Wonkbook: Why Democrats could be in trouble in November

May 20

Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara. To subscribe by e-mail, click here. Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.


Should you bet on America? (Photo by Karen Bleier/AFP/Getty Images)

Wonkbook’s Number of the Day: Nearly 10 million. That's the number of households that remain stuck in homes worth less than their mortgages, a new analysis says.

Wonkbook’s Chart of the Day: This interactive chart shows the challenges of cutting carbon-dioxide emissions to fight climate change.

Wonkbook's Top 5 Stories: (1) Time for Dems to panic?; (2) does Obamacare need a CEO?; (3) the burgeoning China cyberwar; (4) digesting the nutrition policy debate; and (5) inverting and averting tax inversions.

1. Top story: Why Democrats could be in trouble in the midterms 

Mounting danger for Democrats. "President Barack Obama’s job approval slump and voters’ entrenched wariness of his health care law are dogging Democrats ahead of the 2014 midterm elections, and Republicans have captured a lead in the areas home to the year’s most competitive races, according to a new POLITICO poll. In the congressional districts and states where the 2014 elections will actually be decided, likely voters said they would prefer to vote for a Republican over a Democrat by 7 points, 41 percent to 34 percent....Among these critical voters, Obama’s job approval is a perilous 40 percent, and nearly half say they favor outright repeal of the Affordable Care Act." Alexander Burns in Politico.

Primary source: The full poll. Politico.

It's the economy and jobs, stupid, not so much the income gap. "Twenty percent of Americans name unemployment or jobs as the most important problem facing the country in May, up from 14% who mentioned these issues in April. Dysfunctional government (19%) and the economy in general (17%) also rank among the top problems. These three issues — jobs, economy, and government — have been at the top of the 'most important problem' list since the beginning of the year. Mentions of government and politicians rose sharply to 33% in October amid the partial government shutdown, but have dipped back down." Rebecca Riffkin in Gallup.

And the GOP has the edge on the economy. "American voters rate the economy as the most important issue to their vote for Congress this year, and give the Republicans in Congress a slight edge over the Democrats as best able to handle it. Voters give four other issues lower, but still above-average, importance — the federal deficit, taxes, the Affordable Care Act, and income and wealth inequality. Voters see Republicans as better able to handle the first two, while Democrats have the edge on the latter two." Frank Newport in Gallup.

Key Democratic constituencies still aren't feeling the recovery. "Signs that a long-awaited economic recovery may finally be gaining steam should be welcome news for President Obama and his party as they try to stem losses....But rising payrolls, lower unemployment and a buoyed stock market, while lifting the fortunes of the rich, are leaving behind major Democratic constituencies, including young women and blacks, just as the party tries to motivate them to turn out to vote....'There’s a recovery for some people, you know, and other people, not so much,' said James Carville, a Democratic strategist, who likened the current conditions to those in 1994, when Democrats were trounced despite an economy that was clearly in recovery." Jonathan Weisman in The New York Times.

Voters are on Dems' side on several key issues. Here's why that matters less than you might think. "The [Politico] survey found that even in more conservative key states, such as Arkansas or Georgia, as well as too-close-to-call House districts, voters 'still lean in a liberal direction on several issues Democrats have championed this year, including immigration reform, pay equity for men and women and background checks for gun purchasers.' But Democrats suffer because health care is far more important to people." David Lightman in McClatchy Newspapers.

That includes immigration, despite cross-party support. "Comprehensive immigration reform enjoys broad bipartisan support, but is particularly intense among Hispanic voters, who are most likely to weigh the issue heavily as they assess candidates, according to a new POLITICO poll of voters in places with the most competitive House and Senate races....64 percent of Republican respondents back comprehensive immigration reform, as do 78 percent of Democrats and 71 percent of independents." Katie Glueck in Politico.

Gun control, too. "A majority of likely voters in swing congressional districts and states this year support stricter background checks on gun purchasers, and the support spans both parties, a new POLITICO poll finds." Katie Glueck in Politico.

Obama criticizes Republicans for Benghazi, Obamacare focus. "Obama said the main focus of Republicans 'is trying to figure out how they can make people sufficiently cynical, sufficiently angry, sufficiently suspicious that they can win the next election.'....Polls show Republicans stand to maintain control of the House and possibly seize the Senate in November elections. Such an outcome would make it extremely difficult for Obama to advance his priorities during the last two years of his presidency, in 2015 and 2016." Steve Holland in Reuters.

Related: Dems desperately seek an Obama midterm strategy. Edward-Isaac Dovere in Politico.

Other political reads:

Julián Castro is going to run HUD, but that department doesn't really run housing policy. Matthew Yglesias in Vox.

Cabinet positions are lousy launching pads to the vice presidency. Philip Bump in The Washington Post.

PONNURU: How Republicans can minimize their election-year minimum-wage problem. "Republicans are on the defensive, stuck debating whether to oppose an increase in the minimum wage or accept it, because they aren't advancing compelling ideas of their own. They should answer the president's push for the increase, and the larger campaign against economic inequality, by changing the subject to something more important: how to create broad-based prosperity." Ramesh Ponnuru in Bloomberg View.

LAPIDOS: Not much of a silver lining for Dems. "Yes, the poll found that respondents would prefer to vote for a generic Republican over a generic Democrat, 41 percent to 34 percent. It also found that they’re not happy with Barack Obama: 59 percent said they disapproved of his job performance as president. And yet, the poll found substantial support for the Democratic view on two crucial issues: Gun control and immigration reform....Even in a Republican-leaning crowd, Democrats are more in tune with likely voters on guns and immigration. Too bad for Democrats that being on the right, popular side of these issues may not be enough to get them into office." Juliet Lapidos in The New York Times.

SARGENT: Obamacare not a slam dunk for Republicans. "It’s true Dems are in danger. But it’s worth remembering that a tolerable outcome for Dems is if they limit their losses to five Senate seats, which will be decided by a series of grueling contests with a host of unique features. However, the poll’s findings on Obamcare are also noteworthy. Even among likely voters in the competitive races, keep/modify polls slightly better than repeal. The poll finds that 35 percent favor keeping the law with modifications, and another 16 percent favor keeping it as it is — for a total of 51 percent who favor keeping and modifying the law. Meanwhile, 48 percent favor repeal." Greg Sargent in The Washington Post.

Top opinion

BROOKS: Is democracy in decline? "The events of the past several years have exposed democracy’s structural flaws....Across the Western world, people are disgusted with their governments. There is a widening gap between the pace of social and economic change, and the pace of government change. In Britain, for example, productivity in the private service sector increased by 14 percent between 1999 and 2013, while productivity in the government sector fell by 1 percent between 1999 and 2010. These trends have sparked a sprawling debate in the small policy journals: Is democracy in long-run decline? A new charismatic rival is gaining strength: the Guardian State." David Brooks in The New York Times.

MORGENSON: Geithner staying on script. "One on one, Mr. Geithner can come across as arrogant; but on these pages he’s self-effacing. He recounts frequent 'empathy mistakes' that he made at Treasury....He also acknowledges that he was an inept public speaker....But his book is less successful in making the case that he cared as much for troubled borrowers as he did for reckless banks. And he fails to answer one of the most crucial questions about the crisis: How did he and his regulatory colleagues at the Fed, with their army of researchers and high-powered economists, miss the immense and obvious buildup of risk in the financial system that led to the crisis?" Gretchen Morgenson in The New York Times.

BLINDER: Fed hawks vs. doves: The sequel. "We are in the dog days of Fed-watching now, but the boredom won't last long. Once the Federal Open Market Committee (FOMC) announces a few more $10-billion-a-month 'taperings' of asset purchases, the financial markets will fixate completely on the Federal Reserve's eventual 'exit' from its current extraordinarily easy monetary policy....It will probably be accompanied by a revival — likely a loud revival — of the hawk-dove wars at the central bank. Right now, an uneasy truce prevails, as everyone has signed on to the strategy of gradual tapering. That truce won't last." Alan S. Blinder in The Wall Street Journal.

MILBANK: Signs of an Obamacare detente. "For the first time since Obamacare split the country in two, the conditions for a cease-fire have begun to appear. An architect of this detente — although he denies any such intent — is Mike Pence, who as a conservative Republican congressman in 2010 fought bitterly against the law and who as governor of Indiana refused to implement it. But Pence...just announced his intent to take the money Obamacare provides for Medicaid expansion and to use it on his own terms to broaden health-care coverage for the working poor....As more conservatives realize that the law they hate allows them to implement policies they like, they may have trouble recalling what all the fuss was about." Dana Milbank in The Washington Post.

McMANUS: Mind the opportunity gap. "Ever since the financial crash of 2008, we've been having an anxious national debate about the growing income gap. What does it mean for American society when most workers' wages are flat and almost all economic gains flow to the top 1% — or to the top one-tenth of 1%? But it's a discussion that too often turns into a sterile squabble over economic theology between liberal populists, who want to tax the rich, and supply-siders, who say that cutting taxes will add jobs, reward entrepreneurship and raise all boats. So maybe it would be helpful to set the problem of the income gap aside for a while and focus instead on a problem everyone can agree on: the opportunity gap." Doyle McManus in the Los Angeles Times.

VINIK: How the GOP should refocus its deregulation efforts. "Many regulations are vital to correct market failures or uphold societal norms, and deregulation is not a macroeconomic tool for recovering from a recession. But there are many regulations in our economy that stifle long-term growth and choke off innovation. Three areas in particular stand out: housing policy, copyright law, and occupational licensing....Republicans set on deregulating those three areas would have a strong growth agenda....If the GOP was really committed to sparking growth through deregulation, you would hear a lot more about housing policy and a lot less about the Affordable Care Act." Danny Vinik in The New Republic.

Weather interlude: A visually stunning supercell thunderstorm in Wyo.

2. Does Obamacare need a CEO?

Who's in charge of this thing, anyway? "Shortly after Obamacare's disastrous Oct. 1 roll out, there was one major question that emerged: Who was actually in charge of this thing? The answer wasn't entirely clear....There were fresh reminders over the weekend about how much work the federal enrollment Web site still needs. More than 1 million Americans may be getting incorrect subsidy information, and the Obama administration opened the door to new delays for the health-care law's somewhat-neglected small business exchanges." Jason Millman in The Washington Post.

Obama allies revive push for Obamacare CEO. "The recommendation, in a report...by the Washington-based Center for American Progress think tank, calls for a major shakeup within the U.S. Department of Health and Human Services....The idea would be to take the exchanges out of the current bureaucracy and put them in the hands of a CEO with private-sector experience who could run them as true e-commerce sites. The CEO would answer only to President Barack Obama and his intended new health secretary, Sylvia Mathews Burwell. CAP's plan would have the CEO assume full oversight of both federal and state exchanges, as well as insurers and market regulations, but not Medicare or Medicaid." David Morgan in Reuters.

Interactive: How Obamacare will get its performance review. Larry Buchanan, Hannah Fairfield and Karen Yourish in The New York Times.

How Medicaid surgery patients hurt the ACA's bottom line. "Surgery patients covered by Medicaid arrive at the hospital in worse health, experience more complications, stay longer and cost more than patients with private insurance, a new study has found. The study...may offer a preview of what to expect as millions of uninsured people qualify for Medicaid under the Affordable Care Act. Although Medicaid patients in the study were generally younger than the privately insured patients, they were twice as likely to smoke and had higher rates of conditions that made surgery riskier. Those conditions, which can arise from years of poor health habits, include diabetes, lung disease and blood vessel blockage." Robert Pear in The New York Times.

To make Medicaid expansion more palatable to GOP governors, don't call it Obamacare or 'Medicaid expansion.' "Republican governors have found themselves in sticky territory — wanting to avoid a coverage gap in their state, but more vehemently wanting to avoid giving their implicit stamp of approval to Obamacare. Some, like Pence, have tried to find workarounds that would take the federal funding and expand coverage to low-income residents, but through a private, market-based approach that is more palatable to Republicans. Arkansas led the way with its 'private option' plan, and others, such as Pennsylvania and Indiana, have followed suit." Sophie Novack in National Journal.

No basis for fears of skyrocketing ACA premiums, report says. "Fears that insurance premiums will spike next year are premature, according to a new report that argues market competition will likely keep costs from rising. Critics of the Affordable Care Act have long warned that premiums for the ObamaCare plans would skyrocket in 2015 as insurers scrambled to make up for setting artificially low prices this year. Researchers at the Robert Wood Johnson Foundation argue those fears are misplaced....However, the report says some rural states may see higher premium prices because there are fewer insurers and therefore less competition." Ferdous Al-Faruque in The Hill.

Related: How Colo. plans to avoid premium hikes. Elise Viebeck in The Hill.

Other health care reads:

Free preventive care can still cost. Brett Norman in Politico.

White House has confidence in embattled Shinseki. Katie Zezima in The Washington Post.

White House defends VA nominee Murawsky. Ben Kesling, Colleen McCain Nelson and Carol E. Lee in The Wall Street Journal.

Reference pricing: The new Obamacare detail that could save you some money — or cost you even more. Jonathan Cohn in The New Republic.

Health care lobbying is down so far this year. Elise Viebeck in The Hill.

Astronomy interlude: Here comes an impressive meteor shower.

3. The burgeoning cyberwar with China

Chinese military unit charged with cyber-espionage against U.S. firms. And more charges are on the way. "The Justice Department has indicted five members of the Chinese military on charges of hacking into computers and stealing valuable trade secrets from leading steel, nuclear plant and solar power firms, marking the first time that the United States has leveled such criminal charges against a foreign country. The landmark case paves the way for more indictments and demonstrates that the United States is serious about holding foreign governments accountable for crimes committed in cyberspace, officials said at a news conference Monday." Ellen Nakashima and William Wan in The Washington Post.

Explainer: Everything you need to know about the alleged Chinese military hacker squad the U.S. just indicted. Andrea Peterson in The Washington Post.

Well, that escalated quickly. "Chinese web users scoffed and Beijing expressed outrage at the May 19 announcement of a U.S. indictment of five Shanghai-based army officers on charges of hacking and economic espionage. In an uncharacteristically speedy response posted to the Foreign Ministry website within 90 minutes of the US announcement, spokesman Qin Gang called the accusations 'absurd' and 'purely ungrounded.' Qin demanded that U.S. authorities drop the case immediately and added that Beijing would be suspending its participation in Sino-U.S. talks on Internet security due to Washington's 'lack of sincerity.'" Alexa Olesen in Foreign Policy.

What are the implications? "There are implications beyond the ability of the U.S. to protect its companies from foreign espionage and theft of intellectual property. As Attorney General Eric Holder noted, this is the first time the United States has taken this kind of action. As such, it sets a new precedent with serious potential consequences." Sean Lawson in Forbes.

U.S. helps crack down on another cyber-law problem. "Federal prosecutors on Monday announced charges against five individuals accused of distributing a common malware used to infect more than half a million computers in 100 countries since 2010. The indictments are part of a coordinated international effort, which U.S. officials call the 'largest-ever global cyber law enforcement operation' and has already resulted in dozens of other arrests across the globe....The malware, known as Blackshades Remote Access Tool...is capable of taking total control of a victim's computer and hijacking Web cams to secretly record what's visible." Andrea Peterson in The Washington Post.

And feds probe bitcoin exchanges over a shuttered drug market. "U.S. authorities have opened a new front in their investigation into bitcoin exchanges and other businesses that deal in the online currency, examining possible ties between the firms and the online drug bazaar Silk Road, according to people familiar with the matter. The new focus...is the latest indication of how the shuttered online drug market has become linked to bitcoin, tainting the currency with associations of shady activity as its advocates stress to regulators its legitimacy....One of the people familiar with the matter said the investigation was at an early stage, and conclusions hadn't been reached as to whether the exchanges were connected with Silk Road." Christopher M. Matthews in The Wall Street Journal.

Other tech reads:

After net neutrality proposal, political storm brews. Janet Hook in The Wall Street Journal.

AT&T promises to protect net neutrality — if it gets to buy DirecTV. Brendan Sasso in National Journal.

Animals interlude: Watch as this daring "lion whisperer" plays with lions.

4. How much should the U.S. government regulate unhealthy foods?

U.N. food chief says obesity, unhealthy diets pose an even greater health threat than tobacco. "The United Nations' leading voice on hunger has declared that the international community must mobilize to combat obesity and unhealthy diets, not a lack of food, and called on U.N. members to rally around a 'bold framework' of regulations limiting access to salty, sugary foods that are high in saturated fats and contribute to obesity. Olivier De Schutter, special rapporteur to the U.N. on the right to food, said Monday that the global struggle against tobacco use offered a model for efforts to stem the rising tide of obesity and poor nutrition in countries both developed and developing." Melissa Healy in the Los Angeles Times.

Other groups are getting involved, but don't expect Congress to do much... "Consumers International and World Obesity Federation are presenting the global framework this week to the World Health Assembly in Geneva, Switzerland. Ultimately, the groups say governments should remove artificial trans fats from all food within five years of their guidelines being adopted. Much of the policy would face a difficult, if not impossible, path to passage in the U.S. Congress, but the groups did have one suggestion that is already being put into place. The groups recommend that restaurants be required to post calorie information about their food—a requirement already being implemented in the U.S. as part of the Affordable Care Act." Clara Ritger in National Journal.

...except try to roll back healthy-school-lunch standards. "First lady Michelle Obama vowed in a private conference call Monday to fight industry efforts at rolling back healthy school-lunch standards....The remarks to health activists were made at the beginning of a week of intense lobbying around changes in the national school-lunch program, which sets standards for fat, sugar and sodium levels in food....A House bill up for consideration this week by the Appropriations Committee would allow schools to apply for waivers from the federally mandated standards if the school’s food program has recorded a financial loss for six months in a row. The Senate Appropriations Committee may take up a similar proposal Thursday." Tom Hamburger and Kimberly Kindy in The Washington Post.

Background on the House GOP agriculture budget. "House Republicans proposed a $20.9 billion budget for agriculture and food safety programs Monday...that challenges the White House on nutrition rules....In the case of nutrition programs, the House bill seeks to open the door for starchy, white potatoes to be added to the list of qualified vegetables under the WIC supplemental feeding program for pregnant women and their young children. The Agriculture Department would also be required to establish a waiver process for local school districts which have found it too costly to comply with tougher nutrition standards for school lunch and breakfast programs." David Rogers in Politico.

Other agriculture reads:

"Fed Up" portrays obese kids as victims in a sugar-coated world. Peggy Lowe in NPR.

Random acts of music interlude: Spontaneous jazz performance on a train.

5. Dems will try, but probably fail, to stop legal tax dodging 

Democrats to target companies moving overseas to dodge taxes. "Corporate tax-dodging deals known as inversions, in which a U.S. multinational shifts its tax domicile to a lower-tax country, would be restricted under legislation to be proposed in both houses of Congress by Democrats on Tuesday. Representative Sander Levin and Senator Carl Levin, brothers from Michigan, will both propose bills, aides said. Public hearings may follow, shining a light on the increasingly popular inversion strategy. But analysts said it was unlikely that legislation could win approval anytime soon with Congress deadlocked over fiscal policy." Kevin Drawbaugh in Reuters.

How tax inversion may have torpedoed the Pfizer-AstraZeneca deal. "AstraZeneca's executives were sceptical of the business case for a deal. Pfizer's approach 'appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimisation,' said Leif Johansson, AstraZeneca's chairman. Pfizer, which is headquartered in New York, had hoped to set up a tax base in Britain in order to take advantage of lower corporate rates. The purchase of AstraZeneca would have also allowed Pfizer to put to use some of the funds it has been keeping offshore, away from American tax collectors." The Economist.

DOJ hits Credit Suisse with charges over tax-evasion scheme. "Credit Suisse AG was charged by the U.S. with conspiring to help American citizens evade income taxes through the use of secret accounts. The charge was filed against the bank today in federal court in Virginia as a criminal information, which signals a plea deal is likely. The Justice Department also charged two Credit Suisse subsidiaries. The charge marks a tougher stance by the Justice Department, which has faced criticism that it shied away from prosecuting large banks after the 2008 financial crisis because of their size and influence on the economy. Credit Suisse is said to have reached an agreement to pay $2.5 billion." Tom Schoenberg and David Voreacos in Bloomberg.

Other business/financial reads:

Nominees Fischer, Brainard to push for more activist Fed. Howard Schneider and Michael Flaherty in Reuters.

Fed's easy policies pose risks, officials say. Reuters.

Higher mortgage rates dragged down U.S. home sales. Ben Leubsdorf in The Wall Street Journal.

Bernanke says central bank no engine of inequality. Michael S. Derby in The Wall Street Journal.

Why the Swiss said no to a $25 minimum wage. Peter Coy in Bloomberg Businessweek.

Baseball interlude: Boy gives decoy foul ball to nearby girls.

Wonkblog roundup

Foreclosures may be driving the rise in suicides. Emily Badger.

Why Jayson Werth always tips his hat to Ben Bernanke. Ylan Q. Mui.

Is it time for an Obamacare CEO? Jason Millman.

Eric Holder wants to talk about ‘subtle’ discrimination. This is what he means. Emily Badger.

Americans lie about how much they go to church, even if they don’t belong to one. Christopher Ingraham.

Et Cetera

Court declines to review deal for Gulf oil spill. John Schwartz in The New York Times.

Environmentalists are succeeding in making noise. Is anyone listening? Lucia Graves in National Journal.

EPA issues rules to protect fish in power-plant cooling-water systems. Alicia Mundy in The Wall Street Journal.

States take on immigration absent congressional action. Seung Min Kim in Politico.

Oregon same-sex marriage ban voided by judge. Karen Gullo in Bloomberg.

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

Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.

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