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: 2.9 percent. That's the annualized rate at which the U.S. economy contracted in the first quarter, a new government revision showed.
Wonkbook’s Chart of the Day: Almost half of gay Americans can now marry in the state where they live, this chart shows.
Wonkbook's Top 4 Stories: (1) Court ruling roundup; (2) relax, the economy is still doing OK; (3) drilling deeper into the crude-oil export debate; and (4) insights from the GOP primaries.
1. Top story: The Supreme Court's steps into the new world of technology
The Supreme Court ruled that your cellphone is private. "In a sweeping victory for privacy rights in the digital age, the Supreme Court on Wednesday unanimously ruled that the police need warrants to search the cellphones of people they arrest. While the decision will offer protection to the 12 million people arrested every year, many for minor crimes, its impact will most likely be much broader. The ruling almost certainly also applies to searches of tablet and laptop computers, and its reasoning may apply to searches of homes and businesses and of information held by third parties like phone companies." Adam Liptak in The New York Times.
Analysis: Between the lines: Annotated cellphone ruling. Charlie Savage in The New York Times.
TV networks rejoice, SCOTUS says Aereo violates copyright laws. "The Supreme Court delivered a major victory to the nation’s television networks on Wednesday, ruling that an upstart Internet company is violating copyright laws by transmitting programs without paying hefty licensing fees. In a 6-to-3 decision that kept the TV industry’s business model essentially intact, the court said that Aereo — a two-year-old start-up that streams shows to tablets, laptops and other devices — must pay the networks for content, as cable systems do....The decision dealt a potential death blow to Aereo....If the ruling had gone the other way, it could have upended a television industry that has grown fearful of the disruptive force of Internet video." Jerry Markon, Robert Barnes and Cecilia Kang in The Washington Post.
Just how sweeping was the privacy ruling? "The Court rejected every argument made to it by prosecutors and police....It left open just one option for such searches without a court order: if police are facing a dire emergency, such as trying to locate a missing child or heading off a terrorist plot. But even then, it ruled, those 'exigent' exceptions to the requirement for a search warrant would have to satisfy a judge after the fact. The ruling was such a sweeping embrace of digital privacy that it even reached remotely stored private information that can be reached by a hand-held device — as in the modern-day data storage 'cloud.' And it implied that the tracking data that a cellphone may contain about the places that an individual visited also is entitled to the same shield of privacy." Lyle Denniston in SCOTUSblog.
The privacy ruling's broader implications. "The Supreme Court's ruling Wednesday on cellphone searches did not directly apply to bulk cellphone data gathering that USA TODAY has reported is being employed with increasing frequency by local and state police, but it did broadly reference the privacy protections that are due to the kinds of sweeping data available on today's mobile devices....Nine states have adopted laws requiring police to obtain search warrants to gather cellphone data. Two other states already had laws on the books and at least 10 more legislatures are weighing similar measures. Meanwhile, across the country, journalists and privacy advocates continue to challenge police agencies' refusal to release public records about their use of cell 'tower dumps' and Stingray mobile surveillance systems." John Kelly in USA Today.
How the Aereo ruling endangers cloud storage. "In its 6-3 ruling against Aereo, the Supreme Court went out of its way to emphasize that the ruling shouldn't be seen as a threat to other services that transmit copyrighted content at the request of users. Yet a legal scholar whose work was heavily cited by Justice Antonin Scalia's dissenting opinion says that the case will have cloud storage and consumer electronics companies 'looking over their shoulders.'...The problem is that "trust us" isn't going to be very reassuring for entrepreneurs and investors building the next generation of media technologies. Silicon Valley needs clear rules about what's legal and what isn't." Timothy B. Lee in Vox.
Explainer: What's next for Aereo? Anick Jesdanun in the Associated Press.
What the Aereo ruling means for TV watchers: Status quo. "The justices' decision makes life a lot harder for cord-cutters. To continue watching broadcast TV, you'll need to grab a digital antenna and hook it up to your TV. Or, you'll have to pay your cable company for those channels. A ruling the other way would have fundamentally changed the economics of TV. It likely would've altered the balance of power between content companies and distributors. It could have potentially drawn broadcasters into the net neutrality fight. It almost certainly would've affected advertising rates. It would have been fascinating to watch this future unfold — though it still may, just on a slower timeline without Aereo in its current state. But overall, this decision means we keep the system we have." Brian Fung in The Washington Post.
But wait, that's not all! 8 biggest Supreme Court cases this month. Susannah Locke in Vox.
On the Hill, a predictable call for updating privacy- and broadcast-related laws to keep up with tech advances. "Lawmakers and business groups alike are claiming the Supreme Court’s twin decisions on Wednesday should motivate Congress to make sure the law keeps up with advances in technology. At the top of the list is electronic privacy. The high court’s unanimous decision that police officers need a warrant before searching a suspect’s cellphone shows the need for lawmakers to also require a warrant before cops can search people emails, reform backers said." Julian Hattem and Kate Tummarello in The Hill.
After an appeals court struck down Utah's same-sex marriage ban, could the Supreme Court be next? "A federal appeals court in Denver struck down Utah's ban on gay marriage Wednesday, paving the way for a U.S. Supreme Court decision on the issue as soon as next year. The ruling by the 10th Circuit Court of Appeals was the first by any federal appeals court on the issue to date. While the ruling struck down the Utah ban, it applies to the other five states in the circuit: New Mexico, Wyoming, Colorado, Kansas and Oklahoma. Utah officials said they would appeal and would seek a quick resolution of the issue. That would seem to suggest the state will appeal directly to the Supreme Court and will forego asking for a rehearing by the full the appeals court." Nina Totenberg in NPR.
A year after the Windsor case, same-sex marriage backers see reason for hope. "Twenty states and the District of Columbia currently offer legal marriage to same-sex couples, and courts in more than a dozen states have struck down same-sex marriage bans since the high court's U.S. v. Windsor ruling. (Most of these rulings are stayed pending appeal.) Three states offer either civil unions or domestic partnerships. That leaves only a handful of states — 17 — where bans on same-sex marriage remain intact. But even in those states, in some of the most conservative parts of the country, the Windsor ruling has boosted efforts to secure gay rights." Sharyn Jackson in USA Today.
Chart: Almost half of gay Americans now live in states where it's legal for them to wed. Philip Bump in The Washington Post.
Other legal reads:
A judge rules that the U.S. no-fly list doesn't fly. Justin Bachman in Bloomberg Businessweek.
Did The Supreme Court Just Outlaw Company Stock Plans? Daniel Fisher in Forbes.
U.S. looks to provide Europeans access to courts in privacy cases. Sari Horwitz in The Washington Post.
KAFKA: Why Aereo's loss hurts the TV-industrial complex in the long run. "So it looks like Aereo will have to fold up the tent. What else will happen in the wake of the Supreme Court’s decision today? Nothing. Which is a problem, both for consumers and for the media companies celebrating their victory today. I’ve always been skeptical that Aereo would succeed, even with the Supreme Court’s blessing....Still, a Supreme Court victory for Aereo might have done a lot to move the TV industry into the future at a rapid clip, instead of its plodding pace." Peter Kafka in Re/code.
CASSIDY: On the right side of the privacy debate. "It’s not so often these days that I write anything favorable about the Supreme Court. But here’s a quick shout-out to Wednesday’s ruling from the Justices, a unanimous one, that the police need a warrant to search the cell phone, or other digital device, of a person they arrest. For once, John Roberts, who wrote the decision, and all of his colleagues appear to be on the right side of history." John Cassidy in The New Yorker.
POSNER: How exactly does this court know how significant the privacy interest is? "So it is gratifying that a court that often has trouble understanding new technology had little trouble holding that the cellphone represents something new—something that justices addressing searches incident to arrest in opinions written 30 or 40 years ago did not anticipate, to say nothing of the founders. Because people’s privacy interests in the contents of their cellphones are so strong, police cannot examine them without first getting warrants. All that said, I sympathize a bit with Alito, who in a separate opinion wonders why the Supreme Court should decide how important the privacy interest is in one’s cellphone contents. Isn’t this a better question for legislatures?" Eric Posner in Slate.
McARDLE: Aereo fought the law and the law won. "Aereo’s business model was what you might call the Rumpelstiltskin Gambit: Build something illegal, but add some elaborate wrinkle that allows you to claim you’re within the law. If you do it right, you may just be able to turn straw into gold. There’s a tragic flaw in the Rumpelstiltskin Gambit, however: The better your magic, the more likely it is to fail. The better job you do of emulating a desirable but illegal service, the more likely the court is to rule that you are providing that illegal service and shut you down." Megan McArdle in Bloomberg View.
DONNELLY: The case for expanding the Ex-Im bank. "The Ex-Im Bank’s critics live in the world of homo economicus. They say that financial markets are perfectly capable of pricing the risk associated with, say, selling Boeing Dreamliners to Nigeria. They assert that the quality of Boeing’s airplanes — or US-made goods more generally — is so high that the loss of government-backed credit won’t hurt sales that much....But in the world as we know it — that is, the one where humans aspire to be powerful even more than they aspire to be rich, and military power, not wealth, is still the ultima ratio regum, the United States ought not to kill the Ex-Im Bank but to restore its previous and larger scope." Tom Donnelly in AEIdeas.
BERSHIDSKY: The U.S. may always be addicted to oil imports. "The U.S. Commerce Department has found a way to end America's 40-year-old oil export ban without canceling it. The U.S. government is right to take it slow: It would be irresponsible to believe all the shale-oil hype and officially allow crude exports....The U.S. crude producers need the flexibility of exporting oil or selling it domestically. As for the political dreams of making the U.S. a major oil exporting power, or even of energy independence backed by the shale boom, they are just that — dreams. Although the administration recognizes the importance of the political agenda, it is only going to make tiny steps toward liberalizing exports, akin to verbal interventions on the global oil market." Leonid Bershidsky in Bloomberg View.
REDLENER: The health crisis facing the immigrants across the U.S. "The justified outrage over detained minors in California, Oklahoma and Texas has focused the nation's attention on what is only the tip of the iceberg. While the number of apprehended, unaccompanied Central American children could reach 90,000 this year, an estimated 1 million undocumented children already live among us. But this is not just a Southwestern story. In New York and other cities with large immigrant communities, newly arrived children are desperate for medical attention, legal services, and help finding family members." Irwin Redlener in USA Today.
PONNURU: Rubio the reformer... "Rubio sounds very much like a group of people who have been called 'reform conservatives.' Like them, Rubio thinks that the country doesn't need to expand the federal government but does need to apply a series of conservative reforms to dysfunctional institutions like the health-care system and the tax code. And like the reform conservatives, Rubio thinks that Republicans need to apply 'the principles of our founding to the challenges and opportunities facing Americans in their daily lives.' The program he outlined also bears a strong resemblance to the one reformers have been promoting." Ramesh Ponnuru in Bloomberg View.
PRESCOTT AND OHANIAN: Behind the productivity plunge, fewer startups. "In the first quarter of 2014, GDP in the U.S. plunged at a 2.9% annual rate, and productivity — the inflation-adjusted business output per hour worked — declined at a 3.5% annual rate. This is the worst productivity statistic since 1990. And productivity since 2005 has declined by more than 8% relative to its long-run trend. This means that business output is nearly $1 trillion less today than what it would be had productivity continued to grow at its average rate of about 2.5% per year. Lagging productivity growth is an enormous problem because virtually all of the increase in Americans' standard of living is made possible by rising worker productivity." Edward C. Prescott and Lee E. Ohanian in The Wall Street Journal.
2. The first-quarter GDP just got even worse. Here's why you still shouldn't freak out
U.S. economy collapses in first quarter, but growing again. "The U.S. economy contracted at a much steeper pace in the first quarter than previously estimated, turning in one of its worst-ever non-recession performances, but growth already appears to have rebounded strongly. The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate, the sharpest decline in five years, instead of the 1.0 percent pace it had reported last month....The economy was held back by an unusually cold winter, the expiration of long-term unemployment benefits and cuts to food stamps, which curbed consumer spending. It was also weighed down by a slowdown in the pace of restocking by businesses." Lucia Mutikani in Reuters.
It just keeps getting worse, doesn't it. Let's get all of the caveats out of the way first: It was really cold during the winter. Hiring picked up dramatically as spring grew closer. Most economists say the rebound has already begun, and the big drop in the first quarter may just have fueled pent-up demand that is fueling the pickup this quarter.But this recovery has a way of moving out of reach just when we think we're getting close. The International Monetary Fund and the Federal Reserve have already pushed back their forecasts for liftoff from the grinding economy to next year. The new reading of first quarter GDP could move the ball even farther." Ylan Q. Mui in The Washington Post.
But here's why you shouldn't worry too much. "If you dig beneath the headline numbers, the economy, in all likelihood, is still growing at the same slow and steady 2 percent pace that it has been for the whole recovery. One way to tell, as Council of Economic Advisers Chair Jason Furman points out, is that total hours worked increased as much as you'd expect if the economy were growing 2 percent, and not contracting 2.9 percent. As you can see below, there's normally a pretty strong relationship between the increase in hours and the increase in GDP, but there wasn't this past quarter. That's probably just a statistical blip." Matt O'Brien in The Washington Post.
Primary source: The White House CEA analysis.
Explainer: What economists are saying: "Different shades of nasty." Sarah Portlock in The Wall Street Journal.
Even the markets shrugged it off. "The markets don't seem to be particularly concerned either. As of writing, the Dow Jones industrials, Nasdaq and Standard and Poor's 500 are all up for the day, after dipping earlier this morning. If the markets aren't worried and if economists think that the number is an aberration, temperatures in Washington aren't likely to increase too much. But the real reason Obama in particular probably isn't concerned is that there isn't any apparent link between GDP data and presidential approval." Philip Bump in The Washington Post.
Another positive sign: Equipment orders. "American factories received more orders for business equipment in May, pointing to gains in investment that will help the economy snap back from a first-quarter plunge....The increase in orders, combined with gains in employment, shows improving sales are giving companies the confidence to expand. Paced by growing demand for automobiles and housing, manufacturers will probably boost production to restock warehouses, lifting growth into the second half of 2014." Jeanna Smialek and Michelle Jamrisko in Bloomberg.
Maybe Obamacare didn't prop up growth, after all? "The big surprise in the first quarter was the dip in health-care spending....Government statisticians initially forecast a 9.9 percent increase in health-care spending — and what we got was a 1.4 percent decline. Considering all the millions of previously uninsured people who are gaining access to health insurance under the Affordable Care Act, how can they be shrinking so dramatically?...Some people saw this big revision coming, based on the method the Bureau of Economic Analysis uses to make its estimates, as Austin Frakt pointed out....Still, health-care spending is expected to accelerate again in coming quarters." Matthew Philips and John Tozzi in Bloomberg Businessweek.
How the shale boom is helping fuel economic growth. "Despite having mostly smaller economies compared with coastal states, these states will continue growing for at least five more years, energy economists project, and they’ll have a positive impact on American jobs and the trade balance....An analysis by McClatchy of employment numbers...shows that when they’re overlapped with growth data, there’s a strong correlation between state-level growth and the dramatic increase in post-recession mining jobs through the Rockies and North Plains. States with thriving energy sectors boost the local employment picture and draw people from other states who otherwise had few job opportunities, experts say. Residents in North Dakota see the job boom on a daily basis." Patrick Gillespie in McClatchy Newspapers.
EL-ERIAN: The economic patient is still recovering. "With the economy continuing to heal, we should expect quite nice growth in this quarter’s GDP. And virtually every high-frequency economic indicator so far, including this morning’s other data releases, supports that prospect. But that bounce won't be a reason for dismissing completely the implications of the first-quarter contraction. The economy has yet to reach liftoff and as such is still vulnerable to unanticipated shocks. And with Federal Reserve policy already stretched, there is little that monetary policy can do to quickly counter these shocks should they occur. Meanwhile, the rest of the policy arsenal is essentially paralyzed by Congressional polarization." Mohamed A. El-Erian in Bloomberg View.
Other economic/financial reads:
Durable-goods orders fall 1 percent in May. Sarah Portlock in The Wall Street Journal.
Services sector expands at fastest pace in 4.5 years. Rodrigo Campos in Reuters.
Is a compromise on the way to save the Ex-Im Bank? Jim Puzzanghera in the Los Angeles Times.
Regulators debate effective punishments for guilty banks. Zoe Chace in NPR.
Fed warns banks they face tougher tests. Gina Chon and Camilla Hall in The Financial Times.
Yellen may be poised to rewrite Fed's book on wages, inflation. Howard Schneider in Reuters.
Scaredy cat interlude: House cat awkwardly meets guest cat.
3. Is the U.S. about to start actually exporting crude-oil?
Did the Obama administration just lift the ban on crude-oil exports? "Did the Obama administration just quietly lift the four-decade old ban on U.S. crude oil exports? Not quite....Commerce had issued the ruling about ultra-light crude (known as oil condensates) that had been put through a stabilization unit to make them safe for transportation and storage. This isn't like pouring the oil into a huge sophisticated refinery, but the stabilization unit does include a distillation process in which the oil is heated and some of the lightest components removed. According to Commerce, that puts the Eagle Ford oil condensates into the category of refined petroleum products. There are no limits on U.S. exports of refined petroleum products." Steven Mufson in The Washington Post.
Decision deals blow to some Gulf Coast refiners, processers. "The Commerce Department’s decision...is a win for Eagle Ford Shale crude producers, at the expense of refiners and companies planning to build processing plants along the Gulf Coast. The agency effectively declared those types of ultralight oil — called condensates — are a petroleum product free for export as long as they have been run through a distillation tower. The ruling is likely to change the economics of some of the Gulf Coast’s more expensive processing plants....Because unprocessed condensates are barred from export under that ban, the splitters have been viewed as one option for taking that condensate and producing naphtha, gasoil and other products that can, in turn, be transformed with additional materials into gasoline and diesel." Jennifer A. Dlouhy in the Houston Chronicle.
How much oil could be shipped? "The U.S. could allow about 750,000 barrels a day of light crude oil to be exported, based on a new government stance defining what qualifies for overseas shipments. Producers, refiners and pipeline companies are questioning exactly how much the Obama administration has relaxed its position on crude exports after the Commerce Department said June 24 it had categorized some lightly processed oil as exportable. The U.S. has prohibited most crude exports for four decades." Zain Shauk and Dan Murtaugh in Bloomberg.
Whew! Turns out oil exports are in good shape in Iraq. "Iraq’s oil minister said the nation’s crude exports will accelerate next month, adding to signs that violence in the country’s north isn’t affecting the oil-rich south....While violence in Iraq spurred companies including BP Plc and Exxon Mobil Corp. to evacuate workers from the country, there are few signs so far that oil production is being affected. Iraq’s exports will be close to a record next month." Kadhim Ajrash and Nayla Razzouk in Bloomberg.
House approves speeding up LNG exports. "The House passed legislation Wednesday expediting liquefied natural gas exports to nations that lack free-trade agreements with the United States, the latest development in a months-long Capitol Hill debate about whether to send the energy resource abroad. Rep. Cory Gardner's bill...would require the Energy Department to rule on applications within 30 days after developers complete a National Environmental Policy Act review....The debate now shifts to the Senate....Officials have noted that U.S. supplies coming online have allowed large buyers to leverage better deals with Russia, and that even if U.S. natural gas doesn't reach Europe, it will free up flows from other suppliers." Zack Colman in the Washington Examiner.
Other energy/environmental reads:
Congress is debating Keystone XL pipeline — yet again. Sabrina Siddiqui and Kate Sheppard in The Huffington Post.
Obama expected to discuss "critical issue" of climate change at G20 summit. Bridie Jabour in The Guardian.
Texas shatters a wind-power record. Bobby Magill in Climate Central.
Creepy crawly science interlude: Should we all be eating insects?
4.What you need to know about then latest round of GOP primaries.
Fresh insights from primary day. "Mississippi on Tuesday upended a number of accepted rules of politics: Turnout is supposed to drop in run-off elections but it went up compared to the June 3 primary. Republicans who campaign on the benefits of government are supposed to lose, but Sen. Thad Cochran ran on his federal procurements and won. And candidates with momentum aren’t supposed to suddenly lose, but tea partier Chris McDaniel did. Mr. Cochran owes his victory to a turnout operation that recruited Democrat...and a messaging shift that emphasized his Washington clout. His victory, by just less than 6,000 votes out of nearly 365,000 cast, was one in a series of establishment victories — Democratic and Republican — in Tuesday’s primaries." Reid J. Epstein in The Wall Street Journal.
Chart: A look at the tea party upsets. Philip Ross and Hanna Sender in International Business Times.
But again, even when the tea party loses, it still wins. "Coming after the overthrow of big business Republican Eric Cantor, this will require another rapid revision in the Tea-Party-versus-GOP-establishment narrative. But the daily vicissitudes in that ongoing story are beside the point. The bigger story is that on many key issues, the business community is getting nothing for its investment in the GOP establishment’s picks. The GOP is letting Tea Party predilections and preoccupations set the party’s agenda — at the direct expense of the business community’s priorities." Greg Sargent in The Washington Post.
Why Speaker John Boehner is really suing President Obama. "This is generally being interpreted as Boehner (R-Ohio) expressing frustration about executive orders. That's incorrect. At least, that's not the whole picture. This is, really, a fight about executive action. As Wonkblog and others have noted, Obama has actually signed far fewer executive orders than past presidents. The Brookings Insitution determined that he'd signed fewer per day of his presidency than anyone since Grover Cleveland. And most of the executive orders he signs are hardly the sort of thing that would seem to put America on the brink of a constitutional crisis. You can see them indexed at the National Archives website." Philip Bump in The Washington Post.
Chart: Boehner’s attack on Obama’s executive orders ignores presidential history. Christopher Ingraham in The Washington Post.
Other political reads:
A year later, Holder, civil rights groups decry impact of voting rights ruling. Greg Gordon in McClatchy Newspapers.
Let's all come together interlude: Slapping brings people together.
The economy just had its worst quarter since the Great Recession. Here’s why you shouldn’t worry. Matt O'Brien.
Federal gun violence research has been banned for years. Now researchers are getting around it — with Google. Christopher Ingraham.
Did the Obama administration just lift the ban on U.S. crude oil exports? Steven Mufson.
People hate shopping for health insurance. Can Obamacare really change that? Jason Millman.
The ultimate riddle of supply and demand: bikeshare. Emily Badger.
Boehner’s attack on Obama’s executive orders ignores presidential history. Christopher Ingraham.
College is so expensive because we make dumb decisions about college. Christopher Ingraham.
The Supreme Court just killed Aereo. Brian Fung and Cecilia Kang.
How a once-obscure agency is dividing the GOP over "corporate welfare." Rebecca Robbins.
How the sugar lobby helps perpetuate that sweet tooth of yours. Roberto A. Ferdman.
The economy shrank almost 3 percent in Q1. Holy guacamole. Ylan Q. Mui.
Why the massive black market trade in cigarettes affects you even if you don’t smoke. Keith Humphreys.
Key Latino lawmaker gives up on immigration reform. Laura Meckler in The Wall Street Journal.
Workforce training bill clears Senate. Maggie Severns in Politico.
Senate panel backs Castro as housing secretary. Elvina Nawaguna in Reuters.
An opening for a bankruptcy option on student loans? Josh Mitchell in The Wall Street Journal.
A stalemate is forming in Congress' highway-funding fight. Joan Lowy in the Associated Press.
Business at odds with Obama over Russia sanctions threat. Mike Dorning in Bloomberg.
Got tips, additions, or comments? E-mail us.
Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.