Jan. 22, 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: 424,936. That's how many people California enrolled in Obamacare policies between October 1 and December 31. The goal for the reach by the end of March is between 487,000 and 696,000 -- and it now looks very much attainable.

Wonkbook's Graph of the Day: How globalization has shocked the income distribution, from Branko Milanovic's research.

Wonkbook's Top 5 Stories: (1) California is making Obamacare succeed; (2) climate change won't wait on Congress; (3) the scars of recession and financial crisis; (4) juries can't exclude gays; and (5) the smoke-filled-room path to immigration reform.

1. Top story: California is making Obamacare succeed

California's Obamacare program is close to meeting enrollment goal. "Halfway through the process, officials running the Obamacare program in California said Tuesday they are close to reaching the minimum expected enrollment for subsidy-eligible consumers and have surpassed the half-million mark in overall signups. Covered California, the Golden State's incarnation of Obamacare, says it enrolled 424,936 subsidy-eligible policyholders from Oct. 1 to Dec. 31. Peter V. Lee, Covered California's executive director, said in a press release that the agency was forecast by independent assessors to reach enrollment at somewhere between 487,000 and 696,000 during the entire signup period, which runs through March 31." Russ Britt in MarketWatch.

@LarryLevitt: "Enrollment in @CoveredCA continues strong in January (125k). Not as big a dropoff from December as I expected."

The program is struggling to sign up uninsured Latinos, though. "Supporters of the healthcare law say those broader service issues are hampering enrollment among Latinos, who are expected to be among the biggest beneficiaries of President Obama's signature law. An estimated 1.2 million, or 46%, of the 2.6 million Californians eligible for federal premium subsidies are Latino. But Covered California said only 20% of enrollees through the end of December described themselves as Latino on their application." Chad Terhune in The Los Angeles Times.

Longread: Patients' costs soar along with specialists' incomes. Elisabeth Rosenthal in The New York Times.

Fixes to allow existing insurance to continue wouldn't sink Obamacare exchanges. "None of the three proposals to allow people to keep their existing coverage will send the Affordable Care Act into a "death spiral," according to a study released Tuesday by the RAND Corp. The independent healthcare policy institute reported that the three proposals would each be disruptive to varying degrees, but none of them threatened the long-term viability of the new healthcare exchanges...[T]he RAND study forecasted Obama's fix is the least disruptive of the three and would have "only minimal effect on enrollment and premiums."...Last year, the House passed a bill that would allow insurance companies the option of offering old healthcare plans indefinitely and would allow anyone in the country to buy into these plans. The RAND study said this was by far the most disruptive of the three and would lead to a 10 percent premium hike and decrease enrollment by 3.2 million. The bill would also trigger an additional $5 billion in federal spending on subsidies and tax credits." Jonathan Easley in The Hill.

How the Obamacare wars hurt the mentally ill. "Every day he's without his meds, Scott Patrick's demons return: the urge to get high to forget that he's dying of AIDS; the anxiety, paranoia, and phantom noises spurred on by his bipolar disorder and PTSD. Patrick, a former male prostitute and recovering drug addict, was released from a Georgia jail last month without any of his medications on hand. "I could die dirty or die clean," he said. "I want to die clean." So like many struggling Atlantans with nowhere else to go, Patrick sought treatment at Grady Memorial, the state's largest safety net hospital. He carried all his worldly possessions with him: a change of clothes, a Bible, and some vitamin C drops. The partisan war over Obamacare is now threatening the mental health services that Patrick and countless others are seeking." Suzy Khimm in MSNBC.

Congress opens the door to Medicare reform. "At issue are what's known as Medicare "extenders," tacked-on money that Congress has to approve annually to fund the program's coverage for beneficiaries with chronic and debilitating conditions. In past years, Congress has passed a blanket extension of the payments, which include such things as funding for rural and low-volume hospitals, ambulance rides, specialized care for needy patients, and outpatient therapy. But this time around--after trillions in debt and having vowed to root out waste--Congress is attempting to be choosier, looking to move certain expenses off of the federal books. Currently, legislators are mulling two different plans: one from the Senate Finance Committee and the other from the Medicare Payment Advisory Commission (MedPAC), the independent congressional advisory board established in 1997 to advise Congress on Medicare policy." Clara Ritger in NationalJournal.

A Medicaid boom? "As state budgets have been hurt by the stagnant economy, lawmakers have turned more patients eligible for Medicaid over to privately-contracted insurance companies. Now, the health law provides a cash infusion of more than $900 billion in federal dollars from 2014 to 2022 to expand Medicaid programs for states interested in the proposition...Enrollment in health plans that have contracts with Medicaid will rise by 20 percent this year and by nearly 40 percent from last year to 2016, according to a report this week from Avalere Health, a research and advisory services firm on health policy issues tracking the Affordable Care Act." Bruce Japsen in Forbes.

Supply-side economics ad absurdum interlude: We should celebrate 3.5 billion poor because it's good motivation for everyone to aspire to be in the one percent.

Top opinion

ORNSTEIN: Why Obama must be able to make recess appointments. "[R]ecess appointments are a limited tool, a modest safety valve to ameliorate the worst abuses of Senate power. But they are a necessary one to keep some check and balance in place. There is reason to fear that the Supreme Court will take that tool completely away -- and make our dysfunctional politics and policy making much worse...The justices, in the oral argument, focused on the "originalist" fact that at the beginning of the republic, recess appointments were intended not to deal with political disputes between president and Senate but to enable presidents to fill positions when there were, as a practical matter, lengthy stretches without a Senate in session to confirm them. But it is also true that at the beginning of the republic, there were no filibusters, and the Constitution's framers believed that senators would use the "advise and consent" power only rarely to block nominees." Norman Ornstein in The New York Times.

GOLDIN: Close the gender pay gap, change the way we work. "The earnings gap is most pronounced in occupations such as law that place a premium on the willingness and ability to work long hours, be in the office at specific times and build face-to-face relationships with co-workers and clients. In these professions, the penalty for working part time or taking time off -- to give birth or care for a child, for example -- is particularly large. Small differences in time away or in hours translate into large differences in pay." Claudia Goldin in Bloomberg.

GOTTLIEB: No, risk corridors are not a bailout. "Government policies designed to offset the financial losses that the health insurance companies will incur in Obamacare are being labeled a bailout. But these schemes are really a planned subsidy. The cost anomalies that they're designed to mitigate weren't a consequence of a bumpy rollout but a deliberate feature of the law." Scott Gottlieb in Forbes.

SCHMITT: How to think about the inequality debate. "We need a way to talk and think about inequality that presents it as a system, and then finds the points of intervention that might actually change the system. Where, in the current debate, is there a real, comprehensive explanation, a plausible solution that would have a real impact on inequality, and a potentially broad coalition, one that includes the dimensions of inequality that even skeptics purport to worry about?...When economic winners use their political power and influence to cement their gains, the resulting self-reinforcing inequality will lead to economic stagnation and immobility." Mark Schmitt in The New Republic.

SERRATO AND ZIDAR: Don't kill corporate taxes. "We find that, across the country, most firms choose to pay higher taxes and locate where their productivity is highest, rather than chase tax incentives. That is, technology firms will still want to locate in Silicon Valley even if California were to raise its corporate rate modestly. We also measure what happens to wages and firms' profits after states cut corporate taxes, and find that firm shareholders benefit more than workers from state corporate tax cuts. Moreover, workers are left with the bill to pay these generous incentives to firms in the form of lower corporate taxes." Juan Carlos Suarez Serrato and Owen Zidar in The Washington Post.

TAYLOR: Immigration matters for innovation. "The U.S. economy relies to an increasing extent on immigrants for its innovative impetus...Kerr's research shows that when the number of high-skill immigrants on short-term visas rises in a city, and the innovation rate rises, the innovation rate for for other inventors in that city seems to rise slightly, too. It surely looks as if U.S. innovation is being sustained by recent arrivals and people who are here on a short-term basis." Timothy Taylor in The Conversable Economist blog.

THOMA: What's the best way to help the poor? "My view is that the minimum wage and the EITC work best in tandem, and that if we wish to spur hiring during recessions there are much better ways to do it than to allow employers to "capture more of the surplus," -- that is, to keep more for themselves by paying workers less. A carefully designed tax credit, for example, or monetary and fiscal policy measures that spur demand would both promote employment without lowering the income of the most vulnerable households. That's particularly important in a time of rising inequality." Mark Thoma in CBS.

Interview: Bill Gates: 'Capitalism did not eradicate smallpox.' Ezra Klein in The Washington Post.

BARTLETT: How tax reform got done in 1986. "The reason tax reform worked in the 1980s is the ground had been well-plowed for the previous 20 years by those on both the right and left...[Inflation] made average people receptive to tax policies that would have benefited only the rich just a few years earlier." Bruce Bartlett in The New York Times.

Good reading interlude: Famous punctuation marks in literature.

2. Climate change isn't waiting for Congress. Obama might not either.

Report: Obama can advance climate agenda without Congress. "Obama can advance key measures in the battle against climate change with or without Congress, according to a report released Tuesday -- spearheaded by former Colorado Governor Bill Ritter. Ritter met with the administration last week to discuss the 207-page report, which includes roughly 200 recommendations on how Obama can utilize his executive authority to push clean energy standards that are in line with the his climate plan. Obama's former climate czar Heather Zichal, who left her post early this year, also helped craft the report...The five key areas that the report focuses on are energy productivity, financing renewable energy, responsible natural gas production, developing alternative fuels and vehicles, and helping electric and gas utilities to adapt." Laura Barron-Lopez in The Hill.

Primary source: Here's the report.

Keystone pipeline's southern leg to begin transporting oil to U.S. Gulf Coast. "TransCanada will start shipping crude oil through the southern leg of the Keystone pipeline Wednesday, easing the bottleneck at the sprawling storage-tank farms in Cushing, Okla., and feeding refineries on the Texas Gulf Coast. But the company is still waiting for the State Department to decide whether to issue a permit for the 1,179-mile northern leg that would carry predominantly heavy oil from Canada's oil sands, cross the border in Montana and run to the small town of Steele City, Neb. There it would connect with existing pipelines." Steven Mufson in The Washington Post.

And you thought you had seen it all interlude: How to fail your driver's test in under ten seconds (flip the car as you're pulling out).

3. How much did the recession cost?

The true cost of the recession is still being tallied. "How much did it all cost? In July, three economists at the Federal Reserve Bank of Dallas, Tyler Atkinson, David Luttrell and Harvey Rosenblum, gave it a shot, at least as far as the United States economy goes...[T]heir examination offers a panoramic view of the variety of ways in which the financial crisis diminished the nation's standard of living. At a bare minimum the crisis cost nearly $20,000 for each American. Adding in broader impacts on workers' well-being -- an admittedly speculative exercise -- could raise the price tag to as much as $120,000 for every man, woman and child in the United States." Eduardo Porter in The New York Times.

Two-track future imperils global growth. "Globalization has made the world a more equal place, lifting the economic fortunes of billions of poor people over the last quarter century. Here's the rub: At the same time, it has made richer countries more unequal--squeezing the incomes of the poor and the middle class...Branko Milanovic, a former World Bank economist now with the City University of New York, says data from household surveys show that, from 1988 to 2008, real incomes of the poorest 50% in the U.S. grew just 23%. Their counterparts in the bottom 50% in Germany and Japan fared worse, the poorest Japanese seeing their real incomes fall by 2% in real terms. Meanwhile, incomes of the top 1% of Americans grew 113%, a figure that other studies suggest may be an underestimate." Stephen Fidler in The Wall Street Journal.

@conorsen: For the job market being so terrible, there sure are a lot of quits today. #JOLTS

IMF raises outlook for global growth in 2014. "The IMF raised its 2014 global growth forecast to 3.7%, up 0.1 percentage point from its last outlook in October...The U.S. leads the recovery. The IMF raised its forecast for U.S. economic growth this year by 0.2 percentage point to 2.8%, though it downgraded its 2015 outlook by 0.4 percentage point to 3% amid the fights in Congress over the federal balance sheet and spending." Ian Talley in The Wall Street Journal.

@amitabhchandra2: The bottom fifth have seen no wage growth...but forcing their employers to offer health-insurance will lower their wages even more.

Financial regulation has forced banks to sit out the riskiest deals. "Regulatory pressures are pushing many of the biggest banks to pass on financing lucrative deals, as Washington targets excessive borrowing...The new push could make deals more costly for private-equity firms, which rely on banks to lend much of the borrowed money that helps fuel their corporate takeovers...In the letters, the Federal Reserve and the OCC demanded banks comply with guidance published in March 2013 saying they should avoid financing takeover deals that involve putting debt on a company of more than six times its earnings before interest, taxes, depreciation and amortization, or Ebitda...In 2013, the percentage of new U.S. leveraged buyouts with a debt-to-Ebitda ratio above six times was, at 27%, the highest it has been since 2007." Gillian Tan in The Wall Street Journal.

@davidmwessel: IHS Global Insight: Unusually, locomotives of growth this year will be advanced economies, including US, UK, Germany

YGLESIAS: Yellen, please ignore the unemployment rate. "If it seems odd to suggest that the best way to help the unemployed is to ignore the unemployment rate, here is some context...The key thing for now, however, is that the unemployment rate has ceased to be a reliable indicator of the state of the economy. Spending too much time thinking about the unemployment rate may cause you to develop an excessively optimistic view of the labor market, and an excessively pessimistic view of the economy's capacity for growth. The key test for the Fed in 2014 will be its willingness to look past the unemployment rate at broader measures of the economy's health." Matthew Yglesias in Slate.

BROWNSTEIN: Economic mobility has no simple solution. "The big insight from Reeves and Grannis is that reversing these trends requires more than "a one-shot policy." Their summary of the research finds that kids from low-income families are much less likely than those with more-affluent parents to receive effective parenting in early childhood; to start school ready to learn; to be equipped for postsecondary education; and to get a strong start in the labor market or when forming a family. Closing these gaps requires smart, sustained engagement, because evidence shows that the positive effects of even the best interventions at one level (such as good Head Start programs) "wear off over time unless there are additional, reinforcing interventions at the next life stage."" Ronald Brownstein in NationalJournal.

Music recommendations interlude: Fleetwood Mac, "Go Your Own Way," 1977.

4. Gays can no longer be excluded from juries

Appeals court says gays can't be excluded from juries. "[I]n a case involving GlaxoSmithKline and Abbott Laboratories about drug pricing, a three-judge panel of the Ninth U.S. Circuit Court of Appeals in San Francisco extended the principle to gays and lesbians for the first time...A lawyer is allowed to strike someone from a jury for nearly any reason as long as it isn't tied to the person's sex or race. In a series of rulings in the 1980s and 1990s, the Supreme Court said that striking jurors on grounds of their sex or race violated the Constitution's equal-protection clause." Ashby Jones in The Wall Street Journal.

Over at the Supreme Court, justices appear divided on a sweeping challenge to public-sector unions. "The lawyer, William L. Messenger of the National Right to Work Legal Defense Foundation, asked the Supreme Court to overrule a foundational 1977 decision and to declare that government workers may not be forced to pay dues to unions to represent them in collective bargaining negotiations if they disagree with the positions the unions take. Justice Elena Kagan said that was quite a request...Other justices seemed receptive to Mr. Messenger's argument, saying that the First Amendment limits what government workers may be forced to do to support bargaining positions they differ with." Adam Liptak in The New York Times.

History interlude: 15 gorgeous photos of the old Cincinnati Library.

5. Why smoke-filled rooms matter for immigration reform

Two women reach across the aisle on immigration reform. "Esther Olavarria, a Democrat, left Cuba as a child, worked as Senator Edward M. Kennedy's top immigration lawyer and now holds a post in the White House. Rebecca Tallent, a Republican, left suburban Arizona and became Senator John McCain's chief of staff, briefly advised Sarah Palin in 2008 and is now a top policy aide to Speaker John A. Boehner of Ohio. But if there is any way to unlock the immigration stalemate in Washington, colleagues say these two might find it." Michael D. Shear in The New York Times.

States take the lead on immigration reform. "New Jersey joined at least 18 states in approving laws or policies allowing undocumented youngsters to pay in-state college tuition, rather than the higher out-of-state rate. Gov. Chris Christie, a Republican, said at a bill-signing that the measure would maximize the investment the state has made in undocumented students, whose K-12 schooling is financed by New Jersey taxpayers...Meantime, California, Colorado, Connecticut, Georgia, Illinois, Maine, Maryland, Nevada, Oregon and Vermont approved access to driver's licenses for illegal immigrants, bringing to 13 the number of states that allow it." Miriam Jordan in The Wall Street Journal.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Five big questions about the massive chemical spill in West Virginia. Brad Plumer.

Bill Gates: 'Capitalism did not eradicate smallpox.' Ezra Klein.

Why you'll be able to pay for things on your phone in lots of ways for a long time. Lydia DePillis.

Want to help the middle class? Don't kill corporate taxes. Juan Carlos Suarez Serrato and Owen Zidar.

Et Cetera

Former Va. Gov. McDonnell and wife charged in gifts caseem style="line-height: 1.5em;">Rosalind S. Helderman, Carol D. Leonnig and Sari Horwitz in The Washington Post.

Obama goal for quick revamp of NSA program may be unworkable, some U.S. officials fear. Sari Horwitz and Ellen Nakashima in The Washington Post.

De Blasio and Cuomo disagree over how to fund universal pre-K. Michael Howard Saul and Erica Orden in The Wall Street Journal.

Which Republican is giving the response to the State of the Union? Jennifer Epstein in Politico.

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

Wonkbook is produced with help from Michelle Williams.

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