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.
Federal Reserve Chairman Ben Bernanke thinks Congress is doing quite a lot wrong. He headed to the Hill on Wednesday to present them with an itemized list.
"The expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year," he said.
The Federal Reserve can offset some bad economic policy coming out of Congress, but not this much bad economic policy coming out of the Congress. "Monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.”
The result, as Neil Irwin writes, was an unusually blunt testimony from the central bank chief. He basically walked up to Congress and said, "You’re the reason the economy isn’t taking off more."
This is why people need to stop celebrating our rapidly falling deficits. Our deficits aren’t dropping because we’re doing something right. They’re dropping because we’re doing everything wrong. We're cutting deficits much too quickly in the next few years -- that's what Bernanke's testimony is about. We're letting them rise (albeit modestly) between 2016 and 2023. We're doing basically nothing about long-term deficits, which is where the problem actually lies. And we're using policies, like sequestration, that most everyone agrees are bad policy -- so we're cutting spending by cutting the wrong kind of spending.
No wonder Bernanke's irked.
Wonkbook's Number of the Day: $80 million. That's the amount by which Penny Pritzker, Obama's nominee for Commerce Secretary and billionaire heiress to the Hyatt hotel fortune, is reported to have understated her taxable income. More on Cabinet approvals and Senate dysfunction in the fifth story.
Wonkbook's Quotation of the Day: “The drafters seek an end to the problem of illegal immigration for once and for all...While this is a laudable and necessary goal, their bill falls far short of achieving it," said Rep. Bob Goodlatte in a committee hearing.
Wonkblog's Graphs of the Day: An interactive map of the drone war.
Wonkbook's Top 5 Stories: 1) big time for immigration reform; 2) IRS gets its hearing; 3) here come electronic health records; 4) what the Fed said yesterday; and 5) is conflict in the Senate coming to a boil?
1) Top story: House, not Senate, crucial for immigration reform
Immigration vote search moves to the full Senate. "Many of the almost two dozen Republicans identified as possible supporters by the Gang of Eight are demanding changes that would make the bill significantly more conservative. They want stricter border security, tighter control on government benefits for newly-documented immigrants and tougher requirements along the pathway to citizenship...Go too far on any of those elements, and liberal Democrats — who aren’t thrilled with many aspects of the bill already — begin to pull away. Meanwhile, a handful of conservative Democrats, who have been asked to cast several tough votes this year already, won’t commit to the bill unless they secure many of the same fixes that Republicans are seeking." Carrie Budoff Brown and Manu Raju in Politico.
...So they're calling in the reinforcements. "Senator Marco Rubio, Republican of Florida and a co-author of the bill who took the lead in selling it to fellow Republicans and conservative activists, is likely to become an even more visible figure, crucial to marshaling conservative support behind the immigration changes. Mr. Rubio was mainly on the sidelines during the Judiciary Committee debate because he is not a member of that panel." Ashley Parker and Julia Preston in The New York Times.
@markknoller: Pres Obama urging Senate to bring the immigration bill to the floor "at the earliest possible opportunity."
Gay-rights groups criticize Senate on reform. "A decision by Senate Democrats not to add protections for same-sex couples to a landmark immigration reform bill has angered gay rights advocates and put the White House on the defensive over whether President Obama will insist on the provision going forward...Several key gay rights groups did not accept that rationale, arguing that the issue was a matter of principle and fairness for the estimated 30,000 same-sex, binational couples that remain unable to unite in the country. They are currently barred from receiving a spousal visa under the federal Defense of Marriage Act." David Nakamura in The Washington Post.
@jbarro: A specific immigration right for gays is a very tough sell, tougher than repealing DOMA Section 3, which has substantially same effect.
The House looks to be trouble for immigration reform. "House Judiciary Committee Chairman Bob Goodlatte leveled several criticisms of the Senate Gang of Eight bill on Wednesday, saying the legislation ultimately will not stem the flow of illegal immigration to the United States. Those remarks from Goodlatte — who will be a central figure in whether immigration reform is enacted — were his most critical yet on the landmark Senate legislation..Reflecting the concern of many House and Senate conservatives, Goodlatte said he was not convinced the Gang bill would sufficiently secure the border." Seung Min Kim in Politico.
...And could Obamacare kill immigration reform? "The health care law has flared up as a major problem in those talks; group members declared last week that they had struck a deal “in principle” but have yet to work out the fine print...House Democratic leaders are uneasy with the idea of blocking undocumented immigrants from accessing publicly-subsidized care – such as health coverage if they have to be treated in an emergency room...Republicans, however, are insisting that no public dollars – from federal to the local level – will fund the tab for health coverage for the estimated 11 million undocumented immigrants. Negotiators are looking at an end-of-the-week deadline to smooth out the differences on health care between the two sides." Seung Min Kim in Politico.
On the left of the House, Pelosi also faces choices. "House Minority Leader Nancy Pelosi (D-Calif.) and her deputies must decide this week whether to back a tentative bipartisan agreement on immigration reform or place a risky bet on more favorable Senate legislation. The choice could prove critical for the party on both policy and strategic grounds. Signing off on the House agreement would give Democratic backing to a proposal that is significantly more conservative than legislation that has already won Republican votes in the Senate, and it could increase the likelihood that a final immigration bill moves even further to the right." Russell Berman in The Hill.
Music recommendations interlude: Wilco, "Walken," 2007.
MCCONNELL: Obama, the IRS, and the culture of intimidation. "The spread of the speech police under the Obama administration has long been apparent. We all saw the president’s reelection team using the politics of intimidation, with old-school “enemies lists” and explicit attacks on groups and other private citizens. At the same time, the administration has been extremely creative in employing throughout the federal government the sorts of intimidation tactics that were used at the IRS." Mitch McConnell in The Washington Post.
SUNSTEIN: The inevitability of second-term scandal. "Whether a president will face an alleged or actual scandal depends on two variables. The first is whether something inappropriate, or at least apparently so, has happened either at his direction or on his watch. The second is whether someone has both the incentive and the ability to bring the allegedly inappropriate action to the attention of the public." Cass R. Sunstein in Bloomberg.
ZAKARIA: Time for corporate tax reform. "The U.S. tax code is at the heart of a system of institutionalized, legal corruption. The code is so vast because companies, industries and lobbying groups receive special preferences in return for campaign contributions, a cash-for-favors scheme that Washington would denounce as crony capitalism in any Third World country." Fareed Zakaria in The Washington Post.
DIONNE: After tornado, Oklahoma needs help, not ideology. "While listening to an NPR report out of Moore, Okla., this week, I was genuinely shocked. Not by the scale of the devastation or the tenacity of people who have grown stoically accustomed to the damage tornadoes can do but by a political sentiment that, in almost any other era, would not have been surprising at all...Imagine: a solid conservative Republican declaring that Obama did something “kind, thoughtful and gracious.” This takes courage in the GOP these days." E.J. Dionne in The Washington Post.
MILBANK: If tax dollars end up with IRS, the buck should stop there too. "They were the speak-no-evil and see-no-evil duo of the Internal Revenue Service. Lois Lerner, who runs the IRS office that targeted tea party and similar conservative groups for extra scrutiny, took the Fifth when she appeared Wednesday before the House Oversight and Government Reform Committee. Douglas Shulman, who was running the IRS when the abuses occurred, would have been wise to do the same." Dana Milbank in The Washington Post.
Lists interlude: Check out Bloomberg's "Best and Worst."
2) The IRS hearing
Senior Obama aides worked to shield president from IRS issues. "This account of how the White House tried to deal with the IRS inquiry — based on documents, public statements and interviews with multiple senior officials, including one directly involved in the discussions — shows how carefully Obama’s top aides were trying to shield him from any second-term scandal that might swamp his agenda or, worse, jeopardize his presidency." Philip Rucker and Juliet Eilperin in The Washington Post.
New IRS boss sends message to workers. "With his predecessor facing tough questions from lawmakers, Danny Werfel, the new acting commissioner of the Internal Revenue Service, sent an agency-wide message to employees this morning. Admitting that workers have faced “a difficult last few days,” Werfel gave a stern, direct message to the rank-and-file." Ed O'Keefe in The Washington Post.
Explainer: The best moments of the IRS hearing. David Nather in Politico.
Is the IRS inspector general at fault? "IRS inspector general J. Russell George is one of the few people to emerge from the agency’s scandal looking good thanks to his just-the-facts report on the controversial practice of targeting conservative groups. Until now...House Oversight and Government Reform Committee Chairman Darrell Issa slammed George on Wednesday for not alerting Congress to the targeting of conservative groups earlier." Rachael Bade in Politico.
Rubio calls for more IRS hearings. "Sen. Marco Rubio showed his disappointment in the lack of facts coming from congressional hearings on the IRS, calling the proceedings “outrageous” and demanding a more investigative approach...Rubio said that whether the scandal involving the government agency was one of blatant wrongdoing or mere incompetence had to be determined so that suitable actions could be taken, especially in regards to Obamacare, which would be under the jurisdiction of the IRS." Breanna Edwards in Politico.
Why Obama's scandals won't lead to reform. "Unfortunately, for those who would like to see these policy problems resolved, the wrong party is angry about them and the wrong party is complacent...As a result, we have a party eager to exploit scandal and one that has plausible (if dormant) solutions to the underlying problems. They’re just not the same party." Ezra Klein in Bloomberg.
...And why heads should roll. "Put simply, firing civil servants takes a long time, creates a lot of hassle for management, and needs to be for cause. If it’s not for cause, the termination can be overturned, and the entire process would be for naught. This can lead to excessive reluctance on the part of management to go through the trouble of firing anyone. But what remains unclear in the IRS case is whether the directors even wanted to fire anyone." Ezra Klein in The Washington Post.
Unusual hobbies interlude: Megalith construction as pastime.
3) Here come electronic health records
The rise of health IT. "Substantial numbers of doctors and hospitals are now using electronic health records (EHRs) to provide better coordinated care, federal health officials reported Wednesday. The Health and Human Services (HHS) Department said that EHR use by doctors rose from 17 percent to more than 50 percent between 2008 and this year. The rise was even more dramatic among hospitals, from 9 percent up to more than 80 percent using EHRs." Elise Viebeck in The Hill.
Millions of Americans don’t have bank accounts. That could be a problem for Obamacare. "Millions of Americans are expected to qualify for tax subsidies under the health overhaul, which they can use to purchase coverage on new marketplaces. One quarter of those people are effectively “unbanked” and without a checking account, according to a new report from tax firm Jackson Hewitt. With few regulations around what types of payment health insurers must accept – whether they will could require direct debit from a bank account or also allow credit cards – these Americans may run into trouble paying their monthly premiums" Sarah Kliff in The Washington Post.
Explainer: You ask, we answer! Can employed people get Obamacare subsidies? Sarah Kliff in The Washington Post.
Small business owners resist coverage of contraceptives. "Religiously devout business owners are waging a broad rebellion against providing their employees with contraceptive coverage, bringing dozens of lawsuits that seem certain to land the issue before the Supreme Court. The company owners say their religious beliefs take precedence over a new federal requirement, contained in President Obama’s Affordable Care Act, that they give employees insurance that covers contraceptives." Robert Barnes in The Washington Post.
Mother Nature is magical interlude: An Austrian valley, flooded annually by snowmelt.
4) What the Fed said
Fed leaves the market guessing. "In a day of conflicting messages from the Federal Reserve that roiled financial markets, Chairman Ben Bernanke left some straightforward new clues about the central bank's plans for its $85 billion-a-month bond-buying program. The Fed could take a first step toward reducing the program at one of its "next few meetings," Mr. Bernanke said, but he cautioned that he was reluctant to move prematurely or aggressively. The comments, given at a congressional hearing Wednesday, gave markets a dose of clarity for a few hours, though a subsequent release of minutes from the Fed's April 30-May 1 Fed policy meeting added to investor anxiety about the Fed's plans. The minutes disclosed that some officials were prepared to start pulling back the program as early as the Fed's next meeting in June, though the group as a whole, too, expressed hesitance." Jon Hilsenrath and Victoria McGrane in The Wall Street Journal.
...And that sent stocks on quite the ride. "When Federal Reserve Chairman Ben S. Bernanke spoke Wednesday morning on Capitol Hill, his words seemed to hint that the central bank’s stimulus wouldn’t be pulled back anytime soon. The Dow Jones industrial average surged. Hours later, the release of minutes from the last Fed meeting appeared to signal the opposite. The Dow tumbled." Ylan Q. Mui in The Washington Post.
Bernanke to Congress: Seriously, guys, what are you doing? "Ben Bernanke testifies before Congress today for the first time in three months, and the Federal Reserve chairman has a message for lawmakers: You’re the reason the economy isn’t taking off more. Of course, Bernanke is too polite to phrase things quite so bluntly. But to anyone versed in Fedspeak, that’s the gist of his message. Even as state and local governments are becoming less of a drag on growth, Bernanke says in his prepared testimony before the Joint Economic Committee, “fiscal policy at the federal level has become significantly more restrictive.”" Neil Irwin in The Washington Post.
Why we should stop celebrating our falling deficits. "It’s time to stop celebrating last week’s Congressional Budget Office report. Our deficits aren’t dropping because we’re doing something right. They’re dropping because we’re doing everything wrong...The CBO is saying that the federal government will be pulling demand out of the economy in 2013, 2014 and 2015. It will then start adding demand back in again — meaning we’ll be increasing the deficit — from 2016 through 2023, and presumably beyond. That is literally the opposite of what we should want." Ezra Klein in The Washington Post.
Housing off to a solid spring. "Existing-home sales inched up 0.6% in April from a month earlier to a seasonally adjusted annual rate of 4.97 million, the National Association of Realtors said Wednesday. The results were the highest since November 2009 and were 9.7% above the same month a year earlier...Homes sold in April were on the market for a median of 46 days, down from 83 a year earlier. The median sale price in April was $192,800, up 11% from a year earlier, the highest since August 2008...The overall percentage of sales that were foreclosures and other distressed properties fell to 18%, the lowest level since the Realtors' group began tracking the issue through surveys of agents in October 2008." Sarah Portlock and Alan Zibel in The Wall Street Journal.
Interview: Robert Kaiser on Dodd-Frank. Neil Irwin in The Washington Post.
Global efforts begin to reform corporate tax systems. "A global effort to tighten corporate tax rules is gaining momentum as politicians in Europe and the United States take aim at American tech giants whose savvy use of international tax laws has provoked a public backlash. A day after a U.S. Senate report slammed Apple’s use of Irish regulations to minimize payments to the U.S. government, European heads of state said they hoped for quick action from an international effort to change rules that let companies shelter profits." Howard Schneider in The Washington Post.
Woah interlude: Lobsters are functionally immortal.
5) Is conflict in the Senate coming to a boil?
What the 'nuclear option' fight means for filibuster reform. "Senate Majority Leader Harry Reid (Nev.) wants a vote this week on Deputy Solicitor General Sri Srinivasan’s nomination to the D.C. Circuit Court of Appeals. McConnell wants to hold the vote in June, after the Memorial Day congressional recess. The two went on to argue over nominations for nearly an hour, with Reid lamenting gridlock and McConnell pointing to many Obama nominees who have been confirmed. McConnell demanded that Reid pledge not to use the so-called “nuclear option,” which would allows filibusters to be broken by a simple majority vote. Reid refused." Rachel Weiner in The Washington Post.
Sen. Cruz's reason for stopping the budget from going to committee is that he doesn't trust the conservative bona fides of House Republicans. Really. "“The senior senator from Arizona urged this body to trust the Republicans,” Cruz said, referring to Sen. John McCain (R-Ariz.). “Let me be clear, I don’t trust the Republicans. I don’t trust the Democrats and I think a whole lot of Americans likewise don’t trust the Republicans or the Democrats because it is leadership in both parties that has got us into this mess.”...Cruz is demanding that any motion to send the budget to conference include a promise that the group won’t include an increase in the debt ceiling. He has been joined by fellow Republicans Sens. Paul, Mike Lee of Utah and most recently Marco Rubio of Florida. He has also had the backing of Senate Minority Leader Mitch McConnell in blocking the move to conference and insisting for debt ceiling assurances." Ginger Gibson in Politico.
Transportation Sec. nominee sails through committee hearing. "President Obama’s choice to be transportation secretary, Mayor Anthony Foxx of Charlotte, N.C., zipped through a confirmation hearing on Wednesday before the Senate Commerce, Science and Transportation Committee. He was questioned on many points but pushed to make promises on nothing more than working cooperatively with Congress." Matthew L. Wald in The New York Times.
Obama's nominee to Commerce is now in hot water. "Chicago billionaire Penny Pritzker inadvertently understated a portion of her income by at least $80 million in a disclosure form required for her nomination to be U.S. Commerce secretary and has amended the document. Forms released online last night by the Office of Government Ethics show that Pritzker earned additional income for consulting work on hundreds of trusts, including family trusts, beyond what she disclosed last week. The omission, discovered by Pritzker’s financial advisers, was due to a clerical error, said Susan Anderson, the nominee’s spokeswoman." Brian Wingfield in Bloomberg.
Reading material interlude: The best sentences Wonkblog read today.
Fluordation fails in Portland, OR by 20 percent margin. Sarah Kliff.
Bad news for patent trolls, in one chart. Timothy B. Lee.
Stop celebrating our falling deficits. Ezra Klein.
Yes, heads should roll at the IRS. Ezra Klein.
Why you really, really need to read what the CBO has to say about the carbon tax. Zack Colman in The Hill.
Obama to visit Oklahoma on Saturday. David Nakamura in The Washington Post.
Bipartisan House group backs media shield law. Tarini Parti in Politico.
Hagel directs Pentagon to seek new software for veteran health records. Steve Vogel in The Washington Post.
Aspen Ideas festival attracts Washington. Patrick Gavin in Politico.
Wonkbook is produced with help from Michelle Williams.