Nov. 21, 2012

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

Wonkbook’s Number of the Day: $1,423.00. That’s the net increase in federal tax burden coming for a married couple making between $20,000 and $30,000 a year if the austerity-crisis negotiations fail to produce a deal, according to a story by John D. McKinnon, Kristina Peterson, and Josh Mitchell in The Wall Street Journal. Roughly 90 percent of American households, according to the Tax Policy Center, will face higher tax bills in 2013 under such a scenario. Middle-income families, or those making between $40,000 and $65,000 a year, may pay an additional $2,000 in taxes. For more on the austerity crisis, see Wonkbook’s special section below.

Top story: Everything you need to know about Obamacare’s regulations

The Affordable Care Act regulations came down on Tuesday. Here’s what they say. “The Obama administration took a big step on Tuesday to carry out the new health care law by defining ‘essential health benefits’ that must be offered to most Americans... Insurance companies are rushing to devise health benefit plans that comply with the federal standards. Starting in October, people can enroll in the new plans, for coverage that begins on Jan. 1, 2014...The rules lay out 10 broad categories of essential health benefits, but allow each state to specify the benefits within those categories, at least for 2014 and 2015. Thus, the required benefits will vary from state to state, contrary to what many members of Congress had assumed when the law was adopted.” Robert Pear in The New York Times.

Read: The health regulations in the Federal Register.

Another key component of the rules includes those on preexisting conditions coverage. “The Obama administration issued new rules Tuesday that require insurance companies to cover people with preexisting medical conditions — one of the most popular provisions of President Obama's healthcare law...Covering people with preexisting conditions is expensive, and the law seeks to bring younger, healthier people into the system to offset the additional costs of covering sick people. HHS took steps in crafting the regulations to minimize the potential shock to customers' premiums. For example, in the policy governing rate increases based on age, HHS said rates should increase slightly every year, rather than building in larger price jumps every five years.” Sam Baker in The Hill.

@sarahkliff: What’s that? You were looking for 112 pages of actuarial value in health exchanges regulations? You, sir, are in luck!

Wellness programs also get a big boost in the ACA regs. “The Obama administration released new regulations Tuesday to encourage participation in employer-based wellness programs as a way to drive down healthcare costs...The less-familiar wellness rules will increase the maximum permissible reward for workers who participate in programs that encourage certain health outcomes, such as smoking cessation or weight loss...Under the proposed rules, these ‘health-contingent wellness programs’ will now yield a reward of up to 30 percent of the cost of health coverage rather than 20 percent. Workers involved in smoking cessation programs will be eligible for as much as a 50 percent discount, HHS said.” Elise Viebeck in The Hill.

@sahilkapur: Pre-ex rules: premiums may vary on age, tobacco use, family size & geography but not on health status, gender or occupation.

3 more ways the Affordable Care Act changed on Tuesday. “[T]here are a few important changes that the Obama administration made Tuesday. Culled from the 333 pages of federal regulation, here are the three most important changes that happened...Higher deductibles are a-okay — in certain plans...In the small group market, this meant that insurers could not set a deductible any higher than $2,000 for an individual...Insurers griped out this provision: They said it might be impossible, with that relatively small deductible to build an insurance plan that has the consumer paying 40 percent of the bill. Tuesday, the Obama administration essentially agreed.” Sarah Kliff in The Washington Post.

@sam_baker: Today’s #hcr regulations give insurers more certainty about some of the ACA’s most politically popular elements

What the Affordable Care Act does? Americans just don’t know. “After surviving a Supreme Court decision and a presidential election, the Obama administration's health-care law faces another challenge: a public largely unaware of major changes that will roll out in the coming months. States are rushing to decide whether to build their own health exchanges and the administration is readying final regulations, but a growing body of research suggests that most low-income Americans who will become eligible for subsidized insurance have no idea what is coming...Low enrollment could lead to higher premiums, health policy experts say. Hospitals worry that, without widespread participation, they will continue getting stuck with patients' unpaid medical bills.” Sarah Kliff in The Washington Post.

The states will get extensive input in the health law. “The Obama administration Tuesday issued new rules to implement several key provisions of the health-care-overhaul law, giving states some additional discretion over plans sold within their borders...The federal government also expanded requirements for prescription-drug coverage from previous proposals, but it left states with different options to choose from, as well as responsibility for enforcement.” Louise Radnofsky in The Wall Street Journal.

Top op-eds

GIRGIS, ANDERSON, AND GEORGE: The case for a traditional definition of marriage. “What is marriage, and why does it matter for policy? The conjugal and revisionist views are two rival answers; neither is morally neutral. Each is supported by some religious and secular worldviews but rejected by others. Nothing in the Constitution bans or favors either. The Supreme Court therefore has no basis to impose either view of marriage. So voters must decide: Which view is right?...[M]arriage is a uniquely comprehensive union. It involves a union of hearts and minds; but also — and distinctively — a bodily union made possible by sexual-reproductive complementarity. Hence marriage is inherently extended and enriched by procreation and family life and objectively calls for similarly all-encompassing commitment, permanent and exclusive.” Sherif Girgis, Ryan T. Anderson, and Robert P. George in The Wall Street Journal.

MEHLMAN: Why it’s time to allow same-sex marriage. “Some misperceive the issue of marriage equality as exclusively progressive. Yet what could be more conservative than support for more freedom and less government? And what freedom is more basic than the right to marry the person you love? Smaller, less intrusive government surely includes an individual deciding whom to marry. Allowing civil marriage for same-sex couples will cultivate community stability, encourage fidelity and commitment, and foster family values. Same-sex couples today lack the estate-tax protections, Social Security spousal benefits, and joint-filing options available to heterosexual couples.” Ken Mehlman in The Wall Street Journal.

CROOK: How to forestall the austerity crisis. “What matters, though, is not the damage that a temporary change in fiscal policy will cause at the end of the year, but the harm that the prevailing uncertainty over policy has already caused — and will keep causing, even if the fiscal slope is avoided. That's why being told that the cliff isn't a cliff is small consolation... On so compressed a timescale, the best that can be hoped for is an agreement to avoid the fiscal slope plus a statement of principles to shape the bigger deal. For that declaration to be of any use, it must be credible — and it can be credible if, and only if, both sides startle everybody by saying what they are willing to give up. If a deal to avoid the slope just postpones the entire discussion, allowing Democrats and Republicans to press their maximal demands again next year, it will achieve little. If both sides yield just a bit, and do it now, that would be a success.” Clive Crook in Bloomberg.

BARRO: What the GOP can do to adapt. ” Republicans could offer constructive alternatives that focus more on bringing down the prices of things that middle-income Americans have trouble affording, and less on subsidizing them. In other words, Republicans could provide viable plans that focus on making government better without necessarily making it bigger...This brings us to another reason Republicans won't say smart things about cost control: It requires admitting that we need a mix of market and non-market solutions. Health care and higher education are and will remain sectors of the economy that have a large government share of expenses, and so the market will necessarily be distorted. The key objective should be making sure that those distortions balance each other.” Josh Barro in Bloomberg.

What goes around comes around interlude: Mitt Romney’s popular vote total likely to be finalized at ’47 percent.’.

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

Economy

Housing starts rose last month. And the housing recovery marches on. “Builders in the United States started construction last month on the most homes and apartments since July 2008, more evidence that the housing recovery was gaining momentum. The Commerce Department said Tuesday that builders broke ground on homes in October at a seasonally adjusted annual rate of 894,000. That's a 3.6 percent gain from September. Single-family home construction dipped 0.2 percent to an annual rate of 594,000, down from a four-year high in the previous month. Apartment construction, which is more volatile from month to month, rose 10 percent to an annual rate of 285,000.” The Associated Press.

Why Atlanta, New York, and Chicago are poised to drive a housing recovery. “A housing comeback is now underway; that much is clear...The question now is how strong it will be and where it will take place. And to answer those questions it helps to look into the fundamentals of the major U.S. housing markets. These numbers suggest the future for housing is looking bright in the Atlanta, New York, and Chicago metro areas...Most of the largest U.S. cities have housing markets that have been in pretty good balance over the last year, with prices rising at about the same rate as rents... And that may be the best sign for the housing market of all. After all these years of bubbles and busts, ups and downs, there finally is a measure of stability. And that is a shift that bodes well for the economy.” Neil Irwin in The Washington Post.

Bernanke promises continuation ‘monetary-policy support’ to economic recovery. “Fed Chairman Ben Bernanke suggested that the central bank will keep trying to push down long-term interest rates in 2013, as federal tax and spending policies become a more substantial headwind to the U.S. economy. ‘We will continue to do our best to add monetary-policy support to the recovery,’ Mr. Bernanke said at the New York Economic Club, answering a question about how the Federal Reserve would respond to impending spending cuts or tax increases that might restrain economic growth.” Jon Hilsenrath in The Wall Street Journal.

Greece smolders. But the demands of its creditors keep on burnin’. “Negotiations have been deadlocked for weeks, with Greece's major creditors so far unwilling to grant any relief. Without a deal, the IMF will not approve any further disbursements under its bailout program. Bailout lending has been suspended since early this year while Greece held elections and then debated further spending cuts and tax increases demanded under the terms of the rescue program...Ideas under discussion include an outright reduction in the amounted owed — similar to the debt ‘haircut’ of more than 50 percent that private bondholders accepted earlier in the year. There is also discussion of reducing interest rates or pushing repayment of the principal far into the future.” Howard Schneider in The Washington Post.

Music recommendations interlude: Bruce Springsteen, “Hungry Heart,” 1980.

Health Care

Utah's big health-care gamble. “There's a pretty stark choice for states to make on health-insurance exchanges right now: They can decide to set one up. Or they can decide not to. Those, along with one choice where the state and feds divvy up the responsibilities, are the options on the table. That seems to be true everywhere -- except Utah. There, Gov. Gary Herbert is trying to carve out a completely new option: Building a health insurance exchange that is near certainly out of compliance with the federal law, and seeing how the Obama administration responds...The Utah exchange launched back in August 2009 and is a relatively barebones operation: It has had about two or three employees (depending on the time of year) and an operating budget of $500,000. It caters to small businesses — about 7,000 people currently receive benefits through the Utah exchange — and pretty much lets anyone qualified to sell health insurance in Utah set up shop...There's just one pretty big problem: Utah's exchange is near certain not to meet the requirements for an insurance exchange under the Affordable Care Act.” Sarah Kliff in The Washington Post.

Medicare cuts give health providers jitters. “The $716 billion in Medicare ‘cuts’ that got so much attention in the presidential election have already begun sinking their teeth into health care providers. And there are widespread jitters that any further cuts as part of a year-end deal to stave off sequestration or strike a ‘grand bargain’ for a long-term fiscal deal would deeply gouge some providers, if not put them out of business...[H]aving already been cut substantially to pay for the federal health care law, providers say the stakes are higher than ever, and some are digging in their heels.” Brett Norman in Politico.

Study: U.S. faces shortage of 52,000 doctors by 2025. “The United States will need about 52,000 new primary-care doctors as the population grows and ages, according to a new study. Research published in the Annals of Family Medicine estimated that most of the doctor shortage will be caused by the rising U.S. population. Aging adults and the expansion of healthcare coverage under the Affordable Care Act will contribute to a lesser extent, the study found.” Elise Viebeck in The Hill.

‘Doc fix’ cost rises to $25 billion. “A one-year ‘doc fix’ has gotten nearly $7 billion more expensive, according to new estimates from the Congressional Budget Office, obtained by The Hill. Doctors are scheduled to see a 26.5 percent drop in their Medicare payments at the end of the year unless Congress steps in to delay the cut, as it does every year. Delaying the cut and freezing doctors’ payments for one year would cost $25 billion, according to CBO’s latest estimates — up from $18.5 billion in its last projection.” Sam Baker in The Hill.

Love letters interlude: The New Yorker’s hysterical satire of liberals’ obsession with Nate Silver as 11-year-old girl’s crush.

The austerity crisis

Is this the deal that will end the austerity crisis? “We're 42 days away from the beginning of the austerity crisis, and the strangest thing is happening: Washington appears to be preparing to deal with it in a smooth, timely, reasonable way. This might be the calm before the storm. Readers will remember that there were weeks when much of Washington thought the supercommittee was going to come to a deal, too. But in my conversations with the various players, I'm not hearing much concern. In fact, I'm hearing some confidence. December 21st, people keep saying. We'll have a deal by December 21st...Here's how it could work: The top-income tax cuts expire, as Obama wants. Those cuts only raise about $80 billion in 2013, so they're a ‘down payment’ on reform. And their cost is that the Democrats identify roughly $80 billion in spending cuts that can be passed into law now -- so Republicans also get a ‘down payment’ on the bigger deal. And all this happens in the context of a framework for a larger deal, which includes the promise of tax reform in 2013. ” Ezra Klein in The Washington Post.

The budget talks are going slowly and steady as she goes. “Efforts to avoid a year-end fiscal crisis are inching forward...Indicating the slow pace, aides are careful to point out that they aren’t making decisions on what would be included in or excluded from a deal. Rather, they are sifting options for their bosses.” Carol E. Lee and Janet Hook in The Wall Street Journal.

Is it even possible to raise $1.6 trillion from wealthy households without changing tax rates? “Experts say it is. But doing so might be politically infeasible and hugely unpopular, because it would involve wiping out nearly every deduction, credit and preferential rate those affluent households claim...[A]ny proposal raising $1.6 trillion would involve getting rid of nearly every loophole or break in the code for high-income families — not just itemized deductions, but also preferential rates on investment income and every tax credit the wealthy can currently claim. There would be no deduction for charitable giving, or close to none, angering wealthy donors and nonprofit directors. The home mortgage interest deduction would vanish, hurting the housing market just as it has started to turn around. Preferential tax treatment of capital gains and dividends would disappear, probably throwing the markets into a sell-off. The top 1 percent of earners might see their after-tax income fall as much as 19.8 percent, according to calculations by the Tax Policy Center.” Annie Lowrey in The New York Times.

How the austerity crisis will hit American households. “Almost all American households would take a financial hit next year--and low-income families would be hit among the hardest--if the White House and Congress fail to solve the “fiscal cliff” of big tax increases and spending cuts set to start Jan 2. A married couple making between $20,000 and $30,000 a year would go from receiving, on average, a $15 tax credit to owing $1,408, according to research by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. These taxpayers would be part of the roughly 90% of American households that the Tax Policy Center estimates would face higher tax bills for 2013 if Washington cannot craft a deficit-reduction plan to replace the fiscal cliff — the $400 billion in tax increases and $100 billion in spending cuts slated to take effect next year.” John D. McKinnon, Kristina Peterson, and Josh Mitchell in The Wall Street Journal.

Rep. Paul Ryan has a lot at stake in austerity-crisis negotiations. “Ryan must now grapple with the consequences of a much higher profile after being selected as the 2012 Republican vice presidential nominee, in part because of his reputation as a budget cutter and spending reformer...Beyond the next few weeks of deal making, there is the question of what Ryan's involvement in the fiscal cliff talks will mean for his political future...If he pursues a 2016 presidential bid, Ryan — who voted against the Simpson-Bowles commission's recommendations in addition to declining to serve on the debt supercommittee — could well face a primary opponent who uses his involvement in crafting a deal against him, especially if it raises taxes.” Felicia Sonmez in The Washington Post.

The Fed chair says Congress shouldn’t bungle into the austerity crisis. “Bernanke's remarks are notable less for their substance than for their tone and timing. In his most prominent public speech in almost three months, Bernanke made clear that he sees grave risks should the bargaining over the ‘fiscal cliff’ — a phrase he coined — lead to either steep, immediate fiscal austerity or prolonged, confidence-rattling brinksmanship. ” Neil Irwin in The Washington Post.

Read: The transcript of Ben Bernanke’s speech to the New York Economic Club.

The deficit hawks’ inconvenient truth: the market doesn’t believe them. “Scary scenarios like that one have been a common thread in many leading corporate executives' pronouncements about the U.S. fiscal situation. But recent events and the current market seem to belie their arguments...At this point, the markets seem surprisingly confident that lawmakers will come to a deal to avert the austerity crisis. But it's possible that Washington could do so by passing a bare minimum agreement that wouldn't go nearly as far in reducing the long-term deficit as the budget scolds are hoping for. And it's entirely not clear how investors would react under that kind of scenario.” Suzy Khimm in The Washington Post.

Fear overdone on the defense sequester. “[E]ven if we implement every single cut in the sequester, the fall in spending would be less than the military experienced after Korea, Vietnam, or the Cold War. Of course, almost everyone expects that the sequester will, eventually, be disarmed, and the actual cuts to the military will be substantially smaller than what you're seeing on this graph. That means that despite the incredible build-up after 9/11, the fall in spending will be much less than it was after Korea, Vietnam, or the Cold War, and defense spending will settle at a higher real level than it did during any of those post-war troughs.” Ezra Klein in The Washington Post.

Obama voters like the idea of fixing entitlements — at least in the abstract. “Third Way has released a new post-election poll showing that the vast majority of 800 Obama voters (83 percent) want deficit reduction to be a priority. The poll also showed that the majority (53 percent) thought that Social Security and Medicare were in ‘major’ financial trouble. And 79 percent of Obama voters would prefer that ‘the President and Congress make changes to fix Social Security and Medicare,’ rather than do nothing.” Suzy Khimm in The Washington Post.

Federal workforce unions want to avoid cuts to pay and benefits. “The federal workforce has been under a pay freeze for two years. The coalition calculates the budget savings from the freeze at $60 billion. Another $28 billion came out of employees' pockets from a delayed 2013 pay raise that has been off until at least the spring. New hires must contribute more to their retirement, an expense estimated by the unions at $15 billion.” Lisa Rein in The Washington Post.

Energy

Oil boom’s tax revenues aren’t helping area schools. “New drilling techniques have triggered an economic bonanza, but state laws meant to spread around revenue and protect homeowners from soaring tax bills are prohibiting local school officials from reaping the full financial benefits...As a result, 23 school districts, including Karnes City’s, this year switched to ‘property wealthy,’ according to a preliminary list from the Texas Education Agency. The designation is based on several factors, including property values, and districts that cross into the ‘property wealthy’ category often end up with roughly the same amount of money per student as they had when they were ‘property poor.’” Ana Campoy in The Wall Street Journal.

California's CO2 now has a price — but a low one. “A free-market auction has established a price for pollution in California: for each metric ton of carbon dioxide emitted, businesses, utilities and industries that bought allowances last week will pay just $10.09. The results of the first auction, announced on Monday, came as both a relief and a bit of a disappointment, although state officials put the best face of it...Among traders and regulators, there was relief that all of the 23.1 million allowances covering 2013 emissions that were up for auction were sold. The number of bids exceeded the total allowances by about 3 to 1. Polluters do not have to submit the allowances to cover their emissions until November 2014.” Felicity Barringer in The New York Times.

Administration awards grant to speed sales of small nuclear reactors. “The Energy Department selected a grant recipient Tuesday for a class of small nuclear reactors that top U.S. energy officials say could revitalize the domestic industry. Babcock & Wilcox landed part of a $452 million Energy grant that aims to speed commercialization of smaller, less capital-intensive nuclear reactors.” Zack Colman in The Hill.

In the last decade, coal transport costs up 50 percent. “The average cost of shipping coal by railroad to power plants increased almost 50% from 2001 to 2010, with rail transport accounting for more than 70% of U.S. coal destined to the electric power sector, said a new report from the U.S. Energy Information Administration. Though they vary significantly, transportation costs accounted for 40% of the average overall cost of coal delivered at electric power plants in 2010. On average, nominal U.S. rail rates for shipping coal grew from $11.83 to $17.25 per short ton from 2001 to 2010, EIA noted.” Barry Cassell in energybiz.

The State University of New York just closed its hydrofracturing institute in Buffalo. “State University of New York at Buffalo is shutting down a research institute opened seven months ago to study natural-gas fracking after potential conflicts of interest raised what the college's president called a ‘cloud of uncertainty’ over its work. The Shale Resources and Society Institute is closed effective immediately, university President Satish Tripathi said yesterday in a statement. The Public Accountability Initiative, a Buffalo nonprofit that says it focuses on corruption in business and government, said the insitute's only report in April contained errors and didn't acknowledge ‘extensive ties’ by its authors to the gas industry.” Jim Efstathiou Jr. in Bloomberg.

Would a carbon tax cut emissions drastically? Not on its own. “[O]ne of the biggest questions here is whether a carbon tax would actually reduce U.S. greenhouse-gas emissions significantly. Is it a comprehensive solution to climate change? Or just a small first step?...Many economists would argue that it could indeed be a comprehensive solution...But not everyone's convinced. Over at the Brookings Institution, Mark Muro recently argued that a carbon tax, by itself, wouldn't be enough to make a significant dent in U.S. global-warming emissions...Muro writes, there's a growing body of economic research suggesting that a price on carbon can only be fully effective at tackling global warming if it's paired with increased funding for energy research and technology.” Brad Plumer in The Washington Post.

The big climate question: Will the world build 1,200 new coal plants? “Climate scientists have sometimes warned that it could prove impossible to avoid high levels of global warming unless the world stops building new coal-fired plants. But that's not a simple proposition. Across the globe, there are at least 1,199 coal plants now on the drawing board, according to a new report from the World Resources Institute. Many of these proposed new plants are in China and India, which account for 76 percent of proposed capacity. Turkey and Russia also have big plans. And a growing number of coal plants are being proposed for developing countries such as Cambodia, Guatemala and Uzbekistan, nations that are looking to cut-rate sources of energy to fuel economic growth.” Brad Plumer in The Washington Post.

Wonkbook is produced with help from Michelle Williams.

http://view.ed4.net/v/92KH5M/IY62B1/YB0DAVM/JILH9M/MAILACTION=1&FORMAT=H