Friday, July 30, 2010; 7:12 AM
An influential regional Federal Reserve bank president warns that expansionary action may be needed to prevent deflation; GOP senators blocked a bill that would've expanded lending to small businesses; Democratic senators are cutting food stamps to pay for Medicaid and education funding; Paul Ryan lays out the Republicans' economic agenda, and don't forget the street dancing.
It's Friday. Welcome to Wonkbook.
St. Louis Fed president James Bullard is warning that long-term deflation is possible, reports Neil Irwin: "In his paper, ominously titled 'Seven Faces of 'The Peril,'' Bullard raises the possibility of Japan's fate befalling the United States in more explicit fashion than have his colleagues in the Federal Reserve system. He reaches the counterintuitive conclusion that the Fed's commitment to leave rates low for an extended period 'may be increasing the probability of a Japanese-style outcome for the U.S.' by raising expectations that prices will remain flat for an extended period. But he also finds that 'on balance, the U.S. quantitative easing program offers the best tool to avoid such an outcome.'"
The Senate is cutting $6.7 billion from food stamps to help pay for Medicaid and education funding: http://bit.ly/9WYvXH
Goldman Sachs is already working to evade FinReg's proprietary trading restrictions, reports Charlie Gasparino: "The big Wall Street firm has moved about half of its 'proprietary' stock-trading operations -- which had made market bets using the firm's own capital -- into its asset management division, where these traders can talk to Goldman clients and then place their market bets...But by having the traders work in asset management, where they will take market positions while dealing with clients, Goldman believes it can meet the rule's mandates, avoid large-scale layoffs and preserve some of the same risk taking that has earned it enormous profits, people close to the firm say."
Benjamin Sarlin profiles Pete Peterson, calling him the George Soros of deficit reduction: http://bit.ly/b0Zq2V
The Senate GOP held together to filibuster a bill to aide small businesses, reports Stephen Ohlemacher: "The small business tax cuts in the bill include breaks for restaurant owners and retailers who remodel their stores or build new ones. Other businesses could more quickly recover the costs of capital improvements through depreciation. Long-term investors in some small businesses would be exempt from paying capital gains taxes."
Great moments in campaign advertising interlude: Basil Marceaux for Governor of Tennessee.
Still to come: Few unemployed people are moving to find work; the EPA is declining to reconsider its endangerment finding on global warming; Lindsey Graham is leading a push to abolish birthright citizenship; and a baby meerkat finds a home.
Few unemployed workers are relocating for new jobs, reports Michael Fletcher: "With many people locked in homes by underwater mortgages, only 1.6 percent of Americans moved between states in a one-year period that ended in March 2009 -- a labor stagnation not seen in half a century. Though household mobility has gradually declined for more than two decades, the recent sharp downturn has caused economists to worry that it could harm the already struggling recovery."
The IMF faulted FinReg for not reducing regulatory complexity: http://nyti.ms/aMZy1Y
Ezra Klein interviews Rep. Paul Ryan on what Republicans would do to turn the economy around: "If Nancy Pelosi came to me and said I've been wrong, you're right, what do you want to do immediately, we could put caps on spending, maybe make a good dent on future spending through the [fiscal] commission, and extend the tax cuts two years. That, in and of itself, would really help the economy."
David Brooks thinks Republicans are right about entitlements, Democrats are right about industrial policy: http://nyti.ms/cYyMUr
Obama will declare the auto bailout a success, report David Sanger and Jackie Calmes: "In interviews and in a report issued on Thursday, ahead of the president's trip to Michigan, Mr. Obama's advisers argue that had the president not invested more than $60 billion into General Motors and Chrysler, more than a million jobs would have been lost. Instead, they say, 334,000 jobs disappeared from June 2008 to June 2009, a period that ends shortly after the bailout began. And 55,000 new workers have been hired since."
Foreclosure activity is up in most major cities: http://bit.ly/aTczIW
Steve Pearlstein argues we can't rely on private businesses for job growth: "The only surprise is that anyone is surprised by the lack of private-sector hiring. It is only in the world of Chamber of Commerce propaganda that businesses exist to create jobs. In the real world, businesses exist to create profits for shareholders, not jobs for workers. That's why they call it capitalism, not job-ism. There's no reason to beat up on business owners and executives simply because they're doing what the system encourages them to do. By the same token, however, it is more than a bit hypocritical for business leaders to pin the blame on the Obama administration for their own failure to create private-sector jobs, as they have been doing lately."
Paul Krugman argues Obama should reassure progressives by picking Elizabeth Warren: http://nyti.ms/c2OxTL
Hank Paulson argues the government should support homeownership more sustainably: "We must eliminate the inherent conflict between public purpose and private ownership that was destabilizing to the GSEs. Congress could eliminate that tension by restructuring Fannie and Freddie to create one or two private-sector entities that would purchase and securitize mortgages with a credit guarantee explicitly backed by the federal government and paid for by the new entity. These privately owned entities would be set up like public utilities and governed by a rate-setting commission that would establish a targeted rate of return."
Street performance interlude: The most impressive street dancing you'll ever see.
The EPA will not reconsider regulating greenhouse gas emissions, reports Darren Samuelsohn: "In a sternly written opinion, EPA Administrator Lisa Jackson said she didn't agree with requests from the GOP attorneys general from Texas and Virginia, the U.S. Chamber of Commerce and other conservative groups that questioned the underlying science linking humans to global warming and also warned of the potential economic burdens from new climate rules. EPA last December concluded that greenhouse gases are a threat to public health and welfare, a decision clearing the way this spring for climate-based regulations for new cars and trucks."
Tony Hayward left BP still defending his tenure: http://bit.ly/btvX6J
Criticism of biomass energy is mounting, reports Matthew Wald: "Now a group in Cambridge, Mass., is mounting a more direct assault on harnessing biomass: the Biomass Accountability Project is trotting out experts in medicine and forestry to argue against such power generators. Margaret Sheehan, a lawyer with the group, says that even if new biomass plants meet all Environmental Protection Agency regulations on air emissions, generation could still endanger human health because the standards are inadequate. For emissions of very small soot particles, she said, 'there is no safe known limit.'"
The oil spill is bolstering anti-drilling sentiment in California: http://bit.ly/9B6KCH
Brad Plumer notes that oil spills are not rare: "The National Wildlife Federation has just released a new report tallying up the number of oil accidents in the past decade. The numbers are striking. Between 2001 and 2007, there were 1,443 offshore-drilling accidents in the Outer Continental Shelf, with 41 fatalities, 476 fires, and 356 'pollution events.' Onshore, there have been 2,554 'significant' pipeline accidents between 2000 and 2009, with 161 fatalities."
David Roberts argues that the filibuster, not a failure of environmentalism, killed cap and trade: "[Environmentalists] got a majority of U.S. citizens on their side, as polls repeatedly showed. And -- here's the kicker -- on the back of all that work, they got a majority of legislators in both houses of Congress on their side. In a sane world -- and in other developed democracies -- that's what success looks like. Environmentalists did what they were supposed to do, and they did it well! They should be proud of themselves. It's not their fault Republicans are abusing idiosyncratic features of Senate governance to make reform prohibitively difficult."
Kimberley Strassel highlights a GOP proposal to fund nuclear power as a means of emissions reduction: http://bit.ly/cds30P
Adorable animals being adorable interlude: The Chessington Zoo adopts a baby meerkat.
Lindsey Graham is considering introducing a constitutional amendment abolishing birthright citizenship, reports Andy Barr: "Currently, the 14th Amendment grants citizenship to any child born in the United States. But with 12 million illegal immigrants living in the U.S., Graham said it may be time to restrict the ability of immigrants to have children who become citizens just because they are born in the country."
A tax reporting requirement in health care reform is under fire: http://bit.ly/976yap
Colorado is weighing using a controversial immigration database, reports Dan Frosch: "A task force recommended that Colorado institute a federal background check program called Secure Communities, which helps the authorities check an arrested person's immigration history through a government database, for possible deportation...Critics say it promotes racial profiling by the local police and would undermine trust between immigrants and law enforcement, in a state that has particularly strict immigration laws."
Arizona is already planning to appeal the ruling against its new immigration law, report Jerry Markon and Robert Barnes: "9th Circuit has a liberal reputation, and court officials said the case will be heard by a "motions panel" designed for urgent appeals. The panel this month consists of three judges who, like Bolton, were appointed by Democratic presidents...Although many legal experts believe the case is ultimately headed to the Supreme Court, it is unclear at what point in the process that might happen. If the 9th Circuit upholds Bolton's preliminary injunction, experts said it is unlikely the high court would disturb such a ruling until the case over the law is decided."
The judge ruling against the Arizona law has a long record on immigration law: http://bit.ly/aOna8b
Obama is doubling down on Race to the Top as criticism of it increases, reports Nick Anderson: "This year, the Obama administration is distributing $3.5 billion in grants for perennially low-performing schools, with conditions that rile some educators. To qualify for the aid, local educators must choose one of four options: replacing the school's principal and at least half the staff; converting the school to a charter school or a similar alternative; shutting it down and dispersing students; or transforming it through a series of changes in curriculum and management that generally include replacing the principal. The fourth choice is proving the most popular."
Ruth Marcus argues civil rights groups and union should back Obama on education: "Race to the Top has demonstrated the power of leveraging: With the prospect of money dangled before them, states have instituted important changes before receiving a dime. The 21 states that have qualified for funds are home to two-thirds of the minority children in this country. And, as the president pointed out, the only way to win a Race to the Top grant is to come up with a plan to deal with failing schools."
Ross Douthat questions the effectiveness of the Americans with Disabilities Act: http://nyti.ms/aYmQHS
Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard.