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.
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): http://bit.ly/bxK88B
My take -- including three helpful graphs: http://wapo.st/aCC9BQ
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: http://nyti.ms/a1Gp71
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."
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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: http://nyti.ms/b8cGNW
40 state attorneys general are launching an investigation into the foreclosure mess: http://bit.ly/8YNHPD
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: http://bit.ly/9F5hIE
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: http://nyti.ms/d9rsiM
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: http://politi.co/d9bb4U
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: http://nyti.ms/aab0vJ
Long-form interlude: Jon Ronson of The Guardian profiles Insane Clown Posse.
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: http://wapo.st/b9UWF7
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: http://bit.ly/cpVDec
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: http://nyti.ms/d9rsiM
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.
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