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Wonkbook: Romer out; Voinovich questions tax cuts; Kagan confirmed; Delicious lobster


Lots of economic news today: Council of Economic Advisors chair Christina Romer is resigning at the end of the month, which, combined with Peter Orszag's departure, leaves the Obama economic team without two of its lead players. MIT professor Peter Diamond's nomination to the Federal Reserve Board of Governors has been sent back to the White House by the Senate because of GOP opposition. And we're starting to see some opposition to extending the Bush tax cuts without offsets among Republicans, including swing-vote George Voinovich.

Meanwhile, the Senate released the Kagan yesterday, approving the former-solicitor general's nomination to the Supreme Court 63-37, and then passed a $4.7 billion school nutrition bill. Speaking of nutrition, DC's set to get a lobster-roll truck next week; just one more entrant into the city's delicious food-cart renaissance. But ever wonder why DC's suddenly getting so many food trucks and carts? Policy, my friends. Delicious, delicious policy.

It's Friday, and now I want lobster for breakfast. Welcome to Wonkbook.

Top Stories

Christina Romer is leaving the White House to return to UC Berkeley, reports Lori Montgomery: "Obama and his chief economic adviser, Lawrence H. Summers, praised Romer on Thursday, noting that she will continue to serve the administration as a member of the Economic Recovery Advisory Board led by former Federal Reserve chairman Paul Volcker...It was not immediately clear who would replace Romer. White House observers called Austan Goolsbee, a member of the Council of Economic Advisers, an obvious choice, but that would leave Obama without a woman on his senior economic team."

Opposition to extending the Bush tax cuts is spreading among Republicans, reports Walter Alarkon: "Sen. George Voinovich (R-Ohio), President Reagan’s budget chief David Stockman and former Federal Reserve Chairman Alan Greenspan have each argued that extending the tax cuts -- set to expire at year’s end -- would increase the nation’s $13 trillion debt. 'It’s like tax reductions, you don’t need to pay for them? To me, that’s nonsense,' Voinovich said."

Today's job report could determine the Fed's decision on pursuing more monetary stimulus:

Elena Kagan has won confirmation, but the tight margin suggests future confirmation battles will be brutal, reports Josh Gerstein: "Goldstein said Kagan’s margin is uncomfortably close to the 60-vote threshold the majority party needs to end a filibuster...Comparing Ginsburg’s 96-3 landslide with Kagan’s 63-37 tally offers the best evidence of how much things have changed. As the former head of the American Civil Liberties Union’s women’s rights project, Ginsburg clearly had liberal credentials, though she also had more than a decade of experience as an appellate court judge."

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The Senate has passed a $4.5 billion school nutrition bill, reports Abby Phillip: "Senators...funded the reauthorization using a different set of budget offsets from the food stamp or the Supplemental Nutrition Assistance Program, which the Senate also used to fund a $26 billion state aid and education funding bill on Thursday. SNAP received a funding boost in the 2008 stimulus bill, but has suffered deep cuts this week, with a $19.9 billion used from the emergency state aid bill; the child nutrition bill will siphon off another $2.2 billion from the program. In a conference call with reporters on Thursday, Lincoln said the money cut from SNAP would not have been spent until 2013."

Scandinavian pop interlude: Jens Lekman plays "Your Arms Around Me" live.

Still to come: Fannie and Freddie are helping attorneys profit from foreclosures; environmental groups are avoiding staff shakeups after the failure of cap and trade; the Michelle Obama-backed school nutrition bill has passed the Senate; and an opossum gets a pedicure.


The Senate has returned Peter Diamond's nomination to the Fed Board of Governors, report Pedro da Costa and Rick Cowan: "The animosity toward Diamond, who has said he is more worried about deflation than inflation, first emerged during the Senate committee vote...Richard Shelby, the committee's top Republican, said at the time that Diamond did not have the right sort of experience for the job. 'I do not believe the current environment of uncertainty would benefit from monetary policy decisions made by board members who are learning on the job,' the Alabama senator said...It was unclear whether Obama would resubmit Diamond's nomination or name someone else to the post."

Fannie Mae and Freddie Mac are assisting lawyers who profit from foreclosures, reports Andy Kroll: "Hiring lawyers on a case-by-case basis was burdensome, so Fannie and Freddie put together a stable of law firms, prime contractors prepared to litigate large bundles of foreclosures quickly and cheaply. They urged these handpicked firms to bring in-house all of the related services--inspections, eviction notices, sales of repossessed properties, and so forth--or at least to retain a suitable subcontractor to handle the tasks. Thus emerged the foreclosure supermarket."

Jobless claims are up, against economists' predictions:

The Senate state aid bill received final passage, report Lori Montgomery and Jenna Johnson: "Even as the federal government is preparing Friday to release new unemployment figures likely to underscore the weakness of the economic recovery, a separate jobs bill aimed at spurring hiring by small businesses was stalled in the Senate and unlikely to move until after Labor Day. Obama urged the Senate to quickly wrap up work on the package. Aides said a final Senate vote is likely Thursday afternoon. The package would then go to the House, whose members will return to Washington on Tuesday, House leaders said."

A bipartisan group of Senators support eliminating SEC's exemption from FOIA requests:

Paul Krugman thinks Paul Ryan is hardly the truthteller he's made out to be: "The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan’s total tax cuts. That’s not a misprint. Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population...In its first decade, most of the alleged savings in the Ryan plan come from assuming zero dollar growth in domestic discretionary spending, which includes everything from energy policy to education to the court system. This would amount to a 25 percent cut once you adjust for inflation and population growth. How would such a severe cut be achieved? What specific programs would be slashed? Mr. Ryan doesn’t say."

Paul Michel and Henry Nothcraft make the case for patent reform as a jobs strategy:

Steven Pearlstein argues that philanthropy is not enough to fight economic inequality: "Yes, philanthropy has been important, but so have unions, which ensured a fair distribution of corporate profits. So have antitrust laws that prevented successful companies from snuffing out entrepreneurial competition. So have norms of corporate behavior that made it socially unacceptable for top corporate executives to pay themselves 350 times what their workers made. And so have tax-supported schools, playgrounds and hospitals that were good enough to be used by rich and poor alike."

Questionable moments in animal hygiene interlude: How to give a pedicure to an opossum.


Green groups won't shake up their leadership following the cap and trade defeat, reports Coral Davenport: "EDF had spent $20 million on climate legislation since October 2008. Al Gore’s Alliance for Climate Protection pledged in 2006 to spend $300 million, but it’s unclear how much it ended up using. Enraged environmentalists flooded the White House with phone calls after the quotation appeared in publication. Publicly, they decried the finger-pointing and insisted they aren’t alone in deserving fault, saying Obama failed to use his bully pulpit and moderate Senate Republicans weren’t allowed by their leaders to fully negotiate."

Gulf residents are skeptical of the apparent good news:

BP has finished cementing the leaking oil well, reports Guy Chazan: "Privately, some BP officials say that with the well now cemented shut, there is less need to kill the well using a so-called bottom kill procedure via the relief well. On Thursday, Retired Coast Guard Adm. Thad Allen, who heads the federal oil-spill response, reiterated that the operation would only be considered complete once the relief well was drilled, partly because there could be no guarantee that the cement BP had pumped into the well had filled it completely."

Lobbyists are rushing to influence the final oil spill response bill:

David Roberts thinks environmentalists and libertarians can find common ground on climate change: "Some regulatory incentives degrade environmental and economic performance. You could point to fossil-fuel subsidies, antediluvian utility regulations, unpriced carbon emissions, any number of tax breaks and incentives that favor industry incumbents, even parts of the Clean Air Act. These are market distortions that incentivize inefficiency (i.e., stupidity) and therefore waste (i.e., pollution). Removing or rationalizing them -- making a more perfect market, with more competition, better information, and lower barriers to entry -- would improve environmental performance."

The hidden side of Washington interlude: David Deal photographs the physical infrastructure of DC.

Domestic Policy

The Medicare trustee's report suggests health care reform helped the program's solvency, reports Jackie Calmes: "Medicare’s hospital insurance trust fund should remain solvent until 2029, or 12 years more than projected in last year’s report, the trustees said. The long-term, 75-year shortfall for the hospital fund also is reduced, as are the projected costs of the separate Medicare Supplementary Insurance program. But both parts of the Medicare system will require additional reforms to be financially sustainable, the trustees say."

Medicare actuary Richard Foster is challenging the trustees' report:

The FCC has ended net neutrality talks with business, reports Cecilia Kang: "The participants also debated whether carriers could offer faster downloads for some Web sites offered to customers as 'specialized services.' The parties agreed that dedicated capacity for things such as telemedicine could be allowed, but some feared that allowing that could result in tiered service offerings where a carrier would charge for better-quality channels dedicated to YouTube, for example, over Netflix."

Charles Krauthammer thinks the administration is using executive authority to circumvent the will of Congress: "Last week, a draft memo surfaced from the Department of Homeland Security suggesting ways to administratively circumvent existing law to allow several categories of illegal immigrants to avoid deportation and, indeed, for some to be granted permanent residency. Most disturbing was the stated rationale. This was being proposed "in the absence of Comprehensive Immigration Reform."...Regardless of your feelings on the substance of the immigration issue, this is not how a constitutional democracy should operate. Administrators administer the law, they don't change it. That's the legislators' job."

Some Senators are decrying how Ivy League-centric the Supreme Court has become:

Adam Winkler thinks the Kagan hearings showed the confirmation process works: "Even the politicization of the process is salutary. Every nominee’s record is closely examined for controversial statements or ideas, meaning some qualified people are excluded. But the consequence is that anyone who does make it through the process is likely to have more or less mainstream views. Radicals whose jurisprudence would likely take us too far left or too far right need not apply. This is a net positive: the Court should stay within the broad mainstream of American political thought."

David Leonhardt notes the benefits of education don't end in kindergarten:

Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Pete Souza/White House.

By Ezra Klein  |  August 6, 2010; 6:32 AM ET
Categories:  Wonkbook  
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Next: Jobs report: Public sector loses 202,000 jobs; private sector gains 71,000



Krugman today exposes Ryan's absurdities in a way you seem unable to.

You have a decision to make: are you going to analyze things in a way to guarantee yourself access to people across all party lines, or are you going to speak truth to power?

You've done a great job speaking truth to power, but with regards to Ryan, I get the feeling you feel handcuffed for some reason.

Posted by: lauren2010 | August 6, 2010 7:39 AM | Report abuse

On Romers leaving - I saw her on a news progam and was not impressed - Perhaps she did her job well behind the scenes but she was not a good public face for the Obama administrations.

Posted by: LMcORF | August 6, 2010 8:47 AM | Report abuse


Thanks for the heads up on Paul Krugman's column on Paul Ryan - I just read it and its quite good.
Another observation on Ryan et al giving Seniors vouchers so they can get their own insurance.

Some would do this but many are unable - especially those with medical problems - I visit Seniors in the home setting and many struggle mentally with simple tasks.

Posted by: LMcORF | August 6, 2010 8:58 AM | Report abuse

I appreciate the citation above highlighting that "a new tax increase in the health-care law would lead to elimination of employer-sponsored prescription drug coverage for up to 5.8 million retirees by 2016."

These 5.8 million citizens join the numerous others who will suffer as a result of the massive Obama/Pelosi health tax: the death toll rises every day that the PPACA is allowed to fester.

Posted by: rmgregory | August 6, 2010 9:31 AM | Report abuse

Officials said they plan to convene a panel of experts to consider the methodology of future annual reports. "As we work to secure Medicare's future, we're also committed to honest accounting," said Health and Human Services secretary Kathleen Sebelius.

Are our friends from Enron and Worldcom out of prison yet? This just wreaks of politicization of this topic.

Posted by: visionbrkr | August 6, 2010 9:35 AM | Report abuse

Krugman brings it on his Ryan peice. He's at his best when he checks the math that most people are unable or unwilling to do. And yeah, Ezra's lack of follow up questions to Ryan have been infuriating.

Posted by: Quant | August 6, 2010 9:36 AM | Report abuse

Paul Krugman said "The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion."

But Rep. Ryan has already responded to the Tax Policy Center analysis (a long time ago):

"Claim: The Roadmap does not bring in the amount of revenue specified to the CBO according to the Tax Policy Center, and therefore it does not reduce the deficit as is claimed. (pg. 2)

Reality: The Tax Policy Center does not give official revenue estimates, and in their analysis admit to significant uncertainty and unfamiliarity with a proposal of this size and scope. The tax reforms proposed and the rates specified were designed to maintain approximately our historic levels of revenue as a share of GDP, based on consultation with the Treasury Department.

Congressman Ryan stands by his numbers, and of course would be open to adjustments in the specified rates under his tax reforms if in fact TPC’s estimates are closer to reality than Ryan’s estimates. We clearly cannot chase our unsustainable growth in spending with ever-higher levels of taxes – and the purpose of the Roadmap is to get spending in line with revenue – not the other way around."

So Ryan's goal was to get somewhere on spending, and is comfortable with whatever tax rates can produce revenues of 19% of GDP. Krugman isn't checking any math - he's just parroting the results of the Tax Policy Center and conveniently leaving out Ryan's admission that in the event rates are too low he'd raise them. Krugman counts on his liberal readers to just accept his column at face value and not bother to ask "gee, that's a huge smackdown by the Tax Policy Center - I wonder if Ryan had any response to that?"

"Some would do this but many are unable - especially those with medical problems - I visit Seniors in the home setting and many struggle mentally with simple tasks."


I think there is something to this. I'd think we'd be better off deregulating the private healthcare market and having a reasonably sized public provider of healthcare services, with resources capped at a modest level of GDP. Kind of like the Veteran's Health system but about fifteen times the size, paid for by the federal government and administered by the states. To the degree we aren't happy with the social results of private healthcare provision, there would be public providers as a safety net.

Posted by: justin84 | August 6, 2010 10:42 AM | Report abuse

"I think there is something to this. I'd think we'd be better off deregulating the private healthcare market and having a reasonably sized public provider of healthcare services, with resources capped at a modest level of GDP. Kind of like the Veteran's Health system but about fifteen times the size, paid for by the federal government and administered by the states. To the degree we aren't happy with the social results of private healthcare provision, there would be public providers as a safety net."

Isn't this what those evil socialists up in Canada have come up with?

Posted by: lol-lol | August 6, 2010 11:59 AM | Report abuse


Ryan hasn't admitted lots of "Little" things.

His real goal is to eliminate or privatize medicare and SS and keep tax rates for wealthy and corporations at a bare minimum.

Krugman is responding to very specific proposals and "his math" shows that Ryan is full of forked-tongue BS. Ryan basically is trying to fool people into believing he can cut taxes and generate more revenue by stimulating the economy (which wont work) and that he's saving medicare and SS.

Ryan and his like had 30 years to try their voodoo theories and we now see what happened. It's time for a change, though I'm not at all certain that will happen any time soon.

Posted by: lauren2010 | August 6, 2010 12:18 PM | Report abuse

"Isn't this [public hospitals] what those evil socialists up in Canada have come up with?"

Canada is more of a social insurance model. What I describe is a safety net system of hospitals and clinics actually run by the government that aren't funded with the expectation that the whole population would use them. Rather than competing on profit, the state hospital systems would compete on health outcomes.

The hospitals would be free and open to all, but have their budgets tightly capped (say 4% of GDP), so that they would be extreme versions of managed care. The insurance tax deduction and most regulation (other than on recission) in the private market would be dropped. This includes the right to emergency care (which would be provided by the public hospital system).

Effectively, the free market would compete with a VH system on steroids, and the government wouldn't have its budget blown up by healthcare costs.

Posted by: justin84 | August 6, 2010 12:30 PM | Report abuse

"Ryan hasn't admitted lots of "Little" things.

His real goal is to eliminate or privatize medicare and SS and keep tax rates for wealthy and corporations at a bare minimum."


When I read Rep Ryan's proposals, I see him trying to modernize both programs so that the size of government is kept to roughly where it was under President Clinton via reforming entitlements, and at the same time raising revenue in an efficient manner.

As for killing Social Security, he proposes leaving everyone the option of continuing in the government system and is increasing the minimum benefit level to 120% of the federal poverty level.

A family of four pays no net income tax up to $96,000. They get a $39,000 deduction/exemption and a $5,700 health care tax credit which offsets taxes on the next $57,000 of income. Yes, there is a BCT, but it replaces business income taxes and you're kidding yourself if you think the incidence of the corporate income tax on consumers is zero.

I'd prefer to apply one rate to all taxable income to discourage tax arbitrage, but this has the benefit of being extremely attractive for business activity.

"Krugman is responding to very specific proposals and "his math" shows that Ryan is full of forked-tongue BS."

Krugman didn't perform any math. He saw a report from the Tax Policy Center which criticized Ryan's plan and parroted it. He also failed to mention Ryan has responded to that criticism by saying specifically he is willing to raise rates if revenue is short of what he expects.

"Ryan basically is trying to fool people into believing he can cut taxes and generate more revenue by stimulating the economy (which wont work) and that he's saving medicare and SS."

I don't think Ryan has ever claimed that he can grow revenue by reducing taxes. It will grow the economy, however.

Look, Medicare and Social Security aren't sustainable in current forms. This is a solution that modernizes these programs so that they can be sustained over the next several generations. I understand progressives won't like it because it is a conservative Republican's plan, but in general the plan works in terms of achieving its goals. I have yet to see anything similar from the Democrats that doesn't imply crushing taxes on the economy.

Posted by: justin84 | August 6, 2010 2:21 PM | Report abuse

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