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.
Wonkbook's Number of the Day: 29,000. That's the number of people who have enrolled in health-insurance coverage via HealthCare.gov during the first two days of December. It's more than the number that enrolled in all of October.
Wonkbook's Graph of the Day: The Distribution of Household Income and Federal Taxes, 2010. This new CBO report is fresh of the presses and very relevant to President Obama's speech yesterday.
Wonkbook's Top 5 Stories: (1) Obama refocuses on inequality; (2) Obamacare surges; (3) Ryan and Murray near a deal; (4) the NSA knows where you are; and (5) will 2014 be a great year for the economy?
1. Top story: How inequality will come to dominate the agenda
"I believe this is the defining challenge of our time": Read the full transcript of President Obama's economic speech. The Washington Post.
Obama focuses agenda on relieving economic inequality. "President Obama laid out an aspirational agenda Wednesday for the remainder of his presidency, looking past the Republican opposition that has long blocked his goals and toward policies to narrow income inequality and promote opportunity for the poor. Obama’s remarks at an arts and education center in a low-income Southeast Washington neighborhood provided his most specific road map for how he intends to spend his final 37 months in office, seeking to overcome partisan fights about the budget and the troubled rollout of his health-care law. He pressed for a higher minimum wage, more spending on early-childhood education, an overhaul of immigration laws and other measures aimed at boosting the economy." Zachary A. Goldfarb in The Washington Post.
@neeratanden: I was honored to introduce Pres Obama for his compelling speech on inequality today, hosted by CAP. One of the best speeches of his career.
This was a great speech for 2007. But for 2013? "In 2013 we have mass unemployment and shall we say some unresolved questions about the role of the financial sector in the American economy. And the speech didn't really talk about either of those things." Matthew Yglesias in Slate.
More inequality means less mobility. "The President made an important connection between higher inequality and the lack of economic mobility experienced by the increasing share of those on the “have-not” side of the great wealth divide. When such a disproportionate share of the economy’s growth eludes the poor and middle class, the barriers to realizing their potential are heightened. Historically, and the President drew pointed examples from Lincoln to FDR, this has invoked a role for government. If the market fails to provide adequate opportunity, or, more precisely, the returns from the market economy grow so skewed that they block the opportunities of large swaths of households, there is a role for government to take corrective action." Jared Bernstein on his blog.
Reducing inequality might improve growth. "That 2011 paper, by Andrew G. Berg and Jonathan D. Ostry of the International Monetary Fund, calculated that a 10% decrease in income inequality increased the expected length of a period of economic growth by 50%." Timothy Noah in MSNBC.
@swinshi: Have to say again: evidence on economic mobility trends is irrefutably mixed & income inequality within bottom 80% hasn’t grown since 80s
Obama could have been more ambitious. "Rather than simply trying to push the ball a bit farther up the Washington playing field, the President might have been better served to pick up on some of the larger themes that often get left out of the debate in the capital, but which commentators as far afield as Warren Buffett, Bill de Blasio, and Pope Francis have recently been addressing: a tax system which, over all, remains heavily tilted toward the very wealthy; a rampant financial sector, which is itself responsible for much of the rise in incomes at the top of the distribution; corporate-governance standards throughout the business sector that put stockholder value above everything else, and shower great rewards on C.E.O.s who cut labor costs to boost profits; and a change in social norms more generally in a society where, to quote the Pope, issues of ethics and morality are often “treated with a scornful derision.”" John Cassidy in The New Yorker.
Congressional GOP may be willing to let emergency unemployment benefits lapse. "With the jobless rate hovering just over 7 percent, congressional Republicans said Tuesday that they are ready to let emergency unemployment benefits lapse on Dec. 31, immediately cutting off checks to more than a million recipients...Extending the program through 2014 would cost about $25 billion, the nonpartisan Congressional Budget Office said Tuesday, but would boost employment by roughly 200,000 jobs by the end of next year." Lori Montgomery in The Washington Post.
Is economic inequality a matter of trust? "One of the people watching Obama’s speech was Robert Putnam, a professor at Harvard’s Kennedy School of Government..."There remains a serious academic debate about causation—does inequality cause low trust, or does low trust (or rather, low social solidarity) cause inequality, or are both the effects of some as yet undiscovered third variable?”" Amy Davidson in The New Yorker.
Must-read debate forum: Making low wages livable, featuring contributions from Ron Unz, Robert Reich, Douglas Holtz-Eakin, and James Pethokoukis. The New York Times.
Explainer: The best arguments for, and against, raising the federal minimum wage. Cardiff Garcia in The Financial Times.
Music recommendations interlude: Crosby, Stills & Nash, "Unequal Love," 1970.
BOUIE: Obama confronts the liberals' greatest skeptics: white people. "“The opportunity gap in America is now as much about class as it is about race,” and that “we have to reject a politics that suggests any effort to address it in a meaningful way somehow pits the interests of a deserving middle class against those of an undeserving poor in search of handouts.”...What’s important is Obama’s decision to address race as a potential barrier to collective action. As far as I can tell, it’s a first for his presidency." Jamelle Bouie in The Daily Beast.
GOTTLIEB AND EMANUEL: No, there won't be a doctor shortage. "The population is indeed aging fast, but the methods of treating illness in old age are also changing quickly. Today, more patients can be cared for in subacute settings rather than in hospitals. And new technologies are turning the treatment of many medical conditions into less resource-intensive endeavors, requiring fewer doctors to manage each episode of illness...Instead of building more medical schools and expanding our doctor pool, we should focus on increasing the productivity of existing physicians and other health care workers while incorporating new technologies and practices that make care more efficient." Scott Gottlieb and Ezekiel J. Emanuel in The New York Times.
YGLESIAS: Two cheers for unpaid internships. "[I]n terms of the concrete harms attributed to internships—leaving young professionals saddled with debt, erecting a huge barrier to upward mobility for people of modest means—the school option looks much worse. As long as an internship does offer some practical educational value, letting the intern “pay” with menial labor rather than five-figure tuition fees is a great deal." Matthew Yglesias in Slate.
BLOW: The President, the Pope, and the people. "Arguments against addressing income inequality often focus on the possibility of undermining incentives for those at the top. But what happens if and when inequality begins to undermine incentives for those in the middle and at the bottom? Honest work should pay an honest wage. That idea is part of the American social contract and one in danger of disintegrating." Charles M. Blow in The New York Times.
CHAIT: What '12 Years a Slave' has to do with the Obama presidency. "This last weekend, I finally saw 12 Years a Slave. It was the most powerful movie I’ve ever seen in my life, an event so gripping and terrifying that, when I went to bed ten hours later — it was a morning matinee — I lay awake for five hours turning it over in my mind before I could fall asleep. I understand it not merely as the greatest film about slavery ever made, as it has been widely hailed, but a film more broadly about race. Its sublimated themes, as I understand them, identify the core social and political fissures that define the American racial divide to this day. To identify 12 Years a Slave as merely a story about slavery is to miss what makes race the furious and often pathological subtext of American politics in the Obama era." Jonathan Chait in New York Magazine.
DELONG: The long short run. "The domain of the Keynesian (and monetarist) short run, I said, was 0-2 years. When analyzing events at a horizon of 3-7 years, one could safely assume a “classical” model: the economy would return to full employment, while changes in policy and in the economic environment would alter the distribution but not the level of spending, production, and employment. Beyond seven years was the domain of economic growth and economic institutions. All of this is now revealed as wrong, at least for today, if not in the past or the future. Japan since the start of the 1990’s provides strong evidence that the short run can last for decades, and then be followed not by a return to the old normal, but by a transition to a new normal in which the Keynesian short run of economic depression casts a long shadow. What we have seen since 2008 is that Japan is not an exception." J. Bradford DeLong in Project Syndicate.
Longread: Brad DeLong wrote a piece on long-run growth that is, well, so long you will be in the long run by the time you finish it. But you should read it anyway! It's really good and interesting. He comes out an optimist. Washington Center for Equitable Growth.
ROGOFF: What's the problem with advanced economies? "The Gordon-Kasparov-Thiel thesis is extremely interesting, though I have challenged their negative conclusions, both in print and in a debate at Oxford. Personally, I think the greater risk is that the pace of technological progress will accelerate too much for societies to adapt, though the experience so far has basically been positive...The important point is that the case for expanding productive infrastructure investment does not rest on one narrow ideological viewpoint or economic theory. Whether Summers is right about secular stagnation in advanced economies, or whether we are still mainly suffering the aftermath of the financial crisis, it is time to break the political gridlock and restore growth." Kenneth Rogoff in Project Syndicate.
ORSZAG: Give families' second earners a break. "Conservatives who worry about the ill effects of marginal tax rates on high earners rarely discuss the even higher marginal tax rates that some low- and moderate-income families face. A low-income single parent can experience a marginal rate as high as 95 percent -- for each dollar earned, the person takes home only 5 cents. And for married parents, the marginal rate for the family’s secondary earner can be almost as high." Peter Orszag in Bloomberg.
BEUTLER: Obamacare as culture war. "[C]onservatives are wielding Obamacare the way they wielded culture war issues in the 1990s. The particulars are enormously different, but the political objectives are similar: pick an issue that both unites conservative voters and appeals to the discontent of moderates and use it first and foremost to fracture the Democratic coalition." Brian Beutler in Salon.
CASSIDY: What good is Wall Street? "When the banking system behaves the way it is supposed to—as Pandit says Citi is now behaving—it is akin to a power utility, distributing money (power) to where it is needed and keeping an account of how it is used. Just like power utilities, the big banks have a commanding position in the market, which they can use for the benefit of their customers and the economy at large. But when banks seek to exploit their position and make a quick killing, they can cause enormous damage." John Cassidy in The New Yorker.
WALLISON: Get ready for the next housing bubble. "Watt is a good man, but he is a man of the left, and he will use his control of Fannie and Freddie to return to the policies that brought on the mortgage meltdown in 2007 and the financial crisis in 2008...The North Carolina congressman is a consistent, long-time supporter of affordable-housing quotas." Peter J. Wallison in The Wall Street Journal.
STIGLITZ: Saving the euro. "By now, there is a fairly clear understanding of what is required: A real banking union, with common supervision, common deposit insurance, and common resolution; without this, money will continue to flow from the weakest countries to the strongest; some form of debt mutualization, such as Eurobonds." Joseph E. Stiglitz in Project Syndicate.
Books interlude: What Obama will soon be reading.
2. Obamacare surges forward
More signed up for Obamacare in first two days of December than in all of October. "29,000 people have enrolled in coverage through HealthCare.gov since Sunday, when a big set of fixes went into place. That would beat out the 26,000 people who purchased coverage in October...Whether that initial miss will actually matter for total enrollment numbers remains to be seen. My own reporting suggests it really won't: The people out there who want health insurance are pretty hellbent on getting it. I've talked to dozens of insurance shoppers and some who are really frustrated by the technical problems they've encountered." Sarah Kliff in The Washington Post.
Few uninsured young people say they’ll sign up for Obamacare. "[A] Harvard University Institute of Politics poll shows just 29 percent of uninsured 18-to-29-year olds say they will definitely (13 percent) or likely (16 percent) enroll in the Obamacare exchanges. About the same number say they're unlikely to or definitely won't sign up. Another four in 10 say it's a 50-50 proposition." Aaron Blake in The Washington Post.
HealthCare.gov is having trouble signing people up for Medicaid. "Every week, usually on Tuesday, the Centers for Medicare & Medicaid Services sends state Medicaid departments something called a "flat file." These files are sort of similar to the much-discussed 834 transmissions, which the exchange sends to an insurance plan when someone signs up. Except the flat files are for the Medicaid program, and lists people that the exchange thinks -- but hasn't officially determined -- will be eligible for the Medicaid program. And, much like the those 834 transmissions, Medicaid officials say, these flat files are riddled with errors and incomplete information." Sarah Kliff in The Washington Post.
Three things we learned from today’s Obamacare update. "The site had 310,000 visitors Wednesday morning, which is 80 percent higher than where things were last Wednesday morning, Medicare spokeswoman Juile Bataille said. The site has been pretty stable with error rates of 0.6 percent and pages loading in 630 milliseconds." Sarah Kliff in The Washington Post.
Is there a marriage penalty in Obamacare? "Say a couple has a household income of $70,000 with one spouse making $30,000 and the other $40,000. Combined, they are ineligible for a subsidy. But if they were just living together, each would be eligible for a subsidy...The ACA, like the tax code, is complicated, and it sometimes provides a marriage subsidy and a penalty, said Mark Duggan, a health economist at the University of Pennsylvania's Wharton School." Robert Calandra in Kaiser Health News.
Drug-cost surprises lurk inside new health plans. "Americans with chronic illnesses—who are expected to be among the biggest beneficiaries of the health law—face widely varying out-of-pocket drug costs that could be obscured on the new insurance exchanges...Many people with chronic illnesses may find that gold or platinum plans are more cost-effective in the long run than the cheapest-seeming bronze plans, patient advocates say." Melinda Beck in The Wall Street Journal.
Obama tells young heath-care activists, 'stuff that’s worth it is always hard.' ""Just remember, and remind your friends and your peers: Imagine what happens if you get sick. What happens with the massive bills? The people who are running those ads, they're not going to pay for your illness. You're going to pay for it or your family is going to pay for it."" Juliet Eilperin in The Washington Post.
What the Democrats' new Obamacare position is. "The president’s aides said that with fixes in place to the online insurance marketplace, they hoped a daily barrage of more positive messages about the health care law during the next several weeks — some to be delivered by Mr. Obama personally — would help refocus attention on the benefits of the law. Mr. Obama addressed a White House Youth Summit meeting Wednesday, and on Thursday he will talk about how the law prohibits insurance companies from discriminating against people with pre-existing medical conditions...White House officials and congressional Democratic leaders said the effort was intended to get rank-and-file Democrats out of the defensive crouch they had been in for the past two months by countering the barrage of negative stories from Republicans." Jonathan Weisman and Michael D. Shear in The New York Times.
Criminal justice? interlude: These people have been in jail since they were children.
3. Paul Ryan and Patty Murray are basically done
Congress moves closer to a budget deal. "Congressional negotiators are nearing a small-scale budget agreement, possibly by the end of this week...House Republicans had proposed setting discretionary spending levels at around $967 billion for the year that ends Sept. 30, 2014. Democrats had sought $1.058 trillion in budget capacity. Several congressional aides said lawmakers were targeting a budget range close to $1 trillion, but talks remained fluid." Damian Paletta and Kristina Peterson in The Wall Street Journal.
Paul Ryan and Patty Murray think they can raise revenues without raising taxes. "They're accomplishing this amazing feat of budgetary semantics by selling off government assets, auctioning spectrum and tweaking federal employee pensions. The money these policies raise can be categorized as revenues. But none of these policies can be even loosely described as a tax increase. That means Democrats can say the deal wasn't all spending cuts, Republicans can say the deal didn't include any tax increases, and angels can blow their trumpets, for lo, a budget agreement might finally heal this ravaged land. This is evidence, in case any more of it was needed, that Washington's obsession with whether you characterize a particular policy as "cutting spending" or "raising revenues" needs to end." Ezra Klein in The Washington Post.
A budget deal takes shape. "The closer they get to the deadline, the more Republicans and Democrats alike appreciate that even a half-baked deal is better than the status quo. For Republicans, an agreement avoids the possibility of another government showdown, even shutdown, in mid-January; they are still reeling from the debacle in October. And avoiding some of the deep defense cuts, mandated by sequestration, is important to the Republican military hawks...Democrats are pleased that some of the most painful sequestration cuts in discretionary programs for the poor will be replaced." Albert R. Hunt in Bloomberg.
...But it is not yet sealed. "Democratic Sen. Patty Murray and Republican Rep. Paul Ryan met Wednesday as they try to hash out a multi-year budget deal, but no agreement was reached during the one-on-one session in the Capitol, according to multiple sources familiar with the talks. The meeting between the top two negotiators comes more than one week before a Dec. 13 deadline for Murray and Ryan to finish a budget pact that would set spending levels through 2015, while replacing part of the automatic spending cuts known as the sequester." Jake Sherman and John Bresnahan in Politico.
Hagel wants a 20-percent cut in certain Defense personnel. "Defense Secretary Chuck Hagel on Wednesday unveiled details of a plan to save at least $1 billion in personnel costs over five years through a 20 percent reduction in the number of Pentagon staff members who report to him. Civilian and military personnel in the various policy, intelligence, technology and management units that fall under the Office of the Secretary of Defense number about 2,400 today. That would be reduced to fewer than 2,200 by the 2019 fiscal year, Mr. Hagel said." Thom Shanker in The New York Times.
This is just fabulous interlude: Coffee creamer being poured into coffee at 2000 frames per second.
4. They see you when you're sleeping, they know when you're awake
NSA tracking cellphone locations worldwide, Snowden documents show. "The National Security Agency is gathering nearly 5 billion records a day on the whereabouts of cellphones around the world, according to top-secret documents and interviews with U.S. intelligence officials, enabling the agency to track the movements of individuals — and map their relationships — in ways that would have been previously unimaginable. The records feed a vast database that stores information about the locations of at least hundreds of millions of devices, according to the officials and the documents, which were provided by former NSA contractor Edward Snowden. New projects created to analyze that data have provided the intelligence community with what amounts to a mass surveillance tool." Barton Gellman and Ashkan Soltani in The Washington Post.
Explainer: How this all works. The Washington Post.
Journo history interlude: 130 years of the Los Angeles Times page ones.
5. Will 2014 be a great year for the economy?
Fed sees stronger growth ahead. "The U.S. economy expanded at a "modest to moderate" pace in recent months, the Federal Reserve said Wednesday in a report that showed mixed economic conditions across the nation just weeks before a key policy decision by the central bank. The central bank's beige book, which assesses the economic environment in the Fed's 12 districts, cited strength in the U.S. manufacturing sector and consumer spending. Seven districts reported steady growth rates, while four districts indicated a less robust expansion than the others. One region simply said economic activity continued to expand." Sarah Portlock and Eric Morath in The Wall Street Journal.
...They're looking at this and saying, 'May we taper now?' "A run of strong economic data is raising expectations for US jobs numbers due this Friday that will have a crucial influence on when the Federal Reserve chooses to slow its asset purchases from $85bn a month...After the official October jobs report showed an unexpectedly strong 204,000 increase, one question will be whether that is revised downwards, with the Fed more likely to look at average jobs growth over three, six and 12 months than November’s number alone." Robin Harding and Anjli Raval in The Financial Times.
The private sector hired 215,000. "Private employers added 215,000 new jobs to their payrolls last month, according to the payroll processor ADP. It was the biggest rise in the ADP figures in a year and it beat economists’ expectations for a gain of 173,000 jobs. At the same time, the figure for October was revised to 184,000 from 130,000." Reuters.
U.S. new home sales surge. "New-home sales rose 25% in October from the prior month to an annual rate of 444,000, the Commerce Department said Wednesday. That marked the sharpest monthly increase in more than three decades, though it came off a particularly weak September pace. The surge returned sales to the brisk pace seen in the first half of the year before a summer rise in mortgage rates scared off prospective buyers. Sales had tumbled to an average annual pace of 369,000 in July through September, according to revised figures released Wednesday, down from an average pace of 445,000 in the first six months of 2013." Josh Mitchell in The Wall Street Journal.
The wedding markup. "[P]art of the reason that retailers can get away with charging higher prices for wedding-related services is that spouses-to-be probably have stronger preferences for their “special day” than consumers shopping for other kinds of events do. That means they’re less price-sensitive. In the case of gowns, for example, brides probably have much more specific requirements for their own dresses than for the dresses that their bridesmaids will wear, allowing retailers to charge different prices for each, regardless of what material or labor costs go into the respective frocks." Catherine Rampell in The New York Times.
Is there one economic model to rule them all? "There is no single class of macroeconomic models that is best for all questions, at least not yet. The New Keynesian model was built to explain a world of moderate fluctuations in GDP. It features temporary price rigidities, and the macroeconomic aggregates in the model are consistent with the optimizing behavior of individual consumers and producers. When a different world emerged, a large financial shock and the ensuing Great Recession, the model was of little use in guiding policymakers or explaining what had happened. The IS-LM model, on the other hand, was built in the aftermath of the Great Depression to examine precisely the kinds of questions." Mark Thoma in The Fiscal Times.
America’s energy boom has been great for trade. Jobs, not so much. "For the first 10 months of the year, the trade deficit in petroleum products narrowed by $48 billion, a 19 percent decrease. Among non-petroleum goods, the trade balance actually widened by more than $20 billion, a 5.6 percent increase...But what about jobs? There, the direct effects are less dramatic than one might hope. The number of jobs in the oil and gas extraction sector is increasing, just as one might expect. But in the scheme of things, the industry doesn't account for many jobs. There were just under 200,000 jobs in the oil and gas extraction industry in October, and another 304,000 in support activities for oil and gas extraction." Neil Irwin in The Washington Post.
Companies start ditching the suburbs for the cities. "After decades of big businesses leaving the city for the suburbs, U.S. firms have begun a new era of corporate urbanism. Nearly 200 Fortune 500 companies are currently headquartered in the top 50 cities. Many others are staying put in the suburbs but opening high-profile satellite offices in nearby cities, sometimes aided by tax breaks and a recession that tempered downtown rents. And upstart companies are following suit, according to urban planners. The bottom line: companies are under pressure to establish an urban presence that projects an image of dynamism and innovation." Lauren Weber in The Wall Street Journal.
Some big banks are still violating the national mortgage settlement, report says. "A government report said three of the nation’s biggest banks have again violated the terms of the $25 billion national mortgage settlement , a charge that mirrors an earlier study on the landmark agreement to clean up shoddy foreclosure practices. On Wednesday, the court-appointed monitor of the settlement said in a report that Bank of America, JPMorgan Chase and Citigroup continued to mishandle homeowners’ requests for lower monthly loan payments through the first half of the year." Danielle Douglas in The Washington Post.
Reading material interlude: The best sentences Wonkblog read today.
Three things we learned from today’s Obamacare update. Sarah Kliff.
What surprises could climate change have in store for us? Brad Plumer.
Support for stricter gun laws continues to drop. Aaron Blake in The Washington Post.
Student debt load found to vary by college and state. Richard Perez-Pena in The New York Times.
Wonkbook is produced with help from Michelle Williams.