Wonkbook's Graph of the Day: Inflation is still not a thing to worry about.
Wonkbook's Top 5 Stories: (1) What's next for Ryan-Murray; (2) bye bye, Bernanke; (3) don't fear death spirals; (4) all aboard the NSA-reform train; and (5) advocates hunt for hope on immigration reform.
1. Top story: Ryan-Murray's unfinished business
Bipartisan budget deal clears Senate procedural hurdle. "67 senators voted to advance the measure in hopes of ending nearly three years of political gridlock over the federal budget. Despite the opposition of conservative advocacy groups and late-breaking concerns about proposed reductions to military pensions, 12 Republicans joined all 55 members of the Senate Democratic caucus in voting to proceed to a final vote, expected to occur Wednesday evening." Lori Montgomery and Ed O’Keefe in The Washington Post.
Explainer: Here’s what’s in the budget deal the Senate’s voting on. The Washington Post.
Parties' budget haggling turns to specifics. "The budget bill provides $520 billion for military programs and $492 billion for domestic programs—both about $22 billion more than would have been allowed if the full sequester had taken effect in January...On the domestic front, the parties bring vastly different priorities, which were clear earlier this year when the House and Senate committees tried to draft appropriations bills. For example, the Senate's environmental-spending legislation would have provided about $8.5 billion for the Environmental Protection Agency, $3 billion more than the bill drafted by House Republicans." Janet Hook in The Wall Street Journal.
@costareports: As Ryan moved toward a small deal on budget, McConnell was eyeing a larger deal, deal w/ entm ref for seq. Didn't want to buckle on $967b
Reed offers three-month unemployment insurance extension. "Sen. Jack Reed (D-R.I.) called on the Senate to vote for at least a three-month extension of unemployment insurance before leaving for the holiday. “This safety net is really there not just for [the unemployed] but everyone,” Reed said on the Senate floor Tuesday. “It is critical for our economy.” Some liberal lawmakers are upset that Congress is set to adjourn for the year without extending unemployment insurance benefits that expire Dec. 28." Ramsey Cox in The Hill.
It's not great. But hey, look, it's a reprieve from D.C. paralysis. "Skeptics forecast only a temporary lull, a calculated cease-fire in the partisan wars motivated in part by the desire of Republicans to avoid the political damage of the recent government shutdown and to not distract from the mangled kickoff of Mr. Obama’s health care exchanges. Another deadline on raising the debt ceiling by next spring could reignite the trench warfare. After all, many of the structural impediments to compromise remain, and philosophical divisions have hardly disappeared." Peter Baker and Jonathan Weisman in The New York Times.
@grossdm: New rule: you can't approve spending levels in a budget and then turn around the same week and say you won't actually fund it
Congress is likely to cut another $8 billion from food stamps. "Senate Agriculture Committee Chairman Debbie Stabenow (D., Mich.) told reporters Tuesday that the top four negotiators are "very close" to coalescing around a framework for the first new farm bill since 2008 and have "pretty much" agreed on spending levels for the nutrition programs, the most politically contentious component of the legislation." Kristina Peterson in The Wall Street Journal.
Meanwhile, a loophole in the estate tax saves the wealthy $100 billion. "Federal law requires billionaires such as Adelson who want to leave fortunes to their children to pay estate or gift taxes of 40 percent on those assets. Adelson has blunted that bite by exploiting a loophole that Congress unintentionally created and that the Internal Revenue Service unsuccessfully challenged. By shuffling his company stock in and out of more than 30 trusts, he’s given at least $7.9 billion to his heirs while legally avoiding about $2.8 billion in U.S. gift taxes since 2010, according to calculations based on data in Adelson’s U.S. Securities and Exchange Commission filings...Hundreds of executives have used the technique, SEC filings show. These tax shelters may have cost the federal government more than $100 billion since 2000, says Richard Covey, the lawyer who pioneered the maneuver." Zachary R. Mider in Bloomberg.
Paul Ryan, Chairman of the House Ways and Means Committee. How do you like the sound of that? "Paul Ryan will seek to become the next chairman of the Ways and Means Committee, a move that would bring instant star power to the cause of tax reform while complicating his presidential ambitions. The House Budget Committee chairman intends to replace Chairman Dave Camp (R-Mich.) when term-limit restrictions force Camp to step down in 2015, Ryan told The Wall Street Journal." Brian Faler in Politico.
@jimantle: After McConnell and Cochran voted against the Ryan-Murray budget deal, their primary challengers issue statements saying they took too long.
Who pays the taxes? And who gets the benefits? "[CBO data] show that the tax and transfer system has a powerful redistributive effect, raising the share of post-tax and transfer income for those at the bottom and reducing it for those at the top. Those in the bottom 20 percent of households had 2.3 percent of all market income, such as wages and private pensions, but received more than a third of all Social Security and Medicare benefits and almost half of other transfers like Medicaid and unemployment compensation. The effect of these programs is to quadruple the share of post-tax and transfer income going to those in the lowest quintile." Bruce Bartlett in The New York Times.
Music recommendations interlude: M. Ward, "I Get Ideas," 2012.
KLEIN: Why Obama should worry. "The latest Washington Post-ABC News poll asked respondents whether they trust Obama or the Republicans in Congress to do a better job "coping with the main problems the nation faces over the next few years." Forty-one percent said they trusted Obama. Forty-one percent said they trusted Republicans in Congress. A year ago, when pollsters asked the same question, Obama won 50 to 35. That he's now tied not just with Republicans, but with congressional Republicans two months after they shut down the government, shows how much damage the roll-out of the Affordable Care Act has done to perceptions of his administration's competence." Ezra Klein in The Washington Post.
SOLTAS: North Carolina crushed the unemployed. Next, the other 49 states will. "The state is experiencing the largest labor-force contraction it's ever seen -- 77,000 fewer people were working or searching for work this October than a year ago. This should, but won’t, settle a partisan debate. Cutting unemployment insurance apparently hasn’t encouraged the unemployed to look harder for work: It has caused them to drop out of the labor force altogether...Ron Pringle, a food-bank director who oversees seven counties and 230 organizations in the state’s southeast, says they’ve seen on average a 17 percent increase in need since last year." Evan Soltas in Bloomberg.
Opinion interview: How a long forgotten debate between Thomas Paine and Edmund Burke explains American politics, with Yuval Levin. Ezra Klein in The Washington Post.
BERNSTEIN: Lessons from the Great Recession. "What might we have done differently? First, like the UK and Europe, U.S. fiscal policymakers—as distinct from those at the Federal Reserve—embraced austerity measures well before their time...[T]he more directly stimulus measures are tied to job creation the better, and that militates against devoting too many resources to tax cuts. About one-third of the Recovery Act went to lowering taxes, and there’s a slip between the cup and the lip there." Jared Bernstein for the London School of Economics blog.
EDSALL: Is the safety net just masking tape? "What are some of policies and programs that progressives contend would produce growth, strengthen the political and economic leverage of workers, and revive opportunity?...Some more expansive structural proposals include a universal basic income; a sharp increase in top tax rates including on income from capital gains; raising the minimum wage much higher; an integrated social welfare system; trade agreements to protect workers and the environment; labor law reform; and confronting the long-term unemployment problem head on." Thomas B. Edsall in The New York Times.
YGLESIAS: Why dividends are evil. "Bad for the economy, bad for business, and surprisingly unfavorable to investors. A barbarous relic of a less financially sophisticated era, they’re also indelibly coated with misleading rhetoric that perpetuates sloppy thinking about business, profits, and investment...Dividends, by contrast, have a weak and indirect impact on the economy and don’t really serve anyone’s long-term interests. We’re left hoping that rich shareholders will spontaneously develop enough appetite for extra yachts to push the economy forward." Matthew Yglesias in Slate.
SUNSTEIN: The behavioral economist at the movies. "Behavioral economists have written a great deal about “precommitment strategies,” by which people protect themselves against their own propensity to error...A precommitment strategy can take the form of a public declaration. On that count, Taylor Swift’s “We Are Never Ever Getting Back Together” is iconic -- and Beconic." Cass R. Sunstein in Bloomberg.
PORTER: A dogged adversary in the war on poverty. "If poverty were defined based on what people bought in 1967, adjusted only for inflation, the poverty rate would have fallen to about 11 percent today, according to research by Jane Waldfogel and other researchers at Columbia University...In 1967, government programs moved about 3 percent of children out of poverty. In 2012, they prevented 12 percent of children from dropping below the poverty line." Eduardo Porter in The New York Times.
BATEMAN: The wrong college ratings. "At a time when the cost of college is soaring and millions of Americans are being shut out of higher education, a government-approved list of colleges that offer students more bang for their buck might sound like a good idea. But it’s not. The ratings, proposed by President Obama in August, would evaluate schools based on criteria including tuition levels, graduation rates, how many students receive Pell grants and how much money recent graduates earn. The problem is, the program won’t just shape the choices students make; it will create potentially perverse incentives for the schools themselves." Bradley W. Bateman in The New York Times.
SEIB: Mind the gender gap in politics. "On virtually all the hot-button issues that bedevil Washington today—guns, health, how to fix the economy, the state of the Obama presidency—the difference between men and women is striking. And it all adds up to a large difference in what men and women prefer in next year's congressional elections. Indeed, if anyone doubts the significance of gender differences, just consider this finding from the latest Wall Street Journal/NBC News poll, completed last week: 52% of men say they want that election to produce a Congress under Republican control, while just 38% of women feel that way." Gerald F. Seib in The Wall Street Journal.
This is bizarre interlude: Rep. Steve Stockman, call your Webster, Texas office.
2. Bernanke's last FOMC meeting
The verdict on Ben Bernanke. "As Mr. Bernanke prepares for his final days as Federal Reserve chairman, that legacy—a mix of failings, boldness, persistence and frustration—is coming into sharper focus, and with it a clearer picture of the power and limitations of modern central banking. Fed officials meeting in Washington on Wednesday face another consequential decision: a close call on whether to start winding down their $85 billion-a-month bond-buying program. At the root of the issue is a long-running debate between Mr. Bernanke and other Fed officials about how much more a central bank can or should do to try to spur an economy that hasn't been wholly responsive to its efforts." Jon Hilsenrath in The Wall Street Journal.
U.S. inflation remains low. "The consumer-price index, which measures how much Americans pay for everything from furniture to medical care, was unchanged in November from the prior month, the Labor Department said Tuesday. But core prices, which strip out volatile food and energy costs, rose 0.2%. From a year earlier, overall consumer prices increased 1.2% and core prices were up 1.7%. Still, both readings are below the Fed's annual inflation target of 2%." Sarah Portlock in The Wall Street Journal.
It's just a low-inflation world out there. "The downward pressure on prices presents a conundrum for policy makers across advanced economies: Should they respond with even easier monetary policy or dismiss it as a temporary development? Central bankers worry about inflation falling too low because it raises the risk of deflation, or generally falling prices, a phenomenon that is difficult to combat through monetary policy. Some economists believe weak or falling prices can lead consumers to delay major purchases, exacerbating an economic slowdown. Even without deflation, very low inflation can be a sign of weak demand that weighs on wages, corporate profits and growth." Sudeep Reddy, Brian Blackstone, and Jason Douglas in The Wall Street Journal.
Financial-stability risks are abating, says report. "Threats to US financial stability have abated in the past year but vulnerabilities remain, including rising interest rates, increasing risk taking in the loan market and uncertainty about US fiscal policy, according to a government report on Tuesday. The Treasury department’s Office of Financial Research said it had developed a prototype Financial Stability Monitor, a tool that will track threats and the links between them. The monitor will provide a snapshot or “heatmap” of several financial stability indicators, including macroeconomic, markets, credit, funding/liquidity and contagion. The research office is also developing a detailed funding and liquidity map to help identify risks in the securities financing transaction market." Gina Chon in The Financial Times
Obama, to sell trade pacts, will outline the benefits of globalization. "Obama has focused much of his recent economic policy on boosting trade and global investment. He will now need to make the case that a broad new set of trade agreements will help U.S. workers and not merely shift jobs overseas or benefit a small clique of global corporations, as many trade skeptics argue has happened before." Howard Schneider in The Washington Post.
Fannie and Freddie are about to make mortgage borrowing more expensive. This is a huge deal. "The mortgage giants said late Monday that, at the direction of their regulator, they will charge higher fees on loans to borrowers who don't make large down payments or don't have high credit scores. Such fees are typically passed along to borrowers, resulting in higher mortgage rates...A borrower seeking a 30-year fixed-rate mortgage with a credit score of 735 and making a 10% down payment, for instance, would pay fees totaling 2% of the loan amount, up from 0.75% now. The 2% upfront fee could raise the mortgage rate by around 0.4 percentage points. Borrowers with larger down payments could also be affected. Fees for a loan with a 690 credit score and a 25% down payment would rise to 2.25% from 1.5%. Executives at Fannie and Freddie said last month that the fees they have been charging are enough to cover expected losses, but that those fees might need to rise in order to allow private investors, which target a higher rate of return, to compete." Nick Timiraos in The Wall Street Journal.
Supersize my wage. "What Krueger and Card did was undermine the once-dominant rationale against raising the minimum wage: that it might lead to fewer workers being employed. The IGM forum at the University of Chicago acts as a barometer of opinion within the field. It recently asked its panel of experts — all top economists, from various backgrounds, disciplines and political tendencies – — whether raising the federal minimum wage to $9 an hour would make it noticeably harder for low-skilled workers to find employment. About a third said yes, a third said no and a quarter said they were not sure. As always in economics, nobody seems to agree on anything." Annie Lowrey in The New York Times.
Senate Democrats introduce bill to bar employers from using credit checks. "[A] group of Senate Democrats [is] seeking to bar companies from using credit checks to weed out job applicants. Lawmakers say the practice contributes to long-term unemployment and disproportionately affects women and minorities whose credit was damaged during the financial crisis...The bill, which exempts jobs that require a national security clearance, aims to stop employers from disqualifying would-be hires based on poor credit. In the face of stubbornly high unemployment, lawmakers say the continued use of credit reports could stymie economic growth...Companies have long used credit reports to gauge whether applicants who would be responsible for handling money can manage their own finances." Danielle Douglas in The Washington Post.
The modern economy depends on dozens of obscure metals. What happens if we run out? "A fascinating recent paper in The Proceedings of the National Academies of Science looks at 62 different metals that are widely used in modern-day industry. For a dozen metals, potential substitutes are either inadequate or flat-out unavailable. And there are no "excellent" substitutes for any of the 62 metals. A shortage of any of them could do some damage." Brad Plumer in The Washington Post.
Every forecaster should do what Goldman Sachs economists did in this new report. "A report out Monday from economists at Goldman Sachs shows an equally important part of that forecasting process. They went back to their year-ahead predictions from last January to see how they did...What's important for others in the prediction game is how they go about the exercise itself. The world is full of people telling you what they think will happen in the future...But what separates good forecasters from people just talking out their hindquarters is that the former will do a rigorous self-review of what they've gotten wrong and right." Neil Irwin in The Washington Post.
More bizarreness interlude: The Fonz on random BBC interviews.
3. How I learned to stop worrying about death spirals
Why Obamacare won’t spiral into fiery, actuarial doom. "The rumors of an Obamacare death spiral have been greatly exaggerated. So say Larry Levitt, Gary Claxton and Anthony Damico, experts at the Kaiser Family Foundation who have put together a new brief analyzing what would happen if young adults snubbed the Affordable Care Act. Even if young people sign up at half the rate the administration hopes for, it would nudge premiums up only by a few percentage points, their report says. "When you do the math, it matters, but not nearly as much as the conventional wisdom suggests," Levitt says." Sarah Kliff in The Washington Post.
Glaxo says it will stop paying doctors to promote drugs. "The British drug maker GlaxoSmithKline will no longer pay doctors to promote its products and will stop tying compensation of sales representatives to the number of prescriptions doctors write, its chief executive said Monday, effectively ending two common industry practices that critics have long assailed as troublesome conflicts of interest...Andrew Witty, Glaxo’s chief executive, said in a telephone interview Monday that its proposed changes were unrelated to the investigation in China." Katie Thomas in The New York Times.
How Podesta will reboot the West Wing and make it Executive Action HQ. "Podesta’s hire is explicitly meant to shake things up inside the White House. In effect, I was told, it represents the clearest sign to date of the administration’s interest in shifting the paradigm of Obama’s presidency through the forceful, unapologetic and occasionally provocative application of White House power." Glenn Thrush in Politico Magazine.
Obamacare contractors penalized for labor law violations. "The study, released last week by Senate Health, Education, Labor and Pensions (HELP) committee chairman Tom Harkin (D-Iowa), found that Serco Group and CGI, who together accounted for more than $1 billion in federal contracts last year, were assessed $1.8 million and $1.7 million in wage and safety penalties by the Department of Labor, respectively." Jonathan Easley in The Hill.
Twenty-three states aren’t expanding Medicaid. Here’s who they leave behind. "The population they leave behind is mostly young, minority, single adults, according to two new data briefs from the Kaiser Family Foundation. Their analysis is one of the most in-depth looks at the population that falls into this coverage gap...Kaiser estimates that approximately 4.8 million people will fall into this no man's land of health-care reform, where they do have the option to purchase private insurance on the individual market -- but would have to do so without any financial help from the government." Sarah Kliff in The Washington Post.
How Medicare subsidizes doctor training. "Hosspitals used to have incentives to create new residency slots ad infinitum so they could keep on getting higher and higher payment rates from Medicare. Congress decided (perhaps understandably) that this was financially unsustainable; there was also some concern about creating an “oversupply” of doctors in the 1990s. So in 1997, Congress capped the number of positions that Medicare would underwrite, freezing the total at what it was the year before." Catherine Rampell in The New York Times.
Longreads interlude: The Boston Globe's "The Fall of the House of Tsarnaev."
4. All aboard the NSA-reform train
Sen. Reid says he'd consider NSA-reform legislation. "Senate Majority Leader Harry Reid (D-Nev.) on Tuesday expressed some openness to legislation that would rein in some of the National Security Agency’s collection powers, noting that judicial decisions on the controversial data-mining programs have been conflicted." Seung Min Kim in Politico.
An appeal on yesterday's NSA decision will be an early test for a revamped D.C. circuit. "Monday's district-court decision challenging federal surveillance powers could set up an early test for the revamped U.S. Court of Appeals for the District of Columbia Circuit, where a bench newly stocked with Obama appointees will hear any appeals. During the George W. Bush administration, the D.C. Circuit repeatedly approved national-security measures that sometimes were questioned by other courts, legal scholars and bar organizations...The Supreme Court reversed those rulings in a string of landmark opinions delivered between 2004 and 2008, rejecting the expansive view of executive power the D.C. Circuit had embraced...By next year, then, the circuit court's active judges likely will include seven appointees of Democratic presidents and four Republican appointees." Jess Bravin in The Wall Street Journal.
Tech executives to Obama: NSA spying revelations are hurting business. "Cisco Systems has said it is seeing customers, especially overseas, back away from American-branded technology after documents revealed that the NSA enlisted tech firms and also secretly tapped into their data hubs around the world as the agency pursued terrorism suspects...Their message was to say: “What the hell are you doing? Are you really hacking into the infrastructure of American companies overseas? The same American companies that cooperate with your lawful orders and spend a lot of money to comply with them to facilitate your intelligence collection? Really?” said one industry official familiar with the companies’ views." Cecilia Kang and Ellen Nakashima in The Washington Post.
U.S.-Germany intelligence partnership falters. "[T]he effort to repair the damage to the United States’ relationship with Germany appears to have stumbled. American officials have so far refused to pull back from electronic spying in the country, save for Ms. Merkel’s own communications, even though German officials argue that the United States is violating German law. At the same time, Germany is equally reluctant to enter into a deeper cooperation agreement, at least on American terms. Germany has for years participated in American counterterrorism operations, especially those tracking suspected Al Qaeda or other terrorist cells inside Germany, but it has refused to provide the United States with information that it believes could help provide targets for drone strikes." David E. Sanger and Alison Smale in The New York Times.
Senate panel seeks an internal report from the CIA. "The Senate Intelligence Committee has asked the C.I.A. for an internal study done by the agency that lawmakers believe is broadly critical of the C.I.A.’s detention and interrogation program but was withheld from congressional oversight committees...The Senate report, totaling more than 6,000 pages, was completed last December but has yet to be declassified. According to people who have read the study, it is unsparing in its criticism of the now-defunct interrogation program and presents a chronicle of C.I.A. officials’ repeatedly misleading the White House, Congress and the public about the value of brutal methods that, in the end, produced little valuable intelligence." Mark Mazzetti in The New York Times.
Photography interlude: Moving without Mom.
5. It is the east, and immigration reform is the sun
Longread: How America’s harshest immigration law failed. "The vast scope of the law turned Alabama into an unprecedented test for the anti-immigration movement. If self-deportation didn’t work there, it’s hard to imagine where it could. Early reports suggested success: undocumented immigrants appeared to flee Alabama en masse. But two years later, HB 56 is in ruins. Its most far-reaching elements have proved unconstitutional, unworkable, or politically unsustainable. Elected officials, social workers, clergy, activists, and residents say an initial immigrant evacuation that roiled their communities ended long ago. Many who fled have returned to their old homes." Benjy Sarlin in MSNBC.
Immigration's next hurdle: Obamacare. "The flawed rollout of the Affordable Care Act has endangered another of President Barack Obama’s top agenda items: Immigration reform. It’s forcing the White House and its allies to confront a basic, but politically potent, criticism. If the government can’t build a website, how can it be trusted to correctly process millions of undocumented immigrants and require every employer to verify the status of their workers?" Jonathan Allen and Carrie Budoff Brown in Politico.
There is still hope for immigration reform. "Supporters see three potentially encouraging new signs: House Speaker John Boehner's willingness to criticize his party's right-wing base last week on the budget measure raises the possibility he could do likewise on immigration. The speaker also recently hired Rebecca Tallent, a top policy adviser who previously worked for Arizona Senator John McCain, a staunch advocate of immigration reform. Representative Paul Ryan, having settled the budget issue for the foreseeable future, will be freed up to focus on immigration." Albert R. Hunt in Bloomberg.
Reading material interlude: The best sentences Wonkblog read today.
Why Obamacare won’t spiral into fiery, actuarial doom. Sarah Kliff.
Ignore the hype. Beyoncé’s release was totally old-school. Lydia DePillis.
Here’s what’s in the budget deal the Senate’s voting on. Brad Plumer.
Your neighborhood pawn shop is propped up by big banks. Lydia DePillis.
A former Microsoft exec is taking over at HealthCare.gov. Sarah Kliff.
How the Bakken is responding to natural-gas flares. Clifford Krauss in The New York Times.
Wonkbook is produced with help from Michelle Williams.