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Posted at 1:15 AM ET, 11/23/2010

Wonkbook: Regulators, mount up; Farrell and Barr out; Fed gets strategic

By Ezra Klein

One of the less-noticed -- but more popular -- parts of health-care reform was the promise to force insurers to spend 80 percent every premium dollar on actual health-care services. Yesterday, that promise became policy, as the administration issued the actual regulations making it so. But those regulations have some catches: In the individual insurance market, for instance, states can ask that the rule be waived if they believe it will cause insurers in that market to stop offering their products.

There are a shocking number of these rulemaking processes underway right now. The financial-regulation bill, for instance, needs regulators to write 243 rules and conduct 67 studies. As you might imagine, this has been a bonanza for lobbyists who work on such matters, with the number being hired to influence the SEC rising by more than 40 percent this year.

The conventional wisdom is that Washington isn't going to get much done for the foreseeable future. But by "Washington,' the CW usually means "Congress." The next year will be an incredibly busy one for the regulatory agencies as they scramble to define and implement health-care reform, financial regulation, and more. And though many are watching the Republicans in Congress and the conservatives on the Supreme Court to see what the ultimate fate of these bills will be, the decisions the regulators make in the coming months will probably end up being more decisive to the success -- or failure -- of the Obama White House's signature achievements.

Top Stories

Insurers will have to spend 80 percent of every premium dollar on patient care, reports Amy Goldstein: "The Obama administration issued rules on Monday defining a promise to consumers in the new federal health-care law that insurers will spend at least $4 out of $5 they collect in premiums on medical services and other efforts to improve patients' health. The rules say that, starting in January, insurers must reveal far more information than required in the past about how they allot their money. The rule is intended to curb the proportion of their income that insurers devote to administrative costs, their executives' salaries and profits...The regulation is the kind of important fine print that will determine how the sprawling law enacted by Congress in March will play out in practice."

Lobbying around FinReg is picking up, reports Amanda Becker: "Work has begun on drafting 243 rules and on 67 separate studies by the likes of the Treasury Department, the Securities and Exchange Commission, the Commerce Department, the Commodities Futures Trading Commission and other regulatory agencies, according to one estimate by the law firm Davis Polk & Wardwell...During the third quarter of this year, the number of corporations, associations and other interests that hired lobbyists to influence the implementation of the Dodd-Frank Act within the SEC and the CFTC rose by 45 and 22 percent respectively over those that hired such representation during the previous quarter, according to a Center for Responsive Politics analysis of lobbying disclosure forms."

Two of the Obama administration's top economic advisors are leaving, reports Damian Paletta: "White House National Economic Committee Deputy Director Diana Farrell and Treasury Department Assistant Secretary for Financial Institutions Michael Barr are both planning to leave within weeks, people familiar with the matter said... Ms. Farrell had a broad range of responsibilities within the White House. She was part of the White House's auto task force that worked on the restructuring of General Motors and Chrysler, and played a key role in the administration's efforts to address the housing crisis. Ms. Farrell and Mr. Barr played central roles early in the Obama administration by mapping out the new financial regulations Mr. Obama proposed in June 2009."

The Fed is trying political messaging tactics to defend quantitative easing, reports Sewell Chan: "Caught off guard by accusations from Congressional Republicans, Sarah Palin, Tea Party activists and conservative economists, the central bank and its chairman, Ben S. Bernanke, are pushing back, making their case on substantive grounds but also haltingly adopting the tactics of Washington battle, like strategically placed interviews, behind-the-scenes assuaging of opponents and reaching out to potential allies on Wall Street and Capitol Hill...Fed officials concede that they left an opening for their detractors by timing their latest move -- the decision to resume the asset-purchase strategy known as quantitative easing -- for the day after the midterm elections."

Brit-pop cover interlude: Gorillaz plays "Crystalised" by The xx.

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Still to come: Republicans are targeting the Consumer Financial Protection Bureau; a new report suggests NAFTA hurt workers; the Obama administration has announced regulations restricting how insurers spend premiums; new reports indicate the federal government was unprepared for the Gulf oil spill; and a piglet and baby tiger cuddling.

Economy

House Republicans are already challenging the Consumer Financial Protection Bureau, report Victoria McGrane and Deborah Solomon: "Republican Reps. Spencer Bachus of Alabama, the leading contender to take the reins of the House Financial Services Committee, and Illinois Rep. Judy Biggert, the top Republican on the panel's oversight and investigations subcommittee, sent letters to the inspectors general of both the Treasury Department and the Federal Reserve, directing them to conduct an investigation into the work being done to establish the new bureau...While they have little hope of repealing the new consumer agency--which has broad powers to write rules for mortgages, credit cards and other financial products--Republicans can work to influence regulators to blunt the agency's power."

Trade representative Ron Kirk is still having trouble finalizing the South Korea trade agreement, reports Howard Schneider: "Neither Korean nor U.S. officials have explained their bargaining position in detail. But in remarks in Seoul, Obama made clear that the politics of the deal weighed on the discussions. The talks revolved around a handful of issues, including better access to the Korean market for U.S. automakers and beef exporters, but the terms were not adequate to make the president confident that he could push the deal through Congress...Some of the chief skeptics met with the president recently and said the deal would face a difficult road in Congress without major changes."

Reps. Sandy Levin and Richard Neal are running against one another to serve as ranking member of the House Ways and Means committee: http://politi.co/f1ppJ6

A study suggests NAFTA hurt low-income workers, reports Bob Davis: "Looking at communities, they find there was 'no perceptible difference' between wage growth for high-school dropouts in locations that had high Mexican tariffs (which Nafta eliminated) and places that had low or zero tariffs. (High school dropouts, one would assume, would have jobs most affected by import protection.) On the other hand, a worker with that same poor education in the apparel industry, whose 16.6% tariff was eliminated by Nafta, saw wage growth rate about 11 percentage points less than a worker in a business that didn’t depend on high tariffs."

SNL interlude: Black Friday savings, featuring Kirk Douglas!

Health Care

Susan Collins and Olympia Snowe are joining an anti-individual mandate lawsuit, reports Matt DeLong: http://wapo.st/dc2gSV

Health industry groups are criticizing the Bowles-Simpson debt reduction plan's health care provisions, reports Janet Adamy: "The health-care law created an Independent Payment Advisory Board that can recommend Medicare spending cuts to Congress, except for cuts directly to hospital payments. The commission's draft report calls for strengthening the board's powers and stripping hospitals of the exemption. That proposal hasn't gone over well with hospitals and drug makers, which have been working to weaken or to eliminate the board."

It doesn't make much sense for states to eliminate Medicaid, writes Edwin Park: http://bit.ly/i5Ilg0

Domestic Policy

Senate Republicans are amping up attacks on the DREAM Act as a vote nears, reports Scott Wong: "GOP staffers have begun circulating to senators and conservative groups a white paper outlining what they see as the social and financial costs of passing the Development, Relief and Education for Alien Minors Act. 'In addition to immediately putting an estimated 2.1 million illegal immigrants (including certain criminal aliens) on a path to citizenship, the DREAM Act would give them access to in-state tuition rates at public universities, federal student loans and federal work-study programs,' said the research paper, being distributed by Alabama Sen. Jeff Sessions, the ranking Republican on the Senate Judiciary Committee."

Local beneficiaries of earmarks are stepping up to defend the practice, reports A.G. Sulzberger: "Like many other projects involving highways and bridges -- so long as they go somewhere -- spending to repair the St. Louis flood-control system has not been controversial. But getting the money for the work has taken years. The $20 million project, which is scheduled to be completed at the end of 2012, has been praised by fans and foes of earmarks as a straightforward and cost-efficient effort to patch up an aging series of levies, flood walls and floodgates. The Army Corps of Engineers has estimated that a breach could cause more than $1.2 billion in damages."

The Rivlin-Domenici debt reduction proposal shifts tax benefits to childless workers, writes Elaine Maag: http://bit.ly/boJ0ep

Adorable animals forming alliances interlude: A baby tiger and piglet cuddling.

Energy

Green jobs programs are training workers for jobs that don't exist, reports Michael A. Fletcher: "The industry's growth has been undercut by the simple economic fact that fossil fuels remain cheaper than renewables. Both Obama administration officials and green energy executives say that the business needs not just government incentives, but also rules and regulations that force people and business to turn to renewable energy. Without government mandates dictating how much renewable energy utilities must use to generate electricity, or placing a price on the polluting carbon emitted by fossil fuels, they say, green energy cannot begin to reach its job creation potential."

The EPA has announced rules regulating "clean coal", reports Matthew Daly: "The rules, announced Monday, cover an experimental technique to store underground the carbon dioxide emissions from coal-fired power plants and other sources. The technique, which involves injecting carbon dioxide in stable geologic formations, is designed to reduce greenhouse gases that contribute to global warming...The administration wants to encourage carbon storage while overcoming liability obstacles that could hinder its development. A sudden release of large amounts of carbon dioxide can kill by asphyxiation. In 1986, 1,700 people died when a cloud of carbon dioxide escaped from a volcanic lake in Cameroon."

New York and California are working on plans to adapt to climate change, reports Felicity Barringer: "New York State and California are creating blueprints for how governments should plan, and pay for, a wholesale retreat from the shoreline in anticipation of a possible rise in sea level of three or four feet or more by 2100... The new report focuses on the potential impact of climate change on coastal counties, where more than two-thirds of California’s economic activity takes place. It envisions the potential relocation of some coastal roads and bridges and the construction of defenses around major airports. The report offers extensive advice on creating mechanisms to document the impacts of climate change and to then use the information to plan responses at the local, regional and state levels."

Alabama Sen. Richard Shelby is lobbying to get more Gulf cleanup funds for his state: http://on.wsj.com/glRAAN

GOP Sens. Jim DeMint and Tom Coburn are right to want ethanol subsidies to expire, writes Jonathan Zasloff: "Here is a great test to see whether Republican anti-government and anti-spending rhetoric is any more than that. Ethanol is a lose-lose proposition any way you slice it: it costs a big chunk of money, it’s horrible for the environment, and it does nothing but enrich special interests. It’s particularly bad on the climate, because the amount of emissions requiring to produce a liter of ethanol is actually more than just using gasoline. Kudos to Senators Coburn and DeMint for pushing this...Let’s be clear: it’s nowhere close to any kind of real strategy for controlling emissions. But it’s a start, which is more than anything else has been."

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

By Ezra Klein  | November 23, 2010; 1:15 AM ET
Categories:  Wonkbook  
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Comments

I love myself some Warren G, but the allusion to Regulators lost its novelty when TNR did it a few months back (and, when, if I recall correctly, this blog copied the reference a few weeks after). Maybe use Webbie's "I-N-D-E-P-E-N-D-E-N-T" next time?

Posted by: jackie_chiles | November 23, 2010 9:24 AM | Report abuse

Oh man, Regulators again? Didn't TNR and you allude to the track just a few weeks back? Keep things fresh, throw in a reference to Webbie's "I-N-D-E-P-E-N-D-E-N-T" every now and then.

Posted by: jackie_chiles | November 23, 2010 9:27 AM | Report abuse

Use of ethanol as fuel also drives up the prices of staple foods like corn and wheat. Really, really, really bad idea.

Posted by: bgmma50 | November 23, 2010 9:28 AM | Report abuse

Love the idea of storing carbon dioxide. We can have it all nice and ready to pump back into the atmosphere if global warming fails to materialize on schedule and everybody starts freaking out again about global cooling.

I hope that California's planning for wholesale retreat from the shorelines takes into account what happens when they fall into the ocean after The Big One, a much more likely result than inundation from melting glaciers.

Posted by: bgmma50 | November 23, 2010 9:39 AM | Report abuse

A lot to chat about this morning. Let's start with the Dream Act. If Obama wants to insure his defeat in 2012, he couldn't find a better vehicle. The act is a Trojan Horse. As written it affects almost no one. Only about 65,000 illegals graduate high school each year in the US, out of about 2.75 million total. So on it's face it would seem to be an unimportant piece of legislation.

However the key will be enforcement. If the administration simply requires an oath that the individual has graduated high school, rather than actual proof, it will become a fraud vehicle to put Madoff to shame. Also, once you have legalized a single person, you legalize 5-7 others as they begin the paperwork to get their relatives made legal by association.

This would be the single worst piece of legislation the administration could sign, no matter how long they hold office. If it passes, you can simply remove the border with Mexico, as it will no longer serve any meaningful purpose.

Posted by: 54465446 | November 23, 2010 9:48 AM | Report abuse

Oh for anyone who disbelieves what I wrote about not requiring actual proof of graduation, consider the 9th Circuit's most recent ruling about requiring proof of citizenship for voter registration:

"A three-judge panel of the court said the proof-of- citizenship requirement conflicted with the intent of the federal law aiming to increase voter registration by streamlining the process with a single form and removing state- imposed obstacles to registration.

The federal law requires applicants to “attest to their citizenship under penalty of perjury” without requiring documentary proof, the panel said.

“Proposition 200 creates an additional state hurdle to registration,” the judges said.

The law was challenged by voting rights and Hispanic advocacy groups.

The decision is “a warning to anyone who seeks to deter or prevent voter participation” that the Constitution “will protect our democratic process,” Thomas A. Saenz, president of the Mexican American Legal Defense and Education Fund, a San Antonio-based group that argued the case, said in a statement."


Posted by: 54465446 | November 23, 2010 10:13 AM | Report abuse

In other stories:


"Insurers will have to spend 80 percent of every premium dollar on patient care, reports Amy Goldstein: "

. . . or what, they'll lose their license to do business?

Hardly. This will be a Mozillo situation where every time they fail to comply they will pay a small fine to reap big profits.

Posted by: 54465446 | November 23, 2010 10:18 AM | Report abuse

I'm glad to see someone talking about the rule-making process. This is an overlooked function of the Executive Branch. And, in my opinion, why it is so important that Obama be elected to a second term. Over a long period of time, the rules set up by agencies become de facto law. The rule-making process is a long one which gives the interpretation of the current administration a lot of inertia. The effects of bad rulemaking can be linked to the BP Oil Spill and, in some ways, the Housing Bubble.

The fact that we've had 28 years of Republican Administrations versus 14 years of Democratic Administrations since LBJ suggests that the rules in place are, by and large, a Republican creation.

Obama is the first Presidential Candidate, or indeed President, that I can remember acknowledging the positive influence of government in our society. I think Obama is committed to making the Executive agencies work - which is part of the reason Republicans are so desperate to get rid of him.

So even without Congress in Democratic hands, a lot of very good, very progressive things can happen through the rules interpretation process.

Posted by: klautsack | November 23, 2010 10:19 AM | Report abuse

"New York and California are working on plans to adapt to climate change, reports Felicity Barringer"

Because where else can two states with the biggest budget deficits in the country find to waste money they don't have?


" Without government mandates dictating how much renewable energy utilities must use to generate electricity, or placing a price on the polluting carbon emitted by fossil fuels, they say, green energy cannot begin to reach its job creation potential."

How many stupid ideas can you cram into one paragraph?

Green jobs are Asian jobs, not American, no matter how much renewable energy is mandated. There was a recent report of how they have already captured 50% of the German solar panel market (the world's largest) by undercutting prices 10-20%. We can NEVER be the low cost producer in manufacturing jobs, no matter how great the intentions.

It's also a GREAT idea to mandate that consumers pay 60-75% more for energy in a recsssion so we can use more renewables and send MORE jobs overseas.

BTW, every dollar spent on renewable energy means no new alternative energy industry in this country for at LEAST the next 25-30 years, no hydrogen, no nothing!

You didn't think we were going to spend hundreds of billions of dollars to change over to renewables only to say in 10 years "Hey only kidding, we've solved the hydrogen problems, now you have to spend a trillion to replace the generating capacity you just spent!" do you?

Going to renewables effectively speaking ends research on alternative sources of production, period.

Posted by: 54465446 | November 23, 2010 10:34 AM | Report abuse

One last point:

The Korean incident also points up the folly of moving to renewable energy. China is in complete control of the renewable energy market. What happened in Korea today happened with the acquiesence of the Chinese, because the dog can never stray too far from it's master.

We currently mine absolute zero in rare earths used in battery production. There is a mine that is supposed to be restarted next year, and another one in 2013. We can get as much coal, nat gas, and oil as we need from various markets all over the world. The renewable energy market is completely controlled by ONE country, whose ally just fired artillery at our ally.

What INCREDIBLY stupid choices we make as a nation!

Posted by: 54465446 | November 23, 2010 10:43 AM | Report abuse

--*[T]he decisions the regulators make in the coming months will probably end up being more decisive to the success -- or failure -- of the Obama White House's signature achievements.*--

Those "achievements", as you call them, are failures by nature of their very inceptions. They signal a hardened institutionalization of a loss of faith in the spirit of man, and impose a mediocrity (borne of the nature of bureaucracy) on the outcomes of all future endeavors within the various spheres covered by the "achievements".

But we live in an age where little minds, like Klein, are intent on trying to run the world for everyone else.

Posted by: msoja | November 23, 2010 10:45 AM | Report abuse

Ah, the g-funk era. Those were good times.

Posted by: MosBen | November 23, 2010 10:46 AM | Report abuse

54465446-

I'm not sure I'm following you. "Renewables" and "alternative" are essentially equivalent unless the "alternative" is just petroleum products in sheep's clothing (as hydrogen is). If we can produce hydrogen through cyanobacterial farms or something (not gonna happen), the hydrogen economy is essentially a natural gas economy with cooler cars.

Posted by: klautsack | November 23, 2010 11:30 AM | Report abuse

End result of the strict mlr? Twofold. Ome is further market consolidation as smaller insurers can't meet the requirement. Second is outsourcing of customer service and that's already begun. As far as s fine I would expect its not s fine but rather a dollar for dollar refund that will never happen. Actuaries will make sure of that

Posted by: visionbrkr | November 23, 2010 11:32 AM | Report abuse

klautsack:

Renewables as they are commonly used in the media are wind and solar for power generation, and biofuels and electric when it comes to transportation (the whole push for nat gas vehciles seems to have died off).

I am using these terms in the common way. For alternatives, think things that are still on drawing board, or in theory like hydrogen, cold fusion, etc.

If you want to use the terms differently, I won't quibble. The effect is the same.

It's like the space shuttle. Going to that program condemned us to spend the last 30-40 years going nowhere and doing nothing in space, because it was the most off the shelf tech available at the time. It sucked all the money, along with the useless space spation, out of space vehicular research of any other type. So here we are today having achieved absolutely nothing in manned space exploration that couldn't have been done in unmanned space at a tiny fraction of the cost.

Posted by: 54465446 | November 23, 2010 11:56 AM | Report abuse

visionsbrkr:

Can't argue with your two premises. They're grounded on previous experience.

Posted by: 54465446 | November 23, 2010 1:29 PM | Report abuse

This was sent to you almost a year ago, because the CFTC has been doing it's job all along and I wanted you to point it out, publicly. These are public servants who operate with integrity and intelligence. Here's another version about the REAL regulators:

http://www.youtube.com/watch?v=ynyxXQpshyA

Posted by: shark83 | November 23, 2010 7:43 PM | Report abuse

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