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| Welcome to Wonkbook, Wonkblog's morning policy news primer byMax Ehrenfreund (@MaxEhrenfreud). Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here. Follow us on Twitter and Facebook. |
| Was Ted Cruz right to claim inequality worsened under Obama? |
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Politicians on both sides of the aisle are talking about how to ensure that everyone, not just the wealthy, benefits from economic growth, with conservatives accusing the Obama administration of protecting banks and corporations at the expense of the middle class. "I chuckle every time I hear Barack Obama or Hillary Clinton talk about income inequality, because it’s increased dramatically under their policies," Sen. Ted Cruz (R-Tex.) said last month.
That's not true, though. As David Leonhardt writes in The New York Times, federal policy effectively blunted the pain of the financial crisis for most American families, according to data from the nonpartisan Congressional Budget Office. When incomes decline, people pay less in taxes. When people lose their jobs, they qualify for benefits like unemployment insurance and food stamps. The fiscal stimulus expanded many of those programs. As a result, writes Leonhardt, while disposable incomes for the richest percentile declined 27 percent between 2007 and 2011, they remained constant for the nine-tenths of the country that isn't very rich.
Income inequality is still at its highest level in decades, but it's declined slightly since 2007, Leonhardt writes.
Cruz might argue that getting a reduced tax bill or food stamps doesn't feel like an increase in disposable income for most Americans and that it's income from the market that matters most. That's the point that the office of Sen. Bernie Sanders (I-Vt.) made when pressed about his claim that the wealthiest percentile have captured 99 percent of the gains from the recovery. (At The Fact Checker, my colleague Michelle Ye Hee Lee dinged him for using "a specific and narrow" description without context.)
Yet a persistently sluggish recovery has also been frustrating for the richest Americans, who haven't been pulling away from the rest of the country as quickly as they have in the past. If you squint at this graph, you might be able to see an increase in inequality in recent years, but it seems odd to claim that the Obama administration's policies have led to a dramatic change, at least compared to his immediate predecessors.
What's in Wonkbook: 1) Judge halts Obama's deportation plan 2) Opinions, including the Greek finance minister on Kant and the euro 3) Refinery workers strike, and more
Map of the day: Many of the 6 million people who could lose health insurance subsidies if a case against Obamacare succeeds live in the South, especially Florida and Texas. Another large group lives in the Midwest. Lena H. Sun and Niraj Chokshi in The Washington Post.
A federal judge in Texas has ordered a halt to President Obama's executive action for undocumented immigrants. "In an order filed on Monday, the judge, Andrew S. Hanen of Federal District Court in Brownsville, prohibited the Obama administration from carrying out programs the president announced in November that would offer protection from deportation and work permits to as many as five million undocumented immigrants. The first of those programs was scheduled to start receiving applications on Wednesday." Julia Preston in The New York Times.
But the federal government will appeal. "The White House says the Justice Department will appeal a federal judge's ruling which temporarily blocked President Barack Obama's executive action on immigration. ... In a statement early Tuesday morning, the White House said Monday's ruling 'wrongly prevents' the president's 'lawful, commonsense policies' from taking effect." The Associated Press.
SARGENT: So what will Congress do about funding for Homeland Security now? "Republicans who want this mess resolved might argue that, now that the courts are blocking Obama’s lawlessness, Republicans can safely fund Homeland Security without including measures that roll back his actions. ... But here’s the rub: The administration would quickly run to the 5th Circuit Court and request that it overturn the lower court’s stay. It’s very possible — though not certain by any means — that the 5th Circuit would dismiss the case on standing grounds and allow Obama’s executive actions to move forward as scheduled later this month." The Washington Post. 2/12/15.
The Greeks are not using game theory to negotiate a loan with the rest of Europe, writes Yanis Varoufakis, the Greek finance minister. "Because I spent many years during my previous life as an academic researching game theory, some commentators rushed to presume that as Greece's new finance minister I was busily devising bluffs, stratagems and outside options, struggling to improve upon a weak hand. Nothing could be further from the truth. ... We must do what is right not as a strategy but simply because it is ... right. ... The major influence here is Immanuel Kant, the German philosopher who taught us that the rational and the free escape the empire of expediency by doing what is right." The New York Times.
FARRELL: Of course, a good game theorist pretends not to be using game theory. "Varoufakis and the Greek government are threatening not to cooperate with the European Union – even if that results in a run on Greek banks and catastrophe for the Greek citizens they represent. If that threat is to be credible, it has to be, at least in part, irrational in game theoretic terms. A belief that one must do what is right, regardless of the consequences is just as irrational from the point of view of game theory as a threat to cut one’s wrists if one doesn’t get one’s way on some small matter." The Washington Post.
EL-ERIAN: Varoufakis must be willing to play the long game."Monday’s meeting ended in an impasse as Greek officials rejected demands that they stick to the previous government's austerity programs as a condition for continued aid." The Greeks "have no viable choice but to be patient, and to opt for a sequential rather than simultaneous approach to meet their objectives. If the consensus among European leaders is to have Greece remain as an economically dynamic and financially viable member of the euro area, sentiment will eventually turn in favor of a fundamental reset of the Greek program, not least because economic logic will ultimately prevail." Bloomberg View.
KRUGMAN: European officials should recognize it's in their interest to grant Greece's requests. "If they don’t, the European project of peace and democracy through prosperity will not survive. ... The simple fact is that Greece cannot pay its debts in full. Austerity has devastated its economy... Attempting to cough up the extra 3 percent of G.D.P. the creditors are demanding would cost Greece not 3 percent, but something like 8 percent of G.D.P. And remember, this would come on top of one of the worst economic slumps in history."The New York Times.
MÜNCHAU: Greece can issue a kind of parallel quasi-currency if it doesn't get a new loan. "A number of economists have been thinking along these lines. Robert Parenteau, a US economist, has proposed what he called 'tax anticipation notes'. These are IOUs backed by future tax revenue. Such instruments exist in the US at state level. They act as a tax credit that allows governments to run a fiscal deficit until the economy recovers. With such an instrument Greece could abandon austerity without abandoning the euro. John Cochrane, a conservative economist at the University of Chicago, also wants the Greek government to print IOUs. They would be electronic money, not necessarily cash and would be used to pay pensions and other transfer payments." The Financial Times.
CHAIT: The Democratic majority will continue to emerge, but with complications. "Barack Obama’s election and reelection vindicated the argument [of] 'The Emerging Democratic Majority,' first put forward a dozen years ago by Ruy Teixeira and John Judis. ... The national dominance Teixeira and Judis forecast ... never quite happened. Instead, rather, Democrats have gained strength in some areas and lost strength in others. The trade-off has worked generally in their favor; every election cycle replaces older, whiter, Republican-leaning voters with younger, more racially diverse, Democratic-leaning ones. ... The party’s new base is heavily concentrated in urban areas, whose voting strength [is] underrepresented in both the House and the Senate. Additionally, they are far more likely than core Republican voters to stay home during midterm elections. This has allowed the Republican Party to gain a near lock on holding the House, and a strong geographic advantage in holding the Senate." New York.
TANKERSLEY: How will the presidential candidates reckon with robots? "Techno-optimists predict big breakthroughs that create good jobs that would be as unimaginable today as 'auto worker' was in the late 1800s. Pessimists forecast an economy where only a small slice of workers have the skills and education to stay ahead of the automation wave. Where almost everyone agrees is that the phenomenon is growing, and that helping already strained middle-class workers adjust to it calls for big policy debates over education, entrepreneurship and the social safety net. Which is to say, robots, as a political issue, could be ripening in time to snag a lead role in the economic debate of this campaign." The Washington Post.
PORTER: Biofuels could do more harm than good. "The argument for aggressive deployment of bioenergy assumes that it is carbon-neutral because plants pull CO2 back from the air when they grow, offsetting the carbon emitted from burning them as fuel. But diverting a cornfield or a forest to produce energy requires not using it to make food or, just as important, to store carbon. ... If the critics are right, the hunt for biomass on a large scale could vastly change the world’s land use, food supply and ecosystems while helping little to prevent climate change." The New York Times.
The strike at Pacific ports is an economic catastrophe in the making, writes former secretary of commerce Mickey Kantor. "The latest deterioration in the contract talks — which resulted in an almost complete shutdown of the Los Angeles and Long Beach ports over the holiday weekend, with 33 ships lined up waiting to be unloaded Monday — has the potential to turn the slowdown into a full-scale crisis. If the West Coast's 29 ports are not returned to full operation soon, it will create a shock wave that reverberates across the economy." The Los Angeles Times.
Refinery workers are striking for the first time in decades. "At a time when membership has sunk, unions that control critical infrastructure -- like oil refineries -- are digging in. And the fact that the economy is finally recovering gives them more solid ground to stand on, since unions figure that companies have the margins to share a little extra." Lydia DePillis in The Washington Post.
Holder will argue for more lenient sentencing in address Tuesday announcing the release of new data on drug cases."The share of federal drug offenders subject to mandatory minimum sentences that critics call unduly harsh has plunged in the last year, according to figures Attorney General Eric Holder plans to release Tuesday in arguing for the success of his criminal justice policies. Preliminary data obtained by The Associated Press show a 6 percent drop in the number of federal drug trafficking prosecutions in the year that ended last September. At the same time, the percentage of drug cases in which prosecutors pursued mandatory minimum sentences dropped from nearly 64 to roughly 51, which the Justice Department says is the lowest on record." Eric Tucker for theAssociated Press.
The debate over climate change is settled in the United Kingdom. "Republicans and Democrats may still be jousting over whether human behavior is causing the planet to warm and, if so, whether anything should be done about it. But in Britain there’s no debate. The consensus is so strong that [Prime Minister David] Cameron and [his opponent Ed] Miliband, along with Liberal Democrat leader Nick Clegg, have taken the extraordinary step during a heated campaign of signing a joint statement committing to fight 'one of the most serious threats facing the world today.' " Griff Witte in The Washington Post.
Inequality has declined since the financial crisis, partly as a result of federal policy. "How could that be? Because the crisis, which ran roughly from 2007 to 2010, reduced the pretax incomes of the wealthiest Americans more than the incomes of any group. The wealthy have indeed received the bulk of the gains since the recovery began, but they still haven’t recovered their losses. Meanwhile, the steps that the federal government took in response to the crisis, including tax cuts and benefit increases, have mostly helped the nonwealthy. ... Inequality isn't destined to rise. Not only can economic forces, like a recession, reduce it, but government policy can, too." David Leonhardt in The New York Times.
That's not true, though. As David Leonhardt writes in The New York Times, federal policy effectively blunted the pain of the financial crisis for most American families, according to data from the nonpartisan Congressional Budget Office. When incomes decline, people pay less in taxes. When people lose their jobs, they qualify for benefits like unemployment insurance and food stamps. The fiscal stimulus expanded many of those programs. As a result, writes Leonhardt, while disposable incomes for the richest percentile declined 27 percent between 2007 and 2011, they remained constant for the nine-tenths of the country that isn't very rich.
Income inequality is still at its highest level in decades, but it's declined slightly since 2007, Leonhardt writes.
Cruz might argue that getting a reduced tax bill or food stamps doesn't feel like an increase in disposable income for most Americans and that it's income from the market that matters most. That's the point that the office of Sen. Bernie Sanders (I-Vt.) made when pressed about his claim that the wealthiest percentile have captured 99 percent of the gains from the recovery. (At The Fact Checker, my colleague Michelle Ye Hee Lee dinged him for using "a specific and narrow" description without context.)
Yet a persistently sluggish recovery has also been frustrating for the richest Americans, who haven't been pulling away from the rest of the country as quickly as they have in the past. If you squint at this graph, you might be able to see an increase in inequality in recent years, but it seems odd to claim that the Obama administration's policies have led to a dramatic change, at least compared to his immediate predecessors.
What's in Wonkbook: 1) Judge halts Obama's deportation plan 2) Opinions, including the Greek finance minister on Kant and the euro 3) Refinery workers strike, and more
Map of the day: Many of the 6 million people who could lose health insurance subsidies if a case against Obamacare succeeds live in the South, especially Florida and Texas. Another large group lives in the Midwest. Lena H. Sun and Niraj Chokshi in The Washington Post.
1. Top story: Judge sets back president's immigration agenda
But the federal government will appeal. "The White House says the Justice Department will appeal a federal judge's ruling which temporarily blocked President Barack Obama's executive action on immigration. ... In a statement early Tuesday morning, the White House said Monday's ruling 'wrongly prevents' the president's 'lawful, commonsense policies' from taking effect." The Associated Press.
SARGENT: So what will Congress do about funding for Homeland Security now? "Republicans who want this mess resolved might argue that, now that the courts are blocking Obama’s lawlessness, Republicans can safely fund Homeland Security without including measures that roll back his actions. ... But here’s the rub: The administration would quickly run to the 5th Circuit Court and request that it overturn the lower court’s stay. It’s very possible — though not certain by any means — that the 5th Circuit would dismiss the case on standing grounds and allow Obama’s executive actions to move forward as scheduled later this month." The Washington Post. 2/12/15.
2. Top opinions
FARRELL: Of course, a good game theorist pretends not to be using game theory. "Varoufakis and the Greek government are threatening not to cooperate with the European Union – even if that results in a run on Greek banks and catastrophe for the Greek citizens they represent. If that threat is to be credible, it has to be, at least in part, irrational in game theoretic terms. A belief that one must do what is right, regardless of the consequences is just as irrational from the point of view of game theory as a threat to cut one’s wrists if one doesn’t get one’s way on some small matter." The Washington Post.
EL-ERIAN: Varoufakis must be willing to play the long game."Monday’s meeting ended in an impasse as Greek officials rejected demands that they stick to the previous government's austerity programs as a condition for continued aid." The Greeks "have no viable choice but to be patient, and to opt for a sequential rather than simultaneous approach to meet their objectives. If the consensus among European leaders is to have Greece remain as an economically dynamic and financially viable member of the euro area, sentiment will eventually turn in favor of a fundamental reset of the Greek program, not least because economic logic will ultimately prevail." Bloomberg View.
KRUGMAN: European officials should recognize it's in their interest to grant Greece's requests. "If they don’t, the European project of peace and democracy through prosperity will not survive. ... The simple fact is that Greece cannot pay its debts in full. Austerity has devastated its economy... Attempting to cough up the extra 3 percent of G.D.P. the creditors are demanding would cost Greece not 3 percent, but something like 8 percent of G.D.P. And remember, this would come on top of one of the worst economic slumps in history."The New York Times.
MÜNCHAU: Greece can issue a kind of parallel quasi-currency if it doesn't get a new loan. "A number of economists have been thinking along these lines. Robert Parenteau, a US economist, has proposed what he called 'tax anticipation notes'. These are IOUs backed by future tax revenue. Such instruments exist in the US at state level. They act as a tax credit that allows governments to run a fiscal deficit until the economy recovers. With such an instrument Greece could abandon austerity without abandoning the euro. John Cochrane, a conservative economist at the University of Chicago, also wants the Greek government to print IOUs. They would be electronic money, not necessarily cash and would be used to pay pensions and other transfer payments." The Financial Times.
CHAIT: The Democratic majority will continue to emerge, but with complications. "Barack Obama’s election and reelection vindicated the argument [of] 'The Emerging Democratic Majority,' first put forward a dozen years ago by Ruy Teixeira and John Judis. ... The national dominance Teixeira and Judis forecast ... never quite happened. Instead, rather, Democrats have gained strength in some areas and lost strength in others. The trade-off has worked generally in their favor; every election cycle replaces older, whiter, Republican-leaning voters with younger, more racially diverse, Democratic-leaning ones. ... The party’s new base is heavily concentrated in urban areas, whose voting strength [is] underrepresented in both the House and the Senate. Additionally, they are far more likely than core Republican voters to stay home during midterm elections. This has allowed the Republican Party to gain a near lock on holding the House, and a strong geographic advantage in holding the Senate." New York.
TANKERSLEY: How will the presidential candidates reckon with robots? "Techno-optimists predict big breakthroughs that create good jobs that would be as unimaginable today as 'auto worker' was in the late 1800s. Pessimists forecast an economy where only a small slice of workers have the skills and education to stay ahead of the automation wave. Where almost everyone agrees is that the phenomenon is growing, and that helping already strained middle-class workers adjust to it calls for big policy debates over education, entrepreneurship and the social safety net. Which is to say, robots, as a political issue, could be ripening in time to snag a lead role in the economic debate of this campaign." The Washington Post.
PORTER: Biofuels could do more harm than good. "The argument for aggressive deployment of bioenergy assumes that it is carbon-neutral because plants pull CO2 back from the air when they grow, offsetting the carbon emitted from burning them as fuel. But diverting a cornfield or a forest to produce energy requires not using it to make food or, just as important, to store carbon. ... If the critics are right, the hunt for biomass on a large scale could vastly change the world’s land use, food supply and ecosystems while helping little to prevent climate change." The New York Times.
The strike at Pacific ports is an economic catastrophe in the making, writes former secretary of commerce Mickey Kantor. "The latest deterioration in the contract talks — which resulted in an almost complete shutdown of the Los Angeles and Long Beach ports over the holiday weekend, with 33 ships lined up waiting to be unloaded Monday — has the potential to turn the slowdown into a full-scale crisis. If the West Coast's 29 ports are not returned to full operation soon, it will create a shock wave that reverberates across the economy." The Los Angeles Times.
3. In case you missed it
Holder will argue for more lenient sentencing in address Tuesday announcing the release of new data on drug cases."The share of federal drug offenders subject to mandatory minimum sentences that critics call unduly harsh has plunged in the last year, according to figures Attorney General Eric Holder plans to release Tuesday in arguing for the success of his criminal justice policies. Preliminary data obtained by The Associated Press show a 6 percent drop in the number of federal drug trafficking prosecutions in the year that ended last September. At the same time, the percentage of drug cases in which prosecutors pursued mandatory minimum sentences dropped from nearly 64 to roughly 51, which the Justice Department says is the lowest on record." Eric Tucker for theAssociated Press.
The debate over climate change is settled in the United Kingdom. "Republicans and Democrats may still be jousting over whether human behavior is causing the planet to warm and, if so, whether anything should be done about it. But in Britain there’s no debate. The consensus is so strong that [Prime Minister David] Cameron and [his opponent Ed] Miliband, along with Liberal Democrat leader Nick Clegg, have taken the extraordinary step during a heated campaign of signing a joint statement committing to fight 'one of the most serious threats facing the world today.' " Griff Witte in The Washington Post.
Inequality has declined since the financial crisis, partly as a result of federal policy. "How could that be? Because the crisis, which ran roughly from 2007 to 2010, reduced the pretax incomes of the wealthiest Americans more than the incomes of any group. The wealthy have indeed received the bulk of the gains since the recovery began, but they still haven’t recovered their losses. Meanwhile, the steps that the federal government took in response to the crisis, including tax cuts and benefit increases, have mostly helped the nonwealthy. ... Inequality isn't destined to rise. Not only can economic forces, like a recession, reduce it, but government policy can, too." David Leonhardt in The New York Times.
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