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Wonkbook: Deal or no deal, Ryan and Murray?

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

(Photo by Scott Applewhite/AP)
(Photo by Scott Applewhite/AP)

Wonkbook's Number of the Day: $30 billion. That's the amount of new revenue Paul Ryan and Patty Murray want to raise in their new budget deal by raising fees, including those on air travel.

Wonkbook's Graph of the Day: How the EITC has pushed up the true minimum wage, via David Neumark.

Wonkbook's Top 5 Stories: (1) it's deal-or-no-deal time on the budget; (2) The Volcker rule is being voted on today; (3) Obamacare is winning again; (4) hard money, hard hearts and soft heads; and (5) NSA reform gains political muscle.

1. Top story: Deal or no deal, Ryan and Murray?

Congress, with the clock ticking, nears deals on bills. "[T]he House and Senate began their final week of the year together in Washington on the verge of breakthroughs on a new defense policy bill and budget agreement, deals that could permit lawmakers to boast of modest year-end successes and enjoy their first extended Christmas break since at least the start of the Obama presidency.... Work appeared to be complete on the basic package, a plan to partially repeal sharp spending cuts known as the sequester in fiscal 2014 and 2015 and cover the cost with roughly $65 billion in alternative savings." Ed O'Keefe and Lori Montgomery in The Washington Post.

Why the timing is right for a budget deal. "It was a bit of strategy, and some luck, that created the political environment that begs for the kind of short-term accord that senior House and Senate aides expect will get rolled out this week. First, Murray and Ryan decided early on that their talks -- conducted mostly by staff, with some involvement by House and Senate leadership -- would not include structural changes to social safety net programs like Medicare, Medicaid or Social Security. Democrats said they would not push for raising taxes. With these thorny issues left on the sideline, a deal then wasn't terribly difficult to envision: The pair is seeking to set spending levels and ease the blow of the sequester by shaving roughly $60 billion to $65 billion from the edges of federal programs and roughly $30 billion in revenue from tacking on additional fees to airline tickets and increasing other user fees." Jake Sherman and John Bresnahan in Politico.

@samsteinhp: the original Paul Ryan budget envisioned FY 2014 spending at $1.095t. This emerging deal MIGHT get it to $1.0t.

Budget talks worry those not in the room. "Senate Republicans and House Democrats are learning the details of a possible deal largely through the media. For Republicans, their unease is caused by news that domestic spending may surpass existing caps, fueled by an increase in fees on government services. House Democrats are growing angry over the increased likelihood that federal workers' benefits are going to be cut and the possible exclusion of unemployment insurance.... The fear among Republicans is that there may be another flare of intraparty war if the budget deal trades a spending increase now for savings later, uses fee increases to increase spending rather than for deficit reduction or does not adhere to the $2.1 trillion in savings over 10 years as established by the Budget Control Act." Burgess Everett and Ginger Gibson in Politico.

@damianpaletta: Ryan/Murray facing lots of pressure from left and right. It will have to run the gauntlet to survive.

...Heritage Action is already a no. ""Heritage Action cannot support a budget deal that would increase spending in the near-term for promises of woefully inadequate long-term reductions," the group said in a statement. "While imperfect, the sequester has proven to be an effective tool in forcing Congress to reduce discretionary spending, and a gimmicky, spend-now-cut-later deal will take our nation in the wrong direction."" Sahil Kapur in Talking Points Memo.

The budget deal is going to give frequent flyers a bit of a pinch. "Commercial fliers in the U.S. typically pay $2.50 a flight for a "September 11th security fee," instituted about a decade ago to help fund the then-newly formed Transportation Security Administration. Any budget deal will almost certainly increase that fee, according to officials close to congressional negotiations. Both House Republicans and the Obama administration have suggested charging fliers $5 per one-way trip, whether it is nonstop or requires a connection. Today fliers pay $2.50 on nonstop trips and $5 on trips that require a connection, as each leg of the journey carries a $2.50 fee. The Obama administration has also proposed gradually increasing the one-way fee to $7.50 by 2019." Jack Nicas in The Wall Street Journal.

@conncarroll: if Paul Ryan puts his name in a deal that spends more than $1 trillion, his 2016 hopes are over.

Here's what sequestration will look like in 2014 if the budget talks fail. "In 2013, the federal government spent $986 billion on discretionary programs, all told. That's scheduled to shrink to $967 billion in 2014 under current law. Virtually all of the additional cuts next year will come out of the military and other defense programs.... In the abstract, many conservatives favor those lower spending levels. But Republicans were having trouble putting those cuts into practice when it came time to slice up specific programs." Brad Plumer in The Washington Post.

While we're talking about deals: We have a deal on a host of military issues, too. "While the proposed legislation includes what many on Capitol Hill see as expansive changes to laws governing sexual assault, it stops well short of the more far-reaching changes advocated by many victims and Senator Kirsten E. Gillibrand.... The new measure would prevent commanding officers from overturning sexual assault verdicts, expand a special victims counsel program for the survivors of sexual assault throughout the military and make retaliation for reporting assault a crime. Significantly, for criminal complaints, including sexual assault, courts of investigation -- known as Article 32 hearings -- would act more like preliminary hearings looking for probable cause to pursue a court-martial" Jonathan Weisman and Jonathan Steinhauer in The New York Times.

@jimantle: Ryan Murray would actually be a good name for a politician.

One more looks near: the doc fix. "An annual push by doctors to delay cuts to Medicare patient fees is afoot, but this time the prognosis is better for a permanent solution to the long-festering problem. The Senate Finance Committee is scheduled to vote Thursday on "doc fix" legislation that would permanently change how Medicare providers are paid by the government for their services. Similar legislation was unanimously passed by the House Energy and Commerce Committee in July." Amy Schatz in The Wall Street Journal.

Music recommendations interlude: Violin covers of popular music are amazing. Try David Wong's "Get Lucky," "Bastille, "Call Me Maybe." Or Jun Sung Ahn's "Wrecking Ball."

Top opinion

PODESTA: Income inequality's ripple effect. "The fact is that we don't know nearly enough about what high inequality means for economic growth and stability. We need a better understanding of how inequality affects demand for goods and services and macroeconomic and financial imbalances. We are in the dark on whether and how inequality affects entrepreneurship, or whether it alters the effectiveness of our economic and political institutions, or how it affects individuals' ability to access education and productively employ their skills and talents." John D. Podesta in Politico.

Wonkbook note: Yep, that's the same John Podesta who's joining the White House.

BARTLETT: Rethinking the idea of a basic income for all. "In 1978, the negative income tax received a critical blow when reports from the government experiments came in and showed that the impact on work effort was more severe than had been anticipated, with work hours by those receiving government grants falling sharply.... [I]t is worth remembering that we already have considerable experience with the basic income payment in Alaska. Since 1976, it has had a permanent fund to collect revenues from oil production and invest them, paying out an annual dividend to all state residents." Bruce Bartlett in The New York Times.

PONNURU: Republican inflation paranoia is political suicide. "A hard-money political strategy also has three risks Republicans should bear in mind. The first is that it will cost them elite support.... Second, hard-money politics can make Republicans seem indifferent to unemployment. By law, the Fed must try to keep both inflation and unemployment low. The Republicans' chief legislative proposal on monetary policy is to have the Fed drop the employment goal.... The third and biggest risk is that Republicans would eventually gain power and then impose an excessively tight policy. Errors of this sort have in the past proved disastrous -- not only economically but also, for conservatives, politically." Ramesh Ponnuru in Bloomberg.

YGLESIAS: Raise the gas tax. "The idea is a total nonstarter in Congress and politically toxic to boot. Even bothering to discuss it is somewhere between pointless and insane. It's manna from heaven for Republicans who've been on the defensive over taxing the rich and would love to shift the conversation to Blumenauer's plot to make the middle class pay more at the pump. It also happens to be a great idea.... In a useful 2007 paper, Ian Parry, Margaret Walls, and Winston Harrington concluded that the full social cost of burning a gallon of gasoline is a staggering $2.10--far, far higher than what even Blumenauer would charge.... Most strikingly, they calculated that the local pollution cost alone - -that is, the cost if you completely ignore climate change, traffic congestion, and road deaths -- is 42 cents." Matthew Yglesias in Slate.

GERSON: The Pope is right about capitalism, and the Right is wrong. "Those surprised that Catholic social thought is incompatible with libertarianism haven't been paying attention -- for decades. Popes John Paul II and Benedict XVI said the same. And all warned of the danger when a mode of economic exchange becomes a mind-set. Absent a moral commitment to human dignity, justice and compassion, capitalism is conducive to materialism, individualism and selfishness. It is a system that depends on virtues it does not create." Michael Gerson in The Washington Post.

BROOKS: Thinking for the future. "[O]ur challenge for the day is to think of exactly which mental abilities complement mechanized intelligence. Off the top of my head, I can think of a few mental types that will probably thrive in the years ahead." David Brooks in The New York Times.

COHN: Yes, Obamacare is redistribution. But from whom? "Republicans and their allies are making a lot of different arguments about what Obamacare is doing to America. It's hiking premiums! It's making people lose their doctors! It's destroying Medicare! But if you listen closely, you'll discern a common theme - -a message aimed squarely at the middle class: Obamacare is taking away your money or health insurance, and giving it to somebody else.... Republicans aren't wrong when they say Obamacare amounts to redistribution. But they seem to have a pretty distorted view of how that redistribution works." Jonathan Cohn in The New Republic.

NEUMARK: The minimum wage ain't what it used to be. "The decline in the real value of the minimum wage is indisputable.... There has been a significant policy shift, however, in how to guarantee a minimally acceptable income to families with low-wage workers. In particular, the earned-income tax credit was instituted in 1976, and its generosity has since been expanded considerably.... So suggesting that federal policy addressing low-wage work and low-income families has somehow failed because the minimum wage has not kept pace with inflation ignores the fact that we have moved away from a focus on the minimum wage -- a policy with many flaws -- and toward the earned-income tax credit." David Neumark in The New York Times.

SEITZ-WALD: How Adam Lanza wrecked Obama's second term. "The Connecticut massacre set in motion a cascade of events that led the White House to burn through its only real window to accomplish its goals. The month before the shooting, Obama had won a convincing reelection and a modest popular mandate. One major liberal wish-list entry, immigration reform, seemed not only within reach but almost inevitable." Alex Seitz-Wald in National Journal.

NOCERA: The Berkeley model. "It's the other schools in the California system where the harder questions about the role of a public university need to be asked. Like Berkeley, they have seen their state funding slashed. But unlike Berkeley, it hasn't been so easy for them to bounce back. Should they use more online courses? Change their mix of research and teaching? Aim for the same students as Berkeley, or focus on educating the middle class? The real issue is: how do you make college affordable again?" Joe Nocera in The New York Times.

Wonkbook votes for Snowden interlude: Time has released its list for the top 10 finalists for "Person of the Year."

2. The Volcker rule is being voted on today

What's in the Volcker rule. "In recent weeks, regulators who favored a more stringent version of the rule pressed for changes that they think will make it harder for banks to evade the regulation. The version of the rule reviewed by The Times shows that, in some areas, the hard-liners got their way. The rule, for example, includes new wording aimed at the sort of risk-taking responsible for a $6 billion trading loss at JPMorgan Chase last year...To prevent such blowups, according to the version of the rule reviewed by The Times, it will require banks to identify the exact risk that is being hedged. The risks, the rule said, must be 'specific, identifiable' rather than theoretical and broad." Ben Protess and Peter Eavis in The New York Times.

What Wall Street is looking for in the Volcker rule. "Wall Street is anxiously awaiting federal regulators' expected approval Tuesday of a sweeping rule that would restrict banks' ability to make risky investments with their own money. The centerpiece of the 2010 Dodd-Frank financial overhaul law, known as the "Volcker rule," was stalled for years amid government infighting and intense lobbying by banks to weaken it. But after several drafts, policymakers are expected to unveil a tougher-than-expected rule on "proprietary trading" that could have a significant impact on the operations of financial firms." Danielle Douglas in The Washington Post.

Could the Volcker rule crush Goldman Sachs? "Goldman has traditionally made more of its money trading than other Wall Street firms. And a big drop in its currencies business in the past quarter has reignited concerns about Goldman's trading operations. Graseck says that Goldman generates about half of its revenue from trading. Another 17% of its revenue comes from direct investments, some of which are made through Goldman private equity or hedge funds. The Volcker Rule is expected to significantly limit how much money banks can put in those investment vehicles as well. And my colleague Dan Primack has detailed how Goldman has been slower than other banks to exit those investments. All told, Graseck says Goldman is at risk of losing 25% of that revenue because of the Volcker Rule, or nearly 17% of its overall revenue." Stephen Gandel at Fortune.

Mike Konczal's guide to whether the Volcker rule is tough enough:

SEC wants to do a sweeping review of stock trading rules. "The main US securities regulator is facing fresh pressure to undertake a large-scale review of the rules governing the US equity markets following a call from another of the agency's five main commissioners. Michael Piwowar, the newest of the five comissioners at the Securities and Exchange Commission, also became the third to call formally for a review of US market structure in recent weeks." Philip Stafford and Arash Massoudi in The Financial Times.

NYC interlude: A soundscape of the 1920s.

3. Obamacare keeps improving just keeps getting better. "Click. Next page. Click. Next page. The website,, was working so well that Ms. Egozi, who oversees the 45 navigators in eight locations who help consumers enroll in health plans, said her team gave the system an 8 on a scale of 1 to 10, meaning that most people got as far as selecting a plan or taking home information to select a plan. It felt like a champagne moment." Lizette Alvarez and Jennifer Preston in The New York Times.

Republicans finally notice that Obamacare's problems will be their own reform's problems, too. "Democrats' politically bruising experience over the Obama health law has prompted leading Republican policy experts to rethink one of the party's own long-standing ideas about remaking the health-care system.... Some Republicans are now worried that a GOP proposal to begin taxing health-care benefits offered through employers -- which would affect some 160 million Americans -- would cause market disruptions far more severe and expose the party to its own political peril.... [James Capretta] and others recommend capping the tax break available for health insurance through work and finding other ways to pay for additional tax breaks to those who buy insurance on their own." Laura Meckler in The Wall Street Journal.

Your premium may be low. But other costs? High. "Until now, it was almost impossible for people using the federal health care website to see the deductible amounts, which consumers pay before coverage kicks in. But federal officials finally relented last week and added a "window shopping" feature that displays data on deductibles. For policies offered in the federal exchange, as in many states, the annual deductible often tops $5,000 for an individual and $10,000 for a couple." Robert Pear in The New York Times.

Podesta is going back to work for Obama. "President Obama, after a rocky year that leaves him at the lowest ebb of his presidency, is bringing into his White House circle the longtime Democratic strategist John D. Podesta, a former chief of staff for President Bill Clinton. Mr. Podesta, who has agreed to serve as counselor for a year, led Mr. Obama's presidential transition in 2008 and has been an outside adviser since then. He also has occasionally criticized the administration, if gently, from his perch as the founder and former president of the Center for American Progress, a center-left public policy research group." Jackie Calmes in The New York Times.'s problems don't mean Obamacare will fail. "For Obamacare's supporters, the IT problems really were IT problems. Now that the Web site is working the law will likely work, too. For Obamacare's critics, however, the problems with Healthcare.Gov confirmed that Obamacare was a top-to-bottom train wreck. The Web site's improvements -- if they're even real -- will simply give way to new, and probably worse, problems with the law." Ezra Klein in The Washington Post.

Q&A: Your Obamacare questions, answered. Sarah Kliff in The Washington Post.

This $2,000 drug says everything about our messed up health-care system. "very incentive in our health-care system preferences Lucentis, the $1,000 drug, over Avastin. Because it's a more expensive drug, doctors get a higher administrative fee when they give it to patients.... A small majority of doctors -- 56 percent, according to Whoriskey and Keating's analysis -- do use Avastin now to treat macular degeneration. But the sizable [minority] that don't -- the ones who are following the incentives in the health-care system -- mean an extra $1 billion in federal health-care bills." Sarah Kliff in The Washington Post.

Poll: 30 percent delay costly medical treatment. Rebecca Shabad in The Hill.

AIDS advocates say drug coverage in some marketplace plans is inadequate. "Some plans sold on the online insurance exchanges, for instance, don't cover key medications for HIV, or they require patients to pay as much as 50 percent of the cost per prescription in co-insurance -- sometimes more than $1,000 a month.... [T]hey acknowledge that to keep premiums low, they must restrict the use of some costly drugs if there are alternatives. And they say that when high-priced medications must be used, it's reasonable to expect patients to pick up more of the cost." Ariana Eunjung Cha in The Washington Post.

Extraterrestrial interlude: NASA Curiosity rover discovers evidence of freshwater Mars lake.

4. Hard money, hard hearts and soft heads

Conservatives keep being wrong about monetary policy. "Republicans will use the expected vote this month on the nomination of Janet Yellen to chair the Federal Reserve as one more chance to slam the Fed's easy money policies. But there's one big rub to their argument: Their predictions about the impact of these policies since they first began in late 2008 have been wrong so far.... [T]hanks to the tea party influence in the GOP -- in particular the Fed-bashing Rand and Ron Paul wing of the party -- ripping the Fed and the bigger role it is playing in the economy has become more a litmus test for party loyalty, regardless of whether the dire predictions have come true." Kate Davidson in Politico.

Interview: Charles I. Plosser, the conservative Philadelphia Fed president. Binyamin Appelbaum in The New York Times.

Meanwhile, low inflation is becoming a major headache. "[O]ut of the 25 developed economies that publish regular data on Haver Analytics, only Iceland is currently experiencing an inflation rate that could be considered markedly too high by any of these measures. The vast majority of developed countries are currently reporting a headline inflation rate of below 1.5 per cent, with the trend in virtually all of them headed downwards. Five countries, all in the the troubled region of the euro area, are experiencing outright deflation." Gavyn Davies in The Financial Times.

Study: Retirees can explain the drop in the labor force since 2012. "A fairly new paper from Shigeru Fujita of the Federal Reserve Bank of Philadelphia argues that a growing number of discouraged workers were indeed a big factor in shrinking the labor force between 2007 and 2011. But that's less true today. An uptick in retirements are what's driving the continuing fall in labor-force participation since the start of 2012. How does he figure? Fujita sifted through all the Census micro-data on the reasons people gave for not participating in the labor force" Brad Plumer in The Washington Post.

Study: U.S. poverty rate decreased over past half-century thanks to safety-net programs. "Government programs such as food stamps and unemployment insurance have made significant progress in easing the plight of the poor in the half-century since the launch of the war on poverty, according to a major new study.... According to the new research, the safety net helped reduce the percentage of Americans in poverty from 26 percent in 1967 to 16 percent in 2012. The results were especially striking during the most recent economic downturn, when the poverty rate barely budged despite a massive increase in unemployment." Zachary A. Goldfarb in The Washington Post.

Americans are regaining the wealth they lost in the recession. "The stage could be set for stronger economic growth next year, as a surging stock market and run-up in home values have helped Americans recoup nearly all the wealth they lost in the recession. The net worth of U.S. households and nonprofit organizations - -the values of homes, stocks and other assets minus debts and other liabilities - -rose 2.6%, or about $1.9 trillion, in the third quarter of 2013 to $77.3 trillion, the highest on record, according to the Federal Reserve.... The improving net-worth numbers mask that wealth is unevenly distributed among the affluent, who tend to own stocks, and the less affluent, who were disproportionately hit by the housing crash because their biggest asset tends to be their home." Neil Shah in The Wall Street Journal.

Good news! Americans may be done deleveraging. "The increase in mortgage debt in the third quarter of 2013, revealed in new data out from the Federal Reserve on Monday, isn't anything epic. The $10.3 billion increase is only about one-tenth of 1 percent. Personal income rose more than that in the quarter, which means the ratio of mortgage debt to incomes continued its long, gradual decline. This is actually one of the areas of progress in the economy over the last few years.... Americans' household finances look a great deal better than they did just a few years ago." Neil Irwin in The Washington Post.

Government sells remaining stake in GM. "The Treasury Department sold its final shares of the Detroit auto giant on Monday, recovering $39 billion of the $49.5 billion it spent to save the dying automaker at the height of the financial crisis five years ago.... Without the bailout, the country would have lost more than a million jobs, and the economy could have slipped from recession into a depression, Treasury Secretary Jacob Lew said on a conference call with reporters." The Associated Press.

Landscape of foreign direct investment shifts. "Of all the new foreign direct investment, or FDI, that flowed across borders last year, much in the form of mergers and acquisitions, 12% went to the U.S. The good news is that the U.S. was still by far the biggest single recipient of such inflows--but the trend line is troubling and has been for some time. As recently as 2000, the U.S. attracted 22% of new global foreign direct investment.... Executives from 100 firms said that when deciding where to invest, their company's key considerations included workforce skills, the corporate tax system and trade policy." Brenda Cronin in The Wall Street Journal.

Is scarcity over? "Think about the fracking techniques that have turned American prairies into fertile oil fields, improvements in crop breeding that have increased agricultural yields, chemical processes that extract minerals from waste rock, and drill bits that reach ever further into the ground. Every time we stare at a potential shortage, like rubber and latex in World War II, some scientist figures out a new way to make it more cheaply." Lydia DePillis in The Washington Post.

This is so great interlude: Competitive teeter-tottering.

5. NSA reform gains political muscle

A senator plans legislation to narrow authorities' cell phone data requests. "Senator [Edward J.] Markey said he planned to introduce legislation in the coming weeks that would provide stronger privacy protections for consumers, including the requirement of a warrant for police to get cellphone location information from a carrier as proof that it would help uncover evidence of a crime.... The carriers devote a significant amount of resources to dealing with requests from law enforcement. For example, AT&T said in its response that it had a staff of 100 full-time employees working seven days a week handling responses. It received $10.3 million in reimbursement for law enforcement responses last year." Brian X. Chen in The New York Times.

Major tech companies unite to call for new limits on surveillance. "Eight of the nation's largest technology companies called on President Obama and Congress on Monday to impose strict new curbs on surveillance that, if enacted, would dramatically reshape intelligence operations that U.S. officials have portrayed as integral to the war on terrorism.... In a letter to U.S. leaders published in several newspapers Monday, the coalition calls for an end to bulk collection of user information -- such as e-mail, address books and video chats -- and for the enactment of significant new protections when courts consider specific surveillance requests.... In addition to Microsoft and Google, the signers are Apple, Facebook, LinkedIn, Yahoo, AOL and Twitter." Craig Timberg in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

What happens when a union starts acting like a corporation? Lydia DePillis.

This $2,000 drug says everything about our messed up health-care system. Sarah Kliff.

Is scarcity over? Lydia DePillis.

Your Obamacare questions, answered! Sarah Kliff.

Study: Retirees can explain the drop in the labor force since 2012. Brad Plumer.

Here's what sequestration will look like in 2014 if the budget talks fail. Brad Plumer.'s problems don't mean Obamacare will fail. Ezra Klein.

Good news! Americans may be done deleveraging. Neil Irwin.

Et Cetera

Congress reauthorizes ban on plastic guns. Ed O'Keefe in The Washington Post.

Got tips, additions, or comments? E-mail me.

Wonkbook is produced with help from Michelle Williams.



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