A trader works on the floor of the New York Stock Exchange, August 15. (BRENDAN MCDERMID/REUTERS)

So there is plenty for Congress to do, and plenty that has happened in recent months to shock them into action. But they are not acting. There is no evidence that slowing growth, stagnant joblessness, or market turmoil has moved anyone on the Hill into thinking the economy needs even a whisper of added support. If anything, positions are hardening. House Majority Leader Eric Cantor sent his members a memo arguing they could help end policy uncertainty by “stopping the discussions of new stimulus spending.” This is what Morgan Stanley was worrying about when it worried that America might tip back into recession because of “an automatic tightening fiscal policy if, as our US team currently assumes, this year’s fiscal stimulus measures will expire.”

What should happen next is not that hard: Congress should pass legislation greatly increasing support for the economy now and reducing the deficit by about $4 trillion over the next 10 years ($3 trillion once you include the discretionary cuts in the debt deal). It's not rocket science, and it shouldn't be partisan. Ask ex-Reagan adviser Martin Feldstein, or ex-Bush Treasury Secretary Henry Paulson -- or read Jackie Calmes asking them -- and you'll hear the same thing. This is just standard economic theory. But Republicans in Washington are not going to apply it.

If this isn't driving you to despair, you're not paying attention. Unfortunately for him, Kevin Drum is paying attention: "Watching the world slide slowly back into recession without a fight, even though we know perfectly well how to prevent it, is just depressing beyond words. Our descendents will view the grasping politicians and cowardly bankers responsible for this about as uncomprehendingly as we now view the world leaders who cavalierly allowed World War I to unfold even though they could have stopped it at any time."

Five in the morning

1) The White House is urging 5 to 10 percent cuts in agency spending, reports David Rogers: "Reflecting its recent debt reduction deal with Congress, the White House is asking that agencies pare back their 2013 budget requests to show cuts of 5 percent to 10 percent from already reduced domestic appropriations for the current year. The 10 percent standard is much tougher than in the past. In June last year, for example, the administration put agencies through a budget cutting exercise confined to just 5 percent reductions--aimed in part to find the extra room to allow for new investments and a top line freeze. The goal posts have moved. In a two-page memo this week, Office of Management and Budget Director Jack Lew warns that unless a department has been given explicit direction otherwise, 'your overall agency request for 2013 should be at least 5 percent below your 2011 enacted discretionary appropriation.'"

@JoshGreenman: "I'm not against Obama taking a vacation. I'm against him doing it before all the world's problems are fixed."

2) Democrats are getting serious about fighting for higher taxes, reports Rosalind Helderman: "On Wednesday morning, as his tinted black bus pulled into Randy Hultgren’s congressional district, President Obama told residents that Republicans like Hultgren must be willing to raise taxes to reduce the deficit. A few hours and 90 miles away, Hultgren’s own constituents had picked up the message, repeatedly hectoring the freshman congressman at a town hall meeting to raise taxes on the wealthy and corporations...It is a scene that has been repeated at town hall meetings across the country this August as Democrats make a concerted effort to use this month’s congressional recess to change a national narrative on taxes...Since the showdown over raising the debt ceiling, Democrats have been unusually eager to embrace tax increases, gambling that voters will see the Republican refusal to consider higher taxes for the wealthy as recalcitrant and out-of-touch."

3) The Obama administration is stopping deportations of non-threatening young illegal immigrants, reports Robert Pear: "The Obama administration announced Thursday that it would suspend deportation proceedings against many illegal immigrants who pose no threat to national security or public safety. The new policy is expected to help thousands of illegal immigrants who came to the United States as young children, graduated from high school and want to go on to college or serve in the armed forces. White House and immigration officials said they would exercise 'prosecutorial discretion' to focus enforcement efforts on cases involving criminals and people who have flagrantly violated immigration laws...The decision would, through administrative action, help many intended beneficiaries of legislation that has been stalled in Congress for a decade."

4) Republicans are, oddly, arguing for higher taxes on middle-class Americans, reports Jonathan Weisman: "Most working Americans do pay Social Security and Medicare payroll taxes. But because of tax breaks for seniors and inducements for work and raising children, among other accumulated changes to the tax code, many manage to avoid income taxes altogether...As a result, a 2012 election campaign that has featured vows against raising taxes also has produced the parallel critique that too many Americans pay no income tax at all, a point made by Minnesota Rep. Michele Bachmann in July and more recently by former Massachusetts Gov. Mitt Romney and Texas Gov. Rick Perry...Broadening the tax base, simplifying the tax code and lowering tax rates have long been prescriptions for a more efficient tax system, notably from the right."

@JonHuntsman: "To be clear. I believe in evolution and trust scientists on global warming. Call me crazy."

5) An overwhelming majority of Americans disapprove of Obama's economy policy, reports Chris Cillizza:: "New polling from Gallup shows that only one in four Americans approve of the job President Obama is doing with the nation’s economy, a number that marks a lowpoint for the president and makes clear the challenge before him as he turns to his re-election bid in 2012. The poll, which was in the field from Aug. 11-14, showed just 26 percent of people approving of Obama’s handling of the economy while a whopping 71 percent disapproved. The Obama economic approval number has tumbled 11 points since mid-May and is well below his previous nadir -- 35 percent in November 2010 -- on the question...In short: Obama has a major political problem on his hands. Digging into the Gallup data makes clear the deep political challenges for Obama when it comes to the economy."

Irish rock interlude: Villagers play "That Day" live.

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Still to come: Manufacturing numbers are looking pretty scary; a GOP member of the supercommittee is taking Medicare benefits off the table; Ohio's union battle is heating up; carbon emissions are increasing again; and a pug goes skydiving.


Manufacturing indicators turned dramatically negative last month, reports Kathleen Madigan: "Mid-Atlantic manufacturing contracted sharply in August and expectations plummeted, according to the Federal Reserve Bank of Philadelphia, raising worries about third-quarter economic activity. The Philadelphia Fed said its factory-sector index of general business activity fell to -30.7 this month from 3.2 in July and -7.7 in June. The August index was the lowest since March 2009, when the U.S. was in recession, and has never been this low without the economy being in recession. Economists surveyed by Dow Jones Newswires expected an August reading of 1.5. Readings under zero denote contraction, while those above zero represent expansion. Michael Trebing, the Fed economist who oversees the survey, said it was conducted Aug. 8-16, a time of high volatility in the domestic and global financial markets after Standard & Poor's downgraded U.S. Treasury debt and the euro-zone debt crisis continued."

The Justice Department's ratings probe isn't limited to S&P, report Evan Perez and Jeanette Neumann: "The U.S. Justice Department has joined the Securities and Exchange Commission in investigating Standard & Poor's and other credit-rating firms for their role in developing mortgage-bond deals that helped trigger the financial crisis, according to a U.S. official familiar with the matter. The probe by lawyers in the Justice Department's civil division appears to be centered on the actions of S&P, though that could change as the investigation proceeds, this person said. The SEC for months has been looking closely at the conduct of S&P and reviewing the role played by Moody's Investors Service, owned by Moody's Corp., in relation to at least two mortgage-bond deals, according to people familiar with the matter."

Elizabeth Warren is moving toward a Senate run, reports Rachel Weiner: "A week after launching a listening tour of Massachusetts, former White House official Elizabeth Warren has filed an exploratory committee with the Federal Election Commission as she prepares to challenge Sen. Scott Brown in 2012. 'Elizabeth has been listening to people across the Commonwealth as she considers a campaign,' said one Democrat operative assisting with the effort. 'She wants to continue that conversation and the exploratory committee will allow her to do so. It allows her to raise money and it allows another way for people to engage with her' if they cannot see her in person...Many Democrats both nationally and locally see Elizabeth Warren as the likely nominee given her status as a hero of the liberal left and her presumed ability to raise money."

Banks are under stress again, report Brady Dennis and Steve Mufson: "Bank of America chief executive Brian T. Moynihan often talks about his push to 'build a fortress balance sheet' able to withstand harsh economic cycles. But faced with new lawsuits over bum mortgages and the sudden stalling of the global recovery, he just can’t seem to pull up the drawbridge...Bank of America -- still struggling to iron out the portfolio of bad loans it acquired by buying the giant mortgage lender Countrywide Financial in 2008 -- is an extreme case, but it is not alone. Just three years after the financial crisis drove some of the biggest names in finance to the brink of collapse, the combination of European disarray, the downgrading of U.S. debt and a stagnating global economy have rekindled fears about the banking sector’s stability."

The coming payroll tax fight is a role reversal for Obama, writes Howard Gleckman: "I can’t wait to hear Obama lift some of House Speaker John Boehner’s (R-OH) best lines about the folly of raising taxes in the midst of an economic slump. And, of course, we’ll also get to hear Boehner do an Obama and warn against the dangers of recklessly extending temporary tax cuts. If the stakes weren’t so high, it would all be great fun. Confused? Don’t be. Just take what each side said last winter as Obama and Congress battled over what to do about the expiring 2001 and 2003 tax cuts and give the Democrats the Republican talking points and give the Rs the D’s script. Just as the GOP insisted that failing to extend the Bush-era tax cuts would amount to a tax increase, Obama will do the same with the payroll tax. Republicans, by contrast, will argue that allowing the payroll levy to expire is not a tax increase at all since it was always scheduled to come to an end. What would they all do without their ever-flexible baselines?"

Obama's criticisms of the GOP's economic record are unconscionable, writes Charles Krauthammer: "In Obama’s recounting, however, luck is only half the story. His economic recovery was ruined not just by acts of God and (foreign) men, but by Americans who care nothing for their country. These people, who inhabit Congress (guess which party?), refuse to set aside 'politics' for the good of the nation. They serve special interests and lobbyists, care only about the next election, place party ahead of country. Indeed, they 'would rather see their opponents lose than see America win.' The blaggards!...Gov. Rick Perry has been rightly chided for throwing around the word 'treasonous' in reference to the Fed. Obama gets a pass for doing the same, only slightly more artfully, regarding Republicans. After all, he is accusing them of wishing to see America fail for their own political gain."

Our jobs package has to be big, writes Jonathan Cohn: "How much faster do we want the economy to grow? One of the economists I consulted was Harvard's Jeffrey Liebman, a former budget official in the Obama Administration. In his response, via e-mail, he started with Okun’s Law, a basic tenet of economics about the relationship between growth and unemployment...'We need real GDP to grow at 4.5 percent a year for two years to bring the unemployment rate below 7 percent. Achieving 4.5 percent growth for the next two years should be the goal of U.S. economic policy. It is hard to see this happening without additional fiscal stimulus of at least 2.5 percent of GDP in each year.'...What would that be in dollars?...Do the math, as Liebman suggests, and you're getting to the neighborhood of $400 billion a year."

And what have you achieved in your life? interlude: A man sets the world record for number of times (65) biting three apples while juggling them.

Health Care

A Republican supercommittee member is taking Medicare benefits off the table, reports Mike Lillis: "A Republican member of the powerful, deficit-slashing supercommittee vowed this week that the panel won't touch benefits under Social Security and Medicare. Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee, said it's 'critical' that current enrollees in those entitlement programs 'not see benefit reductions.' 'It’s awfully hard to tell someone ... who might be 82, that they’ve gotta go back to work, because their benefits are gonna be chopped,' Upton said Tuesday during a town-hall gathering in Kalamazoo, Mich. 'That’s not gonna happen. We’re not gonna allow that to happen.' Upton's remarks highlight the nuanced nature of the hot-button debate over how to reform big entitlements and shore up finances."

Domestic Policy

Ohio's union rights fight is heating up, report Kris Maher and Amy Merrick: "Labor unions have rejected an offer by Ohio Gov. John Kasich to seek a compromise on a new law that removes most collective-bargaining rights for the state's 350,000 public employees, as a fight over the legislation heads toward a statewide referendum in November. On Wednesday, Mr. Kasich, a Republican, and the party's leaders in the Ohio Senate and House made a pitch to public-employee union leaders to 'avoid the bitter political warfare' over the law, known as Senate Bill 5. In a letter Thursday, however, unions said a 'fresh start must begin with a full repeal of Senate Bill 5.' Rob Nichols, a spokesman for Mr. Kasich, said the governor's offer to meet with union officials Friday still stood. 'We're confident that there are reasonable folks who understand the value of restarting the negotiations that labor unfortunately pulled out from earlier, and we look forward to talking with them on Friday,' he said."

The two biggest figures in education policy squared off in a face-to-face debate, reports Lyndsey Layton: "Michelle A. Rhee, the former D.C. schools chancellor whose take-no-prisoners stance shook up the city and transformed her into a leader of the school reform movement, parried with Diane Ravitch, an education historian whose criticisms of charter schools and high stakes testing has made her a hero to teachers’ unions and many defenders of traditional public education. The Martha’s Vineyard encounter was the pair’s first faceoff in person, after months of dueling opinion pieces and Twitter feeds...Ravitch argued that poverty causes achievement gaps and that the best solution is to offer poor children extra support and resources from birth on. Rhee agreed that poverty plays a role but said educators must focus on what they can control."

An executive order is mandating more diversity in federal hiring, reports Isaac Arnsdorf: "President Obama on Thursday issued an executive order requiring government agencies to develop plans for improving federal workforce diversity. The long-awaited executive order directs a group of high-ranking officials to create a government-wide plan, followed by specific plans in each agency. It marks the highest-profile response to a problem that has been on the administration’s radar: Whites still hold more than 81 percent of senior pay-level positions...The order creates a framework, but the details have not been worked out. Instead of creating a new administrative body, as with Obama’s 2009 executive order on veterans’ employment, this initiative will look to a council of deputy agency chiefs. OPM, the Office of Management and Budget and the U.S. Equal Employment Opportunity Commission will participate."

People have stopped caring about the poor since welfare reform, writes Joel Berg: "Fifteen years ago next week, President Bill Clinton signed the welfare reform bill into law. There will be no ceremony Monday to mark the occasion. No cake. No card. Neither Democrats nor Republicans want to highlight welfare reform anymore. Democrats worry that raising the issue could give the impression that they care about poor people or that they are retreating from Clinton’s centrist reforms. Republicans know that while they sell reform as a cut in spending, any serious effort to move struggling Americans into self-sustaining jobs requires more government funding for job training and work support. Both sides want to convince voters that the only thing they care about is the middle class, so they act as though the 44 million Americans in poverty -- including more than 4 million still receiving cash welfare each month -- don’t exist."

Adorable animals seeking thrills interlude: Otis, the skydiving pug.


Carbon emissions jumped up last year, reports Ryan Tracy: "The U.S. burned more fossil fuels as the economy rebounded last year, leading to the largest percentage increase in carbon-dioxide emissions since the late 1980s, a government report said Thursday. The Energy Information Administration said U.S. emissions of carbon dioxide from consuming coal, natural gas, petroleum and other 'energy-related' sources amounted to about 5.64 billion metric tons in 2010, a 3.9% increase over the previous year. The 2010 total was still lower than a 2007 peak of about six billion metric tons, which was the highest level since 1990. The agency said it expected slower emissions growth--an annual average of about 0.2%--over the next decade...The 2010 jump in emissions followed a steep decline in 2009 during a world-wide economic downturn. In 2009, U.S. carbondioxide emissions dropped 7.1%, the agency said."

We can get shale gas safely, writes John Deutsch: "The emergence of the North American shale-gas resource is the most positive event in the U.S. energy outlook in 50 years. But realizing this opportunity will require cooperation between industry and regulators on a new commitment to data-driven best practices that will lead to a continuous improvement in environmental outcomes. As big as the opportunity is, the emergence of shale gas has stirred opposition and uncertainty. The fundamental question is how to exploit this resource in an environmentally responsible manner. Done properly, the economic benefits are enormous...The subcommittee, which I chaired, presented recommendations this week that would give the public, regulators and industry a measurable way to monitor progress in reducing current and potential environmental impacts of shale-gas production, not just from fracking."

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