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Governing by waiver

Ezra Klein's Wonkbook

Aug. 8, 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.

In Beijing, China, in August 2010, there was a 62-mile traffic jam that lasted for 12 days. The cause wasn’t an earthquake or an accident or a shooting. There were simply too many cars, and particularly too many trucks, and eventually, nothing could move.

This is the metaphor we've chosen for when Republicans and Democrats in Congress can't come to agreement and so Congress ends up doing nothing. “Gridlock,” we call it, as if the bills are piled up, one after another, because Congress tried to do too much too fast.

This is a mistake. It's a metaphor that leads us awry. When Congress can't get anything done, things do happen. It just means they happen outside of Congress.

Take No Child Left Behind, the big school reform bill passed by President George W. Bush with the support of liberal Democrats like Sen. Ted Kennedy and Rep. George Miller and conservative Republicans like Rep. John Boehner.

No Child Left Behind technically expired in 2007. But Congress didn’t manage to do anything about it. They just kept appropriating money for the zombie bill. And so the outdated provisions of this out-of-touch bill began strangling the education system.

NCLB says that fully 100 percent of school districts need to meet tough proficiency goals in reading and math in 2014 or they lose tons of money. It's not going to happen. They're not going to hit those targets and that's been clear for years now. Everyone knows NCLB needs an overhaul. But, you know, Congress.

So the Obama administration has started waiving NCLB for states that propose sufficiently rigorous alternative plans. So far, 39 states and the District of Columbia have been let out of No Child Left Behind. On Wednesday, they were joined by eight individual school districts in California — Los Angeles, Long Beach, Santa Ana, Fresno, Oakland, Sacramento, San Francisco and Sanger. That's the first time that's ever happened.

"This is a pretty troubling development," Chris Minnich, executive director of the Council of Chief State School Officers, told The Post. "The states have always traditionally been in control of accountability for most school districts. . . . The idea that the secretary of education is controlling the accountability system in eight districts in California is kind of mind-boggling."

Of course, the Obama administration says, with some justification, that it would’ve been even more troubling to leave the million kids in these districts in the grips of a law that no longer makes any sense.

With Congress unable to legislate, this governing-by-waiver is becoming almost common. The Obama administration decided to just delay parts of Obamacare for a year (see Sarah Kliff for more on the legal argument over those decisions). After the DREAM Act failed in Congress, the Obama administration decided to stop prosecuting undocumented immigrants who fit DREAMer characteristics. They basically implemented the law by fiat.

Congress could simply take these powers away from the executive. But just as they can’t agree on what they should do, they can’t agree on what the White House should do, either. To Republicans in Congress this is lawlessness. To Democrats in Congress, it's the only way for the White House to govern amidst a Republican Party that refuses to work with this White House.

But this is why congressional gridlock is not like traffic gridlock. Things move. They just don't move through the part of the government they're supposed to.

Wonkbook’s Number of the Day: $4.4 billion. That’s how much Freddie Mac will repay next month to the US Treasury, which lent the government-sponsored enterprise money during the financial crisis to stay afloat.

Wonkbook’s Graph of the Day: As interest rates and housing prices rise, affordability is set to drop sharply.

Wonkbook’s Top 5 Stories: 1) Obamacare’s work unfinished; 2) Obama’s lack of ambition on housing; 3) immigration reform’s fragile coalition; 4) sequestration’s death march; and 5) NSA’s legal thicket.

1) Top story: Much more work for Obamacare

The White House keeps changing Obamacare. Is that legal? “The White House can't simply decide not to set up a law; that much is clear in the constitution, which says the executive branch "shall take care that the laws be faithfully executed." At the same time, Congress has also given the executive branch some flexibility in determining what it means to "faithfully" execute a law. It's hard, after all, for legislators to predict every thorny issue that will come up in the process of turning laws into regulations.” Sarah Kliff in The Washington Post.

@yeselon: Why do GOP intellectuals like @RameshPonnuru and @DouthatNYT underscore what @jonathanchait correctly calls “insane Obamacare boycott”?

The economics of the Affordable Care Act. “In looking at the totality of the Affordable Care Act, what is most noticeable for the economy is the good news that it promises for American workers and businesses. The most important component of the act is what it will do to the costs of medical care…I estimated that slowing cost growth along the lines made possible by the Affordable Care Act would lead to 250,000 to 400,000 jobs gained annually over the next decade. The effects would increase over time.” David M. Cutler in The New York Times.

@samsteinhp: We need to shut down the government to kill Obamacare but damn the government shouldn’t be cutting defense spending so much!

The hurdles still ahead for Obamacare. “In theory, the overhaul could meet both goals. Millions of new Americans armed with a subsidy and shopping among plans would bring consumer choice to bear, finally, on the health care industry. Insurers would compete to create policies that offered the most value for money, pressuring hospitals and doctors on behalf of all of us. Yet despite the care the administration took in establishing incentives and safeguards, even some of Obamacare's most committed backers are wondering whether the experiment will work as advertised -- or, like Harvard's P.P.O., go off the rails along the way. Adverse selection is perhaps the direst threat.” Eduardo Porter in The New York Times.

Higher costs seen for some in Congress on health plans. “Older members of Congress and those who smoke, like Speaker John A. Boehner, could be facing much higher health insurance premiums under a new official interpretation of President Obama's health care law. The administration said Wednesday that the government would continue contributing to the cost of health benefits for lawmakers and thousands of Congressional employees, but that they would have to buy coverage as individuals through new state-based markets known as insurance exchanges.” Robert Pear in The New York Times.

Most Americans would like to die before they turn 100. “Pew Research on Tuesday released a survey that asked nearly this exact question- whether individuals would, with the help of life-extending technologies, prefer to live until at least 120 or die earlier? The majority sided against longer lifespans - while thinking that everyone else would want one. Instead, most Americans identified the "ideal" lifespan as somewhere between 79 and 100 years old.” Sarah Kliff in The Washington Post.

BERNSTEIN AND VAN DE WATER: Obamacare isn’t destroying jobs. “American history is replete with warnings that employer mandates we now take for granted -- about minimum wages and workplace safety, for example -- would have large and disruptive impacts. But the problems are never what they're cracked up to be. In the case of health reform, we recognize that the part-time incentive exists. But it hasn't shown up in the data yet, which is trending the way we would expect as the job market slowly recovers.” Jared Bernstein and Paul van de Water in Politico.

Music recommendations interlude: The Eagles, “One of These Nights,” 1975.

Top opinion

ORSZAG: Will Medicare fixes lead to hospital mergers? “There is one important difference between Medicare and commercial insurance, the institute found, and that is in the causes of spending variation. With commercial insurance, spending is higher in some areas because of markups — that is, the difference between the charge for a service and the cost of providing that service. Seventy percent of the variation in commercial spending was attributed to differences in markups, which in turn probably reflect local differences in market power among hospitals and other providers relative to insurance companies and beneficiaries.” Peter Orszag in Bloomberg.

DOUTHAT: Republicans, white voters, and polarization. “Energizing "ascendant" constituencies while pushing working-class whites toward the Republicans has represented a form of "positive polarization" for the Democrats, since it's left them with a presidential-level majority that they did not enjoy before…Properly understood, then, the argument that the G.O.P. should focus on the Democratic Party's white-working-class vulnerability is not an argument for a conscious strategy of racial polarization. Rather, it's an argument for a Republican Party that recognizes liberalism's growing weakness with a particular demographic, and responds with a reinvention that's pitched to those voters.” Ross Douthat in The New York Times.

IRWIN: The decline of newspapers has been good for everybody else. “I started working at The Washington Post on June 5, 2000. It was in the same building we work in now, but it was very much a different place. We were just on the cusp between one media age and another, even if not everybody understood that yet. One particularly vivid symbol of the earlier era was this: Every day, sitting in the cafeteria, there was a table of middle-aged deaf men. They sat there all day playing cards, drinking coffee and speaking in sign language. They were press operators, a colleague explained to me.” Neil Irwin in The Washington Post.

Adorable animals (is back) interlude: A baby giraffe is born.

2) Obama talks housing

Zillow lists White House for $319 million. “Real estate website Zillow's listing for the White House at 1600 Pennsylvania Ave. NW describes it as a "magnificent 132-room mansion" as the "rarest of homes in the U.S. since it is not only the residence of the U.S. president and his family, but it also has two wings with offices for the president, the First Lady, top staff and aides." Not in the buying mood? The White House could be rented for $1.8 million a month.” Hadas Gold in Politico.

Read: President Obama answers questions on housing. Amrita Jayakumar in The Washington Post.

This is what happens when your CEO interviews the president. “Wednesday afternoon, Zillow CEO Spencer Rascoff did a half-an-hour question and answer session with President Obama on the housing plan he laid out Tuesday. The whole time, ZIllow's logo played on the screen, giving the real estate listing Web site more visibility -- and credibility -- among thousands of viewers who are probably more interested in buying a home than your average bear. The markets knew that would be a great idea: When the Q&A was announced on Monday, the company gained $250 million in value, as its stock took a huge jump after a few months of steady growth.” Lydia DePillis in The Washington Post.

Explainer: Everything you need to know about Obama's latest housing plan . Lydia DePillis in The Washington Post.

White House seeks a return to housing status quo. “he administration isn’t pushing for any major rethink of housing policy in the wake of the crisis. The idea that the government should encourage people to make leveraged investments in owner-occupied housing and that these investments should be the cornerstone of middle-class savings is alive and well with us…The idea is to resolve some of the most egregious problems with the old system and avoid creating any massive new problems. But from another point of view it’s a bit strange to come out of a massive crisis with its origins in the housing sector and the cult of homeownership and come out of it with a reform agenda that very much doubles down on that very same cult.” Matthew Yglesias in Slate.

…And that means the status quo’s errors, too. David Dayen in The New Republic.

Freddie Mac reports $5B gain. “The second-quarter gain reported on Wednesday compares with net income of $3 billion in the same period last year. Freddie said its earnings were largely because of increased profits from investments made to hedge against rising interest rates. That helped offset losses on mortgages during the quarter. Freddie, based in McLean, Va., will pay a dividend of $4.4 billion to the United States Treasury next month and is requesting no additional aid.” The Associated Press.

Consumer credit rose as Americans borrowed more for cars and college. “Consumers increased their borrowing by $13.8 billion in June from May, to a seasonally adjusted $2.85 trillion, the Federal Reserve said on Wednesday in its monthly report on consumer credit. The category that includes credit card use dropped $2.7 billion in June. That followed a gain of $6.4 billion in May. Still, overall credit card debt remained 16.5 percent below its July 2008 peak.” The Associated Press.

…And credit standards are loosening. “Lenders are loosening once-tight credit standards, giving Americans with limited or poor credit histories a better shot at buying a car but raising concerns among consumer advocates about their methods. In the wake of the financial crisis, many lenders shied away from these borrowers. But as the economy bounces back and competition for borrowers with stellar credit intensifies, lenders are turning to credit-challenged borrowers as another potential source of revenue…Although subprime loans represent a small fraction of the auto market, they are the fastest-growing segment. Subprime auto loans, those made to borrowers with credit scores below 680, climbed 8.4 percent in the first three months of the year.” Danielle Douglas in The Washington Post.

Probe turns up heat on banks. “The government has issued subpoenas to banks and other companies that handle payments for an array of financial offerings, ramping up an investigation that has been under way for several months, according to Justice Department officials and other people familiar with the matter. It’s a shift in strategy: Rather than just targeting individual firms, the government is now going after the infrastructure that enables companies to withdraw money from people’s bank accounts.” Alan Zibel and Brent Kendall in The Wall Street Journal.

Richmond, CA under fire for housing plan. “An investor group filed a federal lawsuit against Richmond, Calif., to prevent the city from using eminent domain to seize mortgages of local residents who owe more than their properties are worth in a bid to keep them in their homes…The city recently sent notice to the holders of more than 620 so-called underwater home mortgages in the city, asking them to sell the loans to the city. It would buy the mortgages for 80 percent of the fair value of the homes, write them down and help the homeowners refinance their loans.” Reuters.

Economics songs interlude: Merle Hazard’s latest, “The Great Unwind.”

3) Conservative Dems may break from immigration reform

Are Democrats wavering on immigration reform? “In the GOP-controlled House, some Democrats, largely from conservative-leaning districts, are set to bolster the ranks of Republican lawmakers skeptical of the Senate’s ideas on immigration. As a small faction within the minority party, they won’t likely sway key votes, but amid signs that momentum behind the effort might be flagging, their concerns could put the finish line further out of reach.” Kristina Peterson in The Wall Street Journal.

What immigration reform looks like from the lunatic fringe. “How our nation of immigrants humanely recognizes and empowers its current immigrants will define our generation. But what does biblical prophecy have to do with immigration reform? Apparently, for some people, everything. According to reports from Right Wing Watch and the Huffington Post, Cathie Adams, former chairman of the Texas Republican Party, said one feature of the Senate's immigration bill is a signpost of the end times. A biometric scanning measure, Adams said, will lead to the mark of the beast.” Judy Howard Ellis in The Washington Post.

Luis Gutierrez: Immigration-reform advocate and Spanish TV star. “[A]mong a huge segment of Latinos who get their news from Spanish-language media, Gutierrez (D-Ill.) is the face, the voice and the political force behind immigration reform, and has been for years. He has been a ubiquitous presence on the national Spanish-language newscasts of Univision and Telemundo, mostly talking about the need for immigration reform. That history has given him outsize influence on the debate among some of the people most directly affected by the issue.” Ed O’Keefe in The Washington Post.

Oh my god this is so great interlude: Here’s a live cam of baby penguins.

4) Countdown to the end of sequestration

Obama vows end to sequestration. “President Obama stood at this desert base on Wednesday before nearly 3,000 Marines, sailors and their families -- and a captive audience of two Republican adversaries from Congress -- and vowed that he would fight to end across-the-board budget cuts that have shaken the military…In a wide-ranging address, the president focused particularly on the cuts in military and domestic programs, known as sequestration, that took effect in March when he and Congressional Republicans could not agree on alternative deficit reductions.” Jackie Calmes in The New York Times.

Budget chaos to test budget envoy McDonough. ”Since being named chief of staff in January, Denis McDonough has been running the most intensive outreach campaign the Obama White House has undertaken. He has made pilgrimages to Capitol Hill, met with GOP leaders for drinks and dinner, and given out his cellphone number to lawmakers. Now comes the hard part. Fiscal chaos will unfold this fall if the White House and congressional Republicans can’t agree on basic spending priorities and whether to raise the nation’s borrowing limit. The pipeline between Mr. McDonough’s office and Congress can work one of two ways: either helping bridge the divide or merely improving the tone of the discussion.” Peter Nicholas in The Wall Street Journal.

Late-night comedy interlude: Obama's top five zingers on 'The Tonight Show.'

5) NSA-data use leads to serious legal issue

IRS manual detailed DEA’s use of hidden intel evidence. ”Details of a U.S. Drug Enforcement Administration program that feeds tips to federal agents and then instructs them to alter the investigative trail were published in a manual used by agents of the Internal Revenue Service for two years…A 350-word entry in the Internal Revenue Manual instructed agents of the U.S. tax agency to omit any reference to tips supplied by the DEA’s Special Operations Division, especially from affidavits, court proceedings or investigative files. The entry was published and posted online in 2005 and 2006, and was removed in early 2007. The IRS is among two dozen arms of the government working with the Special Operations Division, including the Federal Bureau of Investigation, the National Security Agency and the Central Intelligence Agency.” John Shiffman and David Ingram in Reuters.

NSA data was supposed to make the DEA's job easier. Instead it makes prosecutors' jobs harder. “It's Justice 101: There's the kind of evidence that you can use in court, and the kind you can't. When the two mix, it creates opportunities for the government to violate your right to mount an effective defense. Knowing this, the DEA has gone to great lengths to hide its use of non-admissible NSA data even as it leverages the information in the field.” Brian Fung in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Why aren't young people getting drivers' licenses? Too much hassle! Brad Plumer.

Raghuram Rajan is India's new central banker. God help him. Dylan Matthews.

Should legal codes be copyrighted? Let's sue to find out! Lydia DePillis.

The U.S. is hitting its ethanol limit. So the EPA may relax its biofuels rules. Brad Plumer.

Here's how the Bank of England is trying to revive the British economy. Neil Irwin.

Amazon nearly destroyed local bookstores. It may do the same with online art sites. Lydia DePillis.

This is what happens when your CEO interviews the president. Lydia DePillis.

The White House keeps changing Obamacare. Is that legal? Sarah Kliff.

The decline of newspapers has been good for everybody else. Neil Irwin.

Most Americans would like to die before they turn 100. Sarah Kliff.