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Posted at 6:40 AM ET, 01/11/2011

Wonkbook: Gun control legislation being introduced; the Fed is the most profitable bank in history; previewing the oil spill report

By Ezra Klein

PH2010111706875 (2).jpg

Top Stories

Companion bills banning the gun magazine used in the Tucson shooting are being introduced, reports Shira Toeplitz: "One of the fiercest gun control advocates in Congress, Rep. Carolyn McCarthy (D-N.Y.), pounced on the shooting massacre in Tucson, Ariz., Sunday, promising to introduce legislation as soon as Monday targeting the high-capacity ammunition clip the gunman used. McCarthy ran for Congress after her husband was gunned down and her son seriously injured in a shooting in 1993 on a Long Island commuter train...Sen. Frank R. Lautenberg (D-NJ) said he’s preparing to introduce a similar bill in the Senate. 'The only reason to have 33 bullets loaded in a handgun is to kill a lot of people very quickly,' Lautenberg said in a statement. 'These high-capacity clips simply should not be on the market.'"

The Fed is the most profitable bank in history, reports Robin Harding: "The US Federal Reserve made a record profit of $80.9bn in 2010 and sent $78.4bn to the US Treasury as income poured in from its programme of quantitative easing. The figures show how the financial crisis has turned the Fed into the most profitable bank in history, earning income of $88.1bn in 2010 but paying only $2.7bn in interest and $4.3bn in operating expenses. The Fed’s interest costs are minimal because almost all of its liabilities, such as bank reserves, are paid at the overnight rate of 0 to 0.25 per cent but many of the longer term assets it has bought yield 4 or 5 per cent."

The BP oil spill panel wants stricter rules, more money for those affected, report Steven Mufson and Juliet Eilperin: "The presidential oil-spill commission is planning to recommend tougher regulation, stiffer fines and a new industry-run safety organization in its final report Tuesday as part of an effort to prevent a repeat of the massive BP oil spill in the Gulf of Mexico last year. The report will recommend strengthening the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), calling it 'underfunded' with personnel who are 'often badly trained,' according to a person briefed by William K. Reilly, the commission's co-chairman. The report suggests that the bureau's head have technical expertise and that an office of safety and environment report directly to the interior secretary."

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Late night indie interlude: No Age plays "Fever Dreaming" on Late Show with David Letterman.

Still to come: Wages are falling more than usual this recession; the Supreme Court declined to hear a case closely related to health-care reform; Michelle Rhee wants to see some teachers fired; drilling proponents are seizing on higher gas prices; and the world's most incompetent ketchup dispensing robot.

Economy

The recession is causing unusually large drops in wages, reports Sudeep Reddy: "Even at times of high unemployment in the past, wages have been very slow to fall; economists describe them as 'sticky.' To an extent rarely seen in recessions since the Great Depression, wages for a swath of the labor force this time have taken a sharp and swift fall...Between 2007 and 2009, more than half the full-time workers who lost jobs that they had held for at least three years and then found new full-time work by early last year reported wage declines, according to the Labor Department. Thirty-six percent reported the new job paid at least 20% less than the one they lost."

Wall Street is unloading Treasuries, signaling optimism about growth: http://bit.ly/eCfWUu

The new House trade subcommittee chair opposes legislation blocking Chinese imports, report Alan Beattie and James Politi: "The US needs to wake up its dormant trade policy by ratifying stalled bilateral pacts and eschewing damaging currency legislation to punish China, according to the new senior Republican on the trade issue in the House of Representatives. Kevin Brady, the Texas congressman who took over last week as chairman of the House ways and means trade subcommittee, said four years of foot-dragging in the Democratic-controlled House had left the US falling behind other countries on trade and tax reform...Mr Brady also said he would not pursue legislation allowing the US to restrict Chinese imports because that would undervalue its currency.'

The G-20 is divided over the role the dollar should play in the global currency system, report Damian Paletta and Ian Talley: "French President Nicolas Sarkozy said he recognized the importance of the dollar, but vowed after meeting President Barack Obama 'to propose new ideas' that could affect the international currency system--suggesting a divergence in economic priorities. Mr. Sarkozy, who will host the November summit of the Group of 20 leading industrialized nations, has pushed his foreign counterparts to consider reducing the role of the dollar as part of an overhaul of the international monetary system. French officials have said an overreliance on the dollar exacerbated the financial crisis by shifting capital from low-interest-rate rich countries to higher-yield emerging-market nations."

Implementing quantitative easing requires the Fed to engage in high-speed trading: http://nyti.ms/h9pitE

The US should focus on creating the right jobs, writes Raghuram Rajan: "Policymakers should remember that the housing boom was fueled by easy monetary policy, which sought to expand job growth as the US recovered from the last recession. Indeed, high-school graduation rates dropped in Las Vegas as people left school for readily available unskilled construction jobs. Now those uneducated unemployed are experiencing more than three times the unemployment rate of college graduates. It will be very hard for them to return to the workforce. The lesson for policymakers is clear: instead of constantly trying to boost spending and potentially creating problems for the future, a more sustainable way to improve job growth is to facilitate the 're-skilling' of the unemployed."

Needs work interlude: An almost functional ketchup-dispensing robot.

Health Care

Could the Supreme Court refuse to hear the cases involving health-care reform? Warren Richey reports: "In a case with potential implications for legal challenges to the Obama health-care reform law, the US Supreme Court on Monday refused to examine whether Congress overstepped its authority when it made it a federal crime for a convicted felon to possess a bullet-proof vest. The key question in Alderman v. US was whether there are limits to Congress’s ability under the Constitution’s commerce clause to outlaw a local, intrastate activity like wearing body armor...Had the high court taken up the Alderman case, it would have signaled a willingness by the justices to closely examine what limits, if any, apply to congressional power under the commerce clause."

Domestic Policy

State budget crunches should lead to layoffs for poor teachers, writes Michelle Rhee: "The budget crisis inevitably requires layoffs of school staff. Teacher-layoff policies are a good example of how recognizing quality over seniority translates into responsible decision-making during difficult economic times. Currently, layoff decisions are based on seniority, which means the last person hired is the first person fired. However, research, such as a recent study by Dan Goldhaber at the University of Washington, shows that when teacher layoffs are determined by seniority it hurts students and teachers... States will continue to find it difficult to solve budget deficits if they continue to ignore problems surrounding the current structure of their benefits and pensions for teachers and administrators."

Politicians need to stay in the open, writes former Rep. Paul Kanjorski: http://nyti.ms/dT7Pbb

Confusing hobbies interlude: Stacking oranges on cat paws.

Energy

The House GOP is planning to use rising gas prices to push for increased drilling, reports Darren Goode: "Rising crude oil and gasoline prices mean that Republicans and Democrats are getting their talking points ready for what some say could be a repeat of the partisan rancor in the summer of 2008. For Republicans, they hope the silver lining of higher prices will provide greater emphasis for their 'all of the above' strategy toward increasing domestic production of oil, gas, nuclear, coal and alternative energy sources. 'It’s obviously going to spur interest in Congress,' said Sen. Chuck Grassley (R-Iowa). 'Because I’ll tell you, there’s nothing more politically sensitive than the price of gasoline.'"

The Chamber of Commerce is pushing the administration to support fossil fuel industries: http://bit.ly/eLLppX

The federal government is making plans for controlling the Arctic once it melts, reports Jacquelyn Ryan: "The Obama administration, like the Bush administration before it, has identified the Arctic as an area of key strategic interest. The U.S. military anticipates the Arctic will become 'ice-free' for several summer weeks by 2030, possibly as early as 2013. But the United States does not have the military and civilian resources it says it needs to successfully operate there - and there are few indications that any significant ones will be forthcoming...The Arctic is believed to hold nearly a quarter of the world's untapped natural resources and a new passage could shave as much as 40 percent of the time it takes for commercial shippers to travel from the Atlantic to the Pacific."

The electric Chevrolet Volt has won the Detroit Auto Show's car of the year award: http://wapo.st/htu2bi

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

By Ezra Klein  | January 11, 2011; 6:40 AM ET
Categories:  Wonkbook  
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Next: Keeping an eye on tax reform

Comments

Just a tip on the fed's profits: The other reason it has such low numbers on the expense side of the ledger is that it doesn't appear to be creating loss reserves for any of the collateral that it took on at face value.

Posted by: paul314 | January 11, 2011 9:32 AM | Report abuse

"The recession is causing unusually large drops in wages, reports Sudeep Reddy"

From the linked article:

"Overall, U.S. wages continue to grow, but at a slow pace. Wages and salaries for civilian workers were up 1.5% before adjusting for inflation in the 12 months ended in September, according to the Labor Department's comprehensive Employment Cost Index, which compares wages in the same jobs and doesn't reflect wages of people switching careers. Over the same period, consumer prices rose 1.1%."

More accurately, people who are losing jobs are finding new jobs at lower wages. Real wages - for people in the same jobs - have actually risen during the recession. This is part of the reason that people who lose jobs are having difficulty finding new ones.

By the way, everyone who touts mild inflation as a way of avoiding the sticky wage problem, while the level of wages are sticky, the growth rate of wages also appears to be sticky. If people become used to mild inflation and 2% annual raises, taking away raises appear to be as difficult as pay cuts in a zero inflation environment.

Posted by: justin84 | January 11, 2011 9:42 AM | Report abuse

"The electric Chevrolet Volt has won the Detroit Auto Show's car of the year award"

Yet, there is no reason to believe that this car would be able to sell in absence of a $7,500 tax credit - in fact, it's hard to believe it will sell well as is - $33,000 is still a high price tag for a car which is basically a Cruze (~$16,000 MSRP) with a different engine.

I mean really, it beat out the Hyundai Sonata? Let's take a look at 2011 sales figures a year from now and see what the market believes to be the better car.

Posted by: justin84 | January 11, 2011 9:54 AM | Report abuse

Shouldn't liberals and Democrats everywhere be outraged by the government giving rich people subsidies so they will buy the Volt? I mean, how many 'poor' or even middle-class people do you think are out shopping for a $40,000 car?

I can only say this....if you are middle class or lower on the income scale, and you are out buying a $40,000 car....don't whine to me about how you can't afford health insurance.

Posted by: dbw1 | January 11, 2011 10:01 AM | Report abuse

dbw1,

yes but its keeping their union buddies in jobs so the tradeoff works for then I'd expect.


Good for Michelle Rhee. The problem though is how do you determine who the bad teachers are. When they're so insulated from responsibility for the poor job they're doing because of tenure and other union backstops to keep poor teachers in their jobs and paying union dues. My daughter has a teacher that's absolutely horrible (and many that are very good) but when we spoke 3 times over the last month to the guidance counselor requesting a meeting, the teacher is blowing not only us off but the guidance counselor (who is shocked by this, we're not). So what's our next step. The principal. When that fails the school superintendent. No, not the one under indictment for stealing 2 million from the district, I guess whoever the new one is. Ya good luck with that, we'll need it.

Posted by: visionbrkr | January 11, 2011 10:08 AM | Report abuse

Gun control legislation? You mean, since the Democrat effort to smear Sarah Palin and the Tea Party as the cause for this tragedy is proving false the more we learn about the shooter, they are redirecting the blame to lack of more gun control? This sounds familiar.....oh yeah, I posted on these boards yesterday that as the facts came out and leftists would no longer be able to blame conservatives, they would turn to blaming gun control (or lack thereof) and continue to politicize this tragedy by using it as an excuse to pass more gun control laws.

You know, following the logic of liberal-progressives I suppose you would have to conlude that Giffords wanted to commit suicide since she supported conceal-carry.

Posted by: dbw1 | January 11, 2011 10:10 AM | Report abuse

I suppose I shouldn't be, but I never cease to be amazed by the staggering level of hypocrisy on the left.

Remember the Ft. Hood shooting? The left and mass media told us we shouldn't jump to conclusions about his motives, even though we knew 1) he was a muslim, 2) he had contact with a radical imam in Yemen, and 3) Army records dating back a few year showed they suspected he had 'tendencies toward radical Islam'. But the left-wing in our country still self-righteously proclaimed it to be bigoted and downright racist to jump to conclusions about the cause and motive of the shooter.

Contrast that to the Tucson shooting of a Democrat congresswoman. Within hours (not days, hours) the left-wing media and Democrat leaders were placing blame squarely on the shoulders of Sarah Palin, the Tea Party, right-wing talk radio, and any other political opponent they could smear while they were at it. This in spite of the fact that even today, there is no proof...NONE....that Lougher:
-ever has seen the 'crosshairs' map on Palin's website.
-attended a Tea Party rally, or even supported them in any way.
-ever listened to Rush Limbaugh, Glen Beck, Hannity, or any other right-wing talk radio program.

No evidence, no facts...yet left-wingers everywhere are trying to use this awful tragedy to smear conservatives for political gain. I would say it's shameful, but it's even worse than that....

Posted by: dbw1 | January 11, 2011 10:26 AM | Report abuse

@dbw:

Ezra had a post up a few hours after the shooting arguing that it wasn't politically motivated.

I don't see why, in the wake of tragedy, it doesn't make sense to consider what extent it was preventable, and what policy modifications might make sense. Is there a reason why someone needs a 33-bullet clip, besides to assist with mass murder? Make the case. Is there a reason it makes sense that those with mental health issues who are considered to be "a danger to self and others" should have no problem obtaining assault weapons? Feel free to make the case.

Posted by: eggnogfool | January 11, 2011 10:49 AM | Report abuse

As an established non-alternative energy guy, let me say a word about the Volt. I've been doing a lot of reading and the problem isn't the car it's the expectations.

From all the non-crazy car guys, it's a nice product for a niche market, overpriced of course, but not more so than some other type of vehicles like SUV's. In an industry where everybody in America has their own type of vehicle, (mini-suv's for soccer moms who feel guilty about an suv, or loathe a minivan), this car has a small place at the table.

The problem is of course the hype. No, electric and hybrid cars won't take over the industry. No the Volt won't bring GM back to leadership in the industry.

Consider it like one of the family. If you have a kid with good mechanical ability, don't tell the world that he's going to college to be a lawyer, celebrate the fact that he might make an excellent living keeping the rest of our homes running well at $60-70 an hour!

Posted by: 54465446 | January 11, 2011 10:57 AM | Report abuse

eggnofool:

It's actually a magazine, not a clip. It's only important because as you know from reading posts about financials, you immediately dismiss posters who don't know the language as being not worthy of your time.

Yesterday, Jennifer Rubin was in the middle of a rant about the Chinese war making potential when she referred to their new plane as a stealth bomber. So sorry, end of reading, because it's actually a fighter not a bomber.

Posted by: 54465446 | January 11, 2011 11:04 AM | Report abuse

eggnogfool:
"Is there a reason why someone needs a 33-bullet clip, besides to assist with mass murder? Make the case."

If the Democrat legislation discussed today became law, it would limit clips to 10 bullets. So what's to stop the next Loughner from carrying 2 guns, each with 10 bullets loaded for mayhem?

The point isn't to argue gun control (which I could). The point is that leftists always try to politicize tragedy to accomplish political goals they otherwise can't achieve in a 'normal' environment. It's quite dispicable, in my opinion.

And by the way...I've never owned a gun in my life (well, other than a semi-functioning bb-gun). But I understand the history of why our Founders believed it dangerous to allow the government to keep the citizenry unarmed.

I think those on the left are left to argue this....thousands (or millions) of people own guns and clips like those used by Loughner, but they haven't committed mass murder. Could there be, might there be, just by some odd chance....some driver other than the availability of firearms that causes nut cases to commit these senseless acts?

On a completely unrelated note, I hope no public high school teacher ever tried to teach Loughner about God and the principles of right and wrong. That would have been egregious....

Posted by: dbw1 | January 11, 2011 11:09 AM | Report abuse

@54465446:
"It's only important because as you know from reading posts about financials, you immediately dismiss posters who don't know the language as being not worthy of your time."

What are you talking about? When did I dismiss a poster for not knowing the language?

dbw1:
I guess we might as well just legalize private purchase of nukes, because someone could just go to everyone's house in a 5-mile radius and stab them to death while they sleep.

It's just a practicality issue. Obviously a line has to be drawn at some fairly arbitrary point, and I'd argue that point should be where the only effect of your policy change is making mass murder more convenient.

Posted by: eggnogfool | January 11, 2011 11:20 AM | Report abuse

eggnofool:

Forgive me for poor choice of words.

Here's a better explanation. Whenever WE read a post about a field where WE may have some expertise or knowledge, WE (as in all of us) reflexively dismiss those who obviously don't understnad much about their subject as evidenced by a lack of the pertinent vocabulary.

It wasn't directed at you, but I see my choice of words made it seem so.

Posted by: 54465446 | January 11, 2011 12:01 PM | Report abuse

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