Welcome to Wonkbook, Wonkblog’s morning policy news primer by Evan Soltas. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.
Wonkbook's Number of the Day: $2 billion. That's the amount of sales revenue CVS says it's giving up by getting cigarettes out of its stores, part of a larger business strategy to refocus on health goods and services.
Wonkbook's Quote of the Day: "Just to understand, it is not that employers are laying people off," said Rep. Paul Ryan of the Congressional Budget Office's finding that Obamacare will encourage workers to cut their hours. "That is right," replied director Douglas Elmendorf.
Wonkbook's Graph of the Day: How the U.S. is running out of room under the debt ceiling.
Wonkbook's Top 5 Stories: (1) debating Obamacare's disincentive; (2) prepare for the first jobs day of 2014; (3) two options on the debt ceiling; (4) immigration reform, drowning again; and (5) Pacific Ocean, sure, but powerful wind.
1. Top story: If Obamacare makes it easier not to work, is that a good thing?
Yes, Obamacare will probably downsize the workforce. Economists explain why. "Back in 2005, Tennesse's Medicaid program was facing a shortfall, and the state abruptly halted coverage for 170,000 low-income adults, a population that the state was not required to cover. This dramatic coverage cut was a rare event. And it gave Craig Garthwaite, a health economist at Northwestern University's Kellogg School of Business, the opportunity to probe what's become an increasingly important question: Does the availability of government-funded insurance effect employment? Garthwaite's findings suggest that it does, potentially to a strong degree." Sarah Kliff in The Washington Post.
...Or take it from Paul Ryan and Douglas Elmendorf. "House Budget Chair Paul Ryan (R-WI) explained in a Wednesday hearing with CBO director Doug Elmendorf that the health care reform law wouldn't cost the U.S. economy more than 2 million jobs, as many of his colleagues alleged, but that Americans would choose to work less..."Just to understand, it is not that employers are laying people off," Ryan said. "That is right," Elmendorf said...To be clear, Ryan wasn't thrilled with the CBO's finding. He said he was "troubled" by the report because it suggested that Obamacare was encouraging Americans "not to get on the ladder of life, to begin working, getting the dignity of work, getting more opportunities, rising the income, joining the middle class." "This means fewer people will do that," he said." Dylan Scott in Talking Points Memo.
@margafret: I wonder how many Americans are thinking, I'm glad Obamacare allows people to work less to get coverage vs those who say the opposite?
Obamacare enrollees hit snags at doctor's offices. "After overcoming website glitches and long waits to get Obamacare, some patients are now running into frustrating new roadblocks at the doctor's office. A month into the most sweeping changes to healthcare in half a century, people are having trouble finding doctors at all, getting faulty information on which ones are covered and receiving little help from insurers swamped by new business." Chad Terhune in The Los Angeles Times.
Health insurers are seeing blowback from narrow networks. "[F]ederal regulators proposed a tougher review process for the doctors and hospitals in plans to be sold next year through HealthCare.gov, a shift that could force insurers to expand those networks. Meantime, regulators in states including Washington and New Hampshire are ramping up their own scrutiny, and lawmakers in Mississippi and Pennsylvania, among others, are weighing bills that could force plans to add more hospitals and doctors...Under the new federal proposal, insurers selling plans in the federally run marketplace would be required to submit to the Centers for Medicare and Medicaid Services a full list of providers in a network before their plans are approved for listing in the exchanges. In the future, regulators also plan to develop federal standards for the required number of providers." Anna Wilde Mathews and Christopher Weaver in The Wall Street Journal.
CVS to stop selling cigarettes by Oct. 1. "CVS, one of the nation’s largest drugstore chains, said Wednesday that it will stop selling cigarettes at its 7,600 locations in an expensive but calculated bid to boost its image as a full-fledged health-care provider rather than a simple purveyor of greeting cards and shampoo. Executives said the move will cost the company $2 billion a year in lost sales. But they are gambling that abandoning smokers will help them strike more profitable deals with hospitals and health insurers." Sarah Kliff in The Washington Post.
Cyberattacks are on the rise. And health-care data is the biggest target. "A study of all data breaches in 2013 found that the health-care sector suffered the highest share of attacks last year, overtaking the business sector for the first time in almost a decade. The Identity Theft Resource Center, a nonprofit organization that tracks data theft, reported that health-care organizations suffered 267 breaches last year, or 43 percent of all attacks in 2013." Amrita Jayakumar in The Washington Post.
Health insurance industry touts supplemental policies to cover medical costs. "Insurers are increasingly marketing these limited policies that pay cash after a hospital stay or specific disease diagnosis, such as cancer. Such products, which cost less and provide fewer benefits than conventional insurance, can play a role similar to “medigap” coverage, which fills holes in the Medicare program for seniors, insurers say. The policies are promoted as helping cover out-of-pocket expenses that can reach thousands of dollars in plans offered by employers and the health-care law’s online marketplace." Jay Hancock in Kaiser Health News and The Washington Post.
@ryanavent: Labor force participation and employment-population rates are basically political choices.
DOUTHAT: Who benefits from less incentive to work? "[T]here are specific classes of people who plainly benefit, in fairly uncomplicated ways, from benefits that provide an incentive to work less, or leave a job outright. The obvious examples are the ones that liberals keep invoking: Parents of young children (for whom the family-friendly tax overhaul that conservative reformers like to tout would presumably have a similar effect), and people with a disability or chronic medical condition that makes work a simple misery. But there also lots of people who emphatically do not benefit from being given an incentive to either detach from the workforce or (if they’re already unemployed or underemployed) remain detached rather than taking a lower-paying job." Ross Douthat in The New York Times.
@bdomenech: Do we really want a labor force where more taxpayers work less, even as their earnings support a greater number of government beneficiaries?
YGLESIAS: Obamacare the job killer. Oh, wait, nope. "One is that by making it possible to get health insurance without a full-time job, it simply makes full-time employment less desirable...The other is that by directing subsidies to low-income people, the ACA makes working longer hours less desirable. Right now, some people work two jobs to make ends meet. The ACA makes it more financially feasible for those people to quit one job and rely on subsidies (or Medicaid) to help fill the gap. Employment may decline, in other words, not because people are going to get fired but because people will be pickier about working." Matthew Yglesias in Slate.
PONNURU: Then there are the taxes. "CBO isn’t saying that Obamacare reduces people’s willingness to work solely or even mainly by letting them get health insurance without a job. CBO says thatObamacare reduces this incentive as well by raising people’s implicit marginal tax rate: the more money they make, the more Obamacare reduces their tax benefit. So 1) is not the full story. Obamacare shrinks the labor force more than just extending health coverage would." Ramesh Ponnuru in National Review Online.
CHAIT: In another universe, the reverse argument. "Imagine that the United States had a national health-care system in place for long enough that it was no longer the subject of frenetic controversy – suppose four decades ago, Richard Nixon, or two decades ago, Bill Clinton, had managed to pass their proposed health-care reform. Now imagine a new president just proposed to eliminate that system and replace it with the one that has existed in the United States until January 1 of this year...The administration that proposed this plan would certainly have some scraps of good news to cling to. There would be a pretty major influx of labor...But opponents of the law would counter that repealing national health insurance would not create two million new job openings. Rather, it would force (the equivalent of) two million workers to go to work, or to work longer hours, in order to get health insurance. The way this plan would work is that millions of workers who are able to afford health insurance outside of getting it through their job would lose it." Jonathan Chait in New York Magazine.
ROY: Why the liberal argument is insulting. "If you’re one of the chumps out there who still toils away at a challenging job, and still pays taxes so that others can “pursue their dreams,” you have a right to resent the White House’s argument. And the “dream-pursuers” themselves should become aware of all the research suggesting that earned success, through hard work, is the most reliable path to true happiness. Participation in the labor force was already declining, thanks to the poor economy and the retirement of the Baby Boomers. Obamacare, it appears, will accelerate that process, forcing fewer and fewer taxpayers to support a greater number of government beneficiaries." Avik Roy in Forbes.
@Avik: Now, lefties in my Twitter feed are arguing that failure to subsidize work drop-outs = “forced labor.” Okay then.
BERNSTEIN: What the CBO said wasn't about healthcare. "Only in Washington could the following occur: the Congressional Budget Office releases a dense, technical report wherein it tweaks its estimates of how labor supply will be affected by the health care act over the next decade … and the whole town goes nuts. Not only that, but in our mass nuttiness, we missed the actual message from that potboiling page-turner also known as the Budget and Economic Outlook, 2014-2024. That message had almost nothing to do with the Affordable Care Act. It was instead a stark warning about the damage to our fiscal outlook from diminished economic growth, jobs and incomes." Jared Bernstein in The New York Times.
COWEN: Do people make the right decision to work less? "A benefit shock comes along, positive for many people, and it induces many of them to work less or not work at all. How happy should we be? And here I mean happy at the margin, due to their change in employment decision...A simpler possibility is that people undervalue the long-term benefits of having a job and thus in both settings the contraction in employment is a quite negative outcome. That is then very bad news for ACA, if only in expected value terms." Tyler Cowen on the Marginal Revolution blog.
KAPUR: Republicans wanted to end health insurance job-lock until Democrats did it. "Republicans and conservative wonks have long supported de-linking health insurance from employment in order to give workers more economic freedom. But now they're attacking Obamacare for ... doing just that. Republicans seized on a Congressional Budget Office report Tuesday to attack Obamacare for "destroying" or "costing" jobs. The reality wasn't so simple; in fact, CBO didn't project any pink slips; it said some 2 million workers would voluntarily exit the full-time labor force (over a decade) because Obamacare will make them less dependent on their employer for health insurance." Sahil Kapur in Talking Points Memo.
@ernietedeschi: Interesting that the ACA labor supply debate is revealing a totally different left/right divide over freedom than we normally see.
CROOK: What we should and shouldn't subsidize. "[O]ne thing -- the small and strangely neglected matter of who pays for the subsidies. As a taxpayer, I'm more than happy to finance a subsidy that guarantees access to decent health care for all. I'm not so happy to subsidize your early retirement or improved work-life balance. Health care is, or should be, a basic entitlement. Your lifestyle choices aren't." Clive Crook in Bloomberg.
Music recommendations interlude: Soft Cell, "Tainted Love," as played through floppy disc drives.
PONNURU AND LEVIN: A policy agenda unequal to the challenge. "The path would seem to be open, then, for Republicans to present a more compelling agenda. That agenda would actually expand opportunity rather than merely gesture toward it, and it would benefit the middle class as well as minimum-wage earners. It would address popular concerns about our economic future without using opposition to income inequality as an organizing principle; without, that is, treating the rising fortunes of the wealthy as a cause of those concerns...Health care, higher education, and the costs of raising children are some of the most pressing concerns of middle-class families, but the case for conservative reforms in these areas applies in others that also matter to many such families. This suggests the possibility of a broad conservative agenda that would lift burdens off the shoulders of parents and workers." Ramesh Ponnuru and Yuval Levin in National Review Online.
ORSZAG: Marrying your equal boosts inequality. "What are the effects of this increased marital sorting? For one thing, it contributes to income inequality. If marriages occurred randomly across educational categories, Greenwood and his co-authors show, the Gini coefficient for household income in the U.S. in 2005 would decline to 0.34 from 0.43" Peter Orszag in Bloomberg.
SCHEIBER: Don't go it alone, Obama. "[T]hese unilateral maneuvers will be highly limited in their substantive impact. Their only real value is signaling that Obama believes he can exert his will on the economy without Congress and is working really hard to do that. But if that’s the effect, then they only exacerbate Obama’s dilemma by further persuading voters he has influence over the economy we just agreed he doesn’t have...[I]nstead of forcing the goofy, self-defeating Republicans into the spotlight and making them answer for economic stagnation, Obama’s year of doing-things-all-by-my-lonesome has effectively let them off the hook. It makes no sense." Noam Scheiber in The New Republic.
COOPER: The silence of the austerians. "The question for 2014, then, will be whether this triumph can be consolidated and expanded into the policy sphere. Because despite the intellectual collapse, Austerian assumptions and reasoning still dominate United States policy, which is undertaking fiscal consolidation at a pace not seen since the WWII demobilization. If the current Austerian death grip on the framework of policy negotiation can be broken, there might be a chance." Ryan Cooper in The New Republic.
TYRE: Improving economic diversity at top colleges. "Poor kids tend to go to under-resourced high schools and, when they graduate, are often not academically prepared for top colleges. The poor students who try to obtain a degree most often enroll in public two- and four-year colleges near their homes, where attrition rates can be high and graduation rates low...According to the College Board, two-thirds of students at the nation’s 193 most selective colleges come from the top income quartile, and just 6 percent from the bottom quartile." Peg Tyre in The New York Times.
GRANT: Restructure teacher tenure, don't end it. "We ask researchers to teach, and teachers to do research, even though these two capabilities have surprisingly little to do with each other. In a comprehensive analysis of data on more than half a million professors, the education experts John Hattie and Herbert Marsh found that “the relationship between teaching and research is zero.”...A research-only tenure track would be for professors who have the passion and talent for discovering knowledge, but lack the motivation or ability to teach well...A research-only tenure track would be for professors who have the passion and talent for discovering knowledge, but lack the motivation or ability to teach well." Adam Grant in The New York Times.
Trying too hard interlude: The man running for Congress in four different states.
2. Tomorrow is the first jobs day of 2014
More men in prime working ages don't have jobs. "Having so many men out of work is partly a symptom of a U.S. economy slow to recover from the worst recession in 75 years. It is also a chronic condition that shows how technology and globalization are transforming jobs faster than many workers can adapt, economists say. The trend has been building for decades, according to government data. In the early 1970s, just 6% of American men ages 25 to 54 were without jobs. By late 2007, it was 13%. In 2009, during the worst of the recession, nearly 20% didn't have jobs." Mark Peters and David Wessel in The Wall Street Journal.
ADP says businesses added 175,000 jobs in January. "Private-sector payrolls in the U.S. increased by 175,000 in January, according to the national employment report compiled by payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics. Economists surveyed by Dow Jones Newswires expected ADP to report a January increase of 189,000 jobs. The December ADP employment increase was revised down to 227,000 from 238,000 reported a month ago...Forecasters also expect December jobless rate to drop to 6.6%, from December's 6.7%." Kathleen Madigan in The Wall Street Journal.
Regulators may again clip the Volcker rule. "Federal Reserve governor Daniel Tarullo told lawmakers Wednesday that regulators are considering whether to loosen provisions that could affect collateralized loan obligations, or CLOs, which are securities backed by bundles of loans made to companies with low credit ratings. CLOs typically offer higher returns than corporate bonds and other loans...As a result of the Volcker rule's ban on certain types of trading, many banks that own CLOs may have to divest them, according to industry officials. Industry representatives have urged U.S. agencies to exempt CLOs by clarifying that they are debt investments and aren't equivalent to the equity investments prohibited under the Volcker rule." Andrew Ackerman in The Wall Street Journal.
How a shrinking middle class has eroded economic growth. "Alan B. Krueger, a Princeton economist who was a top economic adviser in the Obama administration from 2009 to 2013, estimates that had the shift in income gains to the wealthiest earners since 1979 been more uniformly distributed, annual consumption would be $400 billion to $500 billion higher today, equal to about 3.5 percent of gross domestic product." Nelson D. Schwartz in The New York Times.
Mortgage rates hit lowest level in three months. "[U]nease over economic growth in the U.S. and market turmoil abroad drove investors to load up on government bonds, pushing down long-term interest rates. The average rate on a 30-year fixed-rate mortgage was 4.47% last week, down from 4.52% the prior week, the Mortgage Bankers Association said Wednesday. Mortgage rates are tied to yields on the 10-year Treasury note, which closed at 2.64% on Tuesday amid market jitters." Nick Timiraos in The Wall Street Journal.
Businesses are adapting to higher minimum wages in some states. "The current federal minimum of $7.25, when adjusted for inflation, is about 23 percent lower than it was in 1968. In addition, the increases do not reflect an evolving labor landscape in which the number of minimum-wage earners who work full time has increased substantially, prompting some to ask, Is there never a time when the minimum could be raised without objection? And if a business cannot afford to pay minimum wage, might it be doing something wrong?" Stacy Perman in The New York Times.
History interlude: 12,000 images of the French Revolution.
3. There are only two ways the debt ceiling can be raised
The two debt-limit options: a clean increase, or an almost-clean increase. "House Republican leaders, looking Wednesday for ways to ease passage of a needed increase in the federal borrowing limit this month, are considering adding sweeteners with bipartisan appeal such as a boost in pensions for military veterans. House Speaker John Boehner (R., Ohio) has made it clear he doesn't intend to allow the government to default on its debt. But he and other GOP leaders have concluded there is no proposal to raise the debt ceiling that could pass with Republican votes alone, and they are hunting for measures that could secure some Democratic support, according to senior GOP aides." Kristina Peterson and Janet Hook in The Wall Street Journal.
4. Immigration reform is drowning again
Immigration reform's other hurdle: the guest-worker program. "Last March, the AFL-CIO and the U.S. Chamber of Commerce reached a delicately crafted deal on the number of low-skilled workers — such as hospitality employees — who can legally come into the country. That deal is a major reason why the Senate reform bill was able to pass in June. But House Republicans have not yet resolved this thorny problem — the GOP principles released last week only broadly touch the issue — and Republicans are split over whether to raise or reduce the number of guest workers coming into the country, according to several top sources close to the issue." Seung Min Kim in Politico.
Now it's the House Republicans who are cooling to the idea of immigration reform. "Just days after House Republican leaders backed legalization for most immigrants in the U.S. illegally, opponents in the party are making clear they will resist the push, casting fresh doubt on chances for legislative movement on immigration this year. The focus of opposition within the House GOP is less on sensitivities over amnesty or a potential flood of unneeded new workers, and more on politics. Opponents say they worry that moving ahead on the issue could divide Republicans and hand Democrats a victory in an election year when the GOP has the advantage." Laura Meckler and Kristina Peterson in The Wall Street Journal.
Movie recommendations interlude: Wonkbook saw "Her" last night and thought it was deep and disturbing.
5. Pacific Ocean, sure, but powerful wind
West Coast to get its first offshore wind farm. "A Seattle company is being given the green light to develop plans to build the West Coast's first offshore wind energy farm — five floating turbines off Oregon's Coos Bay, federal and state officials said Wednesday. The 30-megawatt pilot project was announced at a press conference by Gov. John Kitzhaber, U.S. Secretary of the Interior Sally Jewell and Bureau of Ocean Energy Management Director Tommy Beaudreau...Several offshore projects are in the works on the Atlantic coast, but they don't use floating platform technology. Instead, they are anchored to the seabed." Gosia Wozniacka in The Associated Press.
White House announces seven regional climate hubs. "On the heels of the Senate’s passage of a long-awaited farm bill, the Obama administration announced the creation of seven regional “climate hubs” on Wednesday to help farmers and rural communities respond to the risks of climate change, including drought, invasive pests, fires and floods. White House officials described the move as one of several executive actions that President Obama will take on climate change without action from Congress...The hubs will be in Ames, Iowa; Durham, N.H.; Raleigh, N.C.; Fort Collins, Colo.; El Reno, Okla.; Corvallis, Ore.; and Las Cruces, N.M. The hubs will be set up at existing federal facilities and will not receive extra financing." Coral Davenport in The New York Times.
Reading material interlude: The best sentences Wonkblog read today.
Cyberattacks are on the rise. And health-care data is the biggest target. Amrita Jayakumar.
CVS to stop selling cigarettes by Oct. 1. Sarah Kliff.
New surveillance technology can track everyone in an area for several hours at a time. Craig Timberg in The Washington Post.
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Wonkbook is produced with help from Michelle Williams.