Are we winning the future yet?
Ezra Klein's Wonkbook
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.
RCP Obama vs. Romney: Obama +3.1%; 7-day change: Obama -0.5%.
RCP Obama approval: 49.6%; 7-day change: none.
Intrade percent chance of Obama win: 69.4%; 7-day change: +8.2%.
Top story: So how’re those “win the future” policies going?
The U.S. is headed for an industrial revival, says a new study. ”The US is on course to regain its status as a global industrial powerhouse…The rebound is being driven by several factors including lower energy costs, higher labour expenses in competitors such as China and the potential to use idle US port capacity for pushing up exports, according to the report by Boston Consulting Group. As a result the US has the potential to increase goods exports by up to $130bn by 2020, in the process adding 5m jobs to the US economy…The consultants estimate that because of the underlying shifts, the US will by 2015 have a cost advantage over manufactured goods exports of 5 to 25 per cent compared with countries such as Germany, Japan and the UK. In particular, the cost disadvantage the US suffers compared with China is starting to decrease.” Peter Marsh in The Financial Times.
@ChicagoFed: As #manufacturing #jobs return to the Midwest, are they restoring #wage levels as well?
And we’re steaming ahead on a huge free trade agreement in Asia. ”As the U.S. hammers on China's front door with demands to further open up its economy, Obama administration officials are negotiating a potential back alley to the same end — a trade agreement with other Asian nations they hope will challenge China to change some of its core economic policies. China is not party to the -Trans-Pacific Partnership talks that the United States is pursuing with 10 other nations. But the proposed treaty has become a central part of the administration's’pivot’ toward Asia…If U.S. ambitions are met, the pact will unite large portions of Asia, North America and South America in a trading bloc of lowered tariffs and common rules — a tidal pull that the Chinese could find hard to resist.” Howard Schneider in The Washington Post.
Obama’s education reforms have been far more sweeping than most know. ”In 3 1/2 years in office, President Obama has set in motion a broad overhaul of public education from kindergarten through high school, largely bypassing Congress and inducing states to adopt landmark changes that none of his predecessors attempted. He awarded billions of dollars in stimulus funding to states that agreed to promote charter schools, use student test scores to evaluate teachers and embrace other administration-backed policies…The president has said changes are needed to close the persistent gap between poor and privileged students, drive up high school graduation rates and produce a workforce that can compete globally.” Lyndsey Layton in The Washington Post.
@mileskimball: It has been and will be a hard road, but US education is being transformed.
But a bill on high-skill immigration — a priority for many policy wonks — failed in the House. ”A Republican bill to provide permanent resident visas for foreigners who graduate from American universities with advanced degrees in science and technology failed to pass the House on Thursday…[The bill] would have eliminated an annual lottery and instead allocated 55,000 visas for legal permanent residency, known as green cards, each year to foreigners who have completed master's and doctoral degrees from American universities in the STEM fields.” Julia Preston in The New York Times.
@ByronTau: Obama asked what his biggest failure is. Says its comprehensive immigration reform.
And Americans aren’t confident in a bright future for the U.S. as a global center of innnovation. ”A majority of likely voters doubt the United States will lead the world in science and technology in eight years, according to a poll released Thursday. Fifty-nine percent gave the name of another country, such as India or China, or said they were ‘not sure’ when asked who would lead the world in science and technology in 2020.” Elise Viebeck in The Washington Post.
Meanwhile, the sequester will slash deep into funds for R&D and innovation. “The sequester requires cuts in discretionary spending to achieve $1.2 trillion in savings from 2013- 2021. When compared to 2011 spending levels, this will lead to a cut of 8.7 percent (or $12.5 billion) of federally-funded research and development (R&D) in 2013. Because of the key role federal R&D plays in driving U.S. innovation, productivity, and economic growth; we estimate that the projected decline in R&D will reduce GDP by between $203 billion and $860 billion over the nine year period, depending on the baseline used. At $203 billion, the loss is equivalent to taking away from U.S. consumers all the new motor vehicles purchase over six months, over two years of airline travel, or six years of attendance at professional sporting events.” Rob Atkinson and Justin Hicks at The Information Technology and Innovation Forum.
Nor is everything going smoothly in green energy policy. ”Over the next seven years, the federal government will spend $7.5 billion on policies to boost the U.S. electric-vehicle industry. But a new report by the Congressional Budget Office casts doubt on whether these programs will achieve all of their goals. The report looked at the $7,500 tax credit that the government offers to consumers who buy plug-in hybrids…the credit was unlikely to make electric cars affordable in the near term, the report argued…What's more, in the short run, the tax credits would have ‘little or no impact’ on America's overall gasoline consumption or greenhouse-gas emissions, the report said. That's because of the way the credits would clash with the Obama administration's new fuel-economy rules.” Brad Plumer in The Washington Post.
BROOKS: Capitalism is elitist. That’s not wholly bad news, though. ”I guess we're all supposed to be talking about how to build the middle class these days and look askance at the top 1 percent. But would you mind if I interrupted this cultural moment to point out that capitalism is an inherently elitist enterprise? Prosperity is often driven by small enclaves of extraordinary individuals that build new industries and amass large fortunes…[I]f growth is ever going to rebound, the U.S. will need a grandiosity rebound and the policies that encourage rich people with brass: immigration policies that attract people like [innovator Elon] Musk, tax rates that encourage risk and government policies that boost them along…Most of all, there has to be a culture that gives two cheers to grandiosity. Government can influence growth, but it's people like Musk who create it.” David Brooks in The New York Times.
KRUGMAN: Republicans have nothing but disdain for the worker. ”[T]he modern Republican Party just doesn't have much respect for people who work for other people, no matter how faithfully and well they do their jobs. All the party's affection is reserved for ‘job creators,’ a k a employers and investors. Leading figures in the party find it hard even to pretend to have any regard for ordinary working families — who, it goes without saying, make up the vast majority of Americans…Needless to say, the G.O.P.'s disdain for workers goes deeper than rhetoric. It's deeply embedded in the party's policy priorities…” Paul Krugman in The New York Times.
@davidfrum: Good Kristol column today. But Paul Ryan isn’t solution to problem that GOP ticket spurns middle class. He caused the problem.
KLEIN: Obama’s unconvincing theory of change. ”‘The most important lesson I've learned is you can't change Washington from the inside,’ President Obama said in Univision forum today. ‘You can only change it from the outside. That's how I got elected. That's how the big accomplishments like health care got done.’ That's a rather revisionist take on how health reform got done. The health-care process, which I reported on extensively, was a firmly ‘inside game’ strategy…And yet, health care passed. The inside game worked…Between those two paragraphs lies the great tension of Obama's reelection campaign: He fulfilled more of his 2008 agenda than anyone could possibly have expected. He really did make change. But it didn't feel like the change he had made America believe in. It felt like politics as usual. At times, it felt like politics had gotten even worse than usual. Earlier in the campaign, the White House tried to unite these facts in one explanation. Change, they said, may not have been pretty. It may not have been inspiring. But it happened.” Ezra Klein in The Washington Post.
MILLER: Why we could fix educational inequities but don’t. ”[T]he uniquely American local system of school finance…dooms millions of poor children to the least-qualified teachers and most run-down facilities in the country. No other wealthy nation tolerates the funding disparities between rich and poor districts that the U.S. does. Even conservatives in other countries agree that poor kids need greater investment to overcome disadvantage. Yet calling attention to this scandal is taboo in American politics because it hides behind the mask of ‘local control.’…The solution is a bigger role for the federal government in school financing. Nowhere in the Constitution does it say that federal officials should provide only 8 percent or 9 percent of the money for K-12 education.” Matt Miller in Bloomberg.
SCHAPIRO: I can’t do anything, so the Financial Stability Oversight Council should. ”[P]olicy makers…saw firsthand the susceptibility of money-market funds to destabilizing runs. While the Securities and Exchange Commission adopted rules in 2010 to make these funds more resilient, I said then and continue to believe that further meaningful reform is essential…With that knowledge, SEC staff developed two alternative reform measures. One measure would float the net asset value, so it would behave like all other mutual funds, reflecting the actual value of the funds’ portfolios. A second measure would require a tailored capital buffer together with a minimal redemption holdback that would apply only to the final portion of an investor’s account…While I respect the views of my fellow SEC commissioners, a majority of them recently chose not to publish the reform proposal for public comment…At this point, the Financial Stability Oversight Council is the right organization to tackle this issue.” Mary L. Schapiro in The Wall Street Journal.
Top long reads
William D. Cohan assesses the legacy of Frmr. Treasury Sec. Robert Rubin: ”Rubin's knack for spreading wisdom and tranquility has been the defining trait of his professional life. Whether economies across Asia are contaminating each other like kids on a school bus or the Mexican government rises one morning and decides to devalue the peso, Rubin's hooded eyes and perpetually mussed gray hair give him the air of an ancient Galapagos tortoise. Whatever nastiness politics or the global economy may throw at him, he abides. This legendary stillness, combined with decades of economic and market expertise, keeps Rubin in constant demand…It's enough to keep a 74-year-old plenty busy. But not enough to shake questions about just how wise and thoughtful Robert Rubin really is, especially on the fourth anniversary of a financial crisis in which he played a pivotal, under-examined role. Rubinomics — his signature economic philosophy, in which the government balances the budget with a mix of tax increases and spending cuts, driving borrowing rates down — was the blueprint for an economy that scraped the sky. When it collapsed, due in part to bank-friendly policies that Rubin advocated, he made more than $100 million while others lost everything.”
Stargazing interlude: The best astronomy photos of the year, as judged by the Royal Observatory.
Got tips, additions, or comments? E-mail me.
Still to come: foreign investment is collapsing; why calorie labels don’t really work that well; how the government fights poverty with policy; rising oil prices; and how dredging works.
On the Fed, the hawks are becoming doves. ”As long as inflation isn't a problem, Kocherlakota is saying, the Fed should keep its foot all the way on the gas pedal until unemployment drops from its current 8.1 percent down to 5.5 percent. What makes it particularly surprising is that Kocherlakota is generally viewed as one of the more hawkish, or inflation-phobic, members of the FOMC. He dissented from two moves by the Federal Reserve to ease policy in 2011. Yet this proposal goes further than that of arguably the biggest dove on the committee, Charles Evans of the Chicago Fed. Evans has proposed that the Fed pledge to keep easy monetary policy in place until either unemployment drops below 7 percent or inflation rises above 3 percent.” Neil Irwin in The Washington Post.
How does one get into the middle class? ”A new study by researchers at the Brookings Institution shows that about two in three Americans achieves a middle-class lifestyle by middle age — and delves deeply into who makes it there and how…Unsurprisingly, the researchers found that success seems to beget success — meeting each benchmark makes one more likely to meet the next. Moreover, the effect accumulates. A child who meets all the criteria from birth to adulthood has an 81 percent chance of being middle class. A child who meets none has only a 24 percent chance.” Annie Lowrey in The Washington Post.
Which state has the highest income inequality? ”Of all American states, New York again has the most unequal income distribution, according to a new report from the Census Bureau. Wyoming has the most equitably distributed income…The Gini index value for the United States in 2011 was 0.475, higher than it was in 2010 at 0.469. The index rose in 20 states last year (including New York); there was no statistically significant change in the rest of the states and the District of Columbia (which, at 0.534, has a higher index value than any state). The Gini index value for New York State was 0.503, which means the state's household incomes are about as equally distributed as those in Costa Rica” Catherine Rampell in The New York Times.
The global banking system is heading towards stability. ”The world’s banks have made progress toward meeting new stricter capital requirements but fared less well on liquidity, the Basel Committee for Banking Supervision said on Thursday. In a six-month study on the impact of the Basel III standards, BCBS said some of the biggest banks still need to raise a total of EUR374.1 billion ($484.5 billion)…Under Basel III, banks must reach a minimum core Tier 1 capital ratio — a key measure of a bank’s financial strength — of 7% by 2018…Most banks have already surpassed the target. The BCBS said the average core Tier 1 ratio for all Group 1 banks was 7.7% at the end of last year. Smaller banks fared better, with 8.8%…The BCBS said that the larger banks had reduced their shortfall by a total of EUR111.5 billion in the six months since its last study.” Geoffrey T. Smith in The Wall Street Journal.
@Goldfarb: Why we should care about Basel III: If bank regulation had originally worked, we wouldn’t be here.
Neuroscience interlude: This is your brain on Jane Austen.
The hard decisions in health insurance. ”Forget the election: Americans have another important decision making event coming up that's far more important — selecting their 2013 health benefits. A survey from Aetna finds that Americans rank choosing health care benefits as the second most difficult major life decision behind saving for retirement. Survey participants reported that choosing health care benefits is more difficult than purchasing a car, making decisions about medical tests or treatments, parenting, and selecting homeowners, renters or auto insurance. Consumers who found health care benefits decisions difficult cited these reasons: the available information is confusing and complicated (88 percent), there is conflicting information (84 percent) and it is difficult to know which plan is right for them (83 percent).” Kathryn Mayer inBenefitsPro.
To what extent could Romney, if president, undo Obama’s health reforms? ”[Romney:] ‘On his first day in office, Mitt Romney will issue an executive order that paves the way for the federal government to issue Obamacare waivers to all fifty states. He will then work with Congress to repeal the full legislation as quickly as possible.’…What are these ‘Obamacare waivers,’ however, and how would Governor Romney go about repealing the full legislation? There are no ‘Obamacare waivers’ that could be issued by executive order…What about repeal? As every American remembers from middle-school civics, the president cannot unilaterally repeal a law.” Timothy Jost in Health Affairs Blog.
Republicans want to raise Obamacare’s ceilings on overhead spending for health insurers. ”The House Energy and Commerce Committee voted Thursday to change rules in President Obama’s healthcare law that govern insurers’ spending. The panel passed a bill to exempt insurance agents’ commissions from the law’s medical loss ratio (MLR) calculation. Republicans say the bill would protect the jobs of agents and brokers, while Democrats say it would weaken an important consumer protection.” Sam Baker in The Hill.
A $15-billion case of Medicaid mismanagement emerges. ”Medicaid has shelled out billions in overpayments to certain healthcare facilities in New York, according to a report from the House Oversight and Government Reform Committee. The committee, led by Rep. Darrell Issa (R-Calif.), said Medicaid has overpaid state-run facilities for people with developmental disabilities by $15 billion over the past 20 years. Medicaid’s payments just to development facilities in New York ‘exceeded the entire Medicaid budgets of 14 states,’ the oversight report says…The federal Medicaid agency has been aware of the excess payments for years but is still working on a plan to reduce the payments, the report says…The inspector general said Medicaid is paying the New York facilities ‘the equivalent of’ $1.9 million per patient per year.” Sam Baker in The Hill.
How American multinations exploit the tax code. ”Many U.S. multinational corporations, including Microsoft and Hewlett-Packard, have exploited weaknesses in the tax code to avoid paying billions of dollars in taxes on overseas profits, said a Senate subcommittee report released Thursday.” Jia Lynn Yang in The Washington Post.
Study gives mixed review of an antipoverty effort. ”When thousands of poor families were given federal housing subsidies in the early 1990s to move out of impoverished neighborhoods, social scientists expected the experience of living in more prosperous communities would pay off in better jobs, higher incomes and more education. That did not happen. But more than 10 years later, the families' lives had improved in another way: They reported being much happier than a comparison group of poor families who were not offered subsidies to move, a finding that was published on Thursday in the journal Science…The improvement was equal to the level of life satisfaction of someone whose annual income was $13,000 more a year…What researchers did find were substantial improvements in the physical and mental health of the people who moved.” Sabrina Tavernese in The New York Times.
Close out the week with disco interlude: ‘Stayin’ Alive,’ The Bee Gees, in music video.
A comeback is in the works for oil in the Gulf of Mexico. ”After a steep drop in oil production in the wake of the Deepwater Horizon disaster, the U.S. Gulf of Mexico is set for an energy boom. Gulf oil flows will increase by nearly 28% by 2022 to 1.8 million barrels per day, according to consulting firm Bentek Energy.” Tom Fowler in The Wall Street Journal.
U.S. gets high marks for fuel economy. ”U.S. fuel-efficiency standards are more aggressive in some respects than those in Europe and Canada, according to two International Energy Agency (IEA) reports published Wednesday. One of the reports noted the recently finalized standards for light-duty vehicles set tougher greenhouse gas emission-reduction targets than in Canada and the European Union…The report also mentioned the U.S. and Japan are the only Organisation for Economic Co-operation and Development nations with fuel-efficiency standards for heavy-duty vehicles.” Zack Colman in The Hill.
Harsh winds of change slam wind power industry. ”[C]uts are happening throughout the American wind sector, which includes hundreds of manufacturers, from multinationals that make giant windmills to smaller local manufacturers that supply specialty steel or bolts. In recent months, companies have announced almost 1,700 layoffs…At its peak in 2008 and 2009, the industry employed about 85,000 people, according to the American Wind Energy Association, the industry's principal trade group. About 10,000 of those jobs have disappeared since.” Diane Cardwell in The New York Times.
But Republicans are making coal a priority. ”The House is slated to vote on roughly a dozen amendments (more on those here), and then will likely pass the legislation that Republicans call needed to prevent an economically harmful ‘war on coal.’ The White House has threatened to veto the bill, arguing it would gut vital protections and presents a false choice between economic growth and public health safeguards. The bill would scuttle federal climate change regulations and rules to limit mercury and other toxics from coal-fired power plants, among other provisions.” Ben Geman and Zack Colman in The Hill.
Wonkbook is produced with help from Michelle Williams.