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Wonkbook: Against grand theories; Graham bolts from climate bill; FinReg schedule


So, something happened last night? Some sort of election? Chris Cilizza has the full results, but most of the interpretive energy is focused on Blanche Lincoln's close victory over Bill Halter. As Marc Ambinder says, however, 3,000 votes is not a very good base upon which to decide what the electorate "really" thinks.

Back in policyland, Lindsey Graham now opposes the climate bill he helped write, which probably kills off a serious climate bill for this Congress (and it's not as if it gets easier next Congress); we've got a schedule for FinReg's conference and final votes; Ben Bernanke is testifying before the House Budget Committee; and the Senate's Environment and Public Works Committee is looking at raising the liability cap for oil spills.

Welcome to Wonkbook, the book for wonks.

Top Stories

Small margins don't support grand theories, writes Marc Ambinder: "It's a funny habit we political pundits have. If, say, 3000 votes separate a winner from a loser, we forget that a small shift in some part of a state could have swung those votes the other way, and we tend to massively over-interpret the meaning of the tiniest of margins. So let's say that the results in Arkansas were flipped -- that Lincoln won by a point, the interpretation ought to be nearly the same, logically." And that's really all Wonkbook has to say about that!

Citing changes to the offshore drilling provisions, Lindsey Graham says he'll vote against the climate bill he helped write:

Brad Plumer doesn't buy Graham's excuses: "Honestly, Graham's complaints here are ridiculous. The differences between the bill he wrote and the bill as it exists now are relatively trivial. His main complaint seems to be that Congress isn't embarking on an offshore drilling free-for-all. Well, sure. That's what happens when an oil company poisons large swathes of the Gulf of Mexico. It's going to be hard to get any major new drilling incentives passed right now. That's not some inherent flaw in the climate bill—it's just an indication that some of his colleagues actually seem to be learning or thing or two from the BP fiasco."

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The FinReg passage schedule is out, reports Michael Crittenden: "The schedule laid out by the two lawmakers calls for conference members to meet Thursday for opening statements. Lawmakers will then meet June 15-17 in day-long sessions to resolve various sections of the legislation, which runs more than a thousand pages in both the House and Senate versions of the measure. Debate will continue June 22-24, though Mr. Frank said the conference could remain working until Saturday, June 26, to complete its work. That schedule would allow the House and Senate to take final votes on the measure in the closing days of June, or the first two days of July."

Car alarm interlude: Rep. Darrell Issa does the "Viper voice".

Table of Contents: The Fed isn't doing everything it can to curb unemployment (and other economic news); The oil leak siphoning effort is getting more effective, but it's also showing that we vastly underestimated the size of the leak (and other energy news); child poverty has reached a new high (and other domestic policy news); and Geithner wants regulators to agree on capital requirements before he sets out on international negotiations (and other FinReg news).


David Leonhardt explains why the Fed should be doing more to stimulate job growth: "By law, the Fed’s mission is to maintain low inflation and maximum employment. Over the last three months, inflation has been zero. Over the last two years, it has risen at the slowest pace in more than 50 years. Meanwhile, 15 million people remain unemployed. Yet the Fed has taken no recent action to spur the economy - like buying bonds to reduce long-term borrowing costs for households and businesses, as Joseph Gagnon, a former Fed economist, has urged.

Wondering why the Fed and Obama administration aren't moving faster on stimulus? Hint: It's because they don't want to move faster on stimulus:

The Senate hedge fund manager tax differs from the House version, reports Martin Vaughan: "Senate Democrats unveiled a proposal to raise taxes on investment fund-manager profits, suggesting a 33% effective rate on income now taxed at 15%.…The Senate's proposal comes after the House in May approved a 35% effective tax on fund managers' carried interest.But unlike the House proposal, Senate Democrats are proposing a lower, 31% rate for carried interest profits from investments held seven years or longer. That was done to placate Democratic senators worried about the effect of the tax increase on venture capitalists and real-estate partnerships."

Martin Wolf says that deflation is still a real danger:

The European crisis could hit Americans through the banking sector, report Jeannine Aversa and Stevenson Jacobs: "For all of Europe, U.S. banks have $1.1 trillion at stake. That's roughly 38 percent of the $3.1 trillion in loans and derivatives U.S. banks have with all foreign banks. Derivatives are investments whose value depends on the price of underlying assets, such as stocks or mortgages. Substantial losses from investments tied to Europe would cause U.S. banks to reduce lending. A deep credit crisis could reduce U.S. growth by 1.5 percent and possibly cause another recession, Goldman Sachs said in a recent note."

Steve Pearlstein looks at why bandwidth providers are abandoning 'Fogo-de-Chao economics':

The jobs bill is ready for its final push, reports David Rogers: "Revenue deals at the expense of the oil industry now unite most Democrats, and the restoration of $24 billion in state aid is a calculated gamble to bring governors off the sidelines and ask senators to support the bill and forestall deeper budget cuts and layoffs at home."

Conspiracy theory interlude: The omnibus Obama theory.


The oil-leak cap is siphoning more oil, report David Fahrenthold and Dan Zak: "Officials said that a "cap" placed over the leak on the gulf floor collected about 14,800 barrels (or 620,000 gallons) in the 24-hour period ending midnight Monday. But that good news was also bad news. Since oil was still flowing out around the cap, it showed that the government's latest estimate of the leak's total size, 12,000 to 19,000 barrels a day, was probably too low. Scientists were told to try again."

West Virginia's Jay Rockefeller will vote to strip EPA's authority over greenhouse gasses, reports Siobhan Hughes.

However, the motion is unlikely to win, reports Meredith Shiner: "Though Murkowski's resolution has 40 additional co-sponsors-including at least one Democrat: Blanche Lincoln of Arkansas - it likely will fall short of the support necessary to pass when she asks for a vote Thursday.…The White House meanwhile issued a statement of administration policy saying President Barack Obama would veto the measure if it came to his desk."

Nancy Pelosi is putting together a bill responding to the oil spill, reports Jake Sherman: "The bill could provide monetary compensation for the residents of the Gulf Coast, as well as an overhaul of the Minerals Management Service, the agency that oversees offshore oil drilling. She also wants legislation to ensure that the federal government has its own expertise for dealing with drilling disasters, rather than relying on oil companies themselves."

Jeremy Leggett thinks an oil crisis will follow the financial one:

Thomas Frank argues that Obama's response to the spill shows his liberal technocrat streak: "Barack Obama is not the first Democrat to offer 'competence' as an answer to a period of deeply ideological governance; that was Michael Dukakis back in 1988. And Mr. Obama seems like Demosthenes when his remarks on health care are compared to the town-hall disasters presided over by his tongue-tied, detail-dazzled fellow Democrats last summer. Meanwhile, the Democratic Party itself is shifting away from its blue-collar roots toward professionals and well-educated voters."

Jaws interlude: Haley Barbour assures the public that Mississippi beaches are free of oil, sharks.

Domestic Policy

Over one in five children are in poverty, reports Liz Szabo: "The rate of children living in poverty this year will climb to nearly 22%, the highest rate in two decades, according to an analysis by the non-profit Foundation for Child Development. Nearly 17% of children were living in poverty in 2006, before the recession began."

A Texas billionaire with a fondness for big-game hunting is the first to die estate tax-free this year:

The Supreme Court is blocking Arizona's public financing system, reports Adam Liptak: "The Supreme Court’s own stay will probably remain in effect through both the primary in August and the general election in November. The court instructed the candidates challenging the matching fund law to file a prompt appeal. If the court agrees to hear the case, as is likely, it is unlikely to be argued and decided before the November election. The Arizona law matches money spent by candidates for state office who do not accept public financing - and therefore can raise and spend without limits - by providing equivalent public money for those who take the public money and face limits."

Rep. Jan Schakowsky says the Republicans on the deficit panel aren't willing to consider tax increases: "[Conservatives] give some lip service to ‘everything should be on the table,’ then, when it actually comes to what kind of revenue can we raise, are closing that door and taking it off the table, and saying that they’re not really willing to consider those things."

Meanwhile, the liberal groups are resisting the possibility of Social Security cuts, reports Lori Montgomery.

The federal government needs to reform its approach to private pensions, writes Charles Millard: "The Pension Benefit Guaranty Corporation (PBGC) insures the private-sector pensions of 40 million Americans. However, it has inherent structural flaws as well as a large and growing long-term deficit.…While Congress does not back its deficits, everyone in Washington assumes that it will. This puts the PBGC in the same moral hazard position as Fannie Mae and Freddie Mac: avoiding the discipline of the marketplace by relying on an assumed governmental bailout."

Does the US actually does spend less on social services than Europe?

Harp interlude: Joanna Newsom plays "Emily" live.


Geithner wants US regulators united on bank capital requirements during international talks, report David Cho and Brady Dennis: "Regulators have been divided over how much money banks should hold in reserve to protect themselves against unexpected losses.Sheila C. Bair, chairman of the Federal Deposit Insurance Corp., has thrown her support behind a measure offered by Sen. Susan Collins (R-Maine) that could force banks to raise tens of billions of dollars to replace a less stable form of capital in their reserves.…Treasury and the Fed oppose the proposal because encoding such requirements into U.S. law "eliminates a negotiating chip" that could be used to obtain concessions from European nations."

The Fed has found the economic crisis has not changed bank compensation, reports Eric Dash: "The Federal Reserve, six months into a compensation review of the country’s 28 largest financial companies, has found that many of the bonus and incentive programs that economists say contributed to the worst financial crisis since the Great Depression remain in place, according to people briefed on the examinations."

Douglas Shackleford, Daniel Shaviro, and Joel Slemford explain the different types of bank taxes, and whether they'll work or not.

Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Danny Johnston-AP.

By Ezra Klein  |  June 9, 2010; 6:42 AM ET
Categories:  Wonkbook  
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Next: No country for primary challenges?


You say:
Rep. Jan Schakowsky says the Republicans on the deficit panel aren't willing to consider tax cuts, quotes Pat Garofalo..."

Now that is different. Republicans unwilling to cut taxes.

Posted by: punchaxverulam | June 9, 2010 7:25 AM | Report abuse

"3,000 votes is not a very good base upon which to decide what the electorate 'really' thinks."

It's a clear victory, thus allowing her to go on to the general election. If she wins it by 2 votes, she still wins it. Representative Democracy means that anyone who gets a majority (or plurality, in greater-than-two way races) of the vote wins.

Bill Clinton lost the election to the George H.W. Bush and Ross Perot juggernaut. But, fortunately, we didn't get a co-presidency of H.W. and Perot, we got Clinton, even though the "mandate" was clearly in favor of Perot/Bush. Because the fundamental goal of our government is governance, not an American-Idol like translation of popular will into legislation.

Also, I'm not a big fan of the "mandate" theory, anyway. She *won*. If she won by 1000 votes in the general, that doesn't mean she shouldn't get to do anything. "Well, yes, you won the election. Technically. But it was a very thin margin, so you only get to vote on two bills next year."

The other guy lost by 3000 votes? Well, you know what? He *lost*. Next time, he should run a better campaign. Blanche gets to run in the general, and, if she wins that by 1000 votes, she gets to vote her way on whatever legislation comes before the senate. She does not have to "temper" her votes by some mythical yardstick in order to hold up a mirror to the electorate. If the electorate does not like her performance, they get to vote her out in 6 years.

Posted by: Kevin_Willis | June 9, 2010 7:43 AM | Report abuse

"Now that is different. Republicans unwilling to cut taxes."

He meant to write that Republicans on the panel were unwilling to consider tax increases. And of course they are. If Democrats want to raise taxes, they are going to have to do it unilaterally.

They'd probably be willing to cut corporate tax rates to spur economic growth.

Posted by: Kevin_Willis | June 9, 2010 7:46 AM | Report abuse

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Posted by: hoildaypackages | June 9, 2010 7:48 AM | Report abuse

It looks like the cheating in garland county, where they closed 40 of 42 polling stations, has caused halter to lose.

Posted by: Lomillialor | June 9, 2010 7:50 AM | Report abuse

Leonhardt is absolutely right and while its a difficult balancing act (low inflation and maximum employment) it can and has been done. The problem is they're pushing all their chips to the former and sacrificing the latter. The sad thing is that we wouldn't have to do all these cuts to state services if people realized where the problem started from.

Posted by: visionbrkr | June 9, 2010 8:08 AM | Report abuse

I'm not going to be around today to post this in the lunch break thread, but thought folks around here might like this:

Posted by: MosBen | June 9, 2010 8:37 AM | Report abuse

"Honestly, Graham's complaints here are ridiculous. The differences between the bill he wrote and the bill as it exists now are relatively trivial."

In other news, babies are not, as it turns out, found under cabbage leafs or brought by storks.

Of course it's not about the bill, or differences in the bill. It's about Graham feeling undermined and wanting to do his climate legislation before immigration and wanting to keep the support of the RNC and a bunch of other things that are political or personal, and have nothing to do with the legislation.

Posted by: Kevin_Willis | June 9, 2010 8:45 AM | Report abuse

news got you down?
here is something beautiful,
for everyone's morning.....

Posted by: jkaren | June 9, 2010 8:48 AM | Report abuse

Kevin_Willis, your long post really has nothing to do with the line that you quoted right at the start.

Posted by: DDAWD | June 9, 2010 9:07 AM | Report abuse

@ DDAWD: Actually, yes it does. Feel free to re-read it.

Posted by: Kevin_Willis | June 9, 2010 9:42 AM | Report abuse

The Fed is afraid of losing it's credibility. It shouldn't be targeting growth rates, it should be targeting levels. The Fed could boost inflation to 4% right now if it wanted to, but it doesn't want to lose credibility by straying from its 2% target. Instead of a 2% target, the Fed should target a price level growth path of 100, 102, 104.04, 106.12, 108.24, 110.41, etc.

That way if the price level is 102 and then falls to 101 the following year, the Fed should try to get to 106.12 after that, and then 108.24 the following year. You can reverse the deflation without losing credibility by targeting the growth path rather than the rate. A firm commitment to the growth path would make it harder for inflationary/deflationary expectations to become entrenched, reducing the odds of excess inflation or deflation.

Or the Fed can go 100% Scott Sumner and target NGDP at 5% (or 3% if you don't like inflation or 6% if you're really scared of deflation - whatever works).

Posted by: justin84 | June 9, 2010 10:25 AM | Report abuse

"3,000 votes is not a very good base upon which to decide what the electorate "really" thinks."

especially since, according to cbs news, it was more like 10,000 votes.

tho i don't think that changes the gist of what you or ambinder is saying, there is a difference (of 7,000 votes!).

Posted by: skippybkroo | June 9, 2010 12:59 PM | Report abuse

The big story regarding Lincoln's victory was that she was supported by the liberal political left (Bill Clinton) while her competition was supported by the unions and millions of dollars of their money.

What's next? This could get interesting.

Posted by: dcharlson | June 10, 2010 11:28 AM | Report abuse

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