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Wonkbook's Graph of the Day: State tax revenues have been surprisingly strong.
Wonkbook's Top 5 Stories: (1) what the State of the Union will be and won't be; (2) Obamacare breaks 3 million; (3) the inequality economy; (4) yes, immigration reform is back; and (5) the environment is the Pope's next subject.
1. Top story: The 2014 State of the Union in two words: 'executive action'
The memo lurking behind the State of the Union. "An internal White House assessment concludes that President Obama must distance himself from a recalcitrant Congress after being badly damaged last year by legislative failures, a government shutdown and his own missteps. But for the first time, following what many allies view as a lost year, the White House is reorganizing itself to support a more executive-focused presidency and inviting the rest of the government to help...Senior adviser Dan Pfeiffer outlined the lessons learned in a three-page memo that Obama discussed with his Cabinet in recent weeks, according to several administration officials who have read the document." Scott Wilson in The Washington Post.
The agenda will be modest. "Obama has, by his own account, come to feel acutely the limits on his power and the shrinking horizons before him — all of which make his nationally televised speech to Congress on Tuesday a critical opportunity to drive an agenda that may yet shape his legacy. But perhaps more so than in any of his previous congressional addresses, Mr. Obama realizes that he has little chance of major legislative victories this year, with the possible exception of an overhaul of immigration law that Republicans are also making a priority...White House officials said Mr. Obama would use the speech to announce executive actions he can take without congressional approval to expand economic opportunity for middle-class workers in areas like retirement security and job training." Peter Baker in The New York Times.
@pourmecoffee: I get Pro Bowl and State of the Union confused. One is big charade with competitors who'd rather not be there and other is a football game.
Aides previewed the speech. "“The president views the power of his presidency in two areas,” Mr. Pfeiffer said on the CNN program “State of the Union.” “His pen, which is the executive orders, the presidential memorandums. Also the phone, where what he can do is he can pick up the phone, bring together American citizens and businesses to commit on key issues.”...Jay Carney, the White House press secretary, appearing on ABC’s “This Week,” said, “The president sees this as a year of action, to work with Congress where he can and to bypass Congress where necessary to lift folks who want to come up into the middle class.”" Emmarie Huetteman in The New York Times.
What liberals want to hear in the State of the Union. "For progressives, Tuesday’s State of the Union isn’t so much about what President Barack Obama says, but how forcefully and expansively he says it. They’re looking less for a specific wish list — though they have one of those, too — than for Obama to deliver a robust response to what he has repeatedly called “the defining issue of our time.”...Progressives say Obama will have to directly address — though likely not by name — recent speeches by Republicans like Sen. Marco Rubio of Florida, Sen. Rand Paul of Kentucky and Rep. Paul Ryan of Wisconsin that have described inequality as a behavioral problem." Edward Isaac-Dovere in Politico.
@BuzzFeedAndrew: The State of our Union is cold.
What Obama wants most but can't get: a renewal of public investment. "[The State of the Union] could underscore his inability so far to convert talk into the taxpayer-financed investments that he and other Democrats believe can make the biggest difference. Congress has shunned a $75 billion plan to expand early childhood education that Mr. Obama proposed in last year’s State of the Union, and the infrastructure bank he has pushed for four years...Over the last half-century, though, it has plummeted. Spending on what the federal government classifies as investments peaked in 1968 at 6.6 percent of the economy, twice the current proportion." John Harwood in The New York Times.
@markknoller: No public appearances on the president's schedule [for Monday], as of this writing. Prepping for Tuesday's State of the Union Address.
The budget deficit? It's now off the agenda. "President Barack Obama isn’t expected to spend much time on deficit reduction and entitlement reform during Tuesday’s State of the Union address, instead focusing on issues such as economic inequality and raising the minimum wage that will be the centerpiece of his 2014 agenda. Republicans don’t want to divert attention from Obamacare and plan to demand changes in the health care law, not spending cuts, in exchange for a debt-limit increase next month. They dismiss grand bargain talks with Obama as fruitless." Carrie Budoff Brown and Jake Sherman in Politico.
Republican response to State of the Union fractures. "The protocol is staid and formulaic. The president addresses Congress on the State of the Union, then the opposition party’s designee follows with a reply. The choreography is tight, predictable and usually forgettable. Not this year. The response, a once careful attempt at stagecraft fashioned under the close watch of party chiefs to be as uniform and on message as possible, has given way to political free agency. The shift speaks volumes about politics today: the value placed on the individual brand over the larger organization, and the way social media and technology have torn down barriers to fame and influence." Jeremy W. Peters in The New York Times.
DIONNE: Obama and the post-Obama era. "President Obama’s State of the Union address on Tuesday is about more than the final three years of his presidency. Its purpose should be to influence the next decade of American political life and begin shaping the post-Obama era. For the first time since his early days in office, Obama has the philosophical winds at his back. He may be struggling with his approval ratings, but the matters the president hopes to move to the center of the national agenda — rising inequality and declining social mobility — are very much on the nation’s mind." E. J. Dionne in The Washington Post.
HUNT: Let's talk about the wealth gap. "The speech is potentially significant, nonetheless, in shaping the agenda and dialogue of this election year. Income inequality, with the emphasis on enhancing opportunities and intergenerational mobility, will be centerpieces; how effectively the president raises these issues will affect politics, and possibly a few legislative achievements...There also could be some consensus on early-childhood education. Maybe the president will belatedly focus on an expansion of the earned income tax credit, which goes to the working poor." Albert R. Hunt in The New York Times.
More important than music recommendations interlude: What's happening in Ukraine.
KRUGMAN: Paranoia of the plutocrats. "Extreme inequality, it turns out, creates a class of people who are alarmingly detached from reality — and simultaneously gives these people great power...I also suspect that today’s Masters of the Universe are insecure about the nature of their success. We’re not talking captains of industry here, men who make stuff. We are, instead, talking about wheeler-dealers, men who push money around and get rich by skimming some off the top as it sloshes by. They may boast that they are job creators, the people who make the economy work, but are they really adding value? Many of us doubt it — and so, I suspect, do some of the wealthy themselves, a form of self-doubt that causes them to lash out even more furiously at their critics." Paul Krugman in The New York Times.
KELLER: America on probation. "Restoring common sense to sentencing is the obvious first step in downsizing prisons. New York rolled back its notorious Rockefeller drug laws, California has softened its three-strikes law and several other states have tinkered with rigid sentencing laws. But there is stiff resistance from prosecutors, who use the threat of long sentences to compel cooperation or plea deals...For every inmate in our state and federal prisons, another two people are under the supervision of probation or parole. A few jurisdictions have tried to make parole and probation less of a revolving door back to prison, with some encouraging results. They focus attention on offenders considered most likely to commit crimes. They send caseworkers out of the office and into the community." Bill Keller in The New York Times.
RATTNER: The myth of the industrial rebound. "[W]ages for blue-collar automotive industry workers have dropped by 10 percent, after adjusting for inflation, since the recession ended in June 2009...For all the hoopla, the United States has gained just 568,000 manufacturing positions since January 2010 — a small fraction of the nearly six million lost between 2000 and 2009. That’s a slower rate of recovery than for nonmanufacturing employment. “We find very little real evidence of a renaissance in U.S. manufacturing activity,” a recent Morgan Stanley report stated, echoing similar findings from Goldman Sachs." Steven Rattner in The New York Times.
KAUS: The other kind of inequality. "The problem with the Democrats' new war on inequality ("the defining challenge of our time," says President Obama) is that there are two kinds of growing inequality—and the Democrats are attacking the wrong one...Social equality—"equality of respect," as economist Noah Smith puts it—is harder to measure than money inequality...We can, for example, honor the universal virtue of work by making it the prerequisite for government benefits wherever possible...We can also pursue social equality directly, through institutions that mix people from all income levels together, under conditions of equal status—institutions like the draft, for example, or national service." Mickey Kaus in The Wall Street Journal.
Opinion interview: ‘You work until you die:’ Inside America’s fragmented safety net for the disabled. Harold Pollack in The Washington Post.
URBINA: Shopping list as policy tool. "The federal government spends around $500 billion annually on goods and services. So when Uncle Sam throws his weight around, markets move...Gay-rights advocates have called on the Obama administration to issue an executive order banning discrimination by federal contractors. Environmentalists have said the government could go a long way toward controlling climate change simply by tightening fuel-efficiency requirements on the government’s roughly 600,000-vehicle fleet. This alone would force changes throughout the entire auto market, they say." Ian Urbina in The New York Times.
KONCZAL: No, Obamacare isn’t a ‘bailout’ for insurers. "What stands out to me is that nobody is saying what a “bailout” actually entails. Can the academic literature help us here? Yes, in fact. Banking, bankruptcy and finance scholars have tried to piece together a definition of bailouts, and perhaps this could help move the conversation forward...According to Block’s definition, bailouts are a form of a government subsidy. But not all subsidies are bailouts. And she specifies three types of subsidies that aren’t bailouts: Bailouts should be distinguished from incentive subsidies, designed to promote a specific behavior such as marriage or savings. Bailouts should also be distinguished from relief subsidies, or the government’s role in providing types of insurance from, say, disasters. And bailouts also aren’t support subsidies." Mike Konczal in The Washington Post.
DOUTHAT: More imperfect unions. "A sustained conservative shift on abortion policy and marriage law probably would, over the long term, increase the rate at which couples take vows and stay together, and improve the life prospects of their children. So one hypothetical middle ground on marriage promotion might involve wage subsidies and modest limits on unilateral divorce, or a jobs program and a second-trimester abortion ban." Ross Douthat in The New York Times.
Public service announcement interlude: Chrome has a big problem with malware in their extensions.
2. Obamacare breaks 3 million
3 million people have signed up for private health insurance through marketplaces. "Three million people have signed up for private insurance coverage through the health-care law’s marketplaces, the Obama administration announced Friday. That lags behind its initial projections for overall enrollment — but it’s closer to hitting the monthly sign-up expectations the administration set in September. In a blog post, the Department of Health and Human Services said that at least 800,000 people had signed up for coverage during the first three weeks of January. In September, the Obama administration had projected that the insurance exchanges would add 1.1 million enrollees this month, a target that could be in reach with one week left in January for people to sign up." Sarah Kliff in The Washington Post.
Obamacare might just hit a sign-up projection. "Since the federal government implemented significant fixes to HealthCare.gov on Dec. 1, monthly enrollment totals have inched significantly closer to the targets. Instead of netting a quarter or third of the expected sign-ups, as the administration did in October and November, now the numbers are coming in much more in range of expectations...Health and Human Services had expected that 4.3 million people would have signed up by the end of January. So the administration is running about 1.3 milli0n behind that projection, although with one week left in the month some of that gap is likely to close." Sarah Kliff in The Washington Post.
Doctors abusing Medicare face fines and expulsion. "The Obama administration is cracking down on doctors who repeatedly overcharge Medicare patients, and for the first time in more than 30 years the government may disclose how much is paid to individual doctors treating Medicare patients...In a directive that took effect on Jan. 15 but received little attention, Ms. Tavenner indicated that the agency was losing patience with habitual offenders. She ordered new steps to identify and punish such doctors...Federal officials estimate that 10 percent of payments in the traditional fee-for-service Medicare program are improper. That would suggest at least $6 billion a year in improper payments under Medicare’s physician fee schedule." Robert Pear in The New York Times.
Doctors cut from Medicare Advantage networks struggle with what to tell patients. "Thousands of primary-care doctors and specialists across the country have been terminated from privately run Medicare Advantage plans, sparking a battle between doctors who say patient care is being threatened and insurers that insist they have to reduce costs and streamline their operations...Insurers say they must shrink their physician networks because they face billions of dollars in government-payment cuts over the next decade — reductions that are being used partly to fund insurance coverage for millions of people under the federal Affordable Care Act. They also say the smaller networks will allow them to curb premium increases and to remain nimble as they prepare for an influx of patients under the law." Ariana Eunjung Cha in The Washington Post.
Interview: Moody’s just downgraded the health insurance industry. Obamacare was part of the reason. Sarah Kliff in The Washington Post.
Supreme Court says nuns are exempt for now from Obamacare contraceptives rule. "The Supreme Court said Friday that a group of Colorado nuns does not have to comply with the Affordable Care Act’s requirement that employers offer insurance plans that cover contraceptives while the nuns pursue a legal challenge of that portion of the law. In a short and unsigned order, the court said the Little Sisters of the Poor must simply inform the Obama administration that they are a religious organization that should be exempt from the requirement...The court’s one-paragraph order came after three weeks of what was likely a vigorous behind-the-scenes debate among the justices. It essentially delays a consideration of the merits of the challenges and provides no legal reasoning for the compromise. It came without noted dissent." Robert Barnes in The Washington Post.
Obamacare's new benefits. "The benefits are modeled after those typically offered by large employers and fall into 10 broad categories: outpatient care; emergency care; hospitalization; maternity and newborn care; mental-health services and addiction treatment; prescription drugs; rehabilitative services and devices; laboratory, preventive and pediatric services. That's good news for the 14 million people who buy individual insurance, a number that's expected to rise substantially in coming years, health-policy experts say." Kristen Gerencher in The Wall Street Journal.
Animal kingdom interlude: Animals riding animals. Who wouldn't want to see a hamster riding a duckling?
3. The inequality economy
Why is the American Dream dead in the South? "The researchers found that the larger the black population, the lower the upward mobility. But this isn't actually a black-white issue. It's a rich-poor one. Low-income whites who live in areas with more black people also have a harder time moving up the income ladder. In other words, it's something about the places that black people live that hurts mobility...Something like the poor being isolated—isolated from good jobs and good schools. See, the more black people a place has, the more divided it tends to be along racial and economic lines. The more divided it is, the more sprawl there is. And the more sprawl there is, the less higher-income people are willing to invest in things like public transit." Matthew O'Brien in The Atlantic.
Income inequality hurts economic growth, researchers say. "The paper by Barry Z. Cynamon and Steven M. Fazzari, economists working with the Weidenbaum Center on the Economy, Government and Public Policy at Washington University in St. Louis, says that stagnant income for the “bottom 95 percent” of wage earners makes it impossible for them to consume as they did in the years before the downturn...[T]apped-out consumers represent about half of the nation’s overall economic activity. With them financially shackled, slow overall growth is all that can be expected, the paper argues." Michael A. Fletcher in The Washington Post.
The war on inequality...may take a while. "[I]nequality is, well, kind of a big topic — as Obama himself acknowledges. It would require a gigantic response, cutting across a broad swath of issues, everything from education and tax policy to wages, job skills and even the quality of the jobs themselves...The exact prescriptions Obama will unveil in the State of the Union address aren’t yet clear, but his “inequality” basket is already pretty full. Among the key provisions: A minimum wage increase, to help workers in the lowest income groups; extended unemployment benefits, to help people who have been sidelined by the weak economy and can’t get back into the workforce; preschool for all 4-year-olds and early learning opportunities for younger children, to give low-income families the benefits wealthier families already have; and measures to make college more affordable, so low and middle-income students don’t get saddled with so much crushing debt." David Nather in Politico.
Explainer: What happens when jobless benefits get cut? Let’s ask North Carolina. Brad Plumer in The Washington Post.
How much economic activity will the Super Bowl really spark? "Economists interviewed for this column expressed skepticism about the widely cited estimate of $550 million to $600 million, whatever its source. Philip Porter, an economics professor at the University of South Florida, estimated that the benefits would be “zero,” because “the people who come to these events aren’t buying what the local economy sells.” Still, most economists with whom I spoke — like John Tepper Marlin, who used to produce economic impact numbers for the New York City government — acknowledged that some businesses would most likely accrue some benefits, perhaps on an order of magnitude lower than what local officials are projecting." Catherine Rampell in The New York Times.
As Fed, China pull back, so do global markets. "Across a number of developing countries, meanwhile, the adjustment to the slowdown of Federal Reserve monetary stimulus began to accelerate, as traders dumped local currency in Turkey, South Africa and elsewhere — a rout that touched off concerns of a new crisis brewing in one or more of the world’s once-vibrant emerging markets...[A]nalysts said that a gradual end of Fed asset purchases would be offset by a strengthening U.S. economy, because the Fed would not reduce its monetary stimulus otherwise. But the impact may still be serious in some nations, notably those that rely on foreign currency to finance trade and other deficits." Howard Schneider in The Washington Post.
Bernanke hopes tapering plan ensures smooth handover to Yellen. "With no press conference and no new economic forecasts, Mr Bernanke’s final meeting will be low key – in keeping with the departing chairman’s style – and the main point of interest will be who dissents among the Federal Open Market Committee’s new voting members. Richard Fisher of Dallas and Charles Plosser of Philadelphia are both relatively hawkish, but when they were last voters in 2011, they only voted ‘no’ at meetings that brought in new policy easing. The most likely dissenter in January, therefore, is Narayana Kocherlakota of Minneapolis. He may cast a vote for easier monetary policy." Robin Harding in The Financial Times.
Michelle Smith, working behind the scenes to shape the Fed’s public image. "Smith, 44, who is the Fed’s chief of staff and runs its office of public affairs, was instrumental in pushing the naturally reserved Fed chairman, Bernanke, and the famously secretive central bank to become more open and to engage the media as never before. The goal was to convince the country — largely through the reassuring words of the soft-spoken Bernanke, a son of Dillon, S.C. — that the Fed was out to help the average American worker." Zachary A. Goldfarb in The Washington Post.
The tale of a house, and an entire market. "[W]hile Americans still want to own their homes, the scars of the financial debacle hold them back in other ways. Some large banks, unmotivated by low interest rates and afraid they will have to buy back any loans that go bad, have cut back on mortgage lending. Tighter lending standards are shutting out close to 12.5 million consumers who would qualify in normal times, according to an analysis by Mark Zandi, chief economist for Moody’s Analytics. But perhaps more significant, individual attitudes have changed. A house is a residence, sure. A better investment than renting, yes. But it is no longer an A.T.M., a source of ready cash for a better lifestyle." Shaila Dewan and Catherine Rampell in The New York Times.
...In housing, big is back. "The median size of new homes built for sale peaked in 2007 at 2,295 square feet, then fell to 2,159 two years later, after the housing crisis hit. But the appetite for ever-larger homes has returned: In 2012, new homes reached a new peak of 2,384 square feet and, according to the National Association of Home Builders, some 41 percent of new homes had four or more bedrooms, up from 34 percent in 2009." Jim Rendon in The New York Times.
How a virtuous economic cycle could start: Improving state economies feed tax revenues. Then states spend. "Governors across the U.S. are proposing tax cuts, increases in school spending and college-tuition freezes as growing revenue and mounting surpluses have states putting the recession behind them. Wisconsin Gov. Scott Walker and New York Gov. Andrew Cuomo are pushing for tax cuts as collections rise, while putting money into job-training and prekindergarten programs, respectively. In Georgia, Gov. Nathan Deal is proposing the largest increase in K-12 school funding since the recession to mark what he called the end of the "deep freeze," while Missouri Gov. Jay Nixon is calling for a boost in K-12 spending and holding tuition steady at state colleges." Mark Peters in The Wall Street Journal.
There’s a war over R&D tax credits. And companies keep winning. "One of the most generous offerings for corporate America in the U.S. tax code is about to become even more bountiful under an Obama administration proposal. The new rules, which are being finalized by the U.S. Treasury Department, would lift restrictions on the types of activities that qualify for tax breaks for business research and development — raising the prospect that Boeing, Lockheed Martin and many smaller firms could reap hundreds of millions of dollars in fresh savings. Administration officials say the changes merely clarify existing rules and would not dramatically broaden eligibility for a 30-year-old tax credit for research and development and related deductions...Marty Sullivan, chief economist for the nonprofit Tax Analysts, called the new rules “a significant giveaway to business.”" Jia Lynn Yang in The Washington Post.
As you've never heard it before interlude: A special version of "Stairway to Heaven."
4. Immigration reform is back
For House Republicans, new momentum on immigration reform. "Recent signals from House Republican leaders that they will pursue their own vision of immigration reform have presented the White House with an opening to achieve a major legislative deal this year that has eluded lawmakers for decades. Speaker John A. Boehner (R-Ohio) is expected to release a brief outline of immigration principles to his caucus as soon as its annual retreat next week. The goals would include strengthening border security and creating new visas for foreign workers, while providing a path toward legalizing the status of the nation’s 11 million to 12 million undocumented immigrants, according to people briefed on the deliberations." David Nakamura in The Washington Post.
As in ye olden tymes interlude: 1860s-style portraits of Sundance stars.
5. Next subject for Pope: the environment
Pope Francis preps tome on the environment. "According to multiple media reports, the Vatican announced Friday that the pope is in the early stages of a work on “the ecology of man.” The pope adopted his name from St. Francis of Assisi, known for his love of nature and the environment. Francis has previously spoken about the exploitation of the earth’s natural resources and urged followers to “respect for the whole of creation and the protection of our environment.”" Jonathan Easley in The Hill.
Fissures in Republican Party as some embrace solar. "In conservative politics, solar power is often dismissed as an affectation, part of a liberal agenda to funnel money to “solar cronies” of the Obama administration and further the “global warming hoax.” So one would not expect to see Barry Goldwater Jr., the very picture of modern conservatism and son of the 1964 Republican nominee for president, arguing passionately on behalf of solar energy customers. But there he was last fall, very publicly opposing a push by Arizona’s biggest utility to charge as much as $100 a month to people who put solar panels on their roofs." Jon Schwartz in The New York Times.
Accidents surge as oil industry takes the train. "In the race for profits and energy independence, critics say producers took shortcuts to get the oil to market as quickly as possible without weighing the hazards of train shipments. Today about two-thirds of the production in North Dakota’s Bakken shale oil field rides on rails because of a shortage of pipelines. And more than 10 percent of the nation’s total oil production is shipped by rail. Since March there have been no fewer than 10 large crude spills in the United States and Canada because of rail accidents. The number of gallons spilled in the United States last year, federal records show, far outpaced the total amount spilled by railroads from 1975 to 2012." Clifford Krauss and Jan Mouawad in The New York Times.
How the pipeline fight has helped the environmental movement. "Environmentalists have spent the past two years fighting the Keystone XL pipeline: They have built a human chain around the White House, clogged the State Department’s public comment system with more than a million emails and letters, and gotten themselves arrested at protests across the country. But as bad as they argue the 1,700-mile pipeline would be for the planet, Keystone XL has been a boon to the environmental movement. While it remains unclear whether President Obama will approve the project, both sides agree that the fight has changed American environmental politics." Sarah Wheaton in The New York Times.
Today in bad news interlude: The Pope's "doves of peace" were attacked.
No, Obamacare isn’t a ‘bailout’ for insurers. Mike Konczal.
Earmarks survive in all but name.Janet Hook in The Wall Street Journal.
How do sick-day laws work with business? Rachel L. Swarns in The New York Times.
New farm bill readied for debate. David Rogers in Politico.
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