Wonkbook: New Cap & Trade Push; Nuclear Option; New Ed Standards
Dylan Matthews is writing Wonkbook while Ezra is in China.
Pivoting off the oil spill, Obama has promised to wrangle the votes needed for cap and trade this Congress. Meanwhile, the administration has ruled out plugging the oil spill with a nuclear weapon. And a group of governors and state school chiefs has released a set of national education standards set to adopted shortly by many states.
Welcome to Wonkbook.
Obama is making a new push for cap and trade legislation, report Steven Mufson and Michael Shear: "In a speech at Pittsburgh's Carnegie Mellon University, Obama made one of his strongest pitches for comprehensive climate legislation, arguing that the case for breaking the nation's addiction to fossil fuels has been made clearer by the environmental catastrophe in the gulf. The president vowed to gather votes for the climate bill in the 'coming months' and repeated his intention to roll back billions of dollars in tax breaks on big oil companies, to tap natural gas reserves as an alternative to coal, and to increase reliance on nuclear power."
The administration is ruling out a nuclear blast meant to seal the oil well, reports William Broad: "Decades ago, the Soviet Union reportedly used nuclear blasts to successfully seal off runaway gas wells, inserting a bomb deep underground and letting its fiery heat melt the surrounding rock to shut off the flow. Why not try it here? --Stephanie Mueller, a spokeswoman for the Energy Department, said that neither Energy Secretary Steven Chu nor anyone else was thinking about a nuclear blast under the gulf. The nuclear option was not ¿ and never had been -- on the table, federal officials said. 'It's crazy,' one senior official said."
New national education standards have been released and are ready for adoption by states, reports Sam Dillon: "The nation's governors and state school chiefs released on Wednesday a new set of academic standards, their final recommendations for what students should master in English and math as they move from the primary grades through high school graduation.--The Obama administration hopes that states will quickly adopt the new standards in place of the hodgepodge of current state benchmarks, which vary so dramatically that it is impossible to compare test scores from different states. The United States is one of the few developed countries that lacks national standards for its public schools."
Great moments in punditry interlude: Joad Cressbeckler gets a TV show.
Table of Contents: the Minerals Management Service is issuing new offshore drilling regulations (and other energy news); unemployment is worsening in cities (and other economic news); new airline ticket regulations are coming (and other domestic policy news); and Warren Buffett defended Moody's conduct during the financial crisis (and other FinReg news).
The Minerals Management Service has raised disclosure standards for firms conducting offshore drilling, reports Juliet Eilperin: "The federal agency overseeing offshore energy exploration announced Wednesday that it would require companies operating offshore to provide additional information about the potential risks and safety precautions in their drilling plans. Regulators have failed to demand such disclosures even in the aftermath of the BP oil spill, according to evidence obtained by The Washington Post."
Oil companies are already planning to fight new regulations, report Eric Lichtblau and Jad Mouawad: "Oil industry executives acknowledge the stiff political resistance that they face. Despite the success of shallow-water drillers in avoiding a continued ban on their end of the industry, executives and industry analysts say the daily images of oil wafting onto the coastline will make it tougher for them to fend off calls for tougher regulations that extend far beyond BP and the Deepwater Horizon spill. Bruce Vincent, president of the Independent Petroleum Association of America, which represents both deep-sea and shallow-water drillers, said Wednesday that he was concerned about a 'domino effect' sweeping through Washington, with new regulations now under discussion threatening to cut oil production, jobs and industry profits."
The federal government is demanding BP pay for barrier islands meant to stop the oil flow, reports Marc Kaufman: "The White House ordered BP to pay for construction of five more large sections of Louisiana barrier island sand berms Wednesday as efforts to contain the gushing Deepwater Horizon oil spill hit more obstacles and the slick approached Florida. Speaking from the coastal town of Venice, Louisiana Gov. Bobby Jindal (R) said he had just heard from the White House that BP would be required to pay for the work. Although the projects had already passed expedited environmental approval, the administration also needed to determine whether the work would actually stop oil from entering the marshlands."
While negligible now, the BP spill could drive up oil prices for the next decade, reports Brian Baskin: "The spill becomes harder to ignore further into the decade. By 2015, Wood Mackenzie predicts stiffer federal offshore permitting and safety regulations will result in more than 350,000 barrels a day of production forecasted for that year to be delayed. What production does come out of the deepwater Gulf is almost certain to be more expensive as well, at a time when there are few alternative sources of new supplies. Companies already need oil prices of at least $60 a barrel to break even on a new project in the Gulf, according to Eurasia Group. The industry would need much higher oil prices to justify investing in new production."
Some Senators are urging BP to withhold derivatives, reports Meredith Shiner: "Sens. Chuck Schumer (D-N.Y.) and Ron Wyden (D-Ore.) sent a letter to the CEO of BP on Wednesday, demanding the company pay no dividends to shareholders until the total cost of the Gulf cleanup has been assessed.--'We find it unfathomable that BP would pay out a dividend to shareholders before the total cost of BP's oil spill cleanup is estimated,' Schumer and Wyden wrote."
There are creative ways to punish BP, writes Daniel Gross: "The oil company's efforts to paint itself as a firm for which hydrocarbons were only a small part of business was laughable. But this spill could actually force BP to go beyond petroleum. Several readers suggested compelling BP to use the cash it earns from its frequently reckless extraction and processing of fossil fuels to fund the transition to different energy sources. Karen suggested we could require BP 'to use a certain percentage of their profits per year in research and development of alternative energy resources, with a requirement that some amount of new tech is made reasonably available to consumers within a certain timeframe.'"
The oil spill could even reach Europe eventually, writes Curtis Ebbesmeyer: "Trapped in such blobs, the oil from Deepwater Horizon will ride the Gulf Stream across the Atlantic. In years to come, some will wash up on European shores, and some will reach the Arctic Ocean and continue along global conveyor belts of currents. Whales, dolphins and other animals will dive through the petro-infused slabs, suffering possible toxic exposures. The unprecedented deepwater injection of chemical dispersants to break up the petroleum before it reaches the surface may only worsen the impact. It will cause more oil to remain suspended longer in these stratified slabs, where there is no way to remove it."
Obama could have prevented the oil spill, and deserves the heat, writes Tim Fernholz: "It was clear when Obama took office in 2009 that the Mineral Management Service, which regulates off-shore oil drilling, was in desperate need of reform. At the time, I wrote a column about how the new administration could succeed at governing; one chief example was reforming the MMS, which had recently been exposed for a 'culture of ethical failure.' An influential transition briefing book prepared by the Center for American Progress discussed the need for reform of off-shore drilling regulation. And though the president appointed Liz Birnbaum, a former congressional staffer, to head the agency, it's clear that she lacked the mandate, resources or ability to change it."
'80s nostalgia interlude: A new "Thundercats" cartoon is coming.
Most cities are facing an increasing jobless rate, reports Maya Jackson Randall: "The job market in April was tougher than a year ago in hundreds of U.S. metropolitan areas, according to data the U.S. Labor Department released Wednesday. The unemployment rate in April was higher than a year earlier in 291 of the 372 metropolitan areas covered by the Labor Department report. It was lower in 73 areas and unchanged in eight areas. The national unemployment rate in April was 9.5%, not seasonally adjusted. But 14 areas--11 of which were in California--reported unemployment rates of at least 15%."
Ad agencies are finding the creative workers are heavily in demand, reports Suzanne Vranica: "The sudden and widespread executive shifts come as ad agencies face increased pressure to find new ways to reach consumers and keep their creative hold on the business as tech giants such as Google Inc. and Apple Inc. increasingly invade their turf. Even traditional media, such as magazines, are bulking up on their creative expertise in the hope of attracting more ad dollars. 'Maintaining an edge in creativity is the lifeblood of the ad business,' says Mr. Brien."
eBooks are making self-published books more viable, report Geoffrey Fowler and Jeffrey Trachtenberg: "Fueling the shift is the growing popularity of electronic books, which few people were willing to read even three years ago. Apple Inc.' s iPad and e-reading devices such as Amazon's Kindle have made buying and reading digital books easy. U.S. book sales fell 1.8% last year to $23.9 billion, but e-book sales tripled to $313 million, according to the Association of American Publishers. E-book sales could reach as high as 20% to 25% of the total book market by 2012, according to Mike Shatzkin, a publishing consultant, up from an estimated 5% to 10% today."
Greece is preparing to sell off much of its public assets to solve its debt crisis, reports David Jolly: "Greece announced a big sale of state-owned assets Wednesday, as the cash-strapped government moved to close a yawning budget deficit and fulfill the terms of an international rescue package. The government will sell 49 percent of the state railroad, list ports and airports on the stock market and privatize the country's casinos, a Finance Ministry official said after a cabinet meeting in Athens. The government will also sell stakes in water utilities serving Athens and Thessaloniki, and combine its vast real estate assets into a holding company to be listed on the stock market, he said."
European countries are targeting prescription drugs to balance budgets, reports Jeanne Whalen: "Several countries in recent weeks, including Spain, Germany and Italy, have proposed or enacted reductions in what they will pay or taken other cost-control measures for various drugs, and analysts say they expect other countries to follow. In Europe, state healthcare systems pay for the bulk of drug purchases. European governments have long been known for their frugality when negotiating prices with drug companies, but the latest cuts are more severe than usual. Europe is the second largest market after the U.S. for many drug companies."
Shoring up Social Security would provide markets with much-needed confidence, writes Burton Malkiel: "Almost more important than the progress that would be made in bringing the long-run fiscal deficit under control would be the psychological message that our political process is actually capable of tackling entitlements. Markets everywhere would celebrate our return to fiscal sanity on at least one entitlement program. Higher prices for stocks could lower the cost of equity capital and enhance the long-run growth outlook considerably. By contrast, failure to solve problems that are easy to fix without changing the basic structure of our social safety net is likely to guarantee that our recent unsatisfactory economic performance will continue."
Teen punk interlude: Be Your Own Pet's "Adventure".
The Department of Transportation has issued new airline rules, reports Susan Stellin: "The proposed new rules would raise compensation for passengers denied boarding on oversold flights, allow customers to get a full refund within 24 hours of purchasing an airline ticket and require reimbursement of baggage fees and expenses when luggage is not delivered on time. The proposed rules also require the airlines to be more prompt in notifying travelers about flight delays and cancellations -- at boarding gate areas as well as through airline Web sites and phone updates."
Questions are being raised about the Dartmouth Atlas health care studies' relevance to health care reform, report Reed Abelson and Gardiner Harris: ""We show where the waste is in medicine," said Dr. Elliott Fisher, a physician who is one of the principal authors of the Dartmouth work and was a frequent visitor to Washington during the long legislative debate. 'If everyone could operate like Oregon, Seattle or the Upper Midwest, there's huge savings.' But the atlas's hospital rankings do not take into account care that prolongs or improves lives. If one hospital spends a lot on five patients and manages to keep four of them alive, while another spends less on each but all five die, the hospital that saved patients could rank lower because Dartmouth compares only costs before death."
Expedited patent applications are on their way, reports Amy Schatz: "Inventors frustrated with waiting for a decision on their applications from the U.S. Patent and Trademark Office may soon be able to pay for expedited review under a proposal to be announced Thursday. The patent office chief David Kappos is proposing a new three-track system for patent applications that would allow applicants to pay an additional fee on top of the standard $545 filing fee to jump to the front of the line and receive expedited reviews. 'Not every application needs to go at the same speed. Some need to go fast and some need to go more slowly,' Mr. Kappos said in an interview."
Government spending is driving up private saving, writes Casey Mulligan: "Government deficits have stabilized in recent months, and so has private savings. It is likely that the private sector dampens the effects of government borrowing. By definition, the government runs a deficit when its spending exceeds its revenue. It typically finances the difference by borrowing. Of course, future governments are burdened with paying the principal and interest on the government debt created today, which is why many critics of deficit spending conclude that such deficits leave us worse off in the future."
Heavy demand for Treasury bonds could last for a while, writes Stephen Gandel: "Cohen says many are predicting the rate will trade down further throughout the summer, keeping the rally in Treasury prices alive at least for a few more months. And that's good news not just for investors, but everybody. After all, it's not just the government that is paying less. Companies and individuals are paying less to borrow as well. Ten-year Treasury bonds serve as a benchmark for lots of borrowing rates, including, most importantly, home loans."
The recession confirms the stimulative value of tax cuts, writes Mark Thoma: "As the recession took hold, we saw a large increase in the saving rate and a corresponding fall in consumption. The tax cuts were an attempt to reverse the decline in consumption, but instead they mostly raised the amount that went into saving. But that has a benefit. Households are not going to start consuming normally again until their balance sheets are repaired. The faster the holes in their balance sheets are refilled, and tax cuts can help with this, the faster the households can return to their normal rates of consumption -- a prerequisite for the economy to return to normal."
Race to the Top is progress, but too little, writes Matt Miller: "Any honest assessment of the bigger picture is more depressing. That's because the real race we're in is not a 'race to the top' within the United States but a race to maintain middle-class living standards in a world where rising, hungry powers such as China and India now threaten them. It's a race against other advanced nations whose school systems routinely outperform ours. Seen in this light, the outer limits of the Obama administration's ambitions are demonstrably unequal to the challenges we face. A one-time $4.5 billion incentive fund in a system that spends $600 billion a year simply can't produce fundamental change."
DC locals interlude: The Mynabirds' "What We Gained in the Fire".
Warren Buffett defended Moody's, of which he is the largest shareholder, before the Financial Crisis Inquiry Commission, reports David Segal: "Warren E. Buffett, the largest shareholder of Moody's, offered a rather tepid defense of the credit-rating company and its chief executive at a hearing on Wednesday examining the causes of the financial crisis. Mostly, he emphasized how little he knows about the ratings business other than that it is -- or has been -- spectacularly profitable. 'I've never been to Moody's,' he said. 'I don't even know where they're located. I just know that their business model is extraordinary.'"
The SEC is trying to bar Steven Rattner from Wall Street, reports Michael Barbaro: "As it investigates a suspected kickback scheme in New York's pension system, the Securities and Exchange Commission has been pushing to bar Steven L. Rattner, a prominent financier and former adviser to the Obama administration on the auto industry, from working in the securities industry for up to three years, according to three people told of the discussions. But Mr. Rattner has fiercely resisted the proposed penalty, setting up a face-off with the federal government, according to these people, who spoke on the condition of anonymity because the negotiations are intended to be confidential."
Buffett's conduct before the FCIC was shameful, writes Edmund Andrews: "Yet when asked by Phil Angelides, the commission chairman, what the agencies did wrong, Buffett passed the buck as shamelessly as every other Wall Street powerhouse player: 'I think they made the same mistake that virtually everybody else made,' Buffett told in the first in a long series of evasions. That 'mistake,' of course, was in failing to recognize that the housing bubble might turn to a bust. When Angelides held up a copy of the Economist from 2005, which featured a cover story on housing called "After the Fall,' Buffett stuck to his story. When Angelides mentioned some of the economists who had warned for years about a housing bust -- Robert Shiller, Nouriel Roubini and Dean Baker, among others -- Buffett still shrugged his shoulders."