Government Executive - Authors - Catherine Hollander

Your Post Office Now Wants to Be Your Bank

Catherine Hollander, National Journal — Mon, 10 Feb 2014 11:12:00 -0500

The post office isn't known as the most efficient or reliable business in America. It can't run its operations at a profit, it's got serious financial troubles, and just try mailing a package on a Saturday without waiting in line for 30 minutes.

Now imagine relying on this institution for your banking needs, everything from loading up a debit card to taking out a small personal loan. It's a hard sell, but one that progressives and congressional Democrats are making as they search for a way to keep this American institution running.

The idea, most recently floated in a white paper by the U.S. Postal Service's inspector general and supported in theory by Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt.,estimates that the money-losing agency could make $8.9 billion a year by offering limited banking services to the tens of millions of people who are not served by traditional banks. (These are people locked out of the current banking system due to geography or relative poverty and who often rely on payday lenders, pawnshops, and title loans for their cash.)

Theoretically, the USPS could partner with banks, who would help it offer branded, reloadable prepaid cards; set up and manage Web and mobile access to financial services; service accounts and loans; and maybe even fund and hold the loans on their own balance sheets. In return for the banks' participation, the USPS would offer its massive network of post offices, 38 percent of which are in ZIP codes that don't have a bank, and its trustworthy name. The banks could reap "substantial revenue" through the arrangement, the white paper predicts.

A marriage made in heaven? Hardly. The banks are not quite on board with the idea of allowing the Postal Service to expand into their realm.

Their stated concern is competition, although Camden Fine, president of the Independent Community Bankers of America, says that might not be the deal breaker. "Have you ever stood in the lines at Christmastime at a post office?" he asked.

He instead points to the Postal Service's dismal financial situation. Since 2007, the USPS has struggled mightily to stay afloat financially. Congress is at least partly to blame for the agency's financial woes; legislation passed in 2006 required the organization to rapidly set aside money to "pre-fund" its retiree health plans. Also at fault is the financial crisis, which hastened the country's shift to cheaper or free digital communication. The USPS has had a net loss for the past seven fiscal years, most recently $5 billion in 2013. Insolvency constantly threatens.

So Fine worries members of his trade group might lose money, either as taxpayers or bankers, if they paired up with the struggling Postal Service.

"Let's say they went down that same dismal road of non-success they have had with the delivery of mail, then when they start racking up losses. Who's on the hook for those losses? It's either going to be the bank, or the taxpayers, or both," Fine said.

Now, banks certainly have their own reputational trouble and some recent history with owing their very existence to the U.S. taxpayer. Still, they say their squeamishness comes from their concern about giving an entity somehow related to the U.S. government access to a piece of the financial market. (The Postal Service has been self-supported for decades, although it has borrowed money from taxpayers to make ends meet in recent years.) Think Fannie Mae and Freddie Mac, the mortgage giants the government had to save by taking into conservatorship.

"Given the Postal Service's unique governmental status, its entry into the financial services market would raise serious unfair competition concerns with the potential to allow it to become the next Government Sponsored Enterprise (GSE) in the broad based financial services arena," four industry groups said, referring to Fannie and Freddie, in a recent letter to Sens. Tom Carper, D-Del., and Tom Coburn, R-Okla., the authors of a postal reform bill. A government-backed postal bank would be just as unfair, they say.

The industry is fighting to kill the Carper-Coburn proposal that would give USPS's expansion the best chance for legal survival. If the industry succeeds, the Postal Service might still be able to go it alone, to a certain extent, by using its current authority to provide money orders and international money transfers. Ruth Goldway, who acts as the Postal Service's chief regulator as head of the Postal Regulatory Commission, said she would be "delighted" if the USPS came to her with a proposal for postal banking.

More complicated may be establishing banking services without industry help. The Universal Postal Union, the United Nations' postal branch, surveyed countries around the world that have postal banking and found the business models—the degree of involvement of the financial services sector—vary quite a bit.

Although banking trade groups say they haven't yet ruled out the possibility of future partnerships, here, with the banking lobby still as powerful as it is, the USPS might be on its own.

This article appears in the February 10, 2014, edition of NJ Daily.

(Image via Flickr user mempix)

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Treasury Secretary Warns U.S. Likely to Hit Debt Ceiling in February

Catherine Hollander, National Journal — Thu, 16 Jan 2014 14:21:00 -0500

Treasury Secretary Jacob Lew warned lawmakers on Thursday that a final deadline for raising the nation's borrowing limit is likely to arrive next month, not in March, which he had previously said was a possibility.

"I think that if Congress is looking at the numbers the way we are—we have the best data—they would see that they would be looking more at the end of February than any time in March," Lew said Thursday at a discussion hosted by the Council on Foreign Relations.

The debt ceiling, which was suspended in October, will be reinstated and reached again on Feb. 7, at which point the Treasury Department can use special authority—so-called extraordinary measures—to prevent the nation from defaulting. These measures can briefly allow the United States to continue to meet its obligations until a later date, the "drop-dead" deadline. At that point, the nation risks default.

Lew's emphasis on February in his Thursday remarks was a departure from a letter he wrote to House Speaker John Boehner, R-Ohio, last month. In that letter, the Treasury secretary said his agency's authority would likely last through "late February or early March."

The unpredictable nature of tax season makes it tough to forecast the exact date when Treasury will exhaust these special measures. On Wednesday, Morgan Stanley economists estimated the drop-dead date could arrive as late as June. "We see it as a close call whether this would last only until late March or further into the spring, which would be largely determined by how strong the tax-refund season is," they wrote in a note to clients.

Lew, for his part, criticized the "Washington parlor sport" of guessing when the nation will hit the limit, and he urged lawmakers to act to raise it "as quickly as possible."

"The buildup to the last minute causes damage," he said.

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Senate Confirms Fed Chair—Now the Hard Part Begins

Catherine Hollander, National Journal — Tue, 07 Jan 2014 12:51:21 -0500

The Senate voted 56-26 on Monday to confirm Janet Yellen as the next chair of the Federal Reserve, elevating her to arguably the most powerful woman in Washington. It won't be an easy job.

In addition to overseeing the unwinding of the central bank's bond-buying program and likely its first interest-rate hike since December 2008, Yellen will inherit the Fed chairman's twice-yearly grilling by members of Congress. The Fed chief is required by law to provide semiannual updates on monetary policy to the Senate Banking and House Financial Services committees.

It won't always be pleasant, but Yellen's job might be slightly easier than that of her predecessor, Ben Bernanke. Not only is the economy slowly improving but the Fed is also easing off a bond-buying program known as "quantitative easing" that has drawn criticism from a number of congressional Republicans, who say it could have unintended negative consequences for the economy.

"There's always a tension between the Fed and the Congress, which is sort of a rightful tension, but I don't think it's going to be as intense," said Stuart Hoffman, chief economist at the PNC Financial Services Group.

From Congress's perspective, the Fed is trudging toward more normal policies, which should please the vocal critics on the right, even as it may draw fresh criticism from Democrats who think the central bank is backing off its support for the fledgling recovery too soon. From the Fed's point of view, Congress just delivered more fiscal certainty—something Bernanke often urged it to do—with the passage of a modest two-year budget agreement last month.

But even though the Fed announced it would cut the total number of monthly asset purchases by $10 billion to $75 billion in December, the central bank still will be growing its balance sheet, which critics say could cause financial instability, through the bond-buying program in 2014. "I don't think the pressure lessens up. I just think it changes a little bit the nature of the Republican criticism," said Sarah Binder, a Congress expert at the Brookings Institution.

Some of the more politically contentious aspects of the Fed are, in addition to quantitative easing, its work as a financial regulator and its transparency. A bill that would open up the central bank's monetary-policy decisions to congressional scrutiny has been the most prominent effort in recent years to change the Fed; it passed the House in 2012 but so far has failed to advance in the Senate.

"I would be very concerned about legislation that would subject the Federal Reserve to short-term political pressures that could interfere with [its] independence," Yellen said at her confirmation hearing, echoing concerns that Bernanke raised during his tenure.

She may be forced, like Bernanke, to defend her position again.

The House Financial Services Committee announced last month that it would spend 2014 examining the Fed's mission through a series of hearings and is prepared to mark up legislation to reform the Fed later next year. The first of 2014, scheduled for Thursday, will focus on the international impacts of the Fed's bond-buying program.

This article appears in the January 7, 2014 of NJ Daily.

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Treasury Official to Be Tapped to Lead Financial Regulatory Agency

Catherine Hollander, National Journal — Tue, 12 Nov 2013 10:16:54 -0500

President Obama will nominate Treasury official Timothy Massad to be the next chairman of the Commodity Futures Trading Commission on Tuesday afternoon, according to a White House official.

Massad will succeed Gary Gensler, who has served as head of the CFTC since 2009 and who has frequently butted heads with Wall Street during his tenure. Gensler's departure this year was expected, and Massad had been reported to be a top contender for the post.

Massad is currently the assistant secretary for financial stability at the Treasury Department, overseeing the Troubled Asset Relief Program, the financial crisis-era bank bailout program. "As TARP moves into the history books, it's my hope that its greatest legacy will be this, that when the nation was confronted with an extraordinary challenge -- in this case, the potential collapse of our entire financial system -- government rose to the occasion," he said in a recent speech at the Brookings Institution. Massad has also worked in the private sector at law firm Cravath, Swaine & Moore and in other Treasury positions.

He'll have plenty to do at the CFTC. The regulatory agency is responsible for writing many of the rules under the 2010 financial-reform law, including the contentious and yet-to-be-finalized "Volcker Rule" that bans banks from making speculative bets with their own money.

The Dodd-Frank reform law vastly increased the agency's responsibilities, and Gensler has frequently complained to Congress that the CFTC's budget is inadequate for the work it has to implement the law and oversee the massive futures and swaps market. Lawmakers have repeatedly declined to expand the CFTC's budget in recent years.

Further complicating life for the next CFTC chairman is that one of the agency's commissioners, Democrat Bart Chilton, said last week that he intends to step down soon. Chilton's will be the second open seat on the five-member commission after Republican commissioner Jill Sommers resigned earlier this year.

The confirmation hearing for the next CFTC chairman will be held by the Senate Agriculture Committee.

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Obamacare Continues to Be a Tough Sell

Catherine Hollander, National Journal — Fri, 21 Jun 2013 11:29:48 -0400

In what turned out to be unfortunate timing for the White House, President Obama traveled to San Jose, California, this month to tout his health care law and kick off a summer push to get Americans ready to sign up for insurance under new online marketplaces, scheduled to open on Oct. 1.

But the health care law wasn't the news of the day. A massive government surveillance program had just been revealed in the press and provoked a loud public outcry. The one question Obama took after his San Jose speech was about the NSA's surveillance program, not the 2010 health reform law that's facing a make-or-break test less than four months away.

The president's off-message moment in San Jose is illustrative of the endless challenges the administration faces in trying to sell the health care plan to voters and sign up the uninsured through exchanges, websites intended to be one-stop shopping for health insurance. The administration faces myriad challenges in preparing people to make complicated health insurance decisions using an unfamiliar interface come October. And so pro-Obamacare groups are preparing to launch a multi-million dollar public relations blitz this summer reaching out to communities, educating consumers and training workers to assist people in enrolling.

Making the sell for Obamacare will be a particularly tough challenge for the national organizations. States are all approaching the exchanges differently; some are working in partnership with the federal government, some are going it alone and others are letting the federal government run the show. Not all states are expanding their Medicaid programs, which will leave certain low-income adults without any affordable health insurance options. Different groups have different concerns about the law, and different insurance needs. The Obama administration may be well positioned to find and target these groups – micro-targeting is something it was renowned for during the latest presidential campaign – but getting people to sign up for insurance could prove much more complicated than getting out the vote.

The Government Accountability Office released a report on Wednesday raising questions about the exchanges' readiness for enrollment by the October deadline. "Whether these efforts will assure the timely and smooth implementation of the exchanges by October 2013 cannot yet be determined," the report said.

Health policy experts say the June push is an attempt to hit the sweet spot of getting consumers up to speed before the exchanges open, but even some supporters worry that the groundwork should have been laid long ago.

Organizing for Action, a nonprofit dedicated to selling the administration's agenda, plans to spend seven figures this summer on a series of ads touting the law and released the first this week. Enroll America, a nonprofit dedicated to getting people to sign up for insurance under the new law, kicked off its "Get Covered America" campaign this week and expects to spend "in the tens of millions of dollars," according to president Anne Filipic, on outreach efforts over the course of the campaign.

Such efforts will be crucial to the success of the contentious law. The effectiveness of the exchanges depend on lots of people signing up. The administration needs young, healthy patients to enroll so it will drive down costs for everyone else. The challenge: They are also among the most difficult to convince to enroll.

Pro-Obamacare groups did get some good news this week in the form of the Kaiser Family Foundation's latest health tracking poll. According to the poll, more than seven out of ten adults under age 30 consider having health insurance to be personally important. That's a sign the administration has some opportunities to convince young adults to sign up.

Enroll America's Filipic, who also worked on the Obama campaign, told National Journal that the group was researching which messages resonate with which groups; financial security, for example, strikes a chord with young people, they found. "Really, how we're thinking about this effort is taking some of the best practices from past enrollment efforts, so from - whether it's CHIP [Children's Health Insurance Program] or Medicare Part D or Massachusetts – taking those lessons learned and those best practices, and then adding to that some of the really innovative work that's been done in recent years by the private sector, by corporate marketing campaigns, by electoral campaigns, by other organizations," she said.

But Keith Nahigian, who helped design the Medicare Part D prescription drug enrollment campaign during the Bush administration, thinks the White House and other pro-Obamacare groups are starting this push far too late. During Medicare Part D, he said, not only did public outreach begin much earlier, but they also had support from state and local government officials. That won't be the case to the same extent for Obama's controversial health reform law, which the House has voted to repeal 37 times.

"If you don't build partnerships, and you don't have third-party validators and local trusted sources, you only have one-way communication of government telling people to take a personal health care decision, and right now there's not a lot of trust of people and government, and also there's a cost," Nahigian said, referring to the fact that unlike voting for a candidate, individuals will be paying for insurance under the new law.

Because funding for outreach efforts is limited, the administration and other pro-Obamacare groups are relying on private organizations, like Planned Parenthood and Doctors for America, which are partnering with Enroll America this summer, for help.

"We are going to be ready. We are on schedule," said Gary Cohen, director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services, in a Thursday conference call with reporters. "Things are proceeding well with all the aspects of what we need to do to create the marketplaces in all the states, and so that's really all I have to say about that."

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Top Econ Adviser: 'The Era of Threatening Default Is Over'

Catherine Hollander, National Journal — Thu, 25 Apr 2013 17:49:19 -0400

Gene Sperling, President Obama’s top economic adviser, sketched out a hopeful scenario on Thursday for the next round of budget negotiations.

Not only is there the possibility of passing a budget to fund the government through the normal congressional process rather than lurching from crisis to crisis with stopgap measures, but Sperling also sees a “building of trust” over the dinners Obama has hosted with groups of lawmakers in recent weeks.

“Trust at least that there can be conversations that can be kept quiet. Trust that the president is willing to compromise, that he’s willing to—as we’ve seen—even take some disagreement from his own supporters,” Sperling, who is director of the White House National Economic Council, said at an event hosted by Allstate, The Atlantic and National Journal.

That's a positive outlook for a process that has been thoroughly twisted in recent years--and, asNational Journal recently reported, for which the path forward is anything but clear.

Sperling offered one place where there won’t be any friendly, quiet talks hosted by the White House. Earlier this year, Congress voted to suspend the U.S. debt ceiling until May 18, at which point the Treasury Department is expected to take so-called “extraordinary measures” to push back the date for a few months when the country exceeds its borrowing limit and goes into default. Then, it will be up to lawmakers to raise the ceiling.

In the summer of 2011, the debate over raising the nation’s debt limit became a looming crisis as Republicans tried to use the talks to demand spending cuts the White House refused to make. The dragged-out negotiations ultimately hit confidence, caused markets to tank and ultimately cost the U.S. its top, triple-A credit rank from ratings agency Standard & Poor’s. It is not remembered by most as a shining example of Washington at work.

This time, Sperling said, “We just have to be very clear: The era of threatening default as a budget [negotiating] tactic is over,” Sperling said. “The president is not going to negotiate on this.”

Suspending rather than raising the debt ceiling this winter allowed Republicans to sidestep a politically thorny issue. But negotiations this summer could heat up again, although it's not clear to what degree. Earlier this month, analysts at political risk research and consulting firm Eurasia Group wrote that "early signals indicate that this summer's debt ceiling fight will present less risk and less opportunity for fiscal reform than that of 2011." Some House Republicans have proposed prioritizing the nation’s payments in the event lawmakers can’t agree to raise the U.S. borrowing limit before it is reached. Sperling rejected that idea. “It is default by any other name,” he said Thursday.

And although Sperling sounded a hopeful note about negotiations occuring through regular processes and growing trust among lawmakers, he acknowledged that any negotiations over the budget could be derailed by intransigence. “I think we have to recognize that… if people, you know, particularly in the House, are completely unwilling to compromise, there’s nothing any of us can do,” he said.

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It's Debt-Ceiling Madness Again. Why You Should Stay Calm (Sort Of)

Catherine Hollander, National Journal — Wed, 10 Apr 2013 08:10:43 -0400

The nation’s borrowing limit will be reached once again on May 19. Even though the Treasury Department can take so-called extraordinary measures to push the real deadline for default out to sometime this summer, it sounds an awful lot like 2011 when the country stood ready to default. But a feeling is growing among some economists and political experts that the markets won't be as jittery this time.

In 2011, U.S. markets slid 15 percent between the week leading up the Aug. 2 deadline for raising the debt limit and the early days of trading after credit-rating agency Standard & Poor’s cut the country’s top rating due to the debt-limit fighting. Congress temporarily suspended the debt ceiling with much less fanfare in February.

What's changed in 2013 is the politics.

Analysts at Eurasia Group say that's because both sides are willing to go small. “Obama will use his budget to renew calls for a 'grand bargain' that remains out of reach; ultimately he will sign either a short- or a long-term debt-ceiling increase later this year,” they wrote in a recent research note. “Republicans will present an initial hard-line position on their debt-ceiling demands, but will ultimately accept a smaller debt-ceiling increase if a bigger deal cannot be agreed.”

“While rhetoric will heat up and negotiations will drag through the summer, we expect that well in advance of a likely August deadline it will become clear Washington is choosing between a small or a large debt-ceiling increase rather than a fiscal deal or default, which should put a floor under market concern,” they said.

The rhetoric has already begun to heat up. Sen. Rob Portman, an Ohio Republican, said Tuesday that the debt limit has “been, frankly, the most effective way” to talk about deficit reduction. “I think this is an opportunity and I think the timing is actually pretty good,” Portman said at a breakfast hosted byPolitico. “So let’s deal with it, let’s use the debt limit, you know, as leverage.”

House Republicans, for their part, have indicated a desire to move forward with legislation that would direct the Treasury Department to prioritize payments in the event the debt ceiling is reached. Democrats say this is an attempt to minimize the impact of reaching the debt limit.

But if analysts feel that some sort of agreement to raise the ceiling in advance of the deadline is more likely now than it was two years ago, the economy could change that.

“If the economy were to suddenly soften, I think that might make a [fiscal] deal less likely because people would say ‘enough already’ [with deficit reduction],” said Greg Valliere, chief political strategist at the Potomac Research Group.

Although economic data of late has been softer, the economy is stronger than it was in 2011, and better able to withstand shocks. Still, if it does come to an eleventh-hour showdown over the nation's creditworthiness this summer, a la 2011, economists have mixed views about how markets would respond.

Some say markets are tired of lurching from crisis to crisis and would be less jittery in response to the latest fiscal fight. The country has definitely seen its share in recent years: the spring 2011government-shutdown fight; the summer 2011 debt-ceiling showdown; the winter 2011 payroll-tax debate; the winter 2012 fiscal-cliff fight; the debate over the March 1 automatic spending cuts known as sequestration.

Europe has also had its share of crises, most recently the tempest surrounding Cyprus’s banking sector and whether the measures to keep Cyprus afloat set a dangerous precedent for the rest of the eurozone. “We’ve just had a lot of crisis fatigue,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

“We’ve gone through a number of these things and it does seem likely that at this point, until there’s a reason — a very clear reason — to worry about a failure to increase the debt limit, markets may assume that it simply will happen,” said Alec Phillips, an economist at Goldman Sachs.

Not everyone agrees. Research from the Federal Reserve Bank of New York suggests that a new debt-ceiling showdown could be worse than 2011, not better. “The relatively benign effects of the 2011 U.S. debt-ceiling crisis on U.S. financial markets appear to have been serendipitous, as the U.S. and European debt crises occurred concurrently,” Fed economists wrote in a post last month, referring to very real fears that Greece would collapse and bring the euro down with it. “Money funds nevertheless reacted to the increased riskiness of Treasuries by dramatically decreasing the maturities of Treasuries held in their portfolios during the debt-ceiling crisis. This behavior suggests that we can’t be sure that the effects of future fiscal crises on financial markets will be similarly benign,” they continued.

Of course, the calculus completely changes if the country actually fails to raise the debt limit and enters into default. Pretty much everyone agrees that would be very, very bad for the economy, calling the country's creditworthiness into question for the first time in history. But — at least at this point — that doesn't seem likely.

(Image via Torian/Shutterstock.com)

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Four Things to Know About Gina McCarthy, Obama's Pick to Head the EPA

Catherine Hollander, National Journal — Thu, 21 Feb 2013 16:31:26 -0500

President Obama is poised to pick Gina McCarthy, the Environmental Protection Agency’s Assistant Administrator for the Office of Air and Radiation, to head the EPA, Reuters reports. Here’s a few things you should know about McCarthy:

She’s a tough-talking and enthusiastic Bostonian. McCarthy, who hails from Dorchester, Mass., is Irish Catholic and speaks with a pronounced Boston accent. The approach she’s taken to her work at EPA earned her the nickname “Obama’s green quarterback” from some environmentalists.
A proud Bostonian, McCarthy once described in a speech getting to yell “Play ball!” at a Boston Red Sox baseball game. “Now, there’s nothing cooler than that,” she said. “I did it with real gusto. Should I do it again? Play balllll!” (McCarthy is also is known for her sense of humor.)
She’s a social anthropologist. McCarthy studied social anthropology as an undergraduate at the University of Massachusetts-Boston before going on to receive a joint Master of Science in Environmental Health Engineering and Planning and Policy from Tufts University, which is also in the Boston area.
The former degree may seem less relevant to her current post than the latter. “People ask me why did social anthropology prepare you for the work that you’re doing in government? Well, everyone who asked me that, I wondered if they had ever been in the Massachusetts legislature, whether they had ever been in the Connecticut legislature, and whether they had ever visited Congress recently, because it is a primitive society into itself,” McCarthy joked. But really, she said, it taught her to “relish diversity.”
She’s a long-time government official, and even worked for Mitt Romney. All told, McCarthy has been working for federal and state governments for over 25 years. Her career has spanned five Massachusetts governors, including former Republican presidential candidate Mitt Romney, one Connecticut governor, Jodi Rell, under whom she ran the state’s Department of Environmental Protection. She was confirmed to EPA and came to Washington, D.C., in 2009.
Her confirmation won’t be a picnic. Obama, who vowed to make tackling the threat of climate change a second-term priority, is likely to rely heavily on the EPA to carry out that agenda, at least initially, which is likely to thrust the agency into the political spotlight. McCarthy is going to have to answer for her agency, which isn’t the most popular among congressional Republicans, who have criticized the regulations it has rolled out in recent years as job-killers.The Washington Post reports that the coal industry could raise some opposition to her nomination, as may Senate Republicans, according to The Wall Street Journal.
On the other hand, McCarthy is popular with environmentalists, and even has support within the energy industry, including from groups that don’t tend to see eye-to-eye with EPA.

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A Look at Obama's Remaining Cabinet Picks

Catherine Hollander, National Journal — Thu, 07 Feb 2013 08:22:50 -0500

President Obama on Wednesday chose Sally Jewell, chief executive of the outdoor retailer REI, to succeed Ken Salazar as Interior Secretary and may be on the verge of picking hotel heiress and longtime supporter Penny Pritzker for Commerce Secretary. Here is a look at the changes Obama has made to his Cabinet so far and the jobs he still needs to fill:

Here are the positions left to fill and the leading contenders:

Commerce Secretary. The Commerce Department has been run by an acting secretary ever since John Bryson resigned this summer. Penny Pritzker, a hotel heiress and mega-bundler for Obama, surfaced in the Chicago Sun-Times as the top choice for the Commerce job, one that has been marred by bad luck for its holder for years. Bloomberg reported on Wednesday that Obama was close to choosing Pritzker for the job.
Energy Secretary. Steven Chu said he will step down as secretary sometime after this month. The list of potential candidates to replace him includes Deputy Secretary of Energy Daniel Poneman, hedge-fund founder Tom Steyer, former Sen. Byron Dorgan, and former Washington Gov. Christine Gregoire.
Environmental Protection Agency Administrator. Former EPA Administrator Lisa Jackson announced her departure in December and will leave after the president’s Feb. 12 State of the Union address. Gina McCarthy, assistant administrator for EPA's Office of Air and Radiation, has emerged as a top contender in recent days, Reuters reports. Other possibilities include Bob Perciasepe, the deputy administrator, and Christine Gregoire.
Labor Secretary. Colorado Lt. Gov. Joe Garcia is the top pick for the job previously held by Hilda Solis, according to Reuters. Ed Montgomery, an economist and the dean of Georgetown University’s Public Policy Institute, is also being considered, according to The Washington Post. Montgomery served in a variety of roles during the Clinton administration. Finally, former two-term Michigan Gov. Jennifer Granholm appears to be in the mix as well.
Trade Representative. Ron Kirk will step down in late February. Jeffrey Zients, the acting director of the White House Office of Management and Budget, is the leading contender to replace him, according to the Financial Times. Lael Brainard, Treasury undersecretary for international affairs, and Fred Hochberg, head of the Export-Import Bank, are mentioned as candidates as well.
Transportation Secretary. Deborah Hersman, the Democratic head of the National Transportation Safety Board, has emerged as a leading candidate to fill the post when Ray LaHood steps down, The Wall Street Journal reports. Los Angeles Mayor Antonio Villaraigosa had been considered a top contender, but he said in a recent statement that although he’s been “flattered and humbled” by speculation that he’d join Obama’s Cabinet, “I am firmly committed to remaining in L.A. and finishing my term.” His term is up on June 30. Another candidate, former Pennsylvania Gov. Ed Rendell, similarly took himself out of the running.
White House Office of Management and Budget Director. Sylvia Mathews Burwell, who heads the Walmart Foundation, is the top candidate for OMB director, according to CNN Money. She has D.C. experience: Burwell served as OMB’s deputy director during the Clinton administration, and was Clinton’s deputy chief of staff and chief of staff to then-Treasury Secretary Robert Rubin.

Obama has already made his choices for some of the top jobs. Here's who he's picked so far:

CIA Director. Obama nominated his top counterterrorism adviser, John Brennan, to fill the post. Brennan’s nomination is likely to spur a debate about Obama’s counterterrorism tactics, including the use of drones. But Brennan's path to the CIA may be a smoother onethan it was four years ago, when he was a candidate for the same job but withdrew after controversy arose over his service in the Bush administration.
Consumer Financial Protection Bureau Director. Obama renominated CFPB Director Richard Cordray for the job, setting up a contentious confirmation process in which the structure and budget of his agency is likely to be questioned once more, particularly after a recent court ruling that has implications for the constitutionality of Cordray’s recess appointment last year.
Defense Secretary. Obama nominated Chuck Hagel, a former two-term Republican senator from Nebraska, to head the Defense Department. Hagel was expected to face a rocky road to confirmation, with controversies over everything from his stance on Israel to gay rights—and he didn’t appear to win over his critics during a confirmation hearing before the Senate Armed Services Committee last month; his performance was widely panned.
Interior Secretary. Obama picked Sally Jewell, president and CEO of REI, an outdoor retailer, to the top post at Interior.
Secretary of State. Former Sen. John Kerry of Massachusetts was nominated and confirmed to the post. His first day at the State Department was Feb. 4.
Securities and Exchange Commission Chairman. Obama nominated tough-as-nails former prosecutor Mary Jo White to fill the position. The president’s selection of White suggests a tougher approach to Wall Street, but others have questioned her record of defending Wall Street bigwigs.
Treasury Secretary. Obama nominated White House Chief of Staff Jacob Lew to replace Timothy Geithner as Treasury secretary. The selection of Lew, who has lots of experience in Washington budget battles, is thought to signal the president's intention to focus on fiscal issues in the coming years.
White House Chief of Staff. The president tapped Deputy National Security Adviser Denis McDonough to serve as chief of staff after nominating Lew for the Treasury secretary's post. Here's what you need to know about McDonough.

Finally, a number of folks are expected to stay in the administration, at least for the beginning of the second term. They are:

Agriculture Secretary. Tom Vilsack indicated in a recent speech that he'd be staying on, and the USDA communications director confirmed that Vilsack had accepted an offer from Obama to stay on, according to Bloomberg.
Ambassador to the United Nations. Susan Rice withdrew her name from consideration to be secretary of State in December, but she's expected to stick around in her current role.
Attorney General. Eric Holder plans on remaining, a White House official tells National Journal.
Council of Economic Advisers Chairman. Alan Krueger has been in the position only since November 2011, and some insiders believe he will stick around in Obama’s second term.
Education Secretary. Arne Duncan told National Journal he plans to stay on for a second term.
Health and Human Services Secretary. Kathleen Sebelius is expected to remain, a White House official says.
Homeland Security Secretary. Janet Napolitano is staying on, The Hill confirms.
Housing and Urban Development Secretary. The Wall Street Journal reports that Shaun Donovan is aboard for a second term. This fall, Donovan said he was “very, very happy with the work” he's doing.
Small Business Administration Administrator. Karen Mills's name has been floated for Commerce secretary, but for now, there's little chatter of her going anywhere else.
Veteran Affairs Secretary. Eric Shinseki is staying, according to a White House official.

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Who is Sally Jewell, Obama's choice for Interior Secretary?

Catherine Hollander, National Journal — Wed, 06 Feb 2013 14:50:43 -0500

Here is what you need to know about Sally Jewell, President Obama's pick to replace Ken Salazar as Interior secretary:

She’s a businesswoman. Jewell is president and CEO of Recreational Equipment Inc., an outdoor and recreational retailer. REI is ranked 17^th on FORTUNE’s “100 Best Companies to Work for” list, and the company boasts of its employees' community service and its conservation efforts. Before coming to REI, Jewell spent nearly two decades in the commercial banking industry. She started her career working as an engineer for Mobile Oil in Oklahoma and Colorado.
She’s no political operator. Jewell was appointed to the University of Washington’s Board of Regents by the state's governor twice, but has never been an elected official. She’s on a handful of corporate and nonprofit boards, including the National Parks Conservation Association. She did come to D.C. in May 2009 for a White House meeting on encouraging private-sector employers to offer health care incentives (Photos from the event show her sitting next to President Obama.) Still, it'd be tough to make the case that she's a political insider.
She’s a break from tradition—but not entirely. The Interior position is usually held by a politician from a Western state. Outgoing secretary Ken Salazar was a Colorado senator. His predecessor, Dirk Kempthorne, was the governor of Idaho, and Kempthorne was preceded by Gale Norton, who served as Colorado’s attorney general. Jewell is not a politician, but she is a Westerner, through and through, having grown up in an outdoorsy Washington family.
She might unite environmentalists and sportsmen. As head of an outdoor supply company that counts among its customers millions of the nation’s hunters and fishers, Jewell could represent a piece of the conservation agenda that often unites Democrats and some Republicans. When it comes to protecting the environment, a “greens and guns” alliance has formed, as environmentalists and sportsmen's groups join in efforts to protect wilderness areas. This could help generate bipartisan support for her in the often contentious confirmation process.

Coral Davenport contributed

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Obama's Cabinet and other top jobs

Catherine Hollander, National Journal — Tue, 05 Feb 2013 15:42:21 -0500

President Obama has already announced many of the most high-profile posts in his second-term Cabinet, but he still has many decisions left to make.

Here are the positions left to fill and the leading contenders:

Commerce Secretary. The Commerce Department has been run by an acting secretary ever since John Bryson resigned this summer. Penny Pritzker, a hotel heiress and mega-bundler for Obama, recently surfaced in the Chicago Sun-Times as the top choice for the Commerce job, one that has been marred by bad luck for its holder for years. Fred Hochberg, head of the Export-Import Bank, is also mentioned as a possibility for the job. If confirmed, he would be the first openly gay Cabinet member.
Energy Secretary. Steven Chu said he will step down as secretary sometime after this month. The list of potential candidates to replace him includes Deputy Secretary of Energy Daniel Poneman, hedge-fund founder Tom Steyer, former Sen. Byron Dorgan, and former Washington Gov. Christine Gregoire.
Environmental Protection Agency Administrator. Former EPA Administrator Lisa Jackson announced her departure in December and will leave after the president’s Feb. 12 State of the Union address. Gina McCarthy, assistant administrator for EPA's Office of Air and Radiation, has emerged as a top contender in recent days, Reuters reports. Other possibilities include Bob Perciasepe, the deputy administrator, and Christine Gregoire.
Interior Secretary. Ken Salazar will vacate the position by the end of March. Gregoire is also a likely choice for Interior, a job that has traditionally been held by politicians from Western states. Office of Personnel Management Director John Berry has also been cited as a possibility, as have Deputy Interior Secretary David Hayes, Democratic Rep. Raul Grijalvaof Arizona and former Democratic Rep. Norm Dicks of Washington.
Labor Secretary. Colorado Lt. Gov. Joe Garcia is the top pick for the job previously held by Hilda Solis, according to Reuters. Ed Montgomery, an economist and the dean of Georgetown University’s Public Policy Institute, is also being considered, according to The Washington Post. Montgomery served in a variety of roles during the Clinton administration. Finally, former two-term Michigan Gov. Jennifer Granholm appears to be in the mix as well.
Trade Representative. Ron Kirk will step down in late February. Jeffrey Zients, the acting director of the White House Office of Management and Budget, is the leading contender to replace him, according to the Financial Times. Lael Brainard, Treasury undersecretary for international affairs, has also been interviewed for the job, and Ex-Im's Hochberg is mentioned as a candidate as well.
Transportation Secretary. Deborah Hersman, the Democratic head of the National Transportation Safety Board, has emerged as a leading candidate to fill the post when Ray LaHood steps down, The Wall Street Journal reports. Los Angeles Mayor Antonio Villaraigosa had been considered a top contender, but he said in a recent statement that although he’s been “flattered and humbled” by speculation that he’d join Obama’s Cabinet, “I am firmly committed to remaining in L.A. and finishing my term.” His term is up on June 30. Another candidate, former Pennsylvania Gov. Ed Rendell, similarly took himself out of the running.
White House Office of Management and Budget Director. Sylvia Mathews Burwell, who heads the Walmart Foundation, is the top candidate for OMB director, according to CNN Money. She has D.C. experience: Burwell served as OMB’s deputy director during the Clinton administration, and was Clinton’s deputy chief of staff and chief of staff to then-Treasury Secretary Robert Rubin.

Obama has already made his choices for some of the top jobs. Here's who he's picked so far:

CIA Director. Obama nominated his top counterterrorism adviser, John Brennan, to fill the post. Brennan’s nomination may spur a debate about Obama’s counterterrorism tactics, including the use of drones. But Brennan's path to the CIA may be a smoother one than it was four years ago, when he was a candidate for the same job but withdrew after controversy arose over his service in the Bush administration.
Consumer Financial Protection Bureau Director. Obama renominated CFPB Director Richard Cordray for the job, setting up a contentious confirmation process in which the structure and budget of his agency is likely to be questioned once more, particularly after a recent court ruling that has implications for the constitutionality of Cordray’s recess appointment last year.
Defense Secretary. Obama nominated Chuck Hagel, a former two-term Republican senator from Nebraska, to head the Defense Department. Hagel was expected to face a rocky road to confirmation, with controversies over everything from his stance on Israel to gay rights—and he didn’t appear to win over his critics during a confirmation hearing before the Senate Armed Services Committee last month; his performance was widely panned.
Secretary of State. Former Sen. John Kerry of Massachusetts was nominated and confirmed to the post. His first day at the State Department was Feb. 4.
Securities and Exchange Commission Chairman. Obama nominated tough-as-nails former prosecutor Mary Jo White to fill the position. The president’s selection of White suggests a tougher approach to Wall Street, but others have questioned her record of defending Wall Street bigwigs.
Treasury Secretary. Obama nominated White House Chief of Staff Jacob Lew to replace Timothy Geithner as Treasury secretary. The selection of Lew, who has lots of experience in Washington budget battles, is thought to signal the president's intention to focus on fiscal issues in the coming years.
White House Chief of Staff. The president tapped Deputy National Security Adviser Denis McDonough to serve as chief of staff after nominating Lew for the Treasury secretary's post. Here's what you need to know about McDonough.

Finally, a number of folks are expected to stay in the administration, at least for the beginning of the second term. They are:

Agriculture Secretary. Tom Vilsack indicated in a recent speech that he'd be staying on, and the USDA communications director confirmed that Vilsack had accepted an offer from Obama to stay on, according to Bloomberg.
Ambassador to the United Nations. Susan Rice withdrew her name from consideration to be secretary of State in December, but she's expected to stick around in her current role.
Attorney General. Eric Holder plans on remaining, a White House official tells National Journal.
Council of Economic Advisers Chairman. Alan Krueger has been in the position only since November 2011, and some insiders believe he will stick around in Obama’s second term.
Education Secretary. Arne Duncan told National Journal he plans to stay on for a second term.
Health and Human Services Secretary. Kathleen Sebelius is expected to remain, a White House official says.
Homeland Security Secretary. Janet Napolitano is staying on, The Hill confirms.
Housing and Urban Development Secretary. The Wall Street Journal reports that Shaun Donovan is aboard for a second term. This fall, Donovan said he was “very, very happy with the work” he's doing.
Small Business Administration Administrator. Karen Mills's name has been floated for Commerce secretary, but for now, there's little chatter of her going anywhere else.
Veteran Affairs Secretary. Eric Shinseki is staying, according to a White House official.

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The perils of bypassing Congress

Catherine Hollander and Erin Mershon , National Journal — Tue, 29 Jan 2013 16:47:15 -0500

If a president's first term is about reelection, his second is about history. And as President Obama made clear in his inaugural address last week, he is hoping to make history by tackling climate change.

But as he butts up against Congress on gun control, immigration reform and a slew of budget battles, the president is expected to pursue his climate agenda through actions he can take without congressional approval, the most prominent of which will be the Environmental Protection Agency’s finalization of rules restricting carbon dioxide emissions from new fossil-fueled power plants, which is expected this spring.

Attempting to make major changes through executive action is a strategy with many pitfalls, says Michael McConnell, a constitutional law scholar at Stanford University. Executive actions lack permanence. Courts could find that the president or executive agencies overstepped. “In general, an executive can move faster when it acts on its own, but the danger is that nine or 13 months later, they’re going to find that what they’ve done is struck down,” McConnell said.

Legal challenges to Obama’s climate actions are all but guaranteed. Even if they aren’t successful, they may delay implementation of new rules and regulations, making progress in Obama’s remaining four years difficult.

Pursuing climate change through the White House rather than Congress also runs the risk of being a slapdash approach to the problem rather than a comprehensive solution.

“Long term, you do need Congress’s support,” Alden Meyer, director of strategy and policy for the Union of Concerned Scientists, said of the administration. “To get the kind of deep reductions and the real transition away from polluting fossil fuels over the next several decades, you need to have some bipartisan support; you need to have Congress going along with it and future presidents also wanting to build on this. I think [Obama administration officials] know that.”

Indeed. “I continue to believe that whenever we can codify something through legislation, it is on firmer ground. It's not going to be reversed by a future president. It is something that will be long-lasting and sturdier and more stable,” Obama said in a recent interview with The New Republic.

With debates over immigration, gun control, and the nation’s fiscal future raging, however, the chances of Congress taking on climate legislation at the moment is slim. Still, it’s possible that some tweaks to climate policy could be made in the context of other legislation (tax incentives, for example, are a popular way to pursue climate goals).

So, can Obama become the climate-change president through executive action alone? History holds out hope. Even though presidents are largely remembered for their legislative accomplishments (think President Reagan’s tax reform, President Clinton’s welfare reform, President George W. Bush’s education agenda, and even Obama’s Affordable Care Act), Barbara Perry of the University of Virginia's Miller Center points to PresidentTruman, who gets a great deal of credit for the country's Medicare system—despite the fact that the law was passed more than 12 years after Truman left office.

Truman, she says, jump-started the national conversation on public health insurance. Though his proposals failed to pass Congress, he used his executive power to direct funds to construct hospitals, expand medical aid to the needy, and provide for expanded medical research. When President Johnson finally signed the bill into law in July 1965, he did so at the Truman Presidential Library in Independence, Mo., with Truman by his side. Crediting Truman in a speech at the signing ceremony, Johnson also enrolled the former president as the first Medicare beneficiary.

The lesson for Obama? Even if it takes a dozen more years to bring Congress around to the idea of comprehensive climate change legislation, Obama's work won't be for naught—and he may even be credited with paving the path on the issue.

In the meantime, the White House has pledged to forge ahead without Congress on climate. “[We will] continue to look for tools, administrative actions that we can take that don’t require Congress and in many cases don’t require federal dollars,” Brian Deese, deputy director of the White House National Economic Council, said at an event on the new energy economy hosted by National Journal and The Atlantic last week.

Here are some actions Obama can take, sans Congress:

Appointments. The president could be losing three strong advocates for action on climate change in his Cabinet: Energy Secretary Steven Chu is expected to resign, and the EPA administrator and the secretary of the Interior have already announced their departures. His choices for successors will say a lot about how committed the administration is to an aggressive climate-change agenda.

Sen. John Kerry, the Massachusetts Democrat who has been nominated to be secretary of State, pledged at his confirmation hearing last week to be a “passionate advocate” of using energy policy to solve climate change.The State Department leads U.S. negotiators on international agreements to address climate change, although any new commitments would need approval of the Senate. State is also charged with determining whether a permit for the proposed Keystone XL pipeline, which would carry oil from Canada's tar sands to U.S. refineries on the Gulf Coast, is in the national interest.

Regulation and enforcement. The biggest—and most widely expected—executive action is the EPA’s release of final rules limiting carbon dioxide emissions from new power plants. Additional action may be taken to address methane emissions from the oil and gas industry, something the Clean Air Task Force urged Obama to tackle in an open letter to the president earlier this month.

EPA will play the biggest, but not the only, role in implementing Obama’s second-term vision for climate change. A host of other departments have climate-related authority: Interior will be involved in discussions over oil drilling, fracking, and offshore wind turbines. Energy can set efficiency standards for appliances and buildings. The Agriculture Department is involved in implementing mandates for biofuels, such as corn-based ethanol. The Commerce Department oversees the National Oceanic and Atmospheric Administration, which interprets and explains climate science. The Transportation Department has a say in fuel-economy standards.

Public pronouncements. Next month’s State of the Union address will bring more clarity to just how Obama plans to tackle climate change. The Senate confirmation hearings for key Cabinet posts should also shed some light on just how rocky Obama's path forward will be.

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Obama kicks off new fight over consumer watchdog

Catherine Hollander, National Journal — Fri, 25 Jan 2013 14:30:23 -0500

President Obama’s re-nomination of Richard Cordray to head the Consumer Financial Protection Bureau reignites the battle that raged last year over the structure of the regulatory agency created under the landmark Dodd-Frank financial-reform law.

Republicans have criticized the consumer watchdog agency, which regulates products ranging from home mortgages to credit cards. Their chief complaints center on the fact that the agency is run by a director rather than a board. They also dislike the agency's funding mechanism. The Federal Reserve Board, rather than Congress, allocates money for its operations.

The GOP will use Cordray’s confirmation process to rehash these concerns. The politics will mirror the first go-around in 2011. Democrats picked up two Senate seats in November but still fall five short of the 60 that would be needed if Republicans decided to filibuster the appointment. Obama ended up using a recess appointment to install Cordray at the head of the agency last year, bypassing the GOP senators who opposed his nomination.

The White House is bracing for a fight. Asked if the Obama administration was expecting “clear sailing,” press secretary Jay Carney told reporters: “I wouldn’t want to predict an outcome except to say that there are no objections to him on substance.”

He's right. The dispute won’t be about Cordray. The credentials of the former Ohio attorney general,who was first nominated in July 2011, have never been the issue for Republicans. He now has a year-long track record at the CFPB, but his approach at the agency has been surprisingly cautious and marked by a focus, at least initially, on the administrative challenges of getting the new agency off the ground. Cordray’s agenda, according to Mark Calabria, director of financial-regulation studies at the libertarian Cato Institute, was “exactly the political strategy one would pursue if you’re trying to build support" for the agency and soothe fears among key constituencies, such as the financial industry, about the agency's mission.

And indeed, the first round of Republican comments to the news that Obama had selected Cordray to head the agency once again didn't focus on the man, but the bureau. The current structure concentrates power in one person's hands, Republicans say. And they don't like it. “No one person, I believe, should have so much unfettered power over the American people,” Sen. Richard Shelby, R-Ala., said at a September 2011 hearing on Cordray’s nomination.

Other independent agencies, as Republicans will tell you, are run by boards: The Fed, the Securities and Exchange Commission, the Commodity Futures Trading Commission, to name a few. The CFPB is more of an outlier in that regard (executive departments, such as Treasury, are run by secretaries who are answerable to the president and removable at will).

Sen. Bob Corker, a Republican who sits on the Senate Banking Committee, said he respected Cordray "as a substantive person who has shown thoughtfulness in writing regulation up to now," but said he still disagreed with the agency's structure. The Banking Committee will be the first hurdle in Cordray’s confirmation process.

Sen. Mike Crapo, the expected ranking Republican on the Banking Committee, said Thursday that he would oppose “any nominee” to direct the agency unless “key structural changes” were made. “If the president is looking for a different outcome, the administration should use this as an opportunity to work with us on the critical reforms we have identified to him,” Crapo said.

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Economists Pan Debt Ceiling’s Very Existence

Catherine Hollander, National Journal — Wed, 16 Jan 2013 16:00:00 -0500

Congressional Republicans may enjoy the leverage the debt ceiling gives them, but economists dislike its very existence.

The University of Chicago Booth School of Business’s Initiative on Global Markets regularly polls economists on major public policy issues. This week’s statement, “Because all federal spending and taxes must be approved by both houses of Congress and the executive branch, a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes,” wasn’t very controversial. Just one out of 38 economists who were polled disagreed with it. A handful did not answer, were uncertain or had no opinion.

MIT’s David Autor commented, “The question contains its own answer.”

Others did not mince words at all. “The debt ceiling is a dumb idea with no benefits and potentially catastrophic costs if ever used,” said Richard Thaler of the University of Chicago Booth School of Business.

Thaler’s colleague, Luigi Zingales, was the lone dissenter. “It can also lead to potential better outcomes,” he said.

Raising the debt ceiling allows the government to pay bills it has already racked up and does not authorize future spending. The Treasury Department has said the country will run out of cash to pay its bills sometime between mid-February and early March if Congress refuses to raise the borrowing limit. GOP lawmakers have said they want spending cuts in exchange for raising the limit, but President Obama has vowed not to negotiate over raising the ceiling.

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Your guide to Obama's staff reshuffling

Catherine Hollander, National Journal — Mon, 07 Jan 2013 15:47:54 -0500

With the inauguration coming up in a few weeks, President Obama has begun shuffling top administration jobs for his second term. Here is National Journal's guide to the expected changes:

The Upcoming Appointments

Attorney General. Eric Holder doesn’t plan to be the “Janet Reno of the Justice Department,” he said last month in reference to the former AG who served two full four-year terms. “I thought [that] was amazing back then when I was her deputy. I find it incomprehensible now as Attorney General,” Holder said at an event at the John F. Kennedy Presidential Library and Museum. He is expected to stay on for the beginning of Obama’s new term and depart at a still-unreported time. When he does go, potential successors include Sens. Amy Klobuchar of Minnesota and Sheldon Whitehouse of Rhode Island—both former prosecutors—and Homeland Security Secretary Janet Napolitano, who is rumored to have interest in the job. Massachusetts Gov. Deval Patrick, who was a top Justice official under Clinton, is oftend cited as a candidate, although he has said he won’t leave his current post for the AG spot.
Commerce Secretary. The post has been unfilled since John Bryson resigned in the aftermath of a hit-and-run car accident this summer. Export-Import Bank Chair Fred Hochberg is in the running and would be the first openly gay Cabinet member. Alternatively, the job could go to a businessperson or someone else inside the administration like U.S. Trade Rep. Ron Kirk or Karen Mills, head of the Small Business Administration.
Energy Secretary. Steven Chu is expected to step down, and the short list for his replacement includes deputy secretary of energy Daniel Poneman, former North Dakota senator Byron Dorgan, who served on the Senate Energy and Natural Resources Committee, and former White House Chief of Staff John Podesta, who heads the Center for American Progress.
Environmental Protection Agency Administrator. Lisa Jackson announced last month that she plans to step down after Obama’s State of the Union address in January. Potential successors include the agency’s deputy administrator, Bob Perciasepe, Mary Nichols, chairman of the California Air Resources Board and EPA air chief Gina McCarthy.
Homeland Security Secretary. If Janet Napolitano takes the AG spot, Obama may need to nominate a new head of Homeland Security. Possible picks include New York City police commissioner Ray Kelly, law-enforcement expert Bill Bratton and retired Coast Guard admiral Thad Allen.
Transportation Secretary. Ray LaHood indicated a year ago that he would leave in a second term, although he’s been tight-lipped about his plans of late and some media outlets have reported that he might stay for all or part of the next four years. If he leaves, Los Angeles Mayor Antonio Villaraigosa is seen as the frontrunner for the job. Other candidates include former Pennsylvania Gov. Ed Rendell and former Rep. Steve LaTourette, R-Ohio.
Treasury Secretary. Tim Geithner is expected to leave this month, and all signs point to White House Chief of Staff Jack Lew stepping into the post.
White House, Chief of Staff. If Jack Lew goes to Treasury, his spot at the White House might go to Ron Klain, Vice President Joe Biden’s former chief of staff. Other contenders include deputy national security adviser Denis McDonough and Valerie Jarrett, who is currently a senior adviser to Obama.
White House, Office of Management and Budget Director. Obama might give Acting Director Jeffrey Zients the full-time gig. If he goes another direction, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, and Gene Sperling, director of the National Economic Council, are also seen as contenders.

The Folks Expected to Stay for a Second Term

Council of Economic Advisers Chairman. Alan Krueger has only been in the position since Nov. 2011, and some insiders believe he will stick around into Obama’s second term.
Director of National Intelligence. James Clapper told colleagues last month that he plans to stay on as director.
Education Secretary. Arne Duncan told National Journal he plans to stay on for a second term.
Health and Human Services Secretary. Kathleen Sebelius is expected to stay on for another term.
Housing and Urban Development Secretary. Shaun Donovan said this fall that although the fate of his job is in Obama’s hands, he’s “very, very happy with the work” he’s doing. He's expected to stay for another term.
Labor Secretary. Hilda Solis is expected to stay on for another term.
White House, National Security Adviser. Tom Donilon is expected stay on into the beginning of the next term.

The Maybes

Agriculture Secretary. Tom Vilsack could stick around to help implement Obama’s “detailed plan” for the rural economy. But he may also be replaced by someone with closer ties to Capitol Hill—someone like former Democratic Sens. Blanche Lincoln of Arkansas and Kent Conrad of North Dakota, or current Sen. Jon Tester, a Democrat from Montana and the chamber’s only working farmer.
Interior Secretary. Ken Salazar is reportedly still weighing whether he wants to stay on for another term, and is expected to make an announcement in “coming months,” according to The Denver Post. The secretary has plans on his calendar through February, according to the same story.

The Nominees

Central Intelligence Agency Director. President Obama nominated his top counterterrorism adviser John Brennan to fill the post. Brennan’s nomination may spur a debate about Obama’s counterterrorism tactics, including the use of drones. But his path to the CIA is easier than it was four years ago, when Brennan was a candidate for the same job, National Journal reports.
Defense Secretary. Obama nominated Chuck Hagel, a two-term Republican senator from Nebraska, to head the Defense Department. Although he’s widely perceived as qualified for the job, Hagel is expected to face a rocky road to confirmation, with controversies over everything from his stance on Israel to gay rights.
Secretary of State. Massachusetts Sen. John Kerry won the nomination for this position in December. He is not expected to face a tough confirmation fight in the Senate.

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Here's what's in the fiscal cliff deal

Catherine Hollander and Chris Frates, National Journal — Tue, 01 Jan 2013 09:19:58 -0500

At around 2 a.m. on New Year's Day, the Senate passed a measure aimed at pulling the country back from the "fiscal cliff" of automatic tax hikes and spending cuts. The measure, hammered out by Vice President Joe Biden and Republican Senate Minority Leader Mitch McConnell, still needs approval by the House. Here's what's in it:

Higher taxes on individuals earning $400,000 or more and families making $450,000 or more. Under that threshold, the Bush-era tax cuts would be permanent for all but the wealthiests households. The $450,000 threshold for families is a significant increase from Democrats’ initial proposal to raise taxes on Americans making $250,000 or more but it is lower than Republicans’ earlier proposal to raise taxes on households making $1 million or more.
Tax rates on capital gains and dividends would rise for wealthier households. Taxes on capital gains and dividends would be held at their current levels of 15 percent for individuals making less than $400,000 and households with income of less than $450,000. They would rise to 20 taxpayers and households above those thresholds.
Automatic spending cuts delayed for two months. The sequester, which would impose steep, across-the-board cuts to domestic and defense programs, would be delayed for two months.
One-year extension to unemployment insurance. Emergency unemployment benefits would be extended for a year. The extension was a priority for President Obama and congressional Democrats.
One-year "doc fix." The measure would put off scheduled cuts in physician payments under Medicare.
Personal exemptions phased out for households making over $250,000. Personal exemptions would be phased out and itemized deductions would be limited for taxpayers making over $200,000 and families earning more than $250,000.
40 percent estate tax. The estate tax is set to rise permanently to 40 percent from its current 35 percent level, with the first $5 million in assets exempted. Democrats had earlier sought a higher increase to 45 percent and a lower exemption of $3.5 million.
Permanent fix to the Alternative Minimum Tax. The alternative minimum tax was levied to ensure the wealthiest Americans paid a fair share of taxes. It was not indexed for inflation but is usually “patched” annually to prevent an increasingly large swath of middle-class Americans from being caught in its net. As part of the fiscal deal, the AMT would be permanently indexed for inflation.
Tax breaks for working families. The deal includes extensions of the American Opportunity Tax Credit, which can be claimed for college-related expenses; the Child Tax Credit; and the Earned Income Tax Credit, which is a refundable federal income tax credit for low-to-moderate income working Americans.
Business tax breaks. The Senate Finance Committee passed a package in August that tackled a variety of routinely expiring tax provisions known as extenders. These include popular tax breaks including those for research and development. That package might now pass as part of the broader cliff deal.

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Analysis: Newtown shooting provides perspective amid fiscal cliff

Catherine Hollander and Nancy Cook, National Journal — Tue, 18 Dec 2012 09:21:36 -0500

Two days after the Newtown school massacre, Congress returned to Washington with a more subdued attitude toward partisan bickering and with a newfound focus on finding a compromise on the fiscal cliff.

Neither party seemed to want to drag out a public battle over taxing the wealthy, or cutting Medicare bienefits, as an idyllic Connecticut town began to bury 20 of its children. The shooting brought some perspective to Congress, a focal point outside of its ongoing fiscal battles over $500 billion in tax and spending policy.

The pace of activity on the fiscal cliff negotiations has picked up in the last few days. President Obama and House Speaker John Boehner met for 45 minutes on Monday morning at the White House—yet another interaction since Friday afternoon, just hours after the shooting, when Boehner privately agreed in a phone call to increase tax rates on household income above $1 million. In a counteroffer, the White House proposed setting the income limit for tax increases at $400,000 in a plan that would raise $1.2 trillion over a decade. That's a reduction from an earlier offer from Obama that sought $1.4 trillion in new tax revenue.

In a change that would slow the growth of entitlement spending, the White House also said it would be willing to tie annual benefit increases in programs like Social Security to a less generous measure of inflation.

Still, it was unclear whether the Newtown tragedy had drastically altered the tone and pace of the fiscal-cliff talks, or if the negotiations would have picked up anyway given the fast-approaching deadline of the New Year and members’ desire to return home for the holidays. Neither Boehner’s office nor the White House wanted to comment on the link between the state of the fiscal-cliff talks and the Newtown shooting.

The attitude on the Hill, however, was remarkably gentler on Monday than in recent weeks. House Minority Leader Nancy Pelosi planned to meet with family members and survivors of mass shootings on Monday evening, while senators took turns giving floor speeches to express their condolences for the victims or to outline their positions on gun control. Some observers of Congress are predicting that Newtown may help create an environment in which neither party wanted to seem petty or unreasonable, or too attached to party orthodoxy, as the country grieved.

“I think the magnitude of this tragedy, the incredible emotional force that it has had on everyone, is going to force all political leaders to essentially act like adults, at least for a little while,” says Matt Bennett, a senior vice president at the centrist think tank Third Way. “And so I think it’s going to kind of require that they negotiate in good faith and really attempt to find a deal.”

Other congressional experts do not think the Newtown shooting will spur deep policy changes, rather just a superficial, short-term change in tone. “If it creates any change in attitude, it is on the Republican side. They are already seen as the obstacle to an appropriate deal, not a facilitator of it,” says Thomas Mann, a senior fellow at the Brookings Institution. “The Connecticut massacre gives them more incentive to get this done because their position will not improve.”

The bipartisan rallying around the Newtown tragedy reminded many political observers of the days after the shooting of former Rep. Gabrielle Giffords, D-Ariz. Then, too, members grieved and experienced a brief honeymoon of bipartisanship. Politicians called for an increase in security for politicians and stricter gun-control laws.

Yet, just weeks later, Boehner unveiled legislation to repeal the health care law and to cut discretionary spending by $100 billion. Later that year, a battle royale erupted over raising the debt ceiling, prompting Giffords to return to Congress for a surprise visit in August 2011 to cast her vote for the increase. The honeymoon, in other words, did not last long.

Instead of linking the Newtown tragedy to the shift in the fiscal-cliff talks, some congressional observers attribute the breakthrough more to coincidence and timing. As the holidays approach, the Republicans want to avoid a repeat of last December’s showdown over the payroll-tax holiday. Then, Obama successfully painted the Republicans as unsympathetic to a tax cut for the middle class just days before Christmas. In the end, the Republicans caved and passed a two-month extension of the payroll-tax holiday but not before losing on the optics.

Other experts point out that Republicans, like Democrats, increasingly do not want to go over the fiscal cliff, fearing an economic slowdown and the blowback of a deadlocked Congress following a divisive and bruising election.

“I think the script is already written,” says Daniel Mitchell, senior fellow at the Cato Institute and formerly an economist for the Senate Finance Committee. “Republicans, for whatever reason, are back on their heels and sort of negotiating with themselves, and I just … I don’t see [Newtown] having a material effect on the outcome.”

The only people, though, who really can answer that question and know their motivations remain the speaker and the president.

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Fiscal cliff, or fiscal slope? There are lots of names for the year-end event

Catherine Hollander, National Journal — Thu, 13 Dec 2012 09:52:48 -0500

Fiscal cliff. “In terms of the terminology, well, people have different preferences about what they want to call things. I think it’s a sensible term because I think of the fiscal policy providing support to the economy. If fiscal policy was very contractionary, then the economy would, I think, go off a cliff. I think it’s reasonable to be concerned about this. I don’t buy the idea that a short-term descent off the fiscal cliff would be not costly.” (Ben Bernanke, Dec. 12 press conference).
Austerity crisis. “The tax hikes and automatic spending cuts that would kick in after Dec. 31 would sharply curb our federal deficit through enacting major, sudden austerity measures that would save the U.S. government about $720 billion in 2013 alone…. The reason the fiscal cliff is so scary is that it’s an austerity crisis.” (Suzy Khimm, The Washington Post, Nov. 9)
Fiscal slope. “The sooner policymakers enact legislation to put the budget on a sustainable long-term path without threatening the vulnerable economic recovery, the better. But, as they prepare for an almost certain postelection 'lame-duck' session of Congress, policymakers should not make budget decisions with long-term consequences based on an erroneous belief: that the economy will immediately plunge into a recession early next year if the tax and spending changes required under current law actually take effect on January 2 because policymakers haven't yet worked out a budget agreement…. In fact, the slope would likely be relatively modest at first (and then much steeper if 2013 unfolds without a fiscal resolution).” (Chad Stone, Center on Budget and Policy Priorities, Sept. 24 report).
Fiscal obstacle course. “For various reasons, 'fiscal cliff' is a poor metaphor, most importantly because there is no single cliff but rather a series of separable tax and spending provisions that can be extended or ended. We thus propose a different metaphor—the fiscal obstacle course—with the obstacles in question standing in the way of rapid economic recovery and lower unemployment.” (Josh Bivens and Andrew Fieldhouse, Economic Policy Institute, Sept. 18 report).

What's in a name, anyway? “I don’t spend a lot of time worrying about whether it’s a slope or a cliff,” outgoing Senate Budget Committee Chairman Kent Conrad, D-N.D., said in an interview with National Journal this week. “I like to deal with facts.… I think the realistic assessment is, it would be much better to [reach a deal] before the end of the year, because you’d remove uncertainty, but I also think it’s not the end of the world if it didn’t happen until early in the next year.”

Katy O'Donnell and Caren Bohan contributed to this report.

(Image via Mostovyi Sergii Igorevich/Shutterstock.com)

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Fed chairman calls fiscal cliff a threat, predicts growth if it's avoided

Catherine Hollander, National Journal — Tue, 20 Nov 2012 17:13:30 -0500

Federal Reserve Board Chairman Ben Bernanke issued a dire warning on Tuesday about the threat that the fiscal cliff poses to the economy. But amid the doom and gloom, he held out a silver lining: When the fiscal uncertainty lifts, the economy could be poised for solid growth.

“The realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery,” Bernanke said in remarks delivered to the Economic Club of New York on Tuesday. He added that the central bank could do little to soften the blow.

A combination of $500 billion in taxes increases and automatic spending cuts could send the economy back into a recession if the White House and lawmakers can't strike a deal to keep the country from going over the cliff within the next six weeks. Stocks reacted strongly to Bernanke's remarks, dropping to near-session lows.

But Bernanke also suggested that the economy has underlying strength, potential that could be unleashed if lawmakers could just sort out the nation's fiscal policy. “Cooperation and creativity to deliver fiscal clarity—in particular, a plan for resolving the nation's longer-term budgetary issues without harming the recovery—could help make the new year a very good one for the American economy,” he said in prepared remarks. During a question-and-answer period following his remarks, he added, “I really have a sense that there is a lot of unused capability, not just in terms of unemployed workers, but in terms of potential products, new investments, new technologies, things that ... are not being utilized to a full extent because people are waiting to see how things will evolve.”

Many signs point to an economy that is slowly improving despite uncertainty about the standoff in Washington that has caused businesses to tread with caution on hiring and investing.

The housing sector, in particular, appears to have turned a corner. That’s no small thing, given that the downtrodden housing market was one of the biggest drags on growth during the recession and recovery. A rise in home prices could encourage spending by making homeowners feel wealthier and thus lift the broader economy.

The labor market is also moving in the right direction. The current 7.9 percent unemployment rate is down from a peak of 10 percent reached in October 2009. That rate is not stellar in and of itself, but it built off of and sustained a surprisingly strong 0.3-percentage-point drop in the unemployment rate in September. Payroll growth for August and September was revised up by a combined 84,000 jobs in the most recent report, another sign things are moving in the right direction and that the good news wasn't a fluke.

A similar trend might be found in gross domestic product. Some firms now believe the government might revise its preliminary reading of third-quarter GDP significantly upward, to more than 3 percent from an originally reported 2 percent. In the fourth quarter, economists surveyed by Reuters now predict that the economy will grow at a more sluggish 1.6 percent annualized rate, but University of Michigan economist Justin Wolfers notes that at this point last quarter, GDP estimates were lower than the government ended up reporting in its preliminary reading. “I don’t think we actually know Q4 is a disaster yet,” he said.

Consumer confidence continues to climb in the face of looming year-end tax hikes and spending cuts known as the fiscal cliff, despite the fact there’s no small amount of uncertainty associated with the cliff. The nonpartisan Congressional Budget Office has said that failure to reach an agreement to avert it could throw the economy back into recession in the first half of 2013.

Top congressional staffers are drafting proposals after both Democrats and Republicans found encouragement in a Friday White House meeting. But the two parties remain sharply divided on taxes, and reaching a deal won't be easy. Still, the global political risk research and consulting firm Eurasia Group put the odds of lawmakers reaching an agreement by year's end at 80 percent.

If that happens, the drag on business investment should lift, although a good deal of caution could linger if the White House and lawmakers arrive at only a temporary deal that delays some of the tax hikes and spending cuts, giving the two parties more time to try to work out a longer-term budget deal.

Business investment fell in the third quarter, and there’s little reason to think it has improved since; business confidence has, by various measures, plunged as the cliff looms larger. A recent analysis by The Wall Street Journal found that half of the 40 largest publicly traded corporate spenders are planning to cut back on spending this year or next. Averting the cliff would be expected to cause business spending to rise again—although this may be an area where we see continued weakness in the data through the fourth quarter, if a deal is struck close to Dec. 31.

Superstorm Sandy may also have temporarily set back growth in the fourth quarter. The late-October storm charged up the East Coast, knocking out power, causing billions of dollars’ worth of damage and disrupting work in economically important New York City, New Jersey, and Connecticut. Deutsche Bank analysts cautioned last week of a possible “acute hurricane impact” on November's payroll numbers, which will be released on Dec. 7, and the Federal Reserve estimated that the storm took a full percentage point off industrial output in October.

But some experts say that Sandy's overall economic impact on the quarter could be minimal—or even positive. The disruption to economic activity is expected to be at least partly offset by the need to clean up and rebuild in the storm’s wake. “It wouldn’t surprise me if it ends up being a small positive,” said Dean Baker, codirector of the Washington-based Center for Economic and Policy Research.

The global economic slowdown is one drag on growth that isn't likely to dissipate any time soon. Eurostat, the European Union’s statistical office, announced earlier this month that the E.U. had returned to recession amid concern over its fiscal future. China has been growing only sluggishly. The Fed continues to warn of the threat to the U.S. recovery from overseas. “Strains in global financial markets continue to pose significant downside risks to the economic outlook,” the central bank’s policy-setting committee said in its October statement.

All told, the economy is far from healed but fairly steady, despite a major storm and even more major uncertainty associated with the looming cliff.

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Debt limit likely hit by end of year, Treasury says

Catherine Hollander, National Journal — Wed, 31 Oct 2012 11:23:28 -0400

The Treasury Department said Wednesday that it expects the U.S. debt limit will be reached by the end of 2012, but that it can use so-called "extraordinary measures" to push the actual date of potential default to early 2013.

The timetable is the same as Treasury laid out earlier this year.

"Treasury continues to expect the debt limit to be reached near the end of 2012. However, Treasury has the authority to take certain extraordinary measures to give Congress more time to act to ensure we are able to meet the legal obligations of the United States of America," Treasury Assistant Secretary for Financial Markets Matthew Rutherford said in a statement. "We continue to expect that these extraordinary measures would provide sufficient 'headroom' under the debt limit to allow the government to continue to meet its obligations until early in 2013."

If the debt limit follows Treasury's timetable, Congress won't have to come up with an agreement to raise the country's borrowing limit until after they tackle the “fiscal cliff,” a combination of tax hikes and spending cuts set to kick in on Jan. 2 if lawmakers fail to take action. However, discussions of raising the debt limit—which were highly contentious in the summer of 2011—could be intertwined with debate over how to prevent the fiscal cliff.

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GDP report suggests fiscal cliff, global growth concerns

Catherine Hollander, National Journal — Fri, 26 Oct 2012 16:07:54 -0400

Business investment fell in the last three months, suggesting but not confirming that concerns over global growth and the impending fiscal cliff have weighed on businesses’ spending decisions.

The Commerce Department reported Friday that overall Gross Domestic Product picked up in the third quarter, rising at an annual rate of 2 percent, up from 1.3 percent in the second quarter. But business investment, which has been a solid contributor to GDP throughout the recovery, contracted 1.3 percent despite other signs of economic strength in the report.

“It seems a little bit out of sync with the rest of the economy,” Josh Feinman, global chief economist of DB Advisors, said of business investment.

Analysts at Capital Economics posited in a research note that the slowdown may suggest “that more businesses are putting projects on hold ahead of the fiscal cliff,” a potentially damaging combination of tax hikes and spending cuts that are set to kick in at the end of the year if Congress fails to act.

It could also reflect broader concerns about the global economy. Exports, another area that have helped boost economic growth throughout the recovery, also contracted in the third quarter. Net exports fell by 1.6 percent after rising by 5.3 percent during the previous period, the Commerce Department reported Friday.

Executives have voiced concerns over both the fiscal cliff and the global economy, and a recent Business Roundtable survey of CEOs found pessimism at a three-year high in the third quarter.

But it’s too soon to pin down just how much cliff pessimism versus global economic pessimism is translating into decisions to hold off on business investments, the economists say. “We won’t have a real verdict on that until the next year,” said Feinman, referring to the extent to which the cliff has been a drag on growth. If a fiscal agreement is reached by the end of the year and the cliff averted, but business investment remains down, that will suggest a much larger contribution from global concerns to its contraction.

Overall, the report painted a picture of tepid growth, although it contained several bright spots.

The 2 percent increase in GDP was primarily driven by a surge in government spending, a number more than one economist described in interviews with National Journal as “lumpy” and volatile. Quarterly jumps in government spending are difficult to interpret, they said, citing factors ranging from a pickup in spending in the last quarter of the fiscal year, which ends on Sept. 30, to a surge in delivery of orders.

But there were some signs of underlying strength in the areas of housing and consumer spending, and the sharp contraction in state and local government spending continued to fade.

The lackluster--but not terrible--report, the second-to-last major economic release before Election Day, gave little new fodder to either presidential candidate.

“While we have more work to do, today’s GDP growth report, showing the 13^th straight quarter of growth, is more evidence that our economy continues to come back from the worst recession since the Great Depression under President Obama’s leadership,” Obama campaign spokesman Adam Fetcher said in a statement.

“Today, we received the latest round of discouraging economic news: Last quarter, our economy grew at only two percent, less than half the 4.3% rate the White House projected after passing the stimulus bill,” Republican presidential candidate Mitt Romney said in a separate statement.

The last big economic news before the Nov. 6 election is the October employment report, which will be released next Friday.

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Report: Man plotted attack on New York Fed

Catherine Hollander, National Journal — Wed, 17 Oct 2012 16:20:06 -0400

reports.

The man drove a van that he thought was loaded with explosives from Long Island to near the site of the Fed building in lower Manhattan, where he was arrested by the FBI and NYPD, according to the story. Law enforcement officials say the FBI and NYPD monitored the plot and the public was never at risk; the "explosives" were inactive.

The suspect is expected in court later on Wednesday, according to NBC 4 New York.]]>

Americans donate almost $8 million to pay down debt

Catherine Hollander, National Journal — Tue, 16 Oct 2012 08:50:00 -0400

More than any time since the mid-1990s, citizens are pitching in to help the government pay its debt.

During the latest fiscal year, which began shortly after a fight over the statutory borrowing limit cast the country's eyes on its ballooning debt, citizens gifted nearly $7.7 million to the government to help it pay down its obligations.

The gifts, allowed under a 1961 law, are processed by a small agency within the Treasury Department called the Bureau of the Public Debt.

According to the bureau's records, fiscal 2012 brought in more than double the amount of donations than any of the past 15 years--and that doesn't even include gifts made in September, the final month of the fiscal year, which have yet to be tallied up.

The annual average since 1996 is $2.2 million; people donated $3.3 million in fiscal 2011.

People can make contributions online or through a check payable to the Bureau of the Public Debt, mailed to "Dept G" at the bureau in Parkersburg, W.Va., according to the bureau's website.

Donations tend to be small, under $1,000, according to Joyce Harris, a spokeswoman for the Treasury Department. They usually come from estates and individuals. Harris did not have data broken down in a way that would explain the spike in giving during fiscal 2012, although she notes that the level of donations has picked up over the last few years.

Even though $7.7 million is a large sum in the gifts-to-reduce-the-debt world, it is a small drop in a giant bucket; the national debt currently stands at over $16 trillion.

(Image via Robert Gubbins/Shutterstock.com)

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Republican senators press Treasury on debt limit plans

Catherine Hollander, National Journal — Mon, 15 Oct 2012 15:12:01 -0400

"Our understanding is that neither the administration nor the Treasury had any formal contingency plan for dealing with the consequences of the U.S. government defaulting on its obligations," Hatch, ranking member of the Senate Finance Committee and Sessions, the top Republican on the Senate Budget Committee, wrote. "With more complete information about when the debt limit may next be reached, we hope to aid decision-makers and preempt any need for such a contingency plan in the future."

The country is expected to reach its borrowing limit in late 2012, although Treasury can take steps to push back the drop-dead date for increasing the debt ceiling until early 2013, according to the department's most recent forecast.

In their sternly worded letter, Hatch and Sessions asked Treasury Secretary Timothy Geithner to outline the "extraordinary measures" his department might take to head off default. They also sought clarity on when those measures would be exhausted and Treasury's plans for asset sales before the debt limit is reached.

A U.S. default was averted in August 2011 following a standoff between Democrats and Republicans in Congress. The upcoming effort to raise the debt limit could become entangled in the fight over how to head off a combination of tax hikes and spending cuts known as the "fiscal cliff." Negotiations over the fiscal cliff are expected to dominate the post-election "lame duck" session of Congress.

Hatch and Sessions requested a response to their questions by Nov. 1, as well as additional updates each month through March.]]>

Charge that BLS employees manipulated jobs data called unlikely

Catherine Hollander and Niraj Chokshi, National Journal — Mon, 08 Oct 2012 10:29:03 -0400

The high-wire act of keeping the country’s economic data secret is guided by a hyper-precise atomic clock and a dryly named 27-year-old rule, Statistical Policy Directive Number 3.

The directive dictates the process for releasing the country’s most closely watched data, including the monthly employment report, the latest of which became public on Friday, and the quarterly gross domestic product readings. Last revised in 1985, the rule spells out who can see the numbers ahead of the release. It is also a framework for keeping a large volume of data processed by a large number of employees top-secret ahead of a pre-scheduled release time.

The stakes of compliance are high. “Fractions of a second can equate to millions or even billions of dollars in market movements,” Carl Fillichio, senior advisor for communications and public affairs at the Labor Department, told members of the House Oversight and Government Reform Committee in June. An early release could send ripples through the global economy and reverberate through Washington, particularly in an election year.

On Friday, after the Labor Department’s Bureau of Labor Statistics announced that the headline unemployment rate had taken a surprise tumble from 8.1 percent in August to 7.8 percent in September, former General Electric CEO Jack Welch took to Twitter to accuse the Obama administration of manipulating the numbers. The issue became a subject of conversation on Twitter and cable television throughout Friday morning.

But economists and other experts familiar with the government's procedures for compiling the data say that is virtually impossible.

The monthly employment report is released by the BLS, an independent statistical agency within Labor that is staffed by career civil servants, many of whom have served throughout both Democratic and Republican administrations. The Commerce Department’s Bureau of Economic Analysis is in charge of GDP. Both agencies are guided by the same directive and rely on similar security measures to keep their data secret until the embargo lifts.

Each agency compartmentalizes the raw data. For the employment report, for example, most BLS analysts only see the data for a single sector, such as health care payrolls. Job growth in different sectors varies, making it difficult to get a clear picture of the headline number from a single category. In September, for example, health care picked up 44,000 jobs. Manufacturing, on the other hand, lost 16,000.

Doors to offices where embargoed data is reviewed are locked, and even within those offices, the data is kept in safes, BLS press officer Gary Steinberg said. Just a handful of employees gather in closed-door meetings to compile the final reports. At the BEA, attendees of these meetings adhere to a superstition: They don’t speak the GDP number aloud, said Thomas Dail, a BEA spokesperson. Materials from the meeting are secured; even scraps of paper bearing doodles and ink cartridges are locked up until the BEA embargo lifts.

The Labor Department has had strict policies in place for decades, said Keith Hall, who served from 2008 through this year as the thirteenth commissioner of the BLS. “BLS is keenly aware—I was certainly keenly aware when I was commissioner—that this is data that has a lot of potential value,” he said.

By Hall’s estimate, more than 100 people are involved in the BLS process from collection to its final analysis for the president. It would be very difficult for the administration to manipulate such a crowd.

The data is also compiled under an incredibly tight deadline, leaving little time for manipulation. Hall wouldn’t learn the details of the household survey, which determines the unemployment rate, until Monday of the week it was made public. The payroll data, which determines the number of jobs added or lost, would come to him on Wednesday. All agencies that deal with statistics operate under a similar mantra, he said: “Once you put the data together, don’t hold onto it.”

When the final numbers are ready, Statistical Policy Directive Number 3 requires they be shared with the president through the Chairman of the White House Council of Economic Advisers before they are released to the public. That means the president does not even see the numbers until late in the day before release.

Hall is particularly well-suited to speak to the process. Before taking on his role at BLS, Hall was chief economist to the Council of Economic Advisors from 2005 to 2008, where he and a handful of colleagues were tasked with summarizing the closely guarded monthly jobs report ahead of its release for President George W. Bush.

On Thursday, the day before the report was publicly released, a BLS official would hand-deliver the memo to the White House, usually around 3 p.m., Hall said. There was talk of transmitting it digitally, but officials couldn’t identify a method secure enough. Sometimes data would be entered into a spreadsheet on a computer isolated from the rest of the White House network.

Administration economic advisers would get to work analyzing and summarizing it for the president. “Even within the Council of Economic Advisors, there’s still only a handful—three or four—who get to see the numbers,” Hall said.

The memo would be put into an envelope and sealed. Copies would be delivered to no more than half-a-dozen people—the president, vice president and whomever else the president wanted to see it. The memo, with Hall’s signature, would be delivered to the president by 7 p.m. or 8 p.m.

The next morning, a small group of journalists, cut off from communication with the outside world, get an early peek at the data in a pre-release lockup. The BEA shares its numbers with the agency’s web team at 7:45 a.m. The team, whose communications have also been cut off, prepares the data for its Internet debut.

“I’m not aware of any concerns that data were within BLS were manipulated for political purposes,” said Steinberg, a long-time employee of the bureau.

Safeguarding the integrity of the data has long been considered a crucial priority among government officials in both parties because the economic numbers are tracked closely by investors around the world who buy and sell U.S. Treasury bonds and stocks in American companies. As countries like Greece and Argentina have had to learn the hard way, any hint that the data might be compromised can gravely harm an economy.

Justin Wolfers, professor of economics and public policy at the University of Michigan, noted that the papering over of the Greek debt caught Europe and the world by surprise, wreaking havoc on the region. And the clear manipulation of inflation numbers in Argentina has made it difficult for the government to borrow because the debt there is indexed to inflation.

“The madness that’s happening in Argentina really is the first step down a slippery step towards economic ruin,” he said.

Photo by Flickr user WSDOT

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