March 1, 2013

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.

Wonkbook’s Number of the Day: Friday, 11:59 p.m. Okay, that’s only partly a number. But it’s also the moment by which, if there’s no deal, the White House must direct the government to start sequestration. We’re only two days away now from the indiscriminate budget cuts. And there’s been little progress over the last week to do anything constructive about them.

Wonkblog’s Graph of the Day: How sequestration will affect government agencies.

Wonkbook’s Top 5 Stories: 1) Two days left before sequestration; 2) Lew, Bernanke, vs the Senate; 3) assault-weapons ban goes to Congress; 4) who’s the next Energy Secretary?; and 5) how the red states learned to love Medicaid.

1) Top story: Will Washington dodge the sequester?

Obama calls last-minute meeting to avert sequester. “In a meeting planned for Friday, President Obama will push Republican congressional leaders to accept higher tax revenue in order to avoid deep spending cuts set to take effect on the same day…The first formal meeting between Obama and congressional leaders over the spending cuts, known as the sequester, will come after weeks of finger-pointing by both sides. An administration official, speaking on the condition of anonymity, said the president will push for specific solutions from Republicans, asking them to name one tax break they are willing to end to stop the spending cuts.” Zachary A. Goldfarb and Mark Berman in The Washington Post.

Think the sequester is the end of fiscal issues? Yeah, right. “It may be hard to believe, given the intense partisan strafing already ignited by the automatic government spending cuts that begin on Friday, but this year's budget wars have yet to get fully under way. In the next month, Democrats and Republicans, so at odds with one another that they are not even negotiating to avert the across-the-board cuts set to kick in at the end of the week, will have to find a way to agree on spending levels for the remainder of this year. If they fail, they could risk a government shutdown starting March 27, when the current authorization for spending runs out.” Richard W. Stevenson in The New York Times.

@robertcostaNRO: Speaking of the sequester, is my reading of this right? Two alternatives will fail Thurs in Senate, then a showy WH mtg on Friday?

…But can a government shutdown save us from the sequester? “The threat of a shutdown actually forces Congress to act. That means that even if, as appears likely, the sequester is allowed to go into effect, Congress will have to pass a spending bill that either keeps the sequester or does away with it in favor of alternate cuts and revenue increases. The same pressures that have prevented a deal this time around will be present, especially with the White House wanting to increase spending in the CR. But because a shutdown is a much more visible and politically potent crisis than the slow-moving damage of the sequester's cuts, the pressure for a deal will increase considerably.” Dylan Matthews in The Washington Post.

When, exactly, does the sequester start? “[I]nquiries suggest that the sequester can start at any time on Friday. According to officials in both camps, the White House and Republicans agree Obama can decide at what time to direct the government to start the cuts. He just has to do it by 11:59 p.m.” Zachary A. Goldfarb in The Washington Post.

WonkTalk: What did we learn from the 1991 sequester? Brad Plumer and Dylan Matthews in The Washington Post.

Obama administration gets caught in a lie about sequester cut. “Take the claim by Education Secretary Arne Duncan that there are ‘literally teachers now who are getting pink slips.’ When he was pressed in a White House briefing Wednesday to name an example, Duncan came up with one school district, in West Virginia, and he acknowledged, ‘Whether it's all sequester-related, I don't know.’ As it turns out, it isn't. What Kanawha County is actually doing is sending transfer notices to 104 educators in response to an unrelated change in the way federal dollars are allocated.” Karen Tumulty and Lyndsey Layton in The Washington Post.

@damianpaletta: Dow is soaring, two days before sequester. I spoke with several business execs today and their response to cuts was, Meh.

The Senate GOP has an alternative plan. “Senate Republicans have offered legislation crafted by Sens. Pat Toomey (R-Pa.) and James Inhofe (R-Okla.) as their alternative to the sequester due to take effect Friday…The bill grants the Office of Management and Budget flexibility to implement $85 billion worth of spending cuts scheduled for fiscal year 2013.” Alexander Bolton in The Hill.

@noamscheiber: GOP is making WH case w/new “flexibility” tack on sequester. Old line was: we need cuts! new line: there are smart & dumb cuts. Exactly!

Republicans are losing on the spending argument. “For the past several years, congressional Republicans have focused relentlessly on a single message: Washington -- led by President Obama -- is spending too much money, and it needs to stop. But according to new Washington Post-ABC News polling, that laser-like focus isn't helping Republicans win the argument over federal spending -- with 67 percent of those tested disapproving of the way Republicans in Congress are handling federal spending.’” Aaron Blake and Chris Cillizza in The Washington Post.

How Republicans see the sequester. “Insofar as there's a long-term strategy here, it comes down to 2014. Republicans feel that this is a defensive year for them, and if they can resist further tax increases while locking in some spending cuts, that will be more than they could reasonably have expected in the days after the election.” Ezra Klein in The Washington Post.

The sequester could make fixing the budget harder, not easier, Bernanke says. “Federal Reserve Chairman Ben Bernanke had something to say about sequestration during his testimony before the House Banking Committee on Tuesday. He thinks the looming spending cuts could actually make it harder, not easier, to reduce the deficit. Why? They'll hurt growth while the economy's still weak.” Brad Plumer in The Washington Post.

@dmarron: Dumbest part of the sequester saga? The belief that fear of it would force “Super Committee” action way back in Nov 2011.

Former immigration officials on the sequester’s impact. “It will have an impact on international business and deals that are made. If they have bad experiences over a period of time -- they can deal with it for a couple of weeks, but it will make certain business transactions harder to carry out. People will start avoiding traveling to ports with lengthy periods of wait time, and the business community in that location is going to feel it -- they will feel it pretty early.” Suzy Khimm in The Washington Post.

KLEIN: We have better ideas than the sequester. “Michael Greenstone, an economist at the Massachusetts Institute of Technology and director of the Hamilton Project, anticipated that. So about six months ago he approached 15 experts and asked them for their best policy proposals, which had to meet two conditions. First, they had to reduce the budget deficit. Second, they had to have "broader positive effects," such as helping the economy, increasing government efficiency, slowing global warming — that sort of thing…The result is "15 Ways to Rethink the Federal Budget," a 110-page guidebook for the undead on how to reduce the deficit.” Ezra Klein in Bloomberg.

ROVE: How the GOP can call the President’s bluff. ”Mr. Obama has pounded away at the alleged damage of the sequester’s across-the-board cuts. House Republicans should call his bluff and pass legislation giving cabinet secretaries flexibility to transfer funds between accounts so that sequester cuts come from less important activities.” Karl Rove in The Wall Street Journal.

DIONNE: Ending the permanent crisis. “The country has been put through a series of destructive showdowns over budget issues we once resolved through the normal give-and-take of negotiations…Here is a way out of permanent crisis: President Obama should demand the repeal of all artificial deadlines and tell both houses of Congress that he won't make further proposals until each actually passes a replacement to the sequester -- not a gimmick or something that looks like an alternative, but the real thing.” E.J. Dionne in The Washington Post.

SEPKOWITZ: The sequester’s dumbest cut. “Of all the sequestration pink slips about to be handed down from Washington, the one for programs to vaccinate children seems particularly shortsighted…Vaccines are one of the most cost-effective preventative strategies in health care, saving billions of dollars a year. Indeed, federal support of the vaccination of children may be the best example of well-spent federal dollars.” Kent Sepkowitz in The New Republic.

MILLER: This is your brain on the sequester. “The first critical but virtually undiscussed question is what portion of the president's brain (or brain trust) led him to extend 82 percent of the Bush tax cuts on Jan. 1…The fallout from this choice can be seen in two facts that decisively shape the current moment. First, revenue was left far below what will be needed as the boomers retire. Second, Republicans feel they can't possibly let the president go back to the well on taxesless than 10 weeks later.” Matt Miller in The Washington Post.

YGLESIAS: It’s time for Speaker Boehner to do some leading. “The person who has to act now is the one person who actually can change the dynamic: House Speaker John Boehner. It is Boehner, not Obama, who must lead and find a way to a solution. It is Boehner, not Obama, who has the ability to move Washington beyond the endless stale debate, and it is Boehner, not Obama, who is ultimately responsible for the success or failure of policymaking in the 113th Congress.” Matthew Yglesias in Slate.

SACHS: This is what Obama has wanted all along. “To hear US President Barack Obama tell it this week, the budget sequestration - the automatic spending cuts that are due to commence tomorrow - will decimate the government. Each party is blaming the other, as if something new and unexpected was about to begin. Many of the cuts are indeed ill-advised - but the fact is that from the start of his presidency Mr Obama has planned a steep reduction in discretionary spending as a share of national income.” Jeffrey Sachs in The Financial Times

Music recommendations interlude: Van Cliburn, Tchakovisky’s Piano Concerto No.1, Movement III, in 1962. He passed away yesterday.

Top op-eds

SOLOW: The real economics of debt. “I want to present a calmer view, by emphasizing six facts about the debt that many Americans may not be aware of…The real burden of domestically owned Treasury debt is that it soaks up savings that might go into useful private investment…But in bad times like now, Treasury bonds are not squeezing finance for investment out of the market. On the contrary, debt-financed government spending adds to the demand for privately produced goods and services, and the bonds provide a home for the excess savings. When employment returns to normal, we can return to debt reduction. In the long run we need a clear plan to reduce the ratio of publicly held debt to national income. But for now the best chance to reinvigorate the economy, spur business investment and encourage consumer spending is through public borrowing and spending. Instead, we're heading into an ill-advised, across-the-board austerity program.” Robert M. Solow in The New York Times.

WADHWA: A ‘free lunch’ on immigration reform. “The saying goes, "there's no such thing as a free lunch." But the Startup Act 3.0, in its third incarnation, is starting to look a lot like an exception to the rule…Kauffman estimates that, conservatively, within ten years, a Start-up Visa could lead to the creation of between 500,000 and 1.6 million jobs-a potential boost to the economy of between $70 billion and $224 billion a year. That translates into a rise in GDP of between 0.5 and 1.6 percent, as computed using a methodology employed by the White House's Council of Economic Advisors.” Vivek Wadhwa in The Washington Post.

WESSEL: The good and bad in finance. “Too much finance can be dangerous to economic health. But too little finance hurts, too. Promising investments are starved. Consumers can’t borrow for homes or education. Growth is slower. So how much finance is enough?…[O]nly about one-quarter of the increase in global finance between 1995 and 2007 went to households and nonfinancial corporations. The rest went to big financial firms or government, some of which did go to infrastructure, education and other investments.” David Wessel in The Wall Street Journal.

KONCZAL: The ideal of the ownership society, and its flaws. “[U]ntil the conservative movement reflects and deals with its ideal of an ownership society, it is unlikely to advance…Rising income inequality and a succession of slow recoveries from recessions have made the masses more vulnerable than before to economic downturns and less able to shoulder risks devolved from the federal government. What Americans need today is less individual ownership of risk, not more.” Mike Konczal in Bloomberg.

DELONG: The crisis of ideas in American conservatism. “On the back left corner of my desk right now are three recent books: Arthur Brooks' The Battle, Charles Murray's Coming Apart, and Nicholas Eberstadt's A Nation of Takers. Together, they constitute an important intellectual movement, which also happens to be a large part of the reason that American conservatism today has little that is constructive to say about managing the economy - and little purchase on the center of the American electorate.” J. Bradford DeLong in Project Syndicate.

KINSLEY: Obama’s “plan” to destroy the GOP. “Look. President Obama has no superpowers. He is a skilled politician who plays the game well. He was reelected by a majority of the voters. Hubris is always a danger among politicians, but I think we can allow him a victory lap or two before worrying that he is creating a dictatorship.” Michael Kinsley in The New Republic.

ORSZAG: The case for medical-malpractice reform. “Most of the costs in the U.S. health-care system are incurred in a small number of expensive cases. The top 25 percent of Medicare beneficiaries ranked by cost, for example, account for 85 percent of total spending. And the expenses in those cases are driven significantly by the recommendations that doctors make to pursue one treatment path and not another.” Peter Orszag in Bloomberg.

In memoriam interlude: C. Everett Koop, a former Surgeon General.

2) Lew, Bernanke, and how Washington could get economic policy right

Jack Lew, Treasury Secretary. “The Senate confirmed Jack Lew as Treasury secretary Wednesday, giving him broad responsibilities over the U.S. economy just as the country faces potentially severe budget cuts, a still-tepid recovery and an overhaul of financial regulations that remains incomplete…As President Obama's recent chief of staff and a former director of the Office of Management and Budget, Lew is no stranger to the ongoing fiscal debate in Washington. But he will also have to delve into the world of banking; a large part of his role will involve taking steps meant to avoid a repeat of the financial crisis.” Jia Lynn Yang in The Washington Post.

Ben Bernanke told Congress they’re doing fiscal policy wrong. “The toughest real talk, actually, tends to come from Bernanke himself, who uses his occasional visits to the Hill to politely, opaquely scold Congress about their approach to fiscal policy…He also tried to disabuse the Senate of the notion that it needs to do something, the sequester is something, and so the sequester is better than nothing…All of this gets back to Bernanke's belief that fiscal policy is currently harming monetary policy -- that to pay off, his efforts to keep rates low need to be matched by a Congress willing to use those low rates to spur economic growth.” Ezra Klein in The Washington Post.

…He could delay the end of monetary easing if things turn sour. “The Federal Reserve is potentially years away from ending its easy-money policies and tightening credit, but Chairman Ben Bernanke said central bank officials could alter their strategy for what to do when that time comes. Testifying on Capitol Hill Wednesday, Mr. Bernanke said the Fed could decide to sell its mortgage-backed securities more slowly than previously planned, or even avoid selling them altogether and instead allow them to mature.” Victoria McGrane in The Wall Street Journal.

The Volcker rule is likely to get delayed again. “Hammering out a rule that bans risky bets at banks has proved so complex that the final version may not come until the second half of the year, much later than previously expected, according to people close to the talks…One area that continues to befuddle regulators is how to distinguish between a firm’s own risky trading, commonly called proprietary trading, and the buying and selling of securities on behalf of clients, the people say.” Scott Patterson in The Wall Street Journal.

Is there really an $83-billion regulatory subsidy for big banks? “The government isn't pulling $83 billion from the budget and handing it out in check form to Goldman Sachs, Morgan Stanley and so forth. What Bloomberg View is arguing is that big banks get an implicit boost from customers, stockholders and other interested parties knowing that if they fail, the federal government will likely bail them out. That's a boost that local savings and loans operations, or even small investment banks, don't get.” Dylan Matthews in The Washington Post.

Economists think the minimum wage is worth it. “The IGM Forum, which is run by the University of Chicago's Booth School of Business,polled top economists on the minimum wage. The first question they asked was whether raising the minimum wage could make it harder for some low-wage workers to find jobs. The responses were mixed…The second question was whether they thought increasing the minimum wage was worth it given the possible downsides. They do.” Ezra Klein in The Washington Post.

Business is looking pretty strong. “Businesses showed some resilience in January, despite a report showing a decline in durable-goods orders amid steep drops in spending on transportation and defense. Orders for goods lasting more than three years fell a seasonally adjusted 5.2% in the first month of 2013, according to a report Wednesday from the Commerce Department. But excluding transportation--which includes aircraft orders that tend to swing significantly month to month--orders notched a 1.9% climb from December, their fifth consecutive month of growth at or above 1%.” Brenda Cronin in The Wall Street Journal.

Humorous interlude: David Letterman makes up countries for Secretary of State John Kerry.

3) Why we worry about gun violence

More than jobs, Americans worry about gun violence. “The Kaiser Family Foundation asked adults how much they worry about a certain situations, ranging from their ability to afford health care to the possibility of being a victim of a terrorist attack. It found, in a new poll out Wednesday, that Americans worry more about being a victim of gun violence than they do about losing a job or being unable to pay their mortgage.” Sarah Kliff in The Washington Post.

Assault-weapons ban gets congressional hearing. “Supporters and opponents of a bill banning military-style assault weapons debated the merits of once again banning the weapons at an emotionally charged hearing Wednesday, even though senators acknowledge that the proposal lacks the support necessary to pass the closely-divided Senate.” Ed O’Keefe in The Washington Post.

Bob Goodlatte is not OK with universal background checks. “House Judiciary Committee Chairman Bob Goodlatte said Wednesday his panel will take up gun control in this session of Congress, but a universal background check would most likely not be a part of that work…Goodlatte said he believes that universal background checks would not stop criminals from getting guns, and there is not enough being done to prosecute people who fill out false information in background checks now.” Kate Nocera in Politico.

Should the feds go after people who fail background checks? “In 2010, nearly 80,000 Americans were denied guns after providing false information about their criminal histories during the background check. Technically, it's a felony to lie during this process. Yet only 44 would-be buyers were ever charged with a crime, according to the New York Times…Groups like the National Rifle Association (NRA), by contrast, say these expanded laws are likely to be ineffective so long as the government doesn't even prosecute existing violations.” Brad Plumer in The Washington Post.

Food interlude: Americans are polarized on every issue. That, apparently, includes what we eat.

4) America’s next energy policy

Sen. Murkowski likes Obama’s expected pick for Energy Secretary. “Sen. Lisa Murkowski (R-Alaska), the top Republican on the Senate's energy committee, signaled that a leading contender to run the Energy Department may receive GOP support. Asked about Massachusetts Institute of Technology physicist Ernest Moniz on Tuesday, Murkowski cautioned that she would need to look more into his background and credentials, but she added the rumored nomination has not prompted pushback so far.” Ben German in The Hill.

Long live the natural-gas boom — for decades, a new forecast suggests. “U.S. natural-gas production will accelerate over the next three decades, new research indicates, providing the strongest evidence yet that the energy boom remaking America will last for a generation. The most exhaustive study to date of a key natural-gas field in Texas, combined with related research under way elsewhere, shows that U.S. shale-rock formations will provide a growing source of moderately priced natural gas through 2040, and decline only slowly after that.” Russell Gold in The Wall Street Journal.

Why a carbon tax is coming up more and more as a real policy option. “A tax on carbon emissions may not be on anyone's short list of legislation likely to emerge from the gridlocked Congress, but that's not dampening the debate over the merits of the idea. The National Association of Manufacturers and left-leaning think tank The Brookings Institution locked horns on Tuesday, with each issuing new analyses on carbon taxes that came to very different conclusions.” Erica Martinson in Politico.

Shell abandons Arctic drilling for 2013. “Royal Dutch Shell announced Wednesday that it will not drill in the Arctic Ocean off the coast of Alaska this year, declaring a cease-fire in one of the nation's fiercest political battles over energy development and environmental protection.” Juliet Eilperin and Steven Mufson in The Washington Post.

Are we going to get big legislation on energy efficiency? “A House Democrat said Wednesday that he is confident the lower chamber can pass a comprehensive energy efficiency bill. Rep. Paul Tonko (D-N.Y.) said Tuesday's House Energy and Commerce subcommittee on Energy and Power hearing on the topic highlighted a bipartisan willingness to hammer out a deal.” Zack Colman in The Hill.

XKCD interlude: He’s right: Google Maps tourism is way more fun than it should be.

5) Arkansas, and how the red states learned to love Medicaid

Obamacare sets off health-care turf war. “All states have something known as ‘scope of practice’ laws, which delineate which health-care providers can provide which services…With the Affordable Care Act's insurance expansion looming, there's at least one group making the case that it's time for these laws to change: The nurse practitioners. In Washington, D.C., and in state houses, the American Association of Nurse Practitioners is making the case that it's time to broaden the scope of practice laws -- and that the Affordable Care Act significantly strengthens their case.” Sarah Kliff in The Washington Post.

Arkansas to expand Medicaid with an all-private model. “The feds have given Arkansas permission to pursue a plan that would provide private health insurance to anyone between 0-138 percent of the federal poverty level, giving coverage to more than 200,000 of the currently uninsured. The government would pay for the entirety of the premium, though consumers might be subject to some co-pays…Arkansas is the first state to publicly get a deal that accomplishes this not via the Medicaid program but via the exchange.” David Ramsey in The Arkansas Times.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Does light rail reduce traffic? Maybe not. Brad Plumer.

RIP: C. Everett Koop. Joshua Green.

Ben Bernanke to Congress: You’re doing it wrong, and on how it could be harder to bring down deficits thanks to the sequester. Ezra Klein, Brad Plumer.

Economists think hiking the minimum wage is worth it. Ezra Klein.

WonkTalk: Brad Plumer and Dylan Matthews chat about the 1991 sequester.

What “too big to fail” is worth. Dylan Matthews.

Americans fear gun violence more than job loss. Sarah Kliff.

Immigration officials on the impact of sequestration. Suzy Khimm.

How Republicans see the sequester. Ezra Klein.

Can a government shut down save us from the sequester? Dylan Matthews.

Should the feds go after people who don’t pass background checks? Brad Plumer.

How Obamacare is starting a turf war in health care. Sarah Kliff.

Et Cetera

The Supreme Court is looking at the Voting Rights Act, and here’s everything you need to know about that. Jess Bravin in The Wall Street Journal, and Sean Sullivan in The Washington Post.

How much does the federal government spend on education? Jason Delisle in The New York Times.

From the Left, an argument for substantive immigration reform. Matthew Cunningham-Cook in Jacobin.

OMB says government travel costs down $2b in two years. Joe Davidson in The Washington Post.

How the financial crisis broke up the global financial network. Howard Schneider in The Washington Post.

Got tips, additions, or comments? E-mail me.

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