Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara (@pkollipara). 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. Follow us on Twitter and Facebook.
Wonkbook’s Number of the Day: $583 billion. That's the White House's projected federal deficit for this fiscal year, the first time the annual deficit would fall below $600 billion since the Great Recession took hold.
Wonkbook’s Chart of the Day: A "nationwide gentrification effect" is segregating us by education.
Wonkbook's Top 5 Stories: (1) Hints ahead on the Fed's rate-hike timing; (2) Common Core meltdown?; (3) processing the migrant children — easier said than done; (4) context on the Boehner lawsuit; and (5) commercial drones take flight.
1. Top story: Signals on the Fed's rate-hike timing ahead this week from Yellen
Mark your calendars, wonks: Yellen has congressional testimony coming up this week. "Janet Yellen's two-day appearance in the U.S. Congress from Tuesday will dominate global markets, which want above all to know how long the Federal Reserve will leave interest rates low after an unprecedented period of cheap money since the financial crisis. While October is likely to mark the end of the central bank's money printing, investors are looking for hints of an interest rate hike early next year, which would signal a return to normality after the Great Recession and its aftermath. But much depends on the health of the U.S. economy and its ability to bounce back from a disastrous first quarter." Robin Emmott in Reuters.
Economists lower third quarter growth forecasts. "The average forecast for growth in the second quarter has fallen to 3 percent, according to a survey...by the National Association for Business Economics....Growth in 2014 as a whole will be just 1.6 percent, they project, sharply below a previous forecast of 2.5 percent. If accurate, this year's growth would be the weakest since the Great Recession. The lower 2014 forecast largely reflects...a sharp contraction in the first quarter....The economists reduced their second-quarter forecast largely because they expect consumers spent at a much more modest pace....Another factor weighed heavily on the first quarter: A big drop in exports widened the nation's trade deficit." Christopher S. Rugaber in the Associated Press.
White House also fears weak growth but a stronger jobs outlook. "The White House released an upbeat outlook for the labor market on Friday, projecting the jobless rate will be 'stabilizing' at 5.4% in 2017, 18 months faster than it projected in March. But it also predicted weaker economic growth this year and in 2017, a pullback it said would hurt tax revenue. The new estimate came in the White House budget office's 'Mid-Session Review,' which updates the economic and budget projections it made in the spring. The White House attributed the improving labor market to its belief that 'as labor-market conditions improve, discouraged workers are expected to rejoin the labor force.'" Damian Paletta in The Wall Street Journal.
Could the Fed start rate hikes sooner due to better job-market news? "A debate is intensifying among the Federal Reserve's regional bank presidents about whether to push interest rates up from zero sooner than planned because of recent improvements in the U.S. job market, potentially signaling a broader discussion that could change the rate outlook. Most Fed officials at June's policy meeting didn't see rate increases until 2015, according to projections made before the Labor Department reported that the jobless rate fell to 6.1% in June, down 1.4 percentage points from a year ago. Fed officials hadn't expected unemployment to fall to near 6.1% until the end of this year, according to their June projections." Jon Hilsenrath and Michael S. Derby in The Wall Street Journal.
One persistent source of labor-market weakness is low 'job churn.' "Quitting a job often can be a good thing. But not enough workers have been doing it. During and after the recession, the U.S. economy has been too weak for many workers to undertake the sort of job-hopping that economists say is critical to building careers and advancing the nation's long-run growth prospects. The consequence: Even many Americans who have remained employed have stunted their earnings growth by staying pinned down to their current jobs. The weak job churn is among Federal Reserve Chairwoman Janet Yellen's leading concerns about an economy that is improving steadily, but with substantial scars just beneath the surface." Josh Zumbrun in The Wall Street Journal.
Workforce training is about to get a facelift. "The bill ties federal workforce training money to local and regional employers, who will help customize training programs at high schools and community colleges. It also consolidates programs and provides more local flexibility in how they’re run. Hagan’s legislation, now part of the bill, requires that operators of job-training centers prioritize training that will lead to nationally recognized credentials that employers in a region require for jobs." Renee Schoof in McClatchy Newspapers.
But the Fed fears financial risks of whatever plan it uses for rates. "Federal Reserve officials are cautiously nearing completion of a new plan for managing interest rates, concerned that some of the new tools they are likely to rely on could pose unintended risks in a crisis. The central bank has devoted extensive debate to the matter over the past two months and officials 'have made a lot of progress' on a strategy to return monetary policy to a more normal footing after years of coping with crisis, Chicago Federal Reserve Bank President Charles Evans said....However, the sheer magnitude of the amounts of money used to combat the crisis — $2.6 trillion sitting at the Fed as bank reserves and $4.2 trillion held by the Fed in various securities — may complicate the U.S. central bank's ability to control its target interest rate once the decision is made that it should be raised." Howard Schneider in Reuters.
Bruised and grumbling, foreign banks bend to U.S. rules. "Major lenders in Europe and Asia are reacting to the steady flow of punishments from the United States by doing ever more to comply with U.S. laws and by cutting business ties in countries Washington dislikes rather than risk its wrath and, in the worst scenario, risk exclusion from the dollar system. Official regulators outside the United States are starting to look at ways to prevent their own banks and markets from being damaged by the scale of U.S. penalties. But for now, each bank on its own has little choice but to toe Washington's line....Meanwhile...foreign banks who have fallen foul of U.S. rules are doing everything they can to ensure they can still tap the world's financial epicenter." Steve Slater and Michelle Price in Reuters.
Other economic/financial reads:
From Benghazi to the boardroom: The road to Citigroup's $7 billion settlement. Ben Protess, Jessica Silver-Greenberg and Michael Corkery in The New York Times.
Interview: The man who took on Fannie Mae. Mary Kissel in The Wall Street Journal.
MIRHAYDARI: The labor market's broken, and that's a good thing. "The job market is tightening to such an extent, and apparently having difficulty matching new workers with available openings, that it’s showing signs of inefficiency....One translation here is that while there are still many Americans looking for work, fewer of them are qualified candidates....That means that businesses will either have to pay existing workers overtime, hire and train another worker, pay a higher wage as the competition heats up for top talent, or simply forgo potential revenue growth. While that's bad news for the corporate sector...it could be great news for the middle class as competition for the best workers boosts wages and shifts the balance from capital to labor." Anthony Mirhaydari in The Fiscal Times.
SMITH: Punish bankers, not the banks. "The conundrum is indicting a bank at the parent level is widely perceived to be a potential death blow, since many counterparties would have to stop doing business with it immediately. Removing the US banking licenses of a serial fraudster, another possible remedy, would similarly put a US firm out of business and would inflict severe, permanent damage on a big foreign bank. Hence the tendency of officials to rely on big, or at least big-sounding, fines. But it is bankers, not banks, that commit crimes. Here, the BNP Paribas deal falls short." Yves Smith in CNN.
NAZARIO: A refugee crisis, not an immigration crisis. "By sending these children away, 'you are handing them a death sentence,' says José Arnulfo Ochoa Ochoa, an expert in Honduras with World Vision International, a Christian humanitarian aid group. This abrogates international conventions we have signed and undermines our credibility as a humane country. It would be a disgrace if this wealthy nation turned its back on the 52,000 children who have arrived since October, many of them legitimate refugees. This is not how a great nation treats children." Sonia Nazario in The New York Times.
KRUGMAN: Obamacare fails to fail. "You might ask why, if health reform is going so well, it continues to poll badly....Obamacare, by design, by and large doesn’t affect Americans who already have good insurance. As a result, many peoples’ views are shaped by the mainly negative coverage in the news media....And as I suggested earlier, people in the media...may be the last to hear the good news, simply because they’re in a socioeconomic bracket in which people generally have good coverage. For the less fortunate, however, the Affordable Care Act has already made a big positive difference. The usual suspects will keep crying failure, but the truth is that health reform is — gasp! — working." Paul Krugman in The New York Times.
BARRO: This road work made possible by underfunding pensions. "Congress is debating whether it should — again — let corporations underfund their pension plans, and generate a one-time boost in tax revenue. And Congress would use that revenue to fund a few months of a continuing spending program that it does not have a plan to make permanently solvent, while exposing pension beneficiaries and taxpayers to risk if a corporation goes bankrupt after underfunding its pension plan. If you define 'fiscal responsibility' solely in terms of whether the federal budget deficit grows or shrinks over a 10-year window, you can reach the conclusion that...politicians in both parties have settled on an insane definition of 'fiscal responsibility.'" Josh Barro in The New York Times.
O'BRIEN: Millennials really are living in their parents’ basements. "Young people moved back home when the economy cratered, and stayed there when it didn't bounce back. There just weren't enough jobs, let alone well-paying ones, for them to afford to move out — especially if they had student loans to pay back. But all of these micro decisions to set up camp in their parents' basements had a macro effect: there wasn't as much demand for new housing. And that's been a big part of why the recovery has been so underwhelming. In other words, because millennials couldn't afford to live on their own, the economy stayed stuck — and so did they. The good news, though, is that this might finally be changing." Matt O'Brien in The Washington Post.
BLASI: A Founding Father profit-sharing fix for inequality. "Current approaches to addressing rising inequality — raising the minimum wage, expanding higher education, increasing the power of unions, widening the...focus on high technology...a national renaissance in manufacturing — have not shown any evidence of reversing the concentration of income and wealth. There is one potential solution that could appeal to both pro-labor liberals and free-market conservatives, which has its roots in the philosophies of the Founding Fathers, and is already being practiced in parts of the economy today: employee shares in companies. The idea is to make every citizen a capitalist through citizen shares of corporations." Joseph Blasi in The Daily Beast.
KARABELL: Let's clone the Ex-Im Bank. "Rather than killing the Export-Import Bank, we ought to use it as the inspiration for multiple other programs. Why spend hundreds of billions in subsidies and direct spending and hiring when we could instead use government as a guarantor that unlocks the free market?...Instead of spending hundreds of billions in highway bills, we could create a public-private road agency. Every agency...could be tasked with finding areas where private companies can serve the public good if they are simply given some basic backstops that give them access to needed capital....The problem with the bank isn’t that it exists; it’s that so many more things like it do not." Zachary Karabell in Slate.
Impatient animal interlude: This boxer dog is tired of waiting in the car.
2. Common Core is losing support left and right
Common Core is now a dirty word for governors. "There was little controversy when the bipartisan governors association in 2009 helped develop the common education standards aimed at improving schools and students' competitiveness across the nation. The standards were quickly adopted by 44 states. But conservative activists who hold outsized influence in Republican politics aggressively condemned Common Core, and lawmakers in 27 states this year have proposed either delaying or revoking Common Core. The issue has forced many ambitious Republicans who previously had few concerns to distance themselves from the standards and the issue has begun to shape the early stages of the 2016 presidential race." Erik Schelzig and Steve Peoples in the Associated Press.
And on the left, teachers unions are increasingly concerned about it. "After years of battling conservative groups opposed to Common Core, supporters of the testing standards discovered Friday morning that one of their most avid allies, the American Federation of Teachers, is bailing on them too. Et tu, Brutus? At its annual convention Friday in Los Angeles, AFT president Randi Weingarten is expected to announce that the union will underwrite $20,000 to $30,000 grants for teachers’ projects designed to rewrite and improve the Common Core standards....While AFT stops short of outright opposing the Common Core, Weingarten has said that that option is not off the table." Haley Sweetland Edwards in Time Magazine.
First Common Core tests say less about what students know and more about how that knowledge is measured. "When New York first administered Common Core tests in 2013, less than a third of students demonstrated 'proficiency' — considered a pass — in math and English. Kentucky recorded similar scores when it launched its assessments in 2012. And results are expected to be comparable in other states as they roll out new tests next year.Experts warned, however, against reading too much into the proficiency labels or pass-fail numbers in assessing how much students were actually learning." Jo Craven McGinty in The Wall Street Journal.
What's the best state in the nation for education? Massachusetts, hands down, one research group says. Reid Wilson in The Washington Post.
FCC OKs scaled-back Wi-Fi expansion plan. "The original plan called for spending $5 billion on WiFi over five years, in line with a push by the Obama administration to bring next-gen broadband and WiFi to 99 percent of students over the same period. Those funds would have partly come from savings as a result of transitioning away from supporting legacy technologies. The proposal would also have eliminated an existing requirement that E-Rate funds be spent first on broadband services before being applied to WiFi....But the FCC's proposal was ultimately scaled back late Thursday amid Republican objections that the E-Rate program can't afford the changes. The final proposal's two-year, $2 billion commitment...does not commit the FCC to funding WiFi upgrades at that same rate for the following three years." Brian Fung in The Washington Post.
But teachers are upset about this, too. "Schools will soon be able to apply for grants from a $2 billion fund to help pay for Wi-Fi networks in schools under a plan approved Friday by federal regulators. The Federal Communications Commission voted to set aside funds for Wi-Fi services over the objections of some schools and teachers unions, which wanted the agency to do much more. The National PTA and teachers unions wanted the FCC to increase the size of the so-called E-Rate fund to help cover the costs of Internet access to more schools. Demand has grown as more schools have tried to improve their Internet access, but funding hasn’t kept pace, they noted." Amy Schatz in Re/code.
Another teachers union ding for Duncan. "The American Federation of Teachers approved a resolution...calling for Education Secretary Arne Duncan to resign if he does not improve under a plan to be implemented by President Barack Obama. The 'improvement plan' would include the requirement that Duncan enact the funding and equity recommendations of the Equity Commission’s 'Each and Every Child' report; change the No Child Left Behind and Race To The Top 'test-and-punish' accountability system to a 'support-and-improve' model; and 'promote rather than question' teachers and school staff....The resolution comes on the heels of one earlier this month by members of the National Education Association calling for Duncan to step down." Allie Grasgreen in Politico.
The Democrats' education war just got real. The AFT just founded a new Democratic-aligned group to counter the influence of education reformers. Libby Nelson in Vox.
Other education reads:
How a better summer vacation could help low-income kids in school. Libby Nelson in Vox.
Wonky LeBron interlude: LeBron James and the theory of price controls.
3. Why the administration has its hands full with relocating and processing the migrant children
Because of a growing NIMBY problem. "In Escondido, Calif., the planning commission denied a permit to turn a former nursing home into a 96-bed youth shelter after residents protested....Federal officials abandoned plans to locate a facility near Richmond, Va., after protests from residents. In Texas, two communities passed resolutions stating they don't want shelters — before anyone suggested opening them there. At the National Governors Association meeting in Nashville, Tenn....governors expressed concerns over the cost of housing children in their states. And Nebraska's governor complained about 200 children who were sent to his state to live with their families." Laura Meckler, Beth Reinhard and Peter Nicholas in The Wall Street Journal.
Administration lobbies state governors. "Health and Human Services Secretary Sylvia Matthews Burwell met privately with dozens of governors Sunday as the Obama administration tried to get support from the leaders of states that will host thousands of the Central American children who have crossed the Mexican border on their own since Oct. 1. Governors of both parties expressed concerns about the cost to states, including providing public education for the children, according to those who attended the meeting. Burwell left the meeting through a side door without talking to reporters." Alicia A. Caldwell and Steve Peoples in the Associated Press.
And because Capitol Hill Republicans oppose Obama's $3.7B emergency funding request as too large. "House of Representatives Appropriations Committee Chairman Harold Rogers said last week that the Obama administration asked for 'too much money' but declined to say what an appropriate figure would be. Representative Michael McCaul, a Texas Republican, also declined to support the spending bill." Diane Bartz in Reuters.
Miss all the Sunday show immigration talk? We've got you covered. Jaime Fuller in The Washington Post.
And immigration activists — and some Democrats — are at odds with the administration... "The Obama administration is seeking the ability to offer 'voluntary removal' of undocumented children from Central America back to their home countries, which the trafficking law now prohibits. Republicans also are demanding the change as one of the conditions for approving $3.7 billion in emergency funding to deal with the surge of children on the border. This idea has raised alarm bells among immigration and refugee advocates, who say voluntary removal is often coerced from vulnerable children. They believe the border patrol is ill-equipped to handle the sometimes difficult interviews with kids who have taken a long and difficult journey fleeing violence at home. Some Democrats agree with the advocates." Fawn Johnson in National Journal.
...and oppose a bipartisan bill to revise the trafficking law. "One of the Hispanic caucus’s own members, Rep. Henry Cuellar (D-Texas), has been trying to write legislation with Sen. John Cornyn (R-Texas) that seeks to revise the trafficking law so that children from noncontiguous countries are treated similarly as those who come from Mexico or Canada.....Aside from equal treatment of all children, regardless of country of origin, their bill includes requirements that facilities holding them be kept in 'humane' conditions, and the lawmakers also say their legislation will keep due process protections for the unaccompanied minors. But those efforts earned a stern scolding from Cuellar’s colleagues on Friday." Seung Min Kim in Politico.
The U.S. is still trying to prevent the influx from even happening. "There's one fact the White House and many Republicans and Democrats can agree on: Parents need to know they shouldn't send their children on an illegal journey into the United States. Two Arizona Republican senators...aim to encourage parents in Central America to apply for refugee status in their home country and avoid sending their children on journeys into the U.S. through Mexico. The bill provides some incentive in the form of 5,000 additional refugee visas for each of the three countries. Additionally, it calls for the expedited removal...to be completed in a span of 'hours or days.'...There's also already a multimillion-dollar advertising campaign underway....But some lawmakers are skeptical....Maybe witnessing planes return children home would work better, they say." Rachel Roubein in National Journal.
Long read: Rare interviews with the children of America's border-migration crisis. Susan Terrio in Politico Magazine.
Border crisis scrambling the politics of immigration policy. "Until now, the politics of immigration have been seen as a no-lose proposition for President Obama and the Democrats. If they could get a comprehensive overhaul passed, they would win. And if Republicans blocked it, the GOP would further alienate crucial Hispanic and moderate voters. But with the current crisis on the Southwest border, where authorities have apprehended tens of thousands of unaccompanied Central American children since October, that calculus may be shifting." Karen Tumulty and David Nakamura in The Washington Post.
Other immigration reads:
Where is immigration reform really happening? The states and cities. Shannon O'Neil in Foreign Policy.
Stunt interlude: Man effortlessly jumps over 80-mph moving car.
4. More context on the Boehner lawsuit
One major motivator behind the lawsuit: Boehner hopes not to have to impeach Obama. "More seems curious than straightforward in Speaker John A. Boehner’s current plan for suing President Barack Obama. But one of the easier things to understand is what the litigation might accomplish inside the House Republican Conference: a cooling of the intensifying and politically problematic talk about how nothing short of impeachment will do....Giving members of the GOP rank and file this way to focus their red meat rhetoric, and their appeals for donations from the hard right, could make calls for impeachment fade, if not quite disappear. And that is what Boehner has made clear he wants." David Hawkings in Roll Call.
Explainer: Republicans v. Obama — and the other times the president have been sued. Sebastian Payne in The Washington Post.
This lawsuit may not even see the light of day. "The lawsuit will charge that president Obama acted illegally when he delayed Obamacare's employer mandate by one year. Many bright legal minds think that the charge will fail on standing. The courts have historically been reluctant to get involved in disputes between Congress and the president. Putting the standing issue aside, there's still the legal question at the heart of Boehner's lawsuit: does the president have the executive authority to hold off a major tax regulation by one year? This is an area where there's significantly less legal agreement, and a real debate over whether the White House's one year delay was, in fact, within the executive branch's powers." Sarah Kliff in Vox.
Why not try a different policy area, such as national security? "In Libya, the president supported the rebellion against Moammar Gaddafi with military force without seeking Congressional approval, an action that many observers claimed was a violation of the War Powers Act....The National Security Agency's broad surveillance of Americans has been based on inventive legal interpretations of federal statute, but Boehner opposed an amendment brought by Rep. Justin Amash (R-Mich.) that would have limited the agency's authority. Yet national security seems to be the one area in which conservatives have hesitated to criticize the president for abusing his authority." Max Ehrenfreund in The Washington Post.
Other political reads:
Florida's electoral map in flux after court ruling. Bill Cotterell in Reuters.
The fate of the new North Carolina voter ID law now rests in a judge's hands. Jeff Tiberii in NPR.
Animal acrobatics interlude: Cat masters new sport of "purrkour" like a champ.
5. Coming to unexpected skies near you: commercially operated drones...
...including over San Diego. "San Diego Gas & Electric has been cleared to begin testing small drones in sparsely populated areas of East County to help survey remote sections of the power grid for outages and wildfires. The subsidiary of Sempra Energy said Friday that it was the first utility in the country to receive approval for testing and pilot training for the technology from the U.S. Federal Aviation Administration. Other industries, from railroads to retailers, envision using drones to help with delivering packages, monitoring construction projects or survey crops. But many uses are on hold while commercial regulations are drawn up by air safety regulators." Morgan Lee in the San Diego Union-Tribune.
Amazon is serious about this drone thing. "The FAA allows hobbyists and model aircraft makers to fly drones, but commercial use is mostly banned. Amazon is asking for an exemption so it can test its drones in the U.S. The Seattle company says its drone testing will only take place over Amazon's private property, away from airports or areas with aviation activity —and not in densely populated areas or near military bases. The FAA is slowly moving forward with guidelines on commercial drone use. Last year, Congress directed the agency to grant drones access to U.S. skies by September 2015. But the agency already has missed several key deadlines and said the process would take longer than Congress expected." Mae Anderson in the Associated Press.
Google and Facebook, too. "Facebook and Google have bought drone manufacturers this year. This is part of their effort to bring internet connectivity to remote parts of the world using drones instead of satellites as telecom relays....Drones are not without their problems. Facebook wants to keep them airborne for as long as possible, to give consistent internet access and to make them easier to operate, by using solar power as fuel. To do this, it must make the battery that stores the power at night very light." Hannah Kuchler in The Financial Times.
Other transportation reads:
Governors slam inaction on highway funding. Peter Nicholas and Siobhan Hughes in The Wall Street Journal.
World Cup interlude: Mario Götze's incredible chest trap and left-footed goal-scoring shot for Germany.
Moody’s has downgraded dozens of universities over the last year. Nick Anderson.
It’s not your imagination: millennials really are living in their parents’ basements. Matt O'Brien.
Here are a few other things Boehner could sue Obama for. Max Ehrenfreund.
Grill baby, grill: Americans choose gas over charcoal. Christopher Ingraham.
LeBron James’ return is bigger for Cleveland than it is for the Cleveland Cavaliers. Roberto A. Ferdman.
A ‘nationwide gentrification effect’ is segregating us by education. Emily Badger.
We still love our trains — even when they don’t run on time. Emily Badger and Christopher Ingraham.
Why Taco Bell is turning its health menu into a muscle menu. Roberto A. Ferdman.
A Florida judge just voided the state’s congressional districts. Here’s what you need to know. Christopher Ingraham.
Tobacco is still America’s top health threat. But Washington doesn’t treat it that way. Harold Pollack.
A federal agency is about to answer the question: Who do you actually work for? Lydia DePillis.
CDC says it improperly sent dangerous pathogens in five incidents in past decade. Lena H. Sun and Brady Dennis in The Washington Post.
Long read: The post-post-apocalyptic Detroit. Ben Austen in The New York Times Magazine.
VA overhauling medical inspector's office after scathing report. Josh Hicks in The Washington Post.
House backs extending business-depreciation tax break. Kevin Drawbaugh in Reuters.
Colorado's marijuana message to the U.S. Jonathan Topaz in Politico.
How disruptive technology is spurring tobacco merger talks. Steven Davidoff Solomon in The New York Times.
Long read: Reporting rape, and wishing she hadn't — how one college handled a sexual assault complaint. Walt Bogdanich in The New York Times.
Global demand rising fastest since 2010 on China, IEA says. Grant Smith in Bloomberg.
Electronic health records ripe for theft. David Pittman in Politico.
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Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.