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The problem with the farm bill, everyone says, is that the cuts to food stamps were too deep for House Democrats but too shallow for House conservatives. It's a neat formulation, but that's not really what went wrong.
Every bill that passes the House is too liberal for someone and too conservative for someone else. But majorities nevertheless emerge out of party loyalty and strategic trust. That was what was supposed to happen here, too. Boehner made a rare, personal appeal for support on the floor. Moreover, everyone knew this wasn't the final word on the farm bill: President Obama had already promised to veto the House legislation, and so this was little more than a vehicle to take to conference with the Senate.
Both appeals failed: Republicans didn't follow Boehner and they clearly didn't trust the strategy.
The GOP protests that the bill failed because too few Democrats voted for it. In one of the day's more amusing moments, Cantor aide Rory Cooper said the bill simply proved the Democrats can't govern -- this despite the fact that his boss is the majority leader.
But the fact that House Republicans were relying on Democratic votes to pass a bill that slashes food stamps and was certain to be vetoed by a Democratic president tells you about what you need to know about the desperation inside the Republican Conference on this one.
Will immigration go the same way? Perhaps. But it's not a sure thing, either. There's not going to be an immigration bill that all House Republicans are happy with. And they're not going to pass an immigration bill because Boehner begs and pleads. But they might, in the end, pass an immigration bill -- or allow one to be passed -- because they trust the basic strategy.
That's not just the difference between immigration and the farm bill. It's the difference between immigration and everything. Washington is acting surprised that Boehner can't control his members. But we knew that already -- remember Plan B? If you're surprised that the House is a mess, you simply haven't been paying attention.
The prospects of immigration have always relied on the theory that it's a unicorn -- that Republicans see a strategic need to pass it, or let it pass, that they don't see for virtually anything else in government. Or, to put it differently, the idea is that immigration reform is an exception to the precise rules that doomed the farm bill. Whether that's true remains to be seen. But the farm bill's failure doesn't prove it false.
Wonkbook's Number of the Day: 201. That's the room number of the space in the Dirksen Senate Office Building that has been converted into an immigration "war room" for the Obama administration, according to Michael D. Shear of The New York Times.
Wonkbook's Quotation of the Day: “For people who are concerned about border security, once they see what is in this bill, it’s almost overkill,” Sen. Bob Corker said.
Wonkbook's Graph of the Day: The financial market freakout, in five charts.
Wonkbook's Top 5 Stories: 1) economic turmoil as Fed plans exit; 2) really great news for immigration reform; 3) GAO wades into NSA surveillance debate; 4) a rundown on the farm bill; and 5) all your Obamacare questions, answered.
1) Top story: Woah there, global economy
Dow drops 353 points. "Stocks fell to their biggest-one day slide of the year as anxiety mounted over the potential for the Federal Reserve to pull back its stimulus efforts. Investors also fretted about a slowdown in the Chinese economy...The Dow Jones Industrial Average shed 353.87 points, or 2.3%, to 14758.32, the biggest percentage drop since November 2012 for the blue chips and the largest point drop since November 2011. The Standard & Poor's 500-stock index lost 40.74 points, or 2.5%, to 1588.19. The Nasdaq Composite Index fell 78.57 points, or 2.3%, to 3364.63." Chris Dieterich in The Wall Street Journal.
Economists: It's the 'Septaper.' "Federal Reserve Chairman Ben S. Bernanke will cut the Fed’s $85 billion in monthly bond purchases by $20 billion at the Sept. 17-18 policy meeting, according to 44 percent of economists in a Bloomberg survey. The survey of 54 economists followed Bernanke’s press conference yesterday, in which he mapped out a timetable for an end to one of the most aggressive easing strategies in Fed history. His remarks prompted economists to predict a faster reduction in purchases: in a June 4-5 survey, only 27 percent of economists forecast tapering would start in September." Joshua Zumbrun and Catarina Saraiva in Bloomberg.
@justinwolfers: Puzzled by the Fed's renewed optimism about the labor market, given that it's been creating around 160k jobs per month for the past 3 years.
Global market turmoil shows reach of Fed beyond U.S. "Tumbling stock, bond and commodity prices around the world are demonstrating just how reliant the global economy has become on the monetary policies of the Federal Reserve...For investors in once-attractive foreign markets, the fear is that those markets may be on even less firm economic footing than the United States’, and consequently less able to absorb the decline in lending that comes along with rising interest rates." Binyamin Appelbaum in The New York Times.
Explainer: The financial-market freakout in 5 charts. Neil Irwin in The Washington Post.
This is why global markets are freaking out. "Markets are spooked, interest rates are on the rise across the globe, and a manufacturing survey hinted at new economic weakness in China. If those trends continue it could be enough to take the air out of a U.S. economic recovery that was just gaining momentum. This isn’t a crisis like the ones that struck the United States starting in 2008 or Europe in 2010. Rather, it is a byproduct of the world’s central banks, having intervened on vast scale to deal with the economic travails of the last several years, introducing uncertainty and even a little chaos as they start to contemplate how and when the era of easy money might end." Neil Irwin and Katerina Sokou in The Washington Post.
@Neil_Irwin: Agree. RT @GagnonMacro: @justinwolfers @Neil_Irwin I suspect Bernanke is not happy with market reaction.
Only when the tide goes out do you discover who's been swimming naked. "The turmoil exposed vulnerabilities in the financial markets and the world economy that had been mostly ignored because central banks were willing to ride to the rescue with huge amounts of money...Cracks in the global growth story have widened. In Europe, yields on sovereign debt have started to rise again after a substantial decline, while unemployment remains high and growth prospects are mixed. In China, a key measure of interbank funding stress briefly touched 25%." Tom Lauricella and Katy Burne in The Wall Street Journal.
What is the Fed thinking? "Fed officials increasingly are convinced that they are finally doing enough to stimulate the economy — not just the steps already taken, but the plans they have detailed for the next several years. That is why they felt comfortable suggesting that they could begin before the end of the year to scale back their purchases of government securities. But some critics see clear evidence in the persistence of high unemployment and low inflation that the Fed should do even more. And many others are simply nervous." Binyamin Appelbaum in The New York Times.
...The Fed has told us exactly what they're going to do. So why are markets so uncomfortable? "[T]he basic challenge the Fed is facing, and the core reason for the sell-off on markets since Wednesday afternoon, is that no matter how much detail the chairman tries to give, in a financial world driven so heavily by central bank activism over the last few years, even the tiniest changes have big implications for asset prices." Neil Irwin in The Washington Post.
@mattyglesias: Bernanke is making monetary policy seem hard, but it should be easy: Looser money when inflation is low, tighter when it’s high!
What's the real issue here with monetary tightening? "Of course, the real story here isn't a one or two-day market sell-off. It's that this sell-off, and the monetary tightening it implies, will keep the recovery from ever reaching the kind of escape velocity that would put the long-term unemployed back to work. Now, to be fair, the Fed has managed to keep all the fiscal tightening from the expiring payroll tax cut and the sequester from throwing us back into recession, and it deserves credit for that. But the Fed has consistently preferred a subpar recovery with sub-2 percent inflation to a recovery worthy of the name with higher inflation. And it's telling us that isn't changing anytime soon." Matthew O'Brien in The Atlantic.
@ryanavent: Yesterday the Fed gave us some bad news: there will be no overshooting in this recovery.
Existing home sales and prices continue surge in May. "Existing-home sales rose about 13 percent in May and prices increased 15 percent compared with the same period last year, according to the latest industry data released Thursday. It was the latest reflection of renewed strength in the housing market, which has seen surging prices and sales this year but has suffered from a lack of housing inventory. Sales are at the highest level since 2009, and the median price staged its strongest gain since 2005, reaching $208,000, according to the National Association of Realtors." Katerina Sokou in The Washington Post.
Jobless claims rose. "Initial jobless claims, a proxy for layoffs, increased by 18,000 to a seasonally adjusted 354,000 in the week ended June 15, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires had forecast 340,000 new applications for last week. Claims for the week ended June 8 were revised up to 336,000 from a previously reported 334,000, while the four-week moving average of claims, which smooths week-to-week volatility, increased by 2,500 to 348,250." Jonathan House and Jeffrey Sparshott in The Wall Street Journal.
@pdacosta: Trader's one word description of financial market conditions post Bernanke taper roadmap: "Awful."
Are U.S. exports about to get hammered by the rising dollar? "Currency markets are moving too – and it may mean a further drag on U.S. exports that are already stuck in neutral. Nomura currency analyst Jens Nordvig noted the dollar’s rise in recent weeks against the currencies of major developing nations – a jump of about 2 percent in the last two weeks alone...If that global trend continues, it makes U.S. products – from soybeans to trucks and airplanes – more expensive overseas at a time when the Obama administration is banking on international sales of American goods to generate jobs." Howard Schneider in The Washington Post.
@JoshZumbrun: Some folks hate this, and folks that ought to take comfort don't, but the Fed is mindful of externalities of QE. Won't push it forever.
Libor case ensnares more banks. "Employees of some of the world's largest financial institutions conspired with a former bank trader to rig benchmark interest rates, British prosecutors alleged Thursday, a sign authorities have their sights on an array of banks and brokerages...The banks include New York-based J.P. Morgan Chase & Co.; Germany's Deutsche Bank AG; British banks HSBC Holdings PLC and Royal Bank of Scotland Group PLC; and Dutch lender Rabobank Groep NV. Prosecutors alleged Mr. Hayes also worked with employees of ICAP PLC, Tullett Prebon PLC and R.P. Martin Holdings Ltd., which are London-based interdealer brokers that serve as middlemen between bank traders." David Enrich in The Wall Street Journal.
SEC looking to hire trading and markets chief. "Securities and Exchange Commission Chairman Mary Jo White is having difficulty finding an industry veteran or seasoned attorney to fill a top post overseeing trading firms and stock exchanges—a critical role for the agency given growing concerns about the speed and complexity of trading." Andrew Ackerman and Jenny Strasburg in The Wall Street Journal.
Music recommendations interlude: Earth, Wind & Fire, "Money Tight," 1987.
BERNSTEIN: Tightening the border. "To be more precise, we kid ourselves if we think we can fix our broken immigration system without controlling legal immigrant flows. Unfortunately, the returns to spending $30 billion more on militarizing the border may be smaller than border-control advocates think. We’re already spending $18 billion per year and illegal flows are way down (though part of that is because of the diminished magnet of the weaker United States economy). Resources would be much better spent strengthening employer verification systems." Jared Bernstein in The New York Times.
JOHNSON: How immigration reform could help the economy. "Most economic analysis about immigration looks at wages and asks whether natives win or lose when more immigrants show up in particular place or with certain skills. At the low end of wage distribution, there is reason to fear adverse consequences for particular groups because of increased competition for jobs...But the longer-run picture is most obviously quite different. The process of creating businesses and investing – what economists like to call capital formation – is much more dynamic than allowed for in many economic models." Simon Johnson in The New York Times.
REINHARDT: Premium shock and joy in the Affordable Care Act. "Under the Affordable Care Act, effective January 2012, the load factor must be at or below 17.65 percent in the large-group market (a medical loss ratio of not less than 85 percent), and at or below 25 percent in the small group and individual market (a medical loss ratio of not less than 80 percent). By itself, this provision should lower the premiums charged to the insured in the nongroup market." Uwe E. Reinhardt in The New York Times.
GOLDHILL: Blame the American lifestyle. "Yes, other nations do achieve better health outcomes, but this is almost entirely a matter of lifestyle (not “partly from lifestyle,” as Frank and so many others believe). Throughout the developed world, improvements in big things such as infant mortality, lifespan, even morbidity are almost completely attributable to diet; exercise; smoking, alcohol and drug usage; education; employment and income; family structure; environment; and community safety." David Goldhill in Bloomberg.
KRUGMAN: Profits without production. "So what’s really different about America in the 21st century? The most significant answer, I’d suggest, is the growing importance of monopoly rents: profits that don’t represent returns on investment, but instead reflect the value of market dominance. Sometimes that dominance seems deserved, sometimes not; but, either way, the growing importance of rents is producing a new disconnect between profits and production and may be a factor prolonging the slump." Paul Krugman in The New York Times.
BROOKS: The humanist vocation. "Most people give an economic explanation for this decline. Accounting majors get jobs. Lit majors don’t. And there’s obviously some truth to this. But the humanities are not only being bulldozed by an unforgiving job market. They are committing suicide because many humanists have lost faith in their own enterprise...The humanist’s job was to cultivate this ground — imposing intellectual order upon it, educating the emotions with art in order to refine it, offering inspiring exemplars to get it properly oriented." David Brooks in The New York Times.
Historic interlude: 11 endangered sites.
2) Really, really good news day for immigration reform
70 votes might be in reach again for immigration reform. "The Senate Gang of Eight edged closer to supermajority support on its immigration bill with Thursday’s breakthrough agreement on border security and other measures meant to attract wavering Republican senators. Negotiators said as many as 15 GOP senators who were on the fence will now be inclined to vote for the landmark bill that revamps the U.S. immigration system and gives a pathway to citizenship for millions of undocumented residents due to the agreement drafted by Republican Sens. Bob Corker of Tennessee and John Hoeven of North Dakota." Seung Min Kim in Politico.
Explainer: The immigration-reform whip list. Aaron Blake and Ed O'Keefe in The Washington Post.
We have momentum. "The Senate edged Thursday toward embracing a plan to put thousands more federal agents on the border with Mexico, in a bid to sway more Republicans to back a comprehensive immigration bill. The deal appeared to give the Senate immigration bill its second major shot of momentum this week, following the news that the legislation was expected to significantly reduce the federal budget deficit. It quickly prompted several previously undecided Republicans to say they would support the bill, without alienating any Democrats who had shied away from tougher border measures." Sara Murray and Kristina Peterson in The Wall Street Journal.
Border security is now in 'overkill.' "Sen. Bob Corker (R-Tenn.) said Thursday morning that the border security deal he helped broker for the Senate immigration bill is so tough that it’s “almost overkill.” “For people who are concerned about border security, once they see what is in this bill, it’s almost overkill,” Corker said on MSNBC’s “Daily Rundown.”" Aaron Blake in The Washington Post.
...The size of Border Patrol will double. "Requirements in the amendment include completing 700 miles of fencing along the U.S.-Mexico border, adding 20,000 border patrol agents, adding an entry-exit and implementing an E-verify program to prevent illegal immigrants from getting jobs, the senators said." Manu Raju, Seung Min Kim, and Burgess Everett in Politico.
Inside the White House's stealth campaign for immigration reform. "The hide-out has no sign on the door, but inside Dirksen 201 is a spare suite of offices the White House has transformed into its covert immigration war room on Capitol Hill...Inside Room 201, the administration has gathered a collection of its own Congressional lobbyists, policy specialists and experts from an alphabet soup of the agencies that will have to put the immigration legislation into effect if it passes. They all moved into the vice president’s offices on June 10, setting up laptop computers and thick binders filled with proposed amendments on an oval conference table." Michael D. Shear in The New York Times.
...Sen. Kirk signs on. "In a sign of how critical a new border security agreement could be toward securing more Republican support for immigration reform, Sen. Mark Kirk (R-Ill.) now plans to vote for the immigration bill because of a deal expected to be announced later Thursday." Ed O'Keefe in The Washington Post.
The immigration bill goes local. "The strategy for passing immigration reform through the Senate isn’t just about striking a deal on border security. It also means assuring Sen. Mark Begich (D-Alaska) that fish processors in his home state will be protected, meeting a request from Sen. Dean Heller (R-Nev.) that Nevada will be added to a border commission and guaranteeing Sen. Heidi Heitkamp (D-N.D.) that resources won’t be diverted from the northern border." Carrie Budoff Brown in Politico.
How the U.S. population would change from immigration reform. "The Census Bureau already expected net international migration to increase by roughly 20 million in the next two decades. The 16.2 million extra people that CBO expects immigration reform to attract are on top of that. So, if the Senate bill passed, the United States would be adding somewhere around 36 million new immigrants over the next two decades — a figure comparable to the population of Canada." Brad Plumer in The Washington Post.
...And how immigration could prop up the U.S. housing market. "[N]ew research from Jacob Vigdor, an economist at Duke, suggests that opening the floodgates a little bit might be worth it. Vigdor’s latest work, conducted by the Americas Society/Council of the Americas and Partnership for a New American Economy — the same pro-immigration group that recently released an excellent paper on North Carolina farm workers last month — looks, county by county, at immigration rates and housing values to see if there’s any relationship between the two. There is, and it’s positive. Vigdor estimates that the average immigrant adds 11.5 cents to the value of the average home in his county. Considering that there are 40 million immigrants in the U.S., and 800,000 housing units, that adds up to about $3.7 trillion in increased housing value." Dylan Matthews in The Washington Post.
Fewer Mexicans head to U.S. as home exerts more pull. "[E]xperts from both sides of the border are skeptical that the U.S. will see an upsurge in immigration from Mexico, citing a strengthening Mexican economy, increases in border security that have made crossing costlier and more dangerous, and demographic changes in Mexico, such as a falling fertility rate. More than 700,000 Mexicans came to the U.S. in 2000 alone, a peak in immigration flows. But immigration slowed to a trickle between 2005 and 2010, according to the nonpartisan Pew Hispanic Center, so much so that the number of Mexicans returning to their home country offset the number coming to the U.S." Sara Murray in The Wall Street Journal.
When you've won Bill O'Reilly, you've won America. "Just hours after Republican Sens. John Hoeven (R-N.D.) and Sen. Bob Corker (R-Tenn.) unveiled a sweeping border security amendment, O’Reilly said, “It is time for the U.S.A. to pass immigration reform” and that he hopes “this bill does become law.” “It’s not perfect, but it’s the right thing to do,” O’Reilly said." Burgess Everett in Politico.
Introducing interlude: Superhydrophobic coating.
3) What GAO has to say about security clearances
GAO: Government lacks uniform security-clearance guidelines."The federal government lacks clear guidelines for determining when to require security clearance for civilian workers, according to a watchdog report released Thursday at a Senate hearing...The watchdog report, from Congress’s Government Accountability Office, said National Intelligence Director James Clapper “had not provided agencies clearly defined policy and procedures to consistently determine whether a civilian position required a security clearance.”" Josh Hicks in The Washington Post.
New documents reveal parameters of NSA’s secret surveillance programs. "The National Security Agency may keep the e-mails and telephone calls of citizens and legal residents if the communications contain “significant foreign intelligence” or evidence of a crime, according to classified documents that lay out procedures for targeting foreigners and for guarding Americans’ privacy. Newly disclosed documents describe a series of steps the world’s largest spy agency is supposed to take to keep Americans from being caught in its massive surveillance net. They suggest that the NSA has latitude to keep and use citizens’ communications under certain conditions." Ellen Nakashima, Barton Gellman and Greg Miller in The Washington Post.
The FISA court is acting like a legislature, and that's a problem. "These documents look more like legislation than search warrants. They define legal concepts, describe legal standards to be applied and specify procedures for NSA officials to follow. For example, the second document states that “a person known to be an alien admitted for permanent residence loses status as a United States person if the person leaves the united States and is not in compliance with 8 USC § 1203 enabling re-entry into the United States.” But rather than being drafted, debated and enacted by Congress, the documents were drafted by Obama administration lawyers and reviewed by the FISC." Timothy B. Lee in The Washington Post.
U.S. probing contractor that vetted NSA leaker. "The Falls Church-based government contracting firm that performed a background investigation into Edward Snowden before he disclosed details of a secret federal surveillance program is under criminal investigation by the Office of Personnel Management, according to Sen. Claire McCaskill (D-Mo.). McCaskill said Thursday at a Senate hearing that the investigation into USIS, whose original name was US Investigations Services, is based on the “systemic failure to adequately conduct investigations under its contract” with the federal government." Thomas Heath in The Washington Post.
Awareness interlude: surrenderyoursay.com.
4) What you need to know about the farm bill
House defeats farm bill in surprise move. "A broad five-year farm bill went down to a surprise defeat in the House on Thursday when Republican conservatives revolted against the legislation, arguing that it would cost too much, while Democrats defected, saying it would not spend enough on their priorities. The 234 to 195 vote was the latest rebuke to House GOP leaders, who have struggled to muster enough control of the chamber to pass major legislation." Paul Kane in The Washington Post.
Explainer: What's in the farm bill, anyway? Brad Plumer in The Washington Post.
...So what's next? "This was unexpected, to say the least. Farm bills have historically sailed through Congress without too much trouble...In theory, the country would eventually revert to the agricultural rules written back in 1949, when the last permanent farm bill was enacted (subsequent bills have all been temporary). That 1949 act was crafted for a very different United States, with smaller crop production and higher consumer prices. So, for instance, dairy prices would skyrocket once outdated price supports came back into effect." Brad Plumer in The Washington Post.
Yet more proof that the House is dysfunctional. "Someone in House leadership screwed up again. The defeat of the farm bill — after both parties were privately bullish it would pass with large margins — shows, once again, how massively dysfunctional the House and its leadership has become. And it plainly reveals that a bipartisan rewrite of the nation’s complex and politically charged immigration laws are a pipe dream in the House, at least for now. Preventing a government shutdown and debt limit fight are not far behind." Jake Sherman in Politico.
Adorable animals interlude: And now, a harbor seal pup.
5) Who will answer my Obamacare questions?
Contractor that handles public’s Medicare queries will do same for Affordable Care Act. "Within days, the company that handles a daily average of more than 60,000 calls about Medicare will be deluged by new inquiries about health insurance under the Affordable Care Act. The six Medicare call centers run by Vangent, a company based in Arlington County, will answer questions about the health-care law from the 34 states that opted out of running their own online health insurance marketplaces or decided to operate them jointly with the federal government." Susan Jaffe in The Washington Post.
Insurers issue rebates under new health law. "Insurers will rebate $500 million to consumers who purchased health insurance under a provision in the new health-care law that requires companies to spend a certain portion on premiums on consumers or refund the money. About 8.5 million Americans will receive the rebates with an average rebate of about $100 per family, the Department of Health and Human Services said Thursday. That is about $50 less per family than last year, when the new provision took effect." Amy Schatz in The Wall Street Journal.
Interview: Is it time to tweak Obamacare? Sen. Joe Donnelly thinks so. Sarah Kliff in The Washington Post.
FDA lifts age limit on Plan B. "The Food and Drug Administration formally approved an application from Teva Pharmaceutical Industries Ltd. to allow the company to sell its Plan B emergency-contraceptive pill without a prescription to anyone regardless of age. The move complies with an April federal court order that directed the agency to make emergency contraception available to anyone without age or point-of-sale restrictions, such as showing identification." Jennifer Corbett Dooren in The Wall Street Journal.
Reading material interlude: The best sentences Wonkblog read today.
The case for a cigarette tax, in one graphic. Ezra Klein.
This is why global markets are freaking out. Neil Irwin.
The financial market freakout, in five charts. Neil Irwin.
Are U.S. exports about to get hammered by the rising dollar? Howard Schneider.
How immigration could prop up the U.S. housing market. Dylan Matthews.
The FISA court is acting like a legislature, and that’s a problem. Timothy B. Lee.
READ: Supreme Court makes it harder to bring class-action lawsuits. Dylan Matthews.
Debate: Should the government end Fannie Mae and Freddie Mac? The New York Times.
Senators close to student-loan deal. Ginger Gibson and Burgess Everett in Politico.
James Comey, former Bush administration official, to be named new FBI director. David Nakamura in The Washington Post.
As prisons squeeze budgets, GOP rethinks crime focus. Neil King Jr. in The Wall Street Journal.
Boehner thinks new White House climate rules would be “crazy.” But Obama may not have a choice. Juliet Eilperin in The Washington Post.
Wonkbook is produced with help from Michelle Williams.