Wonkbook: The facts have changed. Have the policies?

June 6, 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.


(Photo by Charles Dharapak)

“When the facts change, I change my mind. What do you do, sir?”

John Maynard Keynes said that. Or maybe he didn't. When the facts change, I change the attribution on my quotes, as John Maynard Keynes didn't say.

The D.C. version is, when the facts change, you should change your policies. As a new report from the liberal Center for American Progress points out, the budget and economic facts have changed rather dramatically over the last few years. But the policies haven't.

Here are some of the facts that have changed since deficit-mania swept the town in 2010: We've enacted $2.5 trillion in deficit reduction. Health-care costs have slowed beyond our wildest hopes. Interest rates and inflation have remained low despite widespread predictions that deficits and aggressive monetary policy would drive them high. The economy has remained weak. Sequestration has taken effect. That's a lot of change.

Has anyone changed their policies since 2010? Even a little bit?

Take the Republicans. Rep. Paul Ryan's last few budgets cut debt dramatically but didn't balance till around 2040. In 2012, that was good enough. In 2013, though, a combination of new deficit reduction (like the tax increases in the fiscal cliff deal) and improvements in the budget forecast (due to lower projected interest rates and health spending) cut a lot of that debt on Ryan's behalf. So with some of the urgency gone, did Ryan ease up on the cuts to programs like Medicaid and food stamps? Of course not. He just got his budget to balance in 10 years instead of 30. The facts changed. The policies in the Republican budget didn't.

For Democrats, the central change is that sequestration is actually happening, and Republicans have decided they can live with it. So the thing that was so bad and so terrible it could never be permitted to happen has happened, and it looks like it's going to keep happening. In response to this new reality, Democrats have changed...nothing. The Obama administration hasn't accepted discretion to make the sequester's cuts less onerous. Democrats haven't offered an alternative package of spending cuts they're happier living with. In public, they've kept pursuing the exact kind of budget deals that led to sequestration in the first place, and in private, they've simply resigned themselves to a reality they once swore they'd never permit.

For Washington more generally, the deficit has proven much less of a problem than deficit hawks feared, while the economy has recovered much more slowly than economists predicted. Has that prompted a turn away from the politics of deficits and a refocusing on how to accelerate job creation? Of course not. Insofar as economic policy gets any attention everyone is still pursuing some kind of deficit-reduction bill. But in truth, Congress has moved onto other things, from investigating scandals to trying to pass immigration reform. What does Washington do when the facts change in ways that might require inconveniently changing policies? It changes the subject.

Wonkbook's Number of the Day: 58 percent. That's the share of Americans who say the U.S. is still in recession.

Wonkbook's Quotation of the Day: "The softer job market this spring is largely due to significant fiscal drag from tax increases and government spending cuts," said the ADP-Moody's job data report.

Wonkbook's Graph of the Day: Where the House budget would cut -- and where it wouldn't.

Wonkbook's Top 5 Stories: 1) economy is mixed bag ahead of monetary pullback; 2) IRS-DC link emerges; 3) immigration reform falling apart in House; 4) Obamacare's unusual lawsuits; and 5) gun panel releases report.

1) Top story: What if the economy isn't ready for the Fed's exit?

Fed sees 'modest to moderate' growth ahead. "The U.S. economy has continued to expand at a modest pace, supported by a resurgent housing sector and gains in manufacturing, the Federal Reserve said in a report Wednesday...The economic snapshot, based on anecdotal information gathered through late May, will be one of many reports Fed officials weigh ahead of their next policy meeting on June 18-19. Fed officials have indicated they could they could start to roll back their $85 billion-a-month stimulus program in the coming months, and financial markets have been on edge as investors seek clues about the central bank's next move." Jonathan House in The Wall Street Journal.

@pdacosta: Maybe it would be better to bolster markets by addressing problems in the real economy rather than trying to boost growth by goosing markets

ADP report shows 135k new jobs. "Economists surveyed by Dow Jones Newswires expected ADP to report a larger gain of 170,000 private jobs. The April employment increase was revised down to 113,000 from 119,000 reported a month ago..."The softer job market this spring is largely due to significant fiscal drag from tax increases and government spending cuts," the report said." Kathleen Madigan in The Wall Street Journal.

Explainer: Five questions Obama should ask of the next Fed chairNeil Irwin in The Washington Post.

Americans still down on economy. "More than half of America thinks we're still in a recession and only 36 percent of Americans are "satisfied" or "very satisfied" with the economy. That actually counts as good news—those results, from a new NBC News/Wall Street Journal poll, are much better than they have been. In fact, the share happy with the economy is the highest it's been since President Obama took office. And the share of people who think we're still in recession—58 percent—is down 6 percentage points from December." Niraj Chokshi in NationalJournal.

Now is the time to be an infrastructure hawk, not a deficit hawk. "This, then, is the difference between spending the next two years investing in infrastructure and spending the next two years sharply reducing the deficit. Both of them need to be done eventually. Delaying either means saddling the future with debts we declined to pay off in the present. But this is a particularly good time to invest in infrastructure and a particularly bad time to cut deep into the deficit. And yet we’re ignoring infrastructure and rapidly reducing the deficit. We’ve got it backwards." Ezra Klein in The Washington Post.

The era of uncertainty is over. Will an era of growth begin? "The semi-secret of the last five months is that, by several measures, uncertainty is plunging and confidence is rising. Here’s the first: the Economic Policy Uncertainty Index built by Stanford and University of Chicago economists, which is as close as we’ve got to actual quantification of uncertainty effects in the economy." Jim Tankersley in The Washington Post.

@JohnJHarwood: How big a gap between econ data and real people? Wash-Wall St see growth, Dow records. But 58% in NBC-WSJ poll say economy is in recession.

Productivity growth stutters. "Productivity rose at a seasonally adjusted annual rate of 0.5 percent in the first quarter, after a 1.7 percent decline in the October-to-December period, the Labor Department said on Wednesday. With productivity growth slow, companies might have to add workers if demand for their products continues to grow. The first-quarter performance was revised down slightly from an initial estimate of a 0.7 percent first-quarter increase." The Associated Press.

LAZEAR: The hidden jobless disaster. "Yet the unemployment rate is not the best guide to the strength of the labor market, particularly during this recession and recovery. Instead, the Fed and the rest of us should be watching the employment rate. There are two reasons. First, the better measure of a strong labor market is the proportion of the population that is working, not the proportion that isn't." Edward P. Lazear in The Wall Street Journal.

WESSEL: Sequester headlines have been scarier than reality so far. "It is biting, but only those affected directly notice. Federal public defenders across the country, hardly underworked, are facing furloughs of up to 20 days before Oct. 1. The Pentagon has told about 650,000 of its civilian employees to take up to 11 days off without pay between the beginning of July and the end of September. The National Institutes of Health says its clinical center will admit 750, or 7%, fewer new patients this year compared with last, and it will award 703 fewer competitive research grants this year, a drop of about 8%." David M. Wessel in The Wall Street Journal.

Music recommendations interlude: Steve Miller Band, "Abracadabra," 1982.

Top op-eds

DIONNE: What is Obama fighting for in his second term? "The real danger for Obama is that the coming months could become a summer of discontent if those who currently back the president lose track of where he wants to lead the country and abandon hope in Washington’s capacity to make things better...Obama and his party have been playing defense on health care. He needs to turn the tables and challenge those who would obstruct the law’s enactment and block the flow of its benefits. Implementation needs to be transformed from a dry bureaucratic chore into an element of a larger crusade for economic security." E.J. Dionne in The Washington Post.

BUCHANAN: What to do when the invisible hand stops working. "A few economists have been trying to go deeper by exploring the actual coordinating mechanisms of the invisible hand, how they emerge and also how they can break down. One notable example is a line of research initiated about a decade ago by Robert Clower and Peter Howitt. They noted that useful economic coordination comes about over time as people interact, discovering where to find the goods they like as well as the companies they trust and find useful...[T]he recovery of an economy won’t be only a matter of restoring confidence, letting prices and wages adjust, or keeping interest rates low. Recovery requires the time-consuming rebirth of entire networks of firms." Mark Buchanan in Bloomberg.

MILBANK: All in the White House. "Technically, you don’t have to be related to an Obama adviser to get a job in this administration. But as he staffs top posts for his second term, the president is creating an incestuous arrangement. With few exceptions, loyalists and friends are being promoted, with little new blood admitted at the highest levels. The man who boasted about creating a “team of rivals” in his first term has this time been circling the wagons so tightly that people are bound to get motion sickness." Dana Milbank in The Washington Post.

SOLTAS: Spend on watchdogs. Save money. Get a better government. "One good way to improve efficiency is to spend more on inspectors general of federal agencies, eligibility reviews for government benefits and the Government Accountability Office...The aim is to scour the government for waste and fraud. Spending on this task usually pays for itself. Inspectors general, disability reviewers and the GAO cover their costs many times over. At the Department of Veterans' Affairs, the inspector general saved $33 for every dollar spent, according to the office's latest report... The Social Security Administration carries out "continuing disability reviews" to update the status of beneficiaries. These save $10 for every dollar spent." Evan Soltas in Bloomberg.

Cartographic interlude: The history of bizarre borders.

2) The IRS scandal may track back to D.C. after all

Is there a D.C. link? Cincinnati workers say yes. "Two Internal Revenue Service employees in the agency's Cincinnati office told congressional investigators that IRS officials in Washington helped direct the probe of tea-party groups that began in 2010. Transcripts of the interviews, viewed Wednesday by The Wall Street Journal, appear to contradict earlier statements by top IRS officials, who have blamed lower-level workers in Cincinnati." John D. McKinnon and Dionne Searcey in The Wall Street Journal.

IRS puts two managers on leave for accepting free gifts, violating ethics rules. "The Internal Revenue Service, fighting political scandal and accusations of lavish spending, said Wednesday that it placed two managers on administrative leave for accepting free food and other gifts in violation of government ethics rules...Werfel said in a statement that he has begun the process of firing the managers, who allegedly held an after-hours party in their private hotel suites during the three-day conference. It was not immediately clear who gave the managers the food." Lisa Rein in The Washington Post.

How many applications are still caught in IRS limbo? "This week, Rep. Kevin Yoder (R-Kan.) has been seeking an answer to a straightforward question: How many 501(c)(4) groups which came under heightened Internal Revenue Service scrutiny are still awaiting a decision on their applications for tax-exempt status? During a hearing Monday before the House Appropriations Subcommittee on Financial Services and General Government, acting IRS Commissioner Daniel Werfel told Yoder that 132 groups were “overdue,” meaning they had been pending for at least 120 days. But on Tuesday, the IRS told The Post that 236 groups had been seeking tax-exempt status as 501(c)(4)s for more than 200 days." Juliet Eilperin in The Washington Post.

Under the sea interlude: 2013's top underwater photography.

3) Immigration reform falling apart in the House

Rep. Labrador walks away from House immigration-reform talks. "Rep. Raul Labrador (R-Idaho), considered by the Republican Party to be an important voice on the issue of immigration, announced late Wednesday that he is stepping away from bipartisan negotiations over how to overhaul the nation’s immigration laws...[T]he spokesman confirmed that the congressman decided to step away amid concerns over provisions of an emerging agreement regarding immigrant access to health-care." Ed O'Keefe in The Washington Post.

The House won't have a bipartisan reform bill. But maybe that's OK. "The bipartisan House group that’s been working for years on an immigration bill is about to break up without anything to show for it. ABC News reports that the negotiations crashed on the shoals of whether immigrants would have access to government-subsidized health care during their 15-year path to citizenship. So what comes next? “The House is likely to pass several smaller bills that address immigration reform, but would not include a pathway to citizenship.”" Ezra Klein in The Washington Post.

Sens. Rubio, Cornyn working to ease GOP concerns over Senate bill. "Sen. Marco Rubio (R-Fla.) is working with Senate Republican Whip John Cornyn (Texas) to strengthen the border security provisions in comprehensive immigration reform legislation scheduled for the Senate floor next week...After the Wednesday meeting with House conservatives, Rubio reiterated that the border security provisions in the Senate bill must be strengthened. He defended his stance against criticism from liberal immigration reform advocates, who are worried he will drag the bill too far to the right." Alexander Bolton in The Hill.

Republicans: Border security is a 'litmus test' for immigration bill. "A closed-door meeting of over 100 Senate and House conservatives Wednesday afternoon on immigration reform made at least one thing clear: Republicans don’t want to do anything before nailing down the border security issue." Tarini Parti and Seung Min Kim in Politico.

...But House Dems just tried to cut funding for local immigration enforcement. " The House on Wednesday voted down two Democratic attempts to cut a program that gives some authority to state and local officials to enforce immigration laws. Democrats oppose the so-called 287(g) program as something that has caused racial tensions in local communities between police and residents. As a result, they tried twice to pare back the program with amendments to H.R. 2217, the Department of Homeland Security Appropriations Act. Rep. Jared Polis (D-Colo.) first proposed language that would gut the 287(g) program completely, which would save $43.5 million." Pete Kasperowicz in The Hill.

Geek out interlude: Happy 35th birthday, Space Invaders!

4) Obamacare faces lawsuits from left

Court orders access to contraceptive. "A federal appeals court said the Food and Drug Administration must make an older version of the Plan B emergency contraceptive available to all ages without a prescription while the issue continues to wend through the courts. The U.S. Second Circuit Court of Appeals in New York, in a brief order, said a two-pill version of the Plan B emergency contraceptive pill should be available to anyone without age restrictions. Under the order, the more popular one-pill version will continue to be subject to age restrictions." Jennifer Corbett Dooren in The Wall Street Journal.

...It's a loss for the White House. "This is not a ruling on the merits of the case, but rather a decision on whether to drop age restrictions before issuing that ruling. We don’t quite know what the practical impact of this is yet, either: Plan B manufacturer, Teva Pharmaceutical, has told me previously that it would take “a few months” to deal with the logistics of new labeling and other steps necessary to move its product out onto drugstore shelves. In other words: Don’t expect emergency contraceptives to show up next to toothpaste and Advil tomorrow." Sarah Kliff in The Washington Post.

Most lawsuits aim to overturn Obamacare. This new complaint aims to expand it. "Employer health plans routinely cover pregnancy costs for workers and their spouses — but not necessarily their daughters. According to a handful of new complaints filed with the federal government, that’s sex discrimination, and the Affordable Care Act doesn’t allow it. If these complaints are successful, they could expand the benefits that health insurance plans must cover under the Affordable Care Act." Michelle Andrews in The Washington Post.

What bros need to know about Obamacare. "“Young adults are the age group least likely to have health insurance,” the Census found in data released earlier this year. In 2011, 27.2 percent of Americans between 18 and 34 lacked insurance coverage. The young adults least likely to have health insurance are — no surprise here — those with the lowest income." Sarah Kliff in The Washington Post.

Sen. Hatch probes rising cost of Obamacare subsidies. "Hatch wrote to Cabinet officials Wednesday seeking more information about the cost of providing tax credits to help people pay for their insurance premiums. The latest White House budget proposal estimates spending roughly $32 billion in 2014 on tax credits to help cover premiums. That cost has more than doubled over the past few White House budgets." Sam Baker in The Hill.

Realistic Risk interlude: Strange game. The only winning move is not to play.

5) Gun panel releases report

Panel says better data needed on gun issues. "A panel of experts convened in response to the school shooting last year in Newtown, Conn., gave the federal government an ambitious set of priorities on Wednesday for research on guns, ending what experts said has been a 17-year hiatus in the study of gun violence after Congress took away federal money for the topic in the 1990s. President Obama has included $10 million for gun-related research in his 2014 budget, the first federal financing for the topic in years, and the panel’s chairman, Alan I. Leshner, said the report was a first step to deepen evidence about the public health implications of guns." Sabrina Tavernise in The New York Times.

Sen. Ayotte still under pressure for gun vote. "Michael Bloomberg’s gun control group is waging a new front in its war against Sen. Kelly Ayotte (R-NH), this time launching a $400,000 ad blitz accusing her of deceiving constituents on her vote on background checks. The 30-second spot, “False Alibi,” will air in the Manchester, N.H. and Boston-area media markets between today and June 13, Jack Warner, a spokesman for Mayors Against Illegal Guns, told TPM." Sahil Kapur in Talking Points Memo.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

IMF: Our Greek bailout was poorly doneNeil Irwin.

States want to drug-test welfare recipients. That's a horrible ideaHarold Pollack.

It's paywall time at The Washington PostEzra Klein.

What bros need to know about ObamacareSarah Kliff.

The House won’t have a bipartisan immigration bill. That’s (maybe) okayEzra Klein.

White House loses bid to delay Plan B access to women of all agesSarah Kliff.

Daniel Ellsberg: ‘I’m sure that President Obama would have sought a life sentence in my case.’ Timothy B. Lee.

Report: NSA asked Verizon for records of all calls in the U.S. Timothy B. Lee.

An obscure new rule on microwaves can tell us a lot about Obama’s climate policiesBrad Plumer.

Yes, Europe really is in the throes of austerityDylan Matthews.

The era of ‘uncertainty’ may be over. Will a growth boom beginJim Tankersley.

Most lawsuits aim to overturn Obamacare. A new complaint wants to expand itMichelle Andrews.

Five questions Obama should ask candidates for Fed chairNeil Irwin.

Now is the time to be an infrastructure hawk, not a deficit hawkEzra Klein.

Corporate taxes don't cause recessions. But do they hurt growthDylan Matthews.

How patent trolling went mainstreamTimothy B. Lee.

Et Cetera

Student loan battle set in SenateBurgess Everett and Jose Delreal in Politico.

The Congress is full of education reform ideasPete Kasperowicz in The Hill.

Rep. John Dingell is set to become the longest-serving member of the HouseAshley Parker in The New York Times.

Report: Entitlement reforms could put seniors at financial riskMichael A. Fletcher in The Washington Post.

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

Wonkbook is produced with help from Michelle Williams.

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