Wonkbook: WH pushes for state aid; middle-class stagnates, BP endgame?
The White House is pushing for the Senate to pass $26.1 billion in state and local aid before it goes on recess for August. This is something of a last-chance: The package has been whittled down substantially after Ben Nelson and the Senate Republicans blocked previous stimulus attempts, and it's now largely offset. Controversially, it even includes about $7 billion in cuts to the food stamp (or, as it's now called, the SNAP) program. In some ways, the normal language we use for this -- "the Senate is trying to pass x and y" -- is misleading. Most all Democrats -- which is to say, a majority of the chamber -- supports the bill, while most Republicans are going to oppose it. The question is where Ben Nelson and three or four Republicans come down.
But all the temporary programs in the world won't change the bigger picture: The recession has hammered the middle class and reduced the country's income mobility. We may get through the recession and downturn here only to find we're left with an economy with some very sticky problems. Luckily, it's not all doom and gloom today: BP is trying to kill the leak once and for all; and if that doesn't cheer you up, how about some rum in your French toast?
Welcome to Wonkbook.
The Senate will vote tonight on a White House-backed plan for aiding states, reports David Rogers: "Cash-strapped governors are promised $16.1 billion to pay Medicaid bills next year and ease their budget situation; another $10 billion in education assistance would go to school boards to help with teacher hiring--a top priority for Education Secy. Arne Duncan... Reid offset the full cost through a combination of foreign tax credit provisions and $17.1 billion in savings chiefly from cuts to food stamps and prior appropriations. The Medicaid assistance, which extends a program begun under the Recovery Act, is designed now to phase out in the first six months of 2011--something recommended by Sen. Susan Collins (R-Maine.)"
More and more states are considering their own versions of the Arizona immigration bill: http://politi.co/94KKNc
The recession is exacerbating income immobility and wage stagnation among the American middle-class, reports Edward Luce: "Alexis de Tocqueville, the great French chronicler of early America, was once misquoted as having said: 'America is the best country in the world to be poor.' That is no longer the case. Nowadays in America, you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy - even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe."
David Stockman, who served as Ronald Reagan's OMB director, argues the GOP's tax-cutting fervor has cost them their once-sound economic theory: http://nyti.ms/9OGl9p
BP could try a "kill shot" meant to plug the oil leak for good as early as tonight, reports Joel Achenbach: "The positive turn of events has led to a change in the endgame. The static kill has emerged as a potential fix that could take the pressure off the relief-well job. With hurricane season about to hit its busiest stretch, officials have feared that a tropical storm could force the rig drilling the relief well to disengage and sail away temporarily, delaying the termination of Macondo."
Recipe interlude: Ever feel like your French toast is missing a sufficient quantity of rum?
Still to come: A new crop of academics is radically rethinking how we look at financial crises; the House okays an oil spill reaction bill; HHS is facing state concerns on health care reform implementation; and Kanye West gets on Twitter.
Damian Paletta profiles Michael Barr, the non-Elizabeth Warren contender for head of consumer financial protection: "Mr. Barr has called for rules that would force banks to offer 'plain vanilla' financial products to consumers. He has pushed for the creation of a public trust to provide 'financial education and assistance to troubled borrowers,' funded by the penalty fees banks charge to their customers. He has said regulators should take into account the psychology of borrowers when setting rules. In short, he has called for dramatic changes to how banks interact with consumers, often in a way that would make it harder for companies to lean on consumer financial products for profits."
Obama's export growth goals face numerous hurdles: http://nyti.ms/9qzQxy
Econophysicists are proposing a radically different method of determining the causes of economic crises, reports Eric Dash: "'If you analyze them, this earthquake law is obeyed perfectly,' notes H. Eugene Stanley, a Boston University physics professor who published a pioneering study of financial markets in the scientific journal Nature. 'A big shock causes smaller aftershocks, and then ones smaller and even smaller.' Indeed, financial crises come in clusters. The currency crisis in Thailand during the late 1990s was followed by similar problems in Indonesia and South Korea. After Lehman Brothers faltered, Washington Mutual, the Wachovia Corporation and scores of smaller banks toppled over like dominoes." Chris Dodd asked FDIC head Sheila Bair about her interest in the consumer financial protection post: http://bit.ly/a9ySXG
States are increasing retirement ages for government workers, report Jeannette Neumann, Michael Corkery, and Marcus Walker: "Lawmakers in at least 10 states have voted this year to require many new government employees to work longer before retiring with a full pension, or have increased penalties for early retirement. A similar proposal is pending in California. Mississippi, already among the states requiring more years of service for a pension, is weighing the additional step of increasing its retirement age."
William Gale takes on five myths about the Bush tax cuts: http://bit.ly/93QFvY
Job retraining isn't working as planned, writes James Ledbetter: "Our training is really lousy. This seems like an obvious culprit, except that all the way down the line, the incentives appear intact. Governments and business leaders want unemployment to go down; community colleges want federal grants to provide workplace training; companies want skilled employees; and unemployed workers want jobs that pay well. So the problem shouldn't be an inability to teach skills."
Overbuilding has made landlords seek out government-subsidized renters: http://bit.ly/aHiE9r
Clive Crook urges Obama to break his promise to not raise middle-class taxes: "So broken is the US tax system - especially the federal income tax - that raising more revenue without increasing rates of tax is technically, though not politically, easy. The income tax base has been whittled away since the last big reform in 1986. Rates are not low by international standards, and their structure is already quite progressive; yet because they are applied to a slender base, the US income tax raises barely 8 per cent of gross domestic product. A broader base with lower, flatter rates could easily raise more revenue."
Fareed Zakaria wants the Bush tax cuts to expire in full: http://bit.ly/bvrKhh
Robert Shiller makes the case for a direct jobs program: "From the standpoint of economic theory, government expenditures in such areas often provide benefits that are not being produced by the market economy. Take New York subway stations, for example. Cleaning and painting them in a period of severe austerity can easily be neglected. Yet the long-term benefit to businesses from an appealing mass transit system is enormous. (This is an example of an 'externality,' which the market economy, left to its own devices, will neglect.)"
Celebrity stream of consciousness interlude: Kanye West gets a Twitter feed.
An oil spill response bill has passed the House but is stalling in the Senate, reports Matthew Daly: "The House bill includes a provision sponsored by Rep. Charlie Melancon, D-La., that would modify a six-month moratorium on deepwater drilling, so that some drilling permits could be approved on a rig-by-rig basis if the Interior Department determines a rig meets new safety requirements. The drilling moratorium imposed by Interior Secretary Ken Salazar would remain in effect, and Salazar would retain power over whether to approve a permit."
Wind turbine operators are solving complaints from neighbors by simply paying them: http://nyti.ms/ccS8Sn
Louisiana residents are concerned BP is pulling back from the gulf too soon, reports Angel Gonzalez: "More than 32,000 people and 4,400 vessels are part of the response effort all over the Gulf Coast, including thousands of commercial fishermen hired by BP to collect oil and lay boom. Some have already begun to be phased out, according to shrimper Acy Cooper, who said Sunday that his team has been reduced from 21 boats to about nine. 'This is too soon to be cutting back because there's too much oil out there,' he said."
BP used dangerous dispersants despite explicit orders from the White House not to: http://bit.ly/dqILMf
Trevor Houser argues high oil prices can combat climate change: "The fact that high oil prices survived the crisis excises the ghosts of the 1980s, and gives entrepreneurs and investors confidence to support cleaner vehicles and develop alternative fuels. Nearly all of the world’s largest vehicle manufacturers now plan plug-in hybrid or fully electric vehicles within two years, with General Motors rolling out the Chevy Volt last week. At $20 per barrel, powering the Volt with electricity costs more than filling a comparable car with gasoline. But at $80, Volt drivers save enough on fuel to offset the vehicle’s high prices."
Josh Freed and Matt Bennett draw lessons for energy reform from the health care reform fight: http://bit.ly/aLygLN
BP should be held fully liable for all economic damages emanating from the spill, writes Paul Rubin: "Drivers and pedestrians can't bargain in advance over standards of care, or prices and damages, so arguments for reducing damages are less powerful and tort reform is less appropriate. (There are arguments for no-fault insurance, but these are based on reducing transactions costs.) The Gulf spill is exactly this second class of accident--one with no pre-accident relationship. Hotel and restaurant owners and fishermen had no contractual relationship with BP before the oil spill, so arguments generally made by tort reformers have little weight in this case."
Kitsch painting interlude: Celestial Soul Portraits.
HHS secretary Kathleen Sebelius is working with state governments as they struggle to set up health care exchanges, reports Janet Adamy: "State officials say they are struggling to meet the law's deadline for getting the exchanges running by 2014. Strapped budgets have left states without the staff to handle basics such as writing grants to apply for implementation funding, officials say...Another contentious issue is Medicaid funding. Budget-challenged states want more flexibility to pare back spending on the federal-state program for the poor, but the law effectively prevents them from doing that."
Missouri will vote tomorrow on whether to nullify health care reform: http://nyti.ms/a2Z93m
The Obama administration is seeking to ease immigration for military families, reports Julia Preston: "According to the memo, one of those changes has been quietly put into practice since May. The new policy allows illegal immigrants who are spouses, parents and children of American citizens serving in the military to complete the process of becoming legal residents without having to leave the United States -- a procedure that is known in immigration law terms as granting parole. The memo says agency officials approved the new parole approach 'to preserve family unity and address Department of Defense concerns regarding soldier safety and readiness for duty.'"
Jon Kyl has joined Lindsey Graham in opposing birthright citizenship:: http://bit.ly/9vC2Dp
Power is concentrating in boards and the executive because Congress wants it to, writes Matthew Dickinson: "The idea that members of Congress would prefer to incur the political costs involved in balancing the budget or cutting Medicare themselves rather than farming these decisions out to an independent commission is, in my view, dubious...Indeed, rather than a power grab, the creation of independent commissions or boards to tackle tough issues is a time-honored method by both Congress and presidents to avoid having to tackle those issues themselves."
Roberto Suro argues the Arizona immigration bill ignores economic factors: "Immigration policy needs to be about a lot of things, including national identity and security, but right now it needs to be about getting the economy's pulse up and improving our global economic competitiveness. These challenges are macro. The Arizona law offers micro solutions. It argues that immigration can be a law enforcement matter and pushes the decision-making down to the state and local level."
80s cover interlude: Superchunk play "In Between Days" by The Cure.
Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Pete Souza/WH
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