WONKBOOK roundup for the week, articles on the who will be the new fed reserve chair, former republican EPA administrators on climate change, US oil reserves, the jobs report, the ongoing recession, the do nothing 113th Congress and more...
Welcome to Wonkbook, Ezra Klein and Evan Soltas’s morning policy
news primer. Send comments, criticism, or ideas to Wonkbook at Gmail dot
com. To read more by Ezra and his team, go to Wonkblog.
Today
is jobs day. And today’s jobs report, like most jobs report, will lead
directly to the most uncomfortable question of the recovery: Has there
even been an economic recovery?
Spend much time looking at the
drop in the percentage of Americans participating in the labor force and
you’re likely to think not. Unemployment has fallen
2.5 percent from its post-recession peak, but the share of working-age
adults with jobs has barely budged. This leads to scary graphs, like this one,
or scary stats, like this one: If labor-force participation had held at
its pre-recession peak, unemployment would be around 9.7 percent today.
The
implication of these numbers is that the recovery is a mirage. The
official unemployment rate only counts people actively looking for work.
It’s dropped less because people have found work than because
they’ve stopped looking. Ergo, there’s been no recovery — just a
hardening of the post-recession labor market.
This is a story I gestured at on Thursday. But Marc Goldwein of the Center for a Responsible Federal Budget pointed me towards an Urban Institute paper that complicates the situation considerably.
The
popular (well, popular among depressed econ wonks) image of discouraged
workers sighing and deleting their Monster.com account once and for all
is wrong. The rate of labor force exit is actually lower than it was in
the aftermath of the 2001 recession. It’s labor force
entry that’s suffered.
In particular, it’s suffered among women — and it’s really suffered among young women – who are a lot less likely to enter the labor force than they were in 2002 and 2003.
That
is, in certain ways, a more encouraging trend: Discouraged workers who
leave the labor force typically see their skills erode. Young people who
delay entry are often staying in school longer, gathering skills that
will ultimately prove
valuable to them (and student loan debt that will prove burdensome).
But
that comforting possibility surely doesn’t explain all of the drop in
entry we’re seeing among younger people. And it doesn’t really explain
any of the drop in entry we’re seeing among older people.
There’s
been a recovery. The growth numbers, and the payroll numbers, and the
consumer confidence numbers, are all enough to tell us that. But not as
much of a labor-market recovery
as the unemployment rate indicates. A lot of people have been left
behind, or perhaps more accurately, been discouraged from starting at
all.
Wonkbook’s Number of the Day: 3.8 billion. That’s the increase in “proved” oil reserves in the U.S. since last year, according to the Energy Information Administration.
Wonkblog’s Graph of the Day: This graph calls the entire economic recovery into question.
Wonkbook’s Top 5 Stories:
1) three candidates left standing for Fed chair; 2) jobs report today;
3) burning nonexistent Obamacare draft cards; 4) the big legislative
THUD; and 5) UN no longer Power-less.
1) Top story: And then there were three
Obama narrows field for Fed chairman to three.
“Mr. Obama is now in the process of interviewing three
candidates for the position at the helm of the central bank: Mr.
Summers; Janet L. Yellen, the vice chairwoman at the Federal Reserve,
who had generally been considered the front-runner for the job; and a
dark horse for the post, Donald L. Kohn, a former Fed vice chairman. In
his meeting on Capitol Hill, Mr. Obama stressed that he had not yet made
up his mind…One early candidate for Fed chairman was Timothy F.
Geithner,
the former Treasury secretary and Obama confidante, insiders said. The
White House approached Mr. Geithner to ask if he would be considered for
the job, but he declined.” Annie Lowrey in The New York Times.
@TheStalwart:
Yellen would provide continuity from Bernanke. Summers believes more in
fiscal stimulus. Why is Yellen more favored by the left?
What kind of Fed chair would Larry Summers be? This March speech gives hints. “Summers
argued that the goal of monetary policy is changing. Instead of
focusing on reducing volatility in the near-term,
central banks should concentrate on preventing disasters. That suggests
he might at least be open to raising interest rates to pop emerging
bubbles…Summers seems to give more weight to the argument that the
levels of economic activity before the crisis were artificially high due
to bubbles and that the economy is undergoing a more fundamental shift
-- and that the Fed has limited power to counteract a structural
change.” Ylan Q. Mui in The Washington Post.
Explainer: A reading list to the Fed contenders. Binyamin Appelbaum in The New York Times.
Former Fed vice chairman Roger Ferguson could be contender for top job. “On
Sept. 11, 2001, Roger W. Ferguson, then the mild-mannered vice chairman
of the Federal Reserve, found himself unexpectedly asked to play the
role of first responder in what could have
been a global financial meltdown…Ferguson, by all accounts, nailed it.
He issued a statement short enough to get through to people but clear
enough that no one could mistake its meaning: "The Federal Reserve
System is open and operating. The discount window is available to meet
liquidity needs." Banks took out $46 billion in emergency loans, 200
times the daily average before the attacks. He led briefings to organize
the Fed banks across the country to work in concert to ensure that the
human disaster of Sept. 11 did not also become a financial disaster.” Dylan Matthews in The Washington Post.
KRUGMAN: Sex, money and gravitas. “[T]here
are not one but two sexist campaigns under way against Ms. Yellen. One
is a whisper campaign whose sexism is implicit, while the other involves
raw misogyny. And both campaigns manage to combine sexism with very bad
economic analysis…The wrongheadedness of the gravitas
crowd, like its sexism, is subtler. But to the extent that having
gravitas means something other than being male, it means being what I
like to call a Very Serious Person -- the kind of person who talks a lot
about the need to make tough decisions, which somehow always involves
demanding sacrifices on the part of ordinary families while treating the
wealthy with kid gloves.” Paul Krugman in The New York Times.
DELONG: Pick Summers. “If
times were normal, my first choice among the Fab Five would be obvious:
Ms Yellen…But these are not normal times…And this is why my preference
is for Mr Summers. He is the most creative thinker around. If I prepare
for four hours for a one-hour discussion with Mr Summers, it takes him
15 minutes to get up to speed, for the next 30 minutes I am holding my
own, and for the last 15 he is coming up with insights that I would have
missed had I spent 12 hours thinking the issue through. Unless things
start getting better faster, in a year or two it will be clear that the
Fed's current policy consensus is past its sell-by date.” J. Bradford DeLong in The Financial Times.
@DeanBaker13: If Larry Summers is so brilliant, how did he fail to see an $8 trillion housing bubble? Just curious.
KLEIN: The FinReg question at the Fed. “The
strangest part of the increasingly bitter shadow campaign for chairman
of the Federal Reserve is that the contest is not really about monetary
policy. It's about financial
regulation…This is why the prospect of a Summers chairmanship gives
financial reformers heartburn. They think he can't be trusted to
regulate Wall Street. But like many — though not all — of his former
White House colleagues, Barr thinks reform-minded critics don't give
Summers nearly enough credit.” Ezra Klein in Bloomberg.
SWAGEL: Better data, but not enough for the Fed. “I
am still not so sure that the Fed is ready to dial back its monetary
stimulus. The figures for second-quarter G.D.P. were better than
expected, but a growth rate below 2 percent is still too modest to lift
job creation beyond the 200,000 recent pace or to hasten the painfully
slow downward progression of the still-elevated unemployment rate. There
is a sense in which seeing the G.D.P. data as good news only highlights
the sadly diminished vigor of the economy since the crisis.” Phillip Swagel in The New York Times.
Music recommendations interlude: Andrew Bird, “Imitosis.”
Top opinion
RUCKELSHAUS, THOMAS, REILLY, AND WHITMAN: A Republican case for climate action. “Each
of us took turns over the past 43 years running the Environmental
Protection Agency. We served Republican presidents, but we have a
message that transcends political affiliation: the United
States must move now on substantive steps to curb climate change, at
home and internationally…A market-based approach, like a carbon tax,
would be the best path to reducing greenhouse-gas emissions, but that is
unachievable in the current political gridlock in Washington. Dealing
with this political reality, President Obama's June climate action plan
lays out achievable actions that would deliver real progress.” William D. Ruckelshaus, Lee M. Thomas, William K. Reilly, and
Christine Todd Whitman in The New York Times.
COCHRANE: E-Verify would be ultimate achievement in government intrusion. “E-Verify
is the real monster. If this part of the bill passes, all employers
will be forced to use the government-run, Web-based system that checks
potential employees’ immigration status. That means, every American will
have to obtain the
federal government’s prior approval in order to earn a living. E-Verify
might seem harmless now, but missions always creep and bureaucracies
expand.” John H. Cochrane in The Wall Street Journal.
SOLTAS: Why the CBO’s deficit forecasts are too optimistic. “There’s
an old joke about a physicist, a chemist and an economist stranded on a
desert island. A can of soup washes up on the beach. The physicist
says, “Use a rock to smash it open.” The chemist says, “Put it on the
fire and
let the heat burst it open.” The economist says, “Assume a can opener.”
In its forecasts of budget deficits, the Congressional Budget Office is
assuming a can opener: Starting in 2015, it says, three straight years
of 4 percent growth in real gross domestic product will get the U.S. out
of its fiscal troubles. Is this any more plausible than the castaway’s
suggestion?…[T]he problem is its economic model.” Evan Soltas in Bloomberg.
REINHARDT: The sleeper in healthcare payment reform. “In
late June news organizations reported on a practical application in the
United States of "reference pricing" for hospital care…In the arsenal
now being assembled on the payment side of health care to address rising
costs, reference pricing may well turn out to be the
sleeper, because it is a potentially powerful method of "putting the
patient's skin in the game," the delicate phrase we use for
"cost-sharing by patients." As it is able to shift significant market
power from the supply side to the payment side of the health sector,
reference pricing is much feared by the providers - physicians,
hospitals, pharmaceutical companies and others.” Uwe D. Reinhardt in The New York Times.
JOHNSON: Too big to fail isn’t dead yet. “Lending
by the Fed to one specific company is more difficult to justify under
current legislation. But the biggest and most leveraged financial
companies in the United States today are all now bank-holding companies,
with access to the discount window at the Fed, via their
commercial banking subsidiaries.” Simon Johnson in The New York Times.
BROOKS: The neocon revival. “[I]n
the 1980s, when conservatism was at its most politically and
intellectually vibrant, the dominant voices in the movement celebrated
Lincoln, the Progressive Era and even the New Deal. The kind of
conservatism that Irving Kristol embodied was cheerful and at peace with
modern
America.” David Brooks in The New York Times.
Handpicked by Wonkblog interlude: This is an amazing traffic light.
2) Jobs report today
The forecast:
“Payrolls rose by 185,000 workers after a 195,000 gain in June,
according to the median forecast of 92 economists in a Bloomberg survey.
The jobless rate fell to 7.5 percent, matching a four-year low, from
7.6 percent. Other data may show personal spending climbed in June
by the most in four months.” Shobhana Chandra in Bloomberg.
Auto sales back to prerecession levels. “Americans
love their cars and trucks. And in July, they bought a whole lot of
them. Chrysler and Ford each reported their July sales were up 6 percent
from a year earlier, while General Motors notched a 12 per-cent rise,
according to Wards Auto. Some foreign automakers saw even stronger
gains, including 13 percent for Toyota and 16 percent for Honda. In
fact, the auto market has now completed its long slog back to
pre-recession levels. Americans bought cars and trucks at a 15.6 million
annual rate in July, a bit below June and about the level of December
2007, when the recession began, and up from a low of 9 million in early
2009.” Neil Irwin in The Washington Post.
The industrial recovery may be rebooting. “The Institute for Supply Management said on Thursday
that its index of factory activity jumped to 55.4 percent in July from
50.9 percent in June. A reading above 50 percent indicates growth. The
I.S.M. is a trade group of purchasing managers. A gauge of production
soared 11.6
points to 65 percent, the highest reading since May 2004. And a measure
of hiring at factories rose to its best level in a year -- the latest of
several encouraging signs ahead of the July employment report, which
will be released on Friday.” The Associated Press.
Explainer: This graph calls the entire economic recovery into question. Ezra Klein in The Washington Post.
New business formation bounces back; posts first increase since the recession. “After
several consecutive years of decline, the country's rate of new
business births has started rising again, as has the number of jobs
those start-ups are creating, according to an analysis of new Census
data released on
Wednesday…[J]ob creation by those new firms jumped 4.3 percent after
dropping 31.7 percent in the previous four years, according to the
report. Among the smallest of new businesses, ones with between one and
four workers, the employment jump was even higher, at 5.9 percent over
2010.” J.D. Harrison in The Washington Post.
The ratings agencies may be back at it again. “S.&
P. has been giving higher grades than its big rivals to certain
mortgage-backed securities just as Wall Street is eagerly trying to
revive the market for these investments, according to an analysis
conducted for The New York Times by Commercial Mortgage Alert, which
collects data on the industry…Banks have shown a new willingness to hire
S.& P. to rate their bonds, tripling its market share in the first
half of 2013. Its biggest rivals have been much less likely to give
higher ratings.” Nathaniel Popper in The New York Times.
A court ruled swipe fees are still too high. But they're probably going away anyway. “The credit card companies lost a round in the payment wars on Wednesday:
A judge ruled that the Federal Reserve's 21-cent cap on swipe fees for
debit card transactions was too high, and should be reconsidered. The
retail industry
cheered, since it either has to eat the cost of those fees or pass them
on to consumers. But here's the question: If swipe fees are such a
burden on merchants, why are they still paying them?” Lydia DePillis in The Washington Post.
U.S. oil reserves rise to highest level since 1985. “The picture of U.S. future energy supplies looked brighter Thursday
after the federal Energy Information Administration said U.S. oil
reserves grew by a record amount, driven by new shale discoveries…The
EIA report
said that "proved" oil reserves -- oil that can be extracted and
marketed under current conditions -- grew by 15 percent, or almost 3.8
billion barrels, the second straight record year of increases. That
brought U.S. proved oil reserves to the highest level since 1985. The
agency said that U.S. proved reserves of natural gas jumped 10 percent,
the second-largest annual increase since 1977.” Steven Mufson in The Washington Post.
Low wages work against labor-market optimism. “Unfortunately,
the aggregate wages that go with those jobs leave something to be
desired. Since the recession ended, real wage disbursements have
increased by just 1% annualized and disposable personal income by a bit
less. Even amid the recent pickup in hiring, the actual
money in Americans’ pockets isn’t increasing all that quickly…Daniel
Alpert, a managing partner at Westwood Capital, pointed out in a note
last week that nearly 70% of jobs created during the second quarter were
in the lowest-paying sectors or subsectors such as retail trade or
leisure and hospitality.” Spencer Jakab in The Wall Street Journal.
And you thought you had seen it all interlude: How to fail your driver’s test in under ten seconds (flip the car as you’re pulling out).
3) Should you burn your Obamacare draft card?
Inside the Obamacare resistance. “Dean
Clancy wants you to burn your Obamacare draft card. That there's no
such thing as an Obamacare draft card is, at best, only a small problem.
Clancy is a vice president at FreedomWorks, where he has spent years
fighting
President Obama's health-care law. But now, with a Supreme Court case
and presidential election both lost, he and his allies are banking on a
last-ditch campaign to undermine Obamacare: convince Americans to ignore
it altogether.” Sarah Kliff in The Washington Post.
Republicans refuel efforts to cripple Obamacare. “Why
do Republicans persist in their so-far futile efforts? Democrats have
many theories. Republicans, they suggest, care little about the
uninsured. Many, they say, dislike Mr. Obama and want him to
fail…Republicans say they persist because the law is an example of
government overreach and is proving unworkable. For many elected in the
2010 Republican wave, their opposition to the law is the reason they are
in Congress. And, they say, voting to repeal the law is good politics,
as it remains extremely unpopular among Republican voters.” Robert Pear in The New York Times.
Theory on pain is driving rules for abortions. “It
challenges four decades of constitutional doctrine and is based on
disputed scientific theories. Yet a push to ban abortion at 20 weeks
after conception, on the theory that the fetus can feel pain at that
point, has emerged as a potent new tactic of the anti-abortion
movement. Advocates saw the potential of such a measure because it taps
into public concern about late-stage abortions, appears to alter the
rules only incrementally, and claims to be rooted in science.” Erik Eckholm in The New York Times.
In 2014, Congress gets Obamacare. Here's how they'll pay for it. “Starting
in 2014, members of Congress and their staffs will have to get their
health insurance through Obamacare's insurance marketplaces. But
according to a regulation that the Obama administration's Office of
Personnel Management plans to announce on
Friday and release next week, the federal government can continue to
contribute toward the cost of their health plans. The regulation comes
after months of worry on Capitol Hill. The Affordable Care Act includes a
provision, first proposed by Sen. Chuck Grassley (R-Iowa), forcing
members of Congress and their staffs to buy insurance through Obamacare.
But it didn't provide a clear mechanism for them to do so.” Ezra Klein in The Washington Post.
OFA launches 'Truth Team' to defend Obamacare, other White House policies. “The
non-profit associated with President Obama has established a separate
Facebook and Twitter account, that will provide its self-described
"truth tellers" with statistics and background they can use to tout
Obamacare's benefits. While the
campaign is launching during the August recess, the aides said, it would
continue beyond that.” Juliet Eilperin in The Washington Post.
Oh my god this is so great interlude: A glossary of gestures for critical discussion.
4) THUD!
Bill to fund transportation, housing fails in the Senate. “Congress’s reeling budget process stumbled again Thursday
as the Democratic-controlled Senate failed to advance a bill to
increase spending for transportation and housing programs. The vote
came one day after a companion bill to cut spending for those programs
collapsed in the Republican-controlled House because of a lack of
support. The twin failures show the struggle leaders of each chamber
face in moving legislation, and the distance between the parties in
reaching agreement on spending bills needed to keep the government
operating. The vote on the Senate transportation and housing bill was
54-43, short of the 60 votes needed to cut off GOP delaying tactics and
bring the bill
to a final vote.” Janet Hook and Corey Boles in The Wall Street Journal.
Republicans need a budget deal. They need a budget deal badly. “The House's bill to fund transportation, housing, and urban development (THUD) was pulled from the floor on Wednesday. Thursday,
the Senate bill failed to clear a filibuster as Mitch McConnell mounted
an aggressive, last-ditch effort to give House
Republicans cover. Absent that sudden and overwhelming political
imperative, the legislation likely would've passed. But amidst all these
failures, something actually is changing, and very much for the better:
Republicans are coming to realize that sequestration is both a
political and policy disaster for them, and they need a deal that
replaces it.” Ezra Klein in The Washington Post.
…But a budget truce seems out of reach as congressional recess looms. “The
House bill would have embraced the sequester, deep automatic budget
cuts designed to shrink the federal government. The Senate bill would
have ended it, restoring billions of dollars for housing, roads and
bridges. This week, congressional
Republicans tacitly rejected both approaches to next year's budget,
leaving frustrated lawmakers wondering how they will manage to keep the
government open past September.” Lori Montgomery in The Washington Post.
…And intra-Republican rifts make it worse. “”The
group of eight lawmakers headed to the White House to find a way
forward after Senate Republicans filibustered a housing and
transportation spending measure, saying it violated a spending deal
struck two years ago. The blockade of the Senate bill came after
House Republican leaders on Wednesday
gave up on a more austere version of the bill when moderate Republicans
balked and said the cuts in the House measure were too deep. For more
than two and a half hours, the group met with the White House chief of
staff, Denis R. McDonough, senior budget officials and, for nearly an
hour, with President Obama. They emerged to say they would meet again at
least once during the August recess.” Jonathan Weisman and Jackie Calmes in The New York Times.
Why the House GOP's cuts to housing and transportation were so unpopular. “Community
Development Block Grant funding was cut to $1.6 billion, or 47 percent
below the post-sequestration 2013 level of $3 billion. By most accounts,
this was the cut that doomed the bill, repelling Democrats and some
moderate
Republicans.” Brad Plumer in The Washington Post.
House Republicans take another bite at the farm bill. “House
Republicans are proposing to double their food stamp savings to nearly
$40 billion by rolling back waivers for able-bodied adults and targeting
funds to states that are willing to impose greater work requirements on
the parents of young children. The prime
mover is Majority Leader Eric Cantor (R-Va.) who helped jettison the
nutrition title from the House farm bill last month and is now trying to
write his own version before the House goes to conference with the
Senate.” David Rogers in Politico.
NYC interlude: 100 ways to improve the subway, on a Tumblr blog.
5) UN is no longer Power-less
Samantha Power approved by Senate as ambassador to United Nations. “The Senate approved President Obama's pick for ambas-sador to the United Nations, -Samantha Power, by a vote of 87 to 10 Thursday
afternoon. Power is a former foreign
correspondent and foreign policy columnist who has written at length
about human rights issues, genocide and war. She is the author of four
books, one of which was awarded a Pulitzer Prize, and has worked as the
founding executive director of the Carr Center for Human Rights Policy
at Harvard University. She was an early supporter of Obama and has been a
White House adviser” Jenna Johnson in The Washington Post.
Obama picks restructuring expert John Koskinen to head IRS.
”Koskinen oversaw the government's preparations for the year 2000 and
helped lead Freddie Mac out of its financial crisis. If confirmed by the
Senate, part of Koskinen's task will be to restore confidence in the
IRS, which is recovering from recent scandals
involving inappropriate behavior toward tax-exemption applicants and
lavish spending on a conference in Anaheim, Calif.” Josh Hicks in The Washington Post.
Reading material interlude: The best sentences Wonkblog read today.
Wonkblog Roundup
The media loves covering scandal. We don't love telling you when the scandal falls apart. Ezra Klein.
McDonald's wages are rising fastest in Russia, and other facts about fast food pay. Lydia DePillis.
In 2014, Congress gets Obamacare. Here's how they'll pay for it. Ezra Klein.
'Fabulous Fab' Tourre played a bit part in the mortgage crisis. So why is he the only one paying a price? Neil Irwin.
Republicans need a budget deal. They need a budget deal bad. Ezra Klein.
A court ruled swipe fees are still too high. But they're probably going away anyway. Lydia DePillis.
Inside the Obamacare resistance. Sarah Kliff.
Why the House GOP's cuts to housing and transportation were so unpopular. Brad Plumer.
Forget Larry Summers. What if Roger Ferguson took over the Fed? Dylan Matthews.
This graph calls the entire economic recovery into question. Ezra Klein.
What kind of Fed chair would Larry Summers be? This March speech gives hints. Ylan Q. Mui.
Et Cetera
The WSJ’s interview with Sen. Harry Reid. Corey Boles in The Wall Street Journal.
Democratic divide over NSA could pose problem for Obama. Aaron Blake and Scott Wilson in The Washington Post.
FBI: We couldn’t have averted the Boston attack. Michael S. Schmidt in The New York Times.
Got tips, additions, or comments? E-mail me.
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