On Wednesday, Gene Sperling, director of the National Economic Council, released a 17-page attack on Paul Ryan's budget. Treasury Secretary Tim Geithner called an op-ed by one of Mitt Romney's top economists "remarkably hackish." Today, Vice President Joe Biden is giving a speech at New York University in which he'll say Romney intends to take us "back to the failed policies that got us into the mess President Obama has dug us out of." And next week, President Obama will appear with the First Lady at rallies -- yes, rallies -- at Ohio State University and Virginia Commonwealth University. In other words? Welcome to the general election, folks.
Sperling decries "the tendency to engage in a 'pox on both your houses' analysis," writing that "while this may be a way for commentators to sound neutral or non-partisan, it penalizes those who start out from a more balanced position and rewards those who stake out and cling to extreme positions. As a result, it undermines rather than fosters progress toward a balanced agreement on sound fiscal reforms."
The rest of the paper is an extremely detailed comparison between the president's budget and Ryan's plan, as well as between both plans and Simpson-Bowles. This last bit is important to the White House's psychology on this issue: They find it shocking -- and Sperling in particular finds it frustrating -- that they are constantly criticized for not embracing Simpson-Bowles when their budget looks fairly similar to that proposal and the Republican budget violates the commission's basic principles of balancing revenues with spending cuts and protecting programs for the poor.
A few days ago, I had lunch with a friend who is active in the Republican Party's economic-policy debates. The real difference between Republicans and Democrats, he held, was that Republicans believe a fiscal crisis is very near, and that the only reforms that the markets will accept are structural changes to Medicare and Medicaid.
There's an interesting tension between these two positions. The problem the White House has on the deficits issue is that their coolness towards Simpson-Bowles lost them a lot of credibility on this issue. Most Americans may not know what they want to do about the deficit. But they tend to know they want to do something. And Simpson-Bowles, rightly or wrongly, became the symbol for doing something. When the Obama administration didn't follow up on it, and then Ryan and the Republicans were first out the door with a major deficit-reduction plan, it created the sense that, deep down, the White House didn't really want to do anything on deficits, that they were just doing the least necessary to check the box.
The problem Republicans have on the issue is that their animating theory of the case takes means they want to do too much. They are frantic over a possible future deficit crisis even as most Americans are worried about an ongoing jobs crisis. And they have defined the problem such that the only solutions they can accept are radical changes that voters are hostile towards: Making Medicare a defined-contribution system served primarily by private insurance plans and turning Medicaid over to the states and then sharply cutting federal support for the program.
Democrats lost control of the politics of this issue when they waited until after Simpson-Bowles and Ryan to put forward a plan. But Republicans lost control of the policy of it when they preempted Democrats and cut to Simpson-Bowles right by putting forward an extreme plan. Much of this election will be about which worries the voters more. And that election has officially begun.
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1) Doing more to boost employment would be 'reckless,' Bernanke says. "The Federal Reserve chairman, Ben S. Bernanke, on Wednesday dismissed proposals to escalate the Fed’s economic stimulus campaign as 'reckless,' arguing that the costs would be high and the benefits uncertain. Mr. Bernanke spoke after the Fed’s policy-making committee ended a two-day meeting with a statement affirming its intention to continue until late 2014, and possibly longer, policies that aim to increase spending by holding down interest rates, rewarding borrowers and punishing savers. The committee again demurred, however, from expanding those efforts, despite its prediction that millions of Americans would not find jobs for years to come. The Fed also released a set of economic forecasts by 17 senior officials, only some of whom vote on monetary policy, showing that their expectations for domestic economic growth for this year have increased modestly since January." Binyamin Appelbaum in The New York Times.
@mattyglesias: Ben Bernanke will crucify mankind upon a cross of two percent inflation targeting.
@greg_ip: Bernanke is increasingly the lonesome dove. 13/17 FOMC members want to tighten sooner than he. This matters.
KRUGMAN: "Is I see it, in effect he declared that he has been assimilated by the Fed Borg."
2) Democrats and Republicans can't agree on how to pay to keep student loan rates low. "Speaker John Boehner (R-Ohio) announced Wednesday that the House will vote on a bill to keep government-subsidized student loan rates from doubling for the next year, a tactic aimed at blunting Obama’s attempt to paint the GOP as deaf to the concerns of college students. But it’s not that simple. To avoid adding to the debt, Republicans will try to take money from a public health prevention fund in the Democrats’ 2010 health care law. Senate Democrats are aiming for a separate mechanism to offset the price tag of the extension. And that could set up a showdown between the two bodies and the president during this hotly contested election year...The GOP budget, which passed overwhelmingly in the House, assumed that the student loan rate would jump -- Boehner said for budgetary purposes, his party assumed that current law would stay in place." Jake Sherman in Politico.
3) The Senate passed a postal reform plan. "The Senate on Wednesday overcame opposition from several Republicans and passed legislation that would overhaul the financially ailing Postal Service, voting weeks before the agency plans to begin closing thousands of post offices and consolidating hundreds of processing centers to cut costs. The measure was passed 62 to 37, despite a warning from Senator Bob Corker, Republican of Tennessee, that it would add to the national debt. Senators who sponsored the bill said it would provide needed relief for the Postal Service, which said it would run out of cash if Congress did not act...The Postal Service, which objected to parts of the bill because it would limit the agency’s ability to close facilities and cut services, expressed disappointment in the vote. 'If this bill were to become law, we would be back before the Congress within a few years requesting additional legislative reform,' the postmaster general, Patrick R. Donahoe, said in a written statement." Ron Nixon in The New York Times.
@patwcaldwell: Lieberman at Brookings talk: "This is much more engaging than postal reform."
4) Polls right now are not very predictive. "Since Rick Santorum suspended his presidential campaign, essentially ending the Republican primary contest, the starting positions for the general election have taken shape. About 10 national polls have been released: President Obama leads Mitt Romney 47.7 percent to 43.7 percent, according to the RealClearPolitics average of recent surveys. Already, partisans and pundits are criticizing individual polling samples and pollster methodologies. Entire '-gates' - Rosen-gate and dog-gate, for example - have erupted, been fought over and then forgotten in mere days, and each poll is scrutinized to see how the latest controversy has affected the race. It is easy to get lost in the weeds. But, of course, the election is still more than six months away, and in the past 10 presidential campaigns, the national polling leader in late April has won the election only half of the time." Micah Cohen in The New York Times.
5) Obama threatened to veto the House's cybersecurity bill. "The White House threatened on Wednesday to veto cyber-legislation that is widely expected to pass the House this week, asserting that the bill would put Americans’ privacy at risk and give a pass to companies that fail to secure their computer networks. The bipartisan Cyber Intelligence Sharing and Protection Act (CISPA) enjoys wide industry support, and its sponsors said they had lined up more than 200 votes as of Tuesday. But the legislation has drawn stiff opposition from privacy advocates, who have called it a 'cyber-spying' bill. On Wednesday, two days before the expected House vote, the Obama administration expressed its concerns. The bill, it said in a statement, 'fails to provide authorities to ensure that the nation’s core critical infrastructure is protected while repealing important provisions' of privacy law." Ellen Nakashima in The Washington Post.
1) BARRO: Both Obama's and Romney's plans require higher taxes on the middle class. "Hubbard is right on the broad point--the President’s math doesn’t add up, and his budget plan leaves budget deficits that are too large in the out years, which will require further fiscal adjustments. If those adjustments happen on the tax side (i.e., if the president’s spending priorities get funded) then middle-class tax increases will likely be necessary. And though his method for reaching it is strange, I think Hubbard’s 11 percent figure is approximately correct...You could just as easily write an op-ed noting that Romney’s fiscal plans are unrealistic, and that the secret ingredient to making his numbers add up will have to be a broad-based tax increase that includes the middle class. When both parties’ presidential candidates put out budget plans that don’t work unless you raise taxes on the middle class, that should tell you something: that one of the fiscal changes that America needs in the medium term is a middle class tax increase." Josh Barro in Forbes.
2) ZAKARIA: Obama should focus on investments. "Obama started the year speaking of 'an economy built to last.' He should return to this theme and frame this campaign as a choice between investments and budget cuts. The Republican Party is wholly committed to the idea that large-scale budget cuts will by themselves produce economic growth. And the president has substance behind his rhetoric. He has proposed several investment initiatives: a $476 billion infrastructure plan; a 5 percent hike in research and development spending; a job-training program to help dislocated workers; incentives for manufacturing; and funds to expand the pool of college graduates and science and engineering students. He should ask Americans to choose between a theory that says these investments will create long-term growth vs. the notion that cutting government budgets will be enough to ignite growth and employment." Fareed Zakaria in The Washington Post.
3) KLEIN: Super PACs could have their biggest impact in congressional races. "Money is least useful in contests where news coverage is most intense and opinions are most entrenched. How many people do you know who still aren’t sure what they think of Obama? Or are undecided about Romney? Probably not many. But how many people do you know with a strong opinion on their congressman? Or on his or her challenger? Do you even have a strong opinion on your congressman? That’s the kind of low- information' race where money can have a big impact. Although the effect of super-PACs on the presidential race will probably be limited, I worry when I read that casino mogul Sheldon Adelson plans to pump millions into a super-PAC dedicated to influencing the outcome of congressional elections. That’s where an airdrop of a million dollars in negative ads in the waning weeks of a campaign can completely change the result." Ezra Klein in Bloomberg.
4) REICH: Europe's double dip could be coming soon to a place near you. "Europe is in recession...Why should we care? Because a recession in the world’s third-largest economy, combined with the current slowdown in the world’s second-largest (China), spells trouble for the world’s largest...The danger here for the United States is clear, but there’s also a clear lesson. Republicans have become the U.S. party of Angela Merkel, demanding and getting spending cuts at the worst possible time - and ignoring the economic and social consequences. Even if the U.S. economy (as well as President Obama’s reelection campaign) survives the global slowdown, we’re heading for a big dose of austerity economics next January - when drastic spending cuts are scheduled to kick in, as well as tax increases on the middle class. But the U.S. economy isn’t nearly healthy enough to bear this burden. If nothing is done to reverse course in the interim, we’ll be following Europe into a double dip." Robert Reich.
5) MELLOAN: Congress should reform the Fed. "Two bills now before Congress make it clear that legislators are finally giving serious attention to a much-needed reform of the Federal Reserve System. The most recent effort is the Sound Dollar Act (H.R. 4180) introduced in the House in March by Rep. Kevin Brady (R., Texas)...A companion bill was put before the Senate by Mike Lee (R., Utah). The Sound Dollar Act has far more hope of passage than the more radical H.R. 1098, introduced by Rep. Ron Paul (R., Texas) last year. H.R. 1098 would repeal the legal tender laws, end the Fed's monopoly on money creation, and allow the private production and use of gold and silver as specie. The Sound Dollar Act, though more modest in its goals, would be a good start in reforming the way the U.S. dollar is created and managed. It would give the Fed a single mandate: to maintain price stability. The present dual mandate, which adds maintaining full employment as a requirement, never made any sense." George Melloan in The Wall Street Journal.
6) DIONNE: Romney has too much faith in the unfettered free market. "It turns out that there is at least one question on which Mitt Romney is not a flip-flopper: He has a utopian view of what an unfettered, lightly taxed market economy can achieve. He would never put it this way, of course, but his approach looks forward by looking backward to the late 19th century, when government let market forces rip and a conservative Supreme Court swept aside as unconstitutional almost every effort to write rules for the economic game. This magical capitalism is the centerpiece of Romney’s campaign, and it may prove to be his undoing...Romney, unlike Clinton, is not offering a program through which government would take specific steps to solve the problems he catalogues. Instead, he is calling on voters to share his faith that our difficulties would go away if the state simply got out of the way, allowed the market do its thing and counted on the success of the successful to lift up everyone else." E.J. Dionne Jr. in The Washington Post.
Top long reads
Jann Wenner interviews Barack Obama: "It's important to understand that Canada is going to be moving forward with tar sands, regardless of what we do. That's their national policy, they're pursuing it...The reason that Keystone got so much attention is not because that particular pipeline is a make-or-break issue for climate change, but because those who have looked at the science of climate change are scared and concerned about a general lack of sufficient movement to deal with the problem. Frankly, I'm deeply concerned that internationally, we have not made as much progress as we need to make. Within the constraints of this Congress, we've tried to do a whole range of things, administratively, that are making a difference - doubling fuel-efficiency standards on cars is going to take a whole lot of carbon out of our atmosphere. We're going to continue to push on energy efficiency, and renewable energy standards, and the promotion of green energy. But there is no doubt that we have a lot more work to do."
Gene Sperling makes the case against the Ryan plan: "There is a growing awareness and emerging national consensus that we both need to reduce our long-term deficits and do so in a way that asks for shared sacrifice including revenues from those who are most fortunate in our society. This will need to be done in a thoughtful way that neither sacrifices the need to strengthen our current recovery nor our national imperative to make investments in the skills and potential of all of our people. It will, as President Obama has often said, mean that everyone must be willing to avoid clinging to every fiscal sacred cow or ideological claim. If we work in good faith, it will not mean being forced to sacrifice our commitment to looking out for those most in need, investing in all our children, protecting the dignity of work and retirement, competing for a better future and a commitment to shared sacrifice in pursuit of shared prosperity."
Peter Coy profiles Jens Weidmann, perhaps Europe's foremost austerity advocate: "It’s no exaggeration to say that the future of Europe depends on who wins this fight: Weidmann and his allies or the forces arrayed against them. Euro zone unemployment is stuck in double digits, and a crisis of investor confidence that has already forced Greece, Ireland, and Portugal to seek bailouts threatens to claim Spain as well. Backers of 'growth now' warn that austerity is plunging Europe into a depression in which fiscal stringency reduces growth, drying up tax revenue and forcing even deeper spending cuts, and so on in a downward spiral. Weidmann, in the sober tradition of the Bundesbank, sees things differently. He believes that while deficit spending made sense as an emergency measure, it has gone on for too long, killing business confidence and investment while driving up debt and interest rates, thus making Europe’s long-term challenges ever graver."
70s nostalgia interlude: Roxy Music plays "Mother of Pearl" live in Stockholm.
Got tips, additions, or comments? E-mail me.
Still to come: Durable goods orders drop; two paths for FDA bills; the Violence Against Women Act will at least pass the Senate; a new plan for the bioeconomy; and a ferret's unsuccessful dinner roll adventures.
BUT FIRST: Stephen Colbert toasts the Time 100: http://ti.me/IeMWkP
The House's break with spending targets could lead to a government shutdown. "Plunging ahead along party lines, the House Appropriations Committee on Wednesday approved a set of Republican-backed spending targets that break with the August debt accords by demanding more than $27 billion in additional savings from non-defense programs. The 28-21 vote sets up a long summer of political skirmishing, all leading to what could be another government shutdown fight Oct. 1 when a new fiscal year begins and the GOP must come to terms with the White House and Democratic Senate...The House begins with a total of $1.028 trillion for discretionary spending, $19 billion below the $1.047 trillion target set last summer and $15 billion below what was enacted just months ago for the current 2012 fiscal year. Republicans would also go $8 billion over the caps set in the Budget Control Act for defense spending, and the result would be a net reduction of more than $27 billion from all other appropriations." David Rogers in Politico.
Durable goods orders had a big drop. "Orders for durable goods fell in March by the greatest rate in three years, suggesting U.S. factory activity may have cooled at the end of the first quarter. Manufacturers' orders for durable goods--items such as cars and refrigerators that are designed to last at least three years--fell 4.2% in March, according to a report Wednesday from the Commerce Department. That was the biggest decline since the country was still in recession in January 2009. The drop was driven by a big decline in airplane orders, which swing from month to month. The February increase, meanwhile, was revised downward...Economists cautioned that special factors likely made the report appear somewhat worse than the underlying trend. First, the December expiration of a government tax credit for business investment caused many companies to move ahead new orders, which translated into artificial weakness in the early-year figures." Conor Dougherty in The Wall Street Journal.
The unevenness of the recovery has held back growth. "When it comes to the economic recovery, timing is everything -- and so far, it’s been off...Part of the problem is that no one sector has made enough gains to galvanize the rest of the economy. Instead, the unevenness of the recovery has constrained its momentum. The result is a sputtering economy that cannot seem to fire on all cylinders at once. That has analysts predicting a modest 2.5 percent increase in the nation’s gross domestic product for the first quarter. The government is slated to release its estimate Friday. The anticipated increase would represent a slowdown from the more robust 3 percent rate of growth late last year -- and some believe the middling pace could continue well into 2013. Economists say efforts to jump-start the economy have been complicated because weakness in one sector can easily bleed into another, undermining any progress." Ylan Mui in The Washington Post.
Banks are courting low-income customers for products with high fees. "An increasing number of the nation’s large banks -- U.S. Bank, Regions Financial and Wells Fargo among them -- are aggressively courting low-income customers like Mr. Wegner with alternative products that can carry high fees. They are rapidly expanding these offerings partly because the products were largely untouched by recent financial regulations, and also to recoup the billions in lost income from recent limits on debit and credit card fees...The Consumer Financial Protection Bureau, a new federal agency, said it was examining whether banks ran afoul of consumer protection laws in the marketing of these products. In the push for these customers, banks often have an advantage over payday loan companies and other storefront lenders because, even though banks are regulated, they typically are not subject to interest rate limits on payday loans and other alternative products." Jessica Silver-Greenberg and Ben Protess in The New York Times.
@BCAppelbaum: When Shiller says housing won't turn around in "our lifetimes," it's worth remembering that he's 66. #housing #optimism #catchthefever
Storytime interlude: Werner Herzog reads from Cormac McCarthy's "All The Pretty Horses."
The Senate's FDA bill moved forward while the House's version came to a halt. "A bipartisan Senate FDA user fee bill passed out of committee easily Wednesday -- but in the House, work on a companion bill came to an abrupt halt. With overwhelming bipartisan backing, the Senate Health, Education, Labor and Pensions Committee voted Wednesday to send its FDA user fee bill to the full Senate. The panel made no major changes to the version made public Monday by Chairman Tom Harkin (D-Iowa) and ranking member Mike Enzi (R-Wyo.). Compare that with the House, where faltering user fee negotiations between Energy and Commerce legislators burst into the open Wednesday morning, forcing the markup of that chamber’s initial bill to be pushed from Thursday to May 8. Late Tuesday, the Energy and Commerce Health Subcommittee leadership put out an uncompromising 'committee print' and announced a markup for Thursday. But the print contained many provisions that have no chance for Democratic support." Brett Norman in Politico.
Some health insurers are moving into retail. "Three years ago, Blue Cross and Blue Shield of Florida did something unexpected for an insurance company: It began opening stores. They weren’t clinics. They did not provide much in the way of medical care. Instead, the buildings housed something that feels almost antiquated: a place where consumers could walk in, meet a Florida Blue representative, and purchase an insurance policy. In many ways, the Florida health plan was making an odd choice: The Internet already provides a nearly free storefront. Health insurance companies regularly talk about getting squeezed financially, as the health reform law requires them to spend at least 80 percent of every premium dollar on medical costs...The plan’s movement into retail, in many ways, responds to the health reform law: Come 2014, the health reform law will expand the individual health insurance market by an estimated 16 million new customers. Individuals will become increasingly involved with purchasing their own health care, putting a greater premium on customer service. " Sarah Kliff in The Washington Post.
Americans' increase in education is slowing down. "Throughout American history, almost every generation has had substantially more education than that of its parents. That is no longer true. When baby boomers born in 1955 reached age 30, they had about two years more schooling than their parents, according to Harvard University economists Claudia Goldin and Lawrence Katz, who have calculated the average years of schooling for native-born Americans back to 1876. In contrast, when Americans born in 1980 turned 30 in 2010, they averaged about eight months more schooling than their parents. This development already has broad ramifications across the U.S. job market: Those with only a high-school diploma had an 8% unemployment rate in March, roughly double that of college graduates, who had a 4.2% unemployment rate. Workers with bachelor's degrees earn 45% more in wages on average than those of demographically similar high-school graduates." David Wessel and Stephanie Banchero in The Wall Street Journal.
The Senate is likely to vote to reauthorize the Violence Against Women Act. "The Senate appears likely to approve a measure Thursday to reauthorize the 18-year-old Violence Against Women Act, after Republicans decided to largely postpone a battle over some provisions of the sprawling provision dealing with hot-button issues of immigration and new protections for gay men and lesbians. Republicans have shifted their attention to the House, where a group of Republican women announced Wednesday that they will introduce an alternative version of the legislation...The differences between the competing bills will have to be worked out in coming months. Those negotiations will probably feature a battle of finger-pointing, in which both parties seek political advantage while accusing the other of politicizing the sensitive issue of domestic and sexual violence. Senate Democrats note their legislation was written in consultation with victims advocates and was introduced with the support of a filibuster-proof 61 senators." Rosalind Helderman in The Washington Post.
The Supreme Court seems likely to uphold at least part of Arizona's immigration law. "The Supreme Court on Wednesday sharply questioned the Obama administration’s view of the limited roles states may play in enforcing immigration laws and seemed receptive to a central part of Arizona’s controversial crackdown on illegal immigrants. Justices on both sides of the court’s ideological divide expressed skepticism that Arizona’s requirement that police check the immigration status of people they arrest or detain is an impermissible intrusion on Congress’s power to set immigration policy or the executive branch’s ability to implement it...But the justices did question other aspects of the Arizona law, particularly provisions that make it a crime for an illegal immigrant to seek work and allow non-citizens to be arrested for not carrying documentation. That raised the prospect of a split decision." Robert Barnes in The Washington Post.
Adorable animals being hyperactive interlude: A ferret tries to take a dinner roll.
The White House hopes to boost the 'bioeconomy.' "The Obama administration is expected to announce a broad plan on Thursday to foster development of the nation’s 'bioeconomy,' including the use of renewable resources and biological manufacturing methods. The National Bioeconomy Blueprint, as the plan is called, discusses a variety of measures and strategies to spur research and development of medical treatments, crops, biofuels and biological manufacturing processes that would replace harsher industrial methods...Much of what is in the 43-page-report, which the administration released before its planned announcement on Thursday, is a list of government programs that are already under way. So it is not clear what concrete changes, if any, will result. Still, some biotechnology industry executives and scientists welcomed the plan as a sign of the government’s commitment, saying it would now be easier to push for specific new programs to foster biotechnology development." Andrew Pollack in The New York Times.
Some auto engineers are skeptical of electric cars' potential. "Auto-industry marketers are stepping up efforts to tout electric cars and plug-in hybrids to regulators and consumers, but at a gathering of industry technologists here, senior auto-company executives offered a sharply skeptical view of electric cars, predicting they will remain a marginal part of the U.S. market well into the next decade. In presentations Tuesday and Wednesday at the annual Society of Automotive Engineers World Congress, senior auto-industry executives in charge of technology strategy, research, and regulatory issues delivered the same message: Barring an unforeseen breakthrough that significantly drops the cost of automotive batteries, fully electric cars and plug-in hybrid vehicles are likely to remain confined to a niche of under 10% of the market through 2025 and beyond...Industry executives agree that a large-scale shift to electric vehicles would be the surest way to cut the auto industry's contribution to global carbon-dioxide emissions." Joseph White in The Wall Street Journal.
@drgrist: Germany produces more solar power in a month than the U.S. does in a year.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.