I love covering budgets. Budgets are where politicians have to be clear about their visions. They have to make the numbers add up, which means they have to be (relatively) honest about their choices. That exercise can reveal surprising truths.
That's a change from past years. Ryan's 2010 Roadmap included major reforms to Social Security, including private accounts. His previous budget featured much more dramatic reforms to Medicare, including a much lower growth rate. But Ryan has backed off of his cuts to seniors. It is, after all, an election year.
Today, the difference in the two party's visions is really in their plans for everything else: Ryan's budget increases defense spending, cuts taxes on the rich, and pays for all that -- and for his deficit reduction -- with deep cuts to programs for the poor and to the basic services the federal government carries out. The Center on Budget and Policy Priorities estimates that 62 percent of Ryan's cuts are to programs for the poor. (Graph.)
Obama's budget, meanwhile, features large tax increases on the rich, some cuts to the defense budget, some cuts to government services, and relatively few cuts to programs for the poor. Consequently, his budget has somewhat less deficit reduction than Ryan does over the next 10 years.
Obama said much of this in his speech. He accurately explained where Ryan's cuts fall. He admitted that he intends to raise taxes on wealthier Americans. He clearly believes the voters will prefer his approach. And Ryan didn't contest any of it [Update — this is wrong. See this post.]. He didn't say his budget doesn't focus its cuts on programs for the poor, or non-defense discretionary spending. His statement, which you can read in full here, lamented Obama's "empty promises" and efforts to "divide Americans." But it didn't argue that the president got Ryan's numbers wrong. And that's because he didn't: The numbers are there for everyone to see. The same goes for Obama's budget, which Republicans have often blasted for raising taxes on the rich and doing too little on the deficit.
And that's why I love budget season. The two parties have laid out their visions, in detail, in ways we can check, and are now arguing over them. That's what the election should be about.
1) Romney wraps it up. "Mitt Romney captured presidential primaries in Maryland, the District and battleground Wisconsin, the biggest prize of the day, to complete a momentum-building, three-contest sweep Tuesday that cemented his status as the almost certain Republican nominee and put new pressure on rival Rick Santorum to reassess his candidacy. With his campaign increasingly focused on President Obama and the general election, the former Massachusetts governor’s victories in Maryland and the District were never in doubt. He won both by crushing margins. In Wisconsin, where Romney and Santorum devoted most of their energies, the margin was narrower but nonetheless decisive. With Tuesday’s primaries behind them, the candidates now look ahead to April 24, when Pennsylvania and four other states hold their primaries. Santorum, a former senator from Pennsylvania, can ill-afford to lose his home state and has keyed the future of his campaign to success there." Dan Balz and Philip Rucker in The Washington Post.
Wonkbook real talk: The primary is effectively over. Mitt Romney will be the Republican nominee. And if he isn't the Republican nominee, the reason why will be something like "asteroid," not "Santorum."
2) In a speech to the Associated Press, President Obama torched Paul Ryan's budget: "It is a Trojan horse disguised as deficit reduction plans. It is really an attempt to impose a radical vision on our country. It is thinly veiled social Darwinism. It is antithetical to our entire history as a land of opportunity and upward mobility for everybody who is willing to work for it. A place where prosperity doesn’t trickle down from the top but grows outward from the heart of middle class. And by gutting the very things we need to grow an economy that’s built to last. Education and training, research and development, our infrastructure, it is a prescription for decline. And everybody here should understand that because there’s very few people here who haven’t benefited at some point from those investments that were made in the ‘50s, and the ‘60s, and the ‘70s, and the ‘80s. That’s part of how we got ahead." Full speech transcript at the Washington Post.
Paul Ryan's response: “Like his reckless budgets, today’s speech by President Obama is as revealing as it is disappointing: While others lead by offering real solutions, he has chosen to distort the truth and divide Americans in order to distract from his failed record. His empty promises are quickly becoming broken promises – and the American people will hold him accountable for this violation of their trust.”
3) The Fed is unlikely to launch another round of stimulus. "The Federal Reserve appears unlikely to launch another round of economic stimulus to try to generate additional growth and quicken the decline in unemployment, according to minutes of the Fed’s March meeting released Tuesday. At the meeting, Fed officials observed numerous signs of a strengthening economic recovery but also expressed the view that unemployment, now at 8.3 percent, was likely to come down only gradually over the next few years. While the central bank had been actively exploring additional stimulus last year -- and several members publicly called for additional action -- the minutes suggest that that is unlikely to happen at the upcoming April meeting, and perhaps not in the months following if the economy continues to heal...Many economists, despite the Fed’s statements, have suggested that they expect the Fed to act because they expect the recent economic strength to abate." Zachary Goldfarb in The Washington Post.
@RobinBHarding: Fed goes from a "few" members thinking action needed "before long" to a "couple" thinking it "could become necessary" = no imminent QE3.
@justinwolfers: Dear Fed: If unemployment is high & "most participants expected that inflation subsequently would run at or below 2%" then you should ease.
4) Auto sales jumped, driven by demand for smaller cars. "American automakers are faring well, in part, because the entire industry is recovering. U.S. vehicle sales for March reached an estimated 1.42 million, the best month since August 2007. That’s largely due to an improving economy and the fact that many Americans delayed car purchases during the recession. The average vehicle is a record 10.8 years old, according to automotive research firm R.L. Polk & Co. And credit is much more readily available this year. But there’s a more subtle reason that the Big Three are succeeding. With gasoline prices topping $4 per gallon in many parts of the country, Detroit needed to offer reliable, fuel-efficient vehicles that Americans would actually buy. And, unlike when they faced this situation in 2008, the Big Three are well prepared this time around...But for all the recent success, the Big Three still command just 45 percent of the vehicle market in the United States. That is up from a few years ago, but it is down dramatically from their peak." Brad Plumer in The Washington Post.
5) Higher rents are pushing more to home ownership. "Climbing rents for apartments are combining with a continued decline in home prices to push once-reluctant home buyers into finally taking the plunge, say economists and real-estate agents, helping what appears to be a good start to the housing industry's all-important spring selling season. Although increased buying activity from investors and second-home purchasers are also factors behind the recent pickup in home sales, real-estate agents say they are fielding more calls from anxious tenants complaining about rising rents...Average apartment rents rose by 2.7% last year while the national vacancy rate dropped below 5% for the first time since 2001, according to a quarterly survey to be released Wednesday by Reis Inc....Such increases are one reason why analysts at Zelman & Associates believe 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year." Dawn Wotapka and Nick Timiraos in The Wall Street Journal.
1) FISHER AND ROSENBLUM: Big banks threaten the economy. "Our nation is at a fork in the road and the destiny of our financial system depends critically on choosing the correct route. One path leads to a continuation of the status quo, where some financial institutions are ordained by government policy to be 'too big to fail' (TBTF) and where the rules of market capitalism are undermined and subverted. The other--the path to long-term prosperity--is the one we'll be on when we truly end TBTF...Principles are important, but economic performance counts, too. We know from experience that injured, underperforming banks reduce economic activity. When a few, small, geographically scattered banks are in trouble, there is limited impact on the macroeconomy. But when a handful of banks--each with a nearly national geographic footprint--get in trouble while holding more than half the banking system's assets, the economy faces rough sledding." Richard Fisher and Harvey Rosenblum in The Wall Street Journal.
2) PORTER: Manufacturing is a losing jobs strategy. "Things have not looked this promising for manufacturing jobs in a long while. Rising costs in China -- where the government is letting the currency gain against the dollar and wages are rising at a double-digit pace -- are making it more attractive for American companies to produce at home. Expensive oil adds to the cost by pushing up the price of freight. Yet a revolution in manufacturing employment seems far-fetched. Most of the factory jobs lost over the last three decades in this country are gone for good. In truth, they are not even very good jobs. As much as the administration needs a jobs strategy, one narrowly focused on manufacturing is unlikely to deliver...One thing is clear. Most of the jobs lost to China and other poor countries cannot 'come back.' They don’t pay anywhere near enough. And they don’t exist here anymore anyway." Eduardo Porter in The New York Times.
3) TYSON: Multinational companies help America. "In 2009, the latest year for which comprehensive data are available, there were just 2,226 US multinationals out of approximately 30 million businesses operating in the US. America’s multinationals...are responsible for a substantial and disproportionate share of US economic activity. Indeed, in 2009, US multinationals accounted for 23% of value added in the American economy’s private (non-bank) sector, along with 30% of capital investment, 69% of research & development, 25% of employee compensation, 20% of employment, 51% of exports, and 42% of imports...Facts, not perceptions, should guide policymaking where multinationals are concerned. And the facts indicate that, despite decades of globalization, US multinationals continue to make significant contributions to US competitiveness - and to locate most of their economic activity at home, not abroad. What policymakers should really worry about are indications that the US may be losing its competitiveness as a location for this activity." Laura Tyson in Project Synicate.
4) WERTHEIMER: Congress can stop some super PACs. "Here is the only good news about the super PACs flooding the 2012 presidential race with negative ads funded by huge contributions from the super rich: These vehicles for corruption can be eliminated. Congress can pass legislation to end these candidate-specific super PACs that is well within the bounds of Citizens United...While we cannot end all super PACs, as long as the Citizens United decision stands, we can eliminate the type of candidate-specific super PACs being used in the presidential campaign...The linchpin of the Citizen United decision is the requirement that expenditures by an outside group, such as a super PAC, must be made independently from the candidate the group supports. The court left it to Congress to define what constitutes illegal 'coordination.'...Indications of coordination can and should be incorporated into a new statutory definition of coordination that denotes the presence of any such behavior establishes illegal coordination between the super PAC and the candidate." Fred Wertheimer in The Washington Post.
5) YGLESIAS: Abolish the penny! "The basic problem with pennies is that they cost a lot of money for the government to make. Normally, minting coins and printing bills is a profitable undertaking for a government running a fiat currency. Citizens use money to conduct transactions with one another, and ultimately to pay taxes. But as long as that money is sitting around in pockets and sock drawers, it’s as if the government has received an interest-free loan. After all, the resources needed to produce a coin or a piece of paper with Alexander Hamilton’s picture on it are pretty trivial. But in the case of the penny, the problem for the government is that the actual value of the thing is trivial as well...Ten years ago, a penny cost slightly less than one cent to produce, but rising commodity prices mean there are now more than 2.4 cents’ worth of metal and labor in each one-cent coin. In 2011, the net cost to the taxpayer of minting pennies was a bit over $60 million. In the scheme of things, that’s not all that much money, but it’s money that’s worth saving." Matthew Yglesias in Slate.
Acoustic interlude: Ingrid Michaelson plays "Maybe" live on WTMD.
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Still to come: Europe sticks with austerity; Republicans plot Obamacare replacements; cybersecurity legislation gets bogged down; local governments want to regulate drilling; and a baby hippo takes her first dip.
Factory orders jumped. "Orders for U.S. factory goods rebounded in February on rising demand for machinery, computers and aircraft, showing that manufacturers regained momentum after a slow start to the year. Orders were up 1.3% in February to $468.41 billion, the Commerce Department said Tuesday. January orders were revised to a 1.1% loss, from a previously reported 1.0% fall. Economists surveyed by Dow Jones Newswires had forecast a 1.5% improvement in February orders. In a sign that business investment is improving, orders for nondefense capital goods excluding aircraft grew by 1.7% in February. The orders are an indicator of capital spending by businesses--an increase signals confidence in the economy. Unfilled orders, a sign of future demand, grew by 1.3%...Tuesday's report showed inventories increased 0.4% in February. Durable goods orders increased a revised 2.4% in February." Eric Morath and Jeffrey Sparshott in The Wall Street Journal.
Europe isn't backing down from austerity. "Europe is pressing ahead with fiscal belt-tightening amid mounting criticism from economists and political leaders that the strategy is hurting the region's fragile economy. The argument is entering a decisive phase as Europe teeters on the brink of a new recession. Manufacturing contractions in March extended from the Mediterranean periphery to powerhouses including Germany and the Netherlands, according to business surveys. Euro-zone unemployment climbed to 10.8% in February, the European Union's statistics agency said this week, a euro-era high...The euro zone's strongest players, the European Central Bank and Germany, which continue to insist that austerity for all, coupled with long-term structural overhauls of economies, is the only way to end the currency bloc's debt crisis. The ECB, which is expected to keep interest rates unchanged at Wednesday's monthly meeting despite the weakening economy, has long argued that austerity can boost growth." Brian Blackstone in The Wall Street Journal.
@grossdm: it's almost as if rising employment --> rising income-->rising demand-->rising output-->rising employment. Don't tell the Europeans.
A procedural ruling could mean more budget votes in the Senate. "Newly appointed Parliamentarian Elizabeth MacDonough...has decided that last summer’s deal on the debt ceiling and spending caps does not preclude the Senate from taking up other budget resolutions this year. The ruling could force vulnerable Democrats to cast tough votes that hurt them in November, a situation Reid and other leaders are eager to avoid as they work to protect their fragile majority. The written opinion, shared late last week with a handful of Democratic and GOP senators, gives Republicans significantly more leverage to push for votes on budgets of their choosing. It could mean roll calls on Rep. Paul Ryan’s House-passed GOP budget plan and others offered by Sens. Pat Toomey (R-Pa.) and Rand Paul (R-Ky.)...The MacDonough ruling essentially means any senator can place a budget proposal on the Senate calendar. Reid still controls the floor and could choose not to bring them to a vote, though the political optics of such a move could be damaging." Scott Wong in Politico.
@TPCarney: I've had two kids since the Senate last passed a budget.
Remember when AIG crashed the financial system, in part because no one was really watching it? "The Financial Stability Oversight Council, the country’s top financial regulatory body, moved closer on Tuesday to increasing its oversight of nonbank financial institutions, like hedge funds, private equity firms and insurers. The 10-member council, headed by the Treasury secretary, Timothy F. Geithner, voted unanimously to adopt a rule that will designate some of those firms as 'systemically important financial institutions,' and put them under stronger regulatory supervision...The oversight council will now begin a three-part process of determining which firms are subject to additional scrutiny from regulators. The Dodd-Frank financial regulatory reform law, which passed in the summer of 2010, automatically put banks with more than $50 billion in assets under stricter standards. Nonbank firms, like hedge funds, will be evaluated one by one. The first step is to 'narrow the universe of nonbank financial companies to a smaller set' for closer analysis, the rule says." Annie Lowrey in The New York Times.
Student debt is getting increasing attention from lawmakers. "The White House and Democratic lawmakers are scrambling to find funds to stop an expected doubling of student loan interest rates this summer, arguing that they’re heading off another potential blow to the economy. But the new House GOP budget doesn’t include the $6 billion needed...House Education and the Workforce Committee Chairman John Kline (R-Minn.) says that though he’d like to reduce college costs, paying for the loans with deficit spending isn’t the right way to go -- and the only alternative would take away from other programs in his own budget for higher education financing. So Courtney said Democrats are aiming to move a bill through the Senate to force the House’s hand. Among the options is Sen. Jack Reed’s (D-R.I.) measure to set interest rates on Stafford loans at the current 3.4 percent." Josh Boak in Politico.
Star Wars interlude: Yoda speaking words in the correct order.
Republicans are planning their policy response for if Obamacare is stuck down. "Republican lawmakers who have spent two years railing against President Obama’s health care law are beginning to devise alternatives so they can be ready if the Supreme Court forces the issue of the uninsured back into the center of political debate...Republicans say they will have to make good on their pledge to replace the health care law if the Supreme Court strikes down any significant parts of it. They remain optimistic about the possibility of a court victory, even as they begin thinking more seriously about what would follow...Republicans are dusting off proposals that date back more than a decade: allowing individuals to buy health insurance across state lines, helping small businesses band together to buy insurance, offering generous tax deductions for the purchase of individual policies, expanding tax-favored health savings accounts and reining in medical malpractice suits." Robert Pear and Jonathan Weisman in The New York Times.
Several physician groups are set to recommend fewer tests for patients. "In a move likely to alter treatment standards in hospitals and doctors’ offices nationwide, a group of nine medical specialty boards plans to recommend on Wednesday that doctors perform 45 common tests and procedures less often, and to urge patients to question these services if they are offered. Eight other specialty boards are preparing to follow suit with additional lists of procedures their members should perform far less often. The recommendations represent an unusually frank acknowledgment by physicians that many profitable tests and procedures are performed unnecessarily and may harm patients. By some estimates, unnecessary treatment constitutes one-third of medical spending in the United States...Many previous attempts to rein in unnecessary care have faltered, but guidance coming from respected physician groups is likely to exert more influence than directives from other quarters." Roni Caryn Rabin in The New York Times.
Cybersecurity legislation has been caught in complicated negotiations. "The White House is scrambling to influence cybersecurity legislation that’s been tangled in a web of policy, politics and parochialism -- even reaching out to Republican leaders as the House prepares to act on the issue later this month...Nothing is set in stone yet but so far, four bills are expected to be put on the House floor for a vote. They include: the industry-backed Intelligence Committee measure, Texas Republican Rep. Mike McCaul’s bill aimed at boosting cybersecurity research and development and the pool of trained cyberprofessionals, Rep. Darrell Issa’s Federal Information Security Management Act reform bill and some version of Lungren’s Promoting and Enhancing Cybersecurity and Information Sharing Effectiveness Act of 2011. The House avoided some of the Senate’s acrimony by splitting up responsibility for cybersecurity issues among the various committees of jurisdiction." Jennifer Martinez and Jonathan Allen in Politico.
Hippos are adorable interlude: A baby hippo goes for her first swim.
Congressional Republicans are upset by part of the EU's emissions trading plan. "The airline industry and some Republican allies say enough with the talk: It is time to take action against the European Union’s new emissions trading scheme. The EU instituted a rule requiring all airlines that want to serve any member nations to comply with a carbon emissions trading plan, which U.S. airlines say will cost billions of dollars. While the Obama administration doesn’t like the mandate, critics say not enough has been done...The airline industries of several large industrialized nations -- including the United States, China and Russia -- say the mandate is unfair because airlines will have to pay based on the amount of emissions throughout an entire flight, both while inside an EU country and while over international waters. The EU started keeping tabs at the beginning of this year, but the airlines won’t have to pay until the beginning of next year -- and they’re banking on heading off the mandate before that happens." Kathryn Wolfe in Politico.
Local governments are fighting states for the ability to regulate drilling. "States hoping to capitalize on their energy booms are running into resistance from local officials who want to be able to police the noise and industrialization that accompany oil-and-gas drilling. The municipalities are fighting laws that bar them from regulating drilling, enacted by state lawmakers who feared towns would stunt job-creation and a stream of tax revenue. Last Thursday, seven towns collectively sued Pennsylvania in state court to overturn a law passed in February that prevents them from using their zoning authority to regulate oil-and-gas development...The balance between local land-use regulation and energy development has been hard to strike in Pennsylvania, which is carved up into more than 1,000 townships, some of which worry about how drilling would affect traffic, property values and public health." Daniel Gilbert and Russell Gold in The Wall Street Journal.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.