According to the InTrade political betting markets at 12:18am, here's what happened on Thursday, January 19: Mitt Romney's chances of winning the South Carolina primary fell to 37.8 percent -- an almost 50 percent drop in one day. Romney's chances of winning the Republican presidential nomination also fell, dropping from about 90 percent to 79 percent. Newt Gingrich's chances of winning South Carolina, meanwhile, more than doubled. He's now the favorite, with the markets giving him a 63 percent chance of victory. He's also seen his chances to win the Republican nomination rise to 15 percent.
Republican presidential hopefuls Rick Santorum (L), Mitt Romney (C), and Newt Gingrich (R) participate in the CNN Southern Republican Leadership Conference Town Hall Debate in Charleston, South Carolina, Jan. 19. (PAUL J. RICHARDS - AFP/GETTY IMAGES) Thursday was a very good day for Newt Gingrich and a very bad day for Mitt Romney. There are all manner of reasons for that: Rick Perry dropped out of the race and endorsed Gingrich. Romney's tax returns continued to bedevil his campaign, and his close win in Iowa began to look more like a close loss. But perhaps the oddest reason for Gingrich's rise is a bit of jujitsu he employed on a story that should have hurt his campaign: At least part of the reason Newt Gingrich is more likely to win South Carolina today than he was on Wednesday is that he lashed out at the media for asking him about allegations that he sought am open marriage from his then-wife to continue a long-running extramarital affair. In a primary that has already been full of odd twists and turns, this must be the oddest.
It almost goes without saying, but this is, of course, not the stuff of which successful general-election campaigns are made out of. Nevertheless, it is entirely possible that, come Sunday, Rick Santorum will have won Iowa, Romney will have taken New Hampshire, and Gingrich will have taken South Carolina. In the end, I would still expect that to delay rather than derail Romney's nomination. But the argument that moderation is clearly winning the Republican primary -- an argument made by, among others, me -- is not looking so good right now.
Wonkbook fun fact: The last time a different Republican candidates won the Iowa caucuses, the New Hampshire primary, and the South Carolina primary was...never. For the Democrats, however, it happened in 1988: Dick Gephardt won Iowa, Michael Dukakis won New Hampshire, and Jesse Jackson won South Carolina. Dukakis, of course, went on to win the nomination. Come to think of it, that's probably not a historical analogy Mitt Romney likes very much.
Top stories
1) Republican voters face a stark choice on tax policy, reports John McKinnon: "South Carolina's roller-coaster primary could help influence more than the GOP presidential nominee--it could play a big role in determining the direction of Republican policy on taxes for 2012 and beyond...Mr. Romney appears to be sticking with GOP orthodoxy that calls for extending Bush-era tax rates while working toward lowering the top tax rates for corporations and individuals to 25% from the current 35%. That aligns him closely with congressional Republicans. He favors eliminating investment taxes for middle-class filers, including couples with incomes under $200,000, and ending the estate tax. Mr. Romney's plan envisions a long-term corporate-tax overhaul that includes a reduction of tax breaks, though he has offered few specifics...By contrast, Mr. Gingrich, the former House speaker, has embraced more radical changes to the tax code."
@rupertmurdoch: Carried interest tax racket. Billions over many years. Why and where has Obama been?
2) Rick Perry ended his presidential campaign, report Chris Cillizza and Dan Balz: "Texas Gov. Rick Perry ended his bid for the Republican presidential nomination today and threw his support behind former House speaker Newt Gingrich...Perry’s announcement came just hours before the candidates will gather for their 16th debate of the Republican race and just two days before the South Carolina primary. For the last several months, it had become clear that Perry would not be a major factor in the race -- hamstrung by a string of lackluster debate performances that culminated in his inability to name the three federal agencies that he would eliminate if elected president...Perry was seen as pulling from the same pool of voters as Gingrich and former Pennsylvania senator Rick Santorum -- the conservative alternatives to Romney -- and his exit could help Gingrich in particular if he can steer his donors and supporters in the former House speaker’s direction."
@AriBerman: Note to future presidential candidates: starting your campaign by calling Social Security a "ponzi scheme" probably isn't right way to go
@petersuderman: This season of Survivor really has been the best ever. So suspenseful. Do you think Gingrich has a chance?
3) New data has good news for consumers, reports Josh Mitchell: "The U.S. consumer is starting off 2012 on a somewhat sounder footing, as everyday prices ease and the labor market strengthens. The consumer-price index, which measures what Americans pay for everything from automobiles to groceries, was unchanged in December from the previous month, the Labor Department said Thursday. Overall inflation was 3% for the year--the greatest increase since 2007--but prices have been flat or down since October, largely because of a drop in gasoline costs. Meanwhile, the number of Americans filing initial jobless claims tumbled last week to a nearly four-year low, falling 50,000 to a seasonally adjusted 352,000, the Labor Department said. That shows that employers are continuing to slow the pace of layoffs, which likely will translate into more jobs following a recent pickup in hiring."
4) Senate antipiracy legislation looks dead, report Jennifer Martinez and David Saleh Rauf: "Capitol Hill’s effort to crack down on Internet piracy was hanging on for dear life Thursday after Senate leaders gave the green light to abandon ship following the Internet backlash led by Wikipedia, Google and other sites this week. The signs of distress came from the top, as Senate Majority Leader Harry Reid released Democrats from casting their lot with the PROTECT IP Act during a procedural vote scheduled for Tuesday. That also led to questions on the fate of the House Stop Online Piracy Act...Dealing another blow to PIPA, Senate Minority Leader Mitch McConnell (R-Ky.) on Thursday urged Democrats to shelve the bill and put it aside for further study. Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.), the bill’s main booster, meanwhile is scrambling to hammer out a manager’s amendment to address concerns from the tech industry -- particularly Internet companies and search services -- and other lawmakers."
@mattyglesias: There's a huge opportunity dangling out there for the GOP to remake itself as the party of intellectual property reform.
5) The housing market has bottomed out, reports Binyamin Appelbaum: "A reminder that there is a housing crash in progress: Home builders started construction on just 428,600 single-family homes in 2011 and completed just 444,900 single-family homes, the Census Bureau reported Thursday. Both were the lowest totals since the bureau started keeping records in 1959. And the last few years have been much worse than any other stretch during that period. It is even more striking to adjust the level of construction for population growth. In 1982, the previous nadir, builders started construction on one new home for every 350 United States residents. In 2011, one new home was started for every 727 residents...There is growing sentiment among home builders and economists that the bottom has been reached and construction will increase in 2012. Builders are securing more permits, and the pace of housing starts rose in the fourth quarter."
Top op-eds
1) Romney’s tax returns highlight the flaws of U.S. tax policy, writes Paul Krugman: "The larger question isn’t what Mitt Romney’s tax returns have to say about Mitt Romney; it’s what they have to say about U.S. tax policy. Is there a good reason why the rich should bear a startlingly light tax burden? For they do. If Mr. Romney is telling the truth about his taxes, he’s actually more or less typical of the very wealthy. Since 1992, the I.R.S. has been releasing income and tax data for the 400 highest-income filers. In 2008, the most recent year available, these filers paid only 18.1 percent of their income in federal income taxes; in 2007, they paid only 16.6 percent. When you bear in mind that the rich pay little either in payroll taxes or in state and local taxes -- major burdens on middle-class families -- this implies that the top 400 filers faced lower taxes than many ordinary workers. The main reason the rich pay so little is that most of their income takes the form of capital gains, which are taxed at a maximum rate of 15 percent, far below the maximum on wages and salaries. So the question is whether capital gains -- three-quarters of which go to the top 1 percent of the income distribution -- warrant such special treatment."
2) Republicans shouldn't focus on inequality, writes Charles Krauthammer: "The most remarkable political surprise since the 2010 midterm: The struggling Democratic class-war narrative is suddenly given life and legitimacy by . . . Republicans! Newt Gingrich and Rick Perry make the case that private equity as practiced by Romney’s Bain Capital is nothing more than vulture capitalism looting companies and sucking them dry while casually destroying the lives of workers...Suddenly Romney’s wealth, practices and taxes take center stage. And why not? If leading Republicans are denouncing rapacious capitalism that enriches the 1 percent while impoverishing everyone else, should this not be the paramount issue in a campaign occurring at a time of economic distress? Now, economic inequality is an important issue, but the idea that it is the cause of America’s current economic troubles is absurd. Yet, in a stroke, the Republicans have succeeded in turning a Democratic talking point -- a last-ditch attempt to salvage reelection by distracting from their record -- into a central focus of the nation’s political discourse."
3) It's time to tackle poverty, writes Michael Gerson: "The political debates on free markets or the privileges of the 1 percent seldom touch on the actual struggles of citizens -- say, living in the shadow of foreclosure, or attending a failing school, or surviving in a gang-occupied neighborhood. Ideology is abstract. Hardship is lived concretely...Many Americans are being overlooked in this bipartisan conspiracy of economic abstraction. A significant and growing portion of the population lives in poverty. In 2007, the rate was 12.5 percent. By 2010, it was 15.1 percent. The share of Americans in extreme poverty -- with an income less than half the poverty line -- is the highest in the 35 years that the Census Bureau has kept such records. GOP candidates seldom mention the problems of the poor, for fear of being viewed as ideological weaklings. Elected Democrats are advised by their pollsters to focus on the challenges of the voter-rich middle class. No president -- including Barack Obama -- is naturally inclined to talk about conditions that have grown worse on his watch. Yet a debate on poverty is needed. And it would benefit from specificity, which often challenges ideology."
4) We should be worried about inflation, writes Michael Kinsley: "About two years ago I wrote an article saying that despite the lack of evidence, and despite the near-universal belief among economists that it was not a problem, I was worried about inflation. My reason was that I couldn’t see how the government could pay off the massive debt it was running up except by inflating at least part of it away. For this, I was widely ridiculed, and I’d like to take this opportunity to claim vindication. That is, I’d like to -- but I can’t. Inflation (CPI) has been creeping up the past couple of years - - from less than 2 percent to more than 3 percent -- but that’s still pretty low. Nevertheless, I double down: Barring a miracle, there will be a fierce storm of inflation sometime in the next few years and it will wipe out a big chunk of the national debt, along with the debts of individual citizens, and the savings of others."
5) Obama's government reorganization plan is a good idea, writes Matthew Yglesias: "One of my secret shames is an obsession with the Department of Commerce. In the early days of the Obama administration, when the new president had trouble picking anyone to run it, I wrote a series of profiles of America’s secretaries of commerce--cabinet officials who, Herbert Hoover aside, have been remarkable only for obscurity, corruption, and irrelevance. So it is perhaps not surprising that last week the president appeared to endorse eliminating the department and nobody noticed...This proposal lacks earth-shattering significance, but it is a good idea. It would save some money, eliminate some redundancies, and align agencies’ missions in a more logical way. You’re not going to balance the budget with this kind of thing, but saving money by reducing duplication of effort is still good."
Remix interlude: Gil Scott-Heron and Jamie xx play "NY Is Killing Me".
Got tips, additions, or comments? E-mail me.
Still to come: Americans underestimate how much they pay in taxes; the House health reform repeal vote turns one; opposition to antipiracy bills was driven by the grassroots; the debate over Keystone XL is not over; and a dog is happy.
Economy
Americans underestimate their own tax rate, reports David Leonhardt: "When people heard that Mitt Romney’s federal income tax rate was about 15 percent, the immediate reaction of many was to assume that their own rate was higher. The top marginal rate is 35 percent, after all, and the marginal rate on a couple with $70,000 in taxable income is 25 percent. The truth is that most households probably pay a lower rate than Mr. Romney. It is impossible to know for sure, given that he has yet to release his tax return. What is clear, though, is that a large majority of American households -- about two out of three -- pays less than 15 percent of income to the federal government, through either income taxes or payroll taxes. This disconnect between what we pay and what we think we pay is nothing less than one of the country’s biggest economic problems."
Mortgage rates reached a new low, reports Sara Kehaulani Goo: "The average rate on a 30-year fixed mortgage reached yet another historic low this week, falling to 3.88 percent, according to data released Thursday by Freddie Mac. The rate is the lowest on record. The average rate fell a fraction of a percent below last week’s record low of 3.89 and marks the seventh consecutive week where mortgage rates have averaged below 4 percent. The 15-year mortgage, which has become more popular among homeowners who are refinancing, fell to 3.17 percent, up from last week’s 3.16 percent figure...The historically low mortgage rates have done little to help the struggling housing industry. Data on new housing starts for December released Thursday showed 679,000 building permits, a 7.8 percent increase from December 2010, but essentially flat or down 0.1 percent compared with November 2011."
The CFPB will increase scrutiny of payday loans, reports Maya Jackson Randall: "The federal government will give payday loans 'much more attention,' said the newly appointed head of the Consumer Financial Protection Bureau during the agency's first field hearing. Richard Cordray said the consumer bureau will use its powers to wipe out illegal payday lending practices--such as unauthorized debits on a person's checking account--while it works on a broader regulatory framework for the industry. Payday loans are short-term loans that cash-strapped consumers can obtain online or at storefront locations around the country to get cash quickly...The consumer bureau also released guidelines that explain how it will be evaluating all companies that offer short-term, small-dollar loans. Mr. Cordray said this means payday-style products offered by banks and credit unions will be scrutinized in the same way as the nonbank companies that offer payday loans."
Ireland is facing an austerity fueled downturn, reports Liz Alderman: "Ireland, one of the first countries to receive an international bailout during Europe’s sovereign debt crisis, will suffer a sharp slowdown in growth this year as an austerity program that helped reduce the country’s deficit enters its second year, according to a progress report Thursday from international lenders. Ireland cut its deficit to about 10 percent of gross domestic product in 2011 from 32 percent in 2010, the year that a government plan to bail out six of the country’s largest banks inflated the deficit, according to the report by the European Commission, the European Central Bank and the International Monetary Fund. The Irish economy will grow only about 0.5 percent this year, down from a forecast of 1.1 percent just two months ago, as the country’s troubles keep unemployment high and prompt Irish consumers to tighten their purse strings, the report said."
Fanboy interlude: A compilation of Homer Simpson saying D'oh!
Health Care
@amaeryllis: You know you've made it when you have a "care" named after you.
Health reform remains largely intact a year after the House's repeal vote, reports Sarah Kliff: "Today marks the one-year anniversary of the House of Representatives vote to repeal the Affordable Care Act. If you don’t many cakes or balloons, that probably has a lot to do with the fact that the vote didn’t change much. The health reform law still stands. Repealing the Job Killing Health Care Law Act, or HR 2, was dead on arrival in the Democratic-controlled Senate. But that doesn’t mean the health reform law has survived the past two years completely intact. Both Congress and the administration have repealed, stalled or backed off on a handful of health provisions, including one major new insurance program...The number of health reform provisions that government hasn’t enacted is much shorter than the list of those that have already come into effect (John McDonough recently ran through the law and found 36 pieces of the Affordable Care Act already in effect). The biggest impact of the Republican repeal effort is probably political: It has kept debates over the Affordable Care Act going nearly two years after the legislative battle ended."
@EzraKlein: If health-care costs had tracked inflation over recent decades, the average family would have $5,000 more per year: http://bit.ly/wzDCER
Domestic Policy
Opposition to antipiracy bills began at the grassroots, reports Jenna Wortham: "When Wikipedia went dark and Google blacked out its logo on Wednesday, millions of people could not help but notice. For most, it was the first time that they had heard about two antipiracy bills. One puzzled Twitter user wrote: 'Isn’t a SOPA some kind of food?' But that protest grew out of a much wider grass-roots movement -- a collective flexing of Internet muscle that started in some of the less mainstream parts of the Web, like the social news site Reddit and the blogging service Tumblr, and in e-mail chains and countless message boards. It is no coincidence that these social sites were among those that, according to critics of the legislation in question, the Stop Online Piracy Act, and the Protect Intellectual Property Act had the most to lose if it passed. And by design they were able to take the message about the threat and make it go viral."
Simplifying regulations is no easy task, reports Suzy Khimm: "There can be big differences between how regulators and industry leaders would simplify byzantine regulations. The suggestion to reduce the number of risk factors that bank chiefs are responsible for monitoring which might concern regulators. But giving more discretion and power to regulators would likely concern industry. And finding a compromise between the two can often make a law even more complex. Federal Financial Analytics blames such regulatory complexity on 'overengineered standards' produced by a host of expert regulators. But industry lobbyists are also driving these deliberations to carve out exceptions if things aren’t moving in their direction. As a result, achieving 'simplicity' can be harder than it sounds in the abstract. That said, there’s another way to simplify regulations that may attract more consensus. Rep. Bruce Braley (D-Iowa) introduced a bill this week that would require that all federal regulations be written in clear, simple language that their intended audience can understand, reducing compliance costs for the private sector."
Adorable animals being adorable interlude: A happy dog is happy.
Energy
@drgrist: Seems like about 80% of carbon-pricing advocates only appear when arguing against non-carbon-pricing alternatives. Where do they go?
The debate over Keystone XL has only just begun, report Steven Mufson and Juliet Eilperin: "When it comes to the fate of the 1,700-mile Keystone XL pipeline, proponents and foes agree that the fight did not end with President Obama’s decision Wednesday to reject the pipeline’s permit application. The question is how the battle will be waged in the months to come. A war of words is being fought on the campaign trail. And some House Republicans vow to again seek legislation to clear the path for the controversial pipeline. Environmental groups say they will fight not only new Keystone proposals but also other major oil pipelines that would carry crude from Canada’s oil sands region. Meanwhile, TransCanada, which proposed the pipeline, said it will not only file a new permit application but also might pursue a truncated system within U.S. borders that would not require State Department approval. Such a pipeline could serve the growing output from the Bakken shale oil fields in Montana, ease the bottleneck of crude oil at the major terminal in Cushing, Okla., and later hook up with cross-border lines."
Stopping Keystone XL is no victory for environmentalism, writes Lisa Margonelli: "Yesterday, everyone involved in the support and opposition to the Keystone XL pipeline got what they wanted: Obama tossed a squib to environmentalist supporters whom he's previously disappointed, and Republican boosters of the pipeline got to turn the Obama's refusal (which they accelerated by attaching a February 21 deadline for approval to the payroll tax bill) into a talking point against Obama in the upcoming election. In a country without a greenhouse gas strategy or an energy policy, this is passing for political action, but it's really... nothing, a draw, a symbol of symbols. The Keystone XL is merely on hold, and oil from all sorts of other 'dirty' situations continues to flow into our gas tanks. The next time around, environmentalists should resist fighting the symbolic pipeline to concentrate on fighting the larger issue -- reducing emissions and making tar-sands oils prices reflect their environmental toll."
That's not so, writes David Roberts: "In October 2011, National Journal surveyed energy experts about whether Obama was likely to approve the Keystone XL pipeline, which would carry Canadian tar-sands oil through the U.S. to the Gulf of Mexico. Ninety-one percent of the 'energy and environment insiders' believed he would. On Wednesday, Obama proved them wrong. How could the experts have gotten it so wrong? The answer is twofold: Grassroots environmentalists were stronger, and congressional Republicans dumber, than anyone predicted. Back in August of 2011, when author and activist Bill McKibben staged the first anti-Keystone rallies around the White House, political observers scoffed. These were, after all, the same environmentalists who had been rendered irrelevant by their cap-and-trade defeat and the stress of economic recession. No way they could stop a fossil fuel infrastructure project with big money behind it. But McKibben kept at it."
@neiltyson: In 5-billion yrs the Sun will expand & engulf our orbit as the charred ember that was once Earth vaporizes. Have a nice day.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.
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