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The budget deal Patty Murray and Paul Ryan are crafting isn't a "grand bargain." It doesn't put the nation's finances on a vastly different path (or even any different path). It doesn't reform the tax code or overhaul Medicare. It doesn't include infrastructure spending or chained-CPI. It doesn't even replace all of sequestration.
But the deal does lift about a third of sequestration's cuts while giving agencies more flexibility to deal with the rest. It does mean the 2014 budget is the work of human hands rather than automatic cuts. It might be a vehicle for Capitol Hill to extend expiring unemployment benefits. And it would be a small but real boost to the economy.
Joel Prakken of Macroeconomic Advisors says the deal "would be a modest boost to GDP growth (relative to sequester). Maybe 1/4 percentage point." Moody's Mark Zandi adds in the possibility of extending unemployment insurance and estimates that "the lift to GDP next year compared to current law is .4. Small, but it matters."
Politically, the deal is a signal that the age of grand bargains is over. Republicans and Democrats recognize that they can't come to a big agreement. What we don't know is if the age of mini-deals has yet begun. This deal could well fail before it's unveiled before Congress. It could well fail in the House of Representatives, where Democrats are pushing for an extension of unemployment benefits and conservative Republicans say they prefer sequestration.
But it could pass, too. And if it does, it might prove a model for the next few years. Republicans and Democrats realize now that they can't get big things done. But they might learn they can get small things done. Sometimes. Maybe.
Wonkbook's Number of the Day: $65 billion. That's the size of the deal Sen. Patty Murray (D-Wash.) and Rep. Paul Ryan (R-Wis.) are haggling over.
Wonkbook's Graph of the Day: The best economic database in the world, FRED, recently did a sleek redesign of its graphing software.
Wonkbook's Top 5 Stories: (1) just a little bit farther for a budget deal; (2) today in 40-times overpriced goods; (3) clear economic skies, at last; (4) the Iran-deal rollout; and (5) a big week ahead for financial regulation.
1. Top story: The last steps to a budget deal
What the budget deal might include. "Discretionary spending levels for 2014 would be set at roughly $1 trillion.... The deal would provide partial relief from sequestration.... The deal would "pay for" that spending through fees and other cuts.... It's unclear whether aid for the unemployed will be in the deal." Brad Plumer in the Washington Post.
How a budget deal might work. "With lawmakers due back in town Tuesday, aides said Ryan and Murray are likely to bypass the committee and take the deal, if finalized, straight to the full House and Senate. Congressional leaders hope to finish work quickly and leave town for the holidays as soon as Friday. Senior aides familiar with the talks say the emerging agreement aims to partially repeal the sequester and raise agency spending to roughly $1.015 trillion in fiscal 2014 and 2015. That would bring agency budgets up to the target already in place for fiscal 2016. To cover the cost, Ryan and Murray are haggling over roughly $65 billion in alternative policies, including cuts to federal worker pensions and higher security fees for the nation’s airline passengers." Lori Montgomery in The Washington Post.
@damianpaletta: Ryan spokesman says budget talks will continue throughout the weekend. "They are making progress," he said.
Congress has a lot to do this year. And not a lot of time left to do it. "A Senate rule change pushed through by Democrats should help ease the way for confirmation of several of President Barack Obama's executive-branch and judicial nominees, even as Republicans still have the power to prolong the process.... Lawmakers indicated last week they had made progress negotiating the first new, five-year farm bill since 2008.... GOP leaders hope to pass legislation preventing a 24% cut to physicians' Medicare payments, a perennial patch known as the "doc fix," which the Senate hopes to tackle as well." Kristina Peterson and Michael R. Crittenden in The Wall Street Journal.
Durbin: Jobless benefits not a budget deal-breaker. ""I don't think we've reached that point where we say this is it, take it or leave it," Durbin said on ABC's This Week. He added that he hoped an extension would be a part of negotiations over a year-end budget agreement. "I certainly hope as part of it that the negotiators will take to heart what the president had to say: there are working families across America that are struggling," Durbin said." Niraj Chokshi in The Washington Post.
Budget negotiators may look to cut from military pensions. "That’s an important question facing House-Senate negotiators as they try to close out a deal this week to avoid another round of sequestration in January and restore some certainty to the appropriations process for the remainder of this Congress. The two sides appear close but Democrats are anxious about the level of savings being sought by Republicans from civilian federal workers. Finding some money on the military side of the equation could lessen this burden and make the package more equitable too from a political standpoint." David Rogers in Politico.
Who's not in favor of a budget deal? These guys, among others. "Rather than raise taxes, Republicans have said they would be open to some new revenue from higher user fees. As a result, one of the main proposals on the table is a doubling of the airline security fee that is charged on each airline ticket from $2.50 to $5. America’s carriers -- as well as some consumer and travel groups -- are already up in arms, and bracing themselves for a hit." James Politi in The Financial Times.
Music recommendations interlude: Steve Miller Band, "Take the Money and Run."
KLEIN: Obamacare’s real promise: if you lose your health-care plan, you can get a new one. "President Obama's critics are right: Obamacare doesn't guarantee that everyone who likes their health insurance can keep it. In some cases, Obamacare is the reason people will lose health insurance they liked. What Obamacare comes pretty close to guaranteeing, though, is that everyone who needs health insurance, or who wants health insurance, can get it. It guarantees that if you lose the plan you liked — perhaps because you were fired from your job, or because you left your job to start a new business, or because your income made you ineligible for Medicaid — you'll have a choice of new plans you can purchase, you'll know that no insurer can turn you away, and you'll be able to get financial help if you need it." Ezra Klein in The Washington Post.
DOUTHAT: Obamacare has a long way to go. "This was the week when liberals decided that it was safe to feel optimistic about Obamacare again.... [L]iberals have apparently decided that just getting things moving in the right direction makes all the difference. Sure, problems persist, crucial errors remain, and confusion probably looms for some customers and insurers in January, when policies are supposed to take effect. But errors can be fixed, money sluiced around, more temporary changes made. The important thing is there will be no immediate political unraveling ... which means that enrollment will keep rising ... which means that by 2016, Obamacare will be a locked-in, impossible-to-repeal feature of the American landscape." Ross Douthat in The New York Times.
GOOLSBEE: Pre-K is a long-term winner. "If we are committed to evidence, though, there's one area where we ought to be able to agree: early-childhood education. Investments in pre-kindergarten education have among the highest payoffs of any government policy, and whatever budget agreement emerges should restore the country's long-standing commitment to early education. The budget-sequester cuts agreed to in 2011, under the guise of saving money, have knocked as many as 70,000 kids out of such programs." Austan Goolsbee in The Wall Street Journal.
RUBIN, ALTMAN AND KEARNEY: Don't make the poor any worse off with food-stamp cuts. "Congress may take up legislation this week to cut food stamps. The Senate passed a bill in June mandating $4 billion in cuts over 10 years; the House version, passed in September, imposes nearly $40 billion in reductions. A conference committee has been charged with resolving these differences. Somehow, this negotiation is occurring amid the worst poverty levels in two decades, a weak overall economy and rapidly falling budget deficits. Under these circumstances, it would be economically and morally unsound to carry out the cuts." Robert E. Rubin, Roger C. Altman and Melissa Kearney in The Washington Post.
Watch: A video editorial on making math more interesting and engaging in public schools. The New York Times.
FELDSTEIN: Saving the Fed from itself. "The Federal Reserve is pursuing a very risky monetary policy.... While doing little to stimulate the economy, the Fed’s policy of low long-term interest rates has caused individuals and institutions to take excessive risks that could destabilize the economy just as it did before the 2007-9 recession. It has pushed up the values of everything from Iowa farmland to emerging-market bonds. Banks are lending to lower-quality commercial borrowers. Households are seeking higher returns by investing in real estate trusts and other high-risk products." Martin S. Feldstein in The New York Times.
WILLIAMS: Is behavioral economics the nanny-state agenda? "If the idea of federal government officials treating you like a child makes you squeamish, you must first understand the rise of “behavioral economics” in politics — a practice that is expanding rapidly with very little public involvement, transparency, or oversight.... [B]ehavioral economics carries serious risks, because it’s not really about helping you achieve your own goals.... [It is] government bureaucrats nudging you away from your preferences and toward theirs." Richard Williams in Politico Magazine.
DIONNE: Return of the working-class hero. "For more than three decades, working-class Americans receded as cultural heroes, replaced in the popular imagination by swashbuckling entrepreneurs, brilliant innovators and shrewd investors who make millions at the touch of a computer key. It was not always this way. In the 1930s, ’40s and ’50s, the people who operated the trains, worked the machines and tended the farms were stars of film and fiction...For the first time in a long time, working people are making their way back into the news." E.J. Dionne in The Washington Post.
Mile High City interlude: The Denver Post has named its first "marijuana editor."
2. Why do doctors spend $2,000 when they could spend $50?
Longread: An effective eye drug is available for $50. But many doctors choose a $2,000 alternative. "Avastin costs about $50 per injection. Lucentis costs about $2,000 per injection. Doctors choose the more expensive drug more than half a million times every year, a choice that costs the Medicare program, the largest single customer, an extra $1 billion or more annually. Spending that much may make little sense for a country burdened by ever- rising health bills, but as is often the case in American health care, there is a certain economic logic: Doctors and drugmakers profit when more-costly treatments are adopted." Peter Whoriskey and Dan Keating in The Washington Post.
In high deductibles, a new source of sticker shock? "The average individual deductible for what is called a bronze plan on the exchange — the lowest-priced coverage — is $5,081 a year, according to a new report on insurance offerings in 34 of the 36 states that rely on the federally run online marketplace. That is 42% higher than the average deductible of $3,589 for an individually purchased plan in 2013 before much of the federal law took effect." Leslie Scism and Timothy W. Martin in The Wall Street Journal.
The problem with a paper Obamacare application. "Federal health officials, after encouraging alternate sign-up methods amid the fumbled rollout of their online insurance website, began quietly urging counselors around the country this week to stop using paper applications to enroll people in health insurance because of concerns those applications would not be processed in time. Interviews with enrollment counselors, insurance brokers and a government official who works with navigators in Illinois reveal the latest change in direction by the Obama administration, which had been encouraging paper applications and other means because of all the problems with the federal website." Kelli Kennedy in The Associated Press.
Top hospitals to be excluded from networks on some exchange plans. "Amid a drive by insurers to limit costs, the majority of insurance plans being sold on the new healthcare exchanges in New York, Texas, and California, for example, will not offer patients’ access to Memorial Sloan Kettering in Manhattan or MD Anderson Cancer Center in Houston, two top cancer centres, or Cedars-Sinai in Los Angeles, one of the top research and teaching hospitals in the country.... Amid these new regulatory restrictions, says Tim Jost, a health policy expert, insurance companies have had to come up with new ways to cut the cost of their products. In this new era, limiting the availability of certain facilities that are seen as too expensive -- in part because they may attract the sickest patients or offer the most cutting edge medical care – is seen as the best way to control costs." Stephanie Kirchgaessner in The Financial Times.
Can quiet optimism replace loud pessimism for Obamacare? "[F]or all [its] problems, people are enrolling. More than 243,000 have signed up for private coverage through the exchanges, according to the Kaiser Family Foundation, and more than 567,000 have been determined eligible for Medicaid since the exchanges opened on Oct. 1. For many, particularly people with existing medical conditions like Mr. Acosta, the coverage is proving less expensive than what they had. Many others are getting health insurance for the first time in years, giving them alternatives to seeking care through free clinics or emergency rooms — or putting it off indefinitely" Abby Goodnough, Katie Thomas, and Reed Abelson in The New York Times.
Phil Schiliro returns to help spearhead White House health-care policy. "The White House is bringing back its former legislative affairs director Phil Schiliro to help oversee its health-care policy efforts. Schiliro, who played an instrumental role in helping secure the passage of the Affordable Care Act while serving as the president's chief congressional liaison between January 2009 and January 2011, moved to New Mexico with his family after leaving the White House." Juliet Eilperin in The Washington Post.
Covered California gave consumers' contact info to agents. "Raising concerns about consumer privacy, California's health exchange has given insurance agents the names and contact information for tens of thousands of people who went online to check out coverage but didn't ask to be contacted. The Covered California exchange said it started handing out this consumer information this week as part of a pilot program to help people enroll ahead of a Dec. 23 deadline to have health insurance in place by Jan. 1." Chad Terhune in The Los Angeles Times.
Maryland, home of crab cakes and dyfunctional Web sites. "Maryland is struggling to fix its troubled health-insurance website more than two months after it opened, showing how technology woes are affecting more than just the federal system. The official in charge of Maryland's insurance marketplace, Rebecca Pearce, resigned late Friday after criticism of her decision to take a vacation in the Cayman Islands during Thanksgiving week. New statistics released Friday showed just a trickle of customers signing up for private coverage in the state...The site has suffered repeated crashes and errors." Jennifer Corbett Dooren in The Wall Street Journal.
HealthCare.gov still screws up 10 percent of enrollments. "Medicare spokeswoman Julie Bataille confirmed that the agency believes about 10 percent of the health law's enrollment files -- known in insurance-speak as 834 transmissions -- have some kind of error.... Bataille said there are essentially three problems affecting the 834 transmissions. There are situations where HealthCare.gov doesn't generate any transmission at all, times when it generates duplicate transmissions and situations where the transmission occurs but contains inaccurate information." Sarah Kliff in The Washington Post.
POLLACK: Republicans have Medicaid’s cost problem completely wrong. "Although I’m curious to see how healthy, affluent professionals would purchase (say) knee and hip replacements if they faced the full costs, this won’t save much money. Most people in a position to make such choices don’t consume much health care. The real money is spent on patients like my relative who is recovering from a nasty stroke. For all sorts of reasons, giving him something other than comprehensive coverage seems unwise." Harold Pollack in The Washington Post.
The case for tolerating e-cigarettes. "Research also suggests that e-cigarettes may be better at helping to sustain smoking cessation than pharmaceutical products like nicotine patches or gums. No one believes nicotine addiction is a good thing, and our qualified support for e-cigarettes is not one we reach lightly.... [H]istory shows that harm reduction — the doctrine that many risks cannot be eradicated and that efforts are best spent on minimizing the resulting harm — has had an important place in antismoking efforts and suggests that regulation is better than prohibition." Amy L. Fairchild and James Colgrove in The New York Times.
Science has shown this is the world's hardest tongue-twister interlude: "Pad kid poured curd pulled cod."
3. Clear economic skies, at last?
Economic drag from fiscal policies is fading. "Washington is finally set to get out of the way of the nation’s economic recovery in 2014, fueling hopes for faster growth after years of sluggishness. No major new rounds of government tax hikes or spending cuts are on deck. Optimism is growing that lawmakers will forge a deal on the federal budget next week and avoid the partisan gridlock that threatened to derail the economy a few months ago. Massive layoffs among state and local governments have largely ended, with many places now adding jobs." Ylan Q. Mui and Neil Irwin in The Washington Post.
And from monetary policy, no taper is expected until next year. "[I]nfluential Fed officials see little harm in postponing the decision, particularly compared with the risks of pulling back too soon. Significant details of the eventual retreat also remain the subjects of unresolved debates, according to the public statements and interviews. And some officials argue that the slow pace of inflation is itself a reason for the Fed to maintain its stimulus campaign." Binyamin Appelbaum in The New York Times.
... But the Fed's exit strategy is almost ready to go. "The nature of the plan under discussion would see the Fed add extra monetary easing by another means, at the same time as winding down asset purchases, with a goal of a broadly neutral effect on financial conditions. The extra stimulus measures which have the most support on the rate-setting Federal Open Market Committee -- which meets next week -- are the provision of more guidance about how the Fed will behave after unemployment falls below its 6.5 per cent threshold, or a cut in the interest it pays on bank reserves. Setting a minimum inflation “floor” for interest rate rises is also possible, but has less backing." Robin Harding in The Financial Times.
Explainer: Economic data coming your way this week. Amrita Jayakumar in The Washington Post.
Long read: A girl in the shadows. "She wakes to the sound of breathing. The smaller children lie tangled beside her, their chests rising and falling under winter coats and wool blankets. A few feet away, their mother and father sleep near the mop bucket they use as a toilet. Two other children share a mattress by the rotting wall where the mice live, opposite the baby, whose crib is warmed by a hair dryer perched on a milk crate." The New York Times.
Long read: Britain's ministry of nudges. "A 24-year-old psychologist working for the British government, Mr. Gyani was supposed to come up with new ways to help people find work. He was intrigued by an obscure 1994 study that tracked a group of unemployed engineers in Texas. One group of engineers, who wrote about how it felt to lose their jobs, were twice as likely to find work as the ones who didn’t. Mr. Gyani took the study to a job center in Essex, northeast of London, where he was assigned for several months. Sure, it seemed crazy, but would it hurt to give it a shot? Hayley Carney, one of the center’s managers, was willing to try." Katrin Bennhold in The New York Times.
WTO reaches global trade deal. "The agreement is a milestone for the 159 members of the W.T.O., which was created in 1995. It rescues the W.T.O. from the brink of failure and will rekindle confidence in its ability to lower barriers to trade worldwide after 12 years of fruitless negotiations. The deal would speed the passage of goods through customs. Analysts estimate that it could eventually bolster the world economy by billions of dollars and create more than 20 million jobs, mostly in developing countries." Reuters.
Obama and the politics of economic inequality. "Larry Bartels of Vanderbilt University, one of the nation’s leading political scientists, looked at the 2012 election, which was fought over many of the themes and issues Obama highlighted again last week. Bartels concluded that the broad issue of inequality added 2 to 3 percentage points to Obama’s share of the overall vote and about 1 point in the battleground states. But his findings came with a caveat: Obama benefited less because of the specific economic policies he championed than because many voters saw Romney as an out-of-touch plutocrat." Dan Balz in The Washington Post.
Meanwhile in Western Europe interlude: The legal-prostitution experiment may be coming to an end.
4. The Iran-deal rollout
Obama defends Iran nuclear deal to pro-Israel audience. "President Obama on Saturday told an influential audience in Washington that his pursuit of a comprehensive diplomatic deal to end Iran’s development of a nuclear weapon is as likely to fail as succeed, but he defended it as the best option to protect U.S. and Israeli national security with respect to the issue. “We have to be vigilant about maintaining our security postures, not be naive about the dangers that an Iranian regime poses, fight them wherever they’re engaging in terrorism or actions that are hostile to us or our allies,” Obama said at a forum hosted by Haim Saban, an influential Israeli businessman who founded a Middle East center bearing his name at the Brookings Institution." Zachary A. Goldfarb in The Washington Post.
Hagel looks to reassure Persian Gulf allies. "[Defense Secretary Chuck] Hagel announced Saturday a new push to have the Gulf Cooperation Council, a group of energy-rich Arab kingdoms, work together to collectively purchase new early-warning systems from the U.S. He said the diplomatic push by the U.S. to roll back Iran's nuclear program shouldn't be misinterpreted, and that America remains committed to the defense of its allies in the region." Julian E. Barnes in The Wall Street Journal.
5. This week is huge for financial regulation in the U.S.
Volcker rule will give banks discretion. "In a sign of how focused Washington is on the strength of the final rule, departing Commodity Futures Trading Commissioner Bart Chilton said he will stay at the agency through at least Tuesday to vote on the regulation and ensure the measure is strict. Mr. Chilton, who has been pushing for even tougher language in the final rule on the types of hedges banks can engage in, said he was asked by several lawmakers to see the rule through its completion. It's unclear how he will vote. The regulation is expected to include narrow boundaries that restrict banks from buying or selling securities clearly designed to realize profits for the firm, government officials said. Certain behavior will be explicitly banned by the rule, according to a Treasury official, including the type of trades that led to the $6.5 billion "London whale" loss at J.P. Morgan Chase & Co. But the regulation will leave some wiggle room for banks, allowing the firm and the regulators to determine whether some activity is appropriate...Banks will be expected to use their judgment in determining whether an investment that may skate along the line of being a risky bet is a proprietary trade or true market making, these officials said." Deborah Solomon, Andrew Ackerman, and Scott Patterson in The Wall Street Journal.
These bankers, apparently, are not too big to jail. "At a time when the government is being criticized for not holding senior bank executives liable for crisis-era crimes, a little-known federal agency is compiling a growing list of criminal convictions. Since 2008, the Office of the Special Inspector General for the Troubled Asset Relief Program has pursued criminal charges against 107 senior bank officers, most of whom have been sentenced to prison. Created to supervise the government bailout of the auto and financial industries, the agency has found dozens of cases of bank executives who misused bailout funds. SIGTARP has a staff of 170, a budget of $41 million and an enforcement track record that rivals agencies twice its size. The agency’s work has resulted in $4.7 billion in restitution paid to the government and victims. Lawmakers are holding SIGTARP up as a model and questioning why other agencies are not producing similar results." Danielle Douglas in The Washington Post.
Reading material interlude: The best sentences Wonkblog read today.
Republicans have Medicaid’s cost problem completely wrong. Harold Pollack.
Whose sarin? Seymour M. Hersh in The London Review of Books.
Obama judicial nominees poised to join powerful D.C. Circuit Court of Appeals. Timothy M. Phelps in The Washington Post.
Sugar protections prove easy to swallow for lawmakers across political spectrum. Peter Wallsten and Tom Hamburger in The Washington Post.
Wonkbook is produced with help from Michelle Williams.