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.
Wonkbook’s Number of the Day: 2.1 percent. That's what Treasury Secretary Jack Lew, citing the CBO, says long-term average economic growth is now projected to be, down from the previous long-term average of about 3 percent.
Wonkbook’s Chart of the Day: What kills Americans? This chart shows how the causes of death have changed over time.
Wonkbook's Top 4 Stories: (1) The policy fallout of Cantor's defeat; (2) what's next for student-debt refinancing?; (3) the secular-stagnation club; (4) what the administration is doing about the border crisis.
1. Top story: What does Cantor's fall mean for policymaking and Congress?
How Cantor's fall makes a grand bargain even tougher. "Cantor...who had emerged as the heir apparent to House Speaker John A. Boehner (R-Ohio), was considered the linchpin in any possible breakthroughs on a number of difficult issues facing Congress, from an overhaul of immigration policy to fiscal and tax reform. Any prospects for a grand fiscal bargain...would have required Cantor’s imprimatur, and he played a leading role in trying to contain his party’s ideological fervor, both nationally and in the Old Dominion, going into the elections of 2014 and 2016. All of those hopes were tossed out Tuesday when Cantor lost." Paul Kane in The Washington Post.
Primary source: The full text of Cantor's concession speech. The Washington Post.
We already knew that many feel Cantor's fall could further jeopardize immigration reform... See our coverage from yesterday. Puneet Kollipara in The Washington Post.
...but the impact is much broader, especially on big-business priorities. "The country's most powerful business lobbying groups already knew they had a problem with the GOP when Tea Party lawmakers nearly forced the country into a massive default of its debt last year. But...things for the U.S. Chamber of Commerce and the Business Roundtable just got a whole lot worse. For one, they lost a major defender of their favored policies — from the beneficial tax treatment of private equity income to immigration reforms favored by the country's biggest tech companies. But even worse for their prospects, Cantor lost to a challenger who specifically attacked him for his close ties to big business — going so far as to single out the BRT and the Chamber." Jia Lynn Yang in The Washington Post.
...and on Wall Street. "Wall Street and the financial services industry are losing a top ally in congressional leadership...Many lobbyists on K Street whose clients include major financial institutions consider Cantor a go to member in leadership on policy debates, including overhauling the mortgage finance market, extending the government backstop for terrorism insurance, how Wall Street should be taxed and flood insurance." MJ Lee and Zachary Warmbrodt in Politico.
Could the debt-ceiling wars return? "House Majority Leader Eric Cantor's shocking defeat isn't likely to have much effect on U.S. financial markets — unless his departure emboldens Tea Party Republicans to again threaten a government shut-down over the debt ceiling next year, investment strategists said. Even though most of the items on Wall Street's legislative wish list, particularly corporate tax reform, were already viewed as non-starters over the next two years, Cantor's departure may roil the relative calm that's prevailed since the bipartisan budget deal of December 2013. The Tea Party Republicans who supported the 2013 government shutdown may believe that Cantor's defeat opens the door to another such battle." David Gaffen in Reuters.
Signs of trouble ahead for the Ex-Im bank? "In particular, business lobbyists working in support of the Export-Import Bank’s re-authorization by the Sept. 30 expiration say Cantor’s loss will only embolden the conservative Republicans who wish to block the bank." Kate Ackley in Roll Call.
The tech implications: His defeat brings down an NSA defender. "Cantor's loss — and David Brat's win — promises to add even more momentum to a different high-profile issue before Congress: NSA surveillance. Brat, an economics professor at Randolph-Macon College, has wildly different views on the NSA from his erstwhile opponent. Where Cantor voted against a landmark proposal to rein in the NSA — a measure that wound up getting defeated but by a much narrower margin than expected — Brat has...called for an end to the NSA's bulk collection of phone records and greater protections for e-mail." Brian Fung in The Washington Post.
...and could set back expansion of high-skilled guest-worker visas. "Without a doubt, the tech industry lost one vote for an H-1B cap increase with Cantor's defeat, and Brat's win may kill any chance of immigration reform in this Congress. But Brat's attack on the H-1B program doesn't necessarily mean that other Republicans, who have backed a cap increase, will reconsider their support for the temporary work visa, and abandon the tech industry on what may be its top issue." Patrick Thibodeau in Computerworld.
Why his defeat jeopardizes an Obamacare alternative. "The conservative wing of the Republican Conference...had growing interest in voting on a replacement. But at this point, there is no plan that would garner 218 votes. And if an Obamacare replacement is put on the floor and doesn’t get enough Republican votes, the result could be far more embarrassing than it is worth. The debate over whether to do an Obamacare replacement bill could become more interesting if it becomes a data point in the battle to succeed Cantor as majority leader. In the immediate aftermath...it wasn’t clear whether conservative Republicans would base their support for a leadership candidate on whether that member supports holding a replacement vote." Jennifer Haberkorn in Politico.
@samsteinhp: On a more serious note, Cantor's loss removes one of the more vocal Republican NIH champions. A potentially big loss for that community.
Further rightward, ho, on climate policy! Or not. "That's because there's little room to move any further in that direction....These big divides just aren't there on carbon-emissions policy. In recent years, House Republicans, backed by the party's establishment figures, have voted overwhelmingly to nullify EPA's power to regulate carbon emissions....The harmony between industry goals and conservatives is often present on a range of other energy issues, too, though there could be tensions over tax credits that hard-liners and conservative advocacy groups want to kill." Ben Geman in National Journal.
But what about who succeeds Cantor as majority leader? "House Majority Leader Eric Cantor’s unexpected primary loss is giving conservative House members their best chance at securing a seat at the leadership table in years. Except conservatives aren’t excited about the current field of candidates." Lauren French and Anna Palmer in Politico.
Handicapping the potential GOP leadership candidates. Philip Bump in The Washington Post.
The winners and losers, including Cantor. Joel Gehrke in National Review.
What Cantor's defeat says about redistricting reform and gerrymandering. "Cantor’s loss underscores the dangers of overenthusiastic gerrymandering. Virginia Republicans tweaked the boundaries of Cantor’s district in 2010 to make it more conservative. This seemed like a great idea in 2012, when Cantor won his primary by a huge margin. But the unintended consequence was that the district became so conservative that it made Cantor vulnerable to a challenge from the right, even though, ideologically, he’s about as conservative as Minnesota GOP Rep. Michele Bachmann.." Christopher Ingraham in The Washington Post.
Wonky electoral analysis: No, Democrats didn't doom Cantor. "Local level turnout provides some indirect clues on whether this phenomenon was widespread. On two counts, the data cast doubt on whether Democratic cross-over voting caused Cantor's loss. Some Democrats surely selected a Republican ballot and voted for David Brat, but Cantor's loss seems to be much more the result of weak support among Republican voters, some of whom showed up for a race they typically ignore to vote for the tea party conservative who was besieged with attack ads." Scott Clement in The Washington Post.
More wonky analysis: It was like an earthquake. Nate Silver in FiveThirtyEight.
Charts: The remarkably small percentage of people it took to oust Cantor. Philip Bump in The Washington Post.
A broader philosophical issue is at stake: What policies does the GOP stand for? "One way to read the stunning primary defeat of House Majority Leader Eric Cantor (R-Va.) is that the only way to define Republicanism these days is by what it’s against. And that’s what worries many Republicans. An argument is boiling within the party over whether it should offer voters an agenda that shows what Republicans would accomplish if they are returned to power or whether it should simply ride an anti-Democratic tide into the November election." Karen Tumulty in The Washington Post.
DOUTHAT: After Eric Cantor. "Cantor was not really a policy innovator....But he did seem to understand, more than some of his colleagues, that what the G.O.P. ultimately needs from its leadership is a synthesis to unite the warring factions, not a Final Victory for one side or the other — and that a new agenda for the party might be part of that necessary synthesis. So if the message of his defeat, last night, is that such a synthesis simply can’t be achieved — that 'if you try to play both sides of the intra-party divide you will lose,' as some Republicans suggested to the Washington Post’s Bob Costa — then it was a very bad night for conservatism’s future" Ross Douthat in The New York Times.
KLEIN: Who will replace Cantor? Cantor 2.0. "Cantor's fall doesn't leave the Republican Party facing a fight over whether to raise taxes or cut spending or repeal Obamacare. It's not even facing a real fight over whether to pass immigration reform. The Republican Party has its internal arguments, but with Democrats controlling both the White House and the Senate, it has few divisions. Cantor will be replaced in the House Republican leadership by a different politician but not by a different policy platform. Even the GOP's tactical differences are overstated." Ezra Klein in Vox.
LEWIS: Immigration reform and the dangers of right-wing populism. "While some elements of conservative populism are commendable...I remain convinced that immigration reform is solid policy, and that there are many reasons why conservatives ought to support more immigrants. What is more...I suspect it would become even harder to pass immigration reform should Republicans take the Senate...and that this is very problematic for conservatives, in the long run....The problem is that the incentives pushing Republicans to take positions against immigration reform...in order to win primaries probably also sow the seeds for future national general election losses." Matt Lewis in The Daily Caller.
BEUTLER: Why Cantor really lost. "Immigration isn't really why Cantor lost, or even why conservatives were upset with him in the first place — though they will happily embrace that analysis if it'll scare other immigrant-friendly Republicans straight. To the contrary, evidence that immigration reform isn't actually a huge intra-GOP liability lies everywhere in plain sight. Senator Lindsey Graham — a famous conservative bête noire who co-authored, voted for, helped pass, and continues to support comprehensive immigration reform — won his primary handily. In South Carolina. The same night Cantor lost. This isn't to say Republican primary voters shrug off immigration reform....But Cantor's unexpected defeat speaks to a much deeper activist disenchantment." Brian Beutler in The New Republic.
THOMA: Why income redistribution doesn't hurt growth. "Until recently, most economists believed there's a trade-off between equity and efficiency and that the redistribution of income would lower economic growth. Several reasons account for this....In its most extreme form, where redistribution is used to ensure that everyone has the same income, why bother to work hard, or work at all? But as the recent paper 'Redistribution, Inequality, and Growth' by Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides of the International Monetary Fund explains, there are also reasons to believe the redistribution of income can enhance economic growth in some cases." Mark Thoma in CBS News.
RITHOLTZ: What's the penalty for pundits who get it wrong? "Inflation wasn't the only thing Laffer whiffed on. He projected a budget deficit of 13 percent of gross domestic product and warned that it was going to get worse. Instead, the deficit fell dramatically during the next five years and last year it was less than 5 percent of GDP. Pretty much every single warning, every data point, every item Laffer complained about was wrong. Why does this happen, and why are there no penalties for being so inaccurate? This isn't about economics, it's about politics. Unfortunately, the dismal science has become the vehicle of choice for those who seek to further their own political agenda." Barry Ritholtz in Bloomberg View.
SALAM: When students default, colleges should pay a fine. "The basic idea is that if a student defaults on her student loans, the higher education institution she attended should pay a penalty. The genius of this idea, as Kelly has explained, is that it would make colleges think twice about their lackluster advising, even if the penalty were quite small. Colleges would suddenly have an excellent reason to guide students to majors that would help them gain marketable skills....More broadly, we’d do well to rethink higher education from the ground up.... It is egregious that students, parents, and taxpayers are the ones who suffer when colleges don’t do their jobs while the colleges in question are left untouched. We simply can’t let them get away with it anymore." Reihan Salam in Slate.
FRAKT: The moral case for affordable coverage and how Obamacare fails on that. "Some health policy commentators have claimed that President Obama and Affordable Care Act (ACA) supporters have not made a convincing moral case for coverage expansion. Scholars suggest that support for the law could turn, in part, on the moral argument for it.What is that argument, and is implementation of the law consistent with it?" Austin Frakt in JAMA Forum.
Animals interlude: These cats don't know how to cat.
2. Warren's student loan refinancing measure goes down; what other options are there?
Bill fails to clear hurdle in Senate. "Legislation to allow student loan borrowers to refinance at lower interest rates failed to clear a procedural hurdle in the U.S. Senate on Wednesday, dooming a measure that was a Democratic priority ahead of November congressional elections. Democrats had said the bill would let holders of both federal and private undergraduate loans - some with rates of 9 percent or higher - to refinance at 3.86 percent. Republicans thought the legislation was too expensive. The bill, championed by Massachusetts Senator Elizabeth Warren, was part of Democrats' plan this year to rally their base supporters ahead of an election that could tip control of the Senate into Republican hands." Jeff Mason and Eric Beech in Reuters.
The road ahead for student-debt reforms: Unclear. "Newly installed Education Department Undersecretary Ted Mitchell suggested the Education Department will continue exploring student loan debt refinancing at a town hall later Wednesday....Ultimately, changes to student debt will likely come through an update to the Higher Education Act, the main law that lays out student loan policy in the U.S. But the rewriting process for that bill is just beginning, and it will likely take years to get signed into law." Maggie Severns and Allie Grasgreen in Politico.
Needless to say, young people are struggling with debt. "Four in 10 members of the millennial generation said they felt overwhelmed by debt, with more than half reporting they were living paycheck to paycheck, according to poll results released Tuesday....Although 56% said they were living paycheck to paycheck, nearly seven in 10 said they felt better off financially than other members of their generation and expected their standard of living before they retired to be better than that of their parents. Debt concerns — topped by outstanding student loans — weighed heavily on millennials, typically those 22 to 33 years old." Jim Puzzanghera in the Los Angeles Times.
What options are there for those need help with monthly payments? "There are actually a few. A growing number of financial institutions...are rolling out refinance programs to reduce interest rates on private student loans. At least a dozen other lenders, including Wells Fargo, already offer the service....It's unlikely, however, that many lenders will get on board with refinance programs because of the risk of attracting troubled borrowers who might default....Outside of the traditional financial services, there are start-ups...that refinance private and federal student loans....But for now the program is limited to graduates with MBA, law, engineering or medical degrees at fewer than 100 schools." Danielle Douglas in The Washington Post.
Hey, students: Watch out for student-loan scams! Robert Farrington in Forbes.
Could more Pell Grant help be on the way? "Senate appropriators approved a spending bill on Tuesday that would increase the maximum Pell Grant by $100, to $5,830, and provide an additional $606-million to the National Institutes of Health in the 2015 fiscal year. The measure would increase spending on federal Work-Study by $35-million over the 2014 budget and President Obama's plan, and would offer $15-million more for Supplemental Educational Opportunity Grants....The measure...now heads to the full Appropriations Committee and then on to the Senate floor. If it passes, as expected, it will have to be reconciled with the House of Representatives’ version of the measure." Kelly Field in The Chronicle of Higher Education.
Here's a novel idea: Tuition-free college. Sounds crazy, right? "The promise of some — emphasis on 'some' — student loan relief down the road isn't enticement enough for many kids to spend big on a college education. The fact is, lots of them have simply been priced out of higher ed. But what if the first two years of college could be tuition-free, for everyone? We know what you're thinking. Impossible. Inconceivable. And the word that so often means the end before the beginning of big education ideas: expensive. Well, the people of Tulsa, Oklahoma beg to differ. The program is called Tulsa Achieves, and, so far, it's helped some 10,000 kids into college." Cory Turner and Claudio Sanchez in NPR.
The overlooked aspects of the Obama student-debt move. "The first addresses how the government pays loan servicers, the companies that collect the monthly payments from borrowers....The administration has already restructured the contracts to create better incentives to work with students; yesterday the Obama administration said it will do so again — in particular making 'lower payments for servicers when loans enter delinquency or default, and increase the value of borrowers’ customer satisfaction when allocating new loan volume.' An additional part of Obama’s push that deserves attention is an effort to educate borrowers before they take out loans." Karen Weise in Bloomberg Businessweek.
Wonky student-loan reading: Check out our Wonkblog reading list. Max Ehrenfreund in The Washington Post.
Other education reads:
Global aid to education drops significantly. Rebecca Klein in The Huffington Post.
Sports interlude: Oakland Athletics outfielder Yoenis Cespedes's incredible throw.
3. It's not just one paper that worries about lower future growth potential; it's a whole club
The economy may be growing now. The long-term view isn't so sanguine. "A growing number of experts see evidence that the economy will never rebound completely. For more than a century, the pace of growth was reliably resilient, bouncing back after recessions like a car returning to its cruising speed after a roadblock. Even after the prolonged Great Depression of the 1930s, growth eventually returned to an average pace of more than 3 percent a year. But Treasury Secretary Jacob J. Lew, citing the Congressional Budget Office, said on Wednesday that the government now expected annual growth to average just 2.1 percent, about two-thirds of the previous pace." Binyamin Appelbaum in The New York Times.
Welcome to the secular stagnation club, Mr. Lew. "That refers to an argument posited by Lawrence H. Summers, the former Treasury secretary....The capsule version is this: Absent an asset bubble, large demographic changes or extreme intervention in the economy by the government authorities, growth and employment will be lackluster for the indefinite future. Secular stagnation has become the new dominant anxiety of many economists and policy makers in Washington....What happens if the economy simply never shifts into high gear? What if the rich continue to take bigger and bigger slices of the pie? What if the middle class never gets richer, and growth never becomes strong enough to improve the lives of the poor? What do policy makers do then?" Annie Lowrey in The New York Times.
Why retail spending will offer hints on the much-discussed second-quarter bounceback. "Economists have loudly predicted that the U.S. economy will rebound in the second quarter after contracting in the first three months of the year. But after a strong March, the data in April were decidedly mixed....Consumer spending accounts for more than two-thirds of economic output, so it’s a vital area to watch. We’ll get an initial broad look at Americans’ spending during May — and a hint about the second-quarter comeback’s strength or weakness — when the Commerce Department releases its report on retail sales on Thursday....If April’s slowdown in spending at retailers persists, hopes for a strong second quarter could be dimmed." Ben Leubsdorf in The Wall Street Journal.
First-quarter contraction maybe even worse than thought. "The U.S. economy may have contracted more than previously thought during the first three months of 2014...based on new health care-sector data from the government. Some analysts said economic output may have contracted at a 2% pace in the first quarter. That would be its worst performance since the recession....J.P. Morgan Chase economist Daniel Silver and Pierpont Securities economist Stephen Stanley both cautioned that it’s not clear exactly how the Commerce Department will adjust GDP to account for the new health-care services data. But they and other analysts downgraded their estimates for the first quarter based on the new survey, as well as other recently released data." Ben Leubsdorf in The Wall Street Journal.
Chart: Where the U.S. economy grew in 2013 by state. Danielle Kurtzleben in Vox.
Other economic/financial reads:
Many seek homes near cities but are priced out. Josh Boak in the Associated Press.
Trade group sues to block Seattle's minimum-wage hike. Eric Morath and Melanie Trottman in The Wall Street Journal.
Music interlude: A Spotify playlist for Team Cantor.
4. How is the administration handling the child-migrant crisis?
What will happen to the children? "Johnson says he's asked the Border Patrol, the Immigration and Customs Enforcement Agency, FEMA, even the Coast Guard, to focus on the problem. Most of the children are from Guatemala, El Salvador and Honduras. Many of them are being kept in warehouses or former military bases until they can be given over to the Department of Health and Human Services....Administration officials say all the children will go through deportation proceedings. But in the meantime, the hope is to reunite them with family members already here or place them in foster care. Normally, immigrants who are caught having just crossed the border are deported quickly in expedited hearings." Laura Sullivan in NPR.
How is the Border Patrol handling the influx? Barely. "I spoke to a border patrol agent this morning, he told me the average age he sees is 12 to 14 years old. But on Monday, he saw a six- year-old girl caring for her four-year-old little brother who had a fever. They were completely alone. The border patrol is rushing in agents from all over the Southwest to help out. And they're frustrated because it takes so many resources to receive and process all these migrants. It takes them away from their primary duty which is patrolling the border." John Burnett in NPR.
Some agents may be abusing the migrants. "The ACLU and four other immigrants rights groups issued a complaint, Tuesday, detailing reports of what they call systemic abuse against unaccompanied immigrant children by Customs and Border Protection Officials and called on the Department of Homeland Security to put a stop to it." Caitlin Dickson in The Daily Beast.
Ariz. attorney general's office to inspect conditions. "The Arizona Attorney General's Office will soon inspect detention centers in southern Arizona, where hundreds of migrant children are being housed....The agency secured an agreement early Wednesday with the U.S. Department of Health and Human Services, the Department of Defense, the U.S. Department of Homeland Security, and other federal agencies to allow attorney general officers to inspect the Nogales facility 'to ensure the health and well-being of the minors being held there.'" Yvonne Wingett Sanchez in The Arizona Republic.
Chappelle interlude: "Technically, I never quit. I'm seven years late to work."
What the foreclosure crisis looks like in urban neighborhoods with few single-family homes. Emily Badger.
Elizabeth Warren’s bill to refinance student loans dies in the Senate. Now what? Danielle Douglas.
Dave Brat’s unorthodox economics: Adam Smith "was from a red state." Matt O'Brien.
Why America will never see the kind of Uber protests cab drivers are staging all over Europe today. Emily Badger.
Democrats are twice as likely to lose primaries as Republicans. So what’s Eric Cantor’s excuse? Christopher Ingraham.
Shaun Donovan on confronting hurricanes, homelessness and big banks. Dina ElBoghdady.
Americans have never had so few options in deciding what company makes their meat. Roberto A. Ferdman.
Kerry to seek global action to protect oceans. Juliet Eilperin in The Washington Post.
Four years after Gulf spill, a shallow-water drilling revival. Ben Geman in National Journal.
Tax treaties at standstill in Senate over privacy issues. Katy O'Donnell in Roll Call.
Senate overwhelmingly passes VA reform bill as FBI joins investigations. Josh Hicks and Greg Jaffe in The Washington Post.
Got tips, additions, or comments? E-mail us.
Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.