Wonkbook: So many sequester replacements

February 15, 2013

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Wonkbook's Number of the Day: 10. That's how many more days the Senate will spend in recess. That leaves only a week for congressional action to replace the sequester. That may not be enough -- though, if recent crises are any indication, Congress isn't too strict on deadlines.


(Photo by Alex Wong/Getty Images)

Wonkblog's Graph of the Day: A graph version of Valentine's Day.

Wonkbook's Top 5 Stories: 1) Replacing the sequester; 2) more small businesses are worried about taxes and regulation; 3) pushing preschool policy; 4) where we are on immigration reform; and 5) the economics of the minimum wage.

1) Top story: From left and right, sequester alternatives emerge

Both Sen. Reid and McConnell will introduce pieces of legislation to replace the sequester. "Senate Majority Leader Harry Reid (D-Nev.) announced Thursday night that he and Minority Leader Mitch McConnell (R-Ky.) would introduce a sequester replacements when the Senate returns from recess in 10 days...House Republicans, who voted twice to replace the sequester last year, have said it's up to the Senate to initiate action now, but the Senate is in recess next week, leaving only one week for lawmakers to act." Ramsey Cox in The Hill.

There are now 4 big plans to stop the sequester. "Senate Democrats are proposing to cancel the $85.3 billion in sequester spending cuts for 2013 and replace them with a mix of spending cuts and tax hikes. How would they pay for this? For one, this plan would include about $27.5 billion in spending cuts. But rather than fall all at once, these would be spread out over time, starting at $3 billion per year in 2015 and rising to $5 billion per year by 2021." Brad Plumer in The Washington Post.

@sam_baker: Blame game over the sequester is ridiculous. It passed the GOP House, and Obama wanted/signed it. Like it or not, that thing is bipartisan

Here's the Senate Democrats' plan. "The proposal would raise $110 billion to replace the sequester through Jan. 2, 2014, when across-the-board cuts adopted during the 2011 debt-limit showdown would kick back in for the rest of the decade. Half the new savings would come from spending cuts, including an end to direct federal payments to farmers and deeper cuts to the Pentagon after 2015. The other half would come from tax hikes, primarily on millionaires. Households earning more than $2 million a year would have to pay at least 30 percent of their income in federal taxes." Lori Montgomery in The Washington Post.

@elwasson: Sen Harkin and other liberals not happy with $110 billion Reid package. Proposing $157 billion with corp tax loophole closings #sequester

A lot of advanced countries are now planning to back off on austerity. "With a sustained economic recovery proving elusive, finance officials from the Group of 20 industrialized and developing nations will take a look at slowing down the pace of government budget cuts when they meet Friday and Saturday." Ian Talley and Alexander Kolyandr in The Wall Street Journal.

@JimPethokoukis: JPMorgan: We now assume most of the sequester is realized. Dropping 2013 GDP forecast to 1.9% from 2.1%

SOLTAS: Almost nobody cares about the deficit. "You'd never guess it, but very few people in Washington actually care about the federal government's budget deficit. Of course, the news media seem obsessed with the subject. The Washington Post has run 2,310 separate stories with the word 'deficit' in them over the last year, according to the LexisNexis database of U.S. newspapers. That's one deficit story for every 10 the newspaper publishes in its front and opinion sections. But this doesn’t mean anybody actually cares. Deficit talk is a rhetorical ploy -- a decoy justification for the unpopular-but-necessary component of both parties' larger political agendas." Evan Soltas in Bloomberg.

Music recommendations interlude: Arcade Fire, "Modern Man," 2010.

Top op-eds

EMANUEL: Why slowing health care cost inflation is great news. "Think about it. When was the last time you heard the phrases 'good news' and 'health care costs' in the same sentence? I can’t remember either...[T]his trend has finally reversed; over the last three years, Medicare costs per person have grown 1.3 percent slower than growth in the overall economy." Ezekiel J. Emanuel in The New York Times.

ALTER: More than rhetoric can come from the State of the Union. "The theatrics of the event also introduced a new approach to framing the public debate that could yield unexpected victories for the president in the next year or two...'They deserve a vote' might not work. It’s much easier to stop something in Washington than to start it. But casting his program as a struggle for democracy was a smart way for the president to begin his second term." Jonathan Alter in Bloomberg.

NORRIS: Dave Camp's unnoticed move on tax reform. "Representative Dave Camp, the Michigan Republican who heads the House Ways and Means Committee, has...a proposal to make substantial changes in the taxation of financial instruments...Under the Camp proposal, a derivative could create only ordinary gains or losses no matter how long it was held...The Camp proposal would establish a general rule that both arms of an offsetting strategy will be taxed as ordinary income or loss on a mark-to-market basis at the end of each year." Floyd Norris in The New York Times.

KRUGMAN: Rubio and the zombies. "[H]ere we are, more than five years into the worst economic slump since the Great Depression, and one of our two great political parties has seen its economic doctrine crash and burn twice: first in the run-up to crisis, then again in the aftermath. Yet that party has learned nothing; it apparently believes that all will be well if it just keeps repeating the old slogans, but louder." Paul Krugman in The New York Times.

WESSEL: 4 questions for the health law. "Even by Washington standards, implementing this law is extraordinarily complex. The federal government last year issued 70,000 pages of guidance...Mr. Obama barely mentioned the law in his State of the Union address Tuesday. If it works as he hopes, he will have secured his legacy and solved the long-festering problem of the uninsured—though not the companion problem of rising costs. If the law flops or provokes a backlash, a future president will be forced into more radical reshaping of the health-care system." David Wessel in The Wall Street Journal.

BROOKS: When families fail. "[S]tarting a few decades ago, we learned that preschool intervention programs could help...But this problem, like most social problems, is hard. The big federal early childhood program, Head Start, has been chugging along since 1965, and the outcomes are dismal...Fortunately, that is not the end of the story. Over the past several years, there’s been a flurry of activity, as states and private groups put together better early childhood programs." David Brooks in The New York Times.

Adorable animals interlude: A bucket of sloths.

2) Small businesses fearing taxes and regulation

Taxes, regulation displace poor sales as top small business concern. "Starting in September 2008 (the month Lehman Brothers imploded), 'poor sales' claimed the plurality of answers every month for more than three years. But the shares answering 'taxes' and 'government requirements and red tape' crept up, and since early 2012 have been more or less tied with the 'poor sales' group. In fact, the share complaining about government requirements has not been this high since the mid-1990s." Catherine Rampell in The New York Times.

In the U.S., jobless claims fell. "Initial claims for state jobless benefits dropped 27,000 to a seasonally adjusted 341,000, the Labor Department said on Thursday...Last week, the four-week moving average for new claims, a better measure of labor market trends, rose 1,500, to 352,500. The average had approached a five-year low in the previous week." Reuters.

...But the global economy remains sluggish. "The flood of dollars, euros, yen and pounds pumped into the global economy by major central banks in recent years has yet to pay off in the form of job creation, investment and stronger economic growth...[T]he ultimate aim — strong and self-sustaining growth in the world’s core industrial economies — remains out of reach, and analysts are wondering whether central banks are at the limits of what they can do to help." Howard Schneider in The Washington Post.

Humorous interlude: Stewart and Colbert poke fun at Rubio's "Watergate."

3) Pushing preschool

Obama touted his plan for universal pre-K. "President Obama visited a preschool here Thursday to tout early education for all 4-year-olds from low- and modest-income families, part of a three-day campaign-style promotion of ideas outlined in his State of the Union address...Administration officials said the proposals were based on extensive economic research showing the importance of early childhood education and a growing recognition that the United States is falling behind in providing an adequate education for its youngest citizens." Zachary A. Goldfarb in The Washington Post.

Read: Obama's pre-K planDylan Matthews in The Washington Post.

Is Oklahoma the right model for universal pre-K? "Oklahoma’s getting a lot of attention lately for its pre-K program. In fact, insofar as the administration is basing its efforts on any particular model, Oklahoma is the one they name. But is it the right model? Since 1998, Oklahoma has offered universal access to pre-kindergarten and has one of the highest participation rates in the country, with 74 percent of all 4-year-olds enrolled in a pre-K program." Suzy Khimm in The Washington Post.

...What about Alabama? "In Alabama, for example, Gov. Robert Bentley, a Republican, has called for a $12.5 million increase — or more than 60 percent — in the state’s preschool budget, with the eventual goal of increasing financing over 10 years to the point where every 4-year-old in the state could have a preschool slot. The governor’s proposal is supported by a coalition of early-education advocates and business leaders, who see preschool as an important component of future job readiness." Motoko Rich in The New York Times.

Interview: Dylan Matthews talks with Nobel laureate economist James HeckmanThe Washington Post.

Conservatives are skeptical of Obama's preschool idea. "President Obama’s plan to expand preschool for the nation’s children faces deep skepticism among Republicans, who fear the creation of another federal entitlement program that they say could add to the nation’s deficit and swell the ranks of the teachers’ unions...[The plan] could cost as much as $10 billion a year, or nearly a tenth of the entire federal education budget." Michael D. Shear in The New York Times.

Animals interlude: Penguins in love.

4) Political negotiations continue on immigration reform

Immigration reform sets off internal GOP struggle. "A new battle has flared inside the Republican Party in recent days as supporters of more-liberal immigration laws wage a behind-the-scenes campaign to discredit the influential advocacy groups that have long powered the GOP’s hard-line stance on the issue. The campaign, largely waged in closed-door meetings with lawmakers and privately circulated documents, is another sign of how seriously many establishment Republicans are pursuing an immigration overhaul in the wake of last year’s elections." Peter Wallsten in The Washington Post.

How's that labor-business alliance doing on this immigration reform? "In contrast to the broader political debate, the biggest sticking point between business and labor is actually over legal, not illegal, immigration. Business wants a major new guest-worker program and additional visas for high-skilled workers, while labor worries that such changes could allow companies to rely on cheap foreign labor instead of native-born workers." Suzy Khimm in The Washington Post.

In memoriam interlude: Ronald Dworkin, the second-most-cited legal scholar of the 20th century.

5) The economics of the minimum wage

Economists disagree on whether the minimum wage will kill jobs. Why? "What happens when the minimum wage goes up? In theory, this should be simple. A hike in the minimum wage raises the cost of low-wage workers. That should make firms less likely to hire those people. Unemployment should rise. Basic Econ 101, right?...Except that the real world seems to be much murkier." Brad Plumer in The Washington Post.

Explainer: Is this graph the best argument for raising the minimum wage? Ezra Klein in The Washington Post.

What you need to know about economics on the minimum wage. "I’ve often said the true elasticity of job loss with respect to a minimum wage increase hovers about zero.  I’ve seen good studies finding small negatives and good ones finding small positives.  John presents this very cool graph from a 'meta-analysis'—a study of a bunch of studies—showing precisely that result.  There are outliers on both sides of zero, but the strong clumping around zero provides a useful summary of decades of research on this question." Jared Bernstein on his blog.

More animals interlude: Apparently there's something called "coyote hazing," and it's a real wildlife-management tactic.

Wonkblog Roundup

The US Airways-American merger and the end of an era of airline consolidationSteven Pearlstein.

What's at stake in the fight between Tesla and the New York TimesBrad Plumer.

Everyone has a date this Valentine's Day -- just maybe in a different universeDylan Matthews.

Why online dating services are like financial marketsNeil Irwin.

Inside the Obama administration's effort to build 25 health insurance exchangesSarah Kliff.

4 big plans to stop sequesterBrad Plumer.

Labor, business fight together on immigrationSuzy Khimm.

The best argument for a minimum-wage hike, in graph formEzra Klein.

Oklahoma, model of universal pre-KSuzy Khimm.

Economists disagree on minimum wage's employment effectBrad Plumer.

Interview with James HeckmanDylan Matthews.

Et Cetera

Start the weekend early with a long read: Can the Republicans be saved from obsolescence? Robert Draper in The New York Times.

Interview: Ta-Nehisi Coates talks with Harold Pollack of the UChicago Crime LabThe Atlantic.

Watch: President Obama's Google+ "hangout." Natalie Jennings in The Washington Post.

The GAO has a groundbreaking new report out about the public costs of climate changeLisa Rein and Juliet Eilperin in The Washington Post.

They're also getting worried about skill loss in federal-government attritionEric Yoder in The Washington Post.

Obama's proposed voting commission comes under fire from both sidesNia-Malika Henderson in The Washington Post.

Who wants to be Labor SecretaryAl Kamen in The Washington Post.

...And maybe it's time for a new show: So you think you can run the EPATennille Tracy, Keith Johnson, and Ryan Tracy in The Wall Street Journal.

Government is looking for new ways to pay for roads and bridgesJohn Schwartz in The New York Times.

Senate Democrats have a lot of issues with the implementation of the Affordable Care ActSam Baker in The Hill.

House to start work on federal-government pay freeze tomorrowPete Kasperowicz in The Hill.

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

Wonkbook is produced with help from Michelle Williams.

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