It has long been a frustration to the more economically minded that spending more and cutting taxes to support the economy now and spending less and raising taxes to cut the deficit later are considered incompatible in Washington. They should more properly be thought of as complementary: The spending now supports the reductions later, as the money puts people back to work -- it's very hard to cut the deficit with high unemployment -- and makes the investments necessary for businesses to act aggressively when the economy comes back and they see opportunities again.
But will the "supercommittee" listen? Ah, well, there's the rub. Speaker John Boehner's office released "a Statement on Announcement of the President's Upcoming Speech on Jobs." Read that back to yourself: This is a press release on a speech that hasn't happened yet, and whose content no one has actually seen. And it didn't seem enthusiastic.
"Republicans, in contrast to the Democrats who run the White House and Senate, have made creating a better environment for job creation our number one focus. From our Path to Prosperity budget to our Plan for America’s Job Creators – which was built on our Pledge to America – House Republicans have laid out a clear, consistent jobs agenda, and acted on it...We welcome him to our ongoing efforts to help create jobs, and look forward to seeing a detailed plan next month. It is my hope the President will offer specific proposals that depart from his previous policies and allow us to find common ground and work together to put Americans back to work."
Sounds like compromise, huh? This is why I would prefer to see the White House emphasize a jobs process rather than a jobs plan. Whatever Obama announces in his plan is going to get immediately polarized and criticized. Of course Boehner and the Republicans can't embrace the president's proposals. They're trying to win the White House back next year, and "the president is doing an excellent job proposing bipartisan legislation to solve the nation's toughest problems" makes for a terrible attack ad.
But if the White House announced that they could not sign any legislation that the Congressional Budget Office didn't estimate as creating two million or more jobs over the next three years, that would lay down the marke and give the committee a goal without giving Republicans anything in particular to attack or reject, save perhaps the very idea of jobs, which politicians are usually loathe to come out against. At that point, the question becomes whether you believe these sorts of committees can actually work, a question on which there's mixed evidence. But as for whether the president announcing a plan will work, I've seen no evidence of it since Republicans took back control of the House.
Five in the morning
1) Details are emerging on President Obama's push for more stimulus and more deficit reduction, report Zachary Goldfarb and Peter Wallsten: "The president is thinking about proposing tax cuts for companies that hire workers, new spending for roads and construction, and other measures that would target the long-term unemployed, according to administration officials and other people familiar with the matter. Some ideas, such as providing mortgage relief for struggling homeowners, could come through executive action. Obama also plans to announce a major push for new deficit reduction, urging the special congressional committee formed in the debt-ceiling deal this month to identify even more savings than the $1.5 trillion it has been tasked with finding. In packaging the two, he will make the case that short-term spending can lead to long-term savings."
2) Both Perry and Romney are short on specifics on jobs, reports Philip Rucker: "Despite both candidates’ focus on the economy, neither has offered more than standard Republican positions. For months, Romney has said he will create jobs by lowering taxes, easing regulations and drawing on his private-sector experience. But he has offered no details on what taxes, what regulations or what experience would lead to job growth. 'Our regulation, our bureaucracy, our tax rates are so much higher than other countries,' Romney said Wednesday as he toured a steel plant in Berlin, N.H. 'The right answer for America is to get government smaller.' The launch of Perry’s campaign has been nothing if not candid -- he has been brash about criticizing President Obama and the Federal Reserve, among other targets -- but he has avoided saying much of anything specific about how he would manage the nation’s teetering economy."
3) The House has voted for lots of repeals, but few replacements, reports David Fahrenthold: "If the House ran America, what would America look like? It would no longer have a far-reaching health-care law. The House voted to repeal that legislation in January. It would no longer have federal limits on greenhouse gases. The House voted to ax them in April. And it would not have three government programs for homeowners who are in trouble on their mortgages. The House voted to end them all...The GOP’s philosophy holds that paring back an expensive and heavy-handed government bureaucracy would help restore the country’s financial footing...After seven months, it is still only half a vision. On major issues such as health care, climate change and bad mortgages, the House has affirmed that fixes are needed -- if it can ever manage to repeal the old ones. It hasn’t said exactly what those changes should be."
4) Republicans are making the EPA a whipping boy, reports John Broder: "The Environmental Protection Agency is emerging as a favorite target of the Republican presidential candidates, who portray it as the very symbol of a heavy-handed regulatory agenda imposed by the Obama administration that they say is strangling the economy. Representative Michele Bachmann of Minnesota wants to padlock the E.P.A.’s doors, as does former Speaker Newt Gingrich. Gov. Rick Perry of Texas wants to impose an immediate moratorium on environmental regulation. Representative Ron Paul of Texas wants environmental disputes settled by the states or the courts...Only Mitt Romney, the former Massachusetts governor, has a kind word for the E.P.A., and that is qualified by his opposition to proposed regulation of carbon dioxide and other gases that contribute to global warming."
5) The EU should assume its member countries' debts, writes David Wessel: "Tensions between sharing a currency and a central bank while pursuing largely independent national fiscal policies are now painfully evident. Alexander Hamilton understood this. So did Fernando Henrique Cardoso, president of Brazil from 1995 to 2002. A history lesson for Europe: In 1790, the U.S. government owed $54 million and the 13 individual states owed another $25 million. The combined debt equaled 42% of the nation's gross domestic product. Hamilton, then Secretary of the Treasury, proposed that the national government assume the states' Revolutionary War debts...About 200 years later, Brazil's Cardoso, his nation buffeted by financial crises in Mexico, Argentina and Asia, confronted state governments that had borrowed more than their tax revenues could ever repay...Eventually the national government refinanced their debts."
Solo version interlude: Eric Bachmann plays "Web In Front" live.
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Still to come: The Fed is concerned about European banks in the US; health plan labeling rules could take effect soon; the House has voted to repeal more than it has to replace; Perry and Romney diverge sharply on global warming; and a dog who's quite good at volleyball.
The Fed is looking more closely at European banks in the US, report David Enrich and Carrick Mollenkamp: "Federal and state regulators, signaling their growing worry that Europe's debt crisis could spill into the U.S. banking system, are intensifying their scrutiny of the U.S. arms of Europe's biggest banks, according to people familiar with the matter. The Federal Reserve Bank of New York, which oversees the U.S. operations of many large European banks, recently has been holding extensive meetings with the lenders to gauge their vulnerability to escalating financial pressures. The Fed is demanding more information from the banks about whether they have reliable access to the funds needed to operate on a day-to-day basis in the U.S. and, in some cases, pushing the banks to overhaul their U.S. structures, the people familiar with the matter say."
Low interest rates could actually hurt housing demand, reports Kathleen Madigan: "Ignoring down payment requirements and closing costs, the monthly payment on a median-priced existing home is about $932 a month. A year from now, with home prices expected to fall about another 6% and with little change seen in mortgage rates, potential homebuyers buying the same house will save about $55 a month. But what if mortgage rates were to rise one percentage point, to 5.5%? Even at the cheaper price, the same home would have a higher mortgage payment of $982. If prices did not fall, the payment would rise to $1,044, an increase of more than $100 a month. Fence-sitting buyers would suddenly face a choice: buy now and lock in cheaper financing. Or hope home prices will fall fast enough to more than offset the higher borrowing cost. The prospect of higher borrowing costs later on could pull more people into the housing market now, helping to clear out the overhang of homes that have been holding back construction."
S&P is under investigation for its securities ratings, reports Louise Story: "The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews. The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations...It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P."
Rick Perry wants the US to be more like the EU, writes Ezra Klein: "'Fed Up,' Perry’s 2010 cri de coeur (yes, that’s French), can be summed up in one sentence: The federal government is unconstitutional...Perry’s world is not a libertarian dreamscape devoid of Social Security or bank regulation. It’s a world in which public pension systems and bank regulation vary state by state. It’s a world, in other words, that looks less like the United States of America and a whole lot more like the European Union...Under Perry’s vision of the U.S., we would be in much the same place that Europe is now -- trying to navigate a complex, interconnected and international economy with new, untested institutions governing our internal relationships. And we would be moving in the wrong direction."
Growth alone won't bring jobs back, writes Fareed Zakaria: "Since the start of this year, American GDP has returned to its pre-crisis levels -- but with 6.8 million fewer workers. At the current rate of job creation, it will take 60 months -- five years! -- before employment returns to pre-recession levels...Everything we do as a country should be geared toward the central task of boosting employment. Some of this will involve government spending. An infrastructure bank that uses current low interest rates, includes the private sector and chooses projects based on merit rather than patronage is one of the best ideas to come out of Washington in years...But there are many cost-free policies that could boost jobs. Tourism is one of the largest growth industries in America...We should make it much easier for tourists to get visas and work hard to make them feel welcome."
Supercut interlude: People yelling "silence!" in 172 movies.
New health plan labeling rules could take effect as soon as March, reports N.C. Aizenman: "Starting as soon as March, consumers could have a better handle on such questions, under new rules aimed at decoding the fine print of health insurance plans. Regulations proposed by the Obama administration on Wednesday would require all private health insurance plans to provide current and prospective customers a brief, standardized summary of policy costs and benefits. To make it easier for consumers to make apples-to-apples comparisons between plans, the summary will also include a breakdown estimating the expenses covered under three common scenarios: having a baby, treating breast cancer and managing diabetes. Officials likened the new summary to the 'Nutrition Facts' label required for packaged foods."
See what the labels would look like: http://wapo.st/qZSiyI
The health sector is bracing for job cuts, report Reed Abelson and Katie Thomas: "Several health industry analysts warn that the sector is showing signs of economic sluggishness that has long kept other business sectors beleaguered. The situation has led many in the health industry to caution that it cannot be relied upon to keep hiring workers. 'It’s not realistic to believe that we’re going to continue to generate job growth when you’re speaking about Medicare and Medicaid reductions in the hundreds of billions of dollars over the next few years,' said Daniel Sisto, president of the Healthcare Association of New York, which represents the state’s hospitals and health systems. Companies that rely on government spending have been bracing for deeper reductions, and President Obama recently alluded to another round of belt-tightening from one of the industry’s bedrock payers -- Medicare."
Ratings downgrades are leading to higher borrowing costs for municipalities, report Jeanette Neumann and Michael Aneiro: "Since June 2010, S&P, Moody's Investors Service and Fitch Ratings have made 196 so-called super-downgrades on municipal bonds, according to research firm Municipal Market Advisors. Super-downgrades are defined as cuts of at least three notches on the letter-grade scales used by the firms. The ratings firms say the multinotch downgrades are extremely rare and when they do happen they are often tied to bonds where investors already expect volatility, such as bonds that depend on property-tax revenue at a time when the real estate market is depressed. The super-downgrades pushed yields on the downgraded municipal bonds higher and could increase borrowing costs the next time affected cities, counties and other municipalities need to sell bonds."
A number of municipalities are responding by firing S&P: http://on.wsj.com/rsgP6F
The Postal Service needs big changes to survive, writes Annie Lowrey: "The problem is not mismanagement. The problem is that the USPS has an enormous, expensive physical and human infrastructure. It operates more than twice as many U.S. outlets as McDonald's. It runs the largest vehicle fleet on Earth. It has a staff of nearly 600,000, despite considerable reductions in the last decade. To pay for all those people, trucks, and buildings, the USPS needs to handle a lot of mail.
The recession accelerated the longtime trend of businesses and individuals shifting correspondence to the Internet. (After all, 44 cents is still more than nothing.) Mail volumes have plummeted more than 25 percent since 2006. Moreover, the mix has gotten cheaper--more bulk mail, fewer first-class letters. Unlike some of its other national counterparts, the USPS has no other revenue stream to speak of except for delivering mail, so less mail means a lot of red ink."
GOP presidential frontrunners are adamantly opposed to federal involvement in education, writes Dana Goldstein: "As her political career advanced, the overarching theme of Bachmann's education activism was that government attempts to improve schools threatened the prerogatives of the Christian family and represented a dangerous move toward a socialized, planned economy. In 2001, she charged that the 1994 federal School to Work Opportunities Act, which provided funding for low-income teenagers to do on-the-job apprenticeships with local companies, would turn students into 'human resources for a centrally planned economy.'...Bachmann's main competition for Tea Party voters, Rick Perry, has made opposition to federal education mandates a centerpiece of his political career. Under his watch as governor, Texas was one of just two states (the other was Alaska) to refuse to even consider adopting the new state-led common core curriculum standards in English and math."
Adorable animals playing sports interlude: This dog is really good at volleyball.
Rick Perry and Mitt Romney are sharply opposed on global warming, reports Philip Rucker: "At his New Hampshire campaign stop on Wednesday morning, Perry said: 'I do think global warming has been politicized...We are seeing almost weekly or even daily scientists are coming forward and questioning the original idea that man-made global warming is what is causing our climate to change. Yes, our climate has changed. It has been changing ever since the Earth was formed. But I do not buy into a group of scientists who have, in some cases, been found to be manipulating data.'...At a June 3 town hall meeting in Manchester, N.H., Romney was asked about climate change. He said: 'I don’t speak for the scientific community, of course, but I believe the world’s getting warmer. I can’t prove that, but I believe based on what I read that the world is getting warmer. And number two, I believe that humans contribute to that.'"
The White House is loosening up its smog rules, reports Robin Bravender: "The Obama administration is promising to blunt the impact of its pending ozone standards by ensuring flexibility for industries, but it likely won’t have enough wiggle room to win over its fiercest critics. In an effort to refute industry’s claims that a tighter smog standard will put a damper on economic recovery, the White House and the EPA have repeatedly vowed to use flexibility allowed under the Clean Air Act when the rules are implemented. That would allow the administration to install a standard in line with the between 60 and 70 parts per billion that agency scientists have recommended -- and appease environmental and public health groups -- while giving officials the ability to point to the implementation plan as proof that it has maximized flexibility for industry."
Obama should not let Arctic drilling go forward, writes Frances Beinecke: "Last year, Americans watched in mounting fury as the oil industry and the federal government struggled for five disastrous months to contain the much larger BP blowout in the Gulf of Mexico. Now imagine the increased danger and difficulty of trying to cope with a similar debacle off Alaska’s northern coast, where waters are sealed by pack ice for eight months of each year, gales roil fog-shrouded seas with waves up to 20 feet high and the temperature, combined with the wind chill, feels like 10 degrees below zero by late September. That’s the nightmare the Obama administration is inviting with its preliminary approval of a plan by Shell to drill four exploratory wells beginning next summer in the harsh and remote frontier of the Beaufort Sea, off the North Slope of Alaska."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.