Wonkbook: States have 100+ billion in unspent stimulus; out-of-the-box Romer replacements; Fannie and Freddie safe?
The big thing to watch this week is Tuesday's Treasury summit on housing policy, which will be the official kick-off for the effort to reform Fannie Mae and Freddie Mac. But with the housing market sagging again, can you credibly threaten the mortgage giants who are currently backing nine out of every 10 new loans? What happens to the housing market if you do? And if the housing market goes south again, what happens to the (already shaky) recovery?
In other news, a year and half after the bill's passage, state and local governments have more than a $100 billion in stimulus they've yet to spend. Some of that is for long-term projects, but some of it isn't. Meanwhile, some state insurance commissioners are claiming they lack the legal authority to carry out health care reform's requirements; tech firms are saying the just-signed border security bill could wreak havoc on immigration by high-skilled workers; and what about the CEO of Pepsi for Christina Romer's replacement?
If I were in the White House, I'd appoint David Chang to run the CEA. Or at least the cafeteria. Anyway, welcome to Wonkbook.
States and local governments have more than half of their $275 billion in stimulus funds left to spend, reports Alec MacGillis: "Many of the unspent funds lie in programs portrayed from the outset as true long-term investments, such as $8 billion for high-speed rail, $17 billion for health information technology and $10 billion for the National Institutes of Health. But other programs that had been viewed as quicker job-generators are also taking a while to get rolling...The $5 billion program for weatherizing low-income homes is recovering from a slow start as officials wrestled with rules on wages and historic preservation, and as providers struggled to expand capacity."
Frank Ahrens suggests some outside-the-box replacements for Christina Romer: http://bit.ly/arjbIA
A stalling housing market could make Fannie and Freddie overhaulers more cautious, reports Nick Timiraos: "The Obama administration has defended its decision to postpone the debate over the fate of Fannie Mae and Freddie Mac by arguing that it first needed to put the housing market back on track. Now, as mortgage-industry executives and government officials prepare to meet for a summit on Tuesday to begin those discussions in earnest, policy makers are facing an unexpected problem: The housing market appears to be stalling. That will make officials more cautious in considering any dramatic overhaul, because a shaky outlook further underscores the market's heavy dependence on Fannie and Freddie, which together with the Federal Housing Administration are backstopping nine out of every 10 new loans."
Medical costs fell for the first time in 35 years in July: http://nyti.ms/dBA6Ze
Some states claim they are legally incapable of implementing health care reform, report Robert Pear and Kevin Sack: "California, Florida, Hawaii, Michigan, Nebraska, Oklahoma, Virginia and Wyoming, among other states, said they did not have authority to enforce federal law. Some state regulators said they would ask state legislators to expand their authority by putting the federal standards into state law next year. Others said they would rely on their powers of persuasion, the good will of insurers or general state laws that ban unfair or deceptive trade practices."
Democrats are considering slashing food stamps again -- this time to pay for Michelle Obama's child nutrition legislation, reports Russell Berman: http://bit.ly/bUSkon
The visa fee hikes used to pay for the recent border security bill are drawing criticism from tech companies, reports Don Clark: "The broader issue for Silicon Valley is that the flow of technology talent has now reversed. Most foreign students that get advanced degrees at U.S. universities no longer hope to stay in the country, said Mr. Wadhwa, partly because of stiffened immigration policies but also because job opportunities in places like Bangalore and Shanghai are so attractive. The visa increase sends another signal to foreign engineers that they aren't welcome, he added."
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Nirvana cover interlude: Ben Gibbard plays "All Apologies".
Still to come:High corporate profits are bad economic news; energy will will wait for the lame-duck session; the GOP thinks health-care reform costs too much but is trying to repeal all the cost controls; and an illustrator populates his house with cartoon gremlins.
High corporate profits are bad news, writes Floyd Norris: While higher profits are normally deemed good news, it matters why they are rising. “The same thing that caused the profit gains is squeezing now,” Howard Silverblatt, senior index analyst at S.& P., said. “It is the lack of jobs.”...Mr. Silverblatt argues that a stronger recovery could, at least temporarily, lead to a decline in profit margins as companies begin to hire more people and make more investments, thus raising expenses.
China is set to overcome Japan as the world's second-largest economy: http://bit.ly/bwXXN2
The White House's tax overhaul panel will release its report at the end of next week, reports John McKinnon: "Panel chairman Paul Volcker has floated the idea of imposing a value-added tax to help pay for spending...President Barack Obama has asked the panel not to consider policies that would increase taxes on families making less than $250,000... That could complicate any efforts to introduce a value-added tax, which would ultimately hit all consumers. Measures have been proposed by tax experts aimed at offsetting the impact of a VAT on lower-income people, but such an approach could be complex. White House officials say Obama has not proposed a VAT, and such a tax isn’t under consideration."
Lower spending by retiring baby boomers could wreak economic havoc: http://bit.ly/9qXTMe
Gerald O'Driscoll argues the Fed can't fix the economy: "The declines in home values, investor portfolios and 401(k) plans, and the uncertainties surrounding retirement plans, have all had a big impact. The solution lies in restoring balance sheets. For financial firms, that means raising capital. For consumers and businesses alike, that means saving more of their reduced incomes...What is in short supply is not liquidity, but savings. The Fed can supply the former but not the latter. Both fiscal and monetary polices need to shift their focus. The Fed has done the heavy lifting and responded more than adequately to liquidity issues. Now there is little further it can do that is beneficial."
FinReg implementers are promising a transparent rules-writing process, reports Sewell Chan: "The Federal Deposit Insurance Corporation, which will be responsible for seizing and dismantling failing financial institutions, announced Thursday that every two weeks it would publish the names of lobbyists and other industry officials who met with its senior officials to discuss how to carry out the legislation. Two other agencies, the Commodity Futures Trading Commission and the Securities and Exchange Commission, which have vast new duties involving financial instruments like swaps and credit ratings, have announced similar measures."
Fannie Mae has clarified its new, stricter credit policies, which it claims are not as stringent as claimed: http://bit.ly/bAPksI
Paul Krugman refudiates the idea of a Social Security crisis: "They rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count -- because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget -- while future Social Security deficits are unacceptable -- because hey, the program has to stand on its own. It would be easy to dismiss this bait-and-switch as obvious nonsense, except for one thing: many influential people -- including Alan Simpson, co-chairman of the president’s deficit commission -- are peddling this nonsense."
Former McCain advisor Mark Zandi argues letting the Bush tax cuts expire won't hurt growth: http://nyti.ms/9DS4au
Late night sketch interlude: Jimmy Fallon and Will Ferrell remember their soap opera, Jacob's Patience.
Jeff Bingaman says any energy bill may have to wait for the lame duck session, reports Darren Samuelsohn: "Reid is being lobbied aggressively by Democrats to tack a renewable electricity standard onto the oil-spill-focused bill. Sen. Tom Udall (D-N.M.) said last week that some renewable energy advocates count as many as 62 senators ready to support the legislation...Bingaman said he’s not had a chance to examine any of the whip counts on the renewable electricity standard, an issue that he addressed last year with a committee-passed bill. 'I haven’t seen it, and I haven’t had a chance to talk to the individuals on the list to be sure they’re ready to go,' he said."
The White House is urging BP to continue drilling a relief well, reports Isabel Ordonez: http://bit.ly/8ZZQNT
Tyler Cowen attacks free parking: "99 percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price. In his book, Professor Shoup estimated that the value of the free-parking subsidy to cars was at least $127 billion in 2002, and possibly much more. Perhaps most important, if we’re going to wean ourselves away from excess use of fossil fuels, we need to remove current subsidies to energy-unfriendly ways of life. Imposing a cap-and-trade system or a direct carbon tax doesn’t seem politically acceptable right now. But we can start on alternative paths that may take us far."
A $3.2 billion green jobs program passed in the stimulus has only spent 8.4 percent of its funds, reports Matthew Wald: "The problems Mr. Friedman cited are similar to the ones reported with the weatherization grants: when Congress approved the program, the Energy Department did not have the regulations or the staff to process applications. Local governments lacked the staff to make applications or handle the money they received. And federal money comes with strings attached."
Arts and crafts interlude: The goblins that haunt Christoph Niemann's house.
Ezra Klein notices Republican critics of health care reform's costs targeting its cost-control measures: "The board's first recommendations will be for 2015, but it'll take until 2018, when its purview expands to cover hospitals, for it to really start swinging its weight around. If the board makes it that far, it'll be the most aggressive effort lawmakers have ever made to control Medicare's costs. That's a big if. Republicans have zeroed in on the board as a soft target in their campaign to gut the health-care reform bill. 'In true fashion of Obama- Reid-Pelosi hubris,' Cornyn said, 'the IPAB is the definition of a government takeover.' A government takeover of . . . Medicare?"
Jonathan Cohn outlines the road ahead for health care reform's insurer regulations: http://bit.ly/bazD2I
Large health care networks could keep prices down or they could just create monopolies, reports Alec MacGillis: "Another group of health economists says that by many measures, Americans do not use medical care more heavily than people in other developed countries. The real difference is that people in the United States pay much more for the care they get. Expanding networks might allow providers to cut back on unnecessary care, this group says, but the savings could be canceled out if the networks drive up prices. The answer, they say, lies in reducing providers' leverage -- perhaps with a Medicare-like 'public option' for people younger than 65 that could push for lower prices or by public rate setting of hospital prices, as is done in Maryland."
Harold Pollack considers the fiscal impact of public employee overcompensation: http://bit.ly/9xr55J
Demand for public housing is far outstripping supply, reports Valerie Bauerlein: "Only one in four households that are eligible for federal housing assistance receive it, said Linda Couch, senior vice president for policy at the National Low Income Housing Coalition, an advocacy group. The government provides two million vouchers nationwide. The amount of public housing units and vouchers for subsidized housing has declined by more than 9% between 1999 and 2009, she said. 'The housing world is focused on preserving what we have,' she said."
The recession is leading to a community college boom: http://bit.ly/aQxDaN
Obama has adopted Bush's focus on standardized testing, writes Dana Milbank: "Obama has expanded the importance of standardized testing to determine how much teachers will be paid, which educators will be fired and which schools will be closed -- despite evidence that such practices are harmful. In the process, he's offended just about all the liberals involved in or advocating for education without gaining much support from conservatives. "
Paul Starr previews the fight to save health care reform from repeal: http://bit.ly/dvYfx6
Closing credits: Wonkbook compiled with the help of Dylan Matthews, Mike Shepard, and Sakina Rangwala. Photo credit: Newell Turner Photo
August 16, 2010; 6:55 AM ET
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