Wonkbook: On the budget, will it be regular order? Or disorder?

April 24, 2013

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.

(Photographer: Andrew Harrer/Bloomberg)
(Photographer: Andrew Harrer/Bloomberg)

Wonkbook's Number of the Day: 24 percent. That's what the Tax Policy Center is forecasting for the average effective tax rate under the Obama budget proposal. It would be the highest in 40 years. More on the budget and tax reform below.

Wonkblog's Graph of the Day: Even the poorest of the poor pay more taxes under Obama's FY14 budget proposal.

Wonkbook's Top 5 Stories: 1) regular order obstructed on budget; 2) is it time to get our hopes up about tax reform again?; 3) wealth inequality widening; 4) did the EPA just kill Keystone?; and 5) states debate minimum nurse requirements for hospitals.

1) Top story: On the budget, will it be regular order? Or disorder?

Sen. Reid wants regular order for budget. "Senate Majority Leader Harry Reid on Tuesday morning officially started the process of creating a budget conference committee with the House...Under a “regular order” process, Reid and Boehner would name members to a conference that would meet to try to reach a compromise between the two budgets that were passed in late March." Ginger Gibson in Politico.

@hillhulse: Dems hoping to turn tables on GOP by pushing for budget conference after GOP pushed for budget and is now dragging feet on conference.

...But Republicans object. "On Thursday, Speaker John A. Boehner said the House has every intention to try to negotiate a comprehensive budget deal, but Representative Paul D. Ryan of Wisconsin, chairman of the House Budget Committee, first wants to see how close he can get through direct talks with Senator Patty Murray, Democrat of Washington, his counterpart in the Senate. This is standard procedure, since once a conference is formally called, negotiators have a limited time to cut a deal before the talks break down and the minority party can force votes on an alternative budget plan." Jonathan Weisman in The New York Times.

Chart: Even the poorest of the poor pay more taxes under Obama's FY14 budget proposalDylan Matthews in The Washington Post.

More charts: Obama budget would lead to the highest effective federal tax rate since the 1970sDerek Thompson in The Atlantic.

Murray, Ryan meet on budget. "On the same day the White House released its budget, Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.) met to discuss how to move forward on the two budgets that passed their respective chambers last month. The two didn’t reach an agreement to take their wildly different budgets to conference — a process that would allow them to try to find common ground and reach a bipartisan agreement — but they hinted that is the ultimate goal." Ginger Gibson in Politico.

Can we relieve the sequester? "Senate Democrats will make another run at replacing the sequester this week. Majority Leader Harry Reid said Democrats will file a bill Tuesday that would replace the mandatory budget cuts for about five months using money from the Overseas Contingency Fund...The fight over sequestration returned to the forefront this week after being in the background for weeks, especially as the FAA began furloughs of air traffic controllers, leading to flight delays across the country." Ginger Gibson in Politico.

@markknoller: WH official says the Pres & Senators discussed search for common ground on the budget, economy, jobs & strengthening the middle class.

...One sore issue: furloughs of air traffic controllers. "The deadlock over sequestration might have had a dreary same-old quality Tuesday had the budget cuts not tied up the system that delivers 23,000 airplanes, hundreds of thousands of passengers and millions of tons in freight across the nation...The aviation system began to back up again shortly after daybreak Tuesday, with the first delays occurring at New York’s three airports and then spreading to the big hub airports in Dallas and Los Angeles, finally touching traffic into Dulles International and Reagan National airports." Ashley Halsey III in The Washington Post.

The deficit is falling fast. But can Washington accept victory? "[W]hile you wouldn’t always know it from the tone in Washington, the United States has made remarkable progress toward trimming its fiscal sails. We may not be doing austerity European-style (thankfully, if you’ve paid attention to recent economic numbers out of Europe), but American austerity, or at least steady deficit reduction, is well underway, as two new reports affirm." Neil Irwin in The Washington Post.

Music recommendations interlude: Wilco, "One Sunday Morning."

Top op-eds

BROWN AND VITTER: Wall Street, go small or go home. "Today, the nation’s four largest banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — are nearly $2 trillion larger than they were before the crisis, with a greater market share than ever. And the federal help continues — not as direct bailouts, but in the form of an implicit government guarantee. The market knows that the government won’t allow these institutions to fail. It’s the ultimate insurance policy — one with no coverage limits or premiums." Sherrod Brown and David Vitter in The New York Times.

ORSZAG: U.S. needs private spending on public works. "For a country that prides itself on a robust private sector, the U.S. lags behind many other nations in using the private sector to finance, build and operate infrastructure. From 1990 to 2006, for example, public-private partnerships financed five times as much transportation infrastructure in the U.K. as in the U.S. -- even though the U.S. economy is more than six times larger than that of the U.K...[D]one right, they can boost investment and help efficiently manage projects once they are in place." Peter Orszag in Bloomberg.

SOLTAS: Immigration reform has nothing to do with the Boston attack. "Experts on immigration policy have no idea what these congressmen are talking about. "Both arguments, really, are specious," said Edward Alden, a senior fellow at the Council on Foreign Relations, who has written a book on immigration policy and terrorism...Terri Givens, an associate professor at the University of Texas with expertise in immigration policy and security, said that Republicans calling for delay have a strategy, and a precedent, in mind: the 9/11 attack." Evan Soltas in Bloomberg.

BRENNER: Must all patents last for 20 years? "Today, there is a belief that the 20-year life granted to patents in all industries fosters more patents, and that the number of patents granted implies much about a country's ability to innovate or create wealth. Not really. As the University of Western Australia's Tim Mazzarol correctly observed, "many companies today seem to be inventing patents rather than patenting innovations."" Reuven Brenner in The Wall Street Journal.

YGLESIAS: Internet sales taxation is inevitable. "Until recently, cross-border shopping wasn’t economically significant, and no enforcement mechanisms existed to compel you to pay taxes back in your home state. Then came the Internet...The Marketplace Fairness Act requires states to simplify and harmonize their tax rules. More importantly, it requires businesses with more than $1 million in Internet and catalog sales to pay sales taxes in the states where their products are shipped." Matthew Yglesias in Slate.

Wonkblog interlude: This is why you should buy Neil Irwin's book.

2) Is it time to get our hopes up about tax reform again?

Could a retiring Sen. Baucus help tax reform? "Senate Finance Committee Chairman Max Baucus’s decision not to seek reelection could give a jolt to efforts to simplify the tax code — an endeavor he can now devote himself to without the nagging concerns of how it will play back home...Baucus has recently broken with his party on key issues, including over the Democratic budget plan and a key gun control measure that President Barack Obama publicly pleaded with Democrats to support." Steven Sloan, Lauren French, and Kelsey Snell in Politico.

...And Sen. Wyden will take his place as Senate Finance Cmte. chairman. "There’s a joke that Sen. Ron Wyden’s staff members pass around the office. When they’re tired and overworked by their Energizer Bunny of a boss, it’s delivered with a sarcastic bite. When they’ve had their full eight hours of sleep, it’s their rallying cry. “You got a problem?” they say to one another. “Ron Wyden has a comprehensive, bipartisan solution to fix it.” It’s true. The country has problems. And Ron Wyden has comprehensive, bipartisan proposals for fixing them." Ezra Klein in The Washington Post.

...But what will Dave Camp tell Republicans about tax reform? "House Republican leaders will launch an aggressive behind-the-scenes push this week to set up the first rewrite of the Tax Code in more than 25 years...More than 80 percent of Americans agree with the following statements: “the complexity of the tax code benefits corporations and special interests who can afford lawyers and accountants at the expense of average taxpayers”; “the complexity of our tax code hurts the economy” and “I’m more angry about how Washington spends my money than I am about the amount of money they take in taxes.”" Jake Sherman in Politico.

Adorable animals interlude: Here's a sloth snuggling with a kitten.

3) Wealth inequality widening

As economy recovers, rich getting richer, study shows. "Wealth inequality widened dramatically during the first two years of the economic recovery, as the upper 7 percent of American households saw their average net worth increase 28 percent, while the wealth of the other 93 percent declined, according to a report released Tuesday." Michael A. Fletcher in The Washington Post.

Financial market jitters follow AP tweet. "The stock market briefly plummeted Tuesday afternoon after a bogus tweet sent Wall Street into a temporary tailspin, a sign of the fragile state of market psychology and the susceptibility of even the multi-trillion dollar financial markets to bad information." Neil Irwin in The Washington Post.

What economists don't know. "Economists used to think it was obvious how to contain such shocks. No point trying to stop a bubble from inflating, they thought; it would be impossible to identify in the first place. The best a central bank like the Federal Reserve could do is stand ready to cut interest rates after the bubble burst, patch up the financial system and set the economy back on track. In terms of budgets, governments should aim for a prudent level of debt to retain space to borrow and spend when it was needed." Eduardo Porter in The New York Times.

What's the big winner of the recession? The $2T shadow economy. "In this week’s New Yorker, James Surowiecki considers one theory for the recent and drastic decline in the U.S. labor force. More and more Americans mightbe working off the books, in informal jobs that aren’t counted by statistical agencies...Is there any hard data on the underground economy? Some. A 2011 paper (pdf) Richard Cebula and Edgar Feige estimated that as much as “18-19 percent of total reportable income is not properly reported to the IRS." Brad Plumer in The Washington Post.

New home sales increase 1.5%. "Sales of new homes rose 1.5 percent in March to a seasonally adjusted annual rate of 417,000, adding to evidence of a sustained housing recovery at the start of the spring buying season. The Commerce Department said on Tuesday that sales of new homes exceeded February’s pace of 411,000, though they were below January’s 445,000 — the fastest rate since July 2008. New-home sales are still below the 700,000 pace considered healthy by most economists. But the rate has increased 18.5 percent from 352,000 a year ago." The Associated Press.

...Who's behind the housing recovery? The immigrant family next door. "Home ownership in the US fell to a 17-year low of 65.3 per cent in the third quarter of last year, but among immigrant households – accounting for existing families and new arrivals – it has steadily increased. Typically purchased after renting for a few years, for many upwardly mobile immigrants owning a home is a symbol of economic success. Although they represent close to 13 per cent of the US population, immigrants accounted for nearly 36 per cent of growth in home ownership between 2000 and 2010." Pan Kwan Yuk and Anjli Raval in The Financial Times

Astro interlude: Three years on the sun

4) Did the EPA just kill Keystone?

The EPA's objection to Keystone XL matters a lot. "Cynthia Giles, assistant administrator in EPA’s Office of Enforcement and Compliance Assurance, suggested the total amount of greenhouse gas emissions linked to the project could be higher than State estimated because State assumes the energy-intense crude oil would be extracted and shipped by rail if the pipeline is not constructed...EPA’s objection to the State Department’s draft analysis not only provides opponents with political ammunition, it could force President Obama to directly weigh in on the permitting decision if they raise similar objections later when State conducts a national interest determination." Juliet Eilperin in The Washington Post.

Utilities prepare for new emissions rules. "Faced with regulations that threaten to push coal out of the U.S. electricity mix, the power industry is weighing a lobbying strategy that treats new limits on greenhouse-gas emissions as a fait accompli. The approach, one of several laid out in an industry white paper viewed by The Wall Street Journal, would set a cooperative tone at the outset of the most consequential energy-policy debate of President Barack Obama's second term: whether and how much to cut the power sector's use of coal, a major contributor to the emissions linked to climate change." Ryan Tracy in The Wall Street Journal.

The U.S. oil and gas boom has had a modest economic impact so far. "Dales gets a similar result — about 0.7 percentage points of growth since 2009 — when he measures the value of the oil and gas boom in a different way, by looking at investments and the reduction of imports. That’s still significant (the reduction in imports alone have contributed 0.4 percentage points to growth), but it’s also relatively limited." Brad Plumer in The Washington Post.

...One political impact: the rejection of renewables mandates. "Sixteen of the 29 states with renewable portfolio standards are considering legislation that would reduce the need for wind and solar power, according to researchers backed by the U.S. Energy Department. North Carolina lawmakers may be among the first to move, followed by Colorado and Connecticut." Christopher Martin in Bloomberg.

Recent past mashups interlude: 1997 in media.

5) States debate minimum nurse requirements

Should states have a minimum nurse staffing law for hospitals? "How many nurses does it take to run a hospital? Legislatures in at least seven states and the District of Columbia are trying to answer that question as they debate bills that would require hospitals to have a minimum number of nurses on staff at all times. So far, only one state has such a law. California's state legislature passed a minimum nurse staffing law in 1999. Since then, similar nurse staffing laws have failed in every other state where they were proposed." David Schultz in Kaiser Health News.

State governments race to spread word about new health plans. "[W]ith recent studies showing that as many as three-fourths of those people are unaware of their new options, health care providers are joining community organizers and insurance companies in an ambitious effort to spread the word in the six months remaining before the health plans become available...Nationally, the Congressional Budget Office predicts that 14 million uninsured people will get coverage next year. But that goal is ambitious." Robert Pear in The New York Times.

From doctors to data points, in Obamacare program. "A new nonprofit is putting millions of Obamacare dollars towards an effort to turn routine doctor visits into a treasure trove of data on what medical treatments work best. The Affordable Care Act created the Patient Centered Research Outcomes Institute (PCORI) to support comparative effectiveness research, studies that identify the most effective treatments when a whole array of options might be available." Sarah Kliff in The Washington Post.

Does an $8 million advertising campaign really make Obamacare into the Iraq War? "I don’t think Obamacare will have an easy first year. But conservative commentary on the law is caught in an increasingly destructive information loop. The only information that is credible to them is information showing the law will be a disaster. The only news they believe is news that makes Obamacare look bad. The only strategy they’ve developed is one for when Obamacare collapses under the weight of its failures." Ezra Klein in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

The $2 trillion shadow economy is the recession’s big winnerBrad Plumer.

This is why you should buy Neil Irwin’s new bookEzra Klein.

This is how jittery financial markets are, in one chartNeil Irwin.

Under Obamacare program, doctor visits would become data pointsSarah Kliff.

Ron Wyden is wonkish, optimistic, idiosyncratic — and about to be very powerfulEzra Klein.

The U.S. oil and gas boom has had a modest economic impact — so farBrad Plumer.

The deficit is falling fast. Can Washington accept victoryBrad Plumer.

Does an $8 million advertising campaign really make Obamacare into the Iraq WarEzra Klein.

Chart: Even the poorest of the poor pay more taxes under Obama’s budgetDylan Matthews.

Et Cetera

What Obama can learn from female senatorsJuliet Eilperin in The Washington Post.

Can the Republicans come back in the citiesByron Tau in Politico.

Immigration-reform bill is tougher on border crossingsMiriam Jordan in The Wall Street Journal.

Will there be an electoral price to the gun voteNate SIlver in The New York Times.

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

Wonkbook is produced with help from Michelle Williams.

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