Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.
RCP Obama vs. Romney: Obama +4.0%; 7-day change: Obama +0.9%.
RCP Obama approval: 49.8%; 7-day change: +0.4.
Intrade percent chance of Obama win: 72.9%; 7-day change: +7.0%.
Top story: Is the consumer waking up?
Consumer confidence is rising quickly. "Consumer confidence rose in September to the highest level in seven months, the Conference Board said on Tuesday, in a sign that Americans might be ready to loosen their spending. The Conference Board, an industry group, said its index of consumer attitudes rose to 70.3 from an upwardly revised 61.3 in August. It was the highest since February and topped economists’ expectations of 63, according to a Reuters survey...The expectations index rose to 83.7, from 71.1, and the present situation index to 50.2 from 46.5. Consumers were more optimistic on both the current and short-term outlook for the labor market, and had a more favorable view of their income prospects in the next six months." Reuters.
@TheStalwart: If these consumer confidence numbers hold up, Romney is buried.
Thank the Democrats for higher consumer confidence. If not for causing it, then for being more confident themselves. "[T]he confidence boom is mainly driven by the election and partisan politics...Independents have grown slightly more confident about the economy, Republicans have soured a bit. But Democrats are getting downright ebullient. Perhaps they’re taking cues from President Obama, who has been emphasizing the country’s economic progress over the past four years, whereas Republicans tend to agree with Mitt Romney’s assessment that the nation has been struggling. Or perhaps something else is going on." Brad Plumer in The Washington Post.
@AndyHarless: Conference Board consumer confidence data for August appears to confirm the jump in labor demand we saw in the Monster Employment Index
And, finally, consumers are spending. "After two years of falling incomes and penny-pinching, Americans opened their wallets in 2011, ramping up spending on everything from restaurants and clothing to health care. Consumers increased their average annual spending by 3.3% last year, the fastest rate since 2006, according to the Labor Department's most recent annual snapshot of how Americans spend. The average level of spending in 2011, $49,705, was the highest since 2008 for consumers, who are defined as families, single people living alone or with others, and people living together and sharing expenses...In 2011, consumers actually saw their average incomes, before taxes, rise 1.9% to $63,685. That likely gave them more cash to spend." Neil Shah in The Wall Street Journal.
@grossdm: Gee, I wonder if there is any correlation between the slow, steady recovery of housing and the general rise in consumer confidence
Part of what's going on is that home prices are rising again. "The housing market continues to gather strength, and the biggest gains in price now appear to be among the least expensive homes, whose values fell the most in the downturn and have weighed against any would-be recovery. Over all, the Standard & Poor’s Case-Shiller index showed an annual gain of 1.2 percent in the price of single-family homes across 20 cities in July, according to data released Tuesday. In addition, all 20 cities showed price increases from the previous month, the third monthly gain in a row, supporting the idea that the nation’s housing market has bottomed out and, some analysts said, contributing to an unexpected bump in consumer confidence." Shaila Dewan and Nelson D. Schwartz in The New York Times.
@TheStalwart: I think this point about there having been two separate housing peaks [of construction and prices] is still lost on most people.
Wonkblog explains: Compared to other financial crises, the American recovery doesn't look so bad.
But four straight years of trillion-dollar fiscal deficits leave little further room for stimulus. "Now, despite small annual improvements, the deficit for the fiscal year that ends on Sunday will surpass $1 trillion for the fourth straight time...The fiscal imbalance on Mr. Obama’s watch, however much a result of economic and demographic factors beyond his control as well as his own policy choices, has increased the nation’s accumulated debt by about 40 percent and has saddled him with one of his biggest vulnerabilities." Jackie Calmes in The New York Times.
@AndyHarless: Was the Democrats' focus on deficit reduction over the past 2 yrs mostly a set up for possibly losing the election and playing tit-for-tat?
And in Europe, are we ready to let the good times roll? "Spain’s stock markets have surged in the past month, and the interest rate its government pays to borrow money has dropped. The latest data indicate euro-region banks and corporations are able to raise money more easily from private investors. Snapshots to be sure, but there is a building sense that recent steps by the European Central Bank and European officials have put a floor under the euro zone’s festering crisis and begun restoring confidence that the currency union won’t crack apart...Plenty remains to be done...Yet the likelihood of an acute new crisis arising from Europe -- a preoccupation of policymakers in the United States and elsewhere for going on three years -- seems to be fading along with the risk of a broader breakup of the 17-nation currency union." Howard Schneider in The Washington Post.
SUNSTEIN: The power of social dynamics. "We like to think that intrinsic quality produces success, and that in free markets, quality will ultimately prevail. To be sure, quality is usually necessary, but it’s not enough. Social dynamics -- who is conveying enthusiasm to whom, and how loudly, and where, and exactly when -- can...mark the line between stunning success and crashing failure...Every day, social dynamics make or break books, movies, art and countless other products. Plenty of best- sellers, made possible by bandwagon or cascade effects, could easily have switched places with books that you have never heard of." Cass R. Sunstein in Bloomberg.
ORSZAG: The value of more time in the classroom. "[A] growing body of evidence suggests that more time at task is crucial to improving educational performance...Research suggests a strong payoff from extra instructional time. A new paper by Victor Lavy of Hebrew University of Jerusalem offers compelling evidence...His conclusion: Increasing time at task has a 'positive and significant effect on pupils’ performance in core subjects.'...Within the context of U.S. charter schools, Will Dobbie and Roland Fryer of Harvard University have also found a significant effect from more school time...Dobbie and Fryer find that a 25 percent increase in instructional time is associated with annual gains in average math scores of 0.06 standard deviations, very close to Lavy’s estimate." Peter Orszag in Bloomberg.
PRUITT AND WILSON: Dodd-Frank and disorder. "[T]he 2010 federal financial-reform law known as Dodd-Frank continues to undermine economic growth and the rule of law by injecting immense uncertainty into our economy...[T]the law's Title II gives the Treasury secretary and the Federal Deposit Insurance Corp. unprecedented authority to 'liquidate' financial companies. This grants immense power to a handful of unelected federal bureaucrats, empowering them to pick winners and losers among a liquidated company's investors. This arrangement destroys rights long protected by bankruptcy law...Dodd-Frank's elimination of investors' rights directly harms our states because state pension funds are partly invested in financial companies...Title II eliminates all meaningful judicial review and due process." Scott Pruitt and Alan Wilson in The Wall Street Journal.
SOLTAS: How housing bubbles link the Great Depression and the Great Recession. "[E]conomists and commentators have largely overlooked the role of housing in the causation and intensification of the Great Depression. After an encore performance of macroeconomic calamity, this long-standing oversight deserves correction...[In the 1920s, h]ousing starts more than doubled, as did the real value of residential construction. That is four times as large as the housing boom of the 2000s...The stories of the 1920s and the 2000s are parallel even in the way the bubbles popped...The similar role played by housing in the Great Depression and Great Recession is remarkable. How is it, after all, that housing was a key player in the two largest recessions of the modern era? The connections merit new inquiry." Evan Soltas in Bloomberg.
FIRESTONE: GOP is ready to give up ground on taxes to save defense. "The sequester, the widely reviled law requiring indiscriminate spending cuts starting in January, may actually be working as intended: As a spur to action. The prospect of big cuts to the favored programs of each party has brought together several bipartisan groups of lawmakers trying to hammer out an alternative. And those alternatives may include the one thing that prevented the 'Republicans know that if President Obama wins re-election, the tax cut for the rich will probably expire, so they are already talking about using that revenue increase to their advantage in reducing the half of the sequester that they fear the most, $50 billion from the Pentagon.super-committee' from reaching a similar agreement last year: new tax revenues." David Firestone in The New York Times.
MEYERSON: Reverse Riding Hood and the Republicans. "Which is the more redistributionist of our two parties? In recent decades, as Republicans have devoted themselves with laser-like intensity to redistributing America’s wealth and income upward, the evidence suggests the answer is the GOP...The less widely understood way that Republicans have helped redistribute wealth to the already wealthy is by changing the rules. Markets don’t function without rules, and the rules that Republican policymakers have made since Ronald Reagan became president have consistently depressed the share of the nation’s income that the middle class can claim." Harold Meyerson in The Washington Post.
Top long reads
Robert Draper profiles the process of drawing congressional district maps and the men who draw them:"Who’s most to blame for our divisive politics? How about the gerrymanderers quietly deciding where your vote goes. Inside the dark art and modern science of making democracy a lot less democratic."
Put this in your 'awesome graphs file' interlude: Percentage of movies made by genre over the last century.
Got tips, additions, or comments? E-mail me.
Still to come:LIBOR will be come under new management; the FDA is moving towards faster drug approvals; should the U.S. raise the retirement age; how American coal ends up fueling Europe; and the best political ads so far this election season.
The British Bankers Assoc. cedes control of LIBOR rate. "The British Bankers' Association is preparing to give up responsibility for the London interbank offered rate, or Libor, the scandal-plagued benchmark interest rate that the group once called 'the world's most important number.'...The move clears the way for what is likely to be the biggest change in Libor's 26-year history, and introduces the possibility that British or international regulators could be in charge of overseeing the rate, which is tied to trillions of dollars of financial contracts." David Enrich in The Wall Street Journal.
@pdacosta: Sounds like yet another job for Captain Obvious: CFTC's Gensler says Libor must be reformed and based on actual market transactions.
Frmr. FDIC chair Sheila Bair talks about policy during the crisis in her new book. "The Obama and Bush administrations largely ignored the needs of beleaguered homeowners while focusing too narrowly on the well-being of Wall Street during the worst financial crisis since the Great Depression, according to a new book by a top participant in the government’s response. The book, 'Bull by the Horns,' by former Federal Deposit Insurance Corp. chairman Sheila Bair, says both administrations’ top advisers paid little more than lip service to helping borrowers at risk of foreclosure, instituting programs they knew were likely to fail and ignoring her recommendations about how to improve them." Zachary A. Goldfarb and Brady Dennis in The Washington Post.
@Goldfarb: Sheila Bair: "I don’t think helping home owners was ever a priority for" Geithner and Summers.
Underwater interlude: Google, in bid for preservation, launches 'Street View' for some fragile marine habitats..
White House urges faster drug approvals. "A White House advisory body on Tuesday unveiled a plan to double the number of new prescription drugs that go on the market each year by more quickly approving drugs to treat high-risk patients. The President's Council of Advisors on Science and Technology urged the Food and Drug Administration to expand its use of faster drug approvals to a wider range of diseases. The council suggested the FDA could begin to approve drugs that may help only a narrow and high-risk patient population, such as people who are morbidly obese, under what the council called 'special medical use' approvals." Thomas M. Burton in The Wall Street Journal.
Health gains from less smoking are being canceled out by higher obesity. "Both of those trends have an impact on longevity; these researchers wanted to tease out how each affected lifespan. Overall, the benefits of less smoking are outweighing the negatives of rising obesity -- but only by a little bit, especially when it comes to women." Sarah Kliff in The Washington Post.
What are the political stakes for health insurers in the 2012 election? "The close presidential election race is forcing the health-care industry to size up potential policy changes that could eventually switch millions of seniors to private insurance plans...Insurance companies already run about 27% of Medicare plans now, getting payment directly from the government, and that line of businesses has been a lucrative growth market for carriers. That isn't surprising, considering the size of the program and the aging population. Medicare covers almost 49 million seniors and disabled people and paid for 20%, or about $524 billion, of all health expenditures in the country in 2010. The shift to private plans likely would be a win for insurance companies since they would stand to gain a flood of new customers." Louise Radnofsky in The Wall Street Journal.
What knee replacements say about health care cost control. "The number of knee replacements paid for by Medicare has more than doubled over the past two decades, according to a study published Tuesday that suggests the popular procedure is emerging as an important driver of costs for the nation's health-care system...Over the 20-year period, 3.6 million knee replacements were performed on Medicare enrollees, according to the study...At about $15,000 each, the total annual tab for the operations performed on patients of any age is now about $9 billion, the researchers said. By comparison, Medicare spending for 2011 was estimated at $550 billion." Shirley S. Wang in The Wall Street Journal.
Should the U.S. raise the retirement age? "The long-cherished notion of retirement in the US at the age of 65 is “an increasingly obsolete’ concept that should be reconsidered in light of rising longevity and better health among the elderly, says a report to Congress. The report, Ageing and the Economy, by the National Academy of Sciences follows a study of the fiscal and economic effects of life expectancy at birth, which is predicted to rise to 84.5 years by 2050 from 47 years in 1900...The report concludes there is much potential for increased labour force participation at older ages, which would boost national output, slow the rate at which people drew on retirement savings and give workers more time to build up a pension pot. Moreover, the study has found, people are increasingly fit for work beyond 65. Rising longevity has been accompanied by healthier, disability-free lives at older ages, particularly between the ages of 65 and 74." Norma Cohen in The Financial Times.
The Consumer Financial Protection Bureau is looking at the credit agencies. "Credit bureaus sometimes provide Americans with credit scores that are different from those that lenders use in deciding whether to offer a loan and at what interest rate, the government’s consumer watchdog found in a study released Tuesday. Researchers at the Consumer Financial Protection Bureau found that the discrepancy happens for as many as one in four people." Danielle Douglas in The Washington Post.
Penn. lowers bar for its voter ID requirements. "Pennsylvania state officials on Tuesday streamlined requirements for getting a voter-identification card in a bid to keep a court from blocking the law...The Pennsylvania Department of State said Tuesday that registered voters would no longer need to provide two documents showing where they live to receive a new voter ID.that the state began offering in August The cards can be obtained at state driver's license centers when people provide their name, date of birth, social security number and address." Kris Maher in The Wall Street Journal.
Campaign interlude: The best political ads of the 2012 elections.
Oil giant warns against Arctic drilling. "Total SA says energy companies should not drill for crude in Arctic waters, marking the first time an oil major has publicly spoken out against offshore oil exploration in the region....His comments were welcomed by environmental groups that are opposed to Big Oil’s presence in what they see as a near-pristine wilderness...According to a 2008 study by the US Geological Survey, the Arctic contains just over a fifth of the world’s undiscovered, recoverable oil and gas resources. The melting of the polar ice cap has made the area more accessible to the majors than ever before." Guy Chazan in The Financial Times.
Cheap natural gas causes U.S. to export coal. "Cheap natural gas has driven coal from U.S. power plants to those of the European Union, helping cause a boost in carbon emissions there by 2.2 percent this year, according to a Reuters report. More U.S. electricity generators have turned to natural gas as the energy source prices its dirtier coal counterpart out of the market...As a result, U.S. exports of inexpensive coal to the cash-strapped EU rose 29 percent in the first quarter of 2012 compared with 2011, Reuters said, citing Bernstein Research." Zack Colman in The Hill.
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