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Posted at 6:41 AM ET, 12/28/2010

Wonkbook: Obama's 2011 Budget (slightly) delayed; earmarkers become lettermarkers; corporations are buying each other rather than hiring workers

By Ezra Klein

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Obama's budget has been delayed a week, reports Jonathan Weisman: "President Barack Obama's budget proposal for fiscal 2012 will be released in mid-February, a little more than a week after its planned release date. The administration is scrambling to assemble what could be a pivotal document following a six-week delay in the confirmation of the White House's new budget director, a senior administration official said Monday. The budget's release date will be pushed back from Monday, Feb. 7, to some time the following week, the official said. The White House's new budget director, Jacob Lew, saw his confirmation put on hold by Louisiana Democratic Sen. Mary Landrieu, who was protesting the administration's moratorium on offshore oil drilling. Mr. Lew was confirmed Nov. 19."

Members of Congress are finding ways besides earmarks to fund pork projects, reports Ron Nixon: "Lettermarking, which takes place outside the Congressional appropriations process, is one of the many ways that legislators who support a ban on earmarks try to direct money back home. In phonemarking, a lawmaker calls an agency to request financing for a project. More indirectly, members of Congress make use of what are known as soft earmarks, which involve making suggestions about where money should be directed, instead of explicitly instructing agencies to finance a project. Members also push for increases in financing of certain accounts in a federal agency’s budget and then forcefully request that the agency spend the money on the members’ pet project. Because all these methods sidestep the regular legislative process, the number of times they are used and the money involved are even harder to track than with regular earmarks.

Real talk: The move from earmarking to lettermarking, phonemarking, hearingmarking, etc, wasn't just predictable. It was inevitable. And make no mistake: Within three-to-five years, we're likely to be back to earmarking as well.

Corporations are using their cash supplies to fuel mergers, not job growth, reports Jia Lynn Yang: "The volume of global mergers this year rose 19 percent, according to Dealogic, ticking up for the first time since 2007 as firms looked for ways to deploy the record amount of cash sitting on their balance sheets...Conditions are ripe for a comeback in mergers and acquisitions because U.S. companies are holding a record nearly $2 trillion in cash. They have been hesitant to use these massive piles of funds to hire as they wait to see whether the economic recovery picks up more speed. Instead, this year they've been making safer bets: buying back stocks to help boost their share prices and spending money on modestly sized mergers."

Fuzz-pop interlude: Wavves plays "King of the Beach".

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

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Still to come: Foreign banks benefited from a Federal Reserve program; being unemployed is bad for your health; Obama's federal pay freeze is being extended to more civil service workers; the incoming House Energy and Commerce chair outlines his plan to derail the EPA's climate regulations; and a genetically engineered singing mouse.

Economy

The Obama administration is cracking down on banks that are delinquent on their TARP payments, reports Zachary Goldfarb: "The Obama administration has begun monitoring the high-level board meetings of nearly 20 banks that received emergency taxpayer assistance but repeatedly failed to pay the required dividends, according to Treasury Department officials and documents. And it may soon install new directors on some of their boards. The moves come as the number of banks that failed to make at least one dividend payment to the government rose to 132 in the last quarter. These 'deadbeats,' as they are sometimes called, are virtually all community lenders and collectively received billions of dollars in taxpayer assistance. In addition to those firms, seven others have failed, resulting in the total loss of the government's investment."

Looking for a rigorous overview of the various methodological difficulties involved in assessing stimulus proposals? Alan Auerbach, William Gale, and Benjamin Harris have you covered (pdf).

Non-US banks have benefited from Federal Reserve credit, report Robin Harding, Bernard Simon, and Christian Oliver: "Some of the world’s strongest banks have profited from an emergency credit facility set up by the US Federal Reserve to shore up confidence in the global financial system, according to a Financial Times analysis of data released by the Fed. More than half of lending under the Fed’s term auction facility - the largest of its crisis programmes - went to foreign banks. Details of the varied uses to which they put it may add to political criticism of the Fed. The Taf was set up in December 2007 to provide one-month loans to creditworthy banks as markets dried up for lending longer than overnight. In August 2008, it began offering three-month loans as well."

A new study suggests startups are central to job growth: http://on.wsj.com/fDs2eV

There's much Obama could do for the economy that wouldn't require congressional approval, write Paul Krugman and Robin Wells: "Democrats could pressure the administration to fix the inexcusable mess at the HAMP (mortgage modification) program--a program whose Kafkaesque complexity has in many cases made matters so bad for home owners that it has triggered the foreclosures it was supposed to avoid. In addition, mortgage relief would benefit the wider economy. Furthermore, the scope of mortgage relief could be made much wider if Fannie Mae and Freddie Mac were used to guarantee mortgage refinancing. Other proposals go even further: for example, that Fannie and Freddie engineer reductions in mortgage principals. All of this could be done, conceivably, by executive order."

Prizes for spurring innovation work, writes Annie Lowrey: http://slate.me/dFXZgh

A survey of jobless workers shows the extent of their suffering, writes Bob Herbert: "More than 15 million Americans are officially classified as jobless. The professors, at the John J. Heldrich Center for Workforce Development at Rutgers, have been following their representative sample of workers since the summer of 2009. The report on their latest survey, just out this month, is titled: 'The Shattered American Dream: Unemployed Workers Lose Ground, Hope, and Faith in Their Futures.' Over the 15 months that the surveys have been conducted, just one-quarter of the workers have found full-time jobs, nearly all of them for less pay and with fewer or no benefits. 'For those who remain unemployed,' the report says, 'the cupboard has long been bare.'

The American political system is corrupted in favor of the upper classes, writes Jeffrey Sachs: http://bit.ly/icPQdh

Extreme sports interlude: Russian-style bungee jumping.

Health Care

Enrollment is lower and costs higher than expected in health care reform's high-risk pools, reports Amy Goldstein: "An early feature of the new health-care law that allows people who are already sick to get insurance to cover their medical costs isn't attracting as many customers as expected. In the meantime, in at least a few states, claims for medical care covered by the 'high-risk pools' are proving very costly, and it is an open question whether the $5 billion allotted by Congress to start up the plans will be sufficient... According to some health-policy researchers, the success or failure of the pools also could foreshadow the complexities of making broader changes in health insurance by 2014, when states are to open new marketplaces - or exchanges - for Americans to buy coverage individually or in small groups."

Real talk: High-risk health-care pools never work very well. The Democrats knew that when they rejected Republican plans that would've put them at the center of the health-care system for sick individuals. Then, of course, they turned around and made them one of health-care reform's early deliverables. I'm skeptical of arguments that say they "foreshadow" larger market reforms, which work very differently than segregating a tiny fraction of sick patients in state-run insurance programs.

Unemployment could cause serious health damage, reports David Wessel: "A new National Bureau of Economic Research paper suggests that increases in unemployment lead to a decrease in fruit and vegetable consumption, with potentially long-lived effects on workers’ health. 'Among those who are predicted to be at the highest risk of unemployment, a one percentage point increase in the resident’s state unemployment rate is associated with a 2% to 4% reduction in the frequency of fruits and vegetable consumption, and an 8% reduction in the consumption of salad,' economists Dhaval Dave of Bentley University in Waltham, Mass., and Inas Rashad Kelly of Queens College in Flushing, N.Y, said...Research by Daniel Sullivan and Till von Wachter finds that mortality rates in the year following a layoff among high-seniority male workers increases sharply."

The White House denies its new regulation on end-of-life care represents a policy change: http://politi.co/gkMbRZ

Domestic Policy

The federal pay freeze is being extended to more civil servants, reports Lisa Rein: "The two-year pay freeze that is now law for federal employees on the pay scale known as the General Schedule will also apply to hundreds of thousands of civil servants whose wages are set under a separate salary system, according to an executive order signed last week by President Obama. Employees covered by the so-called Administratively Determined pay scale - not legislated by Congress but set by federal agencies - make up about 30 percent of the workforce of 2 million. They include public health doctors and nurses, medical personnel in the Veterans Affairs system, administrative law judges and attorneys, auditors and other staff at financial agencies such as the Securities and Exchange Commission."

Nobelist James Heckman is urging early childhood education as a path toward economic growth, reports James Warren: " James J. Heckman, who has won the Nobel in economic science, offered a provocative idea for reducing spiraling budget deficits and strengthening the economy: investing in early childhood development. Mr. Heckman marshals ample data to suggest that better teaching, higher standards, smaller classrooms and more Internet access 'have less impact than we think,' as he put it at the Spertus Institute. To focus as intently as we do on the kindergarten to high school years misses how 'the accident of birth is the greatest source of inequality,' he said. He urges more effectively educating children before they step into a classroom where, as Chicago teachers tell me, they often are clueless about letters, numbers and colors -- and lack the attentiveness and persistence to ever catch up."

Public universities are getting creative about tuition fees: http://on.wsj.com/ifgrV1

Obama should push for Social Security reform, writes Michael Gerson: "Obama's liberal base contends that the Social Security trust fund is not in immediate trouble. But this argument depends on an elaborate accounting trick. The trust fund is not filled with assets - gold bullion and Apple stock. It is filled with debt issued by the government to itself. The surpluses of the trust fund are in fact liabilities for the government as a whole. And these illusory surpluses are regularly used to subsidize the rest of the budget. The scheme begins to collapse in 2037, when promised benefits for Social Security recipients will suddenly drop by about 25 percent - unless the system is reformed...Obama's urgent political need is to polish his image among Independents on spending and debt."

Fun with genetic alterations interlude: Scientists create a singing mouse.

Energy

Congress should stop the EPA from regulating carbon emissions, write House Energy and Commerce chair Fred Upton and Todd Phillips: "The best solution is for Congress to overturn the EPA's proposed greenhouse gas regulations outright. If Democrats refuse to join Republicans in doing so, then they should at least join a sensible bipartisan compromise to mandate that the EPA delay its regulations until the courts complete their examination of the agency's endangerment finding and proposed rules. Like the plaintiffs, we have significant doubt that EPA regulations can survive judicial scrutiny. And the worst of all possible outcomes would be the EPA initiating a regulatory regime that is then struck down by the courts."

The EPA is well within its rights to regulate carbon emissions, writes Brad Plumer: "Over at The Atlantic, Conor Friedersdorf thinks the EPA is 'disregarding [the] separation of powers.' But why? How? The Clean Air Act is a law that was passed by Congress and amended several times. The law originally focused on specific toxins like lead and sulfur-dioxide, but it was intended to be updated periodically, as new science on pollution and human health came in. The Supreme Court ruled that greenhouse gases fit within this framework--and, so, the Obama administration has begun enforcing the relevant laws. Set aside whether you agree with the policy outcome. What about this is constitutionally troubling?"

The Department of Energy is circulating a "list of accomplishments" from the past year: http://bit.ly/gbQFTh

Sen. Jay Rockefeller is challenging the administration on mine safety, reports Andrew Restuccia: "Sen. Jay Rockefeller (D-W.Va.) is raising questions about whether the federal agency charged with mining safety is adequately funded. In a letter to Labor Secretary Hilda Solis, Rockefeller said he is concerned that the Senate’s inability to pass an omnibus spending bill that would have increased funding for mine safety could 'undermine the progress that is being made and further limit MSHA's [Mine Safety and Health Administration] ability to fulfill its mission.' Instead of the broad omnibus spending bill, the Senate passed a narrow continuing resolution that largely funds the government at current levels until March."

John Tierney makes the case for optimism about the world's energy supply: http://nyti.ms/fKyVGN

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

By Ezra Klein  | December 28, 2010; 6:41 AM ET
Categories:  Wonkbook  
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Next: Remembering 'Obama for America'

Comments

I'd bet high risk pool memberships are low because most people aren't aware they exist and that they may qualify.

Also, many people who are aware of them probably aren't aware of whether or not they will have to pay premiums, and how much they will be.

Even a small premium is prohibitively expensive when you are out of work, and I'd bet many people who qualify for high risk pools are indeed out of work, otherwise they'd get the care from their employers.

There should be public awareness commercials on TV to let people know about these pools and how much they cost and who qualifies. I haven't seen any.

When we switched to digital TV, though, there were abundant ads on TV.

Posted by: lauren2010 | December 28, 2010 7:39 AM | Report abuse

Several reports recently suggest oil prices to skyrocket this summer or next.

Posted by: lauren2010 | December 28, 2010 7:59 AM | Report abuse

As anticipated, "claims for medical care covered by the 'high-risk pools' are proving very costly, and it is an open question whether the $5 billion allotted by Congress to start up the plans will be sufficient." Even though the program is providing benefit to fewer participants than expected, costs are dramatically higher -- almost 400% higher -- than the CBO's initial estimates.

Dick Popper, HHS's deputy director for insurance programs, offered some useful information; however, one statement in Goldstein's report shouldn't be overlooked: "HHS officials declined to provide an update, although they collect such figures monthly, because they have decided to report them on a quarterly basis."

So, even though it's well known that the program is over-budget, nobody in the Obama/Pelosi Regime wants to reveal that fact to the public. That's exactly the sort of 'transparency' in health care administration that causes justifiable fear! At some point, the Pelosian Minority Faction must be honest enough to admit the failure of the "sprawling health-care legislation that Democrats pushed through Congress in March."

Posted by: rmgregory | December 28, 2010 9:11 AM | Report abuse

"He urges more effectively educating children before they step into a classroom where, as Chicago teachers tell me, they often are clueless about letters, numbers and colors -- and lack the attentiveness and persistence to ever catch up."

Why don't we just say the obvious, instead of considering it the ultimate education taboo.

The out-of-wedlock birthrate is the biggest drag on our nation's educational system, and all the money thrown at these other methods is just chemotherapy for a dying patient. In every state in the union there is a direct correlation between school districts that have the highest incidence of the these numbers, and the lowest performance in education.

Ok, we can go back to early education funding now!

Posted by: 54465446 | December 28, 2010 9:20 AM | Report abuse

Gerson writes:

"The scheme begins to collapse in 2037, when promised benefits for Social Security recipients will suddenly drop by about 25 percent - unless the system is reformed"

Another common lie promoted by those who want us to leave SS. The SS system is a general obligation of the US govvernment, unrelated to how much money is actually taken in. Like all other deficits the governmnet runs, there is NO drop in payouts, regardless of inflows, unless specifically changed by legislation. As long as the government is in business, the SS checks HAVE to keep coming.

Posted by: 54465446 | December 28, 2010 9:26 AM | Report abuse

"Furthermore, the scope of mortgage relief could be made much wider if Fannie Mae and Freddie Mac were used to guarantee mortgage refinancing. Other proposals go even further: for example, that Fannie and Freddie engineer reductions in mortgage principals. All of this could be done, conceivably, by executive order."

Combine this thought with yesterday's that inflation was a non factor, and his other arguments for a much greater stimulus, and you can see that Krugman is the greatest economic charlatan and con artist in America today.

If you combine all the ridiculous ideas he has put forth, with the non-existent regard he has for any type of currency soundness, and you're talking about the type of inflation that would make us long for the Carter-Reagan years, as the good old days!

For the uninitiated, Fannie and Freddie are ALREADY guaranteeing most non-jumbo mortgages in today's market as a result of the collapse of the secondary mortgage market.

This proposal would mean that the Federal government might just as well take over the mortgage market entirely and simply eliminate banks and finance companies. Once again the idea boosted by Krugman's proposal is that private companies gain the profits, while the Federal Government takes all the risk.

I'm not in any way a hard currency devotee, but this year, Krugman has been at his bomb-throwing buffoonish best!

Posted by: 54465446 | December 28, 2010 9:55 AM | Report abuse

(1) Jeff Sachs appears to misinterpret the political realities. Democrats are not "keen to shower tax cuts on their major campaign contributors, predominantly rich Americans"; they have very different constituencies, and many of the 'rich American contributors' they do have favor higher taxes on the rich.

Dems would be perfectly happy to raise taxes on the wealthy to pay for programs they care about; in fact, when they had 60 Senate votes, high end hikes were included in financing the healthcare package. Without 60 Senate votes, however, high end rates become a useful bargaining chip to pass spending bills they care about.

There is no real constituency for a balanced budget, or for higher taxes on the rich. A number of groups would prefer the rates on the high end be higher, all else being equal, as the additional revenue would allow more flexibility for spending on their programs of interest in the future, but they're all happy to use the hikes as a bargaining chip as well, birds in hand being twice as valuable as those in the bush.

(2) Count me in as someone who had no clue how the "high-risk pools" were supposed to work.

(3) It's not clear to me how education is an engine for economic growth in a developed nation. I'm fine with the argument from an inequality standpoint, but if we have a workforce of 200,000,000 people with advanced degrees, what jobs will they have? Defense, finance, academia, and healthcare support employment for a large fraction of our highly educated workforce; all are currently on notice that some level of belt tightening is in order for their industries in the medium term. Are we planning on litigating our way to prosperity with Generation Z? There is plenty of demand for skilled labor in terms of masons, plumbers, etc. Engineering, not so much.

(4) Michael Gerson reads straight from the talking points. Treasury debt is worthless and illusory, nevermind that it is considered the safest investment on the planet. A slight reduction in payouts in 2037 is a system collapse.

Posted by: eggnogfool | December 28, 2010 10:00 AM | Report abuse

while Ezra is absolutely correct that larger market reforms shouldn't look to the high risk pools as a barometer of how exchanges will work they can certainly look to them to gauge the COST of care.

Also for those complaining about the low numbers in the pool look to the setup. Remember that you need to be uninsured for 6 months to qualify. So if you're insured now you have to theoretically drop off coverage for 6 months and then HOPE you get in and its affordable enough to get it.

Maybe they should have listened when we say we should have attacked costs along with access.

Posted by: visionbrkr | December 28, 2010 10:05 AM | Report abuse

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Posted by: sdgashasdg | December 28, 2010 11:01 AM | Report abuse


You know what You guys should stop complaining because, one the health care we have now isnt as good as it was supposed to be. also the law has just been signed so give it some time. so if u want to say u have the right to choose tell that to ur congress men or state official. If you do not have insurance and need one You can find full medical coverage at the lowest price by searching online for "Wise Health Insurance" If you have health insurance and do not care about cost just be happy it and trust me you are not going to loose anything!

Posted by: josephpatel | December 29, 2010 2:45 AM | Report abuse


I just refinanced using "123 Mortgage Refinance" and went from a 5.5/20yr to a 3.25/15yr. Monthly payments went down by about $100 but overall savings over the life of the loan are over $60,000. Definitely worth it in my opinion.

Posted by: arleneellis | December 29, 2010 3:47 AM | Report abuse

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