During the worst of the Iraq War,the media research group FAIR noted that New York Times columnist Tom Friedman had declared "the next six months" the crucial turning point for the Iraq War for no fewer than 14 times over the course of a two-and-a-half year period.That led the blogger Duncan Black to coin the term "Friedman unit," which Wikipedia defines as "any event or 'critical period' which is repeatedly expected to happen in the near future, but repeatedly fails to occur."
There are signs that we really could be at a tipping point for the European Union. The contagion has spread to Germany and France. The market seems increasingly uninterested in half measures. They're likely to keep pulling back from Eurozone debt as long as the Eurozone's future remains in doubt. And so European leaders and Eurozone observers are considering more radical, final solutions.
The Wall Street Journal reports that European leaders are negotiating "a potentially groundbreaking fiscal pact aimed at preventing the currency bloc from fracturing by tethering its members even closer together," but they have waited so long to move to further integration that some observers, like Simon Johnson and Peter Boone, believe that the time for further integration has passed. "Some nations will need to leave the euro zone. There is no painless solution."
The Eurozone is now trapped between the unthinkable and the unsellable. Dissolution was considered so unlikely that there aren't even provisions for leaving the Eurozone. But further integration was too tough to manage even when the Eurozone was flush and the various participants more-or-less liked one another. Now that they don't? Further integration -- particularly when it means that countries like Germany have more tools with which to force austerity -- is a very tough case to make to populations that were more skeptical about the Eurozone than their leaders to begin with, and have seen their worst fears realized.
But perhaps we really have come to the point that Europe must choose, quite quickly, between dissolution and integration. Or perhaps not. It's possible European leaders will come up with a way to ease the pressure for a few more months, only to find the crisis gathering force again ib December and January. Few thought the Eurozone's problems would ever get bad enough to threaten Italy's stability, much less Germany's bond sales. But it did. That doesn't really mean we've hit bottom. It means we don't really know where the bottom is.
1) The Euro crisis could be reaching a tipping point, report Steven Mufson and Anthony Faiola: "International investors are holding back, said people familiar with the financial industry, because of uncertainty about the future of the euro zone and worry about how further downgrades of sovereign bonds by credit agencies might hurt banks. Banks in Europe have also practically stopped lending to other banks, a key task of the financial system that central banks are now performing. And international financial officials fear a self-reinforcing crisis of confidence that could slow down economies...Despite the recent selection of Monti, a veteran technocrat with a good grasp of Italy’s financial needs and broad support in domestic opinion polls, Italy had to pay investors 6.5 percent on six-month bonds in an auction Friday, a record in the euro era."
2) And European leaders are on the cusp of a deal for greater integration, report Marcus Walker, David Gauthier-Villars and Brian Blackstone: "Euro-zone leaders are negotiating a potentially groundbreaking fiscal pact aimed at preventing the currency bloc from fracturing by tethering its members even closer together. The proposal, which hasn't yet been agreed to, would make budget discipline legally binding and enforceable by European authorities. Officials regard the moves as a first step toward closer fiscal and economic coordination within the currency area. That would mark a seminal shift in the governance of the 17-nation euro zone. European officials hope a new agreement, which would aim to shrink the excessive public debt that helped spark the crisis, would persuade the European Central Bank to undertake more drastic action to reverse the recent selloff in euro-zone debt markets."
3) Don Berwick, the head of Medicare has resigned after facing GOP opposition, reports Sarah Kliff: "President Obama’s top Medicare official has resigned in the face of Republican pledges to block his confirmation in the Senate. Center for Medicare and Medicaid Services Administrator Donald M. Berwick notified colleagues Wednesday that he will step down Dec. 2, nearly a month before the expiration of his recess appointment...A Harvard-educated pediatrician, Berwick won accolades and the endorsements of major health-care groups for his academic work, which focused on reducing the cost of care while improving quality and patient experience. Republicans, however, seized on remarks he made praising Britain’s National Health Service as an 'example' for the United States to follow. Many accused him of supporting the 'rationing' of services, a claim Berwick has rejected."
4) He will be replaced by his deputy, Marilyn Tavenner, who has a very different style, reports Sarah Kliff: "Berwick and Tavenner have taken markedly different paths to the same job. Berwick spent decades writing, thinking and speaking about overhauling America’s health care system. His sweeping policy ideas, celebrated by many, also became a major political liability. In blocking his confirmation, Republicans seized onto Berwick’s comments about the British National Health Service as a possible “example” for the United States. Such a situation is unlikely to play out with Tavenner, whose health-care experience lies much more in management than policy. In interviews this week, former colleagues describe her as a patient-centered manager, a hands-on medical professional equally comfortable in the board room and the emergency room. And in contrast to Berwick, Tavenner isn’t associated with a grand vision for health reform, or a particular policy agenda for Medicare and Medicaid."
5) Republican support for extending the payroll tax cut looks doubtful, reports Robert Pear: "The No. 2 Senate Republican, Jon Kyl, expressed concern on Sunday about President Obama’s proposal to continue a reduction in the Social Security payroll tax and questioned whether the tax cut had fostered the creation of jobs, as Democrats say. Mr. Kyl’s comments offered a preview of a fight looming in the Senate, which plans to vote this week on the proposal to extend the payroll tax 'holiday' enacted last December. A one-year extension would cost more than $110 billion, the Congressional Budget Office estimates. Senate Democrats want to offset the cost by increasing the tax on income over $1 million a year. Mr. Obama says that if Congress does not extend the tax cut, 'the typical family’s taxes will go up $1,000 next year.'"
1) The Eurozone has a matter of days to avoid collapse, reports Wolfgang Munchau: "With the spectacular flop of the German bond auction and the alarming rise in short-term rates in Spain and Italy, the government bond market across the eurozone has ceased to function. The banking sector, too, is broken. Important parts of the eurozone economy are cut off from credit. The eurozone is now subject to a run by global investors, and a quiet bank run among its citizens. This massive erosion of trust has also destroyed the main plank of the rescue strategy. The European Financial Stability Facility derives its firepower from the guarantees of its shareholders. As the crisis has spread to France, Belgium, the Netherlands and Austria, the EFSF itself is affected by the contagious spread of the disease. Unless something very drastic happens, the eurozone could break up very soon."
2) The Eurozone needs to break up, write Simon Johnson and Peter Boone: "The path of the euro zone is becoming clear. As conditions in Europe worsen, there will be fewer euro-denominated assets that investors can safely buy. Bank runs and large-scale capital flight out of Europe are likely. Devaluation can help growth but the associated inflation hurts many people and the debt restructurings, if not handled properly, could be immensely disruptive. Some nations will need to leave the euro zone. There is no painless solution. Ultimately, an integrated currency area may remain in Europe, albeit with fewer countries and more fiscal centralization. The Germans will force the weaker countries out of the euro area or, more likely, Germany and some others will leave the euro to form their own currency. The euro zone could be expanded again later, but only after much deeper political, economic and fiscal integration."
3) We can and should end Black Friday, writes Robert Frank: "I call it the 6-6-6 plan -- an across-the-board 6 percent national sales tax (on top of any existing state and local sales taxes) in effect from 6 p.m. on Thanksgiving to 6 a.m. on Black Friday. This plan would leave both stores and consumers free to decide for themselves whether middle-of-the-night shopping is worth it. Even if some retailers decided to stick with the early openings and even if some shoppers showed up, the country would reap a significant benefit. As every mature adult realizes, we have to tax something, and the revenue from my 6-6-6 plan would make it possible to reduce taxes on other activities that are actually useful. Best of all, it would encourage Americans to spend Thanksgiving night where they really want to -- in bed."
4) There are plenty of good places to look for new revenues, writes Paul Krugman: "Let me suggest two areas in which it would make a lot of sense to raise taxes in earnest, not just return them to pre-Bush levels: taxes on very high incomes and taxes on financial transactions...A recent report by the nonpartisan Tax Policy Center points out that before 1980 very-high-income individuals fell into tax brackets well above the 35 percent top rate that applies today...High-income taxation could shave more than $1 trillion off the deficit...And then there’s the idea of taxing financial transactions, which have exploded in recent decades. The economic value of all this trading is dubious at best. In fact, there’s considerable evidence suggesting that too much trading is going on...A tiny fee...could yield several hundred billion dollars in revenue over the next decade."
5) Unemployment weakens our whole society, writes Robert Shiller: "Bad as it is for those without jobs and their immediate families, unemployment tears the fabric of our society. Duha T. Altindag of Auburn University and Naci H. Mocan of Louisiana State University used data collected by the World Values Survey on more than 130,000 people from 69 countries to learn how unemployment affects confidence in civil society and basic democratic institutions. They looked at a survey question inquiring whether 'having a strong leader who does not have to bother with Parliament or elections' is a good thing. In the United States, being jobless increases the propensity to agree by about 11 percentage points...They also found that, in countries where they had the appropriate data, people who have been unemployed for more than a year are even more likely to agree, if other factors are held constant."
Trumpet interlude: Beirut plays "Elephant Gun" live.
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Still to come: Wall Street is undergoing a cultural shift; a fight is starting over recusals in the Supreme Court health care case; Congress is steeling for another spending battle; and a dog licks a baby's face.
Wall Street is transforming in response to new capital requirements, report Max Abelson and Ambereen Choudhury: "Now, faced with higher capital requirements, the failure of exotic financial products and diminished proprietary trading, the industry is undergoing what Steven Eckhaus, chairman of the executive-employment practice at Katten Muchin Rosenman, called 'a paradigm shift.' The New York attorney -- whose clients have included Erin Callan, the former chief financial officer at Lehman Brothers -- said he stopped giving his 'spiel' about inherent talent leading to new work. In interviews, a dozen people who have lost jobs at firms including Societe Generale, Royal Bank of Scotland Group and Jefferies Group described a grim banking landscape, darkened further by the Occupy Wall Street protests against unemployment stuck above 9 percent and income inequality."
The US job market could be getting more European, reports Ben Casselman: "For years, Europe has struggled with high rates of long-term unemployment, youth joblessness and related issues that have slowed economic growth. These problems, especially in Spain, Italy and Greece, are among the factors that led to the Continent's debt crisis and brought it to the brink of recession. Now the U.S...is exhibiting some of the same symptoms. More than two years after the economy officially emerged from recession, the unemployment rate remains stuck at 9%...However, while the recent recession exposed these problems--and likely made them worse--it didn't create them. Many had been around for a decade or longer. 'Something in the U.S. economy has changed since the beginning of the '90s,' said Marcello Estevao, an economist for the International Monetary Fund. 'Not enough jobs are being produced.'"
Brokers expect another big round of easing from the Fed, report Daniel Kruger and Cordell Eddings: "The biggest bond dealers in the U.S. say the Federal Reserve is poised to start a new round of stimulus, injecting more money into the economy by purchasing mortgage securities instead of Treasuries. Fed Chairman Ben S. Bernanke and his fellow policy makers, who bought $2.3 trillion of Treasury and mortgage-related bonds between 2008 and June, will start another program next quarter, 16 of the 21 primary dealers of U.S. government securities that trade with the central bank said in a Bloomberg News survey last week. The Fed may buy about $545 billion in home-loan debt, based on the median of the 10 firms that provided estimates. While mortgage rates are already at about record lows, housing continues to constrain the economy."
Europe's greater savings is due to cultural differences, writes Sheldon Garon: "During the 19th century, European reformers and governments became preoccupied with creating prudent citizens. Civic groups founded hundreds of savings banks that enabled the masses to save by accepting small deposits. Central governments established accessible postal savings banks, whereby small savers could bank at any post office. To inculcate thrifty habits in the young, governments also instituted school savings banks. During the two world wars, citizens everywhere were bombarded with messages to save. Savings campaigns continued long after 1945 in Europe and Japan to finance reconstruction...The new Consumer Financial Protection Bureau...might also promote the creation of financial education programs in every school."
Adorable animals being cultured interlude: A man plays Beethoven for some handicapped elephants.
Opposing groups want Clarence Thomas and Elena Kagan to recuse themselves from the Supreme Court health case, reports Robert Barnes: "Just a little more than an hour after some House Democrats recently demanded an inquiry into Supreme Court Justice Clarence Thomas’s ethics, Senate Republicans stepped up the pressure on Justice Elena Kagan to take herself out of the court’s decision on the health-care reform act...House Judiciary Committee Chairman Lamar Smith (R-Tex.) called for the release of more documents about Kagan’s role as President Obama’s solicitor general...Accusations about both justices, from the left and the right, show no signs of dissipating now that the Supreme Court has said it will review the constitutionality of Obama’s signature domestic achievement, the Patient Protection and Affordable Care Act of 2010."
The CBO shouldn't be above criticism, but calling for its abolition is dangerous, writes Austin Frakt: "like any human effort, what the CBO does is not perfect. Of course it has limitations. Of course it could be better. Some critics are right to point out that the CBO's analysis leaves out aspects of the way the world works. For instance, in the area of health care markets, Yuval Levin writes that the 'CBO refuses to estimate the effects of competition on prices--or indeed the effects of any policy on the behavior of consumers or providers.' That's not a reason to dismantle the CBO...Pointing out limitations in the CBO's bag of tricks is, however, the first step in offering something more constructive: funding for more nonpartisan, policy-relevant, empirical research. The CBO's analysis can only be as complete as the body of work that supports its models and predictive techniques."
Health care needs a bigger overhaul, writes Robert Samuelson: "At times, the U.S. health care system delivers the worst of both worlds: pay more, get less...The system needs a fundamental overhaul to deliver more value for money. There are essentially two ways to do this. One is a voucher system that, through tax credits and fixed Medicare premium subsidies, would allow patients to shop for the best health plan. Competition, the theory goes, would force hospitals and doctors to restructure the delivery system...The other way is a government-run, single-payer system that would -- somehow -- include strict budget limits on doctors, hospitals and other providers. Lower administrative costs alone wouldn’t provide enough savings to control overall spending. If open-ended reimbursement survived, so would the existing system."
Congress is steeling for another spending showdown, reports David Rogers: "Will 'regular order' in Congress ever again be just that--a regular event? That’s the question facing lawmakers over the next three weeks as the House and Senate come to grips with their most basic function: funding for a government that has had to live with the uncertainty of endless stop-gap measures for the past 14 months. Prior to Thanksgiving-- even as deficit talks were collapsing--Congress made a first down payment with an old-fashioned compromise allocating $182 billion among five Cabinet departments and major science agencies. But the task ahead is many magnitudes larger, impacting the heart of the domestic budget, foreign aid and war funding not to mention scores of legislative riders--most of which have never been subject to public debate."
It's budget passback day, reports Ed O'Keefe: "'Passback Day,' as the last Monday of November is known in budget circles, is when the White House and the Office of Management and Budget literally pass back drafts of proposed budgets for the next fiscal year to agencies and departments and begin a series of negotiations in hopes of completing a final budget proposal for President Obama by January. In previous years, White House officials passed back budget drafts the day before Thanksgiving, with an expectation that agencies would file formal responses shortly after the holiday. But OMB Director Jacob J. Lew said recently that he decided to move passback to after Thanksgiving, deeming the previous schedule 'cruel and unusual punishment' for agency bosses hoping to spend time with family."
Mitt Romney is attacking Newt Gingrich as a supporter of "amnesty" for illegal immigrants, reports Philip Rucker: "Returning to Iowa on Wednesday, Mitt Romney seized on Newt Gingrich’s embrace of a 'humane' immigration policy and accused his leading rival for the Republican presidential nomination of offering 'a new doorway to amnesty.' Gingrich, a former House speaker who has surged in the polls to challenge Romney’s front-runner status, outlined in Tuesday night’s CNN debate what he called a 'humane' immigration policy that would allow millions of undocumented immigrants who have settled in America and are raising families here to become legal residents. It’s a stance that threatens to hurt Gingrich’s standing with conservative activists, particularly here in Iowa, where the Jan. 3 caucuses kick off the nominating contest."
Adorable squared interlude: A dog licks a baby's face.
Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.