Wonkbook: Are the chances of a fall budget deal underrated?

July 23, 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 J. Scott Applewhite)

Here's some real talk from Time's Mike Grunwald on President Obama's coming jobs speech: "Obama's jobs problem is not lack of focus or too many pivots. It's the GOP. And speeches won't change that."

But the Obama administration doesn't expect speeches to change it. They expect the fall showdowns to change it. And they hope Senate Republicans will help. The speeches are just about setting up that fight.

Over the past six months Washington, D.C. has settled into an unexpected and uneasy stasis on economic policy. After Republicans accepted some tax increases on the rich in January, they managed to delay a debt-ceiling showdown and a government shutdown -- something many thought House conservatives would force. Then sequestration went into effect, which wasn't supposed to happen, and Republicans decided they kinda liked it. Then the deficit began dropping like a rock. And then Congress simply moved onto other things, like immigration and doing nothing.

The expectation in Washington is that this quiet truce will continue. That's not the Obama administration's expectation, though. The fall will bring another debt ceiling increase as well as a deadline on funding the government. House Republicans might turn either or both of these into showdowns -- whether their leadership wants them to or not.

If House Republicans force a showdown, then something will have to happen -- just as it did in February 2011, and August 2011, and January 2013. Showdowns are how Congress legislates now.

The White House's hope for a deal here doesn't come from a speech. It comes from the Senate, where there does seem to be a breakaway group growing frustrated with House Republicans and more interested in White House dealmaking, where there are more Republicans whose top issue is defense (and thus more concern over sequestration's ongoing defense cuts), and where the White House has spent much of the last six months assiduously strengthening relationships.

Will it work? Everybody agrees that the chances of a deal are not great. But in much the same way that the chances of a deal were overrated because budget talks got so much coverage before sequestration, they might be underrated now, when so much of Washington has come to believe 2013's stasis is the new normal, rather than a brief interregnum from budget brinksmanship.

Wonkbook's Number of the Day: 34 percent. That's the percentage cut House Republicans said they wanted to make from the Environmental Protection Agency’s budget.  

Wonkblog's Graphs of the Day: All of the ones in this paper (scroll to page 21).

Wonkbook's Top 5 Stories: 1) class and income mobility; 2) Affordable Care Organizations are in trouble; 3) immigration's summer romance; 4) EPA on the chopping block; and 5) unions today.

1) Top story: America's royal baby is the economy

Reminder: Obama speech on economy is tomorrow. "President Obama is restarting a major effort this week to focus public attention on the American economy, a strategy aimed at giving him credit for the improving job market and lifting his rhetoric beyond the Beltway squabbles that have often consumed his presidency. The new effort, which begins with a major address on Wednesday followed by as many as six economic-themed speeches over the next two months, reflects how often world events, his political adversaries and his own competing agenda have conspired to knock him off that subject. " Michael D. Shear and Jonathan Weisman in The New York Times.

@MikeGrunwald: Obama's jobs problem is not lack of focus or too many pivots. It's the GOP. And speeches won't change that.

...Obama's catchphrase: 'the middle out.' "Mr. Obama plans to elaborate on the middle-out theory in a series of speeches intended to move the national conversation from Washington’s political dysfunction to the economic one on Main Street. But the middle-out idea is also an intellectual counteroffensive against the supply-side economics that has dominated conservative thinking for decades — and that were manifested in the tax and budget cuts that Mitt Romney put forward in his failed campaign last year. The grand idea behind the rhetorical flourish — which Mr. Obama has used for the past two years or so but which the White House put front and center this week — is that the hollowing out of the American middle class is not just unfair or unfortunate, it has slowed growth and created a more fragile economy, too. In that sense, the thinking goes, a thriving middle class is not just a worthy goal in itself, but a path to a stronger economy." Annie Lowrey in The New York Times.

...But, on the economy, Obama is faltering under his own terms. "The president has watched some of his biggest economic initiatives falter since winning reelection. He promised 1 million new manufacturing jobs by the end of 2016. But factory employment has fallen for the last four months, and on net is only 13,000 jobs toward that goal...Obama’s plan to double U.S. exports by 2014 has also run into trouble (due in large part to persistently weak global demand, which was certainly foreseeable when Obama made that promise)." Jim Tankersley in The Washington Post.

Deputy Treasury Secretary Neal Wolin to step down; led efforts on financial regulations. "During the financial crisis, an angry Congress demanded that the Treasury Department limit executive pay at firms that received bailouts — an effort that would be sure to elicit white-hot criticism from all corners. So Deputy Treasury Secretary Neal S. Wolin had an idea: Get someone else to make the unpopular decisions about how much those executives should be paid...Wolin has played a similar role in confronting some of the thorniest economic issues facing the Obama administration. Wolin, 51, has decided to step down next month and is planning to take a post with a not-yet-determined think tank as he mulls other options outside government" Zachary A. Goldfarb in The Washington Post.

Obama said to consider Raskin for No. 2 Treasury post. "President Barack Obama is considering Federal Reserve Governor Sarah Bloom Raskin, a former state banking regulator, to serve as deputy Treasury Secretary, according to two people familiar with the matter. Raskin, 52, emerged as a leading candidate after Obama administration officials concluded that they wouldn’t be able to persuade the Senate to confirm anyone with a long career on Wall Street, according to the people, who asked not to be identified." Hans Nichols and Joshua Zumbrun in Bloomberg.

@BCAppelbaum: If Obama tapped Raskin for a Treasury post, there would be only one woman left on the Fed's board: Janet Yellen.

In climbing income ladder, location matters. "[G]eography appears to play a major role in making Atlanta one of the metropolitan areas where it is most difficult for lower-income households to rise into the middle class and beyond, according to a new study that other researchers are calling the most detailed portrait yet of income mobility in the United States. The study — based on millions of anonymous earnings records and being released this week by a team of top academic economists — is the first with enough data to compare upward mobility across metropolitan areas...Climbing the income ladder occurs less often in the Southeast and industrial Midwest, the data shows, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle and large swaths of California and Minnesota." David Leonhardt in The New York Times.

...Snapshots of upwardly mobile areas. "Scranton still stands out as one of the American cities where poor people have among the best odds of climbing into the middle class, according to a large new study. A poor person from Scranton is almost twice as likely to rise into a higher income bracket than a poor person from Toledo, Ohio, or South Bend, Ind...The authors of the new study found four factors that areas with more upward mobility tend to have in common: a large and geographically dispersed middle class; better than average schools; a high share of two-parent households; and populations engaged with religious and community organizations...Another factor that sets upwardly mobile cities apart is that lower-class people live among the middle and upper classes: according to the study, there is a correlation between upward social mobility and income diversity." Andrew Siddins in The New York Times.

...A steeper climb for single parents. "It is hardly surprising that family structure was one of the four factors with a clear relationship to upward mobility in a large new study comparing mobility across metropolitan areas. In areas with a higher divorce rate and higher share of single-parent families, the odds of climbing into the middle class or beyond were lower...One thought-provoking finding from the new study on mobility: In metropolitan areas with large numbers of single-parent families, even children with two parents face longer odds of climbing the economic ladder. That pattern suggests that a factor that the researchers were not able to measure is affecting both family structure and economic mobility — or that family-structure patterns have effects on an entire community." David Leonardt in The New York Times.

An economic casualty: the missing household. "The number of so-called missing households—representing adults who would be owning or renting their own home if household formation had stayed at normal rates since the recession—has increased 4% over the past year, according to an analysis for The Wall Street Journal. There are now some 2.4 million such people, many of them living with their parents, but also seniors living with their adult offspring and people renting rooms in a home headed by an unrelated person." Josh Mitchell in The Wall Street Journal.

Home sales slip, but recovery on track. "Existing-home sales fell 1.2% in June from a month earlier to an annual rate of 5.08 million, the National Association of Realtors said Monday. That still marked the second-best month of sales since November 2009. Sales in May, which were revised down slightly from initial estimates to 5.14 million from 5.18 million, were the highest level over that period. June's existing-home sales were 15.2% higher from a year ago." Josh Mitchell and Jonathan House in The Wall Street Journal.

...But it's beginning to price out first-time homebuyers. "Such buyers, typically couples in their late 20s or early 30s, have accounted for about 30% of home sales over the past year. They represented 40% of sales, on average, over the past 30 years, and accounted for more than 50% in 2009, when recession-era tax credits fueled the first-time market, according to data from the National Association of Realtors." Conor Dougherty and Dawn Wotapka in The Wall Street Journal.

...And ‘flipping’ makes US comeback as house prices rise. "Flip That House, along with other US reality television programmes about investors who bought properties to revamp and sell for a quick buck, went dark when the housing market crashed. But now bargain hunters looking to make a profit, and the cameras that follow them, are back. Low interest rates, a slowly improving jobs market and greater consumer confidence have spurred more Americans to buy houses. Rapidly depleting inventories of homes for sale and surging prices have created a sweet spot for house flippers – those who buy and sell the same home within six months." Anjli Raval in The Financial Times.

...Rising rates will also contain corporate profit margins. "[A]n analysis conducted by independent strategist Brett Gallagher shows that low interest rates have done much to bolster margins. Given the superlow interest-rate era may soon start drawing to a close, that could be another reason for investors to question just how long margins can hold up...Mr. Gallagher found that in 2012, interest expenses—what companies had to pay to service their debt—came to 1.8% of sales for companies in the S&P 500. That compares with a 15-year average of 3.9%. Nor does this reduction in interest expense reflect a reduction in debt: Net debt as a percentage of assets stood at 14.2%, above the 15-year average of 11.5%." Justin Lahart in The Wall Street Journal.

Economists upbeat, survey says. "More than 70 percent of those surveyed by the National Association for Business Economics, an industry group, forecast that the economy will grow more than 2 percent over the next year. In January, only half of respondents were that optimistic...Many private economists have cut their GDP forecasts for the second quarter. The consensus prediction is for a 1.5 percent annualized rate of growth." Ylan Q. Mui in The Washington Post.

Here’s how Goldman Sachs is making your beer more expensive. "Three years ago, Goldman bought a bunch of warehouses around Detroit and started paying traders extra to bring their metal there rather than anywhere else. The longer it stays, the more rent Goldman can charge, which is then passed on to the buyer in the form of a premium." Lydia DePillis in The Washington Post.

BERNSTEIN: Inequality, mobility and the policy agenda they imply. "The problem is that a central thesis of the inequality/mobility nexus is that skills alone won’t crack it.  Again, no question that overcoming the barriers that block lower-income children from achieving their intellectual (and economically productive) potential is an essential part of this, but if you don’t deal with the politics — really, the power — you’ll end up with a bunch more children who fortunately have gone a lot further in their personal development, but remain stuck in or near the income decile of their birth." Jared Bernstein in The New York Times.

Music recommendations interlude: Tycho, "A Walk," 2011.

Top opinion

PONNURU: Libertarians are leading Republicans to doom. "The defect of libertarian populism, however, is that it would do more to put Republicans on record against the collusion of big government and big business than in favor of policies that would help most people. And while both of these things are politically important, the latter is more so...Libertarian populism sounds good, but we should not mistake a few bars for a whole song sheet." Ramesh Ponnuru in Bloomberg.

KLEIN: An adult political conversation about death. "Rep. Earl Blumenauer still wants Medicare to cover consultations between patients and their doctors on the kind of care they want at the end of their life. That’s the policy that Sarah Palin called a “death panel” during the 2009 health-care debate. It’s also a policy that sounds boring, though commonsensical, when you explain it...[Y]our preferences need to be clearly spelled out so that your doctor and your family aren’t left guessing about whether they should crack your ribs delivering CPR when it’s already clear you’ll never leave the hospital again." Ezra Klein in The Washington Post.

SALETAN: Rules to have a constructive conversation on race. "4. Don’t pretend you’re perfect. If you’re racially colorblind, great. But it’s more likely that you’re human like the rest of us. Studies have documented pervasive, unconscious racial bias even among people with pure hearts. That’s understandable, given our history and the common tendency toward intergroup bias. To overcome this bias, you have to notice it. You don’t have to think about it all the time—that would make your interactions weird. But every now and then, reflect on things you’ve done or said. The seat you walked past on the bus, next to that woman. The way you tightened up as you passed that guy on the street. What was that about? Little by little, you’ll clean yourself up." Will Saletan in Slate.

MILBANK: The maverick returns. "On Sunday, he appeared on CNN, praising President Obama’s speech on the George Zimmerman case and proposing a review of the “stand your ground” laws that came to attention because of the killing of Trayvon Martin. Days earlier, McCain had brokered a deal averting a procedural meltdown in the Senate over the filibuster. Before that, he was a key figure in drafting the bipartisan immigration bill that cleared the Senate. Also this year, he has called some of his hard-line Republican colleagues “wacko birds” and has criticized them for blocking a budget resolution." Dana Milbank in The Washington Post.

You're welcome, fellow New Yorkers interlude: How hot is it on the station platforms of the L train?

2) Why are ACOs struggling?

Did you know the federal government thinks doctors can work 50-hour days? "The inner workings of the Relative Value Update Committee are becoming a little less secretive. Peter Whoriskey and Dan Keating wrote a fantastic piece over the weekend that that revealed how off-base the RUC’s value estimations are, following on excellent work earlier this month from Washington Monthly’s Haley Sweetland Edwards. Taken together, the two are one of the clearest windows we have into the bizarre world of medical prices." Sarah Kliff in The Washington Post.

Hospitals are quitting a key Obamacare cost-control program. "The results of the Accountable Care Organizations’ first year, released last year, are a bit difficult to interpret. All the hospitals did show success in improving on quality measures, rates of re-admissions and monitoring of cholesterol levels. On the other, 14 failed to produce any cost savings – and nearly a third of them also decided to stop participating in the program. Seven switched a different, less aggressive Medicare program, while two dropped out altogether." Sarah Kliff in The Washington Post.

GOP wants more information on premiums under Obamacare. "Congressional Republicans pressed the Obama administration Monday to release more information about health insurance premiums under ObamaCare, after initial filings provided good news for the law. The Health and Human Services Department has not yet released rate information for the 34 states in which it will operate the new insurance exchanges established by the Affordable Care Act." Sam Baker in The Hill.

Federal judge blocks N. Dakota’s most-restrictive abortion law. "A federal judge in North Dakota on Monday temporarily blocked the state’s law banning abortions as early as six weeks after fertilization, calling the legislation “clearly unconstitutional.” The preliminary injunction from U.S. District Judge Daniel L. Hovland means that the nation’s most restrictive abortion law, which would bar abortions as soon as a fetal heartbeat is detectable, will not take effect Aug. 1 as planned. The ruling also suggests that, even as states across the country enact measures limiting abortion access, some of the laws may never take effect because of stiff legal challenges." Juliet Eilperin in The Washington Post.

Health-care enrollment effort gets some star power. "The White House is enlisting the help of celebrity and entertainment officials to promote the health care overhaul, focusing on stars who they hope can convince young adults to purchase insurance coverage. Comedian Amy Poehler, actor Kal Penn and singer Jennifer Hudson attended a closed-door White House meeting Monday, hosted by senior advisor Valerie Jarrett and other top White House officials, according to a White House official." Sarah Kliff in The Washington Post.

...Oprah, Funny or Die and the Grammys want to promote Obamacare. "What do Oprah, Funny or Die and the Grammys have in common? All three, it turns out, have volunteered to promote Obamacare. Senior advisor Valerie Jarrett hosted a meeting Monday with a star-studded group of actors, musicians, writers and producers who have “expressed a personal interest in educating young people about the Affordable Care Act,” according to a White House official." Sarah Kliff in The Washington Post.

Paging Timothy B. Lee interlude: Anti-patent-trolling + crowdsourcing.

3) Immigration reform needs to outlast summer romance

Immigration faces critical weeks. "When it comes to immigration, the House looks like a mess. Speaker John Boehner wanted to pass something by August, but that’s not happening. A bipartisan “gang” has missed every self-imposed deadline to unveil its bill. Rep. Paul Ryan is talking to everyone with an “R” next to their name — and a handful of Democrats, too — but his endgame is unclear. And House Majority Leader Eric Cantor says he wants to help undocumented children gain legal status — but hasn’t said much beyond that." Jake Sherman and Seung Min Kim in Politico.

Interview: Rep. Luis Gutiérrez explains how immigration reform gets out of the HouseDylan Matthews in The Washington Post.

Poll: Illegal immigrants favor Democrats 54 percent to 19 percent. "Hispanic illegal immigrants aren’t very partisan, but they clearly favor the Democratic Party, according to data from the Pew Research Center. The table below, based on Pew’s 2012 National Survey of Latinos, shows 31 percent of Hispanic illegal immigrants identified as Democrats, while just 4 percent said they are Republicans. When you include those who leaned toward either party, though, the Democrats’ lead increased to 54 percent to 19 percent." Aaron Blake in The Washington Post.

The British on drugs interlude: Back in 1963, the troops tested LSD.

4) EPA on the chopping block

House bill slashes EPA budget by 34 percent. "House Republicans on Monday unveiled plans to slash the Environmental Protection Agency’s budget by 34 percent in 2014 and block federal rules to limit carbon emissions from power plants...The reduction was unveiled as part of a $24.3 billion Interior and Environment spending bill coming before a House Appropriations subcommittee Tuesday.  In total, the bill cuts $5.5 billion, or 19 percent, from agencies under its purview. The EPA is cut deeper in order to reduce the effects on other budgets." Erik Wasson and Ben German in The Hill.

Ernest Moniz to reorganize Energy Department. "Energy Secretary Ernest Moniz is massively reshuffling his department’s leadership structure. The plan makes significant changes at the undersecretary level, creating a position of undersecretary for management and performance, consolidating the agency’s defense waste cleanup efforts and merging the energy and science programs." Darius Dixon in Politico.

New EPA chief exhorts agency staff to ‘act now on climate change.' "The Environmental Protection Agency “has a clear responsibility to act now on climate change,” the agency’s new chief said Monday in a video message to staff. EPA Administrator Gina McCarthy, who was confirmed to replace Lisa Jackson last week, said the agency has reached a “defining time” in its history as it prepares to regulate greenhouse gas emissions from power plants." Zack Colman in The Hill.

Introducing 'building-integrated photovoltaics.' "From stadiums in Brazil to a bank headquarters in Britain, architects led by Norman Foster are integrating solar cells into the skin of buildings, helping the market for the technology triple within two years...The projects mark an effort by designers to adopt building-integrated photovoltaics, or BIPV, where the power-generating features are planned from the start instead of tacked on as an afterthought...The market for solar laid onto buildings and into building materials is expected to grow to $7.5 billion by 2015 from about $2.1 billion, according to Accenture Plc, citing research from NanoMarkets." Louise Downing in Bloomberg.

What are the risks of energy transportation? "The oil-train crash also adds a new dimension to the debate over the Keystone XL pipeline, which analysts say would displace some rail-shipped oil. Pipelines have their own problems, too, of course, which the Arkansas oil spill from earlier this year showed. Criticism is likewise growing around natural-gas pipelines, especially in light of a major pipeline explosion in Louisiana last month. And the risks of shipping coal by rail were exposed when a coal train derailed in Maryland and killed two teenage girls in August 2012." Amy Harder in NationalJournal.

No joke: Feds bust energy traders for ‘spoofing.' "The Commodity Futures Trading Commission (CFTC) has accused the high-speed trading firm Panther Energy LLC of gaming commodity markets with a practice called “spoofing,” the agency announced Monday. The $2.8 million CFTC settlement is the first time the commission has used powers granted under the 2010 Dodd-Frank law to limit “disruptive” trading practices, regulators said." Ben German in The Hill.

Your world interlude: Faster than the speed of light?

5) Unions try to stay relevant

Unions rally federal employees to appeal furlough. "Unions are mounting a new attack on the Obama administration’s decision to furlough nearly one in two federal workers, rallying thousands of their members to appeal the unpaid days off to a little-known review board. As of 5 p.m. Friday, almost 6,000 appeals had flooded the offices of the small, understaffed Merit Systems Protection Board — about equal to the number of cases it normally handles in a year." Lisa Rein in The Washington Post.

Workplace injuries drop, but claims of employer retaliation rise. "The number of workplace injuries recorded by the federal government has dropped by 31% over the past decade. But that improvement may not be what it seems, according to a growing group of workers who say companies are retaliating against them for reporting injuries in the first place. About 100 federal and state court cases involving retaliation for workers' compensation claims were decided last year, roughly double the number a decade before, estimates Lex Larson, president of Employment Law Research Inc." James R. Hagerty in The Wall Street Journal.

Unionizing through the backdoor. "The community groups, called worker centers, are often backed by unions. But they aren't considered "labor organizations" by law because they don't have continuing bargaining relationships with employers. That gives them more freedom in their use of picketing and other tactics than unions, which are constrained by national labor laws. The new approach is sparking a backlash from some businesses, who call it an end-run around labor laws that can be used to help unionize new groups of workers." Kris Maher in The Wall Street Journal.

Domestic workers to demand action from Labor Secretary Tom Perez. "Domestic workers plan to rally near the Department of Labor headquarters Tuesday, calling on the newly-confirmed labor secretary and the White House to extend minimum-wage requirements and other workplace protections to in-home caregivers. The National Domestic Workers Alliance has organized the demonstration as part of its annual convention in Washington. The Labor Department is considering proposals that could meet the group’s demands, but the agency has not finalized the guidelines." Josh Hicks in The Washington Post.

New civil rights chief will be pressed to charge Zimmerman in Trayvon Martin killing. "With Tom Perez, former head of the civil rights division at Justice now moving to be secretary of Labor, the question is: Who will head Justice’s civil rights division? The answer for the short term — and we’re hearing likely to be nominated for the long term — is Joycelyn Samuels, who’s been the principal deputy assistant attorney general in that division for the past four years." Al Kamen in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Interlude: Mark Leibovich on ‘the people who think they run your country.’ Ezra Klein.

Congrats on (almost) being born, Royal Baby. Your timing is terribleDylan Matthews.

Here’s how Goldman Sachs is making your beer more expensiveLydia DePillis.

White people believe the justice system is color blind. Black people really don’t. John Sides.

Oprah, Funny or Die and the Grammys want to promote ObamacareSarah Kliff.

Hospitals are quitting a key Obamacare cost-control programSarah Kliff.

How the British press corps really feels about the royal babySarah Kliff.

Interview: Rep. Luis Gutiérrez explains how immigration reform gets out of the HouseDylan Matthews.

On the economy, Obama is faltering under his own termsJim Tankersley.

Did you know the federal government thinks doctors can work 50-hour daysSarah Kliff.

Here’s how the government justifies sucking up your phone recordsTimothy B. Lee.

Et Cetera

'Crack baby' study ends with unexpected but clear result. Susan FitzGerald in The Philadelphia Inquirer.

Obama donors keep sending those checks. Reid J. Epstein and Byron Tau in Politico.

Democrats still divided over student-loan billBurgess Everett in Politico.

Dems propose redistricting limits in response to Voting Rights Act rulingPete Kasperowicz in The Hill.

Is the EPA really biased? NoErica Martinson in Politico.

Harry Reid says nuclear option still on the table. Byron Tau in Politico.

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

Wonkbook is produced with help from Michelle Williams.

Comments
Show Comments
Most Read Business

business

wonkblog

Success! Check your inbox for details.

See all newsletters