Are we the next Saudi Arabia?
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: Romney +0.9%; 7-day change: Romney -0.4%.
RCP Obama approval: 49.5%; 7-day change: +0.5%.
Intrade percent chance of Obama win: 54.5%; 7-day change: -7.2%.
Wonkbook’s Number of the Day: 2020. That’s the year at which U.S. oil production will overtake Saudi Arabia if current rates of production growth hold steady. Currently the world’s second biggest oil producer, the U.S. is rapidly gaining ground: production is on track to surge 7 percent this year, to 10.9 million barrels per day. That’s the biggest one-year gain in more than 60 years.
Wonkblog feature: The third presidential debate in graphs.
Top story: America’s energy future
The U.S. may soon be the world’s number-one oil producer. ”U.S. oil output is surging so fast that the United States could soon overtake Saudi Arabia as the world’s biggest producer. Driven by high prices and new drilling methods, U.S. production of crude and other liquid hydrocarbons is on track to rise 7 percent this year to an average of 10.9 million barrels per day. This will be the fourth straight year of crude increases and the biggest single-year gain since 1951. The boom has surprised even the experts…The Energy Department forecasts that U.S. production of crude and other liquid hydrocarbons, which includes biofuels, will average 11.4 million barrels per day next year. That would be a record for the U.S. and just below Saudi Arabia’s output of 11.6 million barrels. Citibank forecasts U.S. production could reach 13 million to 15 million barrels per day by 2020, helping to make North America ‘the new Middle East.’” Jonathan Fahey in The Associated Press.
@blakehounshell: Obama has been so terrible for the U.S. oil industry that the United States may soon overtake Saudi Arabia
Cheap natural gas is giving new hope to the Rust Belt. ”Plunging prices have turned the U.S. into one of the most profitable places in the world to make chemicals and fertilizer, industries that use gas as both a feedstock and an energy source. And they have slashed costs for makers of energy-intensive products such as aluminum, steel and glass…Natural gas is only part of the story. The same hydraulic-fracturing revolution that is freeing gas from shale formations is being used to extract oil. U.S. oil production is up 20% since 2008, and the U.S. government expects it to rise another 12.6% in the next five years…Economists at Citigroup Inc. earlier this year estimated that increased domestic oil and gas production, and the activity that flows from it, would create up to 3.6 million new jobs by 2020 and boost annual economic output by between 2% and 3.3%.” Ben Casselman and Russell Gold in The Wall Street Journal.
@mattyglesias: We should worry about America’s dangerous dependence on foreign olive oil.
The production turnaround is pushing down imports, also. ”Five years ago, the U.S. was importing 60% of its oil, a figure that had been rising since the early 1980s. Today, the U.S. imports just over 40% of its oil, the smallest share in 20 years…Economists at HSBC — who have been generally skeptical of claims of an energy-driven industrial rebirth — estimate decreased oil imports could shave $85 billion annually off the U.S. current account deficit within a decade. Other analysts are even more aggressive. There is also another, subtler impact: The less dependent the U.S. is on foreign oil, the less the economy suffers when prices spike.” Ben Casselman and Russell Gold in The Wall Street Journal.
Sen. Wyden is calling for details on natural-gas exports. ”The Democrat slated to lead the Senate's Energy Committee is pressuring Energy Secretary Steven Chu to describe how the agency will make decisions about whether to approve natural-gas export proposals. Sen. Ron Wyden (D-Ore.), in a letter Tuesday, asked for an ‘all-inclusive description’ of factors the department will consider as it weighs an array of export applications…Record U.S. natural-gas production is fueling an array of applications to export liquefied natural gas from Oregon, the Gulf Coast and elsewhere; a list of projects under review is here. Wyden has expressed skepticism about the proposals, citing concerns that a surge in exports could raise natural gas costs for manufacturers and other sectors of the economy.” Ben German in The Hill.
As oil and natural gas surge ahead, clean energy is figuring out its next move. ”[T]he stimulus money is almost all gone, leaving many of these projects without a government benefactor and making them orphans in a competitive marketplace dominated by the deep-pocketed fossil fuel industries What happens now?…In recent months a discussion of imposing a carbon tax has been percolating in Washington as part of a broader tax reform and deficit reduction plan…There is also a growing discussion of how to attract more private capital to the clean technology sector. Some economists and green tech entrepreneurs have advocated a change in federal tax law to allow renewable energy companies to use a tax-advantaged investment device known as a master limited partnership, which has attracted $350 billion in private investment but is limited to oil and gas extraction and pipeline projects. Another proposal is to allow real estate investment trusts, which are like mutual funds for real estate, to cover energy transmission networks and renewable energy generation.” John Broder in The New York Times.
MILBANK: Twitter, an accelerant of campaign reporting group-think. “This was to have been the campaign when Twitter and other social media allowed new voices to enter the debate, delivering a more diverse array of opinion and helping candidates reach beyond the media filter. In reality, social media have had the opposite effect, causing conventional wisdom to be set, simplified and amplified, faster and more pervasively -- and nowhere is that more evident than in the debate coverage.” Dana Milbank at The Washington Post.
KLEIN: Romney’s confidence game vs. Obama’s anxiety strategy. ”The conceit of political reporting is that we reporters are telling you readers what the campaigns really think. In most cases, that's little more than a conceit. Campaign staffers aren't confused about who we are and what we do. So when we tell you what the campaigns say, We're really telling you what the campaigns want you to think they think…[G]oing into the final stretch, the two campaigns appear to have precisely opposite strategies…The Romney campaign is emphasizing momentum. Confidence. Even inevitability…The Obama campaign is emphasizing how tight it is. How hard they're going to have to fight this one out. How possible it is that the president might lose…The bottom line is that Boston fears scared Republicans won't vote and Chicago fears confident Democrats won't vote. And so, in this final stretch, Boston wants Republicans confident and Chicago wants Democrats scared.” Ezra Klein in The Washington Post.
@thegarance: We always knew Obama was a weak incumbent. A lot of people forgot bc Romney was also a weak challenger.
ORSZAG: The pension funding scare won’t frighten all states. ”State and local governments, struggling to emerge from the aftermath of the financial crisis, face another looming funding gap: in their public pensions…Even under existing accounting rules, which make the pension math look good by allowing states to apply an artificially high discount rate to future liabilities, the average state pension plan holds assets equal to only about three-quarters of projected liabilities. The difference amounts to about a half-trillion dollars…Using an even lower discount rate, one that many economists prefer, the gap would be as much as $2 trillion. Any way you do the calculation, clearly there's a big problem…Why were some plans so badly underfunded and others not? The worst-funded plans were not especially generous in their benefits, Munnell found, which is consistent with her argument that union strength isn't what matters. These plans, though, did tend to share two characteristics: They were disproportionately teachers' plans, and they used a funding method (called the projected unit credit cost method) that is less stringent than those used by other plans.” Peter Orszag in Bloomberg.
SUNSTEIN: Stayin’ alive, stayin’ alive. ”Philosophers and social scientists have been keenly interested in learning exactly why some people fail to give a lot of weight to their own futures, even when that failure produces real hardship. Perhaps those who start to smoke don't even identify with their future selves, who may be seriously harmed as a result. Behavioral economists have explored the phenomenon of ‘present bias,’ which leads some of us to make decisions that produce short-term rewards but long-term headaches. Of course it makes sense to prefer a dollar today to a dollar tomorrow. But does it make sense to prefer a dollar today to 10 dollars in two months? With respect to health and finances, some people seem to think about their future selves in the same way that they think about complete strangers.” Cass R. Sunstein in Bloomberg.
SOLTAS: How bad immigration policy hurts the American economy. ”For ‘a nation of immigrants,’ the U.S. is denying entry to a lot of foreigners who want to come here and would do a lot to grow our economy… Giving citizenship or permanent residency to more high-skilled immigrants is perhaps the single-easiest way to grow the American economy. Science and technology companies face labor shortages in their industries, preventing expansion, and the students themselves want to stay here and make valuable contributions to research and business. All we have to do is let these people stay here and let American companies hire them.” Evan Soltas in Bloomberg.
@esoltas: Immigration fact of the day: The average likelihood of winning the Green Card Lottery is 0.26%. 50k visas, 14.7m entrants.
NOCERA: Tax reform, an area of agreement. ”[T]here is one area where Mitt Romney and President Obama are in at least quasi agreement: the need for serious tax reform…Romney and the president both want to lower the corporate tax rate and get rid of numerous loopholes. (Romney, of course, has yet to say which loopholes he favors eliminating.) Romney would cap deductions and credits -- which would have the effect of raising taxes on the wealthy, which the Democrats want…Congress and the president [have] a golden opportunity to begin a process that will lead to tax reform and, ultimately, deficit reduction.” Joe Nocera in The New York Times.
Top long reads
Jodi Kantor examines Obama’s calculus on race and politics: ” Mr. Obama rarely dwells on race with his visitors or nearly anyone else. In interviews with dozens of black advisers, friends, donors and allies, few said they had ever heard Mr. Obama muse on the experience of being the first black president of the United States, a role in which every day he renders what was once extraordinary almost ordinary. But his seeming ease belies the anxiety and emotion that advisers say he brings to his historic position: pride in what he has accomplished, determination to acquit himself well and intense frustration. Mr. Obama is balancing two deeply held impulses: a belief in universal politics not based on race and an embrace of black life and its challenges.”
Marc Fisher profiles Sheldon Adelson: “He's a scrappy fighter who defends what is his, a self-made man who held more than 50 jobs before striking gold with his Venetian casino on the Vegas Strip, and he has developed a powerful aversion to taxes and unions. He is the 12th-richest person in the nation, according to Forbes magazine, with a fortune valued at $21 billion. -Under Obama, Adelson has achieved a larger increase in his wealth than anyone else in the country. In the past two decades, he has also undergone a political conversion, from a Massachusetts Democrat who considered Republicans to be the establishment that resisted newcomers like him, to a Nevada Republican who believes that his former party coddles the idle and has fallen captive to identity politics.”
For context interlude: All the world’s aircraft carriers.
Got tips, additions, or comments? E-mail me.
Still to come: about those tire tariffs; all about Medicare; the ‘disposition matrix’; falling gas prices; and all the world’s aircraft carriers .
The political system doesn’t know how to deal with the forces driving stagnation. “The causes of income stagnation are varied and lack the political simplicity of calls to bring down the deficit or avert another Wall Street meltdown. They cannot be quickly remedied through legislation from Washington. The biggest causes, according to interviews with economists over the last several months, are not the issues that dominate the political debate. At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans.” David Leonhardt in The New York Times.
Bad news from corporations means new fears about health of American economy. ”US companies have warned of weaker global demand and are cutting jobs, raising fresh fears about the health of the world economy and sending shares tumbling…US corporate earnings have so far been in line with forecasts that quarterly profits and revenues will fall for the first time since 2009.” Ed Crooks and Michael Mackenzie in The Financial Times.
@TPCarney: Obama bails out giants, erects barriers to entry, hands goodies to corporate friends. Media points to corp. profits as proof he’s capitalist
Home prices continue to rise. ”The FHFA’s report said home prices rose for the seventh straight month in August, increasing 0.7% on a seasonally adjusted basis from July. Compared with a year earlier, home prices were up 4.7%…July’s results were revised to a 0.1% monthly increase from June, compared with an originally reported 0.2% increase.” Alan Zibel in The Wall Street Journal.
How labor force dropouts conceal actual unemployment. ”9.3%: The unemployment rate in September 2012, if the labor force were following historical patterns…The unemployment rate is falling, but by most other measures, the job market is improving only slowly…During the recession, the unemployment rate shot up and the participation rate plunged, as people dropped out of the labor force. More recently, the unemployment rate has been getting better, but the participation rate has continued to trend down…But adding back everyone who's left the labor force makes little sense. Long before the recession, the participation rate was declining due to factors unrelated to the business cycle. People are entering the labor force later as more people go to college. The Baby Boom generation is starting to retire. And the flood of women into the workforce, which drove a long rise in labor force participation in the second half of the 20th century, has slowed. Any serious effort to assess the job market has to take such trends into account.” Ben Casselman in The Wall Street Journal.
The tire tariffs Obama hailed? They’re bad for the American economy, actually. ”t's worth emphasizing what a bad deal those tariffs were for consumers. The best evaluation of the program comes from Gary Clyde Hufbauer and Sean Lowry at the Peterson Institute. Their study found that after Obama imposed the tariffs, employment in the U.S. tire industry grew by 1,200 jobs. Hufbauer and Lowry figure that this is the maximum number of jobs the tariffs could have created or saved, a generous assumption given that tire employment was already trending upward…That's about $900,000 per job, and likely more given how generous the 1,200 jobs saved figure is…Economists are unanimous that trade, and trade with China in particular, is good for the United States. And tire tariffs impede that. They were a raw deal for U.S. consumers, and a rawer deal for Chinese factory workers who were put out of jobs.” Dylan Matthews in The Washington Post.
@esoltas: Most economic studies show that the tire WTO case was a bad idea, that the benefits were narrow and costs broad.
Will the stock market freak out over the ‘fiscal cliff’? ” The fiscal cliff is quickly emerging as the most frequently cited source of market uncertainty in recent surveys and earnings reports of private firms. The Bank of America's fund manager survey in October found that the fiscal cliff is the ‘#1 risk for investors (42 percent of respondents vs. 27 percent for the E.U. debt crisis).’ MacroRisk Advisors found the same in a new survey of recent investors, who cited both the elections and the fiscal cliff as the biggest source of uncertainty…Analysts agree that market turbulence could be on the horizon as the debate moves forward, particularly as the risks haven't been priced into earnings yet.” Suzy Khimm in The Washington Post.
Musical interlude: Gerry Rafferty, “Baker Street.”.
Implementing the Medicare pay raise raises questions. ”To recruit more doctors to treat the poor, President Barack Obama’s health law took a simple approach: temporarily pay doctors more money. Starting Jan. 1, primary care doctors when treating patients on Medicaid, the state-federal health insurance program for the poor, will get the same rates they are paid when caring for seniors in the Medicare program. The higher rates will last for two years…The change, which will cost $11 billion and will be paid by the federal government, means a 64 percent average pay increase, according to an Urban Institute analysis of the rates in 2010.” Phil Galewitz in Kaiser Health News and The Washington Post.
A study in survival. ”Sick patients are less likely to die in Arizona, Montana and Colorado hospitals compared with those in Alabama, Washington, D.C., and Mississippi, according to new research. Healthgrades, a for-profit group that provides consumer information about healthcare providers, ranked states by their average risk-adjusted in-hospital mortality rates. The study found that Western states generally fared better on this metric than did Southern or Northeastern states…Patients are 55 percent less likely to die and 42 percent less likely to have a complication when treated in the best hospitals, the report found.” Elise Viebeck in The Hill.
Medicare penalties hit some states hard. ”Medicare's readmissions penalties are falling hardest on hospitals in New Jersey, New York, Arkansas, Mississippi and the District of Columbia, a Kaiser Health News analysis of updated government data shows…A total of 2,217 hospitals, or 71 percent of those eligible, are receiving penalties for having too many patients with heart attacks, heart failure or pneumonia return within 30 days. Only hospitals with at least 25 heart failure, heart attack or pneumonia cases for Medicare to evaluate were eligible.” Jordan Rau in Kaiser Health News.
Study: Romney-like plan cuts $1.7 trillion in Medicaid. ”Republican presidential nominee Mitt Romney pointed to his Medicaid funding cuts during Monday night's debate as one way to help balance the budget. The Kaiser Family Foundation is out this morning with a deep dive into a plan that looks a lot like Romney's. The big takeaway: Medicaid funding would be reduced by $1.7 trillion, with hospitals and nursing homes seeing payments fall by hundreds of billions of dollars. Kaiser modeled a Medicaid block grant plan, where each state gets a capped amount of money to spend on its Medicaid population. That amount would grow 1 percent faster than inflation, the same target that the Romney campaign set, as did House Republicans in 2012. Under that growth target, Medicaid funding would drop by $1.7 trillion between 2013 and 2022. About half of that cut would come from repealing the health care law's Medicaid expansion. The other half would come from reducing payments to states for the Medicaid patients they already cover.” Sarah Kliff in The Washington Post.
Everyone, everyone wants to be a doctor these days! ”Doctors don't seem to be especially enthusiastic about their work these days. One recent survey of over 13,000 physicians found 84 to say the profession is in decline. More than half wouldn't recommend the career path to their children. Students, however, don't look to be taking their advice: A record number of students applied to medical school in 2012 according to new data from the Association of American Medical Colleges. Applications have risen over the past decade, growing more quickly over the past few years than they did in the mid-2000s.” Sarah Kliff in The Washington Post.
Plan for hunting terrorists signals U.S. intends to keep adding names to kill lists. ”Over the past two years, the Obama administration has been secretly developing a new blueprint for pursuing terrorists, a next-generation targeting list called the ‘disposition matrix.’ The matrix contains the names of terrorism suspects arrayed against an accounting of the resources being marshaled to track them down, including sealed indictments and clandestine operations. U.S. officials said the database is designed to go beyond existing kill lists, mapping plans for the ‘disposition’ of suspects beyond the reach of American drones.” Greg Miller inThe Washington Post.
@ggreenwald: Your new creepy Orwellian euphemism for killing people without due process: “disposition matrix”
A windfall for the FDIC. ”The Federal Deposit Insurance Corp. is about to receive a $42 million legal settlement that will rank among the agency’s largest recoveries in the financial crisis — from a paper company that played no role in the bank failure that spurred the lawsuit…International Paper Co. has agreed to pay the FDIC to settle a year-old lawsuit stemming from the 2009 collapse of Guaranty Financial Group, an Austin, Texas, company that ranks as the fifth-biggest U.S. bank failure…Guaranty failed less than two years later, weighed down by toxic securities that were backed by adjustable-rate mortgages. It had 162 branches and $13.5 billion in assets. The bank’s deteriorating securities portfolio was the subject of a page-one article in The Wall Street Journal just before it failed. The failure cost the FDIC’s deposit-insurance fund $1.29 billion, according to an estimate published on the agency’s website.” Robin Sidel in The Wall Street Journal.
Nautical literary interlude: The original contract for Moby-Dick.
‘Wind turbine syndrome’ and the ‘nocebo’ effect. ”Every now and again, a story will pop up in some local newspaper about how the hums and vibrations from nearby wind farms are making people ill…And yet, whenever public health researchers look into the issue, they find no evidence that ‘wind turbine syndrome’ is an actual thing…So what's happening here? Why do these complaints keep popping up? Over at Discover Magazine, Keith Kloor has an interesting post wondering whether ‘wind turbine syndrome’ might be due to what's known as the ‘nocebo’ effect. That is, people read or hear news accounts of wind turbines giving other people headaches and nausea and then start feeling the symptoms themselves.” Brad Plumer in The Washington Post.
Gas prices are falling. ”Gasoline prices are falling along with the price of crude oil. The average retail price of a gallon of regular gas in the U.S. stood at $3.687, down just over 16 cents from two weeks ago. Concerns about weaker global demand are pushing down the price of oil, the biggest determinant of retail gasoline costs. Also, gasoline supplies are starting to recover from refinery disruptions.” Josh Mitchell in The Wall Street Journal.
Wonkbook is produced with help from Michelle Williams.