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Ben Bernanke bows out

Ezra Klein's Wonkbook

Jan. 17, 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 Numbers of the Day: 72-26. That was the vote count on the $1.1 trillion appropriations bill the Senate passed yesterday.

Wonkbook's Graph of the Day: Almost none of the bills introduced into Congress ever becomes a law.

Wonkbook's Top 5 Stories: (1) bye, Ben; (2) Senate passes appropriations bill; (3) Obama to propose ending NSA control over phone records; (4) the endgame for financial regulation; and (5) Obamacare, a status update.

1. Top story: Ben Bernanke bows out

Bernanke's swan song: Fed chief reflects on the tough job of communications. ""It's like, if you're in a car wreck, you're mostly involved in trying not to go off the bridge. And later on, you're like, 'Oh, my god,' " Bernanke said at the launch of the Brookings Institution's Hutchins Center on Fiscal and Monetary Policy..."We hope that as the economy improves, and as we tell our story . . . people will appreciate and understand what we did was necessary and in the interest of the broader public," Bernanke said. "It was a Main Street set of actions aimed at helping the average American."" Ylan Q. Mui in The Washington Post.

...He also talked about bubbles and financial stability. "[T]he biggest risk he sees from the easy-money policies he pioneered is that they might destabilize the financial system, but he emphasized that he doesn't see evidence this is happening. "The metrics of market valuations seem to be broadly within historical ranges," Mr. Bernanke said at an event hosted by the Hutchins Center on Fiscal and Monetary Policy. "The financial system is strong. The key financial institutions are well-capitalized."" Victoria McGrane in The Wall Street Journal.

Watch: Here's the video for the forum, which included Bernanke and many others worth hearing: David Wessel, Martin Feldstein, Paul Tucker, Donald Kohn, Kenneth Rogoff, and Christina Romer.

Wonkbook note: The Twitter hashtag for this event was #FedatHutchins.

U.S. data points to firming labor market and tame inflation. "Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 326,000, the Labor Department said. That compared to economists' expectations for a fall to 328,000...In another report, the Labor Department said its Consumer Price Index increased 0.3 percent after being flat in November. In the 12 months to December, consumer prices accelerated 1.5 percent after advancing 1.2 percent in November." Reuters.

Kocherlakota wants the Fed to keep easing. "The US Federal Reserve was being complacent by planning for years of below-target inflation, warned Minneapolis Fed President in a clarion call for more economic stimulus. "We're running the risk of being content with inflation running consistently below our target. That's inappropriate," said Narayana Kocherlakota, who votes on Fed monetary policy this year, in an interview with the Financial Times. "Right now we're sitting with an outlook for inflation that even by 2016 . . . is not getting back to 2 per cent."" Robin Harding in The Financial Times.

@Goldfarb: I would pay top dollar for an all out verbal fight between Bernanke and Summers on whether low interest rates are permanent.

What Wall Street economists are thinking about emergency unemployment benefits and the minimum wage. "More than half, 57%, of the respondents were against extending emergency jobless benefits which provided checks to more than one million Americans who have been unemployed over six months. Earlier this week, a deal to extend the program failed in the Senate. About 44% of respondents said the program discouraged workers from taking jobs while another 13% said it was too expensive...Most economists also took a dim view on raising the federal minimum wage to above $10 an hour from its current $7.25. The Journal survey found 54% of the economists who responded were against the idea, 28% for it, and 18% thought it would have no meaningful impact on workers or the economy." Kathleen Madigan in The Wall Street Journal.

@pdacosta: High-paid Wall Street economists oppose raising U.S. minimum wage

U.S. Treasury to sell $3 billion in Ally Financial stock. "The government said it will sell 410,000 shares of Ally at $7,375 a share in a private offering, shrinking the government's stake to about 37% of Ally's common stock from about 64%...The Detroit-based company, formerly known as GMAC, converted to a bank-holding company in 2008 to participate in the Treasury's Troubled Asset Relief Program, allowing it to receive a $17.2 billion bailout. Treasury said taxpayers will have recovered $15.3 billion of that amount following the private offering announced Thursday." Andrew R. Johnson and Ryan Tracy in The Wall Street Journal.

Advocates for workers draw ire of businesses. "After ignoring these groups for years, business groups and powerful lobbyists, heavily backed by the restaurant industry, are mounting an aggressive campaign against them, maintaining that they are fronts for organized labor...Business groups argue that worker centers should face the same strictures as labor unions under federal law, including detailed financial disclosure, regular election of leaders and bans on certain types of picketing. Business groups say worker centers act like unions by targeting specific employers and pushing them to improve wages." Steven Greenhouse in The New York Times.

Faster on 'fast-track,' Republicans demand. "At issue is a bill to give the administration "fast-track" trade authority, under which Congress approves trade pacts on an up-or-down vote, without amendments or procedural delays. Some Democrats are opposed to the legislation, and Republican leaders say the president needs to do more to bring them around." William Maudlin in The Wall Street Journal.

@IvanTheK: Can I pre-order Bernanke's book now?

How the oil boom could change U.S. foreign policy. "Well, for starters, it probably doesn't mean that Americans can now safely ignore the Middle East. The U.S. economy is still heavily reliant on oil, and prices are still largely swayed by what goes on in the global markets. Disruptions in places like Saudi Arabia, Iran or Iraq still have a big impact. That's one conclusion of a major new report by a commission of former generals and senior officials, backed by Securing America's Energy Future (SAFE)." Brad Plumer in The Washington Post.

The housing bubble was much, much worse for Hispanics. "[T]hanks to a Zillow analysis of federal mortgage data and its own home value index with the Urban League, we know that the housing bubble and subsequent crash were much more pronounced in Hispanic communities than places where most whites, blacks and Asians live." Lydia DePillis in The Washington Post.

Music recommendations interlude: Beirut, "Postcards from Italy."

Top opinion

KLEIN: To fight poverty, conservatives will have to spend. "There's a simple way to tell whether the Republican Party's newfound commitment to fighting poverty is more than rhetoric: Follow the money. Follow the trail in the party's recent budgets and what you find, hidden between appendix tables, are deep cuts to programs for the poor...Strain's article doesn't offer much in the way of budget estimates. So I asked him point-blank whether his proposals would require spending more money. "Yes," he said. Elected Republicans who want to do something serious on poverty are going to need to get comfortable with that answer." Ezra Klein in Bloomberg.

BROOKS: The inequality problem. "[T]o frame the issue as income inequality is to lump together different issues that are not especially related. What we call "inequality" is caused by two different constellations of problems. At the top end, there is the growing wealth of the top 5 percent of workers...At the bottom end, there is a growing class of people stuck on the margins, generation after generation. This is caused by high dropout rates, the disappearance of low-skill jobs, breakdown in family structures and so on." David Brooks in The New York Times.

KRUGMAN: Scandal in France. "I haven't paid much attention to Francois Hollande, the president of France, since it became clear that he wasn't going to break with Europe's destructive, austerity-minded policy orthodoxy. But now he has done something truly scandalous...[W]hat's shocking is his embrace of discredited right-wing economic doctrines...For Mr. Hollande, in announcing his intention to reduce taxes on businesses while cutting (unspecified) spending to offset the cost, declared, "It is upon supply that we need to act," and he further declared that "supply actually creates demand."" Paul Krugman in The New York Times.

CHAIT: The Obamacare doomsday scenario slips away. "Last night, Douglas Kamerow and I debated Megan McArdle and Scott Gottlieb at Intelligence Squared over the notion, "Obamacare is now beyond rescue." Intelligence Squared picked the topic two months ago, when the website was still broken, insurers were frantic, congressional Democrats were in a full-scale panic, and it seemed genuinely possible to many people that the law would simply fail. The arguments McArdle and Gottlieb made last night bore little resemblance to the sorts of failure predictions that were widely circulating last November. Many of their arguments simply took issue with the law's goals." Jonathan Chait in New York Magazine.

COHN: Obamacare's risk policies are not a bailout. "Conservatives might object to reinsurance and risk corridors on principle, regardless of amounts involved. That would be a perfectly legitimate argument, except for one thing: Reinsurance and risk corridors are already a feature of some government programs, most prominent among them Medicare Part D. The reinsurance and risk corridors in Obamacare and Medicare Part D are remarkably similar, except that Obamacare's are temporary and Medicare Part D's are permanent--which is to say, they are still part of the program." Jonathan Cohn in The New Republic.

POLLACK: Obamacare helps ex-convicts. That's a good thing! "Most people under the supervision of the criminal justice system are low-income adults without dependents. Few have disabilities that qualify them for federal disability programs. So they are uninsured. That means a lot of ex-offenders are likely to gain Medicaid coverage under the Affordable Care Act. The question is whether this is a feature or a bug." Harold Pollack in The Washington Post.

Urbanism interlude: The 20 most populous metro areas in the United States, in 1 amazing chart.

2. Appropriations bill passes Senate, 72-26

Senate sends Obama a bill to fund the government until October. "The Senate voted 72 to 26 to approve the measure Thursday evening after Republicans persuaded Sen. Ted Cruz (R-Tex.) to drop a last-minute push to force another showdown over the Affordable Care Act, reprising the fight that closed the government for 16 days last fall. The House overwhelmingly passed the spending bill earlier this week. President Obama is expected to sign it by Saturday to prevent agency offices, museums and national parks from locking their gates when the current temporary funding measures expires." Lori Montgomery in The Washington Post.

Next up: raising the debt ceiling. "[T]he next hurdle for the newly ascendant, more pragmatic Republican leadership is only weeks away, with the US due to hit its borrowing limits on February 7. Sticking to the position it adopted in a showdown with Republicans last year, the White House says it will not negotiate over lifting the country's debt limit, saying Congress should do so without attaching any conditions." Richard McGregor in The Financial Times.

Maps interlude: What the U.S. electoral map will look like in 2060.

3. Obama will end the NSA's control over phone records

Obama to call for ending NSA control of phone data. "President Obama on Friday will call for ending the government's control of phone data from millions of Americans, a senior administration official said. The move marks a significant change to the National Security Agency's controversial bulk phone record collection program. Obama will announce the move in a highly anticipated speech at the Justice Department. However, the official said Obama will not recommend who should control the phone data and will instead call on the attorney general, intelligence community and Congress to make that determination." Julie Pace and Kimberly Dozier in the Boston Globe.

NSA collects millions of text messages daily in 'untargeted' global sweep. "The National Security Agency has collected almost 200 million text messages a day from across the globe, using them to extract data including location, contact networks and credit card details, according to top-secret documents. The untargeted collection and storage of SMS messages - including their contacts - is revealed in a joint investigation between the Guardian and the UK's Channel 4 News based on material provided by NSA whistleblower Edward Snowden. The documents also reveal the UK spy agency GCHQ has made use of the NSA database to search the metadata of "untargeted and unwarranted" communications belonging to people in the UK. The NSA program, codenamed Dishfire, collects "pretty much everything it can", according to GCHQ documents, rather than merely storing the communications of existing surveillance targets." James Ball in The Guardian.

Obama's path from critic to defender of spying. "More than six years later, the onetime constitutional lawyer is now the commander in chief presiding over a surveillance state that some of his own advisers think has once again gotten out of control. On Friday, he will give another speech, this time at the Justice Department defending government spying even as he adjusts it to address a wave of public concern over civil liberties. The journey between those two speeches reflects the transition from the backbench of the United States Senate to the chair behind the Resolute Desk in the Oval Office. Like other presidents before him, the idealistic candidate skeptical of government power found that the tricky trade-offs of national security issues look different to the person charged with using that power to ensure public safety." Peter Baker in The New York Times.

Lawmakers seek to stymie plan to shift control of drone campaign from CIA to Pentagon. "Congress has moved to block President Obama's plan to shift control of the U.S. drone campaign from the CIA to the Defense Department, inserting a secret provision in the massive government spending bill introduced this week that would preserve the spy agency's role in lethal counterterrorism operations, U.S. officials said...The provision represents an unusually direct intervention by lawmakers into the way covert operations are run, impeding an administration plan aimed at returning the CIA's focus to traditional intelligence gathering and possibly bringing more transparency to drone strikes." Greg Miller in The Washington Post.

Hilarious interlude: What the British might sound like as commentators on American football.

4. Is financial regulation safe?

How Washington beat Wall Street. "Goldman Sachs, the biggest money machine in Wall Street history, is a shell of its former self. Morgan Stanley, Goldman's one-time bitter rival in the swashbuckling world of high-risk trading, is transforming into a staid money management firm with a side business underwriting stocks and offering merger advice. Citigroup and Bank of America sold off many of their classic "Wall Street" businesses, including proprietary trading desks and private equity and hedge fund stakes, to comply with the Dodd-Frank financial reform bill. Washington's big victory came via widespread public outrage at the financial industry, which paved the way for a strong reform bill. And after President Barack Obama signed Dodd-Frank into law in 2010, the industry made mistake after mistake -- from the interest rate rigging scandal to mortgage-foreclosure "robo-signing" -- making it essentially impossible for the industry's lobbyists to beat back any of the newly imposed regulations." Ben White in Politico.

Congress slashes SEC's funding for technology upgrades. "Congress snatched away half of the $50 million that the Securities and Exchange Commission had set aside for technology initiatives Thursday, dashing the agency's hopes of beefing up the tools it needs to swiftly spot violations such as illegal trades and accounting fraud...Among the SEC's most ambitious undertakings is software that streams real-time trade data. The technology enables the SEC to reconstruct market events, a need that became clear after the 2010 "flash crash" in which the Dow Jones industrial average plunged before bouncing back in minutes. It took the SEC four months to unwind the billions of orders that took place that day and determine what happened. The money for that project came from the $50 million fund, agency officials said. More recently, the agency began using software that scans the financial statements companies file, assesses risk factors and generates a score that identifies outliers within a peer group. The SEC also wants to enhance a system that flags potential insider trading by identifying individuals who trade in unison around certain market events, and another that aims to combat hedge fund fraud by sniffing out unusual fund performance." Dina ElBoghdady in The Washington Post.

New plan to wind down Fannie and Freddie. "The proposal by John Delaney, John Carney and Jim Himes substantially winds down Fannie and Freddie over five years, creating a path for their eventual sale. They said the plan provides the ideal private and public sector partnership by maintaining a government guarantee for mortgages, but having the private sector price the risk, which is more disciplined...The latest proposal would maintain a government guarantee, and therefore the 30-year fixed rate mortgage and other affordable housing options, by restructuring Ginnie Mae." Gina Chon in The Financial Times.

Neat interlude: The Lady Gaga of Flickr.

5. What Obamacare looks like after two weeks

Two weeks into health rollout: Few problems, few patients. "Two weeks into the full rollout of the Affordable Care Act, hospitals and doctors say they are coping with the trickle of new patients relatively smoothly, but one of the biggest issues is making sure enrollees get insurance cards..."We are definitely seeing an impact, but it's a small number compared to the overall population," said Mark Newton, the chief executive of Swedish Covenant Hospital in Chicago. Mr. Newton said his hospital saw at least 25 newly insured patients the first week in January and performed two surgeries on people who were waiting for new coverage to kick in on Jan. 1. "There seems to be this fear that a huge group of patients will suddenly be part of the health-care system. The reality is, they're already part of the system. They're just accessing care in the wrong place, at the wrong time," said Reid Blackwelder, president of the American Academy of Family Physicians, who practices in Kingsport, Tenn. "We want to see more patients coming into primary-care offices--we need to get them out of the ER--but that will take some time."" Jennifer Corbett Dooren and Melinda Beck in The Wall Street Journal.

Medicaid expansion takes a hit in Arkansas. "A Democratic state senator forced to step down last year over ethics violations will be replaced by a Republican after a special election Tuesday that dealt a serious blow to Arkansas Gov. Mike Beebe's (D) push to expand Medicaid. Republican John Cooper defeated Democrat Steve Rockwell in a northeast Arkansas district based in Jonesboro in a race that had centered on whether to expand Medicaid to cover those making less than 138 percent of the federal poverty line." Reid Wilson in The Washington Post.

Boehner: Republicans will advance a real plan to replace Obamacare in 2014. "Speaker John Boehner (R-Ohio) on Thursday predicted that House Republicans would unveil -- and possibly vote on -- a plan to replace the healthcare law in 2014, fulfilling a long-delayed promise to voters. An alternative to ObamaCare will be "one of the big issues" the House GOP will discuss at its annual policy retreat at the end of the month, Boehner said...Party leaders favor a politically safer approach in which the GOP would draft principles on a range of issues, including healthcare, tax reform and immigration, but may not actually hold votes that could be targeted in campaigns." Russell Berman in The Hill.

Is the U.S. too corrupt for single-payer health care? "The key to a single-payer system is that the government sets prices. Usually, it empowers boards of independent experts who set those prices low. Reinhardt's argument is that in the United States, health industry interests have so much sway over Congress that the prices would end up being set by health-care interests...Reinhardt's argument is a reminder that the simple fact that a policy worked in another country does not mean it will work in this country. His point about the importance of independence is particularly crucial." Ezra Klein in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

The Supreme Court gutted the Voting Rights Act. Now a bipartisan gang wants to put it back together. Dylan Matthews.

Almost none of the bills introduced into Congress ever becomes a law. Ezra Klein.

Bernanke's swan song: Fed chief reflects on the tough job of communications. Ylan Q. Mui.

The Supreme Court gutted the Voting Rights Act. Now a bipartisan gang wants to put it back together. Dylan Matthews.

How the oil boom could change U.S. foreign policy. Brad Plumer.

Obamacare helps ex-convicts. That's a good thing! Harold Pollack.

Is the U.S. too corrupt for single-payer health care? Ezra Klein.

The housing bubble was much, much worse for Hispanics. Lydia DePillis.

Et Cetera

Obama lauds efforts to expand college access. Jackie Calmes in The New York Times.