Pressure Grows for Natural Gas Exports

“U.S. companies hoping to export natural gas are frustrated by lengthy delays and rule changes as they await U.S. Department of Energy approval of their applications and may turn to the courts to speed up the process,” Reuters reports.

“Over a dozen projects are awaiting Energy Department permission to export gas to all countries. Four have been in limbo for between 18 and 25 months… One likely focus for legal challenges is the order in which the Energy Department rules on applications, a policy made in midstream that put some major players at a disadvantage.”

“Law experts say making a case for speeding up the DOE’s decision-making process will be difficult. But with multi-billion dollar projects on the line, some firms may try…. courts are typically reluctant to interfere in the regulatory process unless a statutory deadline has been missed.”

Why Would the Fed Taper?

Robin Harding explains why the Federal Reserve is increasingly signaling that it is ready to begin tapering its asset purchases later this year.

“When it started QE3 last September, the Fed said it would keep buying assets until there was a ‘substantial improvement’ in the outlook for the labour market… The Fed’s projection for unemployment at the end of 2013 is down from 7.75 per cent to 7.4 per cent and falling. Average payrolls growth in the past six months has been 194,000 compared with 130,000 in the six months leading up to QE3… Although markets have been slow to acknowledge it, all this looks like a substantial improvement.”

Ryan Avent says this argument for tapering “would represent a pretty significant example of goalpost-shifting.”

“In fact it is very difficult to discern any meaningful improvement in the labour market trend. Nonfarm payrolls grew by 175,000 jobs in May. In the year to May average monthly job growth was 176,000. For all of 2012 average monthly job growth was 183,000. For all of 2011 average monthly job growth was…175,000.”

“So no, substantial improvement in the labour market cannot be the reason for tapering. Neither can inflation worries… Now the Fed may well have other reasons to want to taper its purchases. Concern over financial stability is one candidate. When Mr Bernanke speaks to the press tomorrow…his task will be to explain why those other factors justify the probable reduction in asset-purchases by late this year.”

Corporate Personhood Isn’t Such a Bad Thing

Much of the discussion around corporate personhood has centered around campaign finance reform and the Supreme Court’s ruling in Citizens United v. FEC, but Wendy Kaminer broadens the lens and cautions against denying certain rights to corporations.

“If progressives had their way, the ACLU’s latest challenge to the NSA’s domestic surveillance would easily be dismissed… Of course, ACLU is not merely seeking to protect its interests in this lawsuit: It seeks to protect the interests of clients and prospective clients whose identities are revealed by the metadata… But, again, the ACLU is the plaintiff in this case, representing itself, defending its own corporate constitutional rights.”

“I’m not denying the corrosive, anti-democratic effects of big money. I’m asking progressives to stop denying the liberty interests served by corporate constitutional rights. If ACLU v Clapper doesn’t make those interests clear, then I suspect nothing will.”

Battle Over Medicaid Expansion Rages in Maine

Maine Gov. Paul LePage (R) vetoed legislation that would expand his state’s Medicaid program under President Obama’s health care reform law, “turning the focus back to majority Democrats to try and rally enough Republican votes to override it,” according to the Bangor Daily News.

“It passed in the House, 97-51, and in the Senate, 23-12. While both tallies included some Republican votes, they fell short of the two-thirds threshold needed to override LePage’s veto… In his letter, LePage warned lawmakers against accepting promises that the federal government will pay nearly all costs of expanding Medicaid over the next decade.”

Budget Cuts Make Pentagon Wary of Syria Conflict

Jeffrey Goldberg reports that as the White House continues to revise and adjust its approach to the brewing conflict in Syria, it is the Pentagon that is most resistant to initiating military action, as highlighted by a recent interaction between Secretary of State John Kerry and Chairman of the Joint Chiefs of Staff, General Martin Dempsey.

“Dempsey informed Kerry that the Air Force could not simply drop a few bombs, or fire a few missiles, at targets inside Syria: To be safe, the U.S. would have to neutralize Syria’s integrated air-defense system, an operation that would require 700 or more sorties.”

“At a time when the U.S. military is exhausted, and when sequestration is ripping into the Pentagon budget, Dempsey is said to have argued that a demand by the State Department for precipitous military action in a murky civil war wasn’t welcome.”

Bye Bye Bernanke

President Obama indicated that Federal Reserve Chairman Ben Bernanke likely won’t be appointed in early 2014 to serve a third term in the post, telling Charlie Rose that “Bernanke’s a little bit like Bob Mueller, the head of the FBI, where he’s already stayed a lot longer than he wanted or he was supposed to.”

USA Today: “The former Princeton professor could shed light on his intentions at a news conference Wednesday afternoon following a Fed policymakers’ meeting.”

Reuters: “Obama is said to be considering a number of monetary experts for the job, including Fed Vice Chair Janet Yellen, former U.S. Treasury Secretary Lawrence Summers, and former Treasury Secretary Timothy Geithner. An announcement could come as early as this fall, to give the Fed nominee time to get through Senate confirmation by the time Bernanke’s term ends.”

Ylan Mui: “This is not the first clue that Bernanke may be ready to step down. He is skipping the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyo., in August, the first time a sitting chairman has not attended the gathering of economic bigwigs in 25 years.”

Feds Absent on Oil Spill Health Issues

“Since 2010, at least three ruptured pipelines have spilled oil into U.S. neighborhoods, forcing officials to decide quickly whether local residents would be harmed if they breathed the foul air,” but InsideClimate News reports that “because there are no clear federal guidelines saying if or when the public should be evacuated during an oil spill, health officials had to use a patchwork of scientific and regulatory data designed for other situations.”

“Other federal guidelines limit the amount of benzene that manufacturing plants can emit, or set standards for transporting benzene on the nation’s highways… Without specific rules to help them, health authorities confronted with oil spills usually turn to these disparate guidelines and scientific studies to decide whether an evacuation is needed.”

“After oil spills, public health decisions usually fall to county or state officials. In Mayflower, those decisions were made by the Arkansas Department of Health (ADH), which set a benzene threshold of 50 ppb… InsideClimate News tried to compare that 50 ppb guideline with guidelines established by other agencies, but found that it was virtually impossible to make a direct comparison.”

Why Affirmative Action Is So Important

The highly anticipated Supreme Court ruling on affirmative action in admissions to public universities, Fisher v. University of Texas, will likely come out on a Monday or Thursday in June. John Cassidy explains why the US still needs affirmative action.

“Set aside, for a moment, the explosive issue of black or brown versus white, which underpins much of the discussion about affirmative action… Having lived in the United States for almost thirty years, I am always amazed that Americans persist in believing that this is a land of unparalleled opportunity and social mobility… for all too many working-class Americans—and a lot of them aren’t members of minority groups—U.S. society is less of a launchpad than a glue trap.”

“The motivating force wouldn’t be righting the wrongs of slavery… It would be a desire to make real the vision of a society in which rewards are based on effort and talent, rather than family connections. And that, surely, should be something that even some conservatives could sign onto.”

White House Continues to Weigh Climate Change Options

Reuters reports on President Obama’s refusal, thus far, to utilize the National Environmental Policy Act to incorporate the cost of greenhouse gas emissions in approving federal projects.

“NEPA forces officials to consider the environment before approving federal projects… In early 2010, the White House suggested it would make an update to NEPA that would require counting greenhouse gas emissions among the impacts worthy of a NEPA review. But those standards have been on ice ever since they were written.”

“Several former U.S. officials said the White House is at least a year away from blessing a climate change component of NEPA – if such a move is taken at all.”

Are the Credit Rating Agencies Too Much Too Late?

As the budget debate and debt ceiling drama heat up again in Washington, DC, credit rating agency Moody’s is weighing reducing the US’s perfect Aaa credit rating, following S&P’s downgrade in 2011. Expected Loss looks at whether such a move makes any sense.

“But given the US GDP is growing, while Europe is in a recession, can it make any sense to downgrade the US?  Remember, the rating agencies claim their ratings are RELATIVE measures of risk.  In other words, the rating agencies are ranking each country relative to other countries.”

“Our guess is that what’s happening here is the result of a fair share of awkwardness surrounding a situation in which many of the rating agencies’ outstanding ratings may not reflect their current opinions.  If they delayed implementing the downgrade since the US first failed to meet the relevant criteria necessary to maintain the AAA rating, they would now look a little silly downgrading so long after the fact, now that the economy has stabilized, or turned the corner.”

Setting Up Obamacare Exchanges Comes Down to the Wire

“With the deadline for states to implement Affordable Care Act-mandated health insurance exchanges less than four months away… States are having to reevaluate their existing health insurance infrastructures to meet the act’s requirements,” the Washington Post reports.

“Several states — including California, Oregon and New York — have already set up exchanges, secured vendors, built system infrastructure and created Web sites to educate consumers. These states are now shifting their focus to developing marketing and outreach strategies for the new systems.”

“States that have opted to use federally provided health insurance marketplaces are still awaiting the exchanges, and concerns persist over whether these exchanges will integrate with state health and human service computer systems.”

Arizona Voting Case Raises More Questions

The Supreme Court held in Arizona v. Inter Tribal Council of Arizona that an Arizona law requiring voters to provide proof of citizenship when registering to vote violated the National Voter Registration Act, but left the door open for states to raise such a requirement by other means. Lyle Denniston explains.

“For those who would look to Congress to keep open, and expand, the right to vote for the presidency and for members of Congress, Justice Antonin Scalia’s opinion for a majority (seven to two on several points, six to three on one other very key point) promised that Congress could pass its own laws on the voter registration process, and states would have to yield to those.”

“On the particular point at issue in this case…the Scalia opinion said that a state was free to ask the federal government for permission to add that requirement.   And, Scalia said, if that doesn’t work — either because the federal agency that would deal with such a request is either not functioning or says no — then a state would be free to go to court… The opinion seemed to leave little doubt that, if Arizona or another state went to court to try to establish such a constitutional power, it might well get a very sympathetic hearing.”

Smart Policy Can Reduce Damage From Wildfires

Brad Plumer highlights a new report from Headwaters Economics looking at how government policies increase the damage caused by wildfires.

“The number of people living in fire-prone areas has grown dramatically… State and local governments are mostly in charge of deciding whether to develop this land. Yet the federal government picks up the biggest piece of the tab for fire suppression and protection — now spending about $3 billion per year.”

“For starters, the feds can tighten fire standards and building codes for homes in these areas. Congress could also limit the mortgage-interest deduction for homes built in especially vulnerable regions — or require homeowners to buy federal fire insurance.”

Chart of the Day

– Gavyn Davies looks at the recent surge in “short rates” 3 to 5 years our (in green, purple, and light blue), arguing that “the Fed has lost control of the ‘instantaneous’ rates which are built into the shape of the yield curve.”

“The problem is that, once the market starts to believe that the Fed is ‘done’, it will inevitably start to build into the yield curve a rising probability that the FOMC will embark on a normal path of tightening before too long… The Fed has of course said that it will keep short rates at near zero until the unemployment rate has fallen to 6.5 per cent, subject to projected inflation remaining under 2.5 per cent. One way of forcing home the message that this will not happen soon would be to reduce the unemployment threshold to 6.0 per cent.”

Cullen Roche pushes back against recent reporting on “surging” interest rates: “People who don’t understand the monetary system are still making the same old tired ‘bond vigilante’ argument… Stop panicking.  Things aren’t nearly as bad as they want you to think.”

NSA Spying Chills Globalization

The extent of the National Security Agency’s use of Internet giants to spy on foreigners has Matthew Yglesias concerned that “we’re either going to have to see fragmentation of Internet commerce or else we’re going to need some kind of credible common standards.”

“Democratically elected governments in Europe, Latin America, and Asia are going to be expected to take steps to safeguard their own citizens’ privacy vis-a-vis the United States. Ideally that would take place through the mechanism of international privacy protection agreements that allow us to keep the international internet that we know and love. But if it’s not possible to reach agreement, then U.S.-based tech firms are going to find themselves subject to overlapping and contradictory regulatory schemes.”

“The status quo in which American companies operate as a stalking horse for foreign intelligence operations isn’t going to be sustainable.”

Why Obamacare Should Cover Newly Documented Immigrants

Jed Graham explains the perverse incentives created by proposals to exclude undocumented immigrants who receive legal status under immigration reform from receiving health insurance subsidies through President Obama’s health care reform law.

“Both approaches would give employers a big incentive to hire legalized immigrants in order to dodge ObamaCare’s fines for failing to provide affordable, comprehensive health coverage to workers. That’s because such fines may be levied based on the number of full-time employees who actually get subsidized coverage via ObamaCare’s exchanges.”

“For each subsidized worker, many employers will owe a $3,000 nondeductible fine, which equates to $5,000 in wages for a profit-making firm that pays a combined 40% federal and state tax rate.”

What to Expect From the FOMC Meeting

The Federal Open Market Committee meets today and tomorrow to review Federal Reserve policy and update economic projections. Bill McBride looks at what to expect from tomorrow’s policy statement and Fed Chairman Ben Bernanke’s press conference.

“I expect no policy change following the FOMC meeting with the Fed continuing to purchase $85 billion in longer-term Treasury and agency mortgage-backed securities per month… I expect Fed Chairman Ben Bernanke to argue we still need to see ‘substantial improvement’ in the labor market, and to note the downside risks to the economy, especially from current fiscal policy.”

Jon Hilsenrath and Phil Izzo: “At the conclusion of its two-day policy meeting on Wednesday, the Fed will release its updated projections of growth, inflation and unemployment. The evolution of these forecasts is a critical issue… If they maintain confidence in their economic forecasts, it could signal they think they’re on track to begin pulling back the program later this year.”

“A number of these economists believe the Fed will be disappointed by growth again—as it has so many times in this four-year-old recovery—and that a pullback in the bond-buying program will come later rather than sooner.”

What Would Tax Reform Look Like?

Although a comprehensive tax reform effort seems unlikely in the current political environment, Gary Becker looks at some of the most glaring problems in the current system.

“Expensing investments and taxing earnings moves the income tax code a long way in the direction of a tax on consumption rather than on incomes. The basic efficiency advantage of consumption taxes is that they do not distort the decision to consume now rather than consume later since the returns on savings and investments are not taxed. By contrast, income taxes do distort this decision since they tax the incomes earned on savings as well as the incomes that led to the savings.”

“Whether ones moves to a consumption tax or not, taxes should be simpler and flatter because that would reduce the large cost of tax compliance, and encourage greater investment and work effort. A reasonable proposal that would maintain progressivity yet have a much flatter tax structure would be to have only two or three tax rates.”

The Legal Limits of NSA Surveillance

Marc Ambinder sketches the legal contours of the National Security Agency’s surveillance powers.

“While it is true that an American communication can be accidentally intercepted after an analyst makes a decision to intercept a foreign communication, it would be just plain illegal for an analyst who believes that his or her target is an American to begin the interception process, the content interception process, without a FISA warrant.”

“The NSA has a bit of a safe harbor period — details classified — if certain conditions — details classified — are met, when it comes to an emergency interception of a domestic end of a telephone call or e-mail. Think: an actual ticking time bomb scenario. But…if the FISA court refuses to issue a warrant, the interception would stop… If there’s emergency situation involving an American, NSA sends a bulletin to the FBI through the National Counterterrorism Center in Virginia and lets them deal with it.”

“If you’re an agent of a foreign power, or there’s a reason to believe you’re associated with a group of bad guys and you’re not a U.S. person, the NSA can indeed begin to intercept your communications without a FISA order in certain, classified circumstances.”

Is More Education Enough Anymore?

Although educational attainment has sharply increased in the wake of the Great Recession, FT Alphaville notes that it may not be enough to improve people’s lives and reduce inequality.

“The new inequality is about capital owners and non-capital owners. And increasingly, it’s about technology capital owners. Those who own the robots and the tech are becoming the new landlord rentier types… The owners of the capital — which has the potential to create abundance — are protecting their rate of profit by stalling efficiency (a la patent trolling) and by means of the monopolisation effect.”

“This may not go on forever if the rise of technology jumps over into the Wiki open commons world… But for as long as the monopolies exist and gate-keep access to the higher living standards provided by their own technology, some sort of subsidising effect is needed from the government to stop people becoming totally disenfranchised from the system… or governments should work harder to dissipate the tech-based monopolies which are emerging.”

Why Social Security Is Not a Ponzi Scheme

Cullene Roche explains why pundits and lawmakers that describe Social Security as a “Ponzi scheme” are “extremely misleading.”

“It’s illogical to compare Social Security to a ‘ponzi scheme’.  Ponzi schemes run out of funding at some point.  But the US government can’t run out of dollars so that’s clearly wrong.  Now, it could make the dollar worthless by creating too many of them, but that’s very different than running out of dollars.”

“I am not saying there’s a free lunch here.  Absolutely not.  But if we’re going to have an intelligent debate about all of this we should at least start by understanding what the real debate is about.  This isn’t about whether we have the ability to fund Social Security.  This is is about understanding the real constraint on our government (the inflation constraint) and how we are going to balance government spending with the side effect of inflation.”

NSA Leaks Will Increase Cyber Espionage Against the US

Leaks about the National Security Agency’s extensive spying programs have sparked a debate domestically over the proper balance between security and privacy, but John Villasenor sees an international impact of the leaks as well: “They will significantly increase the level of state-sponsored economic espionage directed against American companies.”

“NSA is almost certainly using the data it gathers under PRISM and from Verizon (and perhaps other carriers) solely for identifying potential terrorism or espionage threats to the United States… But perception can sometimes matter as much as reality, and some overseas observers appear to believe that the NSA surveillance has an economic component.”

Benjamin Wittes: “the U.S. position on cybersecurity is not exactly a model of consistency—amounting in effect to shock that anyone would conduct cyber attacks on us. Our position on espionage is similar: We engage in it unapologetically for our strategic purposes but we object strenuously to other countries—whose strategic purposes may be more economic than ours—conducting espionage against our companies.”

Wild Horse Wars

Retro Report: “The decades-long quest to save wild horses has run amok, creating a problem that even swooping helicopters, aging cowboys, camera-savvy activists, and millions of dollars can’t solve.”

Don’t Blame the Fed for Rising Interest Rates

James Hamilton explains why chatter of the Federal Reserve “tapering” its asset purchasing programs later this year is not to blame for rising Treasury bond interest rates.

“Most observers knew QE2 was coming well before the Fed made its official announcement. It may well be that at least some of the reduction in interest rates in the months prior to the announcement in fact reflected an anticipation of what everybody saw coming… One sees the same pattern in…the current bond-buying program (often called QE3). Rates dropped prior to the bond purchases, with little discernable change after the announcement itself.”

“And just as a weak economy was the primary reason the Fed embarked on QE3, a strengthening economy will be the primary reason the Fed ends it. And if the economy is strengthening, interest rates will be headed up, regardless of whether the Fed keeps buying bonds or not. It’s worth emphasizing that the recent rise in interest rates has been a global phenomenon, not just something seen in the United States.”

“If you want to claim that the recent rise in rates is just an anticipation of what the Fed is going to do, the story has to be that the U.S. Federal Reserve is causing the whole world to move.”

Chart of the Day

– The New York Times charts the spike in college graduates in the US in the wake of the Great Recession, after “more than two decades of slow growth in college completion, which caused the United States to fall behind other countries.”

“The increases appear to be driven both by a sharp rise in college enrollment and by an improvement among colleges in graduating students.”

Matthew Yglesias: “This brings a more precise datapoint to bear on an argument I made last year about why I don’t agree with people who say we’ve had stagnating living standards for the past 40 years… And it’s true that published inflation-adjusted wage and income series appear to show substantial stagnation. But if you look at actual quantities consumed it’s very hard to see where this stagnation is happening.”

“We’ve increased our consumption of goods and services, men work fewer hours per year than they used to, and women have more career opportunities. There are a lot of problems, but the trajectory is positive even in the ‘technological frontier’ countries.”