cost of child care, which can put a real crimp in household budgets." Jonathan Cohn in The New Republic.
The economic case for preschool. "Softhearted people always advocate spending more on kids. But according to a new and authoritative synthesis of available evidence, there's a hardheaded case for investing more in young kids over older ones...Nobel Prize winner James Heckman of the University of Chicago and Dimitriy Masterov of the University of Michigan argue that by waiting until kindergarten, we throw money at kids when it's too late. Their evidence urges shifting educational spending to younger children." Joel Waldfogel in Slate.
Wonkbook's recommended readings: The Journal of Economic Literature as an only slightly technical survey of the state of research on early childhood education as a public policy. And here's a very important analysis by Heckman of the Perry Preschool Program.
Here's more research on the federal 'Head Start' program. "Numerous economic studies, as well as the government’s own sponsored research, have examined the immediate and long-term effects of Head Start, looking at cognitive skills, social and emotional development and health, as well as the likelihood that students attend college, earn higher incomes or avoid criminal activity...Researchers and policy makers have been troubled by studies that show that while children in Head Start show clear gains in skills like vocabulary, spelling, letter naming, color identification and other precursors of academic performance during and immediately following their enrollment in the program, those effects appear to fade over time." Motoko Rich in The New York Times.
But there will be lots of questions on implementing universal preschool. "[I]t's not a very detailed plan. How much money is the federal government going to pony up? What's the income definition and subsidy level the president has in mind? By what standard are we assessing "high quality"? The quality point is really important, too. People who consider themselves skeptics of K-12 education "reform" sometimes fall into a trap of thinking that preschool is like some kind of magic wand. But in fact the research on preschools is very similar to the research on K-12 schools." Matthew Yglesias in Slate.
Comparative advantage interlude: 1 pizza, 1 minute. Kobeyashi.
3) Obama endorsed a minimum-wage hike. Here's what the experts say.
What an increase in the minimum wage would do. "President Obama called on Congress to raise the federal minimum wage to $9 an hour from $7.25 and to automatically adjust it with inflation, a move aimed at increasing the earnings of millions of cooks, janitors, aides to the elderly and other low-wage workers. The proposal directly addresses the country’s yawning levels of income inequality, which the White House has tried to reduce with targeted tax credits, a major expansion of health insurance, education and other proposals." Annie Lowrey in The New York Times.
Here's what EPI has said that will do. "Analysis by the Economic Policy Institute, a left-leaning research organization, suggests that raising the federal minimum wage to $9.80 would lift pay for more than 28 million Americans, increase the gross domestic product by more than $25 billion and create the equivalent of more than 100,000 full-time jobs." Steven Greenhouse in The New York Times.
What the economics lit says about the minimum wage. "An increase in the minimum wage would reduce inequality by pushing up the incomes of the poor, a report from the Organization for Economic Co-operation and Development found this year. A 2008 paper by economists Robert J. Gordon and Ian Dew-Becker also found that minimum wages have significant empirical impacts on income inequality....A study by the Federal Reserve Bank of Chicago did find that it would increase consumption: For every $1 increase in the minimum wage, households with minimum-wage workers increased spending by $800 per year." Evan Soltas in Bloomberg.
Why the minimum wage tends not to generate mass unemployment. "In fact, there are numerous other channels through which the higher wage is absorbed: (1) profits: to the extent that the increase is paid for out of profits, we shouldn’t expect job losses. And in an economy where profits have dazzled while paychecks have fizzled, that ain’t a bad thing. (2) prices: some studies find that a small bit gets passed through to higher prices. (3) productivity: to the extent that higher wages reduce turnover and vacancies, a higher minimum can partially pay for itself by squeezing out such inefficiencies. It’s not wishful thinking—some studies have found just that." Jared Bernstein on his blog.
Why a big minimum-wage hike could make a lot of sense. "It seemed a great way to stimulate the economy without spending a dime of federal revenue...That’s probably because whatever increase a minimum-wage increase brings about in the cost of hiring is offset by an increase in economic efficiency attributable to a drop in turnover and an increase in productivity. When you pay workers a decent wage—imagine this!—they give their employers better value." Timothy Noah in The New Republic.
Adorable animals interlude: Apparently this is the workout that a walrus does. They have to stay fit, you know.
4) From cap-and-trade to green regs, what Obama wants on climate and energy
Obama promised climate action. "While President Obama called on Congress to pass the same kind of cap-and-trade legislation which died in 2010, urging it 'to pursue a bipartisan, market-based solution to climate change,' no such bill is likely to pass in the next two years...Obama did not specify if the Environmental Protection Agency would regulate greenhouse gas emissions from existing power plants, which would have the biggest impact on America’s carbon output. But this remains a viable policy option, along with directing federal funds to help communities adapt to climate change and promoting renewable energy development on public land. EPA may also take other measures aimed at cutting air pollution in an Obama second term, whether it’s limiting cruise ship pollution or setting a tighter standard for smog-forming ozone. But the president was silent on one of the most contentious climate issues he will face: whether to grant a presidential permit to the Keystone XL pipeline project." Juliet Eilperin in The Washington Post.
This is the legislation Obama said he wanted to emulate: The Lieberman-McCain Climate Stewardship Act. Center for Climate and Energy Solutions.
Climate policy is expensive. But so is the current lack of policy. "The United States was subjected to many severe climate-related extreme weather over the past two years. In 2011 there were 14 extreme weather events—floods, drought, storms, and wildfires—that each caused at least $1 billion in damage. There were another 11 such disasters in 2012. These extreme weather events reflect part of the unpaid bill from climate change—a tab that will only grow over time...From 2011 to 2012 these 25 'billion-dollar damage' weather events in the United States are estimated to have caused up to $188 billion in total damage." Daniel J. Weiss and Jackie Weidman in CAP.
Explainers: Cap-and-trade exists in the Northeast (and in California). Here's how they do it. And here are many other environmental and energy policy options the President has on the table. Brad Plumer in The Washington Post.
Another important idea in the speech: An 'Energy Security Trust.' "President Obama proposed a program in Tuesday's State of the Union address that would divert some revenues from federal oil-and-gas drilling into research for alternative fuel technology. In a nod to the economic challenges facing many families, Obama cast the initiative, which he called an 'Energy Security Trust,' as a way to reduce household gasoline expenses." Zack Colman in The Hill.
The link you're going to send to everyone right now interlude: Boston, as seen from the cockpit of a 777, after the snowstorm.
5) How we could use policy to boost manufacturing
President to visit North Carolina factory. "President Obama will visit the Linamar factory in Asheville, NC to discuss his plan to grow the economy and make America a magnet for jobs and manufacturing. Linamar has recently expanded its investment here in the U.S. and created new American manufacturing jobs. Linamar produces heavy duty engine and driveline components." White House Press Office.
Something to know: In a survey of economists, 66% disagreed with the following statement: "The federal government would make the average U.S. citizen better off by using policies that directly focus more on increasing manufacturing employment than employment in other sectors."
Christina Romer is one such economist who thinks most manufacturing policies are a bad idea. "[Public policy] should be based on hard evidence of market failures, and reliable data on the proposals’ impact on jobs and income inequality. So far, a persuasive case for a manufacturing policy remains to be made, while that for many other economic policies is well established." Christina D. Romer in The New York Times.
The MIT Tech Review, however, is one of the loudest supporters of manufacturing policy. "For many people in industry, the connections between innovation and manufacturing are a given—and a reason to worry...[What is w]orrisome, especially over the long term, is what the declining ability of the United States to make stuff implies for the next generation of technology. Can the United States regain its ability to take on high-risk manufacturing?" David Rotman in MIT Technology Review.
See also: Paul Krugman's 2008 Nobel Prize lecture, which talks a lot about trade theory and regional specialization -- two topics which will be key to the crafting of any successful manufacturing policy.
Andy Grove, who used to run Intel, is another leading advocate. " A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer...[O]ur pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don't just lose jobs—we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate." Andy Grove in Bloomberg Businessweek.
Unhappy interlude: Louisiana, the 'prison capital' of the U.S.
One Republican's plan for stopping too-big-to-fail. Suzy Khimm.
The State of the Union, in graphs. Wonkblog.
Obama's ambitious second-term agenda. Ezra Klein.
The U.S. federal government posted a budget surplus in January. Jeffrey Sparshott in The Wall Street Journal.
There is, apparently, no deal in sight for the sequester. Corey Boles and John D. McKinnon in The Wall Street Journal.
...And defense officials are sounding the alarm. Steve Vogel in The Washington Post.
Senate is working on the US-EU free trade agreement. Howard Schneider in The Washington Post.
States are getting ready to launch health-insurance exchanges. Louise Radnofsky and Jennifer Corbett Dooren in The Wall Street Journal.
The Fed really, really wants to fix money market funds. Michael S. Derby and Scott Patterson in The Wall Street Journal.
Wonkbook is produced with help from Michelle Williams.