Ezra is on vacation until November 7th.

Top stories

1) Obama's launching a new plan to help underwater homeowners, report Zachary Goldfarb and Scott Wilson: "President Obama on Monday responded to growing concerns about the nation’s battered housing market by unveiling a plan to help reduce the monthly mortgage payments of homeowners who owe more than their properties are worth. As he met with distressed homeowners in Las Vegas, the foreclosure capital of the nation, Obama announced steps to allow 'underwater' borrowers to refinance their mortgages at today’s ultra-low rates -- near 4 percent...Housing regulators say that 1 million borrowers might be eligible, but that is only one-tenth of the number of homeowners who need help. And while estimates cited by the administration suggest the average homeowner might save $2,500 per year, other projections from housing regulators were in the range of $312 per year."


President Obama walks after speaking on the economy and housing at a residential neighborhood in Las Vegas, Nevada, on October 24, 2011. (JEWEL SAMAD/AFP/GETTY IMAGES)

3) Europe still hasn't worked out a bailout plan, reports Howard Schneider: "Deliberations over a crisis plan for the euro zone continued across the continent Monday, with the Italian government struggling to prove its commitment to reform...The euro region’s financial technocrats...worked to flesh out the details of what has become a complex effort to address three issues at once: a new financing plan for Greece that will include deep losses for private investors who have lent money to the country; a regionwide effort for banks to increase their financial strength to absorb Greek and other potential losses; and a scheme to increase the effective size of a regional bailout fund. The process remains something of a high-wire act with the warning that Greece could face economic isolation if European officials insist on the 60 percent losses envisioned for Greek bondholders."

4) More and more Fed officials are signaling they want more easing, reports Michael Derby: "A top Federal Reserve official suggested Monday that the central bank could take further action to try to boost economic growth, including more securities purchases. 'The Fed is doing--and will continue to do--everything in its power to promote jobs and price stability,' Federal Reserve Bank of New York President William Dudley said in remarks, adding, 'I don't think the Fed has run out of bullets.'...His comment comes a few days after Fed governor Daniel Tarullo called on the central bank to strongly consider buying mortgage securities. The idea is to push mortgage rates downward to encourage more home purchases, and to spur refinancings that could provide homeowners with cash to buy other goods."

Top op-eds

1) We need a flat tax, writes Rick Perry: "On Tuesday I will announce my 'Cut, Balance and Grow' plan to scrap the current tax code, lower and simplify tax rates, cut spending and balance the federal budget, reform entitlements, and grow jobs and economic opportunity. The plan starts with giving Americans a choice between a new, flat tax rate of 20% or their current income tax rate. The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents...By eliminating the dozens of carve-outs that make the current code so incomprehensible, we will renew incentives for entrepreneurial risk-taking and investment that creates jobs."

2) Flat taxes are the same thing as VATs, writes Leonard Burman: "The flat tax is a VAT, not so different from the taxes popular around the world. Under one variant of VAT, called a 'subtraction-method VAT,' businesses deduct the cost of inputs from gross receipts and pay tax on the difference--the value added. It is basically a sales tax where the tax is collected in stages from each producer on the supply chain rather than all at once from retailers (as in the retail sales taxes that are common in the US). A flat tax adds one more wrinkle: businesses are allowed a deduction for wages paid, but the employees pay the “flat tax” on their wages directly. If that’s all that happened, the tax burden would be identical to the VAT (assuming the same level of compliance), but the flat tax also allows an exemption for every worker."

3) The administration's mortgage plan is an end-run around democracy, writes Keith Hennessey: "I am more intrigued by the President’s new mantra, 'We can’t wait.' The logic is 'We can’t wait for a Republican Congress, so we’re acting with every tool we have to improve the economy. We admit it’s not enough, but that’s [Republicans in] Congress’ fault.'...The President’s argument is, in effect, 'We can’t wait for democracy.' The Constitution gives the power of the purse to the Congress, not the President. If the Congress doesn’t want to enact his proposals, then it shouldn’t, and that’s how the system is supposed to work. I am not surprised that the President is using the legislative flexibility he has to maximum effect. I am a bit surprised that he sees a political benefit in framing himself as an Imperial leader who can and should ignore democratic processes."

4) The EU is worth saving, writes Roger Cohen: "The trick is to convince people that crisis is creative more than it is destructive -- and that’s not happening right now. The European Union was created for such a moment. It was meant to guarantee the impossibility of the worst -- not to deliver Europeans to postmodern bliss but to save them from the hell that began almost a century ago in 1914 and did not really stop until the Continent lay in ruins in 1945. Now, thankfully, the big bazookas are financial. Roll them out, whatever the subsequent cost in inflation. Irrevocable means just that: The euro cannot be turned back. There is no soft euro exit imaginable, only mayhem and danger. Recapitalize the banks. Bulk up on the rescue fund. Turn bankers’ Greek haircuts into buzz cuts. Do whatever it takes."

Radio session interlude: Vetiver play "Wonder Why" live.

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Still to come: Banks have more cash on hand than they know what to do with; the IRS is on track to implement health reform's penalties; cyber-schools are poorly regulated; environmentalists are upset by a new Obama hire; and a cat plays with an iPad.

Economy

Banks have more cash than they can use, report Eric Dash and Nelson Schwartz: "Bankers have an odd-sounding problem these days: they are awash in cash. Droves of consumers and businesses unnerved by the lurching markets have been taking their money out of risky investments and socking it away in bank accounts, where it does little to stimulate the economy. Though financial institutions are not yet turning away customers at the door, they are trying to discourage some depositors from parking that cash with them. With fewer attractive lending and investment options for that money, it is harder for the banks to turn it around for a healthy profit. In August, Bank of New York Mellon warned that it would impose a 0.13 percentage point fee on the deposits of certain clients who were moving huge piles of cash in and out of their accounts."

The job's bill's income surtax won't affect the rich that much, writes Greg Sargent: "If the new infrastructure proposal were enacted, the surtax on millionaires would impact a grand total of 345,532 taxpayers nationwide -- or 0.2 percent of American taxpayers. If the new infrastructure proposal were enacted, the 0.7 percent surtax would amount to all of $13,457 on average for the millionaires that would pay it. Given that their average income is $2,923,000, this means they would be paying on average an additional 1/217 of their overall income, or just over an additional 0.4 percent. That’s less than one half of one percent. This number, obviously, would have been even smaller if the state aid package -- with an even smaller millionaire surtax -- had passed. In a large majority of states, fewer than 5,000 taxpayers in each state would feel these surtaxes."

Nominal GDP targeting is tough to implement, writes Kelly Evans: "A growing number of proponents are pushing for the Fed to replace its employment and inflation targets with a single, simpler one. The one being touted is a level of nominal gross domestic product: GDP without stripping out inflation...There are at least three problems with this strategy, however. First, it assumes that the Fed can sensibly determine the 'right' trend for nominal GDP. Second, it isn't clear that it can actually achieve any such target. And third, doing so would run a huge risk of conflicting with the Fed's congressional mandate to promote 'stable prices'--something that can't unilaterally be rewritten. This is because any boost to nominal GDP may well come more from higher inflation rather than from faster growth in underlying GDP, which Goldman acknowledges."

Adorable animals interacting with technology interlude: A cat plays with an iPad.

Health Care

The IRS is on track for enforcing health reform, reports Bernie Becker: "The IRS appears to be meeting the technological challenges sparked by the overhaul of the U.S. healthcare system, a new federal audit has found. The Treasury Department’s inspector general for tax administration reports that the agency is systematically dealing with the more than 40 changes that the healthcare law, signed in March 2010, makes to the tax code. At least eight of the modifications, which include penalties for those who do not acquire healthcare coverage and incentives for those who do, are forcing the IRS to craft entirely new processes to administer the law. In all, the overhaul contains $438 billion in new taxes and fees, the audit found."

The White House doesn't have a plan B now that the CLASS Act is dead, reports Brett Norman: "If health reform’s long-term care insurance program dies, it’s not clear what would replace it. The Obama administration decided two weeks ago to suspend implementation of the Community Living Assistance Services and Supports Act, and now, the calls to repeal the program permanently are mounting. If that doesn’t happen, critics including the Chamber of Commerce, worry that the program could be revived at any time and become a drain on the federal budget. But whether or not the CLASS Act comes off the books, the problem it was meant to address remains: A gap in the health care system is swallowing up the savings of a growing number of seniors and increasing pressure on Medicaid, the program that usually pays for long-term care."

Republican governors oppose Medicaid cuts, reports Sam Baker: "Republican governors on Monday urged the congressional supercommittee to consider major changes to Medicaid, but not the cuts in federal spending that President Obama has proposed. The Republican Governors Association said in a letter to the supercommittee that Obama’s proposal would simply shift costs to the states. Democratic governors also oppose Obama’s plan, for the same reason. Obama has proposed combining various rates of federal Medicaid funding into a single percentage for each state. That would save the federal government about $100 billion, but governors say those savings would come at states’ expense. 'We are willing to do our share to save federal Medicaid dollars, but let us do it in a way that will reduce state taxpayer cost, too,' the RGA said in its letter to the supercommittee."

Domestic Policy

Cyber-schools aren't well-regulated, reports Lyndsey Layton: "As an increasing number of cash-strapped states turn to virtual schools -- where computers replace classmates and students learn via the Internet -- a new study is raising questions about their quality and oversight. In research to be released Tuesday, scholars Kevin G. Welner and Gene V. Glass at the National Education Policy Center at the University of Colorado assert that full-time virtual schools are largely unregulated. Once used by home-schoolers, child actors and others in need of a flexible way to learn outside a classroom, virtual schools have grown in popularity in the past several years. Cyber-schools generally operate as charters, outside the traditional system but funded with taxpayer dollars. Nationwide, more than 200,000 students are enrolled in full-time virtual school programs, in which students have no face-to-face contact with teachers."

Conservatives should embrace education reform, writes Edward Glaeser: "If the Republicans want to battle for a more prosperous, and stronger, country, they must start spending a lot more time fighting the failures of American education...There is a long and distinguished literature linking education with economic outcomes at the individual, country and metropolitan area level. Economists have found that earnings rise with education even among identical twins and that randomly getting a better kindergarten teacher produces higher adult earnings. At the metropolitan level, education predicts earnings growth, not just income levels...All in all, the link between education and prosperity is about as solid as anything in the social sciences. By contrast, the statistical link between tax rates and prosperity is far weaker."

Adorable children running away interlude: A baby escapes from his crib, tries to destroy the video evidence.

Energy

Environmentalists are upset by a new Obama hire, report Dan Berman and Talia Buford: "Environmentalists are unhappy with President Barack Obama’s presidential campaign for hiring a former lobbyist for the Keystone XL pipeline as a senior adviser. Broderick Johnson, a Washington lawyer and lobbyist, is joining the campaign as a senior adviser and member of the senior staff. Johnson registered as a lobbyist promoting TransCanada’s proposed Alberta-to-Texas pipeline in the fourth quarter of 2010, when he worked for Bryan Cave LLP. TransCanada paid $120,000 to Bryan Cave during those three months, according to lobbying disclosure records. Bill McKibben, who is leading protests against the pipeline, said the hiring is another sign of 'disrespect' from the Obama administration. 'It stinks,' McKibben said in a statement."

The science on global warming isn't in serious question, writes Eugene Robinson: "For the clueless or cynical diehards who deny global warming, it’s getting awfully cold out there. The latest icy blast of reality comes from an eminent scientist whom the climate-change skeptics once lauded as one of their own. Richard Muller, a respected physicist at the University of California, Berkeley, used to dismiss alarmist climate research as being 'polluted by political and activist frenzy.' Frustrated at what he considered shoddy science, Muller launched his own comprehensive study to set the record straight. Instead, the record set him straight...Muller’s team, the Berkeley Earth Surface Temperature project, rigorously explored the specific objections raised by skeptics -- and found them groundless."

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.