Jan. 13, 2014

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. Send comments, criticism, or ideas to Wonkbook at Washpost dot com. To read more by Ezra and his team, go to Wonkblog.

Wonkbook's Number of the Day: 67 percent. That's an estimate of the share of people who have paid their first premiums for new Obamacare insurance plans. That means a third of enrollees are late on their first payment, though health insurers are being flexible.

Wonkbook's Quotation of the Day: "When you get into the details of the plans, it's not all written in Spanish. It's written in Spanglish, so we end up having to translate it for them," said a health care navigator of CuidadoDeSalud.gov, the lesser-known Spanish cousin to HealthCare.gov.

Wonkbook's Graph of the Day: Why 74,000 jobs a month is not enough, in one graph.

Wonkbook's Top 5 Stories: (1) CGI Federal is out; (2) Janet Yellen convinced Stan Fischer to come to the Fed; (3) West Virginia shows why environmental-safety laws matter; (4) we need a budget deal by Wednesday; and (5) we are, in fact, divided into red states and blue states.

1. Top story: Somebody finally got fired for HealthCare.gov

Obama administration to end contract with CGI Federal, company behind HealthCare.gov. "Federal health officials are preparing to sign early next week a 12-month contract worth roughly $90 million with a different company, Accenture, after concluding that CGI has not been effective enough in fixing the intricate computer system underpinning the federal Web site, according to a person familiar with the decision who spoke on the condition of anonymity in order to discuss private negotiations. Accenture, one of the world's largest consulting firms, has extensive experience with computer systems on the state level and built California's large new health-insurance exchange. But it has not done substantial work on any Health and Human Services Department program." Juliet Eilperin and Amy Goldstein in The Washington Post.

Maryland's plan to upend health care spending. "The Obama administration is set to announce Friday an ambitious health-care experiment that will make Maryland a test case for whether aggressive government regulation of medical prices can dramatically cut health spending. Under the experiment, Maryland will cap hospital spending and set prices -- and, if all goes as planned, cut $330 million in federal spending. The new plan, which has been under negotiation for more than a year, could leave Maryland looking more like Germany and Switzerland, which aggressively regulate prices, than its neighboring states. And it could serve as a model - or cautionary tale - for other states looking to follow in its footsteps." Sarah Kliff in The Washington Post.

...But Maryland's plan to implement Obamacare has been a mess: "More than a year before Maryland launched its health insurance exchange, senior state officials failed to heed warnings that no one was ultimately accountable for the $170 million project and that the state lacked a plausible plan for how it would be ready by Oct. 1. Over the following months, as political leaders continued to proclaim that the state's exchange would be a national model, the system went through three different project managers, the feuding between contractors hired to build the online exchange devolved into lawsuits, and key people quit, including a top information technology official because, as he would later say, the project "was a disaster waiting to happen."" Aaron C. Davis and Mary Pat Flaherty in The Washington Post.

Health care reform is disappointing Spanish speakers. "Mirroring problems with the federal health care website, people around the nation attempting to navigate the Spanish version have discovered their own set of difficulties. The site, CuidadoDeSalud.gov, launched more than two months late. A Web page with Spanish instructions linked users to an English form...And the translations were so clunky and full of grammatical mistakes that critics say they must have been computer-generated." Russell Contreras and Kelli Kennedy in ABC News.

@Prof_Richardson: Obama Admin keeps saying healthcare.gov is "working." I do not think that word means what they think it means.

Second wave of health-insurance disruption affects small businesses. "While some cancellation notices already have gone out, insurers say the bulk of the letters will be sent in October, shortly before the next open-enrollment period begins. The timing -- right before the midterm elections -- could be difficult for Democrats who are already fending off Republican attacks about the Affordable Care Act and its troubled rollout. Some of the small-business cancellations are occurring because the policies don't meet the law's basic coverage requirements. But many are related only indirectly to the law; insurers are trying to move customers to new plans designed to offset the financial and administrative risks associated with the health-care overhaul. As part of that, they are consolidating their plan offerings to maximize profits and streamline how they manage them." Ariana Eunjung Cha in The Washington Post.

@larry_levitt: On the Affordable Care Act and the small business exchange, a series of 5 tweets. Read here.

Top insurer warns that Obamacare enrollment mix worse than expected. "[I]n a filing with the Securities and Exchange Commission, Humana disclosed to investors, "as a result of the December 2013 federal and state regulatory changes allowing certain individuals to remain in their previously existing off-exchange health plans, the Company now expects the risk mix of members enrolling through the health insurance exchanges to be more adverse than previously expected."" Philip A. Klein in The Washington Examiner.

Obamacare's Catch-22. "Insurance companies had to spend a lot of money adapting to Obamacare's botched rollout. And unless the White House intervenes, the law could penalize them for doing it. Problems with HealthCare.gov--and the administration's work-arounds--saddled insurance companies with unexpected logistical costs. Yet the Affordable Care Act also caps insurers' administrative spending, forcing them to pay rebates if their overhead is too high. Insurers will ask the White House for some relief from those rules, an industry source said, in light of the unexpected costs they had to shoulder because of HealthCare.gov. The request is still preliminary. Insurers haven't yet tried to estimate how much the website's problems cost them." Sam Baker in NationalJournal.

Enrollees at health exchanges struggle to prove coverage. "Similar problems are occurring daily in doctors' offices and drugstores around the country as consumers try to use insurance coverage that took effect on Jan. 1 under the Affordable Care Act. In addition to the difficulties many face in proving they have coverage, patients are also having a hard time figuring out whether particular doctors are affiliated with their health insurance plan. Doctors themselves often do not know if they are in the network of providers for plans sold on the exchange." Robert Pear and Abby Goodnough in The New York Times.

...And health insurers cite slow premium payments for new plans. "Benaissance, a third-party billing firm that works for insurers selling plans through government marketplaces in 17 states, said that for around 100 carriers with a first-premium due date of Jan. 10 or earlier, 67% of the enrollees who have been invoiced had paid as of late afternoon Friday." Anna Wilde Matthews and Christopher Weaver in The Wall Street Journal.

House approves HealthCare.gov security bill. "On a vote of 291 to 122, more than five dozen Democrats joined with all voting Republicans to approve a measure that would require the Department of Health and Human Services to notify affected users of any potential breach on a state or federal exchange within two business days...Republicans will turn to another proposal that would require the Obama administration to provide detailed state-by-state reports on the number of people enrolling for health-care coverage under the law." Ed O'Keefe in The Washington Post.

A few more thoughts on the young and Obamacare-less. "Colorado has done excellent record keeping on the age of its enrollees. It might make a better bellwether for how things are going when it comes to reaching those under 35. What you see, in the graph below, is young-adult enrollment well below target levels -- but also increasing over time. During the first two months of open enrollment, 17 percent of those signing up for coverage were under 35. In early December, that rose to 20 percent and, for the last two weeks of that month, just about a quarter of those enrolling were in the much-coveted young adult demographic." Sarah Kliff in The Washington Post.

Music recommendations interlude: R.E.M.'s national television debut, back in 1983 on the David Letterman show.

Top opinion

GOOLSBEE: Bravo, Ben Bernanke. "As Mr. Bernanke prepares to depart at the end of January and the Fed has initiated the exit-strategy countdown with the start of tapering, it is time to take stock of the QE Era--and time for the critics to admit they were wrong. There is a valid debate to be had about how much longer the Fed's loose monetary policy should continue and about the risks that might be entailed. But looking back at the period since 2010, it is clear that the Fed was right to try to help improve the country's financial health, avoiding deflation, and the critics were wrong that QE would cause inflation and harm the economy." Austan Goolsbee in The Wall Street Journal.

MILANOVIC: The return of patrimonial capitalism. "Using very effectively literary examples from Jane Austen and Honore de Balzac, Piketty shows that in capital-rich societies with high returns on capital as was Europe then, it often made no sense to work but to concentrate rather on finding a rich spouse or otherwise inheriting property...It is back to this, by the most current views revolved type of society, that developed capitalist economies are trending to--argues Piketty. They are moving toward the income relationships where the Rastignac dilemma will again be relevant." Branko Milanovic in a new paper (PDF).

...And you can buy Thomas Piketty's new book here: Capital in the Twenty-First Century. He has also posted his graphs and tables on his website.

FRANK: The vicious cycle of income inequality. "Inequality in the United States has been increasing sharply for more than four decades and shows no signs of retreat. In varying degrees, it's been the same pattern in other countries. The economy has been changing, and new forces are causing inequality to feed on itself. One is that the higher incomes of top earners have been shifting consumer demand in favor of goods whose value stems from the talents of other top earners." Robert H. Frank in The New York Times.

STANLEY AND WEAVER: Is the U.S. a 'racial democracy'? "Evidence suggests that minorities experience contact with the police at rates that far outstrip their share of crime. One study found that the probability that a black male 18 or 19 years of age will be stopped by police in New York City at least once during 2006 is 92 percent. The probability for a Latino male of the same age group is 50 percent. For a young white man, it is 20 percent. In 90 percent of the stops of young minorities in 2011, there wasn't evidence of wrongdoing, and no arrest or citation occurred. In over half of the stops of minorities, the reason given for the stop was that the person made "furtive movements."" Jason Stanley and Vesla Weaver in The New York Times.

KRUGMAN: Enemies of the poor. "Republicans are having a hard time shaking their reputation for reverse Robin-Hoodism, for being the party that takes from the poor and gives to the rich. And the reason that reputation is so hard to shake is that it's justified. It's not much of an exaggeration to say that right now Republicans are doing all they can to hurt the poor." Paul Krugman in The New York Times.

FLEISCHER: Fight inequality. Shack up. ""Marriage inequality" should be at the center of any discussion of why some Americans prosper and others don't. According to Census Bureau information analyzed by the Beverly LaHaye Institute, among families headed by two married parents in 2012, just 7.5% lived in poverty. By contrast, when families are headed by a single mother the poverty level jumps to 33.9%." Ari Fleischer in The Wall Street Journal.

YESELON: Reformist conservatism is a daydream. "[T]he chasm between the wonks and the Republican Party itself is the most important issue in American political culture today. There may be a "vacuum" of policy, but there is not a vacuum of passionate tribal affinity in today's GOP...Are the Koch brothers reading the National Interest and thinking they need to invest $100 million in passing the Strain plan? The Chamber of Commerce may be looking for smoother, less obviously extreme candidates next time around--but that is a cosmetic, not ideological, difference." Richard Yeselon in The New Republic.

EISENBREY: Update overtime. "The problem is that most presidential actions that could help significant numbers of middle-class workers do require congressional participation. But here's one that doesn't: raising the salary threshold for the exemption to the overtime rules of the Fair Labor Standards Act of 1938...[A]s with the minimum wage, which is not automatically adjusted for inflation and tends to lose real value unless it is raised, the overtime exemption threshold generally languishes. That means that many people who once would have been paid 1.5 times their wage when working overtime are not, violating the spirit of the law. For decades, the Department of Labor periodically updated the overtime salary threshold. But today's threshold, at $455 a week, is far below historical levels in real terms." Ross Eisenbrey in The New York Times.

KONCZAL: No, we don't spend $1 trillion on welfare. "The federal government spends just $212 billion per year on what we could reasonably call "welfare."...[C]onservatives complain that we should have less welfare and more opportunity and civil society, only to turn around and also call those things "welfare" too when the time comes." Mike Konczal in The Washington Post.

In memoriam interlude: Dale T. Mortensen, a Nobel laureate and brilliant labor economist.

2. Stan Fischer gets tapped for the Fed

Obama taps Stanley Fischer, Lael Brainard for Fed posts. "President Obama on Friday took another significant step toward making his mark on the powerful Federal Reserve, announcing he will tap Stanley Fischer, the former governor of Israel's central bank and a mentor to many of today's top minds in economics, to serve as the Fed's vice chairman. Only days after the Senate confirmed Obama's nominee to lead the Fed, current Vice Chair Janet L. Yellen, the president also announced he would nominate Lael Brainard, a longtime Democratic economic policymaker and the Treasury Department's former top diplomat, to serve as a Fed governor. He also is nominating Jerome Powell, a current Fed governor who served in George H.W. Bush's administration, for a second term." Zachary A. Goldfarb in The Washington Post.

How Yellen got Fischer to say yes. "As senior White House officials were putting together a list of potential vice chairman candidates last year, they concluded there was no way Fischer, a former Bank of Israel governor who had come close to being on the short list for the Fed chairmanship, would want the deputy's job, according to a person familiar with the decision process. They decided they wouldn't bother asking. Yellen, who was confirmed as Fed chairman this week, enthusiastically told a group of Obama's senior aides that not only did she want Fischer at the Fed, she had already reached out to him and sold him on the idea...[Fischer] told White House officials he was moved by Yellen's impassioned pitch and was sold on it in large part because it was her idea, the person said." Julianna Goldman in Bloomberg.

Economy added 74,000 jobs in weak December report; jobless rate down to 6.7%. "The Labor Department reported that the country added a meager 74,000 jobs in December -- less than half what many analysts had expected. The unemployment rate dropped to 6.7 percent, but mostly because many people gave up looking for work, possibly deterred by a combination of cold weather, the holiday season and the expiration of long-term unemployment benefits." Ylan Q. Mui and Paul Kane in The Washington Post.

The biggest question facing the U.S. economy: Why are people dropping out of the workforce? "The U.S. labor force is still shrinking rapidly. Back in 2007, 66 percent of Americans had a job or were actively seeking work. Today, that number is at 62.8 percent -- the lowest level since 1977." Brad Plumer in The Washington Post.

Jobs data gives hope that unemployment-insurance benefits will be extended. "For Democrats, even a short-term victory on extending unemployment benefits is looking like a long-shot. The six Republicans who voted Tuesday to bring an unemployment bill to the Senate floor ended the week furious that Senator Harry Reid of Nevada, the majority leader, had shut them out of any negotiations to reshape the bill. Even if the measure does clear the Senate, House Republicans say they simply do not feel much pressure to take it up." Annie Lowrey and Jonathan Weisman in The New York Times.

Florida is having big tech problems with paying unemployment benefits. "The botched rollout of Florida's online system for unemployment claims may have kept jobless Floridians from receiving $20 million in benefits in October and November, according to an informal analysis by a workers' rights group...Florida would have processed an additional 290,000 weekly claims worth an estimated $20 million in benefits, the analysis concluded." Lizette Alvarez in The New York Times.

Debate: Are big banks too big to fail? With contributions from Anat Admati, Simon Johnson, and Philip L. Swagel that are worth reading. The New York Times.

Longread: A watchdog grows up: The inside story of the Consumer Financial Protection Bureau. Lydia DePillis in The Washington Post.

Why business investment could break out. "Many say they want to see the economy growing faster--generating sustained growth in demand for their goods and services--before they would be willing to splurge on new equipment, software and buildings. But lackluster business spending is one thing holding back growth...Bernard Baumohl, chief global economist with The Economic Outlook Group, expects the broader measure of business investment to expand 7.3% in 2014, versus 2.5% in 2013; IHS Global Insight sees this gauge speeding up to 4.9% this year and then to 6.3% in 2015 and 7.8% in 2016." Neil Shah in The Wall Street Journal.

Banks say no to marijuana money, legal or not. "Their businesses are conducted almost entirely in cash because it is exceedingly difficult for them to open and maintain bank accounts, and thus accept credit cards...[B]Their businesses are conducted almost entirely in cash because it is exceedingly difficult for them to open and maintain bank accounts, and thus accept credit cards." Serge F. Kovaleski in The New York Times.

The Beatles were the Mitt Romney of the 1960s, and other policy lessons from the Fab Four. "The song: "Taxman." The Lesson: The Laffer Curve is real. The 1966 song from the "Revolver" album is the Beatles' most explicit commentary on public policy. The lads from Liverpool were starting to come into serious money at this point -- only to realize that the policies of the post-war Labour governments would mean that their UK tax bill would add up to a 95 percent (by some accounts 98 percent) marginal rate." Neil Irwin in The Washington Post.

There is no great stagnation interlude: We can make things levitate using sound now.

3. This is why you need to care about environmental-safety laws

Parts of West Virginia have gone without tap water for days. "Tap water service in this region should be restored in the next few days as a chemical that tainted the supply has begun to dissipate...As many as 300,000 people here in the state capital and nine surrounding counties have been under a water-use ban, after a leak of a chemical called 4-methylcyclohexane methanol used for cleaning coal, occurred at the Etowah River Terminal, near the Elk River. The terminal, owned by Freedom Industries Inc., processes chemicals for use in mining...The chemical leaked from a container into the ground and into the river, entering a nearby water treatment facility and polluting a complex distribution system involving hundreds of miles of pipe...As of Sunday afternoon, 10 people had been admitted to hospitals, and another 169 treated and released." Eric Morath and Jennifer Levitz in The Wall Street Journal.

West Virginia chemical-spill sight avoided regulatory scrutiny. "The storage facility owned by Freedom Industries Inc. on the banks of the Elk River was subject to almost no state and local monitoring, interviews and records show. The industrial chemical that leaked into the river, 4-methylcyclohexane methanol, isn't closely tracked by federal programs. Before last week's spill, a state regulator said environmental inspectors hadn't visited the site since 1991...The site wasn't subject to much state regulation because it was used primarily for storage rather than manufacturing or processing." Alexandra Berzon and Kris Maher in The Wall Street Journal.

...And guess why those regulations are loose? Could it be money? Bing, bing, bing, we have a winner. "[L]awmakers have yet to explain why the storage facility was allowed to sit on the river and so close to a water treatment plant that is the largest in the state...Critics say the problems are widespread in a state where the coal and chemical industries, which drive much of West Virginia's economy and are powerful forces in the state's politics, have long pushed back against tight federal health, safety and environmental controls." Coral Davenport and Ashley Southal in The New York Times.

The corporate operator of the chemical facility just went through a merger. "West Virginia records show that Freedom took its current form at the end of last month, when the parent company merged with three related entities: Etowah River Terminal LLC, which ran the site on the banks of the Elk River; Poca Blending LLC, which owns a chemical blending and storage plant in nearby Nitro; and a Delaware partnership called Crete Technologies LLC. Freedom, which buys chemicals from such suppliers as privately held Georgia-Pacific LLC and publicly traded Eastman Chemical Co., distributes them to clients in the mining industry." Kris Hudson and Cameron McWhirter in The Wall Street Journal.

Meanwhile, in North Dakota, senators want new rail-safety rules after a rash of accidents. "[C]oncerns over the safe transport of Bakken oil through the state and across the nation have escalated since a rail accident on Dec. 30 near Casselton, a bedroom community outside Fargo, when a train carrying crude crashed into another train carrying grain that had derailed. No one was hurt, but a fire burned for a day and it was the latest in a series of accidents, the most serious of which was a derailment and explosion in July of a runaway Canadian train that destroyed the Quebec town of Lac-Megantic and killed 47 people. A train carrying Bakken crude also derailed and exploded in Alabama in November." Clifford Krauss in The New York Times.

You need to watch this comedy interlude: I am in awe of Trevor Noah.

4. We need a budget deal by Wednesday

We're closing in on a budget deal. "House-Senate negotiators have substantially narrowed their differences over a $1.1 trillion governmentwide spending bill and are closing in on a deal that the leadership hopes can be filed by Monday night and moved quickly through Congress this week. A proposed compromise on funding for President Barack Obama's health care program appeared to be holding up Sunday...The current stopgap continuing resolution, which has kept agencies operating thus far, is due to expire Wednesday. To avert any threat of a shutdown, a three-day extension through Saturday will be taken up by the House, possibly Tuesday.David Rogers in Politico.

Sen. Ron Wyden is set to get a bigger stage as finance chair. "On taxes, he is likely to try to renew momentum for an overhaul. His tax plan would cut the corporate rate to 24%--lower than other Democrats propose--from its current 35%, although he also would make sweeping changes to corporate breaks that worry some multinational firms...He wants to shore up Medicare by better focusing the program on treatment of chronic health problems, according to his former chief of staff, Josh Kardon. In addition, Mr. Wyden could want more protections for workers and digital firms in pending trade legislation." John D. McKinnon in The Wall Street Journal.

Slatepitches interlude: "Laundering money -- literally -- could save billions of dollars."

5. So much for 'We're not red states and blue states'

Essential longread: How national money funds state political monopolies. "Alabama's transformation was the product, in part, of a sophisticated political apparatus designed to channel political money from around the country into states where conditions were ripe for Republican takeover. In 2010, the effort achieved striking success, moving a dozen states to sole Republican control, including presidential swing states like Ohio and Pennsylvania. In 2012, a resurgent Democratic version -- financed chiefly by labor unions and wealthy liberal donors rather than corporations -- began to catch up, spearheading Democratic takeovers in Minnesota and Colorado. Their combined work has helped remake the nation's political landscape. Republicans or Democrats control both the legislature and the governor's office in 36 states, the most in 60 years. Twenty-three states are now solely controlled by Republicans, and 13 solely by Democrats. In two others -- New York and Washington -- one chamber is jointly controlled." Nicholas Confessore in The New York Times.

Follow-up: Twinned cities now following different paths. "[S]ince Republicans in Wisconsin took control of the State Legislature and governor's office in 2011, and since Democrats gained full dominance in Minnesota last year, people here have watched essential elements of their daily lives -- their savings plans, job expectations, personal relationships and health insurance -- veer apart...For the Smiths, like other members of public sector labor unions, working on the Wisconsin side has meant rising personal contributions for health insurance and pensions and a union with drastically less negotiating power. For Mr. Fulton, like many business executives, running a company on the Minnesota side has meant bracing for new business taxes and higher income taxes." Monica Davey in The New York Times.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

No, we don't spend $1 trillion on welfare each year. Mike Konczal.

A few more thoughts on the young and Obamacare-less. Sarah Kliff.

A watchdog grows up: The inside story of the Consumer Financial Protection Bureau. Lydia DePillis.

Et Cetera

Obama to speak on NSA reforms Jan. 17. The Washington Post.

Most government buildings in Kansas are being forced to allow concealed guns. Steven Yaccino in The New York Times.

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