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Wonkbook: Big meeting, no progress

Ezra Klein's Wonkbook / Dylan Matthews

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Five in the morning

1) An Obama-GOP summit didn't result in progress toward a debt deal, report Zachary Goldfarb and Paul Kane: "A Wednesday meeting between President Obama and House Republicans about the nation’s debt ended with neither side showing a willingness to give ground on any substantive points or rhetorical differences...The most dramatic moment of Wednesday’s 75-minute meeting came when Rep. Paul Ryan (Wis.), the man behind the GOP’s budget plan, said Obama is playing politics in the debt debate. He accused the president of mischaracterizing the GOP budget proposal as turning Medicare into a 'voucher' program that would hurt seniors. Ryan’s comments earned him a standing ovation from his colleagues...Obama replied that both sides have demagogued the debt issue.

2) John Boehner says this month is do-or-die for a debt deal, report Bob Cusack and Molly Hooper: "House Speaker John Boehner (R-Ohio) said Wednesday that he wants to strike a deal on the nation’s debt limit over the next month. Boehner’s comments could change the timetable for a bipartisan agreement, which many lawmakers and Wall Street analysts had previously assumed would not be ironed out until right before the August congressional recess. His statements could also be an attempt to shield the GOP from blame if the stock market plunges next month in the absence of a deal. In a press briefing with reporters, Boehner said that waiting until later in the summer could negatively affect financial markets. He claimed an agreement 'needs to be done over the next month.'"

3) The recovery is slowing down, reports Neil Irwin: "The economic recovery is faltering, and Washington is running out of ways to get it back on track. Two bright spots over the past few months -- manufacturing and job creation by private companies -- both slowed in May, according to new reports Wednesday. The data come amid other reports of falling home prices, declining auto sales, weaker consumer spending and a rising pace of layoffs...Just a few months ago, the economy seemed poised to finally strengthen. Business confidence was rising, and extensive government efforts to foster growth were underway. But those hopes are being dashed...Instead of accelerating, the U.S. economy is puttering along at a growth rate of 2 to 3 percent -- barely enough to bring down joblessness slowly, if at all."

4) Lackluster economic figures should be making Obama sweat, reports Binyamin Appelbaum: "No American president since Franklin Delano Roosevelt has won a second term in office when the unemployment rate on Election Day topped 7.2 percent. Seventeen months before the next election, it is increasingly clear that President Obama must defy that trend to keep his job. Roughly 9 percent of Americans who want to go to work cannot find an employer. Companies are firing fewer people, but hiring remains anemic. And the vast majority of economic forecasters, including the president’s own advisers, predict only modest progress by November 2012. The latest job numbers, due Friday, are expected to provide new cause for concern. Other indicators suggest the pace of growth is flagging."

5) Republicans are taking aim at public health programs, reports Lyndsey Layton: "House Republicans are pushing back against a series of public health measures, including school lunch standards and tobacco regulation...The Republicans have used an agriculture appropriations bill to send several messages: They don’t want the government to require school meals that are more nutritional but also more expensive, they don’t want the government to prod food companies to restrain marketing to children, and they don’t want the Food and Drug Administration to regulate any substance based on anything but 'hard science.' They took aim at measures that are part of the Obama administration’s efforts to combat obesity among children and adults as well as some initiatives enacted by the previous Congress."

Cover song interlude: Queens of the Stone Age play "Needle in the Camel's Eye" by Brian Eno.

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

Still to come: The US is staying mum on who it wants to run the IMF; accountable care organizations may not be the cost-cutting mechanism many hoped for; for-profit colleges are facing tougher regulation; a group of cities is teaming up to fight climate change; and a cat who's very good at shell games.

Economy

The US is keeping hush on the the new IMF director, reports Sudeep Reddy: "The U.S. is largely staying silent in the battle to pick the next chief of the International Monetary Fund...The Obama administration hasn't publicly backed any contender, and has indicated it would favor a nominee who draws some support from emerging-market nations. Most European nations have united behind French Finance Minister Christine Lagarde, who visited government officials in Brazil this week and plans to travel to China and India next week, in a bid for emerging economies' endorsements. Mexico's central bank governor, Agustín Carstens, has also offered himself as a candidate...European countries hold about 35% of the voting shares in the IMF. The U.S. holds a stake of about 17%--the largest of any single country, and big enough to swing the outcome."

Greece is going to need $40 billion to avoid default, reports Howard Schneider: "There is no secret about the tab coming due -- Greece will need more than $40 billion over the next year or so to keep itself afloat and avoid what European officials consider their nightmare scenario, a default by one of the countries that use the euro. But deciding who will pay has left European, International Monetary Fund and Greek officials locked in another round of crisis talks as they try to figure out a series of tough issues. How hard should Greece’s citizens be pushed for further cuts in social programs and other concessions? How much of the bill should shift to taxpayers from other European countries? Should investors in Greek bonds -- including Europe’s major financial institutions and the European Central Bank itself -- take a hit?"

The Fed doesn't look interested in QEIII, reports Jon Hilsenrath: "Federal Reserve officials are in no hurry to respond to recent indications U.S. economic growth has hit another soft patch, despite chatter in financial markets that the Fed might start a new program of U.S. Treasury-bond purchases to boost growth. The central bank has already purchased more than $2 trillion of mortgage and Treasury bonds. The purchases are meant to hold interest rates down by reducing the supply of securities in private hands and to drive investors into areas such as stocks to encourage businesses and consumers...In comments Wednesday, Cleveland Fed president Sandra Pianalto said the Fed's current stance was appropriate and added the recovery was likely to continue, even though growth 'may be frustratingly slow at times.'"

Civil rights groups are teaming up with bank lobbyists to fight loan rules, report Edward Wyatt and Ben Protess: "Advocacy groups like the N.A.A.C.P. and the National Council of La Raza, a Latino civil rights organization, on the one hand, and the American Bankers Association on the other, are joining together to fight rules they say could make home loans less affordable for minority and working-class Americans. The growing alliance between civil-rights organizations and banking lobbyists could extend beyond the current round of financial rule-making. If Congress turns its focus to restructuring Fannie Mae and Freddie Mac, for example, the same groups could voice similar concerns over anything that restricts the availability of credit for first-time home buyers."

The auto bailout could total $14 billion, reports Josh Mitchell: "The White House said Wednesday that taxpayers could lose roughly $14 billion of the money spent on auto industry bailouts, despite the industry's recent recovery. The White House cites the potential losses in a report, 'The Resurgence of the American Automotive Industry,' released ahead of President Barack Obama's trip Friday to a Chrysler Group LLC facility in Toledo, Ohio. The report said that of the $80 billion in bailout money supplied to the auto industry, less than 20%, or $16 billion, ultimately may be lost. That's down from the 60% loss projected two years ago, the report said. The White House's top auto and manufacturing adviser, Ron Bloom, later specified the loss at closer to $14 billion."

States are going to have to raise taxes or cut spending still further, reports Michael Cooper: "Half the states plan to cut spending on higher education, and nearly a third plan cuts to elementary and high schools. Public assistance and transportation face cuts. Eighteen states have proposed slashing aid to struggling cities and local governments. Some states will raise taxes or fees. Others plan to lay off workers, or cut their salaries or benefits. Although state tax collections are picking up after several brutal years, a new survey by the National Governors Association and the National Association of State Budget Officers found that states still expect to collect less tax revenue and spend less money in the coming fiscal year than they did before the Great Recession began."

LBJ's experience shows hardball wins debt limit fights, writes Joseph Califano: "To our surprise the bill was rejected, 210 to 197. Enough liberal Democrats had joined Republicans and conservative Democrats to defeat the bill...Johnson was furious. 'There’s plenty of money for domestic programs,' he told me. 'Tell them we’re prepared to put big public housing projects right in the middle of their districts to show their constituents how much money is available for domestic programs. Maybe that’ll change their minds.' This wasn’t just an idle threat...Indeed, after some choice conversations with liberal representatives -- and a quiet commitment to conservatives to curb domestic spending -- the increase passed the House on June 21."

Tying the debt limit to spending cuts is good economics, writes John Taylor: "This is a common problem in economics, called the time inconsistency problem, where taking actions today that are inconsistent with good policy in the future leads to very poor economic outcomes. Economists Edward Prescott and Finn Kydland were awarded the Nobel Prize in 2004 for explaining the problem and proposing a solution. In this context, the solution is to link the debt limit increase and the spending reductions. The principle of linking the debt increase and spending reductions--put forth by the House Republicans in the White House meeting yesterday--is therefore an important goal worth trying to achieve."

The key to solving the long-term deficit is staying put, writes Ezra Klein: "If Congress does nothing, the federal budget basically balances itself in coming years. It doesn’t achieve balance in a way that anyone will like -- taxes eventually reach almost 30 percent of GDP and Medicare cuts payments to doctors so drastically that many of them will abandon the program. But it balances. Congress can solve the deficit problem simply by sticking to that baseline. That doesn’t mean it must stick to those specific policies. The cost of tax cuts can be offset by spending cuts. The pain of spending cuts can be eased through intelligent policy reforms. But Congress shouldn’t be allowed to pretend that the budget deficit is some irrepressible force of nature."

Adorable animals playing games interlude: This cat is very good at shell games.

Health Care

A new study casts doubt on accountable care organizations, reports Amy Goldstein: "A key government experiment that set out to lower costs and coordinate care for Medicare patients...has failed to save a substantial amount of money. The five-year test enlisted 10 leading health systems around the country and offered financial bonuses if they could save enough by treating older patients more efficiently while providing high-quality care. In 2010, the final year, just four of the 10 sites...slowed their Medicare spending enough to qualify for a bonus...The uneven progress is significant because the experiment involves 'accountable care organizations,' one of the hottest trends in health policy and an idea included in the year-old federal law intended to overhaul the nation’s health-care system."

An appeals court heard oral arguments on health care reform yesterday, reports Kevin Sack: " A panel of federal appellate judges seemed eager on Wednesday to rule on whether it is constitutional for the Obama health care law to require that uninsured Americans buy medical coverage. But the judges must first decide whether the plaintiffs still have legal standing to sue, after one disclosed that she recently bought health insurance from her employer. The three judges from the United States Court of Appeals for the Sixth Circuit in Cincinnati heard arguments for 90 minutes on the second challenge to the health care law to reach an appellate hearing. Five lower-level district court judges have ruled on the merits of the challenges, with three upholding the law’s constitutionality and two striking down all or part of it."

Domestic Policy

Federal regulators are proposing new restrictions on for-profit colleges, reports Daniel de Vise: "Federal education officials are tightening oversight of the burgeoning for-profit higher-education sector with the release Thursday of a new regulation they say will require career preparatory programs to yield 'gainful employment.' The action culminates a lengthy debate between the Obama administration and for-profit college leaders and includes several concessions to the industry meant to soften the regulatory impact. The most important change from a previous draft introduces a multiyear grace period before deficient programs are shut down. The rule could face a legal challenge in courts and is likely to draw close scrutiny from Congress. Republican lawmakers and some Democrats have voiced support for the industry."

Lobbyists' lobbying group are upset about a new contracting rule, reports Sam Stein: "The Obama administration received a stern letter from the American League of Lobbyists firmly warning it to dispose of a draft executive order that would force federal contractors disclose their donations. 'Since your announcement to seek the Presidency you have consistently attacked the honorable profession of lobbying,' the letter, signed by the group's president Howard Marlowe, read...Having the entity that lobbies on behalf of lobbyists come out in opposition to your draft executive order is not, as political resistance goes, the most daunting hurdle. If anything it could give the White House the type of political relations hook to sell the contracting disclosure policy to the public and skeptical members of Congress -- both Republican and Democratic."

Attorney General Eric Holder wants to retroactively cut crack sentences, reports Gary Fields: "Attorney General Eric Holder said Wednesday that new reduced penalties for federal crack-cocaine offenses should be applied retroactively...Speaking at a hearing of the U.S. Sentencing Commission...Mr. Holder said the Obama administration believed those sentenced under the older, stricter rules, 'who are not considered dangerous drug offenders,' should get the benefit of the new standards. Mr. Holder's comments marked his first public statement on how past crack-cocaine defendants should be handled since the Fair Sentencing Act was signed into law last August. That law eased a much-criticized disparity in the old rules...whereby crack-cocaine crimes were punished far more harshly than those relating to powder cocaine."

An international panel is calling for an end to the war on drugs, reports Jose de Cordoba: "'The global war on drugs has failed,' said a report by the Global Commission on Drug Policy due to be released Thursday. The report calls for a frank dialogue on the issue and encourages governments to experiment with the regulation of drugs, especially marijuana. The 19-member commission includes a broad spectrum: former United Nations Secretary General Kofi Annan and former NATO Secretary General Javier Solana, and former presidents Ernesto Zedillo of Mexico, Fernando Henrique Cardoso of Brazil and Cesar Gaviria of Colombia--all countries that have faced brutal drug violence. Former Secretary of State George Shultz and former Fed Chairman Paul Volcker are on the commission, as are writers Carlos Fuentes and Mario Vargas Llosa."

Great moments in sport interlude: A man waterskis safely into a tent.

Energy

Bill Clinton, Michael Bloomberg, and the World Bankare teaming up to help cities deal with climate change, reports Alexei Barrionuevo: "The World Bank signed an agreement on Wednesday with mayors from 40 of the world’s biggest cities to work on technical and financial assistance for projects to minimize the effects of climate change. The deal, announced at the C40 large cities climate meeting here, will ease access to financing for climate-change-reduction projects. It was hailed by many of the mayors, including Michael R. Bloomberg of New York City, and by former President Bill Clinton, who attended the event as part of a new partnership with Mr. Bloomberg. 'The World Bank announcement is terrifically important,' Mr. Clinton said. 'It will give credibility to these projects to get private capital.'"

Dylan Matthews is a student at Harvard and a researcher at The Washington Post. Wonkbook is compiled and produced with help from Michelle Williams.

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