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Wonkbook's Number of the Day: 1.7 million. That's the number of documents Edward Snowden took, according to a leak of details from a Department of Defense report.

Wonkbook's Graph of the Day: Here's the graph the Fed is thinking about right now. Rising yields on two- and three-year Treasuries show that markets think monetary policy will tighten far more quickly than promised.

Wonkbook's Top 5 Stories: (1) the year for NSA reform; (2) how you finish the two biggest trade deals in U.S. history; (3) the mess of the UI extention; (4) what good news on Obamacare sounds like; and (5) Bridgeghazi.

1. Top story: Could NSA reform end up the biggest policy issue of 2014?

Behind the scenes, White House preoccupied by NSA surveillance controversy. "[I]n public, President Obama has focused this week on income inequality, touting initiatives to help the poor and unemployed. But in private, the president and his top aides have spent more time dealing with another issue. Obama met Thursday with a bipartisan group of lawmakers to update them on his review of the National Security Agency’s vast surveillance program. A day earlier, he huddled separately with top intelligence officials and a White House advisory panel on privacy issues and civil liberties. He also called German Chancellor Angela Merkel, whose mobile phone had been tapped by the NSA, and invited her to Washington...[H]is top lawyer, White House Counsel Kathryn Ruemmler, met with privacy advocates Thursday, and executives from the nation’s largest Internet companies were scheduled to visit the White House on Friday." David Nakamura in The Washington Post.

What Obama is about to propose for the NSA. "President Barack Obama is leaning toward extending broad privacy protections to non-U.S. citizens and is seriously considering restructuring the National Security Agency program that collects phone-call data of nearly all Americans, officials familiar with the process said on Thursday. Mr. Obama plans to unveil these and other changes to surveillance programs as soon as next week, the officials said." Siobhan Gorman and Carol E. Lee in The Wall Street Journal.

@mattyglesias: Time for someone at the NSA to leak all their info on this [Christie bridge scandal] and unify our scandals.

Intel panel: DOD report finds Snowden leaks helped terrorists. "Edward Snowden's leaks about National Security Agency programs have put U.S. troops at risk and prompted terrorists to change their tactics, according to a classified Pentagon report. House Intelligence Committee Chairman Mike Rogers (R-Mich.) and ranking member Rep. Dutch Ruppersberger (D-Mich.) said that the Pentagon report found a significant portion of the 1.7 million documents Snowden took were related to current U.S. military operations." Jeremy Herb in The Hill.

Obama, lawmakers discuss whether to end NSA collection of Americans’ phone records. "President Obama met Thursday with senior lawmakers on opposing sides of a debate about whether to end the National Security Agency’s collection of Americans’ phone data. The 90-minute meeting came in the wake of a report by a presidentially appointed review group that concluded that the program, which gathers billions of phone call toll logs, “was not essential” to preventing terrorist attacks. The group recommended that the data be held instead by the phone companies or a private third party" Ellen Nakashima in The Washington Post.

@ChadPergram: PATRIOT Act author Jim Sensenbrenner after Obama mtg: I’m not so sure that the president thinks we need legislation (to reform the NSA)

NSA and GCHQ activities appear illegal, says EU parliamentary inquiry. "The 51-page draft report, obtained by the Guardian, was discussed by the committee on Thursday. Claude Moraes, the rapporteur asked to assess the impact of revelations made by the whistleblower Edward Snowden, also condemns the "chilling" way journalists working on the stories have been intimidated by state authorities." Nick Hopkins and Ian Traynor in The Guardian.

@interfluidity: so, suppose a guy like Chris Christie—let’s just say with staff like Chris Christie’s—headed an executive branch that included the NSA.

As automakers tap smartphone technology, concerns grow about use of drivers’ data. "The growing alliance between Silicon Valley and Detroit has executives in both places excited over the technological and money­making opportunities. But the fast-emerging trend also has raised questions about whether consumers will be able to control the massive trove of personal data that cars are expected to generate in the coming years. U.S. laws are vague about who can harness all that information. Can law enforcement use the data to prove that a driver was speeding? Will hackers be able to get personal data from Web-connected cars? Can consumers stop Google from tracking them as it seeks to sell targeted ads?" Cecilia Kang and Michael Fletcher in The Washington Post.

FRIEDERSDORF: The NSA leaks are about democracy, not just privacy. "[T]here is inherent value in citizens being given access to information when it informs their judgments about public policy. Information of this sort is a prerequisite for meaningful civic participation. There ought to be a strong presumption in favor of making it public, especially when the policy at issue is as significant and controversial as targeted killing...The unstated assumption behind a lot of national-security-state defenders and Snowden critics is that the public has no proper role in deciding any of these questions, because the information needed to make sound judgments is properly classified." Conor Friedersdorf in The Atlantic.

Music recommendations interlude: This is a great YouTube playlist of all the Seventies songs in the movie "American Hustle."

Top opinion

KRUGMAN: The war over poverty. "The narrative went like this: Antipoverty programs hadn’t actually reduced poverty, because poverty in America was basically a social problem — a problem of broken families, crime and a culture of dependence that was only reinforced by government aid. And because this narrative was so widely accepted, bashing the poor was good politics, enthusiastically embraced by Republicans and some Democrats, too. Yet this view of poverty, which may have had some truth to it in the 1970s, bears no resemblance to anything that has happened since." Paul Krugman in The New York Times.

SUNSTEIN: A new War on Poverty needs correct facts. "[S]ome programs have especially big impacts. All by itself, for example, the earned income tax credit reduced child poverty by no less than 5 percentage points in 2012. Food and nutrition programs had almost as large an effect. In 1967, the impact of such programs was close to zero." Cass R. Sunstein in Bloomberg.

ABRAMOWITZ: Political independents don't really exist. "[T]he large majority of independents are “closet partisans” who consistently support only one party’s candidates. They call themselves independents and many of them register as independents when given an opportunity, but they vote like partisans...87 percent of independent Democrats (i.e., independents who lean Democratic) voted for Barack Obama while 86 percent of independent Republicans voted for Mitt Romney. Moreover, 78 percent of independent Democrats voted a straight ticket for president, House of Representatives and U.S. Senate, as did 72 percent of independent Republicans." Alan Abramowitz in Politico.

Opinion interviews: A health industry expert on ‘the fundamental problem with Obamacare.' Robert Laszewski speaks with Ezra Klein. This sociologist has a plan to make America more like Sweden. Lane Kenworthy talks with Dylan Matthews. The Washington Post.

RITHOLTZ: The best housing program you've never heard of. "Of all of the various government housing programs run by various federal agencies, [the Home Affordable Refinance Program] is the most effective and efficient one out there...[A]fter HARP was modified in 2011, refinances increased significantly. The total number of avoided foreclosures has passed 3 million. What does the HARP 2.0 program actually do? It takes people who are underwater in a variety of expensive, or ill-advised or even predatory mortgages, and allows them to refinance their homes into traditional conforming 30-year fixed mortgages. A broad assortment of "interest-only" mortgages, 2/28 teaser rates, adjustable-rate interest-only loans are eligible under the program." Barry Ritholtz in Bloomberg.

BROOKS: Movement on the right. "I’d invite you, for example, to cast your eye over the new issue of National Affairs, the right-leaning policy journal edited by Yuval Levin. You’ll find nine different articles that hang together coherently around what could well be the dominant style of conservatism of the coming years. This is the conservatism of skeptical reform. This conservatism is oriented, first, around social problems, not government...But the emerging conservatives begin their analysis by looking at concrete problems: how to help the unemployed move to where they can find jobs; how to help gifted students from poor families reach their potential. If you start by looking at these specific matters, then even conservatives conclude that, in properly limited ways, government can be a useful tool. Government is not the only solution, but it is also not the only problem." David Brooks in The New York Times.

COHN: The young are alright. "Thanks to analysis from Jonathan Gruber, the MIT economist who was an architect of both the Massachusetts and federal reforms, we know that enrollment was slow to get rolling in Massachusetts—and that, relatively speaking, healthy people came into the system late. Now Gruber has done a new analysis, breaking down enrollment specifically by age, and provided it to the New Republic...Over the course of the first year, the proportion of young people (in this case, ages 19 to 34) who had obtained health coverage through the Massachusetts insurance exchange grew. In other words, they were more likely to sign up late." Jonathan Cohn in The New Republic.

TYSON: For once, a bit of optimism has arrived. But let's be real: it's just a bit. "Optimism about the future should also be tempered by recognition of where the economy is today and what it has lost since the recession. Even with more rapid growth this year, output and employment will remain far below prerecession trend lines for several years. Output fell 8 percent relative to its noninflationary potential in 2008-9 and is now around 10 percent lower than what was judged to be its potential in 2007." Laura D'Andrea Tyson in The New York Times.

2. How you finish the two biggest trade deals in U.S. history

Trade bill to open debate on globalization as Congress demands more oversight. "Lawmakers have proposed a bill that would narrow the Obama administration’s room to negotiate new free-trade agreements, demanding that sensitive issues such as currency ma­nipu­la­tion be covered in future treaties and deepening congressional oversight of the process. The legislation, introduced Tuesday by three of the top lawmakers on U.S. trade policy, would give the administration a green light to complete new trade pacts covering an important swath of Asia and Latin America and all of the European Union — the most significant such agreements in a generation...The measure requires that future treaties set ground rules for how countries manage their currency values — a sensitive issue for any sovereign state that may be difficult to build into a trade agreement with countries as diverse as Japan and Peru. It also asks for limits on the role of state-owned enterprises, and it would allow any member of Congress to attend trade negotiating sessions." Howard Schneider in The Washington Post.

Explainer: What is "trade promotion authority" or "fast track"? Lydia DePillis in The Washington Post.

More economists are taking the 'glass half-full' view on U.S. growth. "Record exports and the smallest trade deficit in four years. Healthier consumer spending, including the strongest annual increase in automobile sales since 2007, spurred by a booming stock market and an improving housing sector. And a slow but steady pickup in job creation that has pushed unemployment to its lowest level since 2008. The confluence of all these forces in recent weeks has prompted economists to sharply revise their expectations for growth in late 2013 and early 2014, and prompted hopes that a more sustained economic expansion has finally arrived...The newfound optimism will face its first test on Friday, when the Labor Department reports the latest data on unemployment and job creation in December." Nelson D. Schwartz in The New York Times.

Jobless claims fall by 15,000. "Initial claims for jobless benefits, a measure of layoffs, decreased by 15,000 to a seasonally adjusted 330,000 in the week ended Jan. 4, the Labor Department said Thursday. That was the lowest level in more than a month. Economists had expected 335,000 new claims for the week...The four-week moving average for claims, which evens out bumpy week-to-week data, fell by 9,750 to 349,000." Eric Morath in The Wall Street Journal.

Federal Reserve faces prospect of bond market showdown over rates. "Bond traders are bringing forward their expectations of when the Federal Reserve will start to tighten policy, leading to a jump in short-term US borrowing costs. Recent economic data have pointed to a gathering American recovery, and could result in a showdown between policy makers and the Treasury market....[T]he upbeat tone of recent economic data is testing the bond market’s belief that the central bank is in no hurry to start tightening policy after the gradual withdrawal of QE is completed, probably later this year." Michael Mackenzie in The Financial Times.

What should we call Chris Christies bridge scandal? interlude: Bridgeghazi? Bridgegate? Blagojebridge? WikiLanes?

3. The fight to extend unemployment benefits has turned into a real mess

Showdown vote ahead on Senate Democrats’ bill to extend jobless benefits. "Democrats offered a roughly $18 billion proposal that would extend the benefits through most of 2014, and Senate Majority Leader Harry M. Reid (D-Nev.) scheduled a showdown vote on the new proposal for next Monday...The new Democratic plan would extend the emergency unemployment program until mid-November (the original proposal was for three months). " Paul Kane in The Washington Post.

Here are some more key policy details. "The law that expired in December provided federal aid to supplement the 26 weeks of unemployment benefits provided by most states. The expired law provided up to 47 weeks of additional payments; the new Reid proposal would scale that back to a maximum of 31 weeks. To partially offset the cost, the bill included a proposal—similar to one backed by President Barack Obama and a broader one introduced by Mr. Portman—to eliminate a kind of "double dipping" by cutting off Social Security disability benefits to people if they are also collecting unemployment benefits. Most of the cost of the bill, some $17 billion, would be offset by postponing for one year the expiration of across-the-board spending cuts, known as the sequester, that apply to mandatory spending programs, including payments to health providers under Medicare." Janet Hook in The Wall Street Journal.

Jobless benefits are not a priority for House Republicans. "House Republicans are showing little appetite, urgency and interest in extending the program, and are hinting that they are content to let the issue disappear if the Senate fails to pass its own legislation...Some Republicans think the nation is awash with unoccupied jobs, others are wary of shuffling more government money to the unemployed and nearly every GOP lawmaker wants to see seismic changes to the way benefits are administered." Jake Sherman in Politico.

Reid is burning bridges trying to get the bill through -- and to an extent that it's hurting the bill. "With his strong-armed change to the filibuster rule and an iron-fisted control of the Senate floor, Senator Harry Reid has engaged in the greatest consolidation of congressional power since Newt Gingrich ruled the House, unleashing a bitterness that may derail efforts to extend unemployment insurance. Mr. Reid of Nevada, the majority leader, on Thursday dismissed all proposed Republican amendments to the unemployment extension, even those drafted by Republicans who had handed Democrats a victory on Tuesday by voting to take up the bill." Jonathan Weisman in The New York Times.

Trains are a cool hobby interlude: Check out these cool ones in history.

4. What good news on Obamacare sounds like

Obamacare is giving a big boost to Georgia's health IT industry. "Politically, Georgia is fighting the health law at every turn. Gov. Nathan Deal, a Republican, has chosen not to expand Medicaid, and the state’s insurance commissioner publically vowed to obstruct the Affordable Care Act. But that doesn’t mean Georgia isn’t seeing a financial benefit from the law. Take the company called PreMedex. Founder and president Van Willis knows that just a few years ago, a company like his would’ve been a hard sell -- impossible, even. The two-year-old company contracts with hospitals and doctors’ offices to call patients after they're discharged. Under the Affordable Care Act, hospitals are penalized if Medicare patients are readmitted within a month for several specific illnesses." Jim Burress in Kaiser Health News.

Maryland's plan to upend healthcare spending. "The Obama administration is set to announce Friday an ambitious health-care experiment that will make Maryland a test case for whether aggressive government regulation of medical prices can dramatically cut health spending. Under the experiment, Maryland will cap hospital spending and set prices — and, if all goes as planned, cut $330 million in federal spending. The new plan, which has been under negotiation for more than a year, could leave Maryland looking more like Germany and Switzerland, which aggressively regulate prices, than its neighboring states. And it could serve as a model - or cautionary tale - for other states looking to follow in its footsteps." Sarah Kliff in The Washington Post.

Medicaid is nearly free health care. Will people move for that? "[S]hould we expect a widespread migration from the states who fail to expand Medicaid into those that are participating? New research suggests it's unlikely: Previous expansions of the public program, coupled with the geographic clustering of non-expansion states, suggest that cases like Workman's will be the exception rather than the rule..."The takeaway, I think, is that as states are considering whether to expand Medicaid it's unlikely they'll see an influx of beneficiaries if they expand," says Aaron Schwartz, a doctoral candidate at Harvard who published the new paper in the journal Health Affairs. "Based on past experience, we don't see any effects on migration."" Sarah Kliff in The Washington Post.

Survey: Most of the uninsured haven't been to HealthCare.gov yet. "The survey from Enroll America, a nonprofit with close ties to the Obama administration that is aiming to sign people up, found seven out of 10 uninsured people in the United States haven’t visited an ObamaCare online exchange yet...In addition, 81 percent said they didn’t know March 31 is the open enrollment deadline, after which they would be subject to the individual mandate penalty, if they remain uninsured. Sixty-nine percent said they weren’t aware that tax subsidies and financial help might be available for them, and 59 percent said they didn’t know anything about plans that may be available in their state." Jonathan Easley in The Hill.

Obamacare will cover breast-cancer drugs. "Certain medications that are intended to prevent breast cancer will be fully covered under Obamacare, in new guidance set to be issued by the Department of Health and Human Services Thursday morning. Women at increased risk of breast cancer can receive so-called chemoprevention drugs, including tamoxifen and raloxifene, without a co-pay or other out-of-pocket expense." Amanda Terkel in The Huffington Post.

White House stops short of veto threats on House healthcare bills. "The Obama administration stopped short Thursday of threatening to veto House bills to require officials to tell people if their personal data has been compromised through ObamaCare, and to require weekly reports on the health law's implementation. The White House said in two Statements of Administration Policy that it opposed both bills, one of which is set for a Friday vote in the House...Weekly reporting requirements on both enrollments and the operation of the HealthCare.gov website would require "unfunded, unprecedented, and unnecessary reporting requirements" on the health insurance exchanges, it said in one statement." Pete Kasperowicz in The Hill.

Writerly interlude: John McPhee on structure.

5. We're calling this Bridgeghazi, right?

Christie apologizes for scandal, fires deputy chief of staff, ousts top political aide. "A contrite New Jersey Gov. Chris Christie apologized Thursday for a scandal that threatens his political future, announcing that he had fired a senior aide and banished his top campaign adviser for their roles in days of traffic jams orchestrated to punish a small-city Democratic mayor. Christie at once accepted responsibility as the state’s chief executive but also insisted he had no involvement in shutting down a pair of access lanes to the heavily trafficked George Washington Bridge over four days in early September. The Republican governor said he was “blindsided” by this week’s release of e-mails and text messages detailing his office’s role in the plot to create severe gridlock in Fort Lee, N.J." Robert Costa and Philip Rucker in The Washington Post.

U.S. attorney’s office reviewing GWB lane closings to see whether federal law violated. "U.S. Attorney Paul J. Fishman has been asked to review the lane closures at the George Washington Bridge in Fort Lee last September to determine whether federal laws were violated. The review, prompted by a referral from the Port Authority Office of Inspector General, is considered a preliminary look to determine if a full-blown investigation is warranted. If a criminal investigation is undertaken, charges ranging from interfering with the right of state travel to obstruction of justice to criminal negligent homicide could be lodged, legislators and legal experts said on Thursday. Another outcome: lawsuits filed by commuters or business owners who were impacted by the massive traffic snarl." Peter Sampson and Karen Sudol in The Bergen, N.J. Record.

Firing of Stepien deprives Christie of a key counselor. "In Chris Christie’s circle of advisers, few were as close to the governor as Bill Stepien. He managed both of the New Jersey Republican’s winning campaigns for governor, helped shape Christie’s tough-guy-on-your-side image and was expected to take a top role in an eventual White House bid. But when Christie cut him loose Wednesday evening, the governor didn’t so much as speak to him. Christie’s decision to oust Stepien and another top adviser implicated in the burgeoning scandal over George Washington Bridge lane closures demonstrated the blunt force that Christie is willing to use to contain a crisis, even if it means exiling members of his innermost circle." Matea Gold and Robert Costa in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Et Cetera

How legalizing pot squeezes police funds for fighting drugsZusha Elinson in The Wall Street Journal.

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