Wonkbook: Boehner buckles on Bush tax cuts; Surowiecki on why the stimulus is unpopular; Happy Basel III day!
For journalists, today marks the hardest day of financial reform: How do we get people to care about a bunch of international regulators calling themselves Basel III? But their agreement is, arguably, more consequential then the financial regulation bill we just passed: Where the bill itself left capital requirements -- the amount of cash and other safe assets banks have to hold to protect themselves (and us) from disasters -- blank, the international agreement fills them in. And they look, well, pretty good. That's a huge coup for Timothy Geithner, as Europe wanted a much weaker agreement.
The easier story to cover will be John Boehner's concession on the Bush tax cuts: "If the only option I have is to vote for those at [$250,000] and below, of course I'm going to do that," he said. That is to say, the Bush tax cuts for the wealthy could expire this year -- though to Peter Orszag's chagrin, the middle-class tax cuts, which cost the bulk of the money, will likely be extended indefinitely, rather than temporarily. That means that when the time comes to raise tax, the Senate will need 60 votes to do so, rather than 34 votes to let the Bush cuts expire and protect the president's veto of their extension.
Last night's Mad Men was probably the weakest of the season, but today's Wonkbook is at least a middling effort. Let's get to it.
Felix Salmon explains how the new Basel III agreement works: "Possibly the most important thing here is the existence of the first column, setting minimum standards for common equity -- which is also known as core Tier 1 capital. Such standards did exist in the past, but they were set extremely low, at just 2%, and so were generally ignored. As of now, common equity is the main thing that matters. No more throwing any old garbage into the Tier 1 bucket and calling it capital: the new standards for common equity are significantly tougher than the old standards for Tier 1 capital in total. The absolute bare minimum for core Tier 1 capital is 4.5%, and the new minimum for Tier 1 capital in general has now been raised to 6%. The minimum for Tier 2 remains at 8%. But that’s just the beginning."
Ezra Klein looks at a Republican stimulus proposal that just might work: http://bit.ly/bfM2AX
John Boehner is wiling to buckle on extending the Bush tax cuts for the wealthy, report Shailagh Murray and Lori Montgomery: "The leader's assertion also makes the Republican position on the issue all the murkier. Numerous GOP lawmakers, including Senate Minority Leader Mitch McConnell (Ky.), have been unyielding in their demand that all cuts be extended. 'If the only option I have is to vote for those at [$250,000] and below, of course I'm going to do that,' Boehner said. 'But I'm going to do everything I can to fight to make sure that we extend the current tax rates for all Americans.'"
Poverty rates are nearing pre-War on Poverty levels, report Hope Yen and Liza Sidoti: http://bit.ly/cizbEn
Obama and Congress are pursuing a more moderate approach to crime, reports Josh Gerstein: "The Obama White House has taken the first steps in decades to move away from a strict lock-‘em-up mentality on crime -- easing sentences for crack cocaine possession, launching a top-to-bottom review of sentencing policies and even sounding open to reviewing guidelines that call for lengthy prison terms for people convicted of child pornography offenses...At the urging of a conservative Democrat, Sen. Jim Webb of Virginia, the House passed a bill in July to create a federal commission to study criminal sentences. The measure cleared the Senate Judiciary Committee earlier in the year with little resistance from Republicans."
Dana Milbank examines the unexpected polarization of John Maynard Keynes: http://bit.ly/9gjueS
James Suroweicki considers the stimulus' image problems: "Paradoxically, the very things that made the stimulus more effective economically may have made it less popular politically. For instance, because research has shown that lump-sum tax refunds get hoarded rather than spent, the government decided not to give individuals their tax cuts all at once, instead refunding a little on each paycheck. The tactic was successful at increasing consumer demand, but it had a big political cost: many voters never noticed that they were getting a tax cut. Similarly, a key part of the stimulus was the billions of dollars that went to state governments. This was crucial in helping the states avoid layoffs and spending cuts, but politically it didn’t get much notice, because it was the dog that didn’t bark—saving jobs just isn’t as conspicuous as creating them. Extending unemployment benefits was also an excellent use of stimulus funds, since that money tends to get spent immediately. But unless you were unemployed this wasn’t something you’d pay attention to."
Music video interlude: Think About Life's "Havin' My Baby".
Still to come: Economists are predicting slow growth across all developed countries; the Obama administration and the Senate have left a lot of important vacancies in economic policymaking; China makes strides on emissions; how to improve teacher quality; "the Mayo Clinic of education"; and police explode a toy pony.
Belt tightening will slow growth across the developed world, report Mark Whitehouse, Marcus Walker, and Joann Lublin: "Economists at Goldman Sachs Group Inc. estimate that, in the U.S., the declining flow of government money will subtract about one-half percentage point from annualized growth in the three quarters to come, and more later. In Europe, governments from Greece to the United Kingdom have begun cutting spending and raising taxes to reduce budget deficits. Even fiscally stronger Germany plans to trim spending next year. The belt tightening is likely to slow growth in the 16-nation euro zone economy."
High earners are cutting spending in anticipation of tax increases: http://bit.ly/bxq0or
Uncertainty about tax policy is affecting business behavior, report John McKinnon, Ben Levinsohn, and Justin Lahart: "There are signs that tax concerns have been affecting a range of transactions on the ground. Analysts say spreads between utility-stock dividend yields and yields on some other securities recently have reflected expectations of a top dividend tax rate in the low-30% range. 'The stocks could initially fall if dividend tax rates reset to marginal rates, but we don't think it will be permanent,' said Dan Eggers, a utility equity research analyst at Credit Suisse Group in New York. Some companies are squeezing in big dividends before year's end."
The number of families living in shelters is rising: http://nyti.ms/b2Kemw
Vacancies are hampering the administration's economic policymaking, reports Sewell Chan: "For example, the Federal Reserve’s board of governors, which is considering additional steps to prop up the flagging recovery, has just four of its full complement of seven members. The Senate has yet to confirm three candidates Mr. Obama nominated in April to fill the vacancies...Other jobs already exist but have not been permanently filled. They include director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac and will be pivotal in shaping the future of homeownership policy, and comptroller of the currency."
Bank capital liquidity requirements will spur deflation, writes Richard X. Bove: http://nyti.ms/boJSMF
Stan Collender explains what a government shutdown would entail: "Shutdowns actually cost the government more money ($800 million last time according to Time) than it would otherwise spend and, therefore, increase the deficit compared to what it otherwise would be. Departments and agencies have to begin to implement shutdown plans within a few days of the possibility that their appropriations might expire. At a minimum, this involves additional communications security, building maintenance needs."
Paul Krugman worries about Chinese bond ownership: http://nyti.ms/auI08f
Robert H. Frank argues for more infrastructure spending: "Europe spends about 5 percent of its annual gross domestic product on infrastructure, while China spends about 9 percent, according to the “Report Card for America’s Infrastructure” by the American Society of Civil Engineers. In the United States, which spends less than 2.5 percent, chronically deferred maintenance has left the infrastructure in dangerously substandard condition. More than 25 percent of the nation’s bridges, for example, were structurally deficient or obsolete in 2007, according to the Federal Highway Administration. Many problems have grown worse. The Association of State Dam Safety Officials estimated that 4,404 dams were unsafe or deficient in 2008. That was up from 4,095 in 2007 and 3,500 in 2005."
Advertising interlude: A polar bear thanks a driver for using an electric car.
Chinese bureaucrats who cut emissions get a career bump, reports Juliet Eilperin: "When it comes to climbing China's bureaucratic ladder, closing factories to cut greenhouse gas emissions can be a career booster. Huang Huikang, as vice mayor of Tangshan in northeastern China, made energy efficiency one of his top priorities, taking aggressive steps to curb greenhouse gases from the city's many factories. Today he is China's special representative on climate change, negotiating with officials from countries worldwide."
Corporations could do a lot to cut emissions even without Congressional action: http://bit.ly/bjMYuY
Bryan Walsh explains the current state of the BP spill plugging effort: "The worry is that pumping drilling mud and concrete through the relief well into the bottom of the original well, which will finally and completely kill the spill, might put too much pressure on the annulus and cause further damage and instability. For the past few weeks BP, at the request of Washington scientists, has been working to ascertain the condition of the annulus before the company can go ahead with the relief well. The fact that they haven't been able to do that yet, or at least not to Allen's standards, is the reason work on the well, which began in the early spring and continued through summer, is still going on."
Governors Chet Culver and Don Carcieri argue for a Renewable Energy Standard: http://politi.co/apLr33
Fossil fuels do more harm to ocean life than the BP spill ever could, writes Alanna Mitchell: "It turns out that the carbon dioxide gas reacts with seawater to make carbonic acid. And there’s been so much gas that we’ve made surface water across the whole ocean 30 percent more acidic that it was before we started fueling our economy on crude and coal in the 1800s. It’s more acidic than it’s been in 55 million years, a shift in fundamental chemistry that runs right across the global ocean. The more carbon dioxide we put into the air, the more acidic the ocean will become."
Great moments in counterterrorism interlude: A bomb squad detonates a toy pony.
John Heilemann's big feature on schools previews McKinsey's striking report about improving teacher quality: "Whereas the best public-school systems in the world--Finland, Singapore, South Korea--recruit all of their teachers from the top third or better of their college graduates, in America the majority come from the bottom two-thirds, with just 14 percent of those entering teaching each year in high-needs schools coming from the upper third. And the numbers may be getting worse. According to a recent survey conducted by McKinsey, a meager 9 percent of top-third graduates have any interest in teaching whatsoever."
"The McKinsey survey is part of an important study that the consultancy will publish later this month, based on its work in school systems in more than 50 countries. For a long time, there has been debate about what, if any, kinds of financial incentives would help create a better talent pool for K-12 teaching in America...According to the study, a Rhee-style compensation package--starting salaries of $65,000, top salaries of $150,000--plus funding for teacher training could raise the percentage of top-third grads among new teacher hires in the one-in-six neediest schools from 14 percent to a whopping 68 percent. The cost at current teacher-student ratios: just $30 billion a year, or about 5 percent of total K-12 education spending."
Democratic and Republican campaign committee are sparring over FCC ad rules: http://politi.co/9nCXLU
Kevin Carey profiles the University of Minnesota at Richmond, the "Mayo Clinic of higher ed": "The effort begins by breaking each course into two- to three-week segments called “learning objects,” which are electronically tagged in a way that allows them to be matched in a database to student records, course materials, group assignments, draft papers, and exams. (The UMR campus was designed as a paperless environment, and students are issued identical Lenovo ThinkPad laptops, which they seem to keep two feet in front of their faces at all times.) This information will be stored in an electronic database that professors will analyze in conducting the learning research they need to get tenure. That research, in turn, will improve their ability to refine new teaching strategies."
A key GOP Congressman says the party will try to defund health care reform if it takes the House: http://politi.co/dca5RP
Two DC lawyers are leading state attorneys general's suit against health care reform, reports Ashby Jones: "Walter Dellinger, who served as acting solicitor general under President Bill Clinton and now works in private practice in Washington, D.C., said the case should be dismissed for lack of standing. 'David and Lee are very well-regarded lawyers, but they've brought better lawsuits.' Such criticism doesn't faze Messrs. Rivkin and Casey, both of whom work at Baker & Hostetler LLP in Washington, D.C. Mr. Rivkin said his clients have the right to challenge the law now for several reasons. For starters, said Mr. Rivkin, states have already had to spend money and commit resources to comply with the law."
Legislators of both parties want a tax provision in health care reform changed: http://nyti.ms/9JCz10
EJ Dionne wants GOP senators to do the right thing on campaign finance reform: "A disclosure bill has already passed the House and the Senate version, sponsored by Sen. Charles Schumer (D-N.Y.) got 58 votes, with 60 needed for passage. The key to its defeat were three Republican senators -- Olympia Snowe and Susan Collins of Maine, and Scott Brown of Massachusetts -- who say they support reform and disclosure in principle but objected to particular aspects of the bill...Schumer has signaled he would be happy to negotiate...This, however, presumes the three would-be GOP reformers are willing to put their votes where their public declarations are, in the face of enormous pressure to side with the Consolidated Megacorps of the world."
Closing credits: Wonkbook is compiled with help from Dylan Matthews and Mike Shepard. Photo credit: White House.
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