Export

Describes motivation process for creativity with emphasis on intrinsic motivation by Corey K Katir

By Curt Dombek, Brian Weimer, Dan Brooks, and Reid Whitten

Since 1999, strict controls on the export of U.S. satellites and satellite components have drastically eroded U.S. manufacturers’ market share in the global satellite industry. On April 18, 2012, the U.S. Departments of State and Defense released the “1248 Report” containing findings related to reducing some of those controls. The 1248 Report assesses the national security risks of removing certain satellites and related components from the tightly controlled United States Munitions List (USML) and transferring them to the generally less restrictive Commerce Control List (CCL). The report concludes that most communications satellites, lower-performing remote sensing satellites, and related components could be transferred from the USML to the CCL without harming U.S. national security. The transfer of these items to the CCL could greatly benefit the U.S. satellite industry by significantly easing the export controls placed on its products.

Background

Commercial satellites and related components are unique in that they are the only category of items required by law to be placed on the USML and the only dual-use items (i.e., items with both civilian and military applications) controlled as munitions. Typically, the President has the authority to determine whether a controlled item should be placed on the CCL and controlled under the Export Administration Regulations (EAR) or placed on the USML and controlled under the International Traffic in Arms Regulations (ITAR). In 1999, however, Congress removed the President’s authority to change the jurisdictional status of commercial satellites and related components following revelations that U.S. satellite manufacturers had improperly transferred missile design information to China. In 2010, Congress passed legislation requiring the Secretary of State and the Secretary of Defense to assess the national security risks of removing satellites and related components from the USML and to make general recommendations for improving U.S. space export control policy.[1]

The 1248 Report

In a finding that could present new export opportunities for U.S. satellite manufacturers, the report concludes that many controls on satellites and related technologies are no longer necessary and that maintaining these items on the USML leaves U.S. satellite manufacturers at a distinct competitive disadvantage. The report notes that the United States is the only country that controls all items modified in any way for use with a commercial satellite. The report also recognizes that the United States is the only country that controls the reexport of foreign-origin satellites containing U.S.-origin satellite-related items and is the only country that classifies all commercial satellites and related items as munitions. The report suggests that subjecting commercial satellite systems, components, and related technologies to strict ITAR controls is anachronistic, because a substantial number of these items have moved from military use to predominantly civil use over the past fifteen years and therefore no longer properly belong on the USML.

In order to keep the regulations current and ease the export controls placed on satellites and related components, the report proposes transferring the following items to the CCL:

• Communications satellites that do not contain classified components;
• Remote sensing satellites with performance parameters below certain thresholds; and
• Systems, subsystems, parts, and components associated with these satellites and with performance parameters below certain thresholds specified for items remaining on the USML.

The author is a member of the Firm’s Government Contracts & Regulated Industries Practice Group. For additional articles and postings concerning this and related topics, please refer to Sheppard Mullin’s Government Contracts Blog, which can be found at www.governmentcontractslawblog.com.

Curt Dombek
213-617-5595
cdombek@sheppardmullin.com

In August 2009, the President directed a broad-based interagency review of the U.S. export control system, with the goal of strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on current threats, as well as adapting to the changing economic and technological landscape. This review determined that the current export control system is overly complicated, contains too many redundancies, and, in trying to protect too much, diminishe…

Representing companies in their sponsorship of foreign workers has become increasingly complex. The DHS and Department of State have increased their scrutiny of all visa petitions and visa applications, particularly in the sponsorship of H-1B and L-1 workers. The web of regulations that govern the control of exports to foreign nationals is complex. What is often not appreciated is that a company who gives access to controlled technology to a foreign national located in the United States is deeme…

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This intermediate/advanced level program …

High profile criminal prosecutions for violations of export and sanctions laws are increasing.  In those cases, white collar criminal defense lawyers must navigate a maze of complex statutes and regulations to defend their clients.  Join a panel of nationally recognized lawyers who will provide practical guidance on representing clients in criminal cases arising under ITAR, EAR, and economic sanctions laws.

ATTENTION CANADIAN ATTORNEYS: To fulfill the interaction requirements of Canadian provinces’ CPD regulations, two or more colleagues must be involved at the same time when watching or listening to recorded programs. If you wish to obtain CPD credit for this program, please read the instructions BEFORE viewing, found here.

In 2010, President Obama…

The world is getting smaller and smaller and your company is looking beyond the national borders for new markets and resources. Unfortunately, there is a myriad of import and export laws and regulations you must navigate through, including OFAC, ITAR and FCPA to name just a few. Learn what you need to know to set a well-charted course for your company, maintain compliance and make the most of your cross-border commerce.

Given the compliance expectations of regulators and the increase in enforcement actions by BIS, DDTC and OFAC, it can be a challenge to stay safe in a global business environment. Should you monitor your international charitable grantees? Does your due diligence of business partners consider risks of trade sanctions or anti-terrorism laws? This program on legal compliance with the FCPA’s under-recognized cousins seeks to provide an overview and general primer into trade sanctions, import-export …

In the past few years, export control compliance has become an increasing business imperative of U.S. and non-U.S. companies alike. The United States has an extensive and aggressively-enforced set of export control and economic sanctions laws and regulations. These rules have several elements that are extra-territorial in application, and enforcement trends in the last few years show an increasing focus on non-U.S. companies that are charged with export control and sanctions violations. …

In the past few years, export control compliance has become an increasing business imperative of U.S. and non-U.S. companies alike. The United States has an extensive and aggressively-enforced set of export control and economic sanctions laws and regulations. These rules have several elements that are extra-territorial in application, and enforcement trends in the last few years show an increasing focus on non-U.S. companies that are charged with export control and sanctions violations. …

In the past few years, export control compliance has become an increasing business imperative of U.S. and non-U.S. companies alike. The United States has an extensive and aggressively-enforced set of export control and economic sanctions laws and regulations. These rules have several elements that are extra-territorial in application, and enforcement trends in the last few years show an increasing focus on non-U.S. companies that are charged with export control and sanctions violations. …

In the past few years, export control compliance has become an increasing business imperative of U.S. and non-U.S. companies alike. The United States has an extensive and aggressively-enforced set of export control and economic sanctions laws and regulations. These rules have several elements that are extra-territorial in application, and enforcement trends in the last few years show an increasing focus on non-U.S. companies that are charged with export control and sanctions violations. …

Thereas been lots of discussion lately on whether Greece should exit the euro. Sure, advocates say, in the short term the country might face even more austerity and a crushing recession. But in the long run, Greece would be free to grow. Hereas Arvind Subramanian making that case:

Just look at what happened to the countries that defaulted and devalued during the financial crises of the 1990s. They all initially suffered severe contractions. But the recessions lasted only one or two years. Then came the rebound. South Korea posted nine years of growth averaging nearly 6 percent. Indonesia, which experienced a wave of defaults that toppled nearly every bank in the entire system, registered growth above 5 percent for a similar period; Argentina close to 8 percent; and Russia above 7 percent. The historical record shows clearly that there is life after financial crises.

** How long would it take for Greece to print and distribute a new currency, anyway? Hereas one historical precedent: aIn 2003, the U.S.-led coalition managed to do it in Iraq in less than three months. But that required the efforts of De La Rue, a British speciality printer, a squadron of 27 Boeing 747s and 500 armed Fijian guards to ease the process.a

“We shouldnat dread the debt limit,” said Speaker John Boehner at the Peter G. Peterson Fiscal Summit. “We should welcome it. Itas an action-forcing event in a town that has become infamous for inaction.”

These comments have been the occasion for much wailing and gnashing of teeth, as if anyone, anywhere, believed that the Republicans’ 2011 debt-ceiling antics were some sort of one-off. But Boehner was clear on Tuesday. “I will again insist on my simple principle of cuts and reforms greater than the debt limit increase,” he said.

Of course he will. For one thing, it worked well for him in 2011. Republicans got more than $900 billion in immediate spending cuts, as well as $1.2 trillion in triggered spending cuts — though they don’t much like the $500 billion or so of those cuts scheduled to fall on the Pentagon. They also drove President Obama’s approval ratings beneath 40 percent. And while I’m not one who thinks Republicans intentionally tank the economy to undermine Obama, there’s little doubt that the effect of the debt-ceiling debacle was to set back the recovery, brightening Republican prospects and darkening Democratic ones. The fact is that it’s easier to be sanguine about economic showdowns when you’re not the ones in charge.

For another, it’s Boehner’s only option in 2012. The Democrats, for once, have nothing but fiscal leverage. They’ve got the expiration of the Bush tax cuts, which all Republicans would hate and many Democrats would welcome. They’ve got the aforementioned spending trigger, which Republicans really have begun to fear for its cuts to defense spending. They can do nothing — or, more likely, offer Republicans a deal they can’t accept — and the resulting paralysis will swing fiscal policy far, far, far to the left. Threatening to default on the national debt is Boehner’s only piece of counter-leverage.

So of course Boehner will try and use the debt ceiling as leverage again. And again. And again. It’s pretty clear that, at this point, there’s no going back to the time when debt-ceiling increases came smoothly. If I were the market, I’d take the fact that the leader of one of the two parties has publicly said that he “welcomes” debt-ceiling showdowns as evidence that the United States is almost certain to default on its debt — if only temporarily — within the next decade or so.

The question is what, aside from complain, Democrats and the business community will do to stop him. Somehow, the debt ceiling needs to be taken off the table once and for all, either because Republicans forced a default in a way that they were blamed for the consequences and scared into never doing it again or because the president successfully pulled off one of the more creative maneuvers suggested during last year’s showdown (Bill Clinton, for instance, argued that Obama should invoke the Fourteenth Amendment — which says “the validity of the public debt of the United States … shall not be questioned” — to raise the debt ceiling unilaterally).

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RCP Obama approval: 48.0%; 7-day change: +0.7%.

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Top stories

1) Boehner threatened another debt-mageddon “Washington braced Tuesday for a replay of last summeras tense battle over the burgeoning national debt as House Speaker John A. Boehner threatened again to block an increase in the federal debt ceiling without significant new cuts in spending. Treasury Secretary Timothy F. Geithner and other senior Democrats quickly blasted the Ohio Republican, arguing that his ultimatum could put the nationas credit rating — and the broader economy — at risk early next year, when the debt is expected to hit its $16.4 trillion limit.” Lori Montgomery in The Washington Post.

@damianpaletta: Boehner’s debt ceiling “line in the sand” is very similar to what he said last year; Definitely got the attention of White House and D’s

@ObsoleteDogma: Shorter Boehner: Regulatory uncertainty is bad. But default uncertainty is good.

INTERVIEW: Sen. Tom Coburn on defusing the debt bomb.

READ: Mitt Romneyas remarks on the debt.

@MichaelSLinden: As a fiscal policy analyst, I’d like to thank Mitt Romney for offering no specifics whatsoever so I can go home at a normal time tonight.

2) Greece failed to form a new government, triggering new elections. “The threat of a full economic collapse in Greece escalated Tuesday after warring political factions here failed to forge a new government, triggering fresh elections and heightening chances that this rudderless Mediterranean nation could be forced to abandon the euro…A nation in danger of running out of cash to operate the government, and where fearful residents in recent days have been rapidly withdrawing more of their savings from Greek banks, faces uncertain new elections next month. Opinion surveys have shown that Syriza, a party that wants to break the terms of Greeceas bailout deal and that came in a surprise second in the last vote, is polling in first place…European finance ministers — whose taxpayers have largely funded the bailout for Greece — were quick to push back Tuesday. Given the potential shock waves if Greece is forced to leave the euro zone, there have been suggestions in recent days that European officials might show more lenience with Athens.” Anthony Faiola in The Washington Post.

Surging bank withdrawals in Greece sparked fears of a bank run. “Greek depositors withdrew a!700 million ($898 million) from the country’s banks on Monday, fueling fears of a bank run amid the growing political disarray. With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area. Greek President Karolos Papoulias told the country’s political leaders that bank withdrawals plus buy orders received by Greek banks for German bunds totaled some a!800 million on Monday, a transcript of his comments said. A central bank official confirmed the figures…Monday’s deposit withdrawal far outpaced Greek banks’ steady decline in deposits since the start of the country’s debt crisis in 2009, as depositors withdraw cash and transfer funds overseas.” Brian Blackstone and David Enrich in The Wall Street Journal.

@grossdm: So, Greece is seeking to solves its economic problems through QE — quantitative electioneering

3) The Senate will vote on several GOP budget proposals today. “The Senate on Wednesday will hold six hours of debate and votes on four different Republican budget resolutions, in an apparent attempt to demonstrate that they will not be supported in the Democratic-led Senate. A fifth budget measure up for a vote, from Senate Budget Committee ranking member Jeff Sessions (R-Ala.), is based on President Obama’s budget and is seen as an attempt to embarrass the White House. But Senate Budget Committee Chairman Kent Conrad (D-N.D.) said Tuesday that debate and votes on the GOP proposals would show there is little appetite for these plans. He also said it would give the country a chance to understand that last year’s Budget Control Act already sets spending caps for Congress. Democrats have been under fire for failing to pass any budget resolution…One of the four GOP budget resolutions to be debated Wednesday is H.Con.Res. 112, the budget resolution approved by the House in March.” Pete Kasperowicz in The Hill.

4) The Justice Department started a criminal probe into JPMorgan Chase’s loss. “The Justice Department has initiated a criminal probe into the $2 billion trading loss at JPMorgan Chase, a law enforcement representative familiar with the situation said Tuesday. The inquiry is at a very early stage, said the person, who spoke on the condition of anonymity because the matter is private. Many details about the loss at JPMorgan are murky, so it is unclear what laws, if any, may have been violated. But the attention from federal officials indicates that regulatory pressure is rising on JPMorgan, and its chief executive Jamie Dimon, to explain what exactly led to the bankas multi-billion dollar misstep. That, in turn, has rekindled questions about whether government regulators are equipped to monitor banks making risky, complex trades…Dean Boyd, a Justice spokesman, declined to comment.” Jia Lynn Yang and Sari Horwitz in The Washington Post.

Too big to fail banks have gotten bigger. “JPMorgan Chaseas $2 billion blunder is throwing the spotlight on an awkward truth for President Barack Obamaas promise to end the era of big bank bailouts: The same institutions that were deemed ‘too big to fail’ before the financial collapse are even bigger now. Efforts to manage the size of such institutions were at the heart of the Dodd-Frank financial law passed in July 2010. But nearly two years later, many of the lawas regulations remain in limbo, as federal agencies muddle through long rule-making processes against stiff industry opposition…All the while, the countryas biggest financial institutions continue to grow. The five largest, which controlled $6.1 trillion in assets before the collapse, by the end of 2011 had assets worth $8.5 trillion — equal to more than half of U.S. economic output, according to Federal Reserve data.” Patrick Reis in Politico.

@BCAppelbaum: This whole JPM story underscores one reason we don’t have effective financial regulation: Our public officials don’t understand finance.

Top op-eds

1) PORTER: It’s time for the euro to come to an end. “Social upheaval across the euro area suggests that it may be time to call it quits and try to work out an orderly process to re-establish national currencies throughout the bloc. Europe would be in much better shape if the euro didnat exist and each member country had its own currency. Monetary union has shackled together nations with vastly different economies, depriving them of an independent monetary policy that can help them through rough times. The interest rate and exchange rate that serve Germany also have to serve Spain, though that country has more than four times Germanyas joblessness. The main problem is that while leaders eagerly embraced the monetary bond, they rejected its necessary complement: a central budget that would transfer money from successful regions to underperforming ones, as the United States government sends tax dollars collected in Massachusetts to pay for unemployment benefits in Nevada.” Eduardo Porter in The New York Times.

2) FROST: The FDIC shouldn’t protect investment banks. “I suggest that we divide the two functions into separately owned, managed and regulated entities. That’s the only way we can ensure that their riskier businesses don’t undermine the insured deposits that are the foundation of a stable and healthy economy. Taxpayer safety-net programs, such as the Federal Deposit Insurance Corporation (FDIC), should be available only to banks in business to provide insured deposits. Financial institutions that provide primarily investment, hedging and speculative services don’t deserve protection either by the FDIC’s explicit guarantees or by an implicit understanding that taxpayers will bail them out because there is no other alternative. Indeed, this kind of protection is a perversion of capitalism and can distort its good outcomes…We need a real and impregnable firewall that keeps one part of the banking system–and the economy–from being consumed when the other goes into flames.” Tom Frost in The Wall Street Journal.

3) ROSEN: Competitive bidding can hurt patients. “On the face of it, competitive bidding sounds like a very good idea. If one supplier can provide power wheelchairs or oxygen masks for 30 percent less than another, itas hard to argue for contracting with the more expensive supplier, especially at a time when everyone is looking for ways to save money. A one-year experiment with expanded competitive bidding that was recently conducted by Medicare yielded cost savings of 42 percent, without reducing the quality of care, and was hailed as a great success. But as a doctor working with patients on the ground, I have doubts about that quality-of-care measure, and I worry that those savings obscure a potentially serious problem…If competitive bidding is predicated on supplying equipment at the lowest possible price, something has to give. And more likely than not, that something will be patient care.” Dennis Rosen in The New York Times.

4) ORSZAG: Want good news on jobs? Look to big businesses. “Big business, we keep being told, has been so hampered by regulatory uncertainty over the past few years, it has been reluctant to hire workers. So it is surprising to read the results of a little-known survey from the Bureau of Labor Statistics: Very large businesses, it turns out, have been expanding their domestic workforces relatively rapidly. If, since January 2011, businesses of all sizes had hired at the same rate as those with 5,000 or more employees, we would have almost 4 million more jobs today…The JOLTS data highlight the importance of exploring how the continuing deleveraging process and resultant sluggish growth in demand is affecting smaller businesses in particular. With the percentage of working Americans stuck at a depressed level, we sure could use those extra 2 million to 4 million jobs.” Peter Orszag in Bloomberg.

5) ALEXANDER: Washington should take over Medicaid and let states handle education. “Staring down steep tuition hikes, students at the University of California have taken to carrying picket signs. As far as I can tell, though, none has demanded that President Barack Obama accept a Grand Swap that could protect their education while saving them money. Allow me to explain. When I was governor of Tennessee in the early 1980s, I traveled to meet with President Ronald Reagan in the Oval Office and offer that Grand Swap: Medicaid for K-12 education. The federal government would take over 100% of Medicaid, the federal health-care program mainly for low-income Americans, and states would assume all responsibility for the nation’s 100,000 public schools…If we had made that swap…states would have about $92 billion a year in extra funds, as they’d keep the $149 billion they’re now spending on Medicaid and give back to Washington the $57 billion that the federal government spends per year on schools.” Lamar Alexander in The Wall Street Journal.

Cover interlude: Screaming Females play Sheryl Crow’s “If It Makes You Happy” for the AV Club.

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

Still to come: Free trade with Colombia is in effect; Catholic bishops are close to suing over birth control; backlash against tests is growing; energy independence is within reach; and a puppies’-eye view of life.

Economy

The Senate will vote on two Fed nominees on Thursday. “Senate Majority Leader Harry Reid (D-Nev.) today set up a procedural vote for Thursday on two nominees to join the Federal Reserve whose nominations have stalled because of opposition from Sen. David Vitter (R-La.)…Vitter blocked attempts in March to quickly confirm Harvard University economics professor Jeremy Stein, a Democratic nominee, and former private-equity executive Jerome Powell, a Republican nominee…Asked whether he was confident that he would have the 60 votes to invoke cloture on the nominations, Reid said, ‘Well I sure hope so, weave been waiting months and months.’…Senate Minority Leader Mitch McConnell (R-Ky.) said he believes there is bipartisan support for the nominees…Without the two nominees in place, the Federal Reserve Board will remain short-handed as it attempts to support the economic recovery” Humberto Sanchez in Roll Call.

The dip in gas prices eased inflation. “The recent slide in gasoline prices in the U.S. has pushed the nation’s annual rate of inflation to its lowest level in more than a year, easing some economic strains on consumers. The consumer price index, which measures what Americans pay for everything from breakfast cereal to doctor visits, was unchanged from March to April, ending three months of increases, the Labor Department said Tuesday. A 2.6% drop in the gasoline-price index helped offset rising costs for many other items. Overall prices are now running 2.3% higher than a year ago, the smallest increase since February 2011…The inflation figures have mixed implications for the recovery. Lower gasoline and utility costs are keeping a lid on household expenses, effectively boosting Americans’ spending money. However, prices are climbing broadly, most notably for food, but also medical care, rents, autos and airfares.” Josh Mitchell in The Wall Street Journal.

States are using foreclosure prevention funds to plug budget gaps. “Hundreds of millions of dollars meant to provide a little relief to the nationas struggling homeowners is being diverted to plug state budget gaps. In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nationas biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the stateas debts. The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes…As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge.” Shaila Dewan in The New York Times.

House Republicans are planning a vote on a ‘fast track’ proposal for tax reform. “Speaker John Boehner said in a speech Tuesday that House Republicans would try to attach a timeline to fast-track a broad tax overhaul to a vote extending the George W. Bush-era tax rates before the November elections…’Our bill to stop the New Yearas Day tax increase will also establish an expedited process by which Congress would enact real tax reform in 2013,’ Boehner (R-Ohio) said in remarks to a fiscal summit in Washington. ‘This process would look something like how we handle Trade Promotion Authority, where you put in place a timeline for both houses to act.’…GOP aides said that, even though Boehner specifically discussed Trade Promotion Authority on Tuesday, House Republicans are looking at a variety of expedited processes that have been used in the past, and have yet to settle on just one.” Russell Berman and Bernie Becker in The Hill.

@grossdm: Memo to Boehner, the markets, etc.: the House passing legislation won’t be sufficient to avert tax increases. They’ll have to make a deal

The euro zone narrowly missed recession. “The euro-zone economy narrowly escaped recession in the latest quarter thanks to a surprising rebound in Germany, which offset deepening downturns in Spain and Italy. Although the region avoided two straight quarterly drops in gross domestic product, the common benchmark for recession, the figures nonetheless reflect a deepening divide between Germany and the rest of the euro zone that complicates the bloc’s efforts to stem its debt crisis…Euro-zone GDP was unchanged from the previous quarter, said Eurostat, the European Union’s statistics agency. In annualized terms, GDP rose 0.1% from the fourth quarter, according to calculations by J.P. Morgan Chase. Economists had expected an annualized contraction of around 1%. GDP fell at a 1.2% rate in the fourth quarter…European stock markets rose initially on the figures, which eased fears that the debt crisis may trigger an economic free fall.” Brian Blackstone in The Washington Post.

Export-Import Bank reauthorization cleared the Senate by a wide margin. “On a broad bipartisan vote of 78 to 20, the Senate voted Tuesday to extend the life of the U.S. Export-Import Bank and expand its authority to make loans to U.S. exporters. In the ‘Schoolhouse Rock’ version of how Capitol Hill works, this is what Congress does all the time — passes legislation. But it made for big news on this Capitol Hill, where protracted partisan warfare has meant that lately the story has more often been about votes forced by one party or the other to indignantly demonstrate the otheras opposition…Tuesdayas bill was the rarest of breeds: a lasting compromise on an issue of substance. It renewed the charter of what is commonly referred to as the Ex-Im bank for three years and will over that time raise the cap on the total financing the bank can guarantee from $100 billion to $140 billion.” Rosalind Helderman in The Washington Post.

The U.S.-Colombia free trade agreement took effect. “A free-trade agreement between the U.S. and Colombia took effect Tuesday after years of negotiations and despite strong opposition from U.S. labor organizations, which are worried about jobs being sent abroad and union-busting violence in Colombia. The first products shipped tariff-free were crates of Colombian roses and other flowers that landed Tuesday morning at Miami’s airport…President Barack Obama signed the free-trade agreement with Colombia in October, days after Congress gave its final approval following heated debates. The deal was originally negotiated by the Bush administration, but President Obama reworked the deal to satisfy Democrats. The U.S. exported $14 billion of goods to Colombia last year, everything from cars to consumer electronics to food, and exports are expected to rise by more than $1.1 billion as a direct result of the pact, according to the International Trade Commission.” Dan Molinski in The Wall Street Journal.

Adorable children singing interlude: Two girls cover Gotye’s “Somebody That I Used To Know” from the back seat of the car.

Health Care

Catholic bishops are threatening to sue over the birth control mandate. “The Catholic Church’s U.S. hierarchy warned Tuesday that without quick action by Congress, it will sue the Obama administration for mandating that insurance plans provide birth control to women without a co-pay. ‘[F]orcing individual and institutional stakeholders to sponsor and subsidize an otherwise widely available product over their religious and moral objections serves no legitimate, let alone compelling, government interest,’ lawyers for the U.S. Conference of Catholic Bishops wrote in a letter to federal regulators. Several small Catholic universities have already filed suit over the policy…The bishops’ notice came in 20 pages of comments submitted to the Department of Health and Human Services (HHS) on a forthcoming rule to accommodate certain religious organizations, such as Catholic hospitals, that were not exempted from the original mandate.” Elise Viebeck in The Hill.

Obamacare will expand healthcare options for immigrants. “The Obama administrationas drive to cut down on Americaas uninsured is about to get multilingual. Come 2014, when core provisions of the Affordable Care Act kick in, millions of legal immigrants will have new options for gaining health coverage. And like U.S. citizens, most will be subject to the individual mandate, under which they will be required to get coverage to avoid a penalty. The national health law explicitly excludes illegal immigrants — a politically explosive topic — and bans them from the new state insurance exchanges, even if they use their own money. They will make up a big chunk of the remaining uninsured population. But advocates say states have good reasons to reach out and get uninsured legal residents covered — especially as the federal government picks up most of the tab…In 2014…legal immigrants will be able to shop for health coverage through the new state insurance exchanges.” Kyle Cheney in Politico.

Domestic Policy

The backlash against standardized testing is growing. “The increasing role of standardized testing in U.S. classrooms is triggering pockets of rebellion across the country from school officials, teachers and parents who say the system is stifling teaching and learning. In Texas, some 400 local school boards–more than one-third of the state’s total–have adopted a resolution this year asking lawmakers to scale back testing. In Everett, Wash., more than 500 children skipped state exams in protest earlier this month…The efforts are a response to the spread of mandatory testing in the past decade. Proponents say the exams are needed to ensure students are learning and teachers’ effectiveness is measured. Critics say schools are spending disproportionate time and resources on the tests at the expense of more-creative learning. They also contend the results weigh too heavily in decisions on student advancement, teacher pay and the fate of schools judged to have failed.” Stephanie Banchero in The Wall Street Journal.

The NLRB suspended implementation of its union elections rule. “The National Labor Relations Board (NLRB) suspended implementation on Tuesday of a rule that would speed up union elections. On Monday, U.S. District Judge James Boasberg struck down the regulation. In his ruling, the judge said the labor board only had two members vote on the final rule in December 2011 when it needed three members to form a quorum. In the wake of the court decision, the agency is temporarily suspending the rule’s implementation, which went into effect on April 30. Further, Lafe Solomon, the NLRB’s acting general counsel, withdrew guidance he sent to the labor board’s regional offices and told those offices to follow the old union election rule instead. The agency is still considering its response to the court ruling…’We continue to believe that the amendments represent a significant improvement in our process and serve the public interest by eliminating unnecessary litigation,’ said NLRB Chairman Mark Pearce.” Kevin Bogardus in The Hill.

Dog’s-eye view interlude: Life from on top of puppies.

Energy

Energy independence is no pipe dream. “Every president since Richard Nixon has called for the U.S. to wean itself from needing oil from unstable or unsavory countries. The nation’s new-found energy riches are likely to bring that ambition closer to reality in the next two decades, according to many forecasters. It’s no pipe dream. The U.S. is already the world’s fastest-growing oil and natural gas producer. Counting the output from Canada and Mexico, North America is ‘the new Middle East,’ Citigroup analysts declare in a recent report. The U.S. Energy Information Agency says U.S. oil imports will drop 20% by 2025. Oil giant BP projects the U.S. will get 94% of its energy domestically by 2030, up from 77% now, as oil imports fall by half…Most enticing, a team of analysts and economists at Citigroup argues that the U.S., or at least North America, can achieve energy independence by 2020.” Tim Mullaney in USA Today.

@umairh: So consider how our political institutions are paralyzed by a financial crisis. Now think about energy, water, etc crises. Sweet!

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

Sen. Tom Coburn (R-Okla.) served on the Simpson-Bowles commission, is a member of the Gang of Six, and just published aThe Debt Bomb: A Bold Plan to Stop Washington from Bankrupting America.a We spoke last week in his office. This interview, which focuses on Americaas debt and growth problems, is the first in a two-part series. The second interview, which focuses on health care, will be published later this week.

Ezra Klein: So ataxmageddona is coming at the end of the year. Depending on how you look at it, itas an opportunity for Congress to trigger a massive and unnecessary fiscal crisis, or to actually get some serious legislating done on our long-term fiscal issues. Are you optimistic about the outcome?

Tom Coburn: No. But it depends on what the mix is. If President Obama is still president and weare in control of the Senate, I think youall see significant attempts to get something done. But I donat think theyall be much more successful than what we saw in August. And I wouldnat consider that very successful. If Romney wins and we win control in the Senate, we have to send a signal that weare going to fix it in order to take away all that potential risk to the economy. You have to say weall work all over the Christmas holidays to get it fixed.

EK: When you look at the Romney scenario, it seems Republicans have spent a few years now learning how to take tough votes on the budget, particularly on the Ryan plan. So if Republicans control the House and Senate, it seems to me that youad see quite dramatic action on those issues, as they can be passed with 51 votes through budget reconciliation.

TC: Well, you can. Ryan has a good plan. I donat think it goes fast enough. But the fact is heas got a plan. The president wonat put out a plan. The Senate Democrats wonat put out a plan. Itas kind of like boxing with a shadow. You canat ever hit it. But it doesnat matter if youare Democrat or Republican. The pain will get worse every year we donat fix these things. And there will come a time when it wonat matter if youare a Republican or Democrat. And I donat have much faith right now that weare up to the task of coming to agreement to fix this.

EK: I want to come back to the question of the plans in a second,. But your book opens by imagining a very dire fiscal crisis in 2014. And this goes to your contention that Ryanas plan doesnat bring down the debt fast enough. Where do you get the urgency of your schedule? I look at Treasuries and theyare selling with very low yields. So you can say thatas just the Federal Reserve manipulating prices. So then I look at credit default swaps on the United States, and there are no alarm bells there, either. I look at countries like Japan and England that have carried on with very high debt levels for a very long time. Weave seen other countries that control their own currency manage very high debt levels throughout the 20th Century.

TC: Well, you need to go study Japan. Theyare going to crash.

EK: People have been saying that for 20 years.

TC: You have two things coming together. This is the first year theyall be a net issuer of debt outside their country. Theyave totally financed all their debt internally. We havenat. Thatas one big difference. They also have a much lower birth rate. Seven births for every 1,000 people. So their population is shrinking and their demographic shift is much worse than ours. And this year, the postal system there that runs all their retirement accounts will not be buying any government debt. Zero. So the Japanese government, for the first time, is going into the international market. And the yenas value is going to decline against every major currency. Whether that happens this year or next year or in three years, itas going to happen. And theyave now had almost two decades of no real GDP growth. So Japan isnat going to make it. The reason they havenat had any problems is they havenat asked anyone else in the world to buy their debt. Now theyare going to have to.

The same thing ultimately will happen to us, but weall be the last person it happens to. The world still views this as the safest place. You see Greece, which will probably be out of the euro by the end of this year. Then you look at Spain and Italy and Portugal and Ireland. Europe is going to print money just like Ben Bernanke is printing money. And whatas the end result of that? Inflation.

EK Well, it depends how you manage it.

TC: How do you sterilize $3 trillion worth of debt?

EK: The difficulty for me when you say that is Iam a market-oriented guy. I trust the markets, more or less. And if you look at the marketas inflation expectations, theyare not high. They donat think what the Fed has done will lead to inflation.

TC: They donat now. But nobody ever does when you print money like that. If you study [Carmen] Reinhart and [Kenneth] Rogoff and what they said, they know whatas coming. Every country thatas ever been with a debt crisis and has printed money has ended up with an intentional inflation problem. Think for a minute that youare Ben Bernanke. Youare trying to control inflation, jumpstart the economy, and improve the unemployment rate. What do you think his long-term answer for this is?

EK: At the moment, I donat think he has one.

TC: His long-term answer is inflation.

EK: Not only do I think that would be an okay answer, but Reinhart and Rogoff do, too. Rogoff has been arguing for higher inflation for a long time. But Bernanke says he wonat permit that. And I donat see a reason he would allow inflation later but oppose it now, when it could really help. In fact, what heas been saying is he wonat do the monetary stimulus many want now specifically because he doesnat want to deanchor inflation expectations later.

TC: But 10 years from now, our bonds wonat be two percent. So what percentage of the total budget do interest costs become if you normalize back to the historical average? If you do that today, you add $650 billion to our annual interest costs. How long do you think he can keep two percent inflation? If he does, then weall continue to have two percent growth. In other words, if we start getting the growth, then weall see the inflation. The reason thereas no inflation now is thereas no velocity to the money. Weave got $2 trillion sitting on the sidelines with corporations in this country. Another few trillion in personal bank accounts. And the reason is no one has confidence in the future. And itas not so much the details of the plan to fix it as the psychological confidence it will get fixed. And thatas why I voted for Bowles-Simpson.

EK: When Bowles-Simpson went before the House, it was rejected by a huge bipartisan majority. Do you see there as being any possibility that one outcome of the taxmageddon period could, be a grand bargain in the Gang of Six/Simpson-Bowles vein?

TC: I donat know the answer to that, frankly. My hope would be we reach a grand compromise. But the vote in the House proves what I said in the book. You had a vote in the House on a plan that could solve our problems and the Democrats didnat vote for it because it touches Social Security and Republicans vote against it because of revenues. Both sides accentuated their differences rather than sending a signal to the international community that we could get together and cut $4.5 trillion over the next 10 years. Which raises the question: Why are they here? If youare here just to get reelected, youare worthless to the country.

EK: Youare searingly critical of Congress in the book. So let me ask you: How do you fix the Senate?

TC: Let the Senate operate the way itas supposed to. put stuff through committees. bring it up in regular order. Have an open amendment process. Iam the number one amendment offerer in the Senate in the last few years.

EK: Congratulations.

TC: Well, itas not necessarily a compliment. But the point is the Senate really could work if you let it work on the real issues. If you were to put Simpson-Bowles on the floor and really have a strong debate on that bill, it could get through the Senate.

EK: When I talk to the party tactician types, the senators trying to figure this out, their argument is that when you try to do this out in public, with 24-hour news media broadcasting every move and every possible compromise, the issue polarizes, the interest groups descend, the party bases descend, and solutions get taken off the table. In the end, they think there will have to be some big backroom deal. They think a more open process would make this harder, not easier.

TC: I just adamantly disagree. Thatas the sickness of Washington. What that really says is the politician doesnat want to stand up and debate and tell their interest groups no. We had the pharmacists in here earlier. They want a bill to protect community pharmacies. And I said, you know what, the market is changing, Iam not about to support a bill, even though you support me, that doesnat allow the market to work this thing out. I think the reason you get this kind of analysis is because people wonat stand up and do what they think is right because it hurts their political chances. And on our bonds, our bonds will be fine until theyare not, till that tipping point comes when they say crap, we canat get out of it.

EK: As you just said, youare a market guy. You want the market to work things out. You believe in the marketas ability to work things out. So why do you think your view of our likely debt and inflation path is so much more dire than the marketas?

TC: Because the market is biased towards up. Why do you invest in the market? Not because you think youall lose money. Why do you invest in bonds? To make money. Where is the contrarian view?

Let me give you one example. Five weeks ago, Bernanke said there would be no QE3. What happened to the 10-year bond in four days? It rose 48 basis points. What the market said then is if thereas no more QE3, weare going to short the value of a bond. Thatas one little signal. What if you get 20 signals? How do you explain the Chinese getting rid $160 billion of our debt last year? Eventually, theyare not going to buy our debt. Who bought most of our debt last year? It was the Federal Reserve. Go out there and try and float $10 billion of our long-term debt. You canat. Thereas no market. Because the long-term market is saying, send us a signal that youall fix this. And so the reason we have the shortest debt maturity in our countryas history is first, because you canat sell long-term debt because no one wants to buy it, and second, because long-term debt makes the deficit look worse.

Look, I may not be right. But what I see and the people I read — all I do at night is read economic reports on peopleas view of us — and when you look at it, Spain, wonat make it, the European Central Bank will eventually print money. You agree?

EK: Iam hoping so.

TC: Theyall do that to buy time. And where I agree with Paul Krugman is you canat just have austerity. You need growth, The question is how do you get the growth. Do you get the government-driven growth, or do you get confidence and certainty so that the private money comes in and creates the growth? One costs you double. The other costs you half. So thereas a fourfold difference in where you get the growth from. When you borrow the money to spend $800 billion, you got that debt hanging on you, which Reinhart and Rogoff have proven without a doubt, when youare at 90 percent and above, and weare at 101 percent right now, debt-to-GDP, thatas at least a one percent cut to growth.

EK: To go back to Krugman, if he were sitting here, head say in this crisis thereas been no evidence anywhere that cutting deficits leads to growth. Weave not seen it in the euro zone or the UK. And head say the Reinhart/Rogoff story is a correlation story. It doesnat prove that high debt always and everywhere hurts growth.

TC: Go look at Sweden. Hereas what Sweden did. They cut their spending and their taxes. They have the best growth rate in Europe. They had a surplus this year. They had growth at six-plus percent. They actually did a Reagan style approach to their problem by cutting spending and cutting taxes. And theyare the fastest growing with a decline in their debt-to-GDP ratio.

EK: But correct me if Iam wrong, but if I recall, Swedenas monetary policy went towards a very sharp devaluation, theyave been driven by export growth, and alongside Israel, theyave been more aggressive than any other central bank in the world. Theyave done stuff that if we did it here, people would lose their minds.

TC: I think there are monetary parts to that. But their finance minister put in place tough stuff. They had people who left Sweden because of the tax ratio. Now theyave moved back. And itas not a perfect example, but itas an exception to the Krugman story.

EK: Is there anything we need but deficit reduction to get growth back on the right path?

TC: Itas signals. The number one thing, and I think most economists would agree, confidence matters. If you have negative confidence, then you get much lower growth. If you have positive confidence you get much better growth with the same set of numbers. I think people are so disgusted with Washington that if we send a signal weare actually going to fix this — with any combination of tax and spending, remember that I voted for Simpson-Bowles — weall get our mojo back when people have some confidence in the future and see their Congress solving their problems.

EK: It seems your view is that just as the market needs to have faith in your demographics and in the flexibility of your labor market and the competitiveness, it has to have faith in your political systemas capacity to deal with long and short-term threats. Do you see any reason for the market to have that faith right now?

TC: No. One of my biggest worries is what happens if Romney wins and Republicans control both chambers, do they have the courage to do what it takes to fix the country? Itas kind of their last chance. If theyare given the favor of control and they donat act on it, why should you ever trust them again? You shouldnat. Itall be the death knell of the Republican Party. They controlled it all for four years under Bush and grew the government. They created a new entitlement with no revenue. Went against the very tenets of what they said they believe.

One of the reasons I wrote the book was to show a whole lot of people how many stupid things we do. I donat really blame presidents too much. You gotta get appropriations. I say the problem is not that we donat get along. We get along too well. Government is twice the size it was 10 years ago. The president canat spend the money if we donat appropriate it. So itas not a president problem. Itas a congressional problem.

EK: On the other side of that hypothetical, letas say Obama wins, but Republicans hold the House and maybe even take the Senate. How do they act in that hypothetical? Are they more or less willing to compromise with Obama?

TC: I donat know. Iam not good at predicting that. If President Obama is president again, those problems are still there and we have to solve them. He knows that. Weave had conversations where heas told me heall go much further than anyone believes heall go to solve the entitlement problem if he can get the compromise. And I believe him. I believe he would.

Don’t think of gay marriage as a cultural issue. Don’t think of it even as an equality issue. Don’t even think of it as a political issue. Think of it, just for a moment, as an economic issue.

In the traditional view of marriage, write economists Betsey Stevenson and Justin Wolfers, “the joining of husband and wife yields a more productive firm, because it allows one spouse to specialize in earning income from working in the market, while the other specializes in the domestic sphere. The division of labor allows for greater productivity, just as it does in the workplace. The different skills required for these separate roles provide an economic rationale for the advice your grandmother may have offered, that ‘opposites attract.’” Romantic, right?

But in recent decades, the marriage-as-firm view has crumbled — and not just because social mores have changed. “Washing machines, dishwashers and microwave ovens have reduced the value to the family ‘firm’ of employing a domestic specialist,” say Stevenson and Wolfers, who are, themselves, married. “Cheap clothes can be imported from China, rather than sewn at home. Healthy meals can be purchased from the freezer at Trader Joeas. Whatas more, legal and social changes have broken down many of the barriers keeping women out of the labor market…All these developments have increased the opportunity cost of having a spouse stay home, because that spouse now has greater value in the marketplace.”

One possibility was that, as the traditional economic case for marriage fell apart, marriage itself would decline as an institution. But that didn’t happen. Rather, we developed a new kind of marriage. “Modern partnerships are based upon ‘consumption complementarities’ — the joy of sharing things and experiences — rather than the production-based gains that motivated traditional marriage,” continue Stevenson and Wolfers. “Consistent with this, co- parenting has replaced the separate roles of nurturer and disciplinarian. We have called this new model of sharing lives ‘hedonic marriage.’ These are marriages of equality in which the rule aopposites attracta no longer applies in the same way, because couples with more similar interests and values can derive greater benefits. So likes are now more likely to marry each other.”

And it’s into this institution that gay couples are being admitted, because the nature of this institution doesn’t provide a good argument for their exclusion.

Gay couples couldn’t credibly promise to provide each other with the separate and specialized skills — separate for reasons of legal discrimination, and social beliefs about what men and women could do — that were the basis of the older conception of marriage. But gay couples can certainly share the joy of things and experiences, they can certainly improve each other’s lives, they can certainly co-parent, they can certainly bring increased economic stability to a household by combining two incomes — they can do all the things that form the basis of what Stevenson and Wolfers call “hedonic marriages.”

In other words, one story here is that our attitudes have changed towards homosexuality, and that’s certainly true. But another is that our attitudes have changed towards marriage — even heterosexual marriage — in ways that opened the institution for gays. And that’s true, too.

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Top stories

1) Greece’s coalition talks remain deadlocked. “Greeceas president is set to resume coalition talks on Tuesday with the countryas political leaders in another attempt to avoid a fresh general election after a meeting on Monday evening ended without agreement. Antonis Samaras and Evangelos Venizelos, the conservative and socialist leaders, and Fotis Kouvelis, head of a leftwing splinter group, held a fruitless one-hour discussion on how to escape the crisis but agreed to meet again, along with other party heads. President Karolos Papoulias has another 48 hours to persuade politicians to join a national unity government according to the constitution or face having to call another election…Alexis Tsipras, the leader of Syriza, the radical leftwing coalition that rejects the terms of Greeceas international bailout, refused to participate in Mondayas talks. ‘Weare not going to join in selective meetings of political leaders … The circle of contacts provided for by the constitution has been completed,’ he said.” Kerin Hope and Peter Spiegel in The Financial Times.

The standoff is raising worries of a European economic crisis. “Political deadlock in Greece rattled world markets Monday, reviving fears that the fractious Mediterranean country could spurn an international bailout, abandon the common European currency and risk a fresh round of world economic turmoil. European stock indexes fell, with Greeceas market now at a 20-year low, while the euro currency continued a recent decline against the dollar. U.S. stocks also fell. Coming only days before the leaders of the worldas Group of Eight industrialized nations meet at Camp David, the standoff in Greece over its political direction has thrust Europeas troubles to the top of the agenda. A downturn in Europe could stagger a fragile recovery in the United States and undermine growth around the world. Fighting a new downturn would be a challenge for the major economies, many of which have not fully stabilized since the last big economic crisis.” Howard Schneider and Anthony Faiola in The Washington Post.

FAQ: Why is Greece in such trouble? And can it be fixed?

@ezraklein: “Syriza” is a rather evil-sounding name for a political party. Pretty sure it means Hydra in Greek.

2) Senate leaders reached a deal to move the Export-Import Bank bill forward. “Legislation to extend the Export-Import Bankas charter advanced in the Senate Monday evening after agreement was reached on addressing tea party demands to reopen a bipartisan deal approved only days ago by the House. Five GOP amendments will be permitted Tuesday — some re-litigating specific agreements reached by House leaders. But in each case, a supermajority of 60 votes would be required, leaving Senate Majority Leader Harry Reid (D-Nev.) hopeful that the House package will survive intact and go quickly to President Barack Obama for his signature this week…Mondayas agreement, as announced by Reid, came only minutes before a scheduled procedural vote in which he would have needed 60 votes himself to move on to the bill. By coming to terms on the amendments, Reid avoided that challenge, but as part of the same deal, he will need 60 votes for passage of the bill.” David Rogers in Politico.

3) JPMorgan Chase’s loss has the banking industry scared. “A Congressional committee announced plans on Monday to hold a hearing on the financial regulatory overhaul that will look at the JPMorgan loss. Wall Streetas representatives, fearing that the entire banking industry might pay for JPMorganas sins, are trying to contain the fallout in Washington, people close to the matter said…JPMorgan, however, is stepping away from another public panel on the Volcker Rule. The Commodity Futures Trading Commission, one of the regulators writing the Volcker Rule, will host a public roundtable this month about the new regulation and has invited JPMorgan to speak. Last week, JPMorgan suggested that one of its top Volcker Rule experts would attend. But then the bank said that this person had a scheduling conflict. Rather than dispatch another executive to Washington, the banks recommended an employee at another bank..” Ben Protess and Ed Wyatt in The New York Times.

The fiasco claimed its first casualty. “JPMorgan Chase on Monday announced the abrupt retirement of the executive who oversaw the unit that lost $2 billion trading exotic securities, the latest twist in a story that has exposed the gulf between how Wall Street views itself and how the public sees the financial sector. To the bank, its actions — which included appointing an executive to investigate what went wrong — were an example of how it could take the initiative in cleaning up its own shop. But to many lawmakers and analysts, the question remains how a bank with a sterling reputation could get into such trouble two years after Congress passed laws to prevent dangerous financial gambling…On Monday, the bank announced that Chief Investment Officer Ina Drew, who oversaw the London unit, would leave the firm, which she has served for 30 years…The bank also announced that Mike Cavanagh, a top executive, would lead a team of officials to investigate the losses.” Zachary Goldfarb and Steven Mufson in The Washington Post.

FAQ: What happened at JP Morgan? And should you care?

@lizzieohreally: Carl Levin just waved highlighted parts of Dodd-Frank at me. Which was awesome.

@SuzyKhimm: Part of Obama’s problem in selling Dodd-Frank: many new regs aren’t written yet, much less implemented. Similar to Obamacare conundrum.

4) Businesses are bracing for taxmageddon. “Defense contractors have slowed hiring. Tax advisers are warning firms not to count on favorite breaks. And hospitals are scouring their books for ways to cut costs. Across the U.S. economy, anxiety is rising about the potential for widespread disruptions after the November election, when a lame-duck Congress will have barely two months to resolve a grinding standoff over taxes and spending. The halls of the U.S. Capitol are already teeming with people warning of disaster if lawmakers fail to defuse a New Yearas budget bomb scheduled to raise taxes for every American taxpayer and slash spending at the Pentagon and most other federal agencies…The uncertainty is already prompting some firms to take action. Many more say they will be forced to contemplate layoffs and other cost-cutting measures long before the end of the year unless the Republican House and the Democratic Senate come up with an alternative path to tame deficits.” Lori Montgomery and Rosalind Helderman in The Washington Post.

5) The House GOP may link tax cut extensions with a tax reform vote this summer. “House GOP leadership is considering linking a short-term extension of the expiring Bush-era tax cuts to an overhaul of the tax system this summer, aiming to give its party a campaign talking point and to pressure Senate Democrats to act. While the details of the plan are very much up in the air, one option being considered is passing a bill extending the 2001 and 2003 tax rates for one year along with a resolution affirming GOP principles for tax reform. The measures could also include some form of fast-track authority, much like the power granted to the Joint Committee on Deficit Reduction, to expedite floor consideration of a tax reform plan in 2013, when the Bush-era tax cuts would again expire…Boehner is expected to address this and other financial issues at a speech before the Peter G. Peterson Foundation Fiscal Summit today.” Daniel Newhauser and John Stanton in Roll Call.

Top op-eds

1) KLEIN: The filibuster may be unconstitutional. “According to Best Lawyers — ‘the oldest and most respected peer-review publication in the legal profession’ — Emmet Bondurant ‘is the go-to lawyer when a business person just canat afford to lose a lawsuit.’ He was its 2010 Lawyer of the Year for Antitrust and Bet-the-Company Litigation. But now, heas bitten off something even bigger: bet-the-country litigation. Bondurant thinks the filibuster is unconstitutional. And, alongside Common Cause, where he serves on the board of directors, heas suing to have the Supreme Court abolish it…At the core of Bondurantas argument is a very simple claim: This isnat what the Founders intended. The historical record is clear on that fact. The framers debated requiring a supermajority in Congress to pass anything. But they rejected that idea.” Ezra Klein in The Washington Post.

2) SALAM: The U.S. economy shouldn’t follow China’s model. “Americans have always looked abroad for inspiration. Alexander Hamilton drew on the experience of Britain and France to shape the economic institutions of the early republic. In the early 19th century, Henry Clay championed tariffs, a national bank, and internal improvements in an effort to match Britainas economic might. As the 19th century gave way to the 20th, Germany emerged as an industrial colossus, and American intellectuals had a new model. During the 1950s, at least some Americans, mainly but not exclusively on the political left, saw the breakneck modernization of the Soviet Union as a clear indication that the old-fashioned market economy was on its last legs…But the belief that we had much to learn from the Soviets was both dangerous and stupid. And much the same can be said for the current enthusiasm over Chinaas economic model.” Reihan Salam in National Review.

3) BERWICK: Cheaper healthcare can mean better healthcare. “Reducing costs wonat just rescue health care; it will also help rescue our schools, our roads, our museums, our wages, and the competitiveness of our corporations…The route is simple: improve care. In a study in the Journal of the American Medical Association, my colleague Andy Hackbarth and I estimated the amount of pure waste in American health care — overtreatment that helps no patient at all (like treating viral infections with antibiotics), errors and injuries from unsafe care, failures in coordination (such as sending people home from hospitals without supports), needless administrative complexity, failures of price competition, and fraud. The lowest estimate of total waste in these six categories was 21 percent of health care costs; the highest was 47 percent; and the midpoint was 34 percent. When we are wasting $1 in of every $3, it makes no sense to say we cannot afford to make health care a human right without rationing. Donat cut care. Cut waste.” Donald Berwick in The Boston Globe.

4) SCHMITT: Link worker pay to corporate taxes to fight inequality. “The tax code can be part of the solution. The first step is to end the preferential treatment of income from capital gains, which economists like Princetonas Alan Blinder have shown to have no lasting effect on total investment or the economy. But we can and should go further, actively using the corporate tax code to create a real incentive to pay CEOs less, and workers more, by linking the head honchoas compensation to both employee salaries and tax rates. Hereas how the idea could work. The current corporate tax rate is a flat 35 percent. In an equity-based corporate tax system, companies with a pay ratio at the historic norm of 40:1, or even up to 60:1, would pay the existing rate and be able to deduct executive pay. But companies that pay their top executives more than 60 times the average worker (including employees in overseas subsidiaries) would pay a higher rate, 40 percent, and those with extreme pay differentials, 80:1 or higher, would pay 45 percent.” Mark Schmitt in GOOD.

5) STEVENSON AND WOLFERS: An economic mode of marriage equality. For our grandparentsa generation, marriage was about separate roles, separate spheres and specialization. Gary Becker, an economist at the University of Chicago, won the Nobel Prize partly for describing the family as an economic institution — a bit like a small firm that employs people with different skills to produce both income and a well-run household. In Beckeras view, the joining of husband and wife yields a more productive firm, because it allows one spouse to specialize in earning income from working in the market, while the other specializes in the domestic sphere. The division of labor allows for greater productivity, just as it does in the workplace…Modern marriage offers different benefits. Today, we search for a soul mate rather than a good homemaker or provider. We are more likely to regard marriage as a forum for shared experiences and passions. Viewed through an economic frame, modern partnerships are based upon ‘consumption complementarities’ — the joy of sharing things and experiences — rather than the production-based gains that motivated traditional marriage. Consistent with this, co- parenting has replaced the separate roles of nurturer and disciplinarian.” Betsey Stevenson and Justin Wolfers at Bloomberg View.

Anti-folk interlude: Kimya Dawson plays “I like Giants” live.

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

Still to come: A fall in commodities prices sparks worries of deflation; a turf war over primary care; colleges begin to confront costs; regulators worry about solar flares; and a harbor seal pup explores the water for the first time.

Economy

New data suggests the eurozone has returned to recession. “Industrial production in the 17 countries that use the euro fell unexpectedly in March, leaving little doubt the region contracted for a second straight quarter in the first three months of the year and returned to recession, data by Eurostat showed Monday. The European Union’s statistical agency will publish the first estimate of first-quarter gross domestic product Tuesday. Economists are forecasting a 0.2% quarterly decline, according to a Dow Jones Newswires poll. Industrial production fell 0.3% on the month in March and by 2.2% on the year. The latter was the steepest drop since a 3.7% decline in December 2009, while the monthly decline was because of a sharp 8.5% decrease in energy production as the weather in March was warmer than usual for the time of year, a Eurostat statistician said…The data were weaker than expected. Economists had forecast a 0.5% monthly increase and a 1.2% year-on-year fall.” Ilona Billington in The Wall Street Journal.

Commodities prices fell to a new yearly low. “The prices of key commodities fell to their lowest level of the year on Monday, dragged down by worries about Europeas debt crisis and the possibility of a slowdown in China, the worldas second-largest economy. An emerging concern among some economists and investors is that the declining prices of materials such as gold and crude oil could be an early signal of deflation — a decline of prices that is economically corrosive because it makes it more difficult for businesses to make a profit. The downturn in prices is reflected in broad measures of commodity prices. The Standard & Pooras GSCI, an index tracking prices for crude oil, gold, copper and several other commodities, has dropped more than 6 percent this month so far. Even the price of gold, which usually rises when investors have concerns about the economy, has fallen.” Jia Lynn Yang in The Washington Post.

Smile for the camera interlude: Videos of people who think they are posing for a picture.

Health Care

Romney and Obama differ sharply on Medicare. “President Obama and Mitt Romney agree on one thing about Medicare: the differences between them are huge…Mr. Romney, who would limit the governmentas current open-ended financial commitment to Medicare, contends that Mr. Obama has no workable plan to prevent Medicare from going bankrupt. Under the Romney proposal, the government would contribute a fixed amount of money on behalf of each beneficiary, and future beneficiaries could use the money to buy private insurance or to help pay for traditional Medicare…Mr. Obama assails the Romney proposal for the same reason he denounced a similar plan devised by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee: the government contribution, he says, would not keep up with the rising cost of health care, so Medicare beneficiaries — older Americans and people with disabilities — would have to pay more of the cost.” Robert Pear in The New York Times.

A primary care turf war is heating up. “Nurse practitioners are rolling out a campaign this week to explain what, exactly, nurse practitioners do — and why patients should trust them with their medical needs…The AANP will follow up on the public relations blitz with state-level lobbying efforts, looking to pass bills that will expand the range of medical procedures that their membership can perform…All states have ‘scope of practice’ laws, which regulate what medical procedures each profession can, and cannot, perform, given their level of education…In 16 states, nurse practitioners can practice without the supervision of another professional such as a doctor. Other states, however, require a physician to sign off on a nurse practitioneras prescriptions, for example, or diagnostic tests. As the health insurance expansion looms, expanding those rules to other states has become a crucial priority for nurse practitioners.” Sarah Kliff in The Washington Post.

A senator is floating a plan to make HIV drugs cheaper. “Why do American patients pay tens of thousands of dollars each year for HIV drugs that cost just hundreds in Africa? Drugmakers wave their patent rights in developing countries as part of the Presidentas Emergency Fund for AIDS Relief. But the higher cost of brand-name drugs in the United States makes it difficult for many HIV patients to stay on drug regimens that can cost as much as $30,000 a year. Thatas the challenge a Senate subcommittee will explore on Tuesday at a hearing on how to narrow the gap. Itas mainly a vehicle one proposed solution — a proposal by Sen. Bernie Sanders (I-Vt.) that would award prize money rather than grant patent rights to manufacturers that develop new HIV drugs, allowing the medication to go straight to the generic market. But the hearing will also look at the root causes of a dilemma that has had some HIV patients and drugmakers at odds for years.” J. Lester Feder in Politico.

@petersuderman: This new issue of Health Affairs looks so, so awesome. All coverage expansion all the time!

Domestic Policy

Broadcasters are pushing back on recent FCC moves. “TV broadcasters look at the Federal Communications Commissionas recent drive to move them off frequencies and put their political advertising rates on the Internet and draw one conclusion: The FCC has it in for television. And broadcasters are fighting back by publicly airing that charge in the midst of the ongoing policy debate on freeing up airwaves for wireless broadband…For decades, televisionas use of the airwaves was virtually unchallenged. Under Chairman Julius Genachowski, the FCC has focused on fostering mobile broadband as the essential communications platform of the future. As broadcasters see it, television has become a much less important medium to the agency…In the wrangling over spectrum, broadcasters see the wireless industry — which is clamoring for access to more airwaves to satisfy the exploding amount of broadband data traffic — as their main foe. As the wireless industry sees it, the best use of finite spectrum resources is mobile broadband.” Brooks Boliek in Politico.

A federal judge struck down a NLRB rule on union elections. “A federal judge ruled Monday that a contentious union election rule proposed by the National Labor Relations Board (NLRB) is ‘invalid.’ In an 18-page memorandum opinion, U.S. District Judge James Boasberg struck the regulation down, saying the labor board only had two members when it voted on the final rule in December 2011. Boasberg said the agency needed at least three members to have a quorum for action on the rule…Two NLRB members — Chairman Mark Pearce and then-Member Craig Becker, both Democrats — participated in adopting the rule. The labor boardas third member at the time, Republican Brian Hayes, did not participate…The judge said the decision by the U.S. District Court for the District of Columbia ‘may seem unduly technical,’ but cited a 2010 Supreme Court ruling that the NLRB needs a quorum of three members to issue regulations and make rulings. Boasberg said his ruling was not made on the merits of the union election rule and noted the NLRB could vote again to pass it.” Kevin Bogardus in The Hill.

@AlecMacGillis: Dems’ failure to pass labor law reform in ’09-’10 haunts once again–a judge just threw out NLRB’s incremental new rule to ease organizing.

Colleges are beginning to confront costs. “College presidents across the country are confronting the same realization, trying to manage their institutions with fewer state dollars without sacrificing quality or all-important academic rankings. Tuition increases had been a relatively easy fix but now — with the balance of student debt topping $1 trillion and an increasing number of borrowers struggling to pay — some administrators acknowledge that they cannot keep putting the financial onus on students and their families. Increasingly, they are looking for other ways to pay for education, stepping up private fund-raising, privatizing services, cutting staff, eliminating departments — even saving millions of dollars by standardizing things like expense forms…The problems arenat confined to public colleges. Administrators at some nonprofit private institutions said they too had come to realize they could not keep raising tuition and fees.” Andrew Martin in The New York Times.

Adorable animals exploring the world interlude: The firsts of a harbor seal pup.

Energy

A transmission line for offshore wind is moving forward. “A pioneering proposal to build a wind power transmission line on the ocean floor from southern Virginia to northern New Jersey cleared a hurdle on Monday when the Interior Department opened the way for the projectas sponsors to start work on an environmental impact statement. The Bureau of Ocean Energy Management, part of the Interior Department, said that no competitor had emerged for the right-of-way for the proposed transmission line, known as the Atlantic Wind Connection, allowing the bureau to issue a ‘determination of no competitive interest.’ By linking wind farms 15 to 20 miles off the coast, the backbone would greatly reduce the number of individual radial lines needed to bring the energy to shore…Construction of the full project would take about 10 years, according to the company. The right-of-way corridor, including branches to reach the shore at intermediate points, would run about 790 miles, the Interior Department said.” Matthew Wald in The New York Times.

Regulators are considering options to protect the grid from solar flares. “With a peak in the cycle of solar flares approaching, U.S. electricity regulators are weighing their options for protecting the nation’s grid from the sun’s eruptions–including new equipment standards and retrofits–while keeping a lid on the cost. They are studying the impact of historic sunstorms as far back as 1859 to see if the system needs an upgrade, and encountering a clash of views on how serious the threat is and what should be done about it…The sun is expected to hit a peak eruption period in 2013, and while superstorms don’t always occur in peak periods, some warn of a disaster. John Kappenman, a consultant and former power engineer who has spent decades researching the storms, says the modern power grid isn’t hardened for the worst nature has to offer. He says an extreme storm could cause blackouts lasting weeks or months, leaving major cities temporarily uninhabitable and taking a massive economic toll.” Ryan Tracy in The Wall Street Journal.

Highway crashes are the leading cause of fatalities for oil and gas workers. “Over the past decade, more than 300 oil and gas workers like Mr. Roth were killed in highway crashes, the largest cause of fatalities in the industry. Many of these deaths were due in part to oil field exemptions from highway safety rules that allow truckers to work longer hours than drivers in most other industries, according to safety and health experts. Many oil field truckers say that while these exemptions help them earn more money, they are routinely used to pressure workers into driving after shifts that are 20 hours or longer…Last year, the National Transportation Safety Board said it ‘strongly opposed’ the oil field exemptions because they raise the risk of crashes. This threat will grow substantially in coming years, safety advocates warn. According to federal officials, more than 200,000 new oil and gas wells will be drilled nationwide over the next decade.” Ian Urbina in The New York Times.

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

In 2010, there was an effort — led mostly by freshmen Democratic senators like Tom Udall and Jeff Merkley — to reform the filibuster. Senate Majority Leader Harry Reid squelched their campaign. Last night, he apologized to them on the Senate floor:

If there were ever a time when Tom Udall and Jeff Merkley were prophetic, itas tonight. These two young, fine senators said it was time to change the rules of the Senate,and we didnat. And they were right. The rest of us were wrong — or most of us, anyway. What a shame…

Mr. President, I am finished here, but I just want to say again, for those that are listening here or watching, Senator Udall and Senator Merkley want to do something to change the rules regarding filibuster. If there were anything that ever needed changing in this body, itas the filibuster rule, because itas been abused, abused, and abused.

Earlier this week, I wrote that we were seeing athe outlines of a necessary systemic crisis leading to an overdue set of procedural reforms in the Senate.a My point was that both parties are becoming more and more intent on changing the Senateas rules, and that suggests weare only one Senate crisis away from one party or the other actually following through on it. That post is looking pretty good right now.

For the President of the United States to endorse gay marriage is certainly, as Vice President Joe Biden would say, a big you-know-what deal. But what’s actually changed this morning?

In Slate, Emily Bazelon argues that President Obama’s position was actually trailing his administration’s legal strategy. They had long ago made the unusual choice to stop defending the Defense of Marriage Act in the courts. That is to say, they had stopped defending a law that pits the federal government against states that choose to to allow same-sex marriage. This largely predicted Obama’s evolution on the underlying policy issue — he personally supports gay marriage, but thinks that the actual decisions should be left up to the states.

Then, of course, there’s the political fallout. This is unpredictable, of course. And my guess is that it probably hurts Obama a bit more than it helps him. But overall, I think Jonathan Bernstein is right that it’s largely being overhyped by both sides.

“Yes,” he writes, “some marriage-equality advocates had talked about withholding support unless the president ‘evolved.’ But realistically, there was no way that political activists a people accustomed to the normal give-and-take of politics a were not going to appreciate the wide gulf between Obama and Mitt Romney on lesbian, gay, bisexual and transgender issues.” Similarly, “itas highly unlikely that anyone who, otherwise was fine voting for Obama despite disagreeing with him on ending ‘donat ask donat tell’ and each of the other measures he has supported and in many cases has enacted, would draw the line here.”

“And what of everyone else?” Asks Bernstein. “The millions of Americans, most likely a large majority, who donat really care very much? Theyare still not going to care very much.”

But there are many Americans for whom this will matter quite a lot. Many of them are young Americans who perhaps have only recently realized that they’re gay, and who live in places, or with families, they know will have trouble accepting that fact. To them, the president’s words are a signal that they can look forward to a future in which they will be accepted, and in which they can live in a way that makes them happy. His words are proof that it gets better. And that’s a big deal.

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Top stories

1) The polling on gay marriage has flipped. According to surveys included in the PollingReport.com database, an average of 50 percent of American adults support same-sex marriage rights while 45 percent oppose it, based on an average of nine surveys conducted in the past year. This is a reversal from earlier periods: support for same-sex marriage has been increasing, and opposition to it has been decreasing, at a relatively steady rate of perhaps two or three percentage points a year since 2004…In addition, there is no longer evidence of an aenthusiasm gapa with respect to same-sex marriage: an NBC News/Wall Street Journal poll in March found that 32 percent of Americans said they strongly favored same-sex marriage, while 31 percent strongly opposed it. Nate Silver in the New York Times.

2) The president’s personal position is catching up with his administration’s legal strategy. Obamaas Justice Department withdrew more than a year ago from defending the Defense of Marriage Actas definition of marriage as ‘a legal union between one man and one woman.’ Attorney General Eric Holder started backing away from DOMA in suits brought by same-sex couples in Connecticut, Vermont, and New Hampshire. The idea in these cases is that in states that recognize same-sex marriage, the federal government should follow state law and stop denying the economic benefits of marriageaestate tax deductions, Social Security benefits, pensions, and the likeato married gay couples….As Mother Jonesa Adam Serwer points out, Obama caught up to his administrationas legal position today without going beyond it. He said ‘at a certain point I’ve just concluded that for me personally it is important for me to go ahead and affirm that I think same-sex couples should be able to get married,’ and he also said he thinks the states should decide the question of legalization for themselves. Emily Bazelon in Slate.

3) The Bundesbank may accept higher inflation. “The Bundesbank, the most hawkish of central banks, has signalled it would accept higher inflation in Germany as part of an economic rebalancing in the eurozone that would boost the international competitiveness of countries worst-hit by the regionas debt crisis. A future German inflation rate above the eurozone average could be part of a natural adjustment process as crisis-hit countries pulled themselves out of recession, the Bundesbank argued in evidence to German parliamentarians submitted on Wednesday…The Bundesbank has for some time seen European Central Bank policy as too loose for Germany. The willingness to contemplate higher domestic inflation in public comments points to a new-found flexibility in German thinking…Despite the Bundesbankas conciliatory stance on inflation, German policy makers have been among the toughest in insisting that Greece sticks to its agreed reform programme underpinning its bailout in the aftermath of Sundayas Greek election.” Ralph Atkins in The Financial Times.

4) Banks are throwing their weight behind Obama’s Fed nominees. “President Barack Obama’s two nominees to the Federal Reserve Board have received support from the financial-services industry, including Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. Sen. David Vitter (R., La.) has effectively blocked Senate confirmation of the nominees, Harvard University economics professor Jeremy Stein and former private-equity executive Jerome Powell. Wall Street firms have been quietly pressing Mr. Vitter to drop his objections, an aide to the senator said. Senate leaders aren’t expected to bring the nominees to the floor for debate, a potentially lengthy process unlikely to be welcomed by either party in an election year. The Senate generally confirms nominees through the faster process of unanimous consent. Unless Mr. Vitter changes his mind, the two Fed nominations are unlikely to advance.” Kristina Peterson in The Wall Street Journal.

5) The House will vote today on a plan to cut health-care spending rather than defense. “The House is expected to vote Thursday on a Republican plan that would spare the Pentagon from the deep across-the-board spending cuts envisioned as part of last summeras debt-ceiling agreement, reviving what has been an emotional debate in Washington about the best ways to reduce the federal budget deficit. With a series of troubling end-of-year deadlines looming, Republicans are proposing to replace the first round of $110 billion in reductions, which are set to take effect in January. The cuts are a first-year down payment on $1.2 trillion in reductions spread over 10 years, which were to be split evenly between the military and domestic programs. To forestall the defense hit, the GOP proposal would cut funding for food stamps, eliminate key pieces of the federal health-care law and slash funding designed to help the government better monitor the financial sector.” Rosalind Helderman in The Washington Post.

@MichaelGrabell: The Sequester Replacement Reconciliation Act is probably the hottest name for a bill I’ve ever seen.

@ChadPergram: Ryan on bill to change sequester: The supercmte didn’t do its job. We’re doing what the supercmte was supposed to do: prioritize spending.

6) The FDIC will outline its plan to take down failing banks. “When the next crisis brings a major financial firm to its knees, U.S. regulators will seize the parent company but allow its units around the globe to keep operating while the mess is cleaned up, according to a planned announcement Thursday from the Federal Deposit Insurance Corp. The equity stakeholders of the large bank or other financial firm will be wiped out, and bondholders will face losses as their holdings are swapped for equity in a new entity, as a part of the FDIC’s plan. Nearly four years after the massive government bailouts of the financial crisis, regulators are looking to chip away at the tacit understanding that the government will step in to save top financial institutions seen as vital to the economy or banking system. As part of that effort, acting FDIC Chairman Martin Gruenberg will outline the agency’s strategy in a speech in Chicago Thursday, his first public remarks on the dismantlement plans for banks.” Victoria McGrane in The Wall Street Journal.

7) The CFPB will propose tighter mortgage lending regulations. “The Consumer Financial Protection Bureau said it planned to propose tighter mortgage lending regulations that would limit the ability of banks and mortgage brokers to charge certain transaction fees, possibly ending one of the most abusive costs levied on consumers when they buy a house. Bureau officials said that the rules, which were released Wednesday ahead of formal introduction this summer, would ban mortgage companies from charging origination fees that vary with the amount of the loan…The consumer bureau also said it would require that lenders offer a reduced interest rate when a consumer opted to pay upfront discount points and would require lenders to offer a loan option without points. During the financial crisis, some lenders charged the points without lowering the interest rate. Changing that rule, the bureau believes, will make it easier for consumers to weigh offers from multiple lenders.” Edward Wyatt in The New York Times.

Top op-eds

1) KLEIN: Polarization is largely attributable to Republicans. “Look no further than Senator Richard Lugaras concession statement Tuesday night, which showed, in its wan effort to make the two parties sound equivalently extreme, just how much further the Republican Party has gone…Whether the Republican Party is ‘the problem’ is a subjective judgment. Perhaps you loathe taxes and, in the face of all available evidence, consider global warming a hoax. In that case, the Republican Party is doing exactly what it should be doing. But there is simply no denying that the Republican Party has gone much further right than the Democratic Party has gone left, and that, from policy pledges to primary challenges, it has done much more to discourage its members from compromising than the Democratic Party has. So if you think polarization is the main problem in Washington today, then Mann and Ornstein are right: Your beef is largely with the Republicans.” Ezra Klein in Bloomberg.

2) HANSEN: If tar sands drilling continues it’s game over for the climate. “Global warming isnat a prediction. It is happening. That is why I was so troubled to read a recent interview with President Obama in Rolling Stone in which he said that Canada would exploit the oil in its vast tar sands reserves ‘regardless of what we do.’ If Canada proceeds, and we do nothing, it will be game over for the climate. Canadaas tar sands, deposits of sand saturated with bitumen, contain twice the amount of carbon dioxide emitted by global oil use in our entire history. If we were to fully exploit this new oil source, and continue to burn our conventional oil, gas and coal supplies, concentrations of carbon dioxide in the atmosphere eventually would reach levels higher than in the Pliocene era, more than 2.5 million years ago, when sea level was at least 50 feet higher than it is now. That level of heat-trapping gases would assure that the disintegration of the ice sheets would accelerate out of control…Civilization would be at risk.” James Hansen in The New York Times.

3) YGLESIAS: It shouldn’t be so hard for foreign visitors to come to the U.S. “For a depressed economy, exports function as a magic elixir. Demand–and with it jobs–appears from outside, generating new income that cycles through the economy, This is why President Obama, as part of his recovery strategy, has set a goal of doubling exports over five years. Talk of exports normally conjures up images of factories and container ships, but many of Americaas exports are services. The nationas biggest service export is in some sense not an export at all–itas travel and tourism, an industry begging for respect on National Travel and Tourism Week…As far as the national balance sheet goes, tourism functions exactly like an export. Foreigners come here and spend money, leaving extra funds in American hands, with which we can purchase oil and Chinese toys. Itas an export realm in which the United States has very strong fundamentals.” Matthew Yglesias in Slate.

4) SALMON: Principal reductions can benefit everybody. “Principal reduction in mortgage modifications has to become the rule rather than the exception. The reason the governmentas efforts to fix the mortgage market have failed so miserably is that those efforts have centered on interest payments, not the total amount owed. A sluggish housing market will act as an economic drag for as long as millions of homeowners owe vastly more than their house is worth. If done right, these policies can be implemented in a positive-sum way, making everybody — including the banks doing the write-downs — better off. For instance, the government could impose higher capital standards on banks that insist on marking underwater defaulted mortgages at par, and give the banks an incentive to write down principal that way, while making the whole banking system safer at the same time…If we donat want the United States to continue to suffocate under the weight of far too much debt, we have to start making serious efforts to bring our debt burden down.” Felix Salmon in Reuters.

5) WILL: The medical device tax will mean fewer life-extending inventions. “Congress, ravenous for revenue to fund Obamacare, included in the legislation a 2.3 percent tax on gross revenue — which generally amounts to about a 15 percent tax on most manufacturersa profits — from U.S. sales of medical devices beginning in 2013. This will be piled on top of the 35 percent federal corporate tax, and state and local taxes. The 2.3 percent tax will be a $20 billion blow to an industry that employs more than 400,000, and $20 billion is almost double the industryas annual investment in research and development. An axiom of scarcity is understood by people not warped by working for the federal government, which can print money when it wearies of borrowing it. The axiom is: A unit of something — time, energy, money — spent on this cannot be spent on that. So the 2.3 percent tax, unless repealed, will mean not only fewer jobs but also fewer pain-reducing and life-extending inventions…which have reduced health-care costs.” George Will in The Washington Post.

Top long reads

Marcus Walker examines the failings of Europe’s bailout of Greece: “Two years after Europe bailed Greece out to protect the euro, the rescue has become a debacle that threatens to unravel the common currency. After Greece’s May 6 elections left pro-bailout parties too weakened to govern the country, more elections are likely in June, with no guarantee a stable government will emerge. By next month, Athens must identify a!11.5 billion, or $15 billion, in fresh spending cuts or face suspension of the international loans it needs to pay pensions and run schools. If it doesn’t get the money, it would eventually have to print its own. Greece’s growing turmoil is the culmination of a radical austerity experiment and botched economic overhaul that have pushed the nation to the brink of social and political breakdown. The story of the ill-fated bailout suggests that forcing deep austerity on individual member states won’t save the euro and may worsen its crisis.”

Susan Headden on the search for better standardized tests: “Critics of testing habitually protest its cost, implying that the millions spent on assessment would be better put toward smaller class sizes, expanded library hours, or the restoration of art and gym. But despite testingas huge and growing role in education, the U.S. now devotes less than a quarter of a percent of per-pupil spending to assessments. Thatas less than the cost of buying each of Americaas students a new textbook. The American education system is at a major crossroads, one that few Americans are aware of. The new assessments–the product of a huge investment of time, knowledge, and talent–are only two years away from being put in place, and theyare desperately needed. Itas too early to know whether they will work as advertised, and even if they do, the danger is that states will quickly revert to their old habits of doing assessment on the cheap. But if we do this right, we could finally provide educators like Caryn Voskuil with one of the tools they need most: a test worth teaching to.”

Robert Rothman on the Common Core and its effect on innovation: “In some ways, the American elementary and secondary education system is undergoing a transition similar to what the American rail system underwent around the time of the Civil War. For decades, each state has set its own expectations for what students should know and be able to do at each grade level. These standards might reflect the tradition of local control of education, but they have made it difficult for students to move from state to state; students transferring from fourth grade in, say, Indiana, might face a different set of expectations when they arrive in fifth grade in Illinois. And, by fragmenting the educational marketplace, these varied standards have impeded the kinds of innovations that might otherwise come with economies of scale–in testing, textbooks, and teacher education.”

British post-punk interlude: Django Django plays “Default” live on Later with Jools Holland.

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

Still to come: The Fed approved Chinese banks; primary care doctors will be getting more for Medicaid patients; the F.T.C. and the White House want online privacy legislation; it’s a good time to be a solar installer; and a super-medley of songs from Super Mario Bros. 3.

Economy

Europe may be open to relaxing Greece’s payment deadlines. “As another day passed with Greece no closer to a working government, European officials suggested Wednesday that they had a new tool in their mission to keep the shared euro currency with all its partners: time. A ticking watch may be the most powerful bargaining chip Europe has against the possibility that anti-bailout voices in Greece will push it off the euro. Every day that ends without new European bailout money for Greece to pay its bills heightens the pressure on its leaders to comply with the austerity measures that come as a condition of the $171 billion rescue package. But German officials signaled Wednesday that they may be willing to relax some of the nationas payment deadlines if a pro-bailout government comes to power…They may even be willing to consider reducing the interest payments on Greeceas emergency loans, sweetening the deal without abandoning any of the fundamental overhauls they say Greece needs to get its economy on track.” Michael Birnbaum in The Washington Post.

@TonyFratto: I used to believe Greece couldn’t exit the euro. Now I think it’s only a matter of timing.

@esoltas: Likelihood of Eurozone exit soars on @Intrade — 69% by yearend 2014, 54% by 2013, 35% by 2012. http://pic.twitter.com/ES1kbQqF

Fannie Mae won’t need additional taxpayer aid for the first time since the bailout. “Fannie Mae, the government-backed mortgage financier, said on Wednesday that it made a profit in the first quarter and that it did not need additional bailout money — a first since the federal government took it over in fall 2008. A slowdown in the decline of home prices and in the number of homes entering serious delinquency allowed the company to eke out a profit after paying its dividend to the Treasury. Fannie Mae also said losses on its portfolio of home mortgages had probably peaked and that it expected better profits in the future, another sign that the worst might be over for the battered American housing market. The company reported quarterly net income of $2.7 billion, up from a $6.5 billion loss in the first quarter of 2011. Fannie has received about $116 billion from the Treasury over the last three and a half years and paid back about $23 billion in dividends.” Annie Lowrey in The New York Times.

Export-Import Bank reauthorization is headed towards the Senate. “Ending months of haggling, the House voted Wednesday to extend the Export Import Bankas charter through September 2014 and raise its loan exposure cap to $140 billion — a 40 percent increase. The bill must still pass the Senate but the lopsided 330-93 House margin makes it harder for conservatives to obstruct. Republicans split 147-93 for the measure, and Democrats, whose party controls the Senate, were unanimous in their support…Wednesdayas vote caps a remarkable odyssey is which all of modern Washingtonas politics seemed to descend with a thud on the once obscure enclave of overseas financing for U.S. manufacturers. Pushed to the brink, the bank is only weeks away now from seeing its charter expire at the end of May, by which point it will have also exhausted its $100 billion cap and be unable to take on further transactions in the pipeline.” David Rogers in Politico.

@TPCarney: 93 GOP votes against the Export-Import Bank, as compared to 50 Nays in 2002: Evolution!

@Amy_NJ: Overheard in a Capitol elevator: “Another day in the United States Senate. I couldn’t be more excited.”

The Fed approved the U.S. expansion plans of Chinese state banks. “Giant banks owned by the Chinese government are coming to the U.S. The Federal Reserve on Wednesday approved plans by three state-backed Chinese banks to expand in the U.S., including the first acquisition of a U.S. retail-banking network by a state-owned Chinese lender. The approval is a landmark step for U.S. banking regulators. Chinese banks long have sought access to the U.S. banking system in order to provide financing to Chinese companies operating overseas and to do business with foreign investors looking for exposure to the Chinese currency, the yuan. But they have been stymied in previous attempts by assorted delays and rejections…The Federal Reserve effectively is giving its seal of approval to China’s bank-regulatory system, a big step for U.S. regulators given their past concerns about the adequacy of Chinese supervision of banks.” Jon Hilsenrath, Robin Sidel, and Lingling Wei in The Wall Street Journal.

Compilation interlude: People say “you just don’t get it, do you?” a lot in films.

Health Care

A new regulation will boost Medicaid payments for primary care doctors. “Primary care doctors could get a pay raise next year for treating Medicaid patients, under a rule announced by the Obama administration Wednesday. The proposed regulation implements a two-year pay increase included in the 2010 health-care law. The increase, effective in 2013 and 2014, brings primary care fees for Medicaid, which covers indigent patients, in line with those for Medicare, which insures the elderly and some disabled patients. Although Medicaid is jointly funded by states and the federal government, the pay boost would be covered entirely with federal dollars totaling more than $11 billion over the two years it would be in effect…Administration officials also noted that the law has already increased Medicare payments to primary care doctors — awarding more than 150,000 physicians almost $560 million in additional compensation in 2011.” N.C. Aizenman in The Washington Post.

Some lawmakers want a permanent ‘doc fix.’ “Reps. Allyson Schwartz (D-Pa.) and Joe Heck (R-Nev.) introduced a bill Wednesday to reform how Medicare pays healthcare providers and to avoid a cut to reimbursement rates on Jan. 1. The bipartisan measure would repeal Medicare’s current reimbursement formula and replace it with a new system of payment models. It would also give doctors small boosts in payment rates for four years. Money for the changes would coming from war savings from troop withdrawals in Iraq and Afghanistan — a move Republicans have opposed in the past as a ‘Ponzi scheme.’…The proposal instructs the Centers for Medicare and Medicaid Services to create new payment model options aimed at giving providers more flexibility based on specialty, region or type of practice. Doctors who treat Medicare patients are scheduled to see a 30 percent cut to their reimbursements on Jan. 1, 2013, if Congress does not step in.” Elise Viebeck in The Hill.

Domestic Policy

The FTC and the White House are urging Congress to pass online privacy legislation. “The Obama administration and the nationas chief privacy regulator pressed Congress on Wednesday to enact online privacy legislation…Jon Leibowitz, chairman of the Federal Trade Commission, which enforces limited Internet privacy laws, and Cameron F. Kerry, general counsel for the Commerce Department, said at a hearing of the Senate commerce committee that writing new laws and giving the F.T.C. the power to enforce them with civil penalties would promote Internet commerce by increasing the trust that Americans put in online transactions. Currently, the F.T.C. monitors whether Internet companies that have privacy policies keep their promises to consumers about when and where they will share personal information. But the commission lacks the authority to assess penalties for most transgressions, and it has little authority over how companies operate when they have no written privacy rules.” Edward Wyatt in The New York Times.

Game music interlude: Meine Meinung play a super-medley of songs from the Super Mario Bros. 3 soundtrack.

Energy

Consumer resistance to ‘smart meters’ is slowing a grid upgrade. “A growing consumer backlash against new wireless digital technology for measuring power usage is slowing U.S. utilitiesa $29 billion effort to upgrade their networks. States including California, Maine and Vermont have responded to customer concerns about higher bills and safety by offering them the option of keeping their conventional devices for an extra charge. The fee may discourage drop-outs from the ‘smart-meter’ program, in which household usage data is transmitted over radio waves to local utilities such as PG&E Corp. (PCG), Central Maine Power Co. and Central Vermont Public Service Corp. (CV), which can use the information to charge higher rates during times of peak demand…The meters are key to the ‘smart grid’ being rolled out nationwide to increase delivery flexibility. Investment by utilities in the new grid has totaled $15.4 billion through the first quarter of 2012 and is projected to increase by another $13.4 billion through 2015.” Mark Chediak in Bloomberg.

Solar installers are thriving. “Jay Nuzzi, a New Jersey state trooper, had put off installing solar panels on his home here for years, deterred by the $70,000 it could cost. Then on a trip to Home Depot, he stumbled across a booth for Roof Diagnostics, which offered him a solar system at a price he couldnat refuse: free. Mr. Nuzzi had to sign a 20-year contract to buy electricity generated by the roof panels, which he would not own. But the rates were well below what he was paying to the local utility…Similar deals are being struck with tens of thousands of homeowners and businesses across the country. Installers, often working through big-box chains like Home Depot or Loweas, are taking advantage of hefty tax breaks, creative financing techniques and a glut of cheap, Chinese-made panels to make solar power accessible to the mass market for the first time. The number of residential and commercial installations more than doubled over the last two years to 213,957, according to Greentech Media, a research firm.” Diane Cardwell in The New York Times.

@AndrewRestuccia: Dingell quotes from “Oliver Twist” at hearing on electric reliability #youdontseethateveryday

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

Thereas been lots of discussion lately on whether Greece should exit the euro. Sure, advocates say, in the short term the country might face even more austerity and a crushing recession. But in the long run, Greece would be free to grow. Hereas Arvind Subramanian making that case:

Just look at what happened to the countries that defaulted and devalued during the financial crises of the 1990s. They all initially suffered severe contractions. But the recessions lasted only one or two years. Then came the rebound. South Korea posted nine years of growth averaging nearly 6 percent. Indonesia, which experienced a wave of defaults that toppled nearly every bank in the entire system, registered growth above 5 percent for a similar period; Argentina close to 8 percent; and Russia above 7 percent. The historical record shows clearly that there is life after financial crises.

** How long would it take for Greece to print and distribute a new currency, anyway? Hereas one historical precedent: aIn 2003, the U.S.-led coalition managed to do it in Iraq in less than three months. But that required the efforts of De La Rue, a British speciality printer, a squadron of 27 Boeing 747s and 500 armed Fijian guards to ease the process.a

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