Wonkbook: Tentative signs of a spring economic rebound

June 5

People participate in a job fair in New York in this June 11, 2012 file photograph. Private employers stepped up hiring in June and the number of Americans filing new claims for jobless benefits last week fell by the most in two months, hopeful signs for the struggling labor market. But dark clouds continue to gather over the U.S. economy, with the vast services sector crawling forward at its slowest pace in nearly 2-1/2 years in June and retailers reporting sales below expectations, other data showed on July 5, 2012. REUTERS/Eric Thayer/Files

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.

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Wonkbook’s Number of the Day: 6 million. That's how many people have gained Medicaid coverage since Obamacare was rolled out last fall.

Wonkbook’s Chart of the Day: How do you figure out what each state will have to do for the EPA climate rule?

Wonkbook's Top 5 Stories: (1) Spring economic rebound; (2) Obamacare numbers galore; (3) climate state(s) of affairs; (4) beyond VA wait lists; and (5) a roll-back of Dodd-Frank rules?

1. Top story: With jobs day near, an economy on the rise

Data readings converge to show a strengthening economy. "For months, the weather has dominated discourse about the economy. Analysts attributed the dearth of shoppers, the weak employment numbers and the overall decline in economic activity to the cold and snow in the eastern half of the nation, the freakish storms in the South and Midwest, and the drought in the West. But finally a set of numbers is emerging that takes the temperature of the economy without the taint of severe weather. And while some of the data is disappointing — for starters, exports slowed in April and productivity gains have been modest — over all the economy appears to be getting back on a moderate growth path after the setbacks of the first quarter." Dionne Searcey in The New York Times.

First, the not-so-awesome news: Private-sector hiring slower than expected in May. "U.S. businesses added new workers at a slower-than-expected pace in May....Private-sector payrolls in the U.S. increased by 179,000 new jobs in May, says the national employment report compiled by payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics....The ADP estimate is issued ahead of the Bureau of Labor Statistics' employment situation report scheduled for Friday. But Wednesday's results probably won't cause many forecasters to rethink their nonfarm payroll estimates. Economists expect nonfarm payrolls will increase 210,000 in May. That's slower than the surprisingly strong 288,000 added in April but still a solid job gain." Kathleen Madigan in The Wall Street Journal.

Primary source: ADP's NER report.

Americans are splurging on imports. "The trade deficit ballooned in April to the widest in two years as Americans bought record amounts of consumer goods, business equipment and automobiles from abroad. The gap grew by 6.9 percent to $47.2 billion from the prior month’s $44.2 billion, which was larger than previously estimated, Commerce Department figures showed today in Washington. The April reading exceeded all estimates in a Bloomberg survey of 70 economists and was the biggest since April 2012. Exports were little changed. A rebound in U.S. growth after a harsh winter is likely to be driven by gains in consumer spending and business investment that will bolster imports. At the same time, slower expansions abroad will probably check gains in exports, keeping the trade gap elevated." Michelle Jamrisko in Bloomberg.

And service industries look strong. "Service providers from construction companies to retailers expanded in May at the fastest pace in nine months, signaling a broad-based rebound in the U.S. economy after a dismal first quarter. The Institute for Supply Management’s non-manufacturing index climbed to 56.3, the highest reading since August, from 55.2 in April....Readings greater than 50 signal expansion. Seventeen of the 18 industries surveyed showed improvement. The figures, combined with a pickup in manufacturing reported by ISM earlier this week, point to gains in business and consumer spending that will probably lift growth and spur employment after the world’s biggest economy shrank from January through March. " Jeanna Smialek in Bloomberg.

If growth has been pretty good, why hasn't poverty declined? "From 1959 to 1973, the nation’s economy per person grew 82 percent, and that was enough to drive the proportion of the poor population from 22 percent to 11 percent. But over the last generation in the United States, that simply hasn’t happened. Growth has been pretty good, up 147 percent per capita. But rather than decline further, the poverty rate has bounced around in the 12 to 15 percent range — higher than it was even in the early 1970s. The mystery of why — and how to change that — is one of the most fundamental challenges in the nation’s fight against poverty." Neil Irwin in The New York Times.

The Fed sees anecdotal signs of a growth rebound. "The Federal Reserve said the economy expanded at a modest to moderate pace last month as auto sales led household spending and the labor market improved. 'Consumer spending expanded across almost all districts,' the report said today. 'Labor market conditions generally strengthened' with 'hiring activity steady to stronger' in most of the U.S. Seven of 12 districts saw 'moderate' growth, with the rest characterized as 'modest,' the Fed said in its Beige Book business survey, which is based on reports from its district banks. The survey... supports Chair Janet Yellen’s view that the economy is rebounding from a 1 percent contraction in the first quarter caused largely by harsh winter weather." Steve Matthews in Bloomberg.

It looks like workforce dropouts are coming back. Could it bolster Yellen's views on slack? "For the first time in six years, the share of people who either have a job or are looking for one is on the rise in a majority of U.S. states, a sign one of the deepest scars of the economic crisis could be healing....The data bolsters Federal Reserve Chair Janet Yellen's view that America has ample room to create jobs without causing uncomfortably high inflation and it buttresses arguments for keeping interest rates low. If Yellen is wrong, the Fed's easy money policies could lead employers to bid up wages for scarce talent, stoking price increases." Howard Schneider and Jason Lange in Reuters.

Productivity is down, but it's not because America is playing too much 'Flappy Bird'. "U.S. non-farm productivity fell at its sharpest pace in six years in the first quarter as harsh winter weather depressed output, leading to a jump in labor-related production costs. The Labor Department on Wednesday revised productivity data to show it tumbling at a 3.2 percent annual rate. That was the biggest drop since the first quarter of 2008. It had initially been reported falling at a 1.7 percent rate. The drop in productivity, which mirrored a decline in economic growth during the same period, is likely temporary." Lucia Mutikani in Reuters.

Other economic/financial reads:

Senators start over on unemployment insurance extension. Sarah Mimms in National Journal.

APPELBAUM: No need to read the Fed's beige book if you read this instead. "That’s because there is not a lot of there there. A former Fed official once compared the survey’s approach to asking your uncle about the health of the economy. The Minneapolis Fed concluded in a 1999 study of the value of the Beige Book, 'The short answer is — not much.' Indeed, the Fed started releasing the Beige Book, in 1983, precisely because officials considered the contents harmless. To underscore the point, they put a beige cover on it. Fed watchers abhor a vacuum, so the Beige Book is carefully parsed for evidence of the Fed’s intentions. Save yourself the time." Binyamin Appelbaum in The New York Times.

Top opinion

ROSE: How Piketty sells the middle class short? "For those who believe in social justice, the unexpected success of Thomas Piketty’s Capital in the Twenty-First Century is a breath of fresh air that brings the discussion of income and wealth inequality into the forefront. There is no doubt that inequality is up, and Piketty has done a good job explaining the rise of the one percent. But he has not done as good a job of explaining what has happened to everyone else, and particularly to the middle class." Stephen Rose in The New Republic.

VOORHEES: Has the White House figured out how to talk about climate policy. "Forget the polar bears and melting ice caps. Let’s talk about our children and the elderly....All told, the rules would mean as many as 2,800 fewer hospital admissions a year for Americans, the agency estimated, and 4,900 fewer missed days of school and work. The public-health pitch involves a bit of sleight of hand, however. Those near-term health benefits aren’t directly tied to the carbon emissions that contribute to global warming, but instead would result largely from curbing the release of more conventional pollutants — mercury and sulfur dioxide, among them — that billow out of coal plant smokestacks along with the CO2. But ancillary benefits are still benefits, and the White House has a good reason to hype them....The more immediate question: Will the PR plan work? The climate crowd has good reason to believe it will." Josh Voorhees in Slate.

THE WASHINGTON POST: Why Congress has detoured from common sense on highway funding. "The smart and obvious way to fund federal transportation policy is to create a steady, long-term funding source to finance multi-year projects, one that relies on fees from users — such as a higher gas tax or a vehicle-miles tax. It is both efficient and fair to require drivers to pay according to the amount they exploit and degrade the roads. This discourages overuse rather than subsidizing big-time road users. Congress set up just such a system when it established the gasoline tax and dedicated its revenue to the Highway Trust Fund. But lawmakers haven’t raised the gas tax since 1993, preferring instead budgetary gimmickry and short-term patches to fill holes in the fund. This year has been no different." Editorial Board.

GORDON: The little miracle spurring inequality. "Judging by the Forbes 400 list, the richest people in America have been getting richer very quickly. In 1982, the first year of the list, there were only 13 billionaires on it. A net worth of $75 million was enough to earn a spot. The 2013 list has nothing but billionaires, with $1.3 billion as the cutoff. Sixty-one American billionaires aren't rich enough to make the list. Many regard this as a serious problem, seeing the development of a plutocracy dominating the American economy through the sheer power of its wealth. The French economist Thomas Piketty, in his new book 'Capital in the 21st Century,' calls for an 80% tax on incomes over $250,000 and a 2% annual tax on net worth in order to prevent an excessive concentration of wealth.That is a monumentally bad idea." John Steele Gordon in The Wall Street Journal.

Wonky animals interlude: The Internet was made for cats, and you can blame economists.

2. Even more Obamacare numbers, plus Medicaid growth 

Medicaid logs 6 million new enrollees since since Obamacare rollout. "Medicaid enrollment is surging, but states shunning Obamacare’s huge Medicaid expansion are getting left behind, according to data released Wednesday by HHS. About 65 million people were enrolled in Medicaid and the closely related Children’s Health Insurance Program at the end of April, 6 million more than had been enrolled in the months leading up to Obamacare’s Oct. 1 launch. The numbers reflect a big spike in April, when 1.1 million additional people were enrolled in Medicaid compared to March." Kyle Cheney in Politico.

Measuring the Obamacare component is tough, but states that expanded Medicaid saw greater increases. "Figuring out how many actually signed up for the program for low-income Americans because of the law is complicated....CMS officials were quick to point out when they released the Wednesday data that they weren’t saying that 6 million people were in Medicaid because of the health law...They said instead that states that had already expanded Medicaid by April had a 15.3% bump in enrollment compared with the July to September period, and states that did not expand had a 3.3% increase over the same timeframe." Louise Radnofsky in The Wall Street Journal.

Report: States that expand Medicaid see less charity care and uninsured treatment. "After gathering data from 465 hospitals in 30 states — 15 that expanded Medicaid and 15 that did not — the report concluded that in states that chose to participate in Medicaid expansion, the average charity care cost per hospital decreased from $2.8 million to $1.9 million. In non-expansion states, hospitals witnessed an increase in charity care spending, from $3.8 million to $4.2 million, with the proportion of Medicaid and self-paying patients remaining unchanged. By expanding Medicaid to include Americans making up to 133 percent of the federal poverty level, expansion states experienced an average increase of 29 percent in Medicaid cases, which could reduce health care costs by reducing the levels of uncompensated care." Shadee Ashtari in The Huffington Post.

Obamacare: Now serving millions so far. "The numbers are in and have been tallied…by many. 8 million selected marketplace plans (HHS)...7.22 million paid, 8.14 million total insured from health insurance exchanges (ACAASignups.net)...8.75 million eligible for a marketplace plan with financial assistance, 8.2 million have selected a plan (Kaiser Family Foundation)...9.3 million net gain of adults insured through mid-March 2014 (RAND)...Healthcare insurance enrollment numbers from the first open enrollment period have been debated — and are debatable — to say the least. Enrollment figures will continue to be a topic of intense conversation, as the healthcare law will likely play a large role in the November mid-term elections.." Greg Caressi in Forbes.

CBO throws in the towel on projecting so many of these Obamacare numbers. "Congressional budget scorekeepers said they can no longer measure the fiscal impact of many provisions of ObamaCare because the task is impossible. In a little-noticed footnote from April, the Congressional Budget Office (CBO) said it will continue to assess the effects of the law's exchange subsidies and the Medicaid expansion, while not tracking others." Elise Viebeck in The Hill.

Now application 'inconsistencies' threaten coverage for 2 million. "A government document provided to The Associated Press indicates that at least 2 million people enrolled for taxpayer-subsidized private health insurance have data discrepancies in their applications that, if unresolved, could affect whatthey pay for coverage, or even their legal right to benefits. The final number affected could well be higher. According to the administration the 2 million figure reflects only consumers who signed up through the federally administered HealthCare.gov website and call centers....For consumers, a discrepancy means that the information they supplied, subject to perjury laws, does not match what the government has on record." Ricardo Alonso-Zaldivar in the Associated Press.

Obamacare has another Medicare Advantage problem worth $70 billion. "Obamacare is supposed to cut the Medicare Advantage program by $156 billion over a decade to reduce the bloated program serving about 16 million seniors. Insurers as of 2009 had been reimbursed 14 cents more on the dollar for Medicare Advantage beneficiaries compared to seniors in the traditional program, and the Affordable Care Act is supposed to close that gap. Now, a new investigation from the Center for Public Integrity finds that insurers have been taking in much more money than they should have from the $150 billion-a-year program. Between 2007 and 2011, insurers netted $70 billion in improper payments from a program design flaw, according to the center's review of enrollment data, government audits, research papers and other documents." Jason Millman in The Washington Post.

Just in time for Burwell's arrival at HHS. "The Senate voted 67-28 on Wednesday to advance the nomination of Sylvia Mathews Burwell as HHS secretary, another sign of her smooth path toward confirmation. The vote was only a procedural move. Final confirmation is expected Thursday afternoon. Republicans had initially hinted that they would turn the nomination — to run HHS and Obamacare — into a proxy over the health care law. But their opposition never crystallized. Republicans say they’re impressed with Burwell’s resume." Jennifer Haberkorn in Politico.

Science interlude: You may not want to drink cola again after seeing this experiment.

3. The climate rule's state(s) of affairs

EPA rule's launch represents new experiment in federalism. "States got a first look at U.S. EPA's proposed carbon dioxide regulations yesterday. At first blush, the phone book-sized rule gave them a puzzle with the potential of 50 different ways to lower their carbon emissions. It gave them a deadline with a final rule due next summer. Reactions ranged from incendiary to a warm enthusiasm....The more cautious reactions of most state governments and their agencies reflect the complex energy landscape of the United States, where some states have embraced carbon reduction, while others see their fortunes tied to the ongoing viability of fossil fuels....States have wide latitude to meet their carbon reduction targets under the proposed rule....Nor are proposed reductions uniform across the states." Nathanael Massey in ClimateWire.

Explainer: How exactly do you figure out what each state will have to do? Brad Plumer in Vox.

U.S. warming also breaks down by localities. "The United States is warming fastest at two of its corners, in the Northeast and the Southwest, an analysis of federal temperature records shows....The contiguous United States' annual average temperature has warmed by 1.2 degrees since 1984, with summers getting 1.6 degrees hotter. But that doesn't really tell you how hot it's gotten for most Americans. While man-made greenhouse gases warm the world as a whole, weather is supremely local. Some areas have gotten hotter than others because of atmospheric factors and randomness, climate scientists say." Seth Borenstein in the Associated Press.

How some states' backlash could create the climate-regulation version of HealthCare.gov. "In at least eight states, lawmakers have approved symbolic anti-EPA resolutions based on a model approved by the American Legislative Exchange Council....Kentucky has gone even further, enacting a law this spring that could block the state from complying with EPA’s rule. West Virginia and Kansas have new laws taking aim at the regulation one way or another....If the anti-EPA trend catches fire, it would force the agency to write a greenhouse gas reduction plan for every state that refuses to submit its own. That would bring renewed accusations of federal overreach...and it would thwart EPA’s hopes of letting each state choose its own strategy for reducing power plants’ carbon pollution." Andrew Restuccia in Politico.

Related: Can the administration avoid Obamacare botched rollout 2.0? Michael A. Memoli and Neela Banerjee in the Los Angeles Times.

Audio: How all this uncertainty over what the states will do is frustrating utilities. John Ydstie in NPR.

Turns out meeting renewable-energy targets isn't that expensive for states. "Among the 24 states with renewable portfolio standards that were analyzed, the cost of complying between 2010 and 2012 was equal on average to roughly 1 percent of retail electricity rates — according to a study....The average additional cost in 2012 for renewable energy came to about 2 cents for each kilowatt-hour....There has been upward pressure on the cost of compliance as renewable-energy targets are raised and more renewable sources are added....But because many states...cap the rate impacts of renewable energy, the pressure likely will not translate to higher bills." Mark Jaffe in The Denver Post.

What could the EPA learn from California? "When California launched its landmark global warming law in the final years of the George W. Bush administration, it was a risky act of defiance from a state frustrated by federal inaction....Now, the federal government is trying to catch up — and that could position the state to cash in....If the rule is finalized in its current form...California can easily adhere to it. In addition, other states are likely to clamor for California's help....Nichols rattles off the ways California could benefit from the Obama administration's ambitious push. The most obvious is through an expansion of the fledgling trading market for carbon pollution credits at the core of California's program....There are also less direct potential benefits." Evan Halper in the Los Angeles Times.

By the way... Turns out China isn't as seriously considering CO2 emissions caps as was originally thought. Andrew C. Revkin in The New York Times.

Other energy/environmental reads:

Is new emissions plan a turning point in our love affair with coal? Dennis Dimick in National Geographic.

How renewables could be key to lower energy costs. Ed Crooks in The Financial Times.

Climate change interlude: It had better not dare take away my coffee.

4. There's a lot more at stake in the VA debate than wait lists

Is the VA scandal debate broadening to include the quality of care? "For weeks, a crisis at the Department of Veterans Affairs has focused on whether veterans are forced to wait months before receiving medical care. Now, the issue is broadening and includes the quality of actual medical care itself. Writing in this week’s New England Journal of Medicine, two doctors — one still at the VA and one a former VA employee — highlight what they call 'a disturbing pattern of increasingly uneven quality of care' that has 'also evolved in recent years.'...Disparities in the quality of medical care at VA hospitals were the topic of an article in the Wall Street Journal Tuesday." Thomas M. Burton in The Wall Street Journal.

Explainer: Top 10 conclusions about the VA crisis. Norm Ornstein in National Journal.

Major issues: Wait lists and red tape. "Despite the ugly headlines, veterans rate their care and benefits very highly. The major hurdle for the VA is access to care." Quil Lawrence in NPR.

Potential Obama VA nominee gets a very early boost. "Lawmakers usually wait for the White House to nominate someone to a high level post before weighing in (except in the case of Larry Summers and the Federal Reserve). But Ohio’s two U.S. senators on Wednesday praised one leading candidate the White House is considering as the next secretary of the Department of Veterans Affairs – Cleveland Clinic chief executive Delos 'Toby' Cosgrove. Dr. Cosgrove is a physician and hospital executive who served as an Air Force surgeon in Vietnam." Damian Paletta in The Wall Street Journal.

Well, this could get awkward quickly. "The top man reportedly being considering to lead the Department of Veterans Affairs was recently quoted criticizing the administration's signature healthcare law. Delos 'Toby' Cosgrove, CEO of the Cleveland Clinic, said ObamaCare has led to increased costs for participants....He also criticized the Affordable Care Act for leading to smaller provider reimbursements from insurers." Ferdous Al-Faruque in The Hill.

More on the VA scandal:

Sanders seeks bipartisan deal on VA fixes. Burgess Everett in Politico.

Nerdy animal interlude: What happens when an engineer owns a dog.

5. An effort to roll back some of Dodd-Frank?

Banking regulators are launching a broad review of burdensome rules. "Three of the nation's financial regulators on Wednesday launched a broad effort to identify rules that are unnecessary or too burdensome for banks. Under a 1996 law, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency are required to conduct such a review at least once every 10 years. The new study comes after Congress enacted a sweeping overhaul of financial laws in 2010. Agencies still are drafting remaining rules to implement the reforms." Jim Puzzanghera in the Los Angeles Times.

U.S. Senate adjusts capital rules for insurers. "The U.S. Senate has approved a bill tweaking the 2010 Dodd-Frank law's treatment of insurers, a rare adjustment to the Wall Street reform law that had been sought by the industry. Senators unanimously agreed on Tuesday to give the U.S. Federal Reserve more authority to tailor its capital requirements for insurance firms such as Prudential Financial and American International Group to reflect the ways their business models differ from banks'. The move stemmed from a portion of Dodd-Frank that directed the Fed to ensure that large, risky non-bank firms face capital requirements comparable to those placed on banks." Reuters.

Explainer: How the insurance industry got its Dodd-Frank fix. Ryan Tracy in The Wall Street Journal.

Fed may shun global risk rules banks spent billions to meet. "The Federal Reserve may scrap elements of international measures aimed at assessing bank health in favor of imposing its own rules, frustrating bankers who have spent billions of dollars retooling their books to meet global standards. Fed officials are concerned that parts of a key tool that regulators have developed to measure banks' riskiness — known as 'Basel III capital rules' — are flawed and can be gamed by the companies. Under Basel, banks can determine how much debt they can take on by using their own models and computer systems to calculate how risky their assets are, among other methods. The higher the risk, the less money banks can borrow and lend, in turn cutting income banks can earn." David Henry and Emily Stephenson in Reuters.

Other financial reads:

U.S. appeals court voids judge's rejection of SEC-Citigroup accord. Jonathan Stempel and Sarah N. Lynch in Reuters.

Possible U.S. fines raise tensions with BNP Paribas. The Wall Street Journal.

Food interlude: Adults taste-test baby food.

Wonkblog roundup

The ECB is about to introduce negative rates. Can it save the euro? Matt O'Brien.

Voters in one of America’s most expensive cities just came up with another way to block new housing. Emily Badger.

70 billion reasons why Medicare Advantage just got harder to defend. Jason Millman.

Will the new EPA rules for coal plants inspire other countries? Steven Mufson.

Et Cetera

DHS: Shield against deportation can be extended. Alicia A. Caldwell in the Associated Press.

Senators discuss options for transportation fund bailout. Billy House in National Journal.

A year after Snowden, U.S. tech losing trust overseas. Aarti Shahani in NPR.

GOP primary challengers leave their mark. Rhodes Cook in The Wall Street Journal.

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

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

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