RCP Obama vs. Romney: Obama +1.8%; 7-day change: Obama -0.2%.
RCP Obama approval: 47.0%; 7-day change: -0.2%.
Top story: Summertime and the Fed might be easing
The Fed is moving closer to action. “Federal Reserve
officials, impatient with the economy’s sluggish growth and high
unemployment, are moving closer to taking new steps to spur activity and
hiring. Since their June policy meeting, officials have made clear–in
interviews, speeches and testimony to Congress–that they find the
current state of the economy unacceptable. Many officials appear
increasingly inclined to move unless they see evidence soon that
activity is picking up on its own. Amid the recent wave of disappointing
economic news, conversation inside the Fed has turned more intensely
toward the questions of how and when to move. Central bank officials
could take new steps at their meeting next week, July 31 and Aug. 1,
though they might wait until their September meeting to accumulate more
information on the pace of growth and job gains before deciding whether
to act.”
Jon Hilsenrath in The Wall Street Journal.
@jamespoulos: QE3 QED
@ryanavent: Is this really the best the Fed can do? This is absurdly lame.
Why the Fed might act (in one chart): http://wapo.st/PZNqZH.
Treasury investors cut bets on inflation to the least in six months.
“Treasury investors cut bets on inflation to the least in six months
and yields reached record lows as Bill Gross, who runs the world’s
biggest bond fund, warned the U.S. economy may stop growing. The
difference between the rate on 10-year notes and same- maturity Treasury
Inflation Protected Securities, a gauge of trader expectations for
consumer prices over the life of the debt, narrowed to 2 percentage
points. It was the least since Jan. 4 and compares with an average of
2.15 over the past decade. The U.S. plans to sell $35 billion of
five-year debt today, as slowing growth and Europe’s debt crisis fuel
demand for the relative safety of Treasuries. ‘The market is implying
that there is deflation in the economy, that the U.S. economy will get
weaker,’ said Kevin Yang, head of bond investment in Taipei at Hontai
Life Insurance Co., which has $6 billion in assets.”
Wes Goodman and Kristine Aquino in Bloomberg.
An audit the Fed bill is expected to pass the House today.
“Several senior House Democrats warned that passing a bill from Rep.
Ron Paul (R-Texas) requiring a full audit of the Federal Reserve Board’s
monetary policy decisions will allow Congress greater leverage to put
political pressure on these decisions, which they said would cause
serious problems in the U.S. and global financial markets. The Federal
Reserve Transparency Act, H.R. 459, was expected to come up for a vote
Wednesday, and seemed poised for passage given its 270 co-sponsors,
including nearly four dozen Democrats. Nonetheless, many Democrats used
the Tuesday floor debate to warn about the chances that Congress might
use the audit to politicize monetary policy decisions.”
Pete Kasperowicz in The Hill.
@dwreilly2: So, wait. Will the “Audit the Fed” bill tell us where Roger gets those classy knit sweaters he rocks after a match?
MALLABY: The Fed should raise its inflation target.
“The Fed faces a dilemma. With inflation below target and unemployment
far above the neutral rate, there is a clear case for stimulus. But the
familiar tools of stimulus seem unlikely to work. So the markets expect
next week’s Fed policy meeting to produce more equivocation. The better
way forward would be to come up with new tools…The Fed could couple more
quantitative easing with a formal announcement of a higher inflation
target. Some Fed leaders are open to this. Charles Evans, the Chicago
Fed president, has floated the idea of a 3 per cent target, effective
until unemployment falls below 7 per cent. A higher inflation target
would lead markets to understand the Fed is committed to quantitative
easing of game-changing magnitude, inducing the behavioural shifts
needed to make the policy succeed.”
Sebastian Mallaby in The Financial Times.
@mattyglesias: Let’s hope Ben Bernanke reads Sebastian Mallaby
Inflation would be at 4.2% if it was as far from target as unemployment: http://on.wsj.com/OYU3Kv.
CROOK: Elected government inaction has forced central banks to step up.
“The defining feature of policy since the Great Recession began has
been a fundamental shift in what we ask of elected governments on one
side and unelected central banks on the other. Governments have failed,
and are still failing, to get fiscal policy right. So, with varying
degrees of reluctance, central banks have had to step in with
quasi-fiscal measures, such as buying long-term government debt or
absorbing risks previously borne by the private sector. This
reassignment of duties is no mere technicality. It’s a momentous and
troubling development. To be clear, central banks have good reason to
engage in fiscal policy in today’s extraordinary circumstances…The
longer-term implications of this reversal, though, aren’t good.”
Clive Crook in Bloomberg.
HILTZIK: Inflation can be our friend. “Wars and
other crises have a way of remaking your oldest enemies into your best
friends (and vice versa — just look at the history of U.S.-Soviet
relations from 1939 to 1945). Given the depth and persistence of the
financial crisis here and in Europe, isn’t it time to embrace one of our
oldest economic foes, inflation?…Inflation hasn’t always been regarded
as the fearsome gargoyle it is now. In fact, it’s more commonly been
treated as a useful policymaker’s tool in times of economic
crisis…Stable prices, it was understood then, benefited bondholders and
other creditors by maintaining the value of their claims at the expense
of debtors and the working class. That’s still true.”
Michael Hiltzik in The Los Angeles Times.
Top op-eds
1) GORDON AND WEST: Don’t worry about the fiscal cliff.
“Why do pundits and politicians continue to act as if the U.S. is a
risky sovereign like Greece, in desperate need of a fiscal plan and in
constant search of pliant lenders lest it face a crisis? Such dire
prognostications are way off base — and the so- called fiscal cliff is
perhaps the biggest red herring…Officials in Washington must resolve a
fiscal drag equal to 5 percent of gross domestic product. In an emerging
market — or Europe, for that matter — this would be a recipe for
disaster: a sharply divided legislature would need to choose between
reneging on fiscal promises designed to placate lenders or brokering a
politically treacherous substitute deal in a condensed time frame. But
policy makers have an easy way out because the U.S. will not be subject
to such financial pressures. U.S. haven status all but guarantees that
the lame-duck Congress and Obama will agree to forgo the austerity that
makes up the fiscal cliff, and they won’t suffer for doing so.”
David Gordon and Sean West in Bloomberg.
2) FRUM: Republicans should reform, not repeal, Obamacare.
“‘Repeal and replace’ has been the Republican slogan against the giant
Democratic health reform enacted in 2010. But replace with what? The
reform, for all its many, many faults, did one important thing: extend
health insurance coverage to almost all Americans. A Republican
alternative should aspire to do the same. That statement is
controversial in today’s GOP. It should not be. Universal coverage need
not mean higher costs, nor more statism. But how to get there while
meeting Republican concerns?…Obamacare leaves Medicare, the scheme for
the elderly, almost untouched. This reliance on existing programmes has
dangerous effects…The exchanges offered an alternative vision: a
marketplace operated by the states in which providers would compete to
offer programmes to ensure their clients’ health and wellbeing.
Individuals would choose from a regulated menu of such programmes. This
managed competition model should be extended rather than eliminated.”
David Frum in The Financial Times.
3) HAY: It’s not the time to raise taxes on investment income.
“If Congress fails to act, tax rates for investment income will soar
beginning Jan. 1, 2013. The top tax rate on capital gains will jump to
23.8% from 15% and the top rate on dividends will nearly triple to 43.4%
from 15%. The House of Representatives is considering legislation to
extend the current 15% tax rate on investment income for one year. But
the Senate plan, scheduled for a vote this Wednesday, would raise the
top tax rate on capital gains and dividend income to 23.8% for
individuals making more than $200,000 per year and joint filers earning
more than $250,000. Now is not the time to raise tax rates on investment
income–even if limited to upper-income taxpayers. Raising taxes on
dividends and capital gains will have a devastating, domino-like effect
that would hurt the economic security of millions of Americans at every
income level.”
Lewis Hay II in The Wall Street Journal.
4) ORSZAG: Congress should privatize the Postal Service.
“Those who believe in the usefulness of government must be vigilant
about making sure all its activities are vital ones, since the
unnecessary ones undermine public confidence. With this in mind,
Congress should now privatize the U.S. Postal Service. Further evidence
for why this should happen came last week, when the Postal Service
announced that it would be unable to meet billions of dollars in
payments that are coming due in August and September for future retiree
health benefits. Privatization is not always the best way to improve
efficiency, but the problems facing the Postal Service will be difficult
to address if it remains within the government, and there is no longer
any sound reason for it not to go private.”
Peter Orszag in Bloomberg.
5) FELDSTEIN: The declining value of the euro is the key to its survival.
“The last eurozone summit ended with an optimistic communiqué but
nothing of substance. Meanwhile, financial markets may already be in the
process of forcing a solution upon Brussels policy makers. The
declining value of the euro holds the key to the eurozone’s survival…A
lower value of the euro would reduce the prices of eurozone exports and
raise the cost of imports, reducing or eliminating the current account
deficits of the peripheral European countries, since about half of their
trade is with countries outside the eurozone…The decline of the euro
can therefore occur without specific action by the European Central
Bank. But a further shift by the ECB toward a looser monetary policy
would speed the euro’s decline.”
Martin Feldstein in The Financial Times.
@BCAppelbaum: Trying to remember what we all did for entertainment back before the Euro crisis.
Chan Marshall interlude: Cat Power plays Love and Communication at Rolling Stone.
Still to come:NY Fed was quiet on Libor; a new CBO
score for Obamacare; cybersecurity is scaled back; historic thaw for the
Greenland ice sheet; and a dog gives a cat a piggyback ride.
Economy
The New York Fed was quiet on Barclays’ admission of rigging Libor.
“Treasury Secretary Timothy F. Geithner has said that he sounded the
alarm four years ago to regulators about problems with the benchmark
interest rate known as Libor. But Geithner, who was then head of the
Federal Reserve Bank of New York, did not communicate in key meetings
with top regulators that British bank Barclays had admitted to Fed
staffers that it was rigging Libor, according to people familiar with
the matter. Instead, regulators at the Commodity Futures Trading
Commission and the Justice Department worked largely without the Fed’s
help to build a case against Barclays. That work has culminated in a
massive scandal rocking the banking industry on both sides of the
Atlantic.”
Jia Lynn Yang and Danielle Douglas in The Washington Post.
Congressional Republicans doubt Romney’s plan to repeal Dodd-Frank.
“Mitt Romney says President Barack Obama’s financial reform is
strangling the economy – and he’s pledging to repeal it once he’s in
office. The problem: Republicans in Congress say that’s impossible. The
Dodd-Frank law celebrated its second anniversary this month, and its
critics concede it’s just too far along to fully repeal it. That leaves
Romney’s campaign rhetoric as just that – words that sound good on the
stump, but don’t offer Republicans in Congress much guidance on what
their Wall Street agenda should look like, even if they had a fellow
GOPer in the White House.”
Patrick Reis and MJ Lee in Politico.
The Senate votes today on tax cuts. “The legislative
battle set for Wednesday is largely meaningless. Neither side has the
60 votes necessary to overcome a filibuster and push its preferred tax
package to final passage. Leaders in both parties acknowledge that the
issue of what to do about the expiring tax cuts enacted during the
George W. Bush administration will be resolved only after the November
elections. For now, Senate Democrats hope to muster 50 votes for their
$250 billion proposal to extend the middle-class tax cuts through 2013,
an outcome that would permit them at least to claim majority support and
press the argument that Republicans are holding the middle class
hostage…The Republican-controlled House, meanwhile, was laying plans to
vote next week on a $400 billion one-year extension of the tax cuts
virtually identical to the one proposed by Senate Republicans.”
Lori Montgomery in The Washington Post.
Congress split over online sales taxes. “A move to
make all online retailers levy sales tax continues to face resistance
from some legislators in the US Congress even as it is backed by Amazon,
which wants to avoid being singled out by individual states that are
forcing it to collect. Laws that let internet sellers avoid collecting
the tax from customers are the most incendiary political issue in US
retailing, the source of rifts between online and bricks-and-mortar
stores and between big businesses and small rivals.”
Barney Jopson in The Financial Times.
Musical history interlude: The history of whistling.
Health Care
The CBO says the SCOTUS’ ruling will make Obamacare cost less and cover fewer.
“In its June 28 ruling, the court upheld the bulk of the Affordable
Care Act, but struck down a plan to require states to expand their
Medicaid programs to cover residents who earn as much as 138 percent of
the federal poverty level. As a result, analysts at the nonpartisan
Congressional Budget Office expect that some states will refuse to
expand their Medicaid programs or will delay expansion until after 2014,
when most other provisions of the law are scheduled to take effect. In
those states, people who earn between 100 percent and 138 percent of the
poverty level will have the option to receive government subsidies to
help them buy private insurance on newly created exchanges. But those
who earn less than the full poverty level could be left out, the CBO
said.”
Lori Montgomery in The Washington Post.
@sarahkliff:
Kind of weird to see some Dems celebrating the CBO report. Get that it
estimates savings – but only because states will thwart the law!
A proposed definition of ‘affordable’ may leave some children out.
“While most uninsured children will qualify for coverage under the
federal health law, a small percentage — 6.6 percent of the total, or at
least 460,000 — may be shut out because of how the government proposes
to define ‘affordable’ coverage, says a
report
from the U.S. Government Accountability Office. The proposed Treasury
Department rule says workers and their families are ineligible for
federal subsidies for coverage if an employer offers them affordable
coverage at work. An employer’s offer is considered affordable if the
worker’s share is less than 9.5 percent of household income. But the
rule bases affordability on what a worker would have to pay to cover
himself or herself, not on the cost of covering the entire family, which
is generally higher.”
Julie Appleby in Kaiser Health News.
Domestic Policy
The cybersecurity bill has been greatly scaled back.
“A cybersecurity bill likely to reach the Senate floor this week
greatly scales back an earlier White House-backed proposal to require
power grids, air-traffic-control systems and other critical networks to
bolster their protections…The bill’s sponsors–Sens. Joseph I. Lieberman
(I., Conn.), Susan Collins (R., Maine) and several Democrats–are seeking
to break a logjam on cybersecurity legislation. Earlier versions of the
bill stalled largely over Republican objections to the security
requirements for critical infrastructure, which they said amounted to
new regulations. The latest proposal drops the mandatory protection
standards, in a major shift in approach. Adherence to new standards
would be voluntary, with participating companies given liability
protections under the law.”
Siobhan Gorman in The Wall Street Journal.
Reliance on imports leaves the U.S. vulnerable to disasters.
“An increasing reliance on imports, combined with the fraying of the
nation’s power grid, highways and rail lines, leaves the United States
more vulnerable to the damage of natural disasters and terrorist
attacks, according to a report to be released Wednesday by former
homeland security secretary Tom Ridge. The report, which Ridge shared
with homeland security officials Tuesday morning, warns that the
offshoring of U.S. factories means that rebounding from a catastrophe
will be more difficult because so many critical supplies would have to
come from overseas.”
Peter Whoriskey in The Washington Post.
Congress will investigate data sellers. “In a move
that could lay bare the inner workings of the consumer data industry,
eight members of Congress have opened a sweeping investigation into data
brokers — companies that collect, collate, analyze and sell billions of
details annually about consumers’ offline, online and mobile activities
for marketing and other purposes. Representative Edward J. Markey,
Democrat of Massachusetts, and Representative Joe L. Barton, Republican
of Texas, co-chairmen of the Bipartisan Congressional Privacy Caucus,
along with six other lawmakers, sent letters of inquiry on Tuesday
afternoon to nine leading industry players. In the letters, the
legislators requested extensive information about how the companies
amass, refine, sell and share consumer data…The Congressional inquiry
heightens the scrutiny of a largely unregulated industry whose companies
sell their services to third parties, rarely interacting directly with
consumers.”
Natasha Singer in The New York Times.
Interspecies friendship interlude: A small dog gives a cat a piggyback.
Energy
The Greenland ice sheet saw its biggest thaw since 1973 this month.
“Greenland’s surface ice cover experienced a broader thaw during a
three-day period this month than in nearly four decades of satellite
record-keeping, according to three independent satellite measurements
analyzed by NASA and university scientists. About half of the surface of
Greenland’s ice sheet melts on average each summer. But between July 11
and 13, roughly 97 percent of the the sheet — from its coastal edges to
its 2-mile-thick center — experienced some thawing. The unusual amount
of melt — coming on the heels of the Petermann glacier’s loss of ice
last week — has highlighted the extent to which warming temperatures are
affecting the Arctic. There has been an unusually strong ridge of warm
air, or a heat dome, over Greenland.”
Juliet Eilperin in The Washington Post.
The House will vote on a GOP drilling plan today.
“Members of the House debated legislation on Tuesday that would replace
President Obama’s five-year plan for offshore oil and gas lease sale
plan with a Republican plan that would expand lease sales in an effort
to increase domestic oil and gas production. The GOP bill, H.R. 6082,
would replace the Obama administration’s plan to keep some offshore
areas off limits for lease sales, and also require additional lease
sales off Alaska’s coast. Obama’s five-year plan was put forward in late
June, and Republicans said they are compelled to try to replace it with
a more aggressive plan for developing domestic energy…Hastings also
announced that Republicans would set up two main votes on Wednesday —
one on the GOP bill, and another on a bill that reflects Obama’s
five-year plan.”
Pete Kasperowicz in The Hill.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.
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