Wonkbook: Finding the next Fed chairman

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

Wonkbook dashboard

RCP Obama vs. Romney: Obama +0.5%; 7-day change: Obama -3.5%.

RCP Obama approval: 49.7%; 7-day change: -0.2%.

Intrade percent chance of Obama win: 63.7%; 7-day change: -14.0%.

Top story: Finding the next Fed chairman

Who will be the next chairman of the Federal Reserve? "Whoever is inaugurated as president Jan. 20 will, in the first year of his term, face a decision that will have a greater impact on the economy than any other single call he will make: Whom to select as chairman of the Federal Reserve. Ben S. Bernanke’s term ends Jan. 31, 2014, about a year after the president takes office; if the past is a guide, and given the sluggishness of the Senate confirmation process, a nomination should happen by Labor Day.That leaves a potential vacancy in a job that has become all the more difficult during Bernanke’s time in office. The Fed chairman has always been powerful, controlling the levers of the nation’s monetary policy. But now, since the Dodd-Frank legislation passed in 2010, the Fed and its leader have even more explicit power and responsibility to address risks in the financial system and try to lessen the damage from future crises." Neil Irwin in The Washington Post.

@justinwolfers: Econ gossip: @Neil_Irwin handicaps the field to see who will succeed Bernanke. My tip: The wise Janet Yellen.

Meanwhile, the global economy is cooling off, says the IMF. "Major developing countries such as China, India and Brazil were fast and forceful in battling the worldwide economic downturn of 2009, raising hopes that these dynamic economies would continue to serve as engines for global growth in the years that followed. But now, these countries are struggling to sustain their dramatic expansion...The International Monetary Fund on Monday downgraded its projections for growth in developed and developing economies. The agency now expects the world economy to grow by 3.3 percent this year and 3.6 percent in 2013, down slightly from estimates in July." Howard Schneider in The Washington Post.

@Goldfarb: I am beginning to believe that Ben Bernanke's next job could be MLB commissioner.

And the OECD says it is only going to get worse. "Most major economies are to slow further in coming months, with only Brazil and the U.K. to experience a moderate pickup, according to the Organization for Economic Cooperation and Development's composite leading indicators...The OECD said its leading indicator of economic activity in its 34 developed-country members fell to 100.1 in August from 100.2 in July, and its leading indicators for most large developing economies were unchanged or lower. The OECD's leading indicators are designed to provide early signals of turning points between the expansion and slowdown of economic activity and are based on a wide variety of data that have a history of signaling changes in economic activity." Paul Hannon in The Wall Street Journal.

@ModeledBehavior: Tales of Bernanke's persuasion are impressive, but I do think we'd be better off now if Obama had put Mankiw in for Fed Chair.

But the September jobs report in the U.S. may have understated gains. "The most recent government jobs report showed that the U.S. economy gained 114,000 jobs in September. That was encouraging. But as we emphasized last week, the report came with a lot of caveats. The margin of error on the number of payroll jobs gained in September was plus or minus 108,293. But history can also tell us how the government’s estimate for September jobs is likely to change in the months ahead. That number will be revised twice as the Bureau of Labor Statistics gathers fuller data...So take Friday’s report with a grain of salt. If the recovery to date is any indication, the 114,000 number could very well be too low." Dylan Matthews in The Washington Post.

@AnnieLowrey: With the major IMF-World Bank meetings underway, the fund warns of "alarmingly high" risks of a slowdown

FINK: How to restore confidence in financial markets. "In the financial services and banking industry, [investors] must be seen as part of the solution to what ails our markets, not the cause. This requires constructive engagement with regulators on mechanisms that, without choking off investment opportunity, introduce greater clarity for investors. The stiff opposition of the mutual-fund industry to efforts by the Securities and Exchange Commission to reform the regulation of U.S. money-market funds does not instill the sort of trust we need...Financial education and transparent investment products that are easy to understand and apply can allow investors to capture market opportunities and achieve the returns they need to achieve their objectives even in a complex and challenging new world. This too will help restore trust in the markets." Laurence D. Fink in The Wall Street Journal.

@Reddy: The risk of a new global recession is now 17% vs. 4% in April, the #IMF says as it cuts its growth outlook.

Top op-eds

SUNSTEIN: In praise of turncoats. "Question: What do Whittaker Chambers, Richard Nixon, John Roberts, Elena Kagan, Bill Clinton and Bob Dylan have in common?...Answer: All of them have been denounced as turncoats. A former communist, Chambers repudiated communism. Nixon went to China. Roberts, nominated by President George W. Bush, voted to uphold an important provision of Obamacare. Nominated by President Barack Obama, Kagan voted to strike down an important provision of Obamacare. Clinton signed the law that ended welfare as we knew it. Dylan went electric, abandoning folk music for rock ’n’ roll. Disloyalty is not a virtue, and traitors rank among history’s worst villains. But societies need turncoats. In authoritarian nations, turncoats may be freedom fighters. In democracies suffering from a high degree of polarization, turncoats are indispensable. We need more Nixons going to China. We need more Dylans going electric. In politics, turncoats make sensible compromises possible. If Democrats and Republicans are sharply divided on a question of economic policy, and no one is willing to break ranks, an agreement might be unachievable." Cass R. Sunstein in Bloomberg.

KLEIN: The immoderacy of 'moderate Mitt.' "As the Republican party has moved to the right in recent years, so too has our standard for what counts as a moderate Republican. These days, if you’re willing to admit that President Obama was probably born in the United States, that the U.S. Treasury probably shouldn’t default on its debts, and that someone, somewhere, might occasionally have to pay taxes, then congratulations, you’re a moderate Republican! The fact is that a moderate Republican today is an arch-conservative from only a few short years ago...Why this shift? Because moderate Republicans of today fear their base more than they fear independent voters...The problem for those of us who would like to see the return of Moderate Mitt -- and I count myself in that number -- is that there’s little reason to believe Romney would find himself forced to work with Democrats if he was president...We’ve seen what Romney does when he fears the right: He folds...Romney isn’t an ideological moderate. He’s a pragmatic executive. When he needs to govern from the center, he does. When he needs to lurch to the right, off he goes. So if you want to know how he’ll govern, don’t listen to what he says. Look at who he has reason to fear." Ezra Klein in The Washington Post.

@aviksroy: I don't understand this whole "Romney shifts to the center" meme. Romney's positions haven't changed at all: not on taxes nor health care.

STEVENSON AND WOLFERS: Fiscally responsible? Not the GOP. "Presidential candidate Mitt Romney says he will get the U.S. government’s finances in order and make life better for business. It’s a classic Republican pitch, but to what extent does it correspond to what he might really do as president? Not so much...One way to assess the benefits of Republican presidencies is to look at how markets have responded to them over the years. The most reliable method is an 'event study,' which analyzes the response of market prices to rapid shifts in the likelihood of a Republican in the White House...Let’s take the 2004 election as a particularly stark case study. In the middle of Election Day, flawed exit-poll numbers suggested that John Kerry would win in a landslide. For the next few hours, financial markets believed that there would be a Democrat in the White House...So how did markets respond? Yields on government bonds were lower during the brief period in which a Democrat was expected to be president, suggesting investors believed the Republican would increase the national debt." Betsey Stevenson and Justin Wolfers in Bloomberg.

@pourmecoffee: Romney is basically a toddler: Do whatever it takes to please whoever's in the room and claim an exceptionalism entitling no apologies.

PONNURU: Why Ryan should resoundingly win his debate against Biden. " Even though Republicans will be trying to lower expectations for their candidate, Representative Paul Ryan, everyone knows he is a formidable and unflappable debater. He knows the ins and outs of domestic policy at least as well as Biden, and speaks more authoritatively about them...The vice president seems to believe -- judging by how he goes on about it -- that he has some special gift for connecting with middle-class voters. This may lead to overconfidence. Ryan has been at least as effective as Biden in making a blue-collar case for his party’s ideas...And the consensus Democratic view that Obama was too passive and disengaged probably misunderstands why he lost the debate. The real problem was that he was less up to speed on the arguments and counterarguments than Romney was. If Biden internalizes the Democratic conventional wisdom, he will be more engaged than Obama was -- but it won’t help unless he is also better informed. An amped-up yet inadequate response can come across as bluster." Ramesh Ponnuru in Bloomberg.

@hillhulse: From the day Rep. Ryan was picked for veep, adoring House GOPers have predicted he would vanquish VP Biden in debate. This week will tell.

Technological interlude: Rose's Law and quantum computing.

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

Still to come:$7,000 for the long-term unemployed; Obamacare raising costs for mid-size firms; Baby Boomers aren't taking the jobs of Millenials; California gas prices skyrocket; and evoking the work of M.C. Escher.

Economy

GOP lawmaker proposes $7K subsidy to companies who hire the long-term unemployed. "Rep. Robert Dold (R-Ill.) introduced legislation late last week that proposes a new pilot jobs program under which companies would get a $7,000 subsidy if they hire people who have been out of work for six months or more. Dold said his proposal, outlined in his Back to Work Blueprint Act, would take money from current job training programs and turn it into a more effective incentive for companies to hire the long-term unemployed." Pete Kasperowicz in The Hill.

Infographics interlude: Wealth and investment stance by member of Congress.

Health Care

Study: Costs will rise on mid-size firms from new healthcare law. "President Obama's healthcare law won't erode employer-based health insurance -- but it will raise some companies' costs by nearly 10 percent, according to a new analysis from the Urban Institute. Although the law's critics usually focus on small businesses, the new paper says medium-sized firms will see the biggest cost increase...Higher costs stem largely from expanded coverage, the report says." Sam Baker in The Hill.

And Obama's lead on health care issues is shrinking. "Mitt Romney appears to be closing the gap on healthcare issues, according to the latest survey from the Pew Research Center for People and the Press...Obama leads Romney by 3 points on which candidate survey participants think would be better at 'dealing with health care,' and by the same margin on Medicare. Obama had a 13-point edge on both questions in last month's Pew poll." Sam Baker in The Hill.

The powerful influence of lead on school performance. "Over the past 50 years, after scientists realized that even minute doses of lead can have harmful effects, policymakers have been steadily pushing to eradicate the stuff from the environment...Lead levels in the air have dropped 92 percent since then...By most accounts, this was a savvy investment...Economists have pegged the value of the leaded gasoline phase-out in the billions or even trillions of dollars. Some criminologists have even argued that the crackdown on lead was a major reason why U.S. crime rates plunged so sharply during the 1990s...Yet there’s arguably still more clean-up that could be done. Childhood lead levels have been falling steadily in the past decade, according to the Centers on Disease Control, but there’s room to fall further...[A] new NBER paper from economist Jessica Wolpaw Reyes suggests that even modest reductions can have out-sized benefits...[I]n Massachusetts during the 1990s, the state took aggressive steps to strip old paint from homes with children under the age of six...Massachusetts managed to reduce the fraction of students who scored poorly on their exams by 1 to 2 percentage points." Brad Plumer in The Washington Post.

The Nobel Prize in Medicine goes to two stem-cell researchers. "Two stem-cell researchers have won this year's Nobel Prize in Physiology or Medicine for their groundbreaking work in cellular reprogramming, a technique that unleashed a wave of advances in biology, from cloning to the possible treatment of diseases using a patient's own cells. Experiments by John B. Gurdon of the United Kingdom and Shinya Yamanaka of Japan showed that mature cells taken from the body could be changed to an embryonic-like state in a laboratory dish, a head-spinning discovery that is the biological equivalent of turning back time." Gautam Naik in The Wall Street Journal.

Policy change in works on high blood pressure. "About 1 in 3 American adults has high blood pressure...Now, health officials are mounting an ambitious effort to target those people who are at greatest risk -- the estimated 36 million patients, or nearly half of all people with high blood pressure, who haven't brought the condition under control. Some of those patients are taking medication that isn't sufficient to reduce their blood pressure to a safe level. Many others have high blood pressure, also known as hypertension, and aren't aware of the fact." Laura Landro in The Wall Street Journal.

Domestic Policy

Americans' misspent youths. "Liberals and conservatives alike have turned Europe into the harbinger of what doom may come to America...But Europe’s youths may not be as badly off as that eye-popping statistic suggests, while America’s youths may be comparatively worse off...The Organization for Economic Cooperation and Development’s calculations that youth unemployment is at 53.8 percent in Greece and 52.9 percent in Spain, which sounds like real cause for alarm...But that doesn’t mean that half of Spain and Greece’s young people are sitting at home, idle, out of work, and checking Facebook. In Spain, Kirkegaard notes, 83 percent of those between 15 and 19 years old are in school, as are 39 percent of those between 20 and 24 percent. What’s more, many Europeans countries also offer job training and apprenticeship programs to young people that don’t count as full-time employment...[A] better measure of 'wasted youth' would be to look at the OECD’s calculation of the share of young people 'not in employment, education or training.'...[T]here is still a higher proportion of “idle youth” in Spain and Greece than in the United States. But the rates of idleness are much closer than the sheer unemployment measure." Suzy Khimm in The Washington Post.

Things that Baby Boomers aren't doing: stealing younger people's jobs. "More baby-boomers are putting off retirement, as the sour economy has sapped pension plans, 401(k)s and other savings, while life-expectancy has continued to rise. That’s led to some speculation that younger workers are getting squeezed out of the workforce and face a 'millennial glass ceiling' while they’re in it. But one recent study shows the opposite to be true: Older workers who stay in the workforce tend to help younger workers get more jobs and better-paying work." Suzy Khimm in The Washington Post.

This is the sound of House music. "If you’ve been following along with the Election in Numbers, you know that most models are predicting that President Obama will win reelection comfortably (more than 300 electoral votes, in many estimates) and Democrats will retain the Senate, with 52 to 54 seats. The House, however, is a bit of a mystery. Democrats are leading in generic ballot polling, which prompted Sam Wang to predict that they’re favored to retake the majority there...But John Sides, Eric McGhee and Ben Highton at the Monkey Cage have built a model using economic data that is more bearish on Democrats’ chances, forecasting a net gain of only one seat, with Republicans retaining their majority." Dylan Matthews in The Washington Post.

Think Congress isn't extreme enough? "While the occupant of the White House and the composition of the next Congress are still to be decided, one thing is clear: there will be many fewer moderate politicians here next year. A potent combination of Congressional redistricting, retirements of fed-up lawmakers and campaign spending by special interests is pushing out moderate members of both parties, leaving a shrinking corps of consensus builders. Socially conservative Democrats, known as Blue Dogs, have been all but eviscerated from the House over the last few elections...The House is more polarized than at any time in the last century, according to models built by Keith Poole, a professor of political science at the University of Georgia, and Howard Rosenthal, professor emeritus of social sciences at Princeton. The last time the Senate was this divided, according to the joint research, was a century ago." Jennifer Steinhauer in The New York Times.

Illustrations interlude: Matthew Borrett's Escher-like sunken cityscapes.

Energy

Why California’s gas prices are going haywire. "Gasoline at the pump in California is typically about 40 to 50 cents more expensive than it is anywhere else in the country. The state’s gas taxes are significantly higher than the national average and many of its retailers have to sell a higher-quality blend of gasoline in order to reduce smog and other pollutants. That all raises prices. But over the past week, things have really gotten out of whack. California’s gas prices have leaped an additional 50 cents to near-record highs...So what happened? Why the chaos?...[A] handful of disruptions at key California refineries and a pipeline shutdown happened." Brad Plumer in The Washington Post.

Defining 'sustainability.' "Thursday marked the launch of the Sustainability Accounting Standards Board (SASB), a nonprofit organization that's revisiting corporate disclosure by revealing the value of material information about companies’ environmental stewardship, social policies and corporate governance...SASB will produce what it's calling a 'materiality map,' which scores key sustainability issues across 10 sectors. Inherent differences among industries will require that each sector refine its own sustainability disclosure practices...The SEC has asked SASB to brief its analysts as they complete their assessments of materiality by sector, according to Mitchell." Justin Doom in Bloomberg.

Wonkbook is produced with help from Michelle Williams.

business

wonkblog

Success! Check your inbox for details. You might also like:

Please enter a valid email address

See all newsletters

Comments
Show Comments
Most Read Business

business

wonkblog

Success! Check your inbox for details.

See all newsletters

Next Story
Dylan Matthews · October 8, 2012