But I'm not particularly interested in plans. We've had plenty of those. I'm interested in process. The Democrats made a puzzling mistake when they didn't insist that the supercommittee's mandate included a requirement to put forward proposals to create, say, two million new jobs. Perhaps the Republicans would have said no and allowed the country to default because they opposed even a vague effort to look into job creation measures. But somehow, I doubt it. It was just one more lost opportunity for Democrats to use leverage, rather than speeches, to act on unemployment. They got so wrapped up trying to look more serious about deficit reduction than the Republicans that they forgot they were supposed to be doing something about jobs.
The question now is how far they're willing to go to rectify that. Democrats control half the seats on the supercommittee. They also control the Senate and the White House, both of which have to sign off on the supercommittee's recommendations if they're going to become law. That's more than enough leverage to say that the economic news of the past month or so has again emphasized the need for jobs, and there is no way they can sign on to any package of recommendations that the Congressional Budget Office doesn't score as creating or saving two million jobs. Indeed, it could even be framed as something of a deficit issue: there's no way we're going to get the deficit under control if jobs don't come back.
But as of yet, the Democratic statements on the supercommittee have stopped far short of any such strategy. The word out of the White House is that the president will announce a plan in September. They've not said anything about how he intends to get it enacted. A Wall Street Journal op-ed today by Senators Murray, Baucus and Kerry -- the Senate Democrats on the supercommittee -- included a bit of boilerplate about jobs, but specifically said "our goal is to reduce spending" and "we are ready to get to work with our colleagues on both sides of the aisle to report out a balanced plan, with the shared sacrifices this moment requires." It was clear from their piece that they're not thinking of radically changing the conversation or mandate in the supercommittee, at least not yet.
But the 15 million unemployed might say that this moment requires legislation to create jobs rather than poll-tested language about "shared sacrifice," and they would be right. Over the past year, Republicans have moved the conversation to their issues by coolly assessing their leverage and ruthlessly using it. They were willing to let the Bush tax cuts expire for all Americans, the government shut down, and the Treasury default. Now they have clearly said they're willing to let the trigger go off if the supercommittee emerges with a deficit package that's not to their liking. Democrats, meanwhile, have attempted to look more reasonable than the Republicans. That's helping them in the polls. But it's not doing much to help the labor market.
If Democrats want results, they should ask themselves that timeless question: What Would the Republicans do? In this case, it's pretty clear. Republicans won't sign off on anything coming out of the supercommittee that doesn't contain serious action on their key priorities. Democrats shouldn't either.
Five in the morning
1) Obama is considering asking the supercommittee to include stimulus in its plan, report Carol Lee and Janet Hook: "President Barack Obama is considering recommending that lawmakers on a deficit committee back new measures to stimulate the lagging economy, people familiar with White House discussions said Tuesday. The plan Mr. Obama is considering also would recommend the congressional committee come up with a package that reduces the federal budget deficit by much more that its mandate of $1.5 trillion over the next decade, a senior administration official said, through changes in the tax code and social safety-net programs...Mr. Obama...has been pushing Congress for months to adopt a variety of stimulus measures...The White House is also looking at a payroll-tax cut for employers, worth perhaps as much as roughly $110 billion, and other tax breaks for businesses of as much as $55 billion."
2) Sens. Patty Murray, Max Baucus, and John Kerry give their take on the supercommittee: "We know that our goal is to reduce spending. But we also know that America faces not just a budget deficit but also a jobs deficit. Nobody on this committee would be happy if we reduced the budget deficit but even more Americans end up losing their jobs. So we are ready to get to work with our colleagues on both sides of the aisle to report out a balanced plan, with the shared sacrifices this moment requires. One that moves past the partisan rancor, puts our nation back on strong fiscal footing, and allows us to continue shining bright in the world in this generation and for generations to come."
3) Germany's slowdown is threatening the whole Eurozone, reports Howard Schneider: "The economy of Germany, Europe’s headline performer, slowed to a virtual standstill over the past three months, according to new figures released Tuesday, a further blow to international efforts to contain the financial crisis on the continent. The discouraging news came just hours before German Chancellor Angela Merkel and French President Nicolas Sarkozy called for closer European coordination in setting economic policy and new steps to discipline governments whose lax budget practices prompted the debt crisis...The pair proposed that countries harmonize their tax policies, adopt a new tax on financial transactions and commit to balancing their budgets, as well as set up an economic council of national leaders that would meet at least twice a year."
But European leaders stopped short of "Eurobonds": http://bit.ly/ogH7Fv
4) Rick Perry's Fed-bashing could put pressure on the institution, reports Neil Irwin: "Texas Gov. Rick Perry’s broadside against Federal Reserve Chairman Ben S. Bernanke on Monday night was a remarkable departure from the usual approach of major presidential candidates toward the Fed, which has been to make any criticism delicately and politely...To accuse any Fed chairman who would 'print money' of treason is like criticizing the transportation secretary for building roads. It is the job of the Fed, or any central bank, to print money...That said, the attack from Perry and others in the race for the Republican nomination does complicate the Fed’s job ahead. The central bank is supposed to make its decisions in response to economics, not politics. But officials will be reluctant to do anything that puts the Fed in the crosshairs of what is sure to be a polarizing presidential election."
@AriannaHuff: "So a guy who raised secession calls Bernanke "almost treasonous" and threatens "ugly" treatment #verypresidential"
5) Key economic metrics policymakers rely on are highly unreliable, reports Binyamin Appelbaum: "When the government announced in April that the economy had grown at a moderate annual pace of 1.8 percent in the first quarter, politicians and investors saw evidence that the nation was continuing its recovery from the depths of the financial crisis...Three months later, the government announced a small change. The economy, it said, actually had expanded at a pace of only 0.4 percent in the first quarter...How can such an important number change so drastically? The answer in this case is surprisingly simple: the Bureau of Economic Analysis, charged with crunching the numbers, concluded that it had underestimated the value of vehicles sitting at dealerships and the nation’s spending on imported oil. More broadly, politicians and investors are placing a great deal of weight on a crude and rough estimate that has never been particularly reliable."
Punk cover interlude: Against Me! plays "Janie Jones" by The Clash.
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Still to come: Another ratings firm has confirmed the US's AAA rating; HHS could set up a federal exchange with no funds set aside for it; the supercommittee is set to get in turf wars with other committees; the one thing Obama could do on his own to fight global warming; and a baby hedgehog in a tea mug.
Fitch has reaffirmed its AAA rating of the US, report Matt Phillips and Mia Lamar: "Leaving Standard & Poor's as the sole major credit-rating firm to downgrade the U.S. rating, Fitch Ratings on Tuesday affirmed the triple-A status of the U.S., suggesting that the wealth and financial flexibility of the U.S. continue to make it one of the world's most-reliable borrowers. Fitch, which also called the recent Budget Control Act to reduce the deficit a "significant positive development, said its confidence in the U.S. is supported by the a pivotal role the U.S. plays in the global financial system, the U.S. dollar's role as the reserve currency and its diversified economy. 'We still believe that the U.S. is an exceptionally strong credit,' said David Riley, head of government ratings at Fitch Ratings, a unit of French company Fimalac SA."
Policymakers need to get serious about increasing aggregate demand, writes Bruce Bartlett: "With the debt limit debate temporarily set aside, the Obama administration is talking about finding some way to create jobs and stimulate growth. But the truth is that there really isn’t much it can do and it knows it. There may be some small-bore things it can do without Congressional action that may help a little, but the operative word is 'little.' The only policy that will really help is an increase in aggregate demand...Fiscal policy could raise velocity and growth by getting money moving throughout the economy. But since that is not feasible, the Fed is the only game in town. Joseph Gagnon, a former Fed economist, says that it should immediately increase the money supply by $2 trillion and promise to keep increasing it until the economy has turned around."
The Fed's latest action said a lot about its level of concern, but may not do much, writes Alan Blinder: "The two-year interest-rate commitment is based on a wing and a prayer. Economists' main theory of the yield curve, the 'expectations theory,' holds that, for example, the two-year Treasury rate should approximate the average of the overnight interest rates expected over the next two years...But there are two big problems, both of which Mr. Bernanke knows well. First, the expectations theory has been proven wrong six ways from Sunday. Did someone say 'weak reed'? Second, markets were already expecting very low funds rates for the next two years. So the Fed's announcement, while stunning, didn't change market beliefs much...What all this says to me is that the FOMC majority is very worried."
Adorable animals in confined spaces interlude: A baby hedgehog gets stuck in a tea mug.
HHS can create a federal health exchange, but it has no money for it, reports Lester Feder: "While sorting out the policy kinks in setting up a federal exchange, HHS must tackle another problem: There is no money to pay for it. A quirk in the Affordable Care Act is that while it gives HHS the authority to create a federal exchange for states that don’t set up their own, it doesn’t actually provide any funding to do so. By contrast, the law appropriates essentially unlimited sums for helping states create their own exchanges. The lack of funding for a federal exchange complicates what is already a difficult task. HHS will likely be operating exchanges in states like Louisiana and Florida that oppose the ACA on principle and have said they will not comply with the exchange provisions. But HHS also will likely be responsible for several other states that may want to set up exchanges, but will be unable to enact laws and set up the infrastructure under the short time frame specified by the law."
Regulators have settled on a new standard info form for health insurance, report Anna Wilde Mathews and Janet Adamy: "Consumers shopping for health insurance will soon get a peek at a new standard form--akin to the nutrition label on food products--that will lay out the details of each policy, from deductibles to how much it might cost to have a baby. Federal regulators are expected to unveil the proposed summary form, part of the health-care overhaul law, on Wednesday, and the requirement is supposed to take effect next March...Currently, states mandate certain disclosures from health insurers, but they vary by state. The information often comes as part of a document known as the certificate of coverage or evidence of coverage, which can run to dozens of densely written pages and is often supplied only after a consumer has signed up for a policy."
Digital medical records can cut costs, writes Peter Orszag: "Consider the experience of Partners HealthCare System Inc., an early adopter of health IT at Brigham and Women’s Hospital and Massachusetts General Hospital in Boston. In 2006, more than two-thirds of its doctors used electronic health records and, by 2009, all of them did. The system includes integrated clinical-decision support, which gives doctors computerized help in assessing the best tests and treatments for their patients...The IT interventions appear to have been effective at reducing imaging rates across the board, including among the doctors who ordered the tests most. By 2009, that doctor at the 90th percentile ordered 20 images per 100 patients, a decline of almost 10. This one doctor’s net decrease in scans was larger than the total number of scans ordered by the doctor at the 10th percentile even in 2006."
The supercommittee could face turf wars with regular Congressional committees, reports Darren Samuelsohn: "The 12-member supercommittee needs to find its $1.5 trillion in spending cuts from somewhere -- and that means treading on the jurisdiction of some very powerful committee leaders who may not be happy to have ceded a significant amount of authority on perhaps the biggest spending cut bill in American history...The House and Senate Agriculture committees, for example, will want to defend mandatory conservation, energy and export programs tied to the farm bill...Even committee heads who are on the supercommittee don't necessarily want the group of 12 to touch their turf. Rep. Dave Camp (R-Mich.) of the House Ways and Means Committee, for instance, has said any talk of a major tax reform package should remain within his domain."
Obama laid out some policies meant to help rural areas yesterday, reports Zachary Goldfarb: "On the second day of his Midwestern economic tour, President Obama spoke less about the particulars of policy and more about what Washington could learn from rural America. 'I’ve been traveling through these small towns and talking to folks,' Obama told an audience at Northeast Iowa Community College here. 'You do your part. You meet your obligations. It’s time Washington acted the way you do every single day.'...But on Tuesday, the White House announced several measures to support economic growth in rural communities by making it easier for small businesses to get loans, helping people find jobs and get training and improving access to technology. Officials made clear, however, that the initiatives would not need extra funding, underscoring how difficult it is for the White House to find new funds for boosting the economy."
America's aid to homeowners has gotten out of hand, write Viral Acharya, Matthew Richardson, Stijn van Nieuwerburgh, and Lawrence White: "The United States spends more than $100 billion annually to subsidize homeowners. Renters get no breaks; homeowners get tons of them. Their mortgage rates are subsidized through the government-sponsored enterprises Fannie Mae and Freddie Mac; they get a big deduction on federal income taxes for mortgage interest payments and for state and local property taxes; and they even get favored treatment on capital gains from the sales of primary residences...According to data collected by Alex J. Pollock of the American Enterprise Institute, a comparison of homeownership among economically advanced countries shows that the United States is in the middle of the pack, which suggests that subsidizing housing with tax breaks is neither a necessary nor a sufficient condition for a flourishing housing market. Rather, these subsidies enabled people to borrow more than they could afford so they could buy houses bigger than they needed, leading to a house price bubble."
Supercut interlude: Movie bit appearances by celebrities from before they got famous.
An oil pipeline fight is an opportunity for Obama to show he cares about the climate, writes Bill McKibben: "The issue is simple: We want the president to block construction of Keystone XL, a pipeline that would carry oil from the tar sands of northern Alberta down to the Gulf of Mexico. We have, not surprisingly, concerns about potential spills and environmental degradation from construction of the pipeline. But those tar sands are also the second-largest pool of carbon in the atmosphere, behind only the oil fields of Saudi Arabia. If we tap into them in a big way, NASA climatologist James Hansen explained in a paper issued this summer, the emissions would mean it’s 'essentially game over' for the climate...For once, the president will get to make an important call all by himself. He has to sign a certificate of national interest before the border-crossing pipeline can be built."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.