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Wonkbook: LeBron and the SEC; FinReg fate unclear; another judge rejects drilling ban

With Congress due back in session next week, key Senate swing votes on FinReg are still undecided. Meanwhile, an appeals court has rejected the Obama administration's entreaty to reinstate the deepwater drilling ban. And the IMF has projected slow growth for America in the coming years, and made some strong suggestions about the sort of deficit reduction that will entail. The administration rejects these forecasts, but a close look at the imbalanced nature of our recovery might leave you wondering whether they're being optimistic.

It is, at last, Friday. Welcome to Wonkbook.

Top Stories

LeBron James being hounded by the SEC? Well, sort of. An ex-SEC lawyer is claiming paternity, and demanding $4 million in damages. It looks pretty kooky, but how else was I going to get LeBron into today's lede? And what's with Cavs-owner Dan Gilbert's affection for quotations marks and comic sans?

Three key Senators have still not announced their votes on FinReg, reports Damian Paletta: "Congressional aides believe Ms. Snowe is the most likely to support the bill, with many speculating that Mr. Brown will eventually vote for it as well. Aides are split on what Mr. Grassley might do. The lawmakers have said they wanted to use the congressional break to study the bill. If the three vote for the bill, it would almost certainly pass. If they all vote against it, the bill would likely fail. If they split their votes, the margin could be razor-thin."

A three-judge panel at a federal appeals court has rejected the Obama administration's attempt to reinstate the deepwater drilling ban, reports Kris Hudson: "'The secretary has failed to demonstrate a likelihood of irreparable injury if the stay is not granted,' reads the panel's decision, issued late Thursday shortly after the panel heard arguments from both sides in the Fifth Circuit Court of Appeals in New Orleans. 'He has made no showing that there is any likelihood that drilling activities will be resumed pending appeal.'"

Obama takes to the stump to defend his economic record: http://politi.co/dxHOf2

The current recovery is off balance in the same way the pre-recovery economy was, reports Neil Irwin: "Many had concluded that the crisis would shock the system into a fundamental change....For a time that prediction seemed to be coming true, as the gap between spending and income narrowed. The U.S. savings rate, which was less than 2 percent of disposable income before the crisis, spiked to 6.4 percent in May 2009, as Americans chose to hoard cash rather than spend it, largely out of fear. But in the year since, spending has risen faster than incomes, and the savings rate has edged back down to 4 percent."

Kitsch cover interlude: Clem Snide plays Journey's "Faithfully".

Still to come: BP has twenty-four hours to describe its new spill strategy; the US declines to call China a currency manipulator; capital gains taxes may only rise slightly; and troops in Afghanistan adopt a kitty.

Economy/FinReg

The IMF wants the US to cut Social Security and the mortgage interest deduction and increase the gas tax, reports Howard Schneider: "An administration official said the IMF's conclusions were too harsh...The Obama administration's budget for next year, for example, assumes economic growth of close to 4 percent, with growth above 4 percent in the years that follow. The IMF forecast U.S. growth of 2.9 percent in 2011 and slightly slower growth in subsequent years. The agency also assumes that the United States will have to pay slightly higher interest to borrow money in the future."

The US will not name China as a currency manipulator, reports Bob Davis: "'New York Democratic Sen. Charles Schumer, a leading China hawk, called the report 'as disappointing as it is unsurprising.' He did raise the threat of legislation to punish China for its currency policies."

The rich are actually the biggest mortgage defaulters: http://nyti.ms/9iPIxH

Tim Geithner says the administration may only mildly hike capital gains and dividends taxes, reports John McKinnon: "In a CNBC interview late Wednesday, Geithner said the Obama administration still hopes to hold the top tax rate on both capital gains and dividends to 20% next year - the level the White House has been proposing since taking office. Of course, a 20% rate would represent a big increase over the current 15%. But it’s a lot better than the 39.6% top rate for dividends that congressional Democrats have signaled they were planning next year for higher earners."

Paul Krugman thinks charges that Obama is hostile to business are baseless: "Beyond that, business leaders are, as I said, feeling unloved: the financial crisis, health insurance scandals, and the catastrophe in the Gulf of Mexico have taken a toll on their reputation. Somehow, however, rather than blaming their peers for bad behavior, C.E.O.’s blame Mr. Obama for 'demonizing' business -- by which they apparently mean speaking frankly about the culpability of the guilty parties."

Gerald Seib outlines Robert Gates' plans to slash the defense budget: http://bit.ly/aiChNi

We should phase in deficit reduction in stimulus legislation, argues Laurence Seidman: "Congress should enact a set of temporary tax cuts and expenditures to stimulate the economy. This legislation must contain a phase-down schedule so that these temporary measures are phased out as the unemployment rate, which is currently over 9 percent, falls below 9 percent, then 8 percent, then 7 percent, and are completely terminated when the unemployment rate falls to 6 percent."

Adorable animals being adorable abroad interlude: US troops in Afghanistan adopt a kitten.

Energy

The administration is giving BP twenty-four hours to describe how it will replace the oil well cap, reports Kendra Marr: "Allen’s directive also orders the oil giant to provide a detailed contingency plan in case something goes wrong during the procedure, as well as a timeline of improvements and progress BP has made on drilling a relief well that will permanently shut down the well. Allen also requested information about pressure testing at the well site, and efforts to optimize skimming and burning of tens of thousands of gallons of crude oil that will pour unchecked into the Gulf of Mexico during the swap."

The US will likely see record heat this decade going forward: http://bit.ly/9xMoT1

Brad Plumer explains why biomass isn't as carbon-neutral as you would think: "For a variety of reasons, it's quite hard to make biomass carbon neutral. There's a timing problem, for one. Most trees have spent decades and decades absorbing carbon and growing to full size. Burning that tree sends up all that carbon in an instant. If you plant a new tree, it will again take decades to absorb an equivalent amount of CO2--and in that time lag, there's extra carbon in the air, heating up the planet."

Eugene Robinson thinks climate change deniers are asking the wrong question: "It's time to end the silly 'argument' over whether climate change is real. Here's a better question: Would it be more appropriate for humanity to spend, say, $1 trillion reducing carbon emissions, and thus save thousands or millions of lives that could be lost to drought or sea-level rise or whatever at the end of this century or the next, or to spend that money providing clean water in places such as Congo or Bangladesh, saving thousands or millions of lives right now?"

It's hard to say if oil is responsible for some Gulf animal deaths: http://bit.ly/cWru9a

The blogger at Things Break argues Jim Manzi has his math wrong on the benefits and costs of climate action: "The “likely” temperature range for A1FI is 2.4-6.4°C. The high end cost of ~6°C warming in Manzi’s source is upwards of 11% global GDP, yielding a range/estimate of 1-11%/5.5% GDP, not 1-5%/3%. Manzi cites a third party estimate of mitigation costs as ~6% GDP for stabilization at 450 ppm, while other analyses by experts in the field put the cost far lower- e.g. 2.5% at 350-400 ppm."

Manzi makes the case for not predicting and considering negative results of climate change hundreds of years out: http://bit.ly/9FIbM4

Cartoon lecture interlude: Jeremy Rifkin explains the importance of empathy in human society.

Domestic Policy

Medical supply companies make American medicine more dangerous and expensive, writes Mariah Blake: "As for independent assessment of GPOs’ effect on costs, they are hard to come by. But the little information that is available suggests that they may actually drive up the price of supplies. A 2002 pilot study by the Government Accountability Office found, for instance, that hospitals that went through GPOs paid more for safety needles and most models of pacemakers than those that negotiated prices on their own--for some pacemakers the median gap was as wide as 39 percent."

Cutting funding for states would amount to blaming the victim, writes Jon Shure: "The huge gap between what states need and what they have overwhelmingly reflects how badly state income, sales, and corporate tax revenues have collapsed in the recession. In fact, state tax revenues have fallen more in this recession than at any time in at least the past 45 years (the relevant data only go back to 1965)."

Steve Pearlstein argues that community hospitals are starting to be run for profit, not for patients: http://bit.ly/ah3ZpR

David Ignatius thinks Donald Berwick is just the right man to reform fee-for-service health care: "That's Berwick's challenge -- to encourage an urgent process of innovation. If you want a sense of what he will bring to the job, check out the Web site of his institute (http://ihi.org). He describes some of the ideas he has been developing over the past several decades for implementing change. The list includes 'breakthrough series collaboratives' to share knowledge; 'bundles' of procedures that establish protocols for treating common problems; the use of medical records to better forecast bad events; and the use of operations research to improve the efficiency of emergency rooms."

A Congressional change allowing unlimited switches to Roth IRA threatens to blow up the federal budget, writes Howard Gleckman: "At the time the law passed, CBO figured it would generate about $6.5 billion from 2010-2015. But in the long run, turning billions of dollars from tax-deferred to tax-free savings will be a huge loser for Treasury. My colleagues at Tax Policy Center figure that, through mid-century, allowing unlimited Roth conversions will reduce federal revenues by $100 billion ($15 billion in net present value)."

Closing credit: Wonkbook is compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Rich Arden-AP.

By Ezra Klein  |  July 9, 2010; 1:04 AM ET
Categories:  Wonkbook  
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Comments

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Posted by: luiscade05 | July 9, 2010 3:23 AM | Report abuse

Are you unemployed and worried? It is time to plan, With the newHealth Care Plan, Government is going to insure additional 33 Million people. Survey says that there is going to be huge demand for MedicalAssistants, Medical Billing, Medical Coding, Pharmacy Assistant &Pharmacy Technician across the nation at least a million. We can helpyou get a training during weekends and evenings and get a degree infew months. The course is easy, contact for free consultation at http://bit.ly/9lshvJ make use of this opportunity

Posted by: luiscade05 | July 9, 2010 3:24 AM | Report abuse

You guys should stop complaining cuz one the health care we have now isnt as good as it was supposed to be. also the law has just been signed give it a try u guys are too hard on democrats they went to college and we voted for most of these people.so if u want to say u have the right to choose tell that to ur congress men or state official. as for obama people are just tryin to make it look like america made a mistake he has done things to help us and we had a full 8 years of a terrible president and i will be so as happy as ever when a obama fixes bush's mistakes. You can find full medical coverage at the lowest price from http://bit.ly/chE6zp obama has to put up with the wo0rld judging his every move and trying to fix the mess we are in we are lucky anyone wants to be our president. STOP COMPLAINING AND GIVE HIM A BREAK. i wanna see one of yall do what he sas done. some people are just so ignorant.

Posted by: henryjose09 | July 9, 2010 6:30 AM | Report abuse

How did you guys not even mention the federal district court ruling holding DOMA unconstitutional?

Posted by: MosBen | July 9, 2010 7:57 AM | Report abuse

Ezra,

The reason Lebron James went to Miami is to avoid having to pay state income taxes. I know that you had a blog post about how millionares rarely move to take advantage of lower tax rates, but I am sure it factors into decisions like the one Lebron made all of the time.

Posted by: cummije5 | July 9, 2010 8:32 AM | Report abuse

cummije5 I would argue that a professional basketball player can live anywhere he wants to. Lebron could have his residence in Fla and still work in cleveland. I don't see millionaires LEAVING THE COUNTRY to avoid federal income taxes. If that were really true (lots of millionaires move to avoid taxes--I am sure that some do, but not anywhere near a majority) there would be no millionaires in NY since it is one of the high tax states, just like Conn and MA. Somehow lots of millionaires live there anyway.

Posted by: srw3 | July 9, 2010 9:39 AM | Report abuse

srw3,

well of course no one leaves this country because taxes are higher elsewhere. Doesn't mean that they don't move to different parts of this country to avoid taxes. Don't you wonder why Tiger Woods and so many others that are ultra wealthy live in Florida?

Posted by: visionbrkr | July 9, 2010 9:49 AM | Report abuse

Obviously rich people move (across state lines; at least on paper) to avoid taxes. Why wouldn't they?

As a result, it doesn't make much sense for states to rely on income taxes. First, they have an extreme degree of variation with economic conditions (where states aren't allowed to run deficits), so states that use income taxes exacerbate their recessionary problems.

Second, high-earners can move their incomes. Sales taxes are also problematic, but not quite as bad.

Unsurprisingly, states with high real estate taxes (Texas) are doing much better than states with low (California), as it's hard to claim that your Dallas estate should pay its taxes in Florida or whereever. Though of course California is screwed by the Worst Law Ever Passed, Proposition 13, which precludes them from ever being a functional entity.


* For the LeBron case, I don't think it matters where he lives so much as where his games are played; if I remember correctly athletes have to pay taxes in each state where they play as they get paid mostly on a per game basis (makes filing taxes a nightmare). As such, LeBron will benefit by having 40-50 of his games in Florida.

Posted by: eggnogfool | July 9, 2010 12:34 PM | Report abuse

Whether the IMF's GDP growth projections are too harsh or not (they are not),

the mortgage deduction cut (reasonable cap, ideally) and gas tax suggestions are good policy. Really, great policy. String-pulling stuff.

The social security part is not that helpful.

Posted by: eggnogfool | July 9, 2010 1:16 PM | Report abuse

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