That embarrassing chapter ended with the two sides agreeing on the basic political reality of the day: in order to pass, legislation requires bipartisan support. In order to get bipartisan support, legislation requires compromise, In order to force that compromise, inaction requires consequences. That's how we got the supercommittee and the associated trigger.
But the supercommittee has a design flaw: it's directed to return recommendations on deficit reduction, but not job creation. That doesn't make sense from an economic perspective and it doesn't make sense from a political perspective. If the supercommittee succeeds and a deficit-reduction package passes Congress, Washington will have nevertheless failed to make any progress on the issue that economists consider most important in the near-term and that the American people have named, in poll after poll, as their top priority.
Later today -- which will, incidentally, be after the August jobs number comes out -- Rep. John Larson is introducing a bill to add a jobs component to the supercommittee's mandate. His legislation suggests three possible ways of doing so: either the existing supercommittee should commit to returning recommendations on jobs, or it should add four new members and create a subsupercommittee on jobs, or it should create a parallel supercommittee on jobs. In all cases, Larson says, failure to return and pass job-creation legislation would mean the trigger goes off.
Larson is on the right track here: the political system's hard-won insights into how to achieve deficit reduction -- or at least how to make it more likely -- should be applied to jobs, too. That the supercommittee wasn't designed this way in the first place is evidence of how misplaced Washington's priorities are. That every member of Congress and the president isn't rushing to the microphone to swear they'll fix it is, well, I don't even know what to say about that.
Five in the morning
1) The White House projects 9 percent unemployment through next year, reports Brian Beutler: "President Obama's mid-session budget review confirms what most private and government projections have recently concluded -- that the economy is considerably weaker than earlier forecasts held, and won't fully recover from the Great Recession for years. Most troubling, both for the country and for Obama politically, is that near-term unemployment is expected to remain significantly higher than expected, averaging 9 percent in fiscal year 2012...The revised figures 'reflect the substantial amount of economic turbulence over the past two months,' OMB says, triggered by the European debt crisis, the earthquake in Japan, congressional brinkmanship over the debt ceiling among others. They also take into account the fact that GDP growth in the first half of fiscal year 2011 turned out to be significantly lower than originally thought."
2) The administration fears a big jobs plan could provoke another downgrade, reports Jackie Calmes: "Despite Republican opposition to spending measures or tax cuts to spur job creation and economic growth, the president is under pressure to fight for a significant stimulus program. The demands come not only from Democrats, but also from many economists, financial analysts and executives who fear a relapse into recession. But as administration officials are well aware, another display of partisan gridlock this fall could again provoke a downgrade of the United States’ credit and market upheavals that would further batter consumer confidence. Mr. Obama has said bipartisanship is his aim...People familiar with the White House’s planning say Mr. Obama will focus in his speech on the specifics of his immediate job-creation plans, but leave the details of his longer-term deficit reduction program for later."
3) The Senate needs to take nominations more seriously, writes Barney Frank: "Once upon a time, we could have expected the following sequence: After considerable debate, Congress would have passed a bill creating an agency. The president would then nominate someone to head that agency. That nomination would be considered on its merits by the Senate. But this is now. The president has nominated Richard Cordray, an able, experienced and thoughtful former state attorney general who has a record of achievement in protecting individuals against financial abuse, to head the Consumer Financial Protection Bureau. And the Republican minority in the Senate has announced that it intends to deny any consideration of the individual whom the president has nominated pursuant to his constitutional prerogative...Cordray is just the latest capable, dedicated public servant to fall victim to a Republican mugging."
4) The US will sue a dozen big banks over mortgages, reports Nelson Schwartz: "The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation. The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter. The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims."
5) Austerity could be killing Europe's recovery, reports Howard Schneider: "After more than a year of aggressive budget cutting by European governments, an economic slowdown on the continent is confronting policymakers from Madrid to Frankfurt with an uncomfortable question: Have they been addressing the wrong problem?...The budget cutting has been coupled with a reluctance by the the European Central Bank to stimulate economic growth like the Federal Reserve has in the United States; the ECB has instead raised interest rates twice this year to contain inflation. Those steps have sucked hundreds of billions of dollars out of a European economy that may be edging towards recession. Such a downturn, by choking off government revenues and increasing the demand for public services, could put struggling countries such as Spain and Italy at risk of missing the very deficit-reduction targets that budget cuts and other austerity measures were meant to achieve."
Live session interlude: Deerhunter play "Desire Lines".
Got tips, additions, or comments? E-mail me.
Still to come: It's jobs report day; why Rick Perry's Mexican health care proposal might be a good idea; the White House is accepting petitions now; the FTC says speculation isn't driving up oil prices; and the world's shortest train.
Today's jobs report could signal whether a double-dip recession's at hard, report Neil Irwin and Lori Montgomery: "The latest read on the nation’s job market, due Friday morning, is the biggest test yet of whether the U.S. economy is muddling along or sliding back into recession. The Labor Department’s monthly unemployment report will be the first solid piece of economic data -- not a survey, but a measure of actual economic activity -- for August. It will offer an early reading of the impact on job growth of a factious debate in late July over raising the nation’s debt limit that has sapped Americans’ confidence in their government and of the fallout from the jaw-dropping ups and downs of the stock market in early August. The report will also weigh heavily on Federal Reserve policy. The central bank plans to meet Sept. 20-21, extending the originally planned meeting from one to two days to have more time to consider actions to boost economic growth."
The judge handling the AT&T/T-Mobile case looks likely to back it, reports Cecilia Kang: "The Justice Department’s lawsuit to block the mega-deal between AT&T and T-Mobile now rests in the hands of a federal judge who has ruled against the government before in an antitrust case with some parallels to this one. U.S. District Judge Ellen S. Huvelle of the District of Columbia -- who was described as a 'judicial machine' because she processes cases so efficiently -- in 2001 ruled against the Justice Department’s attempts to block a merger between two dominant computer-disaster-recovery companies. Unconcerned that the combined company would control 70 percent of that market, Huvelle explained that the computer-disaster business was constantly changing and that competitors were able to enter the market."
Critics left and right are targeting Rick Perry's job creation fund, reports Leslie Eaton: "Critics on the right and the left are taking aim at Texas Gov. Rick Perry's trademark job-creation funds as he steps up his campaigning for the Republican presidential nomination. The funds, which dole out tax dollars to companies that launch or relocate in Texas, became controversial in the state soon after Mr. Perry persuaded the legislature to start one in 2003 and put it under his control. Mr. Perry believes the funds have contributed to job growth in Texas, which has accounted for 40% of all new jobs in the U.S. since the recession's end in 2009, said spokesman Mark Miner... The conservative Club for Growth, in an evaluation of his record released in Washington last week, called these funds corporate welfare and suggest 'Governor Perry is more pro-business than he is pro-free markets.'"
S&P is rating subprime mortgages as AAA again, report Zeke Faux and Jody Shenn: "Standard & Poor’s is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government. S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties. New York-based S&P stripped the U.S. of its top rank on Aug. 5, saying Washington politics were making the country less creditworthy...S&P has awarded AAAs to more than $36 billion of securities in the U.S. this year that were created by bankers who continue to gather thousands of loans, bundle them into bonds of varying risk and pay ratings firms a fee to assign credit rankings."
Republicans need to take government's role in the economy more seriously, writes David Brooks: "There’s strong evidence to suggest that the rate of technological innovation has been slowing down...Meanwhile, middle-class wages have been stagnant for a generation...Republicans have done almost nothing to grapple with and address these deeper structural problems. Tackling them means shifting America’s economic model -- tilting the playing field away from consumption toward production; away from entitlement spending and more toward investment in infrastructure, skills and technology; mitigating those forces that concentrate wealth and nurturing instead a broad-based opportunity society. These shifts cannot be done by government alone, but they can’t be done without leadership from government."
Rick Perry could unravel the New Deal consensus, writes Michael Gerson: "Perhaps this ideological moment is just different, in the same way the 1930s or the 1980s were different. Another dip into recession -- a continuing, sputtering failure of the American job-creation machine -- might do more than call three years of Obama policies into question. It might call seven decades of accumulating entitlement commitments into question. Can a modern economy remain energetic and competitive when it transfers increasing amounts from the private to the public sector, from young to old, from the productive to the retired? Will America need to break decisively from the European social model to avoid Europe’s economic fate?...It is hard to imagine Perry as the carrier of Reagan-like ideological transformation -- though it was also difficult, at one time, for many to imagine an aging actor in that role."
The US could learn from Argentina's government-fueled growth, writes Ian Mount: "Why have Argentines embraced bigger government? In part because the preceding era showed how poorly austerity measures -- the sort now being pushed by conservatives in the United States -- promote growth. In the late 1990s, Argentina cut government spending drastically on the order of its lenders at the International Monetary Fund. Predictably, between 1998 and 2002, Argentina’s economy shrank by almost 20 percent. It was only after Argentina turned its back on these austerity demands, and defaulted on its debt, that it began to recover...Argentina still offers valuable lessons. For one thing, extreme cost-cutting during a stagnant economic period will only inhibit growth. And government spending to promote local industry, pro-job infrastructure programs and unemployment benefits does not turn a country into a kind of Soviet parody."
Adorable animals hanging out in other adorable animals interlude: A kangaroo joey climbs out of his mother's pouch.
Rick Perry was right on binational health care, writes Sarah Kliff: "Texas Gov. Rick Perry’s endorsement of a 'binational health insurance' program with Mexico has drawn increasing attention this week. Most of it points to a 2001 plan, where Perry lauded an 'an important study that will look at the feasibility of binational health insurance' that could 'treat maladies unique to this region.'...To clarify, what Perry referenced was not a merging of Mexico and the United States’ public health systems...Rather, he pointed to a newly passed Texas law, which directed the state to explore allowing private health plans to cover services in Texas and Mexico. Those plans would then be available to any Mexican national or American citizen working within 62 miles of the Texas-Mexico border. There’s a lot to like about this idea...The benefits could be numerous and largely economic."
The White House is now accepting online petitions, reports Matt Negrin: "The White House on Thursday announced a new way it will keep in touch with public concerns -- by promising to consider online petitions that get at least 5,000 supporters. The idea behind 'We the People' -- as the program will be called -- is that anyone with an idea or cause can go to the White House website and make a public pitch for support. If the idea gets 5,000 backers within 30 days, said White House spokeswoman Sandra Abrevaya, a 'working group of policy officials' will respond...Allen St. Pierre, the head of the National Organization for the Reform of Marijuana Laws, vowed in an interview with POLITICO that he would submit a petition and said: 'We can get 5,000 signatures in less than one hour. I promise you.'"
Republican primary voters are making immigration a key issue, report Philip Rucker and Amy Gardner: "Mitt Romney opened his town hall meeting here talking about the economy -- his thoughts on growing business, getting government out of the way -- just as he does nearly every other campaign event. But when he opened last week’s forum for questions, the first voter he called on didn’t seem concerned about any of that. He wanted to know the Republican presidential candidate’s stance on border security...Polls may not suggest it, and the candidates may not be catering to it, but immigration is an issue that voters won’t let the GOP White House hopefuls escape. Republican primary voters keep bringing immigration up as the candidates campaign in back yards, opera houses and recreation halls across Iowa, New Hampshire and South Carolina."
Advocates are upset with the administration's slow progress on campaign finance reform, reports David Levinthal: "Public interest groups are growing increasingly frustrated with the Obama administration’s indecision regarding a draft executive order that, as conceived, would force government contractors to reveal new details about their politicking. And the groups’ message to the administration is clear: Hurry up, particularly with dozens of corporations, unions and special interest groups primed to blitz Congress’s debt-slashing supercommittee with numerous advertisements, the funding for which won’t necessarily be a matter of public record...The White House indicated that the executive order mandating enhanced political activity disclosure remains a possibility, although a spokesman for President Barack Obama declined to offer a timetable for its issuance - or death."
Infrastructure spending is important for job creation, writes Matthew Slaughter: "Over much of the 20th century, America's strong infrastructure investment was a major factor attracting global corporations headquartered in other countries to invest and create jobs here. Rising U.S. standards of living were fueled by a strong infrastructure system that facilitated the growth of companies in America, both global and domestic alike: transportation systems to move people and products, electrical systems to power plants and offices, communications backbones to drive computers and creativity...Today is very different. America's decaying infrastructure costs the typical American worker hundreds of hours in lost productivity. It also costs companies time and efficiency in moving their products around -- and also out of -- the country."
The GOP has turned nihilistic, writes Paul Krugman: "[Eric Cantor's] doing it again, this time over disaster relief, making headlines by insisting that any federal aid to the victims of Hurricane Irene be offset by cuts in other spending. In effect, he is threatening to take Irene’s victims hostage...It turns out that in 2004, when his home state of Virginia was struck by Tropical Storm Gaston, Mr. Cantor voted against a bill that would have required the same pay-as-you-go rule that he now advocates. But, as I see it, hypocrisy is a secondary issue here. The primary issue should be the extraordinary nihilism now on display by Mr. Cantor and his colleagues -- their willingness to flout all the usual conventions of fair play and, well, decency in order to get what they want."
"est" interlude: The world's shortest train.
The FTC says speculators aren't driving up oil prices, reports Jamila Trindle: "The Federal Trade Commission weighed into the intensifying debate in Washington about oil-market speculation, saying supply-and-demand forces drive gasoline prices, not speculative oil traders. The FTC didn't investigate speculation independently, but reviewed the available research and found it inconclusive. The agency also looked at competition in the oil industry and whether it affected gasoline prices from 2005 to early 2011. 'The American people need to understand why they often pay so much for gasoline,' FTC Chairman Jon Leibowitz said in a statement. The report comes at a sensitive time in the ongoing debate in Washington about the role that speculation should play in commodity markets...The Commodity Futures Trading Commission is likely to finalize limits on speculative trading in late September or early October."
Regulators are making nuclear reactors assess their earthquake vulnerability, reports Rebecca Smith: "Nuclear regulators said Thursday they want the operators of all 104 U.S. commercial reactors to conduct new assessments of their facilities' vulnerability to earthquake damage. The decision was motivated by the increased awareness that seismic risks may have been underestimated by nuclear-power industry and regulators in the past, especially for the central and eastern U.S. A draft requirement for the new assessments, released Thursday for public comment by the U.S Nuclear Regulatory Commission, has been in the works for six years, but gained urgency with the nuclear accident at Japan's Fukushima Daiichi nuclear installation in March and smaller earthquakes in Virginia in the past two weeks that sidelined two reactors."
Closing credits: Dylan Matthews is a student at Harvard and a researcher at The Washington Post. Wonkbook is compiled and produced with help from Sarah Halzack.