Matthews is writing Wonkbook while Ezra is traveling.

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Read the Fed's full statement:

2) The Fed is choosing half measures when it should go all the way, writes the New York Times editorial page: "The Fed could take modest steps, like shifting its portfolio toward bonds with longer maturities, which would help to keep long-term rates low and nudge investors into riskier investments. It could reduce the interest it pays on the banks’ huge reserves or even tax the reserves to try to encourage more lending. It could also resume buying Treasuries or other securities to provide additional monetary stimulus. A more aggressive strategy would be letting inflation rise above the Fed’s comfort level of 2 percent or so to, say, 4 percent. That could help the economy by easing the repayment of debt. In the absence of stimulative fiscal policy, even assertive moves by the Fed are unlikely to turn the ailing economy around. But they could help, if only the Fed would deploy them."

3) Harry Reid has picked Sens. Patty Murray, Max Baucus, and John Kerry for the Supercommittee, reports Rosalind Helderman: "Senate Majority Leader Harry M. Reid (D-Nev.) has selected Sen. Patty Murray of Washington to serve as co-chair of a new congressional committee charged with reducing the debt, Reid’s office announced Tuesday. Reid has also chosen Sen. Max Baucus (D-Mont.) and Sen. John F. Kerry (D-Mass.) to serve on the panel...Kerry comes as something of a surprise, since he has focused more closely on foreign relations. However, as a respected former presidential candidate, his selection could help appease liberals...Reid’s selections include none of the senators who served on the so-called Gang of Six....In a joint statement, Murray, Baucus and Kerry...neither demanded tax reform be a part of the committee's recommendations...nor did it reject Republican calls for changes to entitlements."

The Supercommittee's timeline:

4) S&P is downgrading thousands of municipal governments, reports Michael Aneiro: "Standard and Poor's downgraded more than 11,000 public finance issues to keep them in line with its newly lowered rating on federal government debt. S&P said it had lowered to double-A-plus from triple-A the ratings on certain public finance debt issues linked to the federal government, matching the downgrade it applied to U.S. government debt last Friday. The number of issues affected by the downgrades covers less than 1% of the estimated 1.2 million outstanding debt issues in the $2.9 trillion municipal bond market. The downgrades applied to a variety of debt issues linked to the federal government, including pre-refunded bonds backed by escrowed Treasury notes, public finance housing authority issuers, and public finance debt issues with mortgage insurance from the Federal Housing Administration."

5) But it's facing a bipartisan backlash, reports Victoria McGrane: "Standard & Poor's downgrade of the U.S. government's credit rating has created something few thought possible: a bipartisan consensus in Washington. Unfortunately for S&P, the rating firm is the one in the crosshairs. Democrats and Republicans in Congress are gearing up to put it under investigative scrutiny and do more to restrict the influence of S&P and its peers in financial markets. Democrats are particularly angry about S&P's alleged $2 trillion mistake in estimating total federal deficits over the next decade...The downgrade almost certainly eliminated the chances that Congress will change a provision in last year's Dodd-Frank financial overhaul that requires U.S. financial regulators to purge references to ratings from their rules, analysts say."

S&P says a balanced budget amendment would hurt more than it helps:

'90s cover interlude: The Decemberists play "If I Can't Change Your Mind" by Sugar.

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Still to come: Obama's manufacturing czar is leaving; Kansas is rejecting millions in health care reform money; the National Labor Relations Board is kicking into high gear; the administration has approved new fuel efficiency rules for trucks; and the cutest bear attack you've ever seen.


Obama's manufacturing czar is leaving, reports Josh Boak: "Ron Bloom, the White House adviser on manufacturing and architect of the auto bailout, is leaving the administration this month, the White House announced Tuesday. President Barack Obama expressed gratitude to Bloom in a statement, saying his 'leadership and expertise has helped us put America’s automakers back on the road to recovery, launch new partnerships to make our manufacturers more competitive and set aggressive fuel economy standards that will save consumers and businesses money at the pump.'...The former investment banker became a negotiator for the United Steelworkers union before turning to government service. Bloom joined the administration in February 2009 as the senior adviser to Treasury Secretary Timothy Geithner on the president’s task force on the automotive industry."

Banks are still suffering from the housing bust, report Brady Dennis and Jia Lynn Yang: "The recent swings in the stock market have hit U.S. banks hard, but falling share prices are only one in a long list of troubles for financial institutions. Nearly three years after the government infused the banking industry with hundreds of billions of taxpayer dollars, many large banks continue to struggle with the fallout of the housing bust...Bank of America, the largest bank in the country by assets, has faced the most pressure from investors. The company has lost roughly half its market value since July amid doubts about its ability to manage its large portfolio of bad mortgages...It’s not just Bank of America getting battered on Wall Street. Wells Fargo’s stock is down about 20 percent for the year. J.P. Morgan Chase has fallen 14 percent, and Citigroup has dipped 32.7 percent."

Germany looks like it's slowing down, reports Suzy Khimm: "Germany’s robust economy is showing signs of a slowdown, raising fears that the linchpin holding together Europe’s fragile financial health could be weakening. On Tuesday, the country revealed that its exports in June rose by only 3.1 percent, compared with a 20.1 percent increase in May, marking the smallest increase in 16 months. A few days earlier, an index of German manufacturing activity dropped from 54.6 in June to 52 in July -- the lowest level since October 2009, marking the third consecutive month of declines....If Germany’s domestic growth declines at the same time that its exports slow, the double whammy will be felt across the eurozone, which relies on German economic strength to bolster troubled members such as Greece and Portugal."

A "skills gap" is keeping Americans out of work, write Mary Landrieu and Patty Murray: "A recent report on this issue from the perspective of CEOs and college presidents found that more than half of the companies surveyed reported a challenge in finding candidates with the right skills. Of the smaller businesses, 67% said finding skilled workers was difficult. A Wells Fargo/Gallup Small Business Index Survey reveals that while half of small-business owners hired new workers in 2010, 42% of these hired 'fewer' [employees] than needed.' Sixty-two percent of that group said this was because it was 'hard to find qualified employees for [the] positions available.'...As we work to create jobs and get our economy back on track, closing this skills gap needs to be a top priority. A critical first step: reauthorizing and reforming the Workforce Investment Act, our nation's foundational federal work-force development policy."

Liberals need to push the Fed to act, writes Jonathan Bernstein: "The Fed is a good target for liberal organizing, and it’s all too often overlooked. Liberals should be pressing Obama to immediately name people for the two open seats on the Fed, and to threaten the Senate that he will recess appoint them if they are not approved in, say, 30 days. It’s outrageous that the Senate filibustered Nobel Prize winner Peter Diamond when Obama nominated him, but even more outrageous that Obama did little to fight for him -- and that liberals didn’t appear to care very much about it. Beyond pressing Obama, liberals should be actively campaigning against the do-nothing Fed. Remember, Tea Partiers and Ron Paul style libertarians have been threatening the Fed for some time, pushing on policies that (liberals believe) would sacrifice economic growth. Where’s the push in the other direction?"

We need a global plan for growth, writes Gordon Brown: "The potential for strong global growth the coordination of national policies, with China agreeing to raise consumer spending and allowing its rising middle class to buy brand-name goods from abroad; India opening its markets so its poor can benefit from lower-cost imports; both countries taking millions out of poverty; and Europe -- not just Germany -- and America trading their way out of the downturn. Only by creating such a virtuous growth-enhancing circle will we escape a low-growth decade. Keeping commodity prices low, fending off inflation, dealing with currency shocks, breaking the Doha impasse and setting a carbon price that stimulates jobs in renewables are all challenges that a pact has to meet and master. Confidence about the future is necessary for confidence today."

Adorable animals that will probably kill you when they're older interlude: A bear cub attacks a backpacker, adorably.

Health Care

Kansas is rejecting millions in health care reform money, reports Jason Millman and Kate Nocera: "Kansas is returning a $31.5 million grant to lead the way on exchange development, marking one of the largest rejections of federal money to implement a piece of health reform. Kansas will send back to HHS an Early Innovator Grant it was awarded in February to build technology infrastructure for the exchanges that other states could use as a model. Two of the seven states that have received the grants have now returned them. Oklahoma Gov. Mary Fallin turned back a $54 million grant in April after mounting pressure from state GOP lawmakers. A handful of states have meanwhile rejected $1 million grants to help plan health exchanges...Kansas and Oklahoma have staked the position that accepting the Early Innovator Grant would have attached too many federal requirements to their states’ exchanges."

MIT professor Jonathan Gruber is an unsung figure behind health care reform, writes Christine Gossmann: "If health care reform is a major issue in the 2012 presidential campaign, which seems likely, and if President Obama's opponent is former Massachusetts Gov. Mitt Romney, who currently leads in polls of Republican voters, then a central figure of debate will be a silver-tongued economist at MIT. Jonathan Gruber advised both the governor and the president on health care, and even though Romney now derides Obama's law as 'disastrous,' Gruber's ideas animate both efforts....He created the Gruber Micro-Simulation Model...For the first time, policy makers were able to see whether they could actually afford their health-reform bills and what impact they would have on the behavior of both employers and individuals."

Read an interview with Gruber, as well as a few panels from his new comic book on health care reform:

Republicans are staying quiet about new birth control rules, reports Elizabeth Titus: "Republicans who swept to power last year vowing to repeal President Barack Obama’s health care law have been nearly silent about new rules that will force health insurance companies to cover birth control and other women’s health services without co-pays. The new standards are a piece of the law Republicans might predictably oppose: a coverage mandate at the intersection of Americans’ most personal lives. But a week after the rules were announced, most Republicans have stayed mum, with Hill leaders laying off press releases and declining to comment when asked directly. 'Republicans don’t want to be portrayed as anti-woman, and the way these stories tend to get written, that’s how it gets spun,' said Tevi Troy...who served as deputy Health and Human Services secretary for part of the George W. Bush administration."

Domestic Policy

The National Labor Relations Board is picking up the pace in anticipation of vacant seats, reports Melanie Trottman: "The National Labor Relations Board is hurrying to push through a raft of decisions by year's end, when a pair of vacant board seats could leave an important part of the agency hobbled indefinitely. At the same time, congressional Republicans and business groups, unhappy with recent NLRB enforcement and rule-making initiatives, are signaling that they will try to block any new board nominees President Barack Obama might put forward...When Chairman Wilma Liebman's term expires Aug. 27, the NLRB will have just three members on its board--two Democrats and one Republican. That is the minimum number needed to make major new rules. The board would shrink to two when Democrat Craig Becker's term expires Dec. 31...With Ms. Liebman on her way out, a flurry of activity is expected in the coming weeks."

Congress is considering back pay for furloughed FAA workers, reports Ashley Halsey: "About 4,000 employees of the Federal Aviation Administration, including almost 1,000 who live in the Washington region, would receive back pay for the two-week partial shutdown of the agency under a bill introduced in the House on Tuesday. Restoration of the lost pay has been expected but requires congressional action. With Congress away until after Labor Day, it would be September before the workers see the money...[Rep. Frank A.] LoBiondo introduced a bill that would tap into the federal Aviation Trust Fund to pay the 4,000 people who were furloughed...LoBiondo received bipartisan support for the bill, with Transportation Committee Chairman John L. Mica (R-Fla.) and Reps. Peter T. King (R-N.Y.), Lynn A. Westmoreland (R-Ga.), Gerald E. Connolly (D-Va.) and Jon Runyan (R-N.J.) signing on."

An appeals court has upheld the US ban on foreign campaign contributions, reports Del Quentin Wilder: "A three-judge federal panel on Monday upheld a ban on campaign donations by foreigners. The ruling came in a lawsuit brought by two Canadians challenging the legality of U.S. laws that block the financial influence of foreigners in elections...In a unanimous opinion issued in the District’s federal court, Judge Brett M. Kavanaugh wrote that it wasn’t even a close call for Congress to ban such contributions...The Supreme Court last year blocked a ban on political spending by corporations. Although the court did not resolve questions about campaign donations by foreigners in that case, Kavanaugh wrote that its 5-4 majority decision was consistent with such a ban."

Green tech interlude: Airborne wind turbines.


The administration has set new fuel efficiency standards for trucks and buses, reports Juliet Eilperin: "The Obama administration set the first-ever fuel-efficiency rules for heavy-duty trucks and buses Tuesday, a move that will cut greenhouse gas emissions and fuel use by everything from long-haul tractor-trailers to school buses over the next several years. The regulations require fuel-efficiency improvements of as much as 23 percent by model year 2018, compared with the industry’s 2010 baseline...Heavy-duty trucks and buses account for 20 percent of the nation’s annual greenhouse gas emissions...The regulations were welcomed by trucking industry officials, a response unlike that received by recently announced fuel-efficiency standards for passenger cars and light trucks."

A gas tax fight could be coming, report Keith Laing and Bernie Becker: "Transportation advocates and congressional staffers are concerned that the federal gas tax could become the next confrontational issue that Democrats and Republicans push to the brink...Environmental groups said Tuesday they were bracing for the worst, just in case. 'The debt-ceiling debate looms large here,' Deron Lovaas, federal transportation policy director at the Natural Resources Defense Council, said. 'Anything involving taxation or spending could become an issue. I think everyone is watching [anti-tax activist Grover] Norquist and his group like hawks to see what they do next.' Chris Prandoni of Americans for Tax Reform, a group founded by Norquist, said his group believes states should eventually be in charge of gas taxes and take care of their own roads, but he added that he did not think the votes were there."

Closing credits: Dylan Matthews is a student at Harvard and a researcher at The Washington Post. Wonkbook is compiled and produced with help from Michelle Williams.