Government Executive - Authors - Niraj Chokshi

Want to Add 1 Million Jobs to the Economy? Cancel the Sequester Next Fiscal Year

Niraj Chokshi, National Journal — Fri, 26 Jul 2013 07:00:00 -0400

Its impact may not have been quite as dire as initially predicted, but the automatic cuts under sequestration will take their toll over the next fiscal year. If the scheduled cuts are canceled this August, the nation would have 900,000 more jobs in the third quarter of next year (the end of FY2014), according to the nonpartisan Congressional Budget Office. In June, 11.8 million people were unemployed and looking for work, according to Labor Department figures.

Canceling the cuts would increase government spending by about $14 billion in FY2013 and $90 billion in the next fiscal year. The nation's economic output, as measured by the gross domestic product, would be 0.7 percent higher. The calculations were made in response to a request by Rep. Chris Van Hollen, D-Md., the top Democrat on the House Budget Committee.

While it may seem like a no-brainer to cancel the cuts, CBO notes some important caveats. Repealing the cuts, they wrote, would add to the nation's debt, ultimately reducing output and income, relative to continuing the sequester. While that may be true, many complain that the automatic cuts are too blunt and could be more smartly targeted.

CBO was also careful to note that the estimates were midpoints in a range—GDP would be anywhere between 0.2 percent and 1.3 percent higher, while the number of jobs added could be anywhere from 300,000 to 1.6 million.

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The House Is the Most Conservative It's Been in More Than 60 Years

Niraj Chokshi, National Journal — Mon, 15 Jul 2013 11:54:16 -0400

The last session of the House of Representatives, from 2011 to 2012, was the most conservative in more than 60 years, according to the Brookings Institution .

The think tank, along with the American Enterprise Institute, released a trove of data last week—the annual update to the Vital Statistics on Congress —and the data show a stunning shift to the right among House Republicans over the past 35 years. House Republicans have been getting more conservative than House Democrats have been getting liberal, according to the data.

The rankings are based on ideological scores assigned to lawmakers' voting records by professors Keith Poole of the University of California (San Diego) and Howard Rosenthal of Princeton University.

House Democrats have been slow to veer leftward, with Southern Democrats becoming liberal faster than their non-Southern counterparts.

The Senate, meanwhile, hasn't exhibited the same sharp rightward shift, with the entire chamber hovering around the center of the ideological spectrum over the last 65 years.

( Image via Orhan Cam / Shutterstock.com )

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That Good-for-Nothing Congress Is Actually Getting More Done

Niraj Chokshi, National Journal — Tue, 09 Jul 2013 17:54:04 -0400

That's right, the good-for-nothing, inept, ineffective, partisan, unyielding Congress everybody loves to hate is actually getting more productive, at least according to some measures.

The American Enterprise Institute and Brookings Institution just released their Vital Statistics on Congress —a trove of legislative data—and it shows that lawmakers have been putting in more hours to pass more legislative text over the past 60 or so years. Despite all the hate , Congress seems to be getting more done, at least by sheer number of words.

Of course, it's all a bit relative. And there are still some reasons to hold on to your bitter hatred of the glacial legislative branch: After passing a peak 2,482 bills in its 1949-1950 session, the House passed an almost-steadily declining number of bills before hitting a low of 561 in the 2011-2012 session. At the same time, the number of recorded votes in the House has been climbing, fueling the argument that lawmakers are more concerned with taking political votes than actually getting stuff done.

But that's just one chamber. How does the picture change when you look at Congress as a whole? Using simply the number of bills enacted , it's not all that much better: Congress peaked in the 1955-1956 session and hit a low in the 2011-2012 session.

So Congress isn't passing many bills. But what bills it does pass are bigger—much bigger. In fact, Congress has enacted more and more pages of legislative text, peaking in the 2007-2008 session from a low in the 1951-1952 session.

And both chambers have been putting in more hours per session. You might argue that the bills Congress does pass are worthless, but there's no denying that lawmakers are putting in more hours in session to churn out more pages of text, for what that's worth.

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Defense Workers Take Furloughs in Stride

Niraj Chokshi, National Journal — Mon, 08 Jul 2013 12:56:58 -0400

Let it never be said that Defense Department employees have no sense of humor. Starting Monday, some 680,000 of the department's civilian employees each began taking one unpaid day off per week through September. And to cope with what amounts to a 20 percent pay cut over 11 weeks, some have taken to joking about their situation.

One forum for the humor has been an unofficial Facebook page created by Beth Flores and Christel Fonzo-Eberhard, both of whom are directors in the Office of the Secretary of Defense. Just over one month ago, the pair launched the page both to serve as a forum for the affected to share their stories, but also to promote Monday night's "Federal Furlough Five-Mile Fun Run" from the Pentagon to the Capitol—with a special surprise at the 80 percent mark. The page now has more than 160 members and about 80 have signed up for the run.

"We can't come to work, we can't accomplish the mission [of the department], that's really tough," Flores says. "It's just harder to do great work."

Defense jobs aren't the kind people take for the money, she says. The employees work hard and are passionate about their service, so morale had been flagging in anticipation of the furloughs, which were set in motion when Congress failed to prevent across-the-board spending cuts under sequestration. The two started wondering over lunch not too long ago whether there was anything they could do about it.

"We were talking about how the furlough period's going to start and how do we try to keep morale from dipping," Fonzo-Eberhard says. And then it struck them, she says: "What if we did a run?"

So the two set up the page in early June and started promoting the run, which now has more than 80 participants signed up.

"This is really an antidote," Flores says. The light-hearted, sometimes sarcastic, tone of the comments—and the fake running bibs—reflect the page's purpose as a place to share stories and vent frustrations. Several of the runners, for example, posted fake bibs with serious and sarcastic explanations of what the furlough is keeping them from:

And in one thread several commenters posted fake out-of-office replies they might have set up for their days off:

"Today's my furlough day. I am supposed to do 20% less work. You'll find out on Monday whether your email is part of the other 80%."

"Furloughed! In case of emergency please contact the Senate Appropriations Committee at 202-224-7363 and request supplemental funding. I will return your call as soon as possible."

Monday night's run may not be the last such event, Fonzo-Eberhard says. She and Flores are thinking it over, but they may set up a scavenger hunt or golf game next month.

For now, though, they have their own furlough days to plan. Flores's first is on Friday, but Fonzo-Eberhard's is Monday. After preparing for the run, a trip to the pool may be in order, she says, adding that it's hard preparing for a forced day off.

But, she jokes, "I'm sure I'll get good at it."

( Image via Stefan Schurr / Shutterstock.com )

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Sequestration Concerns Play Out

Niraj Chokshi — Wed, 03 Jul 2013 09:35:13 -0400

Critics of government spending have long complained that the sequester fears were overblown: The across-the-board spending cuts were not and will not be apocalyptic. And, in a lot of ways, they were right. Half of the doomsday predictions that The Washington Post looked at this week never happened, the paper reported. But that doesn't mean the sequester was a big dud.

Some 680,000 of the Defense Department's civilian personnel nationwide will begin taking occasional furlough days starting next week through the end of the year. And sequestration has reduced unemployment benefits across the country by more than $100 a week in some states, according to the National Employment Law Project.

As of three days ago, some recipients in New Jersey—those receiving the maximum amount of benefits—will see a reduction of as much as $139, or one-fourth of what they currently get. Nationwide, sequestration is eating up about 15 percent of the average unemployment recipient's payout of $289 a week.

Of course, that share varies by state. In New Mexico, for example, an $82 cut translates to about 25 percent of the average weekly benefit, while the cuts in many states amount to roughly 10 percent, according to NELP's report. All told, 1.9 million people nationwide are affected.

The cuts affect individuals who have exhausted their state benefits and have had to turn to the federal government for further assistance. Many of the people who fall into that category qualify as being long-term unemployed, a group whose ranks have swelled during the economic downturn.

The plight of the long-term unemployed—those who have not held a job for 27 weeks—has quickly become one of the most pernicious problems in the recovering jobs market. Individuals out of work the longest are more prone to emotional and psychological problems and find it increasingly hard to regain employment, studies have found.

As seen in the graph below, the share of unemployed individuals out of work for at least 27 weeks has skyrocketed during the recession and recovery.

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Treasury Secretary Lew Cleans Up His Signature for the Nation's Currency

Niraj Chokshi, National Journal — Tue, 18 Jun 2013 15:01:06 -0400

Priggish patriots everywhere can breathe a sigh of relief: America's currency was spared Treasury Secretary Jacob Lew's loopy signature.

Ever since Lew's appointment in January, his signature has been a running, playful joke . President Obama made fun of it, a signature generator was created, and it was the butt of many a late-night jab .

The Wall Street Journal recently charted its evolution:

And now we know how it will appear on the $1, $5, $10, $20, $50, and $100 bills. The tradition of Treasury secretaries' signatures appearing on currency dates back to 1914 and takes about 18 weeks to implement, according to Treasury. And on Tuesday afternoon it announced that the following signature will be gracing newly printed bills:

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Is a Sequester Tipping Point Coming?

Niraj Chokshi, National Journal — Mon, 17 Jun 2013 15:29:56 -0400

When $85 billion in broad spending cuts went into effect in March the world didn't end. Kids weren't kicked out of school en masse, hundreds of thousands weren't laid off, the economy didn't tank. Sequestration was overhyped and the deluge never came. But it may begin to pour this summer.

The across-the-board reductions may gain more visibility this summer largely as big defense cuts go into effect. Starting in early July, the Defense Department will begin 11-day furloughs for hundreds of thousands of its civilian employees nationwide, and the local reports are rolling in.

In Wyoming, more than 400 people will be affected, according to The Billings Gazette. In Montana, more than 500 at Malmstrom Air Force Base will see furloughs, according to The Great Falls Tribune. And nearly five times as many will be affected in Minnesota, according to The Minneapolis StarTribune.

Starting July 1, [Air Reserve electrician Dustin] Hawkins will be among more than 2,400 federal Department of Defense employees in Minnesota forced to work a reduced, four-day week for several months. Those furloughs will be spread across 63 sites statewide, but Duluth's 148th Fighter Wing, Camp Ripley in Little Falls and St. Paul's 133rd Airlift Wing — the units with the highest concentration of federal employees — face the brunt of the cutbacks.

Some federal furloughs have already begun, but the onslaught of Defense Department furloughs—roughly 680,000 civilian employees in total—will take a more noticeable toll. Under the heading "it's just the beginning," Bank of America economists wrote in a recent analyst note that the effects on government-worker income seem to be coming.

We expect aggregate government-worker income to decline in May given that furloughs started in late May. The first day of government wide furloughs was on May 24, when roughly 115,000 federal workers, or 5% of the total federal work force, stayed home without pay. However, with the majority of the furloughs not kicking in until the beginning of July, including the Pentagon's 680,000 furloughs beginning July 8, the real income shock will not show up until the July personal income and outlay report on Aug. 30.

Other economists have said that the furloughs will begin to affect growth this quarter. And the effects of sequestration won't be manifested in furloughs alone. Even nongovernment employees will feel the effects as July Fourth celebrations are canceled in several states.

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Labor Department Offers $2.5 Million in Grants to Improve Bangladeshi Factory Conditions

Niraj Chokshi, National Journal — Thu, 13 Jun 2013 14:52:35 -0400

The U.S. Labor Department wants to improve the subpar safety standards in Bangladesh's garment sector and is putting up $2.5 million in grants to do it.

The collapse of the Rana Plaza factory on April 24 killed more than 1,100 people and is considered to be among the worst modern structural collapses, second only to the building collapses on 9/11, according to the BBC. The Bangladeshi building was found to have had illegal additions and unaddressed structural problems.

Such problems are widespread in Bangladesh, the Associated Press reported on Thursday, citing a new report:

Taken together, the findings offer the first broad look at just how unsafe the working conditions are for the garment workers who produce clothing for major Western brands. And it's more bad news for the $20 billion industry that has been struggling to regain the confidence of Western retailers and consumers following a November fire at the Tazreen Fashions factory that killed 112 people and the April collapse of the Rana Plaza building that killed 1,129 people in the worst garment-industry tragedy. But the proliferation of inspections could signal the industry is finally taking its workers' safety seriously.

If the industry wasn't taking the issue seriously on its own, it now has added incentive in the $2.5 million Labor Department grant. Applications are due August 2.

Here's the department's full release about the funding:

The U.S. Department of Labor's Bureau of International Labor Affairs today announced a $2.5 million competitive grant solicitation to fund improvements in the enforcement and monitoring of fire and building safety standards to better protect workers in the ready-made garment sector of Bangladesh.

Ready-made garment production has been central to Bangladesh's economic development, with the sector accounting for the vast majority of Bangladesh's exports to the United States. The industry also is the focus of long-standing concerns over violations of worker rights and workplace safety standards. The Government of Bangladesh has been the subject of a review under the Generalized System of Preferences trade program since 2007. Attention to these concerns has grown in the wake of the Tazreen Fashions factory fire last November that killed more than 100 garment workers and the Rana Plaza building collapse in late April that led to the loss of more than 1,200 lives.

In recent months, the Government of Bangladesh, industry, worker and civil-society organizations, and other groups have engaged in stepped-up efforts to address fire and building safety concerns. The government and other stakeholders, however, have a great deal of additional work to do in order to implement existing and developing plans.

The Department of Labor's funding of technical assistance represents one important element in a broader strategy to address these issues. The department will fund one or more recipients who will work to (1) strengthen the Bangladesh Government's ability to improve its enforcement of fire and building safety standards and (2) build the capacity of worker organizations to effectively monitor violations of fire and building safety standards and abate related hazards in the ready-made garment sector.

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What Little We Know About the NSA Leaker

Niraj Chokshi, National Journal — Mon, 10 Jun 2013 09:41:39 -0400

The man behind a set of astounding leaks about top-secret government data-gathering efforts has unmasked himself. The Guardian and The Washington Post, both of which published details about a highly classified NSA data-mining program late last week, unveiled the man behind those revelations as Edward Snowden, a 29-year-old former government contractor.

Both profiles describe him as being fully aware of the risks he took, both in revealing the data and in coming forward. Here are some of the most fascinating details to come forward from the revelation.

He believed the NSA would not have hesitated to kill a journalist. Barton Gellman, a former Post journalist who returned to that newspaper to report on the data-gathering last week, wrote in a profile of his exchanges with Snowden that the 29-year-old believed Gellman's life was at risk until he published the leaked information. Here's how Gellman put it:

"The U.S. intelligence community, he wrote, "will most certainly kill you if they think you are the single point of failure that could stop this disclosure and make them the sole owner of this information. I did not believe that literally, but I knew he had reason to fear."
He used the code name Verax, Latin for "truth teller," in exchanges with The Post. Snowden wasn't the first to use the codename. Here's The Post on the historical antecedents: "Two British dissenters had used the pseudonym. Clement Walker, a 17th-century detractor of Parliament, died in the brutal confines of the Tower of London. Two centuries later, social critic Henry Dunckley adopted 'Verax' as his byline over weekly columns in the Manchester Examiner. He was showered with testimonials and an honorary degree."
He may have been a Ron Paul supporter. Snowden said he contributed to a third-party candidate in 2008 and said he has lived in Maryland and Hawaii. Though unconfirmed, campaign-contribution records show that an Edward Snowden in each state donated $250 to Ron Paul's campaign in 2012.
Nearly all of his employer's revenues last year came from the government.Booz Allen Hamilton, Snowden's employer in Hawaii, earned 98 percent of its revenues in the fiscal year that ended in March from the government, according to The New York TImes:

"Thousands of people formerly employed by the government, and still approved to deal with classified information, now do essentially the same work for private companies. Mr. Snowden, who revealed on Sunday that he provided the recent leak of national security documents, is among them."
He may have made a mistake in moving to Hong Kong after the leak. The Wall Street Journal reports that several Hong Kong lawyers found Snowden's decision to move to Hong Kong, before seeking asylum in a sympathetic country, misguided:

"'We work very closely with U.S. authorities,' said Regina Ip, current legislator and former security secretary, who described Mr. Snowden's choice of location as 'really being based on unfortunate ignorance.'"

Politico reported that "he'll have to navigate a labyrinthine international legal system" along the way.
He never expected to get away with it undetected. Both The Guardian and The Postquote Snowden acknowledging that he expected he would be discovered. "You can't protect the source," he told Gellman, adding later "there's no saving me."
He says he was granted broad "wire-tapping" authorities. In a video interview withThe Guardian, Snowden claims to have had incredibly broad authority to wiretap Americans, saying "I, sitting at my desk, certainly had the authorities to wiretap anyone, from you or your accountant, to a federal judge or even the President, if I had a personal e-mail."

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Susan Rice Taking Over as National Security Advisor Despite Benghazi Mess

Niraj Chokshi, National Journal — Wed, 05 Jun 2013 09:31:21 -0400

President Obama will elevate U.N. Ambassador Susan Rice to national security advisor -- a post currently held by Tom Donilon, who will resign -- despite Republican fury over her mischaracterization of the fatal attacks on American diplomats in Benghazi.

Obama plans to make the announcement this afternoon, according to various news outlets. Rice's candidacy to replace Hillary Clinton as Secretary of State evaporated over the Benghazi scandal. Here's how The New York Times put it:

At the United Nations, Ms. Rice earned good reviews for lining up balky members behind sanctions on North Korea and Iran. After Mr. Obama's re-election, she was seen as a prime candidate to replace Mrs. Clinton. But that was before she appeared on television to discuss the attack in Benghazi, which killed four Americans, including Ambassador J. Christopher Stevens.

Ms. Rice, using talking points supplied by the White House, said the assault appeared to be a protest gone awry rather than a premeditated terrorist attack. That proved incorrect, and though Ms. Rice cautioned that the account could change with further intelligence, Republicans accused her of sanitizing the truth for political reasons.

The plan to replace Donilon with Rice has been in the works for some time. Donilon, who had said he planned to step down after Obama's first term, has been an influential part of Obama's inner circle, amassing "enormous internal control," according to a recent unflattering profile in Foreign Policy. That power didn't come without controversy, according to the profile's author:

Over the past half year, several present and former administration officials have urged this reporter to examine the powerful role Donilon plays as national security advisor, the extraordinarily tight leash he holds over the foreign-policy apparatus, his demanding treatment of staff, and the way he allegedly undercuts or elbows aside challenges to his power. Despite his prominent place at the center of Obama's foreign-policy operation, few news outlets have profiled Donilon, who generally prefers to operate behind closed doors.

Rice's promotion could provoke Republican ire, but unlike Secretary of State, the position of national security advisor isn't subject to Senate confirmation.

Samantha Power, a former National Security Council official in Obama's White House, will replace Rice at the U.N.

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The Banality of Al-Qaida's Scathing Letter to One of Its Operatives

Niraj Chokshi, National Journal — Wed, 29 May 2013 17:21:53 -0400

Al Qaida, it turns out, isn't immune from bureaucratic dysfunction.

In a lengthy report posted late Tuesday night, the Associated Press's Rukmini Callimachi described in great detail a letter from al-Qaida leadership excoriating one its insubordinate employees. The harsh rebuke reads like a warning from human resources to a senior executive on thin ice.

"In page after scathing page, they described how he didn't answer his phone when they called, failed to turn in his expense reports, ignored meetings and refused time and again to carry out orders," Callimachi writes.

The employee was Moktar Belmoktar, a.k.a. Khaled Abu Abbas, who eventually split from the terrorist organization and went on to take more than 100 people hostage at a BP-operated gas plant in Algeria in January. Here are some highlights from the 25-page letter:

It Didn't Have to Be Like This. The letter starts off with leadership stressing that they just had no choice but to write it in response to one he had sent them earlier.

We are forced and obliged to write to you, and we had not wanted our correspondence to center on such issues, given the phase that the jihadist project is passing through in the region and the great challenges that it faces. But what else can we do? … And for your information, we only refrained from wading into this battle in the past out of hope that the crooked could be set straight by the easiest and softest means and that reason and the right path would rule between us.

Don't Take It Personally. They also took great pains throughout to maintain what what little remained of their frayed relationship with Khaled.

So any stringency and harshness in our tone is intended to fix the situation, right the path and correct behavior. God is behind all intentions and he is the guide on the path.

You Botched the Canadian Kidnapping. Leadership's complaints begin with what they saw as the botched attempt to extract concessions for the release of Canadian diplomat Robert Fowler and a colleague. Khaled, they write, struck a deal for money instead of pursuing the concessions in the Afghanistan war that leadership wanted.

He chose to step outside the organization and reach an agreement in his own way, he did not follow the organization's instructions, and if not for God Almighty's leniency and the reasonableness of the brother emirs, the problem would have escalated. … Does the inadequacy come from consultation and coordination, which we were insistent on or does it come from unilateral behavior, along the lines of our brother Abu Abbas, which produced a blatant inadequacy: trading the weightiest case (Canadian diplomats!!) for the most meager price (700,000 euros)!!

You Only Call When You Need Something. Leadership also took issue with the fact that Khaled rarely picked up when they called, though he also seemed to find time for the media.

Why do you only turn on your phone with the Emirate when you need it, while your communication with some media is almost never ending!

Keep Your Mouth Shut. Khaled was a blabbermouth, too.

The bitter truth, which we can barely swallow, is that Abu Abbas aired our laundry publicly and spilled secrets of jihad to random young men whom he doesn't know, out of his reprehensible drive to break up our ranks.

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Analysis: Could Fracking Close the Budget Deficit?

Niraj Chokshi, National Journal — Wed, 29 May 2013 09:34:00 -0400

You can measure the success of a disruptive new market by how freaked out existing market participants are. And oil producers around the globe are plenty freaked by the U.S. oil boom.

The surprising shift in fortunes has major implications. The boom could help to boost the economic recovery and wean the U.S. off of its reliance on foreign sources of energy, potentially disentangling it from conflicts and support roles abroad. But there's another potential upside: if harnessed well, the oil boom could be used to help solve the nation's fiscal problems.

Increasing the oil-consumption tax could help tame the nation's growing deficits. So could implementing a new carbon tax. There are downsides, of course: The taxes would hit the nation's poorest citizens hardest and be, um, tough to pass politically. But the burden on the poor can be offset and, given the current options, once off-limits proposals could find their way into negotiations. In the end, a new carbon tax and hiking oil taxes could help to reduce emissions, oil consumption, the price of oil and, of course, deficits.

On its own, an increase in oil-consumption taxes is politically unpalatable, but it could be a viable option if its an alternative to deep income tax hikes or cuts to beloved programs, two researchers with the Council on Foreign Relations argued in a February study. The duo used the 2011 Simpson-Bowles deficit-reduction package as a starting point, adding oil taxes and analyzing changes to that plan's corporate tax, income tax, and government spending levels. In many configurations, an oil-tax hike made the deficit-reduction packages that much more effective, they found.

"[O]il taxes can bring, through the end of this decade, stronger economic growth, lower unemployment and reduced oil consumption -- even while raising more money," Michael Levi and Daniel Ahn wrote in an accompanying op-ed at the time.

The impact on the economy could be broad, they found. After accounting for effects on the tax base and on world oil prices, one such package boosted economic output by more than 0.8 percent through 2020 with unemployment dropping more than 0.2 percent. (That package adds an oil tax hike and maintains the levels of income and corporate tax hikes in the Simpson-Bowles plan, all while halving the level of spending cuts in the plan.)

There are other consequences of raising oil taxes, some good, some bad. A tax hike would lower oil consumption, which would also reduce world prices, they suggest. It would also disproportionately affect the poor. But that impact could be partially offset by a tax rebate, they argue.

Levi and Ahn are the first to caution that any economic-forecasting model could turn out to be way off. But, they conclude in the op-ed, "if lawmakers decide to go ahead with further deficit reduction, they would be remiss not to take a hard look at higher oil taxes as part of the deal."

Some have suggested a carbon tax could serve a similar purpose. At first glance, the consequences are stark: costs for businesses would rise, pushing up prices for carbon-intensive goods and services. High prices, in turn, would devalue purchasing power, discouraging workers and decreasing the labor supply. Investment would fall and output would follow. And the impact would be uneven and disproportionately hit the poor, the nonpartisan Congressional Budget Office reported last week.

But that's only one half of the picture. There are ways to offset the downsides, depending on how the new revenue is used. Applying that new cash to deficit reduction, for example, or offsetting cuts to marginal tax rates could offset the impact, CBO found. And the new revenues could even be used to ease the burden the tax would ultimately create for the poorest Americans. It would take less than 30 percent of the carbon-tax revenue to offset the cost to the lowest two-fifths of income earners, according to one study. And then there are the costs, though difficult to estimate, of doing nothing.

Given conflicting study results and its limited scope, the CBO report didn't come to a definitive conclusion on the ultimate impact a carbon tax would have on the economy, but other studies have suggested it could be a universal positive. Regardless of how the new revenue is used, the economy would be better off with a carbon tax than by simply maintaining the high tax rates needed to maintain the federal revenue stream, two MIT researchers found in an August report.

"We find that any of several different options for using the carbon tax revenue would generate a win-win-win solution," they found. "Given that all other options for dealing with the Federal deficit require difficult tradeoffs, it would seem hard to pass up one that offers so many advantages."

The findings of the recent studies on energy taxes may not be conclusive, but they offer potentially viable alternatives to painful cuts or tax hikes elsewhere.

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Analysis: The Good Side of the IRS Scandal

Niraj Chokshi, National Journal — Wed, 22 May 2013 16:07:23 -0400

If there’s just one lesson to learn from the IRS scandal, it’s that big government failed. If there’s another, it’s that big government worked.

News of the scandal broke when an IRS official responded to a planted question, explaining that the tax agency unduly interrogated conservative groups seeking tax-exempt status. But those comments preempted a 54-page report from a Treasury Department tax investigator. It was that report which fueled subsequent news reports and congressional hearings. And it highlights the significant—and often successful—role such in-house investigators play in uncovering government scandals, even as they face scrutiny themselves.

"These type of oversight functions return more money to taxpayers than they cost to run,” says Joe Newman, communications director for the Project on Government Oversight, a nonpartisan watchdog.

The work of federal inspectors general saved the government nearly $94 billion in fiscal year 2011,according to a report by the Council of Inspectors General on Integrity and Efficiency, an independent executive branch organization tasked with auditing the auditors. The savings were also well worth it: the government got a $35 return for every dollar spent on 73 IG offices, according to the report. And investigations also led to thousands of prosecutions, debarments and other similar actions.

IG investigations routinely unearth corruption and mismanagement in government. IG’s have helped uncover corruption in the Iraq and Afghanistan reconstruction efforts. The infamous $800,000 Las Vegas conference hosted by the General Services Administration was uncovered by its IG and counterparts have helped to track government spending on stimulus funds in recent years as well.

But, despite their successes and independence, IG offices face plenty of scrutiny. And Treasury Inspector General of Tax Affairs J. Russell George, who unearthed the IRS missteps, is no different. At a Wednesday hearing, House Oversight Committee Chairman Darrell Issa criticized George for failing to keep Congress abreast of the IRS investigation as it was going on.

“The statute as written does not give you the ability to—or any IG to—use us as a whipping boy when you want to and in fact keep us in the dark until an investigation is completed,” Issa said.

George’s office faces $8 million in budget cuts this year under the across-the-board cuts known as sequestration. And he’s not alone. Two dozen IG offices face cuts of anywhere from $1 million to $28 million, they found, according to the Project on Government Oversight. All told, IG offices face more than $100 billion in cuts this fiscal year.

Such cuts mean fewer resources for investigations like the one that unearthed the IRS affair. In late March, the General Services Administration IG said cuts to his office would rob the GSA of $281 million in savings and revenue. At the time, his Education Department counterpart predicted staff wide furloughs of up to 11 days. And the House Oversight committee’s top Democrat, Rep. Elijah Cummings, said at a hearing that month that such cuts would hinder “the very oversight work we are praising them for today.”

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Why the Immigration Plan Really Could Give Us Border Security

Niraj Chokshi, National Journal — Wed, 17 Apr 2013 12:21:50 -0400

The bipartisan immigration reform proposed by the "Gang of Eight" promises to bring the 11 million illegal immigrants out of the shadows. But first, there’s the little issue of securing the border.

The plan requires that a set of border-security goals be met before any undocumented immigrant gets legal status. And it sets a high bar: achieve a border-security effectiveness rate—measured by how many individuals are apprehended or sent back—of 90 percent in high-risk areas. It’s an ambitious goal, but achievable no less.

“What I read here ... is eminently doable, and it doesn’t read to me like there’s anything in here that is going to get in the way of going forward with a [legal] registration program,” said Doris Meissner, a senior fellow at the nonpartisan Migration Policy Institute and the director of its U.S. Immigration Policy Program.

That the new goals seem so achievable is thanks in large part to a recent trend: Deportations are up , and many of the border-security goals in the 2007 reform bill have already been achieved , even though that measure never became law. An accelerating Mexican economy and the subdued U.S. economy have made illegal crossings less appealing, too.

“The push factor is less; the pull factor is less,” said Andrew Selee, vice president for programs and senior adviser to the Mexico Institute at the Woodrow Wilson Center, a nonpartisan think tank. Given the use of new technology—the Gang of Eight's plan also calls for surveillance systems and drones to police the border—the border is going to get harder and harder to cross anyway, Selee said.

The plan dedicates $3 billion to the effort, a sum that Selee and Meissner both say seems sufficient to achieve the goal of a 90 percent security effectiveness rate in so-called high-risk border sectors. The plan defines high-risk sectors as those "where apprehensions are above 30,000 individuals per year."

A December report from the Government Accountability Office suggests that achieving that goal may not be too far off. Of the Border Patrol’s nine southwest-border sectors, five had more than 30,000 apprehensions in fiscal 2011, according to the report. And of those five, two had already achieved an above 90 percent effectiveness rate, which the Gang of Eight plan defines as the number of “apprehensions and turn backs in a specific sector divided by the total number of illegal entries.”

The Tucson, Ariz., border sector, which accounted for more than one-third of all apprehensions in fiscal 2011, had an effectiveness rate of 87 percent. Of the five sectors with more than 30,000 apprehensions that year, Laredo and the Rio Grande Valley had the lowest rates, at 84 percent and 71 percent, respectively.

The border is far from impervious to illegal entry, and a strengthened U.S. economy will surely tempt more would-be Americans to cross the border illegally. But the new goals may be achievable thanks to recent trends.

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The Income Tax Form Turns 100

Niraj Chokshi, National Journal — Mon, 15 Apr 2013 14:00:31 -0400

There is probably no single number more closely associated with tax day than 1040, the number assigned to the federal income tax form. This year, that form turns 100.

On Feb. 3, 1913, Wyoming ratified the 16th amendment to the Constitution, authorizing Congress to tax income. That move gave the one-sentence measure approval from three-fourths of the states, the threshold needed to amend the Constitution.

Later that year, the Bureau of Internal Revenue issued the first-ever Form 1040, the federal income tax form. At the time, there were only two tax rates: a 1 percent tax on income above $3,000 and a 6 percent tax on income above $500,000. But few people paid it, according to the National Archives, which hosts a digital version of the original form.

"[D]ue to generous exemptions and deductions, less than 1 percent of the population paid income taxes at the rate," the Archives explains.

And it wasn't the first time that Congress had levied an income tax. Here's some history from the Internal Revenue Service, which took on that new name in the 1950s:

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The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. The income tax was repealed 10 years later. Congress revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year.

The tax code has undergone many changes since and could be reformed once again, with the White House and the heads of the congressional tax-writing committees on board for comprehensive reform. But one thing hasn't changed: the number on the form for individual filers.

The IRS hosts a digitized version of that first-ever 1040 form, while the National Archives hosts a copy of the original.

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Why This Is the Age of Small Government (Sort Of)

Niraj Chokshi, National Journal — Thu, 11 Apr 2013 14:16:38 -0400

With the president's budget released on Wednesday, all the plans, Democratic and Republican, are in. And under each, nondefense spending—funding for many of the government's most-visible operations—will reach a 50-year low.

Here’s an explanation we wrote when the Senate Democrats and House Republicans released their budgets in March:

Every year, the government spends money in two broad categories. The first is funding that has to be approved annually by Congress, or discretionary spending. The second is funding that does not, known as mandatory spending. Most of the mandatory spending goes to Social Security and to Medicare and Medicaid, the latter of which are among the key drivers of the country's debt. In other words, the “debt crisis” that many politicians decry... is in large part the result of runaway future health care spending.

Of the money approved annually by Congress—discretionary spending—about half goes to defense. The other half goes toward things like government operations, law enforcement, education, transportation, national parks, research, and welfare programs. Historically, those nondefense discretionary programs have accounted for about one-fifth of all spending. But, as a share of economic activity, that spending is about to dip to its lowest levels since 1962.

In the last 50 years, nondefense spending has never accounted for less than 16 percent of total spending. But it would shrink to 11.5 percent by 2023 under the White House or House Republican budget plans. It would also reach a 50-year low as a share of economic output.

That's a continuation of a trend: Over the past five decades, discretionary spending (defense and nondefense) has taken on a smaller and smaller share of overall spending while mandatory programs have accounted for more and more of it. The nonpartisan Congressional Research Service laid it out pretty simply in a 2010 report.

With more and more baby boomers retiring, the problem is only going to get worse. You can compare all the possible budget outcomes in the chart here.

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Is Chained CPI the Wrong Solution to the Right Problem?

Niraj Chokshi, National Journal — Wed, 03 Apr 2013 17:11:54 -0400

When President Obama releases his budget next week, it may include what some tout as an elegant solution to the nation's fiscal problems, a way of measuring price changes known as “ chained CPI .”

The thinking goes like this: The debt needs to be reined in. Changes to benefit payments don’t accurately reflect the way Americans spend money. If you fix the benefit adjustments to make it so they do, you would raise money and put the government on a path to addressing the debt.

The proposal enjoys broad support. But the very premise of the change—that chained CPI will make adjustments to benefits and taxes more accurate—may not hold true for everyone, especially the elderly.

The Problem

The government currently relies on a one-size-fits-nobody measure of inflation. That indicator, known as the Consumer Price Index, is crucial for determining how tax brackets and government benefit payments are updated over time. When prices rise, benefit payments rise in step. But the current inflation measures (components of CPI known as CPI-U and CPI-W) fail to account for how people actually spend money. When the price of certain items rise, consumers turn to cheaper alternatives. If pork gets more expensive, for example, people might start buying beef. If new car prices rise, Americans might turn to used cars. The current measures tracks the price of all items, but it doesn't fully account for the cost of substitution.

The (Proposed) Solution

Some argue that the government should instead use its chained CPI indicator, an alternative inflation measure that better accounts for that substitution. Because it more accurately reflects how consumers swap out goods to mitigate price hikes, chained CPI rises more slowly than the current inflation measures to determine benefit payments. In fact, chained CPI is projected to grow about 0.25 percentage points more slowly per year over the next decade, according to the nonpartisan Congressional Budget Office.

It may seem small, but the gap widens over time. The Moment of Truth project, a nonpartisan group that advocates taming the ballooning federal debt, illustrates the difference in the chart below. From 2000 to 2011, prices either rose by 29 percent (chained CPI) or 34 percent (current inflation measures). If the government switched to chained CPI next year, it would raise $390 billion in taxes and program savings through 2023, the group says.

Almost exactly one-third of the money raised—$127 billion—would come from reduced Social Security payments, according to the Moment of Truth calculations. Estimates vary, but changes to Social Security Cost of Living Adjustments account for a large share of savings under each. A switch to chained CPI would barely be noticeable for Social Security recipients at first: Benefit payments would be about 0.3 percent less at the start of retirement, the Center for Retirement Research at Boston College wrote in a 2011 paper . But it would compound. By the time the average retiree reaches 85, payments would be about 6.5 percent less per month than they would be otherwise.

Proponents acknowledge that the elderly and other federal benefit recipients will take a hit, but say that that’s a subject for a separate debate. “Using an incorrect inflation index is neither a sensible nor well-targeted way to help these populations,” the authors of the Moment of Truth paper write. “It is not a reason to forgo the deficit reduction that moving to the chained CPI would bring,” the Center for Budget and Policy Priorities wrote in a paper last year. It and others argue for a broad benefits increase and other changes to mitigate the impact of switching to chained CPI.

Is Chained CPI Accurate?

If it’s accuracy you want, chained CPI won’t get you there, opponents argue.

Seniors spend money differently from the average person. Health care accounted for 13 percent of spending for those 65 or older at the time the Center for Retirement Research wrote its paper. It accounted for 5 percent of spending for the general population. Not only do the elderly spend more on health care, but those costs also grow faster than others.

To better understand the difference in seniors' spending, the government has long tested an elderlyfocused inflation measure (CPI-E). From 1982 to 2010, that experimental measure outpaced standard inflation by 0.27 percentage points annually, according to the nonpartisan Congressional Research Service.

In other words, using the experimental elderly inflation measure (CPI-E), benefit payments would rise faster than under the current inflation measures. Using chained CPI (or C-CPI-U), benefits would rise more slowly, as AARP shows in the graph below. AARP, the huge seniors lobby, has been one of the biggest opponents of chained CPI. The group plans to release in a week or two the results of a survey showing how backing the proposal would affect voter favorability for individual lawmakers.

That’s not to say that CPI-E is perfect, either. Costs may be rising, but so too might the quality of health care services. And it may not account for that. The point, opponents of switching to Chained CPI argue, is not that the CPI-E is the best measure to calculate Cost-of-Living Adjustments (COLAs), but that so far there is no better alternative.

“To ensure that the system is paying proper COLAs, Congress should instruct the Bureau of Labor Statistics to develop a statistically rigorous index of inflation among retirees,” The New York Times editorial board recently wrote . “Until that is done, cutting the COLA on grounds that it is too large would be unjustified and disingenuous.”

More research also needs to be conducted on how—and whether—the low-income elderly substitute goods, according to the Center for Retirement Research. For low-income seniors, most of their spending goes to essential items such as food, housing, transportation and health care. Because they are already spending so little, they may not have as much room to maneuver around price hikes.

“With little ability to respond to price changes, the poor have no mechanism to offset the full brunt of a price increase,” the center wrote in its report.

And Social Security’s top actuary made a similar point in a 2011 letter to Rep. Xavier Becerra: “[T]he degree to which individuals, in different circumstances and with different income levels, are able to change their purchases on a discretionary basis across strata likely varies."

In other words, chained CPI may account for substitutions, but not everybody substitutes in the same way. Like the current inflation measures, chained CPI is a one-size-fits-all or -nobody solution, depending on your point of view.

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There’s Nothing to Fear But the Debt Itself

Niraj Chokshi, National Journal — Thu, 28 Mar 2013 13:23:38 -0400

Quick, which segment of federal spending will grow fastest from 2015 through 2021? Did you guess Medicare? If you did, you’d be wrong.

It’s an underappreciated fact that a significant contributor to the ballooning debt is ... the debt itself. Federal interest payments are projected to grow faster over the next decade than any other broad category of expenditures, outpacing spending on Medicare, Medicaid, and Social Security. Even a small, sudden shift in the interest rate on government debt could inflate deficits by trillions of dollars over the next decade.

It’s “the issue that concerns me more than anything else,” said former longtime Senate Budget Committee staffer William Hoagland at a recent panel on the budget. “It’s the level of debt as a combination of interest rates plus the level of accumulated debt that’s really explosive in the out years,” he said at the panel hosted by the Bipartisan Policy Committee, where he now works as a senior vice president.

Lawmakers and experts are rightly focused on entitlement reform because spending for those programs is so huge. Interest spending is projected to grow quickly in the near term, but it still makes up only a small portion of the debt. That could grow quickly, though, according to the nonpartisan Congressional Budget Office.

Interest rates fluctuate in response to a variety of factors, including expected inflation, Federal Reserve policy, and domestic and global economic strength. But if economists polled in the October and February Blue Chip Economic Indicators surveys are right about their rate predictions, it would mean that the CBO—Congress’s budget scorekeeper—is underestimating the size of the 10-year budget deficit to the tune of $1.1 trillion.

In other words, the upward shift in interest rates would eradicate most of the savings from the roughly $1.2 trillion in painful spending cuts implemented under sequestration over the next decade. Lawmakers in both parties are currently trying to reduce deficits over by about $4 trillion in roughly that time frame, too. If interest rates returned to 1980s levels, CBO says deficits would swell by $6.2 trillion instead.

Over the long term, interest spending will become an increasingly large burden unless something is done about the debt broadly. And the Treasury Department has a graph in its “Citizen's Guide to the Fiscal Year 2012” that shows the potential scale of the problem. (It should be noted that economic predictions even 10 years out are notoriously subject to error. Longer-term projections like the one below are even harder to get right, but they can still prove instructive in understanding the makeup and path of the debt.)

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Nondefense Slice of Domestic Spending on Track to Hit 50-Year Low

Niraj Chokshi, National Journal — Fri, 15 Mar 2013 14:33:57 -0400

Here’s one key takeaway from the Senate Democratic and House Republican budgets released this week: Under each, nondefense spending—funding for things like welfare programs and government operations—will reach a 50-year low, as a share of economic activity, within a few years.

Every year, the government spends money in two broad categories. The first is funding that has to be approved annually by Congress, or discretionary spending. The second is funding that does not, known as mandatory spending. Most of the mandatory spending goes to Social Security and to Medicare and Medicaid, the latter of which are among the key drivers of the country's debt. In other words, the “debt crisis” that many politicians decry—and which is a key motivator of Republican spending cuts—is in large part the result of runaway future health care spending.

Of the money approved annually by Congress—discretionary spending—about half goes to defense. The other half goes toward things like government operations, law enforcement, education, transportation, national parks, research, and welfare programs. Historically, those nondefense discretionary programs have accounted for about one-fifth of all spending. But, as a share of economic activity, that spending is about to dip to its lowest levels since 1962.

That nondefense discretionary spending, as a share of gross domestic product, will reach a historic low by 2017. That’s the case under current law, with or without the automatic spending cuts under sequestration. And now it’s the case under the proposed budgets—Democratic or Republican.

As the economy and population grow over the next decade, spending dedicated to these programs—some of them very popular, some of them aimed at providing low-income assistance—will hold relatively steady. It's a partial philosophical win for Republicans, who have long pushed for shrinking the federal government, to have Democrats preventing one slice of government spending from growing.

Take the budget released by Senate Democrats. Nondefense discretionary spending hovers roughly between $600 billion and $660 billion, while economic output (GDP) is projected to grow from $16 trillion to $26 trillion within a decade, according to the Congressional Budget Office. The House Republican budget proposal holds that spending even lower—between $510 billion and $570 billion.

(Image via isak55/Shutterstock.com)

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In the Budget Debate, Even the Definition of Spending Is Up for Grabs

Niraj Chokshi, National Journal — Wed, 06 Mar 2013 15:36:23 -0500

If you need a sign that Washington is going to have a tough time breaking its gridlock on the budget, look no further than the fact that Democrats and Republican can't even agree to the terms of the debate.

For a while now, a so-called "grand bargain" on long-term deficit reduction has seemed elusive, though President Obama still hopes it can be achieved. The president plans to have dinner with about a dozen GOP senators on Wednesday night in an effort to revive talks and has plans for a rare trip to Capitol Hill next week. Republican Senator Lindsey Graham described it to The New York Times as "probably the most encouraging engagement on a big issue since the early days of his presidency." It's a promising development for proponents of deficit reduction, but a huge amount of distance remains between the two sides.

Democrats see no way of reducing the nation's annual deficits without both cutting spending and generating new revenue. But Republicans say Democrats already got a concession on revenue at the beginning of the year, when Congress voted to let upper-income tax cuts expire as part of a fiscal cliff deal, raising roughly $620 billion over 10 years. House Republicans say revenue should be off the table and that the focus should be solely on spending cuts.

The difficulty the two parties will have in reaching a compromise was on full display at Tuesday's Senate Budget Committee hearing. Democrats wanted to explore how to raise money by eliminating tax loopholes. Republicans took issue with the very premise of the meeting.

The committee’s Democratic chairwoman, Sen. Patty Murray, kicked off the Tuesday hearing arguing that “finding savings from unfair tax provisions is an opportunity to responsibly reduce our deficit.” But, to the committee’s top Republican, that argument was based on misguided reasoning.

“The title of the hearing, ‘Reducing the Deficit by Eliminating Wasteful Spending in the Tax Code,’ really suggests how much disconnect we have,” ranking member Sen. Jeff Sessions said in his opening statement.

“When you allow a person to keep money that they earn because of a certain deduction, for charitable or mortgage or healthcare payments, I don’t believe that’s spending by the United States government,” he said. Tax breaks shouldn’t be seen as an untapped revenue source, he and other Republican senators argued. Eliminating a tax break is just a tax increase. “You can’t spin it any other way,” Sessions said.

But Democrats argue that some loopholes are a form of spending through the tax code. That’s because they can serve the same purpose. Need-based federal grants for college and subsidized childcare are no different from tax-deferred college savings accounts or the childcare tax credit, argued Jared Bernstein, a former top economic advisor to Vice President Joseph Biden and one of the hearing’s witnesses. “If you believe we have a spending problem, you should also believe we have a tax expenditure problem,” he said.

Russell Roberts, a research fellow at the conservative Hoover Institution, who testified at the hearing also expressed discomfort with the phrase “tax expenditures,” but he suggested an alternative. “‘Special deductions’ may be a better phrase,” Roberts offered.

(Image via PutilichD/Shutterstock.com)

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Sequester Fears May Be Overhyped, Overblown and Overly Politicized

Nancy Cook and Niraj Chokshi, National Journal — Thu, 28 Feb 2013 13:52:02 -0500

Let’s be clear about one thing: The across-the-board spending cuts known as the "sequester” aren’t a doomsday scenario, or a meteorite that will blow up the economy.

Teachers, FBI agents, and Border Patrol officers will not get fired tomorrow, when the sequester kicks in. The Internal Revenue Service will still be able to process your tax return in April. Preschool programs won't kick out 70,000 little kids until the fall, according to Education Secretary Arne Duncan—and that’s if the spending cuts stick. Unemployed people, arguably some of the worst-off of the lot, will not see their federal benefits reduced by 11 percent until April at the earliest, says the National Employment Law Project. This is roughly four weeks away, giving Congress and the White House time to act beyond the March 1 deadline that has been touted in headlines and press conferences for the past week.

The immediate impact of sequester is “absolutely overhyped,” says Steve Bell, senior director for economic policy at the Bipartisan Policy Center and a former Republican staff director for the Senate Budget Committee. “A sequester will occur and, the next day, the likelihood is that almost no one will know that it started.”

The only guaranteed effect over the next few days, Bell and his colleagues say, is that federal employees across agencies will likely start receiving 30-day furlough-warning notices. The 150,000 federal employees, represented by the National Treasury Employees Union, still have little guidance on the timing or structure of those furloughs, says Colleen Kelley, the union’s national president.

So why all the shouting about these disastrous spending cuts? Well, in the long run (i.e., the next six months), they will put a drag on the economy, cost us jobs, and cut money from the federal budget in a blunt -- rather than careful -- manner. But for now, much of the doomsday talk is old-fashioned politics.

Sequestration is not an economic or policy fight. It’s an ongoing, roiling political argument about the amount of money the federal government spends and the manner in which it does it. This long-time spending argument between the political parties has been distilled in this round of fiscal warfare to a wonky-sounding word and given an ominous deadline. Yet, its greatest immediate legacy may be the fodder it has provided for the 24/7 news cycle and the ammunition it has given the White House as it tries to beat down the Republicans in the court of public opinion.

To cut through the hysteria surrounding sequestration, here are some facts to counter the myths.

THERE’S FLEXIBILITY AGENCY-TO-AGENCY

The myth is that the sequester cuts will hit all at once on Friday, and federal budget officers at various agencies will be forced to immediately cut a big chunk of money from a very specific list of departments and programs. In truth, the administration and certain agencies do have a little flexibility depending on the way they define their programs, projects, and activities. The specificity of those definitions varies not just between agencies, but within them as well.

Take the Defense Department. Civilian salaries, funds for fuel, and other forms of operation and maintenance are defined at the account level, meaning that the department may have more flexibility in how to make those cuts.

So, instead of reducing costs for refueling, they could furlough more people, or instead of furloughing, find another fix, say Shai Akabas of the Bipartisan Policy Center. Sequestration only mandates cuts at the “program, project, and activity” level, as defined by the laws governing each agency’s appropriations.

DELAYING THE CONSEQUENCES

Federal departments and agencies also have some flexibility in the timing of the sequester cuts, says Charles Konigsberg, a former assistant director of the Office of Management and Budget during the Clinton administration. They could, for instance, delay implementing any cuts until the summer or fall. Of course, this strategy could backfire if Congress does not act and an agency runs out of money, but if a budget officer is willing to take the risk, such a move could also buy time and possibly more money through the fiscal year … with the assumption that Congress will eventually undo sequestration.

FURLOUGHS WON’T START FOR ANOTHER MONTH

There’s so much hand-wringing about the furloughs, when most of them will not even begin until April or later. Teachers and aides, for instance, will not face furloughs until the fall, Duncan said at a White House briefing on Wednesday. The timing of other furloughs could be seriously delayed, as the unions that represent some federal employees negotiate with the agencies on the timing and structure of the unpaid leave.

A SLOW-MOTION ECONOMIC IMPACT

Even the immediate economic impact of the sequester may be overblown. Yes, the spending cuts will take money out of the economy and drag down growth by as much as 0.6 percentage points in 2013, but “the immediate impact will not be that large,” says Nigel Gault, chief U.S. economist of IHS Global Insight. The stock market certainly isn’t worried. The Dow closed at level not seen in the past five years and close to a record high.

Instead, the economic impact of the spending cuts will seem like a slow-moving train wreck, Bell says. It will take months to work its way into the economy, drag down growth, and lead to enough job losses to tick the unemployment rate upward in 2014.

“I think what the economic data effectively shows is: ‘Here’s what will happen once everything is phased in,” Gault adds. It’s just that the full weight of the cuts won’t kick in until the summer and early fall, making March 1 and all the hype surrounding it seem like a manufactured crisis.

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Introducing Obama's Likely Pick for Energy Secretary

Niraj Chokshi, National Journal — Thu, 21 Feb 2013 13:54:48 -0500

President Obama has settled on MIT professor Ernest Moniz to be the next head of the Energy Department, according to reports. Here's what you need to know about him.

No Stranger to Government. Moniz has held key energy policy roles under Presidents Clinton and Obama. As under secretary for energy from 1997 to 2001, he was the department’s public face in explaining in 1998 how the Cabinet agency failed to prevent one nuclear weapons plant from leaking nearly a million gallons of radioactive waste over time. A year later, he had to defend a nearly half-billion dollar, 16-year mistake in how the department handled such waste. Earlier in Clinton’s tenure, Moniz spent two years as the associate director for science in the president’s Office of Science and Technology Policy. In 2009, he was appointed to be a member of Obama’s Science and Technology Advisory Council. Moniz also has experience testifying before Congress, having discussed the Clinton administration’s energy policy in June 2000 and the future of natural gas in 2011.
Proponent of Good, Old-Fashioned Nuclear Energy. Moniz is an advocate for a low-carbon future and has, in a variety of forums, promoted the use of nuclear energy to get there. He favors improving on existing technologies, he told Dan Rather in 2011, arguing that untested new options take a long time to develop and are subject to a nuclear-licensing process "which is inherently tortuous." He also supports setting aside $36 billion in government loan guarantees to fund new nuclear-power plants. The hope, he said, is that such guarantees would ultimately come at no cost to the public. France, Japan, Korea, and Russia have made gains in recent years in recruiting talented nuclear workers, he said. But he said he was pleased to see that the United States seemed to be coming back to nuclear energy.
A Fan of Natural Gas—For Now. To the chagrin of some environmentalists, Moniz has described the growth in domestic shale-gas production over the past few years as paradigm-shifting. In introducing a major MIT report on the future of natural gas in 2010, he called it “a bridge to a low-carbon future.” In the long term, natural gas would likely be phased out in favor of zero-carbon options, he said. “For the next several decades, however, natural gas will play a crucial role in enabling very substantial reductions in carbon emissions,” Moniz said.

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Why It's A Good Sign For Jacob Lew His Hearing Was So Bland

Niraj Chokshi, National Journal — Thu, 14 Feb 2013 08:08:30 -0500

Lew, President Obama’s chief of staff until last month, went in to his confirmation hearing for Treasury secretary on Wednesday without much to gain. A few new questions about his past had been raised since he was last in the confirmation hot seat, and he ran the risk of becoming a whipping boy for critics of the administration’s fiscal policies. But by playing it cool and boring, Lew emerged relatively unscathed and on track to what many predicted before the hearing would be an easy confirmation.

Even Sen. Orrin Hatch, R-Utah, who persistently questioned Lew on a one-time offshore investment and a stint at Citigroup, felt that Lew had survived the grilling fine. “I think you’ve done really well,” he told him after the hearing.

Lew’s relatively low-key experience drew a sharp contrast to that of Chuck Hagel, Obama’s nominee for Defense secretary. Hagel faced sharp questioning in his full-day hearing, was pressured to submit additional financial documentation, and has had his nomination threatened by procedural tactics. Lew stuck close to his script, rarely giving opponents fresh material to criticize.

That’s not to say there wasn’t drama. Almost from the start, Lew was pressed on an investment he once held in an offshore account and on a $940,000 bonus he received while working at Citigroup. Sen. Chuck Grassley, R-Iowa, criticized Lew for accepting the bonus just one day after Citigroup received a $301 billion bailout.

“Explain why it might be morally acceptable to take close to a million dollars out of a company that was ... about to receive billions of dollars of taxpayer support,” Grassley asked.

“I was employed in the private sector and compensated in a manner consistent with” others in the industry, Lew said. He had barely finished his answer before the senator moved on.

Grassley had also criticized Lew during and after the hearing for saying that he was unaware of the details of an offshore investment he once held, which was housed in Ugland House, a Cayman Islands office building.

"Mr. Lew’s unfamiliarity with the most high-profile example of what the president calls 'the largest tax scam' does not build confidence in his knowledge of the tax code, his ability to enforce it, or his ability to help shape the broad tax reform everyone agrees we need," Grassley said in a statement after the hearing. He added that he would "reserve judgment" until Lew provided written responses to his questions.

Lew, a budget and fiscal veteran, also handled questions—deftly, in most cases—on the range of responsibilities facing a Treasury secretary, including dealing with tax reform, economic sanctions, China's currency, entitlement reform, and other issues.

If Lew’s goal was to have an uneventful hearing, he seemed to have achieved it. Even the two activists donning Robin Hood hats and being eyed by a Capitol Hill police officer did nothing to disrupt the event.]]>

Treasury Nominee Expected to Ace Confirmation Hearing

Niraj Chokshi, National Journal — Tue, 12 Feb 2013 09:17:19 -0500

Jacob Lew is nothing if not prepared.

If the Obama administration’s critics are bracing for the possibility of a gaffe or off-message comment from the nominee for Treasury secretary, they could be waiting a long time. Lew, a veteran of confirmation hearings and budget fights, doesn’t get flustered easily, and he will be working with a team of senior Treasury and White House officials to prepare for the grilling he will face at his Senate confirmation hearing. Lew will testify on Wednesday at 10 a.m. before the Senate Finance Committee.

“He’s really a very well-prepared nominee for his job,” said Phillip Swagel, who served as Treasury’s assistant secretary for economic policy under President George W. Bush.

Nominees typically receive giant briefing books to study up on the relevant issues and endure two or three “murder boards,” practice hearings designed to shore up answers, prepare nominees for tough questions, and give staff the opportunity to criticize and grill senior officials, according to former officials involved on both sides of the preparations.

“It’s intense and frenetic and exhaustive,” said Stuart Eizenstat, who served as deputy Treasury secretary under President Clinton.

But Lew has spent decades preparing. A 30-year veteran of budget battles, he most recently served as President Obama’s chief of staff, guiding negotiations on a variety of fiscal issues. Lew has twice served as director of the Office of Management and Budget, once under Obama and before that under President Clinton. But even all that experience doesn’t cover the breadth of what Treasury does.

The biggest shock to a nominee is the range of issues the department is responsible for, said Tony Fratto, who has helped prepare three Treasury secretaries and roughly 40 officials in all for confirmation hearings during his time as a Bush administration Treasury and White House official.

“You need to be knowledgeable about everything from our sanctions programs on Iran and North Korea, but also the travel ban and spending ban on Cuba,” said Fratto, who is now managing partner at the communications strategy firm Hamilton Place Strategies. Few nominees expect to carry the mantle on an administration’s Cuba policy, he said, “but that’s what happens, because you run the program.”

And that’s where experts say the opportunity may come to trip up Lew: international issues. Though he spent two years at the State Department, Treasury’s international operations—sanctions programs, managing the economic relationship with China, etc.—can be incredibly complicated.

“I would expect someone trying to trip him up on one of those more esoteric questions,” said Stan Collender, a former longtime House and Senate Budget panel staffer who is now a director of financial communications with Qorvis Communications.

And just because Lew is a budget veteran, don’t expect Republicans to hold back. Senators have vowed to press him on his stint at Citigroup, an offshore account in which he was once invested, and his role in past fiscal talks.

The hearing may be tough, but with few surprises expected, Lew is expected to sail to confirmation.

This article appeared in the Tuesday, February 12, 2013 edition of National Journal Daily.

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The 22 Funniest #GeithnerBookTitles Tweets

Niraj Chokshi, National Journal — Wed, 06 Feb 2013 16:37:00 -0500

News broke late Wednesday morning that former Treasury Secretary Tim Geithner plans to write a book about his response to the financial crisis.

According to the Associated Press:

Geithner has not started writing the book and no timetable has been set for a deal, but an official with knowledge of his plans says the goal is for publication in 2014. The official asked not to be identified, saying that no formal announcement would be made until an agreement is reached with a publisher.

Within hours, jokes about possible book titles began trending nationwide on Twitter under the hashtag #geithnerbooktitles.

Many poked fun at Geithner, who has been criticized for being too cozy with Wall Street. Others riffed on the travails of the giant financial institutions—Lehman Brothers, Citi, AIG, Goldman Sachs, etc.—that weathered the crisis to varying success.

Here are 22 of the funniest tweets:

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