The U.S. Capitol building. ((Bill O'Leary/The Washington Post))

There has been less done for the jobless than for the deficit. After all, the debt-ceiling deal did lead to $900 billion in cuts to domestic discretionary spending, and to the spending trigger that threatens to make a trillion more in cuts starting in 2012. But the jobless? Save for a two-month extension of the payroll tax cut and unemployment insurance benefits, they got nothing.

And unlike the deficit, which isn't yet causing problems in the American economy, joblessness is an ongoing crisis. The unemployment rate is 8.6 percent. If millions of discouraged workers hadn't left the labor force, it would likely be in the double digits. That's led to immense suffering for the unemployed and their families, and also less consumer spending, more foreclosures, and a general prolonging of the economic crisis.

Some argue that there's really no tension here at all. The best thing to do for the unemployed is reduce the deficit. But that's ideology talking. There are good reasons to want to reduce our long-term deficits, but accelerating short-term job growth isn't one of them. In a July 2011 paper, the International Monetary Fund -- which has unimpeachable deficit hawk credentials -- assessed 173 "fiscal adjustments" and concluded that "a 1 percent of GDP fiscal consolidation reduces real private consumption over the next two years by 0.75 percent, while real GDP declines by 0.62 percent." In other words, in the short term, austerity hurts the economy. There is no free lunch.

There are things Congress could do that would help the jobless. Infrastructure investment, for instance. A bigger payroll tax cut. A massive effort to refinance the mortgages of creditworthy borrowers. Burying sacks of cash out in the Nevada desert. But Congress isn't doing any of them. And unlike with deficit reduction, it didn't even spend the year obsessing over how to do any of them. It wasn't until September, when President Obama proposed the American Jobs Act, that the political system even began talking about job-creation proposals again.

This has been a key theme of 2011: For reasons that defy any of the signals we're seeing in the actual economy, Congress -- and, for much of the year, the president -- has been obsessed with finding a deal on deficit reduction and relatively resigned on policies to create jobs. In part, that's simply because the Republicans in Congress were (and are) staunchly opposed to further stimulus but seemed willing to work with Democrats on the deficit, and the political system prefers to focus on things it can do rather than things it can't. In part, it's because, for most of the year, Democrats were willing to go along with Republicans who wanted to talk about the deficit rather than job creation measures -- note that they didn't, for example, demand, as part of the debt-ceiling deal, that the supercommittee also come up with jobs proposals.

But the end result has been very weird, like watching the doctors of a patient with acute pneumonia spend a year discussing the best way for the patient to lose weight.

Top stories

1) Despite all the talk, not much deficit reduction got done in 2011, reports Lori Montgomery: "The debt stood at $15.1 trillion, $1 trillion more than when he got to town. By the end of next year, projections show, it will grow by an additional $1 trillion. Ribble said he and his allies had cut spending for 2012 by only about $7 billion...Look past 2012, and the budget deals of the past year make a more significant dent. They reduce spending by more than $1 trillion over the next 10 years, the largest debt reduction in two decades. Yet no one, of any ideological stripe, is bragging about the accomplishment. Instead, the Capitol is pervaded by an atmosphere of failure, of opportunity blown. Despite round after round of negotiations...Republicans and Democrats never resolved the most fundamental budget questions: whether to raise taxes and how to control spending on an aging population."

2) Obama has nominated Jerome Powell and Jeremy Stein to the Fed: "The Obama administration is nominating Jeremy Stein and Jay Powell to the Federal Reserve’s Board of Governors. Stein is a Harvard economist who served in the Obama administration in 2009. Powell, a former private-equity executive with the Carlyle Group, is a visiting scholar at the Bipartisan Policy Center and was Undersecretary of the Treasury for Finance under George H.W. Bush. So this is a Noah’s Ark nomination: One Democrat and one Republican. On the surface, both nominees should be broadly acceptable to both sides. Tyler Cowen called Stein “one of the most creative contemporary economists.” Powell is a moderate Republican who has spoken admiringly of Dodd-Frank and who played a crucial role in convincing the mainstream of the GOP that defaulting on the debt was unthinkable. But there are a few big differences between the two nominees."

3) GOP presidential candidates don't have much in the way of new ideas on housing, reports Michael Fletcher: "Three years into the president’s term, the nation’s housing market remains a mess...Even so, with Iowa voters set to caucus on Jan. 3, the GOP candidates are not rushing forward with alternatives, making it very likely there will be no help on the way if a Republican recaptures the White House next fall...Neither Obama nor the GOP candidates are talking about the kinds of expensive and, no doubt, politically risky moves some economists say are necessary to repair the housing market. Some economists say bold moves, such as a large-scale refinancing program that would relieve mortgage holders of their negative equity, would help revive the market...More than that, all the Republican candidates are advocating a smaller federal role in the housing market, which industry leaders say is the opposite of what is needed."

4) Obama will ask for a debt ceiling increase, reports Margaret Chadbourn: "The White House plans to ask Congress by the end of the week for an increase in the government's debt ceiling to allow the United States to pay its bills on time, according to a senior Treasury Department official on Tuesday. The approval is expected to go through without a challenge, given that Congress is in recess until later in January and the request is in line with an agreement to keep the U.S. government funded into 2013...Under the agreement struck in August during the showdown over the government's debt limit, the cap is automatically raised unless Congress votes to block the debt-ceiling extension. Lawmakers have 15 days within receiving the request to vote, which is largely symbolic because the president can veto it and Congress would be unlikely to muster the two-thirds majority to override it."

Top op-eds

1) Tim Geithner deserves credit for Obama's payroll tax win, writes Ron Klain: "What made victory possible...was a strategic choice made by Obama and Vice President Joe Biden in December 2010, based on a recommendation from the Treasury secretary and his then-counselor...Gene Sperling...He and Sperling suggested that when the payroll tax cut expired, reluctant congressional Republicans would be under pressure to extend it. Geithner argued that if the administration and its allies rallied effectively for an extension, the result would ultimately be that the one-year tax cut would become a two-year one...The president and vice president took Geithner’s advice and put the payroll tax cut into the package enacted in December 2010. And, just as Geithner predicted, in December 2011, when that one-year measure was set to expire, House Republicans found it was untenable to refuse to extend it."

2) Fixing inequality requires more than tax changes, writes Clive Crook: "The combination of global markets and new technology has increased the earning power of star athletes and entertainers. The pay of top executives has soared, too. That might be because the most successful companies have grown bigger and more difficult to run...If top incomes were surging only for reasons like that, few would complain: Americans believe in pay for performance...The finance industry, with its oversized paychecks, has expanded mightily -- not to the country’s obvious benefit, and partly thanks to hidden subsidy. The point is, some instances of very high pay are fair and efficient, and some aren’t. Do you raise taxes on all high incomes, regardless? If that’s all you do, you leave the underlying failures (of corporate governance, financial regulation and so on) unaddressed."

3) Obama's Arizona lawsuit is executive overreach, write David Rivkin and Joe Jacquot: "In response to Arizona’s efforts to identify and arrest undocumented immigrants, the president claims that he can preempt state law whenever its enforcement might irritate a foreign government. This unconstitutional power grab cannot stand...The administration’s...argument is simply that the president has unilateral power under the Constitution to nullify Arizona’s law respecting immigration. Mexico, the administration explains, has lodged complaints regarding Arizona’s law, and this implicates the president’s power over foreign affairs, which in turn trumps Arizona’s immigration-related actions. This is a stunning and audacious power grab, far more expansive than the legal theories that prompted critics of President George W. Bush to argue that he established an 'imperial presidency.'"

4) Anti-vaccine hysteria is a public health risk, writes Steven Weinreb: "Vaccination rates for many diseases in Europe and in areas of the United States are falling. This is partly due to Andrew Wakefield, a British doctor who published a paper, now discredited, in 1998 in The Lancet tying childhood vaccines to autism...As a result of these unwarranted fears, childhood diseases are returning. The rate of whooping cough cases has spiked over the past 20 years. In 1990, the incidence was 2 per 100,000 people; in 2000 it was 3; by last year, it had risen to nearly 10. Measles cases are also increasing. For each year between 2001 and 2008, the median number of cases in the United States was 56. In the first six months of this year alone, there were more than 150 reported cases...A vast majority of those who were sickened had not been vaccinated or had uncertain vaccination histories."

Mashup interlude: DJ Earworm mixes together the 25 biggest hits of 2011.

Got tips, additions, or comments? E-mail me.

Still to come: More and more jobless people are turning to disability benefits; state-based children's health coverage is spreading; GOP presidential contenders don't have much in the way of new ideas on housing; new forms of biofuel are falling short; and a baby turtle valiantly battles a tomato slice.


More and more jobless people are relying on disability benefits, report Damian Paletta and Dionne Searcey: "The prolonged economic slump has fueled a surge in applications for Social Security disability benefits, with many desperate Americans seeking refuge in the program as a last resort after their unemployment insurance and savings run out. Two new studies, one of them co-authored by the White House's top economist, show a correlation between when people seek Social Security disability payments and when their unemployment benefits are exhausted. Some economists say that connection shows many people now view the system as an extended unemployment program. The Social Security Disability Insurance program was created in the 1950s to provide financial support and health care for Americans no longer able to work because of injury or ill health, covering them until they get better or retirement benefits kick in."

ECB overnight lending is at a record high, reports William Launder: "Use of the European Central Bank's overnight deposit facility reached a new, all-time high Monday, as euro-zone banks parked a growing surfeit of market liquidity in the central bank's safe haven for deposits. Banks deposited €411.81 billion overnight Monday, up from €346.99 billion deposited overnight Thursday ahead of the Christmas holiday, ECB data showed Tuesday. Monday night's deposit figure surpasses the previous record of €384.3 billion reached in June 2010, ahead of a 12-month tender operation and concerns about the then-nascent debt crisis. The high level reflects ongoing distrust in inter-bank lending markets, where banks prefer using the low-risk ECB facility for excess funds rather than lending them to other banks. It further underlines the abundance of liquidity in the euro-zone financial system, after the central bank extended nearly half a trillion euros in long-term loans to more than 500 euro-zone banks last week."

Adorable animals eating food interlude: A baby turtle tries to eat a tomato slice.

Health Care

State-based children's health coverage is growing, reports NC Aizenman: "Publicly funded programs have enabled 1.2 million more children to gain health insurance since 2008 -- at least in part due to extra work by many states to ensure that more of the children who are eligible for the programs are actually signed up, Obama administration officials plan to announce Wednesday. Twenty-three states are to be awarded federal performance bonuses totaling nearly $300 million for these efforts. Maryland and Virginia have qualified for the two largest amounts -- $28.3 million and $26.7 million, respectively -- under an incentive plan aimed at improving child enrollment rates in Medicaid and the Children’s Health Insurance Program, or CHIP. Jointly funded by states and the federal government, CHIP supplements Medicaid, the health insurance program for the poor, by offering insurance to children in low-income families."

Domestic Policy

The pledges the Republican [presidential candidates are making to nix agencies ring hollow to experts, reports Darren Samuelsohn: "Republican presidential candidates are promising to save taxpayers a buck by turning entire government agencies into dust. The familiar conservative rallying cry is met with almost universal skepticism from anyone who's seen the wreckage from past bungled attempts to ax big bureaucracies like the Education, Commerce and Energy departments. But with a $15 trillion federal deficit and evidence of agency overlap -- remember President Barack Obama's State of the Union wisecrack about salmon regulators? -- GOP candidates led by Ron Paul and Rick Perry are seemingly in competition to out promise each other...Recent history is littered with examples of broken presidential promises for downsizing government. Richard Nixon tried to fold together his Cabinet into four super-Cabinet positions...Reagan said he'd undo Jimmy Carter's legacy by eliminating the Education and Energy departments."

The White House wants states to follow through on their Race to the Top reforms, reports Stephanie Banchero: "The Obama administration is stepping up pressure on states to make good on their commitments under its Race to the Top competition, after all 12 winners either scaled down plans or pushed back timelines to overhaul their public-education systems. The U.S. Department of Education warned last week that Hawaii, which won $75 million in Race to the Top funding, is so far off track that the state could lose its money if it doesn't start making good on its pledges. It was the first state to receive such a stern warning, though federal officials have threatened in the past year to withhold smaller amounts from Rhode Island and Delaware...Race to the Top, President Barack Obama's signature education initiative, offered $4.3 billion to states that promised to transform their education systems."

Look at this hand-standing dog interlude: A dog descends the stairs on his front legs, while wearing pants.


New forms of biofuel are falling short, reports Ryan Tracy: "Hopes for a surge in production of alternative biofuels are falling flat, and the U.S. expects to continue to rely on corn- and sugarcane-based ethanol to meet a national mandate for renewable fuels in 2012. The Environmental Protection Agency said Tuesday that a tiny fraction--less than one-tenth of 1%--of renewable fuels required to be used in the U.S. next year will come from cellulosic biofuel, based on projected production volumes, despite a congressional target that the fuel made from plant stalks and other inedible materials account for more than 3% of the total...Cellulosic fuel, which can be made from plant waste such as corncobs, is still far from being able to meet volume mandates laid out by Congress, the EPA said Tuesday."

Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.