The job numbers come out tomorrow. And it doesn't look like they're going to be particularly good. The monthly survey by Automatic Data Processing Inc. -- which is predictive, though not perfectly so -- says the private-sector created 119,000 jobs in April. Goldman Sachs is expecting a jobs report in the neighborhood of 125,000.
But some of it is just an economy that remains weak. On Wednesday, at an event at the Economic Policy Institute, Paul Krugman explained why, in his new book, he calls the current moment "a depression. " "A recession," Krugman said, "is when the economy is going down. A depression is when it stays down for a long period of time. Remember that the Great Depression included two separate recessions and recoveries."
So, sure, payback for the warm weather isn't helping. But it's a more marginal story. The reality is we're just not out of this thing yet. And Congress isn't considering doing anything to help us get out of it faster, and nor, as far as anyone can tell, is the Federal Reserve. Somehow, the depression has become normal, or at least normal enough that it no longer excites the people who might be able to do something about it.
RCP Obama vs. Romney: Obama +3.6%.
RCP Obama approval: 48.1%.
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1) The House GOP budget puts avoiding defense cuts above poverty programs. "The House Budget Committee meets Monday afternoon to put the final touches on the more than $300 billion 10-year package -- the opening shot of a fall campaign to preserve defense spending without bowing to Democratic demands for new taxes. Monthly food stamp benefits would be cut, hitting millions of single-mother households by summer’s end. Unemployed workers would be dropped from the rolls until they spend down their cash savings below $2,000 -- one-fifth of Romney’s famous $10,000 bet. Working-class, often Latino, parents would be denied child tax credit refunds if they lack Social Security cards proving they are authorized to work in the U.S. These are immigrant taxpayers whose average annual wages are $21,240 and generate far more for the Social Security system in payroll taxes than any refunds they receive." David Rogers in Politico.
2) New data suggested weak jobs growth. "A gauge of private-sector hiring showed weakness in April, the latest data to suggest the labor market has cooled a bit from its healthy early-year pace. The U.S. added 119,000 nonfarm private-sector jobs last month, the slowest pace since September, according to a report Wednesday by payroll giant Automatic Data Processing Inc. and forecasting firm Macroeconomic Advisers. The report comes ahead of the Labor Department's monthly jobs report on Friday, but it isn't as closely followed because the ADP figures are calculated differently and have a mixed record of predicting the government's more authoritative figures. Economists surveyed by Dow Jones Newswires expect the government's report will show U.S. nonfarm payrolls grew by 168,000 in April, up from 120,000 in March but well below the 211,000 average through the first three months of 2012. The government figures include both government and private-sector jobs." Conor Dougherty in The Wall Street Journal.
@DLeonhardt: ADP report breeds justifiable skepticism. But other data also suggests baseline for Friday's jobs report is mediocrity.
3) The U.S. won't have to lift the debt ceiling before the elections. "Lawmakers will not have to re-fight their epic battle over raising the debt ceiling until after the November elections, according to the Treasury Department. April tax receipts have not moved Treasury's debt-ceiling target date, and Secretary Timothy Geithner still expects lawmakers will have until the tail end of 2012 to raise the $16.394 trillion ceiling...Lower-than-expected tax receipts could have moved up the date on the debt ceiling, forcing a vote both parties would like to avoid before the election. The government has borrowed $15.673 trillion, and the limit is still too far off for Treasury to more accurately predict when it will be reached, an official said Wednesay...The Treasury spokesman insisted the agency has the tools to prevent the United States from going over the limit if it draws near prior to Nov. 6, when voters go to the polls." Peter Schroeder in The Hill.
@amandacarpenter: In addition to Bush tax cuts expiring, AMT, doc fix, 13 approps bills, sequesters, Congress gets to fight about debt increase in lame duck
4) Natural gas producers are scaling back drilling. "Energy producers are showing the first significant signs of scaling back their natural-gas output, responding to a glut that has driven prices to the lowest level in more than a decade. Exxon Mobil Corp., Encana Corp. and ConocoPhillips, among the country's largest natural gas producers, said in recent days they reduced production in the first quarter and pledged to reduce drilling further in coming months. And government data earlier this week showed output in February had the biggest percentage drop in a year. The production decline could be the beginning of a trend that would help alleviate what has been a huge oversupply of natural gas, industry experts say. Importantly, they say, the pullback in production has coincided with a sudden pickup in demand from users, such as power plants, which are trying to capitalize on falling prices." Carolyn Cui and Liam Pleven in The Wall Street Journal.
5) A Fed official warned that financial reform is losing steam. "A top federal regulator overseeing the banking sector said Wednesday that reforms begun after the financial crisis are still far from complete and raised concerns that the energy behind the effort may be fading. The warning from Daniel Tarullo, a Federal Reserve governor, comes as banks are putting up stiff resistance to new oversight and financial regulations -- including at a private meeting Wednesday between Tarullo and the heads of Goldman Sachs, JPMorgan Chase and other Wall Street firms, according to the Fed...A report released this week by the law firm Davis Polk said that regulators have missed 67 percent of deadlines for new rules imposed by 2010’s Dodd-Frank legislation, a rewrite of the rules governing the financial sector. Among the major new regulations that has been delayed is the Volcker Rule, which would seek to prevent banks from taking excessive risks by curtailing their ability to speculate with their own money -- rather than on behalf of clients." Zachary Goldfarb in The Washington Post.
1) KLEIN: Europe shows that austerity won't create growth. "Europe is a mess. But it’s a peculiar mess that both the left and the right think validates everything they’ve been saying about what we should -- and shouldn’t -- do here in the U.S. 'The right argues we have to cut deficits now or we’ll be like Greece,' says Tom Gallagher, a principal at the Scowcroft Group. 'The left argues we can’t cut deficits now or we’ll be like Europe.' So, who’s right? Well, which entity do you think is more comparable to the U.S.? Greece? Europe? Neither? I come down somewhere between 'Europe' and 'neither'...What lessons should we draw? Don’t be like Greece -- that’s the easy one. The more important lesson of the euro area is that a successful currency union should also be a fiscal and political union. The U.S. has little to learn on that score. As for the U.K., well, it’s more about relearning a lesson that some in our country seem to have forgotten: Austerity does not create growth, and it’s not something you want to try prematurely." Ezra Klein in Bloomberg.
@BCAppelbaum: The thing about quitting the Eurozone is that countries like Spain and Greece really weren't doing any better on their own.
2) SAMUELSON: Oil speculators aren't the problem. "We should exorcise the politically convenient notion that high oil prices result from the market maneuvers of greedy 'speculators.' It’s convenient because it suggests that a solution to high pump prices -- or a partial solution -- is to banish the offending speculators from the marketplace. That’s fantasy...It’s true that outside investors (a.k.a. 'speculators') have dramatically shifted money into commodities -- raw materials. 'Commodity index funds,' which invest in a basket of commodities (oil, wheat, corn), have attracted hundreds of billions of dollars. It’s easy to imagine all this money chasing prices up in futures markets, just as speculative stock market frenzies push share prices to unrealistic levels. It’s also wrong...Casting speculators as scapegoats for our dependence on high-priced global oil is easy and misleading. It obscures the only real solution: Use less, possibly through an energy tax, and produce more." Robert Samuelson in The Washington Post.
3) BARRO: A value-added tax should be part of tax reform. "With the exception of the U.S., every country in the Organization for Economic Cooperation and Development has a value-added tax -- one on business sales that functions much like a retail sales tax...Unfortunately, the VAT hasn’t been a central feature of most tax-reform discussions. Bipartisan plans such as the one proposed by the commission led by Alan Simpson and Erskine Bowles focused on expanding the personal income tax base while cutting rates, so that more revenue could be collected without hurting the economy. The calculation seemed to be that Americans were unlikely to accept an entirely new tax, so we should focus on making the income tax better. The problem with this theory is that Americans are also unlikely to accept the changes needed to make the income tax much more efficient...With little appetite for any plan that really expands the income-tax base, it is time to reconsider a VAT. It would be both substantively better and more politically palatable." Josh Barro in Bloomberg.
4) NOAH: America doesn't have a illegal immigration problem. "I hate to interrupt a good brawl. But, while politicians and Supreme Court justices debate how, and at what level of government, to halt the national crisis of illegal immigration, it might be worth considering whether the crisis has, um, passed...An obvious question to ask is whether net immigration flow from Mexico to the United States will rise again once the U.S. economy more fully recovers. If it does, then perhaps the crisis (if it is a crisis) won’t have passed. But it’s hard to imagine a sustained increase over the long term. After all, the decline in immigration began a decade ago, and the U.S. construction boom that prevailed during the first half of that decade did strikingly little to reverse it. Another reason to doubt the recession’s importance in reducing net migration flow is that the recession was considerably worse in Mexico than it was here. Mexico’s economy is heavily dependent on U.S. investment and trade, so, when Uncle Sam catches a cold, Mexico catches pneumonia." Timothy Noah in The New Republic.
5) ROGOFF: Chinese currency manipulation still matters. "One of the most notable macroeconomic developments in recent years has been the sharp drop in China’s current-account surplus. The International Monetary Fund is now forecasting a 2012 surplus of just 2.3% of GDP, down from a pre-crisis peak of 10.1% of GDP in 2007, owing largely to a decline in China’s trade surplus - that is, the excess of the value of Chinese exports over that of its imports. The drop has been a surprise to the many pundits and policy analysts who view China’s sustained massive trade surpluses as prima facie evidence that government intervention has been keeping the renminbi far below its unfettered 'equilibrium' value. Does the dramatic fall in China’s surplus call that conventional wisdom into question? Should the United States, the IMF, and other players stop pressing China to move to a more flexible currency regime? The short answer is 'no.'" Kenneth Rogoff in Project Syndicate.
Top long reads
Atul Gawande on the last 200 years of surgery: "Surgery is a profession defined by its authority to cure by means of bodily invasion. The brutality and risks of opening a living person's body have long been apparent, the benefits only slowly and haltingly worked out. Nonetheless, over the past two centuries, surgery has become radically more effective, and its violence substantially reduced -- changes that have proved central to the development of mankind's abilities to heal the sick...If the past quarter century has brought minimally invasive procedures, the next may bring the elimination of invasion. One feels foolish using terms like nanotechnology -- I haven't the slightest idea what it really means or can do -- but scientists are already experimenting with techniques for combining noninvasive ways of seeing into the body through the manipulation of small-scale devices that can be injected or swallowed. Surgical work will probably even become fully automated. The possibilities are tantalizing. A century into the future, a surgeon will tell the tale -- that is, if the world still makes such people."
Adam Davidson reviews Edward Conard's case for inequality: "I recently met Edward Conard on 57th Street and Madison Avenue, just outside his office at Bain Capital, the private-equity firm he helped build into a multibillion-dollar business by buying, fixing up and selling off companies at a profit. Conard, who retired a few years ago at 51, is not merely a member of the 1 percent. He’s a member of the 0.1 percent...Unlike his former colleagues, Conard wants to have an open conversation about wealth. He has spent the last four years writing a book that he hopes will forever change the way we view the superrich’s role in our society. 'Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong,' to be published in hardcover next month by Portfolio, aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conard writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off."
Acoustic interlude: Stephin Merritt plays "The Nun's Litany" live in London.
Got tips, additions, or comments? E-mail me.
Still to come: The Treasury delayed its choice on floating-rate notes; employers won't drop health coverage; flood insurance resurfaces as an issue; rules for fracking are coming soon; and some baby goats frolic around.
Corporate tax reform is fading out of view. "The push for reform of the US corporate tax code has emerged as a casualty of election-year political paralysis. But concern is growing that it may not even be top of the policy docket at the beginning of next year...For at least eighteen months, there has been a rough consensus in US among politicians of both stripes that overhauling America’s business taxes by lowering the rate and paying for the effort by eliminating some corporate tax breaks would help bolster the country’s competitiveness. Yet moving beyond that level of agreement in to the nuts and bolts of which politically-sensitive tax deductions to sacrifice has been difficult - and belief that momentum could suddenly emerge out of a new political constellation in January is waning...As greater scrutiny is placed on the details of corporate tax reform, the reality of the tough political and economic choices it entails are coming to the surface, posing further challenges to its progress." James Politi in The Financial Times.
Chinese currency manipulation remains an issue in negotiations. "The pace of appreciation of the Chinese currency against the dollar has slowed in the last year, ensuring that China’s manipulation of its exchange rate remains a central topic as Treasury Secretary Timothy F. Geithner arrives in Beijing for the annual dialogue between the nations. While praising the Chinese government for its progress, Treasury officials have promised to maintain the pressure...The Chinese government has been holding back the pace of appreciation, which makes Chinese goods relatively more expensive and American goods relatively cheaper...Mr. Geithner’s central goal is to encourage changes to make the Chinese currency and financial systems more responsive to market forces, with exchange rate and interest rate controls as main points of American concern. The renminbi has appreciated about 30 percent against the dollar since 2005, adjusting for both economies’ rates of inflation." Annie Lowrey in The New York Times.
Euro-zone unemployment rose to a new high. "Unemployment in the euro zone rose to a new high in March, according to figures released on Wednesday. The data came a few days before crucial elections in France and Greece, and it is likely to prompt more intense calls for an easing of Europe’s austerity drive. Unemployment in the 17 countries that belong to the euro zone rose to 10.9 percent in March from 10.8 percent in February, according to Eurostat, the European Union’s statistics agency. In March 2011, the rate was 9.9 percent, a number that illustrates the deterioration of the region’s economy in the last year. The monthly increase, the 11th in a row, translates into more than 17 million jobless people, and it is in line with other recent indicators showing that the euro zone economy remains distressed. Manufacturing in the region hit a 34-month low in April, according to a survey of purchasing managers released Wednesday by the research firm Markit." Jack Ewing in The New York Times.
@conorsen: Government employment has had no recovery since 2009, but state/local employment look finally ready to turn the corner.
Remote control interlude: A real life fire-breathing dragon.
Companies are unlikely to drop employees' health coverage. "A new report, out Tuesday from Republicans on the House Ways and Means Committee, estimates that America’s 100 largest companies could save a collective $422 billion over a decade. Financially, there’s a lot at stake. If workers use public subsidies at a higher rate than expected, the cost of Obamacare could skyrocket...The best experience we have suggests that employers won’t drop coverage. That comes from Massachusetts’ experience under Romneycare, which, like the federal law, provided subsidized insurance for low-income Americans. There, employers have continued to offer coverage at the same level they did prior to the reform law. What gives? To start, all those benefits of offering insurance -- the competitive, financial and wellness aspects -- don’t disappear in 2014. Companies can still get more bang for their buck offering compensation as health insurance rather than wages. " Sarah Kliff in The Washington Post.
The U.S. still leads the world in healthcare spending. "The United States spends more on health care than 12 other industrialized countries, a new Commonwealth Fund study finds - but that doesn’t mean this country’s care is any better. The U.S. spent nearly $8,000 per person for health care services in 2009, the study found, confirming that 'health care spending in the U.S. dwarfs that found in any other industrialized country.'...The Commonwealth Fund concluded that this country’s high price tag for health care isn’t because of more doctor visits -- the U.S., with an average of about four visits per person in 2009, ranked at the bottom for the number of doctor consultations. And it isn’t because of lengthy hospital treatments -- the study found the U.S. had shorter hospital stays, as well as a smaller number of hospital beds and discharges...So what’s causing the U.S.’s cost problem? The Commonwealth Fund points to high prices for medication and medical services, as well as a good deal of use of expensive technology, such as MRIs and CT scans." Kathryn Smith in Politico.
Federal officials conducted a major Medicare fraud bust. "Federal officials said Wednesday they had charged 107 people across the country in recent days for allegedly running a string of unrelated Medicare fraud schemes involving a total of $452 million in false claims. Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius said that charges were being brought against defendants in seven cities, including doctors and nurses, for seeking to defraud the federal health program for the elderly and disabled. At least 83 of the defendants were arrested Wednesday morning, officials said...The departments of Justice and Health and Human Services have stepped up their efforts to combat Medicare fraud in recent years, and say they are trying to shift their focus to stopping the government from paying false claims rather than trying to recover the money later." Louise Radnofsky in The Wall Street Journal.
Food safety regulations have been held up at the OMB. "More than a year after President Obama signed a landmark food-safety bill, the key provisions are hung up at a unit of the White House that is in charge of reviewing proposed policy changes. The delay at the Office of Management and Budget baffles consumer advocates and industry groups, which joined forces to lobby for passage of the legislation and press for its funding. The united front by this unusual alliance -- and the president’s enthusiastic endorsement of the legislation in the past -- makes the hold-up especially puzzling...OMB officials say the duration of this review is not unusual given the complexity of the regulations. 'The administration is working as expeditiously as possible to implement this legislation we fought so hard for,' said Moira Mack, an OMB spokeswoman...The OMB must approve draft rules, which are then submitted to the public for comment before being finalized." Dina ElBoghdady in The Washington Post.
The Obama administration is continuing its illegal immigration crackdown. "The Department of Homeland Security, continuing its crackdown on employers who hire illegal immigrants, has ordered hundreds of companies in recent weeks to submit their hiring records for inspection. This year's first 'silent raids' haven't been publicly announced by Immigration and Customs Enforcement, the DHS agency that conducts them. But an ICE spokeswoman confirmed on Tuesday that as of March 29, the agency had notified 500 businesses 'of all sizes and types' to turn over I-9 employment-eligibility forms and other documents for audits...Since January 2009, the Obama administration has audited at least 7,533 employers suspected of hiring illegal labor and imposed about $100 million in administrative and criminal fines--more audits and penalties than were imposed during the entire George W. Bush administration." Miriam Jordan in The Wall Street Journal.
The federal flood insurance program is nearing expiration. "Federal officials are putting fresh pressure on Congress to take action on the National Flood Insurance Program, whose authorization expires at the end of this month, one day before hurricane season begins. The NFIP has been a political football in Washington for years, particularly because of the unsustainable debt load it took on in the wake of Hurricane Katrina in 2005. There is a broad push to reform the program and put it on a sound financial footing, but competing visions on that reform (including whether to forgive the program's debts) have stalled legislation. For now the program remains in business with repeated short-term extensions, though in 2010 it was allowed to lapse for a few weeks...Federal law requires that homes in designated flood-risk areas have flood insurance before a mortgage can be completed. Because the NFIP is effectively the only flood insurance available in the United States, a lapse in the program means home sales cannot close in designated flood areas." Ben Berkowitz in Reuters.
Goats are the cutest interlude: Two week old goats frolic around the yard.
Fracking regulations will be here soon. "The Interior Department will release a new proposal to regulate 'fracking' on federal lands as soon as Thursday, a top industry official told The Hill. 'I expect they will be out tomorrow or Friday,' American Petroleum Institute CEO Jack Gerard said Wednesday. The proposal would regulate the oil-and-gas development method known as fracking, in which water, chemicals and sand are injected at high pressure into rock formations to open up seams that enable trapped oil and natural gas to flow. The rules are expected to include the required disclosure of chemicals used in the hydraulic fracturing process, along with regulations on well integrity and wastewater management. Fracking and advances in horizontal drilling technology are enabling a natural gas and oil production boom in many states, but have raised concerns about air pollution and water contamination as well." Ben Geman in The Hill.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.