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Wonkbook: WH infrastructure report; Diamond's Nobel (and Shelby's response); admin opposes foreclosure moratorium


President Obama renewed his call for increased infrastructure spending yesterday, making the case both in public remarks and in a report (pdf) released by the Council of Economic Advisers. The report's argument, by this time, will be familiar to readers of Wonkbook: America needs trillions in infrastructure repairs and upgrades. Right now, construction sector unemployment is 17 percent, slack global demand means raw materials are cheap, federal borrowing costs are at their lowest point since the 1950s, and the economy desperately needs jobs. Given the choice between paying for infrastructure repairs today and paying for them tomorrow -- and that is our choice -- we will get more for our dollar, and do more for our economy, if we pay for them today.

The administration's proposal, however, is not a program to meet our infrastructure needs. it is a one-time, $50 billion bump to the surface transportation budget. That would certainly help, but it's too small, and limited to roads, rails, and runways, even though our drinking-water systems and schools also need help. Ask the administration about this, and you'll hear about Congress. And to be fair, Congress is not a hotbed of sound economic thinking lately. Republicans are still blocking the nomination of newly minted Nobel-prize winner Peter Diamond to the Federal Reserve Board. "The Royal Swedish Academy of Sciences does not determine who is qualified to serve on the Board of Governors of the Federal Reserve System," Shelby said.

Happy back-to-not-caring-about-Columbus-Day. And welcome to Wonkbook.

Top Stories

Obama renewed his call for $50 billion in new infrastructure spending, reports Lori Montgomery: "Also present: former transportation secretaries Sam Skinner and Norman Mineta, who last week released a separate report saying that the nation needs to spend $134 billion to $194 billion just on basic repairs. With concern rising about the nation's growing debt, that figure is more than the federal government can provide, administration officials said. Instead, they are pressing for the $50 billion infrastructure bank as the first portion of a six-year plan for transportation funding that has been under discussion for months in Congress."

Read the administration's infrastructure report (pdf):

My take -- including three helpful graphs:

The White House doesn't want a foreclosure moratorium, reports Binyamin Appelbaum: "The administration’s basic logic has not changed since it took office in the depths of the financial crisis: Hitting the financial industry, officials argue in private and in public, hurts the broader economy. A moratorium on foreclosures may provide short-term political satisfaction in an overheated election climate, but the administration fears it will only delay the inevitable and necessary process of forcing many Americans out of homes they cannot afford."

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Fed nominee Peter Diamond shared the economics Nobel with Dale Mortensen and Christopher Pissarides, but that doesn't mean Republicans will let him onto the Federal Reserve's Board, reports Neil Irwin: "Diamond was among three academics awarded the Nobel Prize in economics Monday for pioneering research on unemployment that has helped better explain the factors that can keep people out of work...Sen. Richard C. Shelby (R-Ala.) has argued that Diamond may not be qualified to serve at the Fed given that his background is not in monetary policy...Shelby, in a statement, said that 'while the Nobel Prize for Economics is a significant recognition, the Royal Swedish Academy of Sciences does not determine who is qualified to serve on the Board of Governors of the Federal Reserve System.'"

Harvard economist Ed Glaeser explains the work that won the Nobel Prize:

Barney Frank will lead the effort to pass a mortgage industry overhaul next year, reports Zachary Goldfarb: "Senior Obama officials are scheduled to release a proposal in January that would replace the two mortgage giants and rethink federal programs that help make housing affordable... Frank has abandoned hope for Fannie and Freddie, saying they should be abolished. His new goals are to devise a housing finance system to replace Fannie and Freddie, preserve existing affordable housing and set up a trust fund to help pay for more. For all his efforts, Frank readily acknowledges that there are more people needing decent housing than there were when he started in Congress."

Got tips, additions, or comments? E-mail me.

Acoustic session interlude: Warpaint plays "Undertow".

Still to come: The foreclosure jam could lead Fannie and Freddie to lose billions; David Brooks argues that public employee compensation is "the Democratic Party's epic failure"; US ethanol subsidies are due to expire; Obama is amping up his criticism of foreign campaign spending; and Grover is the Monster Your Monster Could Smell Like.


The foreclosure mess could threaten Fannie and Freddie's solvency, report Zachary Goldfarb, Dina ElBoghdady, and Ariana Eunjung Cha: "To protect themselves from those losses, Fannie and Freddie have threatened to penalize thousands of lenders if they fail to rapidly fix the way they seize the homes of borrowers who missed their payments, according to letters sent by the firms to lenders. Fannie and Freddie, the recipients of a $160 billion federal rescue, have been virtually the only companies willing to buy mortgages from lenders since the financial crisis broke out."

New Fed governor Janet Yellen concedes there are risk to low interest rates:

40 state attorneys general are launching an investigation into the foreclosure mess:

Newly powerful developing countries are thwarting attempts to pressure China on its currency, reports Sewell Chan: "The crisis has shifted influence from the richest powers toward Asia and Latin America, whose economies have weathered the recession much better than those of the United States, Europe and Japan... The shifting dynamics have most noticeably affected the United States, which pushed more forcefully than its counterparts for stronger pressure on China but has been unable to persuade them to stand with it at the forefront of the debate."

Outsourcing creates more jobs in the US than abroad, writes William Cohen:

Obama has, if anything, spent too little, writes Paul Krugman: "the big government expansion everyone talks about never happened...Furthermore, it wasn’t mainly focused on increasing government spending. Of the roughly $600 billion cost of the Recovery Act in 2009 and 2010, more than 40 percent came from tax cuts, while another large chunk consisted of aid to state and local governments. Only the remainder involved direct federal spending."

Compensation for public employees keeps states from more productive spending--like infrastructure investment, writes David Brooks:

Both bankers and borrowers must do the right thing to get out of the mortgage mess, writes Steve Pearlstein: "Those who are cheerleading for a moratorium should realize they can only push things so far. It would not help the recovery of the economy, or the real estate market, if the foreclosure process became so hopelessly tangled that banks and investors effectively lose the ability to recoup the remaining value of their collateral. That would provide some immediate financial relief to households facing foreclosure, but it would encourage many more homeowners to begin shirking their mortgage payments in the belief that they would also be able to avoid the consequences."

Sesame Street interlude: Grover parodies Old Spice's ads.


Forthcoming global climate deal talks don't look promising, reports Juliet Eilperin: "Environmentalists issued a slew of dire pronouncements over the last 24 hours, suggesting international negotiators will have to work harder if they want a meaningful outcome when representatives from more than 190 countries gather in Cancun in late November and early December...Kyle Ash, Greenpeace U.S. energy policy analyst, laid the blame at the feet of American diplomats, questioning why they won't embrace the idea that global emissions must peak by 2015 and why they haven't finalized legislation cutting U.S. greenhouse gas emissions even if they have taken some steps to cut America's carbon footprint."

US ethanol subsidies are expiring soon, reports Louise Loftus: " framework of tariffs and subsidies introduced by the U.S. Energy Tax Act of 1978 has long bolstered the American ethanol industry, helping to increase demand while keeping foreign competitors out. But these tariffs are due to expire Dec. 31 and other countries are lobbying hard to get into the U.S. market -- particularly Brazil, the world’s largest producer of sugar cane ethanol, which stands to be the biggest beneficiary if the tariffs are allowed to end."

California is speeding up its carbon regulation process:

The weak recovery is hurting efforts to build nuclear reactors, reports Matthew Wald: "One major factor driving the cautious stance of both the industry and the government is the fall in electricity demand, which peaked in 2007. In 2009, demand dropped by more than 4 percent from 2007. So far, it seems that demand in 2010 will be higher than last year, but not as high as 2007. These are big changes for an industry that is accustomed to growth on the order of 1 to 3 percent a year. With slack demand, there is less urgency to build new plants."

The World Bank is giving more and more to fossil fuel projects:

Long-form interlude: Jon Ronson of The Guardian profiles Insane Clown Posse.

Domestic Policy

Obama is increasing his criticism of Citizens United-enabled foreign spending on campaigns, report Dan Eggen and Scott Wilson: "David Axelrod, a top Obama adviser, said on CBS's 'Face the Nation' that secret political donations to the chamber and other groups pose 'a threat to our democracy.' Axelrod also took the unusual step of calling on the chamber to release internal documents backing up its contention that foreign money is not being used to pay for U.S. political activities. Democrats have seized on a report by a liberal blog alleging that dues from chamber-affiliated business councils could be used in that way."

The first human trial of stem cell therapy is underway:

High costs are leading patients to abandon prescription drugs, reports Jonathan Rockoff: "A review of insurance-claims data shows that so-called abandonment--when a patient refuses to purchase or pick up a prescription that was filled and packaged by a pharmacist--was up 55% in the second quarter of this year, compared with four years earlier. The phenomenon coincides with rising co-payments for many drugs and increasing enrollment in high-deductible insurance plans that require patients to pay hundreds or thousands of dollars out of pocket before insurance kicks in."

If you want more Facebooks, invest in the intellectual commons that made Facebook possible, not in Mark Zuckerberg's continuing payout, writes Ezra Klein: "Human beings are more comfortable thinking in terms of people than in terms of technology. And a movie about a socially inept genius is certainly more interesting than a film about conferences where programmers present advances in social network software. But the focus on people leads us to overinvest in the rewards for individual innovation and underinvest in the intellectual commons that make those innovations possible. We're investing, in other words, in the difference between Zuckerberg and Goldberg rather than the advances that brought them into competition."

A new push is underway for a ban on Hill staffers trading stocks of companies they regulate:

Obama is applying accountability measures to early childhood ed, write Ron Haskins and W. Steven Barnett: "What happens if, based on the evaluation and the classroom rating, the Head Start program does not measure up? The program would then be required to compete with other programs to keep its funding. The solution, in other words: Use the market to get rid of underperforming Head Start programs and fund new programs that hold more promise. If the new program did not perform, it would also lose the Head Start money."

Compensation for public employees keeps states from important spending--like infrastructure investment, writes David Brooks:

The Supreme Court will not allow reasonable restrictions on foreign spending in elections, writes Richard Hansen: "There are of course good reasons to limit foreign money in the electoral process--it's just that none of them are compatible with the Supreme Court's First Amendment absolutism. Unlike American citizens, foreign individuals, governments, and associations are unlikely to have allegiance to the United States. A foreign entity may even have military or economic interests adverse to the United States. Foreign individuals or groups could support candidates to curry favor, or at the least, to secure preferential access to elected officials."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.

By Ezra Klein  | October 12, 2010; 6:32 AM ET
Categories:  Wonkbook  
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Next: Messynomics


Ezra, Couldn't Diamond take Summers' job (except he's not female!)?

Posted by: carolerae48 | October 12, 2010 9:09 AM | Report abuse

"Obama has, if anything, spent too little, writes Paul Krugman: "the big government expansion everyone talks about never happened"


Government spending at all levels rose from 34.98% of GDP in 2007 to 43.85% of GDP in 2010. Spending was only 32.56% of GDP in 2000. Government spending is still anticipated to be ~42% of GDP in 2015. An extra 7% of the economy taken up by government spending once we've recovered, and Krugman doesn't think there was an expansion of government?

Total real spending at all levels of government (2005 dollars):

2000: $3.66 trillion
2007: $4.64 trillion (3.4%/yr since '00)
2010: $5.75 trillion (7.4%/yr since '07)

"Ask yourself: What major new federal programs have started up since Mr. Obama took office? Health care reform, for the most part, hasn’t kicked in yet, so that can’t be it. So are there giant infrastructure projects under way? No. Are there huge new benefits for low-income workers or the poor? No. Where’s all that spending we keep hearing about? It never happened."

Okay, let's look at federal spending, same years, 2005 dollars:

2000: $2.02 trillion
2007: $2.57 trillion (3.5%/yr since 2000)
2010: $3.34 trillion (9.1%/yr since 2007)

So, according to Krugman we haven't increased spending because no new programs have been launched. Actually, we've increased spending substantially and we haven't done anything impressive with the money.

"And government purchases of goods and services have gone up. But adjusted for inflation, they rose only 3 percent over the last two years — a pace slower than that of the previous two years, and slower than the economy’s normal rate of growth."

Adjusted for inflation, the economy hasn't grown over the past two (or three) years - it will probably end up slightly smaller in 2010 than it was in 2007. And spending isn't just direct purchases of goods and services. Government at all levels is spending about 24% more in inflation adjusted dollars than in 2007 this year, depsite a slightly smaller economy.

Posted by: justin84 | October 12, 2010 9:53 AM | Report abuse

Well, its nice that brooks has discovered that governmental entities have been playing the same shell game with pensions that big business has.

Because the original Social Security legislation made government employees ineligible, states and the federal Government had to set up their own retirement systems. Eventually, like Big Business, they took to not actually funding theior part of the contributions to retirement systems until the employee retired, or at least became vested and therefor guaranteed some kind of a pension. By not funding the retirement system as they went, the governments freed up funds to do other things with. They made the same bad calculation that GM and Chrysler and Ford did, that when they had to cough up the money times would be good and it would be easy.

Those pensions and other benefits are a big part of the reason government employees take lesser pay rates while working, (Dayton OH used to try to peg its pay scales at the quartile above the median pay for a given job.)

Now those government's accounting tricks have come back to haunt them, and good Republicans like Brooks decide that the whole problem is that the workers want their legitimate pay.

Consider Brooks wonderful discovery that those pension funds are underfunded by $87 k per participant. OF COURSE they are that far underfunded, that represents an average of how much every one of those participants has contributed to the system THAT THE GOVERNMENT HASN'T MATCHED WITH ITS CONTRIBUTION.

(Apologies for too many all caps, but I don't know how to play games with type fonts on blogs.)

The problem isn't greedy government workers, it is miserly government bodies who won't ask for more taxes and want to hide their insolvency by taking it out of worker's paychecks.

A contract is a contract. Were Mr. Brooks to agree to write a book for a publisher, with his first payment against royalties being &100k, and he delivered the final manuscript to the publisher, and the publisher told him their profits were down so they were going to only pay him 90% of royalties AFTER the book sold enough copies to pay all the production costs, and if the book did really well maybe eventually he would get the remaining 10%, he would be understandably upset.

But we government workers do our jobs and expect our pay, and Brooks decides that we are wrong to want to be properly paid for our work.

Good republican approach to contracts as applied to government workers they don't like.

Posted by: ceflynline | October 12, 2010 11:16 AM | Report abuse

"Shelby, in a statement, said that 'while the Nobel Prize for Economics is a significant recognition, the Royal Swedish Academy of Sciences does not determine who is qualified to serve on the Board of Governors of the Federal Reserve System.'""

Shelby isn't particularly impressed with the Nobel Prize, after all the president and his Science adviser each have one, and Gore and Carter each have one, but Georgie doesn't, and neither does his father.

So the Nobel committee obviously are left wing media types.

Posted by: ceflynline | October 12, 2010 11:22 AM | Report abuse

"Also present: former transportation secretaries Sam Skinner and Norman Mineta, who last week released a separate report saying that the nation needs to spend $134 billion to $194 billion just on basic repairs."

Well, just how much money is currently in the Highway Trust fund, because every penny of that has to go to highways, and anything over current operating requirements ought to go to highway repair. If the money is there, use it. If it isn't, raise the gas tax 'till it is.

Posted by: ceflynline | October 12, 2010 11:26 AM | Report abuse

Here we go again. Bank of America self-imposed foreclosure, is just another tactic to deceive the government again. I just found this statement from BOA, which confirms that their moratorium is just a ploy to buy time and fool the government into not mandating a National Foreclosure Moratorium immediately. Here is the statement, "Bank of America (BAC_) stopped just short of those requests, saying it would halt foreclosure sales - but not proceedings - in all 50 states. That means the foreclosure process will continue for defaulted borrowers, but the bank has requested that courts forestall making a final decision until all documents can be reviewed.
"We will stop foreclosure sales until our assessment has" BEEN COMPLETED. Unbelievable, that this swindlers are bold enough to do this right in our faces. They are basically setting everything up and waiting for Obama, Congress, DOJ and SEC to snooze again, and then they are going to push the button and throw 100's of thousands of homeowners out of their homes doing the holidays. The only answer is for Obama to order a National Foreclosure Moratorium today and for Congress to follow-up with a mandated one. This mortgage banking and securities fraud must be completely investigated and prosecuted, before these banks are allowed to cash out and disappear. This is a scandal onthe Madoff level. Obama and Congress already know this and must take action today.

Posted by: awesomelm | October 12, 2010 11:29 AM | Report abuse

Foreclosure Stoppage Trouble for Property Market! Plus Obama admin does not support a moratorium on Foreclosures...

Posted by: foreclosure_help | October 12, 2010 3:01 PM | Report abuse

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