In the West Wing, Chief of Staff Bill Daley's new role is being sold as addition rather than subtraction: He has taken on more ambassadorial duties and asked Pete Rouse to take on more day-to-day managerial duties. This transition has been happening over the course of the last month. It was formalized yesterday.


White House Chief of Staff Bill Daley listens as President Obama and French President Nicolas Sarkozy make statements to reporters after their meeting at the G20 Summit in France in Nov. 3. (Charles Dharapak/AP)

Outside the White House, it looks like Daley is being demoted. In part, that's because Daley has many friends but few defenders these days. His relationships with Hill Democrats are weak -- fine, that was somewhat expected -- but he has also been unable to forge strong working relationships with Hill Republicans. The debt-ceiling debacle and the inane spat with Speaker John Boehner's office over the day of the president's speech to Congress did not inspire confidence. Nor have Daley's vaunted relationships with the business community led to an evident thawing between the Obama White House and the country's corporate titans.

Meanwhile, the White House's strategy is changing. Daley was brought on when the playbook was Clinton 1995. And who better to run Clinton 1995 than the Clinton administration? Gene Sperling was promoted to run the National Economics Council, just as he did in the late-90s, Jack Lew was brought back as budget director, and Bruce Reed was hired as Vice President Joe Biden's chief of staff.

The plan was to co-opt and cut deals with Republicans. The plan failed. That had more to do with the Republicans than with Daley, to be fair. But since then, the Obama administration's strategy has moved towards confrontation even as the Obama White House was staffed for conciliation. In recent months, they have seen -- or believe they have seen -- some success in the polls by picking a lengthy and public fight over the American Jobs Act, and that has led them to begin previewing a more aggressive message for 2012. But when you're promising to orient much of the election around your support for financial reform and the Republican Party's opposition to Dodd-Frank, does it really make sense for Daley, an ex-JPMorgan Chase executive who was brought on partly to repair relationships with Wall Street, to lead the effort? Probably not. And so he isn't.

Top stories

1) Bill Daley has been demoted, reports Carol Lee: "On Monday, Mr. Daley turned over day-to-day management of the West Wing to Pete Rouse, a veteran aide to President Obama, according to several people familiar with the matter. It is unusual for a White House chief of staff to relinquish part of the job. A senior White House official who attended Monday's staff meeting where Mr. Daley made the announcement said that his new role has not yet been fully defined...The recalibration of Mr. Daley's portfolio, agreed to by Mr. Obama, is designed to smooth any kinks in the president's team as it braces for the overlapping demands of governing while campaigning for re-election, people familiar with the matter said...The new set-up effectively makes Mr. Rouse the president's inside manager and Mr. Daley his ambassador, roles that appear to better suit both men's talents."

More from Glenn Thrush: http://politi.co/rAr10i

2) The latest jobs package -- which centers around tax credits for hiring veterans -- is moving forward, report Mark Landler and Jennifer Steinhauer: "The Senate on Monday cleared the way for a measure that would repeal a tax withholding program on government contractors and provide tax incentives for companies that hire veterans, making them the first pieces of President Obama’s jobs plan to gain some momentum in Congress. The Senate voted 94 to 1 to take up the bill to end a new tax withholding program on government contractors after the House easily passed the measure last month. Democrats also intend to make the Senate bill the vehicle for a package of tax breaks to spur the hiring of veterans after Mr. Obama promoted that effort on Monday with the approach of Veterans Day. These modest provisions are the only ones so far in Mr. Obama’s sweeping proposal to promote hiring that have gained support in both parties."

3) The European bank crisis is already hitting the US, reports Robin Harding: "The crisis in Europe has begun to spill over into US bank lending, according to the latest survey of loan officers by the US Federal Reserve. Credit conditions have steadily eased since the end of the recession but that process almost ground to a halt in the last three months, with only five domestic banks out of 50 saying that they relaxed their standards for lending to large companies. Two banks had tightened conditions. There was also a sharper retrenchment by US branches of foreign banks: 23 per cent of such operations tightened their lending terms, raising their interest rate spreads and cutting back on the amount and period for which they are willing to lend. Of the foreign banks that tightened their lending conditions in the US, all nine pointed to a weaker economic outlook."

4) Italy looks like it could fall soon, reports Anthony Faiola: "The center of Europe’s debt crisis was rapidly shifting Monday from tiny Greece to far-bigger Italy, threatening to open a dangerous new chapter in the region’s financial turmoil and plunging embattled Prime Minister Silvio Berlusconi into the deepest political crisis of his two-decade career. Investors staged a fresh run on Italian bonds that drove borrowing costs for the world’s eighth-largest economy above 6.5 percent -- brushing up against levels that, once crossed by Greece, Portugal and Ireland, led to a quick erosion of confidence that triggered international bailouts. The escalating turmoil in Italy highlights the repeated failures of European leaders to come to grips with the debt crisis, which has been building over the past two years."

5) Supercommittee Republicans are open to cutting tax breaks, reports Robert Pear: " Republican members of a Congressional panel seeking ways to cut the federal budget deficit indicated on Monday that they might allow some additional tax revenue as part of a deal with Democrats. The Republicans met Monday to consider a proposal that would raise additional revenue by limiting some income tax deductions that primarily benefit higher-income households. Republicans cited the proposal as evidence that they were open to ideas that would raise revenue and thus help reduce the federal budget deficit, which has exceeded $1.2 trillion in each of the last three years. Democrats, however, said the proposal was unlikely to lead to an agreement."

Top op-eds

1) It's time to end banker bonuses, writes Nassim Nicholas Taleb: "Any person who works for a company that, regardless of its current financial health, would require a taxpayer-financed bailout if it failed, should not get a bonus, ever. In fact, all pay at systemically important financial institutions -- big banks, but also some insurance companies and even huge hedge funds -- should be strictly regulated. Critics like the Occupy Wall Street demonstrators decry the bonus system for its lack of fairness and its contribution to widening inequality. But the greater problem is that it provides an incentive to take risks. The asymmetric nature of the bonus (an incentive for success without a corresponding disincentive for failure) causes hidden risks to accumulate in the financial system and become a catalyst for disaster."

2) Occupy Wall Street is getting too militant, writes Michael Gerson: "There is some ideological coherence within OWS. Its collectivist people’s councils seem to have two main inspirations: socialism (often Marxist socialism) and anarchism. The two are sometimes in tension. They share, however, a belief...that normal, democratic political methods, dominated by monied interests, are inadequate. Direct action is necessary to provoke the crisis that ignites the struggle that achieves the revolution...Occupy DC protesters recently assaulted a conservative gathering, then took over a public intersection to prevent the passage of luxury cars. Blocking the path of one driver and his 2-year-old son, an activist shouted, 'Sorry, but you have no power right now.' That is the opposite of participatory democracy -- the use of power to intimidate a fellow citizen on a public street. It is the method of British soccer thugs."

3) Romney's entitlement reform proposals show he's serious, writes David Brooks: "Romney would create a premium support system, but he would also give seniors the option of a government-run insurance plan that works a lot like the current fee-for-service Medicare...The Romney approach sets up a prudent experiment. If real competition works, seniors will migrate toward that. If it doesn’t, seniors will stay in Medicare and conservatives will have a lot of rethinking to do. Romney’s plan still has some holes in it (how fast would premium supports grow?), but it exemplifies the sort of big reformist vision that should be at the center of a serious Republican campaign. The U.S. is beset by sclerotic institutions: health care, the tax code and the education system among them. To thrive, these institutions need a burst of creative reinvention."

4) Saving the Euro is the wrong goal, writes Gideon Rachman: "The euro is not an end in itself. The single currency is just an instrument, aimed at promoting economic prosperity and political harmony across Europe. As the evidence mounts that it is doing the precise opposite, it is time to think not about how to save the euro - but about how to scrap it, or at least allow the weakest members to leave. For reasons of pride, fear, ideology and personal survival, it is extremely hard for European leaders to accept that the euro is a large part of the problem. Instead they search for other explanations for the economic crisis. Countries have failed to stick to the rules. They have lied. Europe needs new political structures. The bazooka is not big enough. The markets are irrational. The people are revolting."

5) There's good reason Barack Obama is no FDR, writes Ezra Klein:"The left and the right don’t agree on much these days, but they do agree on this: Barack Obama is no FDR. For liberals, this is a disappointment. They had hoped for, as Time magazine put it after Obama’s victory, “a new new deal.” Instead, they find themselves mounting an unexpected rear-guard defense of Medicare and Keynesian economics. For conservatives, it’s a relief. Two short years ago, they feared an FDR-like realignment. Today, they thrill to the idea of undoing much of the original New Deal, or at least the Great Society. But for political scientists and historians of the Great Depression, the agonies and ecstasies of both sides are a continual annoyance — an example of how the past and the present are distorted by America’s fixation on the president and inattention to almost everything else in the political system."

Street musician intelude: EMA plays "Marked" in Paris.

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Still to come: The European crisis is already reaching the US; malpractice reform is stalled; the Census has unveiled a new poverty measure; the State Department's pipeline review process is being investigated; and a police horse and a dog hang out.

Economy

The SEC is proposing new money market fund rules, report Shahien Nasiripour and Dan McCrum: "The US Securities and Exchange Commission will soon propose sweeping reforms of money market funds that could include capital standards and an end to practices that encourage investors to believe they will never lose money. Money market funds - traditionally viewed by US investors as a higher-yielding alternative to government-insured bank deposits - played a prominent role in the financial crisis when one popular fund, the Reserve Primary Fund, 'broke the buck' by falling to a value of 97 cents a share in 2008. Mary Schapiro, SEC chairman, told financial executives on Monday: 'There is a lingering concern about how money market funds will stand up in a significant financial crisis.'"

Wall Street is seeing smaller bonuses this year, reports Brett Philbin: "Wall Street bonuses are set to shrink by an average of 20% to 30% from last year, with even steeper declines for bond traders, according to a widely watched compensation survey. The projections, to be released Tuesday by consulting firm Johnson Associates Inc., reflect the tough times at many banks and securities firms since the spring. Business has been difficult because of fears about the U.S. economy, the sovereign-debt crisis in Europe and volatile equity markets. Along with cuts in bonuses, many financial firms are eliminating jobs and pruning other expenses...The quarterly survey is based on publicly disclosed data in regulatory filings and conversations with employees at investment banks, commercial banks and asset-management firms."

Adorable animals playing together interlude: A dog and a police horse hang out.

Health Care

Malpractice reforms are stalled, reports Brett Norman: "In a bid to win support for health reform from skeptical doctors back in 2009, President Barack Obama pledged action on an item near the top of their wish list -- malpractice reform. And he delivered an initial step: $25 million to test alternatives to the medical liability system. That won praise from the American Medical Association, among others. But since then, tort reform on the federal level has been put on ice, a victim of both tight money and bitter politics. Malpractice provisions in the Patient Protection and Affordable Care Act were limited in the first place -- $50 million for expanded state demonstration projects. And Congress didn’t fund it. Nor did the administration get the $250 million it requested for fiscal year 2012 for the Department of Justice to explore alternative approaches."

Far fewer businesses are taking advantage of a health reform tax credit, reports Bernie Becker: "Fewer taxpayers have taken advantage of a tax credit for small businesses included in the healthcare overhaul than expected, a new audit has found, even though the IRS implemented the new tax break fairly seamlessly. The Treasury Department’s inspector general for tax administration found that, by May, roughly 228,000 taxpayers had claimed the small-business credit to the tune of more than $278 million. The IRS had previously tried to reach out to some 4.4 million taxpayers that it thought could have been eligible for the credit, and the Congressional Budget Office had estimated that up to $2 billion could be claimed for 2010. In all, CBO has said the credit will cost roughly $37 billion over a decade."

Hospitals want real comparative effectiveness reform, reports Sahil Kapur: "The American Hospital Association is urging the debt law's super committee to embrace “real” comparative effectiveness research that includes cost analysis as it searches for health care deficit cutters, an AHA official told Inside Health Policy, breaking with physicians and drug and device makers who are dead set against the idea. The group argues that the inclusion of cost-effectiveness can improve health care quality and efficiency and encourage technological innovations. AHA described the idea as 'real' CER in a list of proposals it put together for the super committee in October. 'When we talk about 'real' comparative effectiveness research, we really support including cost-effectiveness of different treatment options,' the AHA official said."

Domestic Policy

The Census has unveiled a new poverty metric, reports Michael Fletcher: "The Census Bureau on Monday released a new, comprehensive poverty measure that painted a more dismal picture of the nation’s economic landscape than the official measure from September. The report found that 49.1 million Americans -- 16 percent of the population -- lived in poverty in 2010, which is higher than the 46.2 million Americans found to live in poverty by the official measure released in September. The new report marked the culmination of a years-long effort by the Census Bureau to come up with a poverty measure that takes into account the huge amounts of money in social services benefits provided to the needy, as well as their expenses for things such as medical care and payroll taxes. The increased level of poverty revealed by the supplemental measure is at odds with what some poverty experts expected."

Education reform needs unions, writes Joe Nocera: "[Steven Brill] had a conversation with Dave Levin, the co-founder of the Knowledge Is Power Program, or KIPP, which is generally regarded as the best charter school network in the country. 'If you tore up every union contract in the country,' he told Brill, you would still have to train not just the 70,000 to 80,000 teachers in charter schools, but the three million teachers in America’s public schools. To put it another way, you simply cannot fix America’s schools by 'scaling' charter schools. It won’t work. Charter schools offer proof of concept that great teaching is a huge difference-maker, but charters can only absorb a tiny fraction of the nation’s 50 million public schoolchildren. Real reform has to go beyond charters -- and it has to include the unions. That’s what Brill figured out."

Supercut interlude: The films of Stanley Kubrick, in four minutes.

Energy

The State Department's process around the Keystone pipeline is being investigated, reports Steven Mufson: "The State Department’s inspector general said Monday that he will conduct a special review of the department’s analysis of TransCanada’s proposed Keystone XL pipeline. Howard W. Geisel said he will examine the department’s handling of its environmental impact statement and its process for determining whether the pipeline would be in the national interest, both part of the permitting process that President Obama delegated to the State Department. The inquiry is likely to scrutinize the use of Cardno Entrix, which also has worked extensively for TransCanada, to draw up State’s environmental impact statement. Geisel said he was responding to a request for an inquiry made by Sen. Bernard Sanders (I-Vt.), Rep. Steve Cohen (D-Tenn.), two other senators and 10 other House members, who focused on that issue."

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