June 18, 2012

Bottom line from the Greek elections: The euro lives for another day.

That will have markets breathing a sigh of relief. But only a small one. New Democracy's win over Syriza removes an immediate threat to the continued existence of the euro zone. It was possible that Syriza, which opposed the Greek bailout, would be unable to come to an agreement with the euro zone's leaders, and Greece would fall out of the currency union, leading to crushing runs against Portugal, Ireland, Spain, and Italy -- leading, in turn, to the break-up of the euro. Now that won't happen. Actually, let me rephrase that: Now that won't happen in the next few days.

New Democracy's win doesn't remove any of the underlying threats to the continued existence of the euro zone. It doesn't make Greece's economy any more competitive, nor does it make the requirements of the bailout substantially less austere (the euro zone may be willing to loosen the terms a bit, but only a bit). It doesn't make the euro zone's monetary policy any better suited for the trouble periphery, nor does it do anything for growth. The euro zone has not yet succumbed to its problems, but nor has it solved any of them.

Indeed, Greece, may be back in the soup quite quickly. In a smart research note, Morgan Stanley's Europe Economic & Strategy team runs through the outstanding risks:

"Risk I: Even though the election outcome appears to be such that there are the numbers to form a pro-bailout government, whether this happens in practice remains to be seen. One risk is that PASOK leader Venizelos, according to a press report by Bloomberg (June 17), seems keen to see a broad national-unity government, encompassing not only pro-bailout ND, PASOK and perhaps the smaller Democratic Left, but also anti-bailout SYRIZA. Thus, the risk that such negotiations fail and lead to an inconclusive outcome remains high. Should this happen, markets might perhaps price in a higher probability of a near-term eurozone exit."

"Risk II: The list of prior actions that Greece needs to comply with is long and substantial. The IMF Memorandum of Understanding published on March 9, 2012, says that 'prior to the first disbursement of the new programme, the Government adopts the following measures, through a supplementary budget.' These measures amount to about €3bn, or 1.5% of GDP. And 'some 7% of GDP in additional measures will be needed to attain the 2014 fiscal target'. Even though the Troika might make some small concessions, there’s a high risk that the loan tranche is disbursed with some delay, given that we are running at least six weeks behind schedule for Greece’s ability to make all domestic payments."

In the coming days, euro zone leaders are set to release a number of plans to deal with some of the more systemic elements of the crisis. There's going to be a proposal for the European Central Bank to regulate and insure financial institutions across the euro zone. The French are pushing for a (much-too-small) stimulus. The Greek elections have bought them the time to release these proposals. But it's the proposals themselves, and not the elections in Greece, that will decide whether the euro zone is sustainable going forward.

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Top story: The world breathes a sigh of Grelief

The Greeks backed the bailout. "Greek voters broke months of political stalemate by narrowly endorsing pro-bailout forces in a momentous election, easing fears of an imminent rupture with the euro zone--for the moment. The result, giving the pro-austerity conservative and socialist parties enough votes to form a fragile and awkward ruling coalition, won't erase the immense problems that face Greece and the euro zone, both apart and together. But the showing by the conservative New Democracy party, which came in first and has pledged to continue cooperating with Europe, was enough to skirt two outcomes policy makers and investors feared far more: a win by the anti-bailout leftist Syriza party, or a confused muddle that left Greece hobbled by political infighting...With 99% of ballots counted Sunday night, New Democracy had 30% of the vote, compared with 27% for Syriza...In a way, the Samaras win sends the ball back into Europe's court--and particularly into Germany's." Charles Forelle in The Wall Street Journal.

@BCAppelbaum: Congratulations everyone. Instead of a new crisis, we're going to keep on having the same one.

@ianbremmer: Greece to World: Yes, We Can (Kick That Can)!!!

@petersuderman: Looked at the news this morning. It's all Greek to me.

Now a coalition must be formed. "Greece’s centre-right New Democracy (ND) party was poised on Sunday night to win the country’s second general election in six weeks after pushing the leftwing Syriza coalition into second place. Antonis Samaras, its leader, now faces an uphill task to put together a viable coalition government to try to rebuild credibility with European partners and revive the country’s flagging bailout programme...The conservatives will have to negotiate with the two moderate leftwing parties, Pasok and Democratic Left, in order to secure a workable parliamentary majority of about 178 out of 300 seats...Democratic Left has already made clear it is ready to become the junior partner in a coalition government...Before the election, Mr Venizelos appeared to rule out participating in a coalition, though several veteran former cabinet ministers from Pasok were keen to join. But within minutes of New Democracy’s emergence as the winner, he changed position, and proposed a meeting of party leaders on Monday to form a government immediately." Kerin Hope and Joshua Chaffin in The Financial Times.

Meet Antonis Samaras: the likely next prime minister of Greece. "Antonis Samaras, the leader of Greece's victorious New Democracy party, has made a fast turnaround from Europe-bashing populist to the continental power brokers' preferred choice to lead Greece...As the leader of the top-finishing party in the fractured poll, Mr. Samaras will get the first shot at attempting to form a government and is likely to be prime minister...In the early 1990s, Mr. Samaras took on a sensitive question of the day: The name of Macedonia, the country on Greece's border that was formerly part of Yugoslavia, which shares the name of a region in northern Greece. He adopted a populist view, which remains policy to this day, to reject the use of 'Macedonia' for Greece's neighbor. That caused a break with New Democracy, and he was expelled--only to return as party leader two decades later." Charles Forelle and Matina Stevis in The Wall Street Journal.

Markets in Asia rallied on the Greek news. "Financial markets rallied across Asia early Monday and the euro gained as Greece's election results defused worries that the nation may soon exit from the euro zone, a move many investors feared would spark a financial contagion. But analysts warned that the benefit may be brief, and investors are likely to soon refocus their attentions on the troubled road ahead for Greece, and the rest of Europe, particularly Spain. The euro rose to $1.2714, compared with $1.2640 late Friday in New York. In stock action, Tokyo's Nikkei was up 1.8%, Hong Kong's Hang Seng Index gained 1.5% and South Korea's Kospi was up 2.1%. Dow Jones futures were up 52 points...Investors had worried that a defeat for those in favor of austerity measures, enacted in accord with Greece's European neighbors, could lead to Greece leaving the euro." Daniel Inman, Steven Russolillo, and Matt Jarzemsky in The Wall Street Journal.

European leaders are working on a plan to stabilize the currency zone's banking system. "The head of the European Central Bank and other euro zone leaders worked on Saturday on a grand vision for the euro zone meant to reassure investors and allies that flaws in the currency union will be addressed quickly. The plan will include measures to prevent bank runs and reduce what has become a vicious cycle of government debt problems turning into banking crises, as has happened in the past two years...Under the plan, euro zone leaders will seek to establish the central bank as supreme bank regulator with broad powers, in place of the relatively toothless European Banking Authority. Countries would also create a deposit insurance program to augment national programs. The goal would be to reassure ordinary depositors and prevent bank runs, an imminent danger in Spain as well as Greece. But any sharing of financial burdens almost automatically encounters opposition in Germany." Jack Ewing in The New York Times.

France's Socialists won a parliamentary majority. "President François Hollande secured the parliamentary majority he says he needs to revive France's economy and help repair the euro zone, after voters gave his Socialist Party a commanding lead in Sunday's legislative elections. Because a Socialist-led coalition already controls the Senate, the upper house, Mr. Hollande will now have a supportive Parliament to back his policies. But with a stalling economy at home, and uncertainties in Greece over whether a coalition government may emerge from Sunday's legislative elections, Mr. Hollande may have to shelve some of his costly proposals--such as hiring 12,000 civil servants a year--and instead resort to an unpopular mix of spending cuts and tax increases...The French president has been lobbying in favor of introducing euro bonds, a code word for jointly issued debt, to help countries such as Spain and Italy borrow at affordable cost." David Gauthier-Villars and Gabriele Parussini in The Wall Street Journal.

KRUGMAN: Only Germans and the ECB can save Greece. "Ever since Greece hit the skids, we’ve heard a lot about what’s wrong with everything Greek. Some of the accusations are true, some are false -- but all of them are beside the point. Yes, there are big failings in Greece’s economy, its politics and no doubt its society. But those failings aren’t what caused the crisis that is tearing Greece apart, and threatens to spread across Europe. No, the origins of this disaster lie farther north, in Brussels, Frankfurt and Berlin, where officials created a deeply -- perhaps fatally -- flawed monetary system, then compounded the problems of that system by substituting moralizing for analysis. And the solution to the crisis, if there is one, will have to come from the same places...The only way the euro might -- might -- be saved is if the Germans and the European Central Bank realize that they’re the ones who need to change their behavior, spending more and, yes, accepting higher inflation." Paul Krugman in The New York Times.

MÜNCHAU: Unless eurozone officials make a deal soon Spain and Italy will leave. "The Bundesbank said there should be no banking union until there is a fiscal union. Angela Merkel said that there should be no fiscal union until there is political union. And François Hollande said that there should be no political union until there is a banking union. They have 10 days to disentangle that knot. The obvious solution to a sequencing problem is to have it all: a banking union, a fiscal union and a political union. That may well happen. But I somehow did not have the impression that Ms Merkel was kidding when she rejected any proposal that could solve the crisis. So 10 days before the next European summit, my optimism is restrained. What if there is no deal or another fudge? In that case, I would expect Italy and Spain to leave the eurozone. If a banking union is a necessary prequisite for a monetary union, and you are told that a banking union is politically unacceptable, then one must sadly conclude that the monetary union is unfeasible." Wolfgang Münchau in The Financial Times.

ROUBINI: The global economy is facing a tough year ahead. "Dark, lowering financial and economic clouds are, it seems, rolling in from every direction: the eurozone, the United States, China, and elsewhere. Indeed, the global economy in 2013 could be a very difficult environment in which to find shelter. For starters, the eurozone crisis is worsening, as the euro remains too strong, front-loaded fiscal austerity deepens recession in many member countries, and a credit crunch in the periphery and high oil prices undermine prospects of recovery. The eurozone banking system is becoming balkanized, as cross-border and interbank credit lines are cut off, and capital flight could turn into a full run on periphery banks if, as is likely, Greece stages a disorderly euro exit in the next few months. Moreover, fiscal and sovereign-debt strains are becoming worse as interest-rate spreads for Spain and Italy have returned to their unsustainable peak levels." Nouriel Roubini in Project Syndicate.

Top op-eds

1) COWEN: A lack of trust is driving austerity on government jobs. "Since Mr. Obama took office, 780,000 private sector jobs have been created, while the number of public sector jobs has fallen by about 600,000, mostly at the state and local level. A quick look might suggest that we need only to bolster the number of public sector jobs to have a healthier economy, but there is a deeper way to think about the problem. State and local governments are controlled by politicians and, indirectly, by voters. And for better or worse, those voters have lost faith in the social returns of these jobs and our ability to afford them. The voters have responded by looking to cut expenses, and they’ve chosen state and local government employment as a target...The reason that we aren’t getting more expansionary macro policy is fundamental: a lack of trust. It’s not an easy problem to fix, but the place to start is by recognizing it." Tyler Cowen in The New York Times.

2) WOLF: America needs reform to keep its economic assets. "The historic dominance of the US is the fruit of its exceptional assets. It is a continental power bounded by oceans to the east and west, and unthreatening neighbours to the north and south. It has huge, albeit dwindling, natural resources. It has had the world’s largest economy and the highest output per head since the late 19th century...How much of this array of assets will the US retain in this century?...What is needed is serious reform. But this has become impossible, because of the exploding role of money in politics and the rising intransigence of the Republican party...If the US is to be what it can be, it has to rediscover the pragmatism that long marked its policy making, notably in its responses to the many challenges of the 20th century. No democracy can thrive if its citizens view their own government as their greatest enemy. If Americans choose to make their government fail, the US is sure to do so, too." Martin Wolf in The Financial Times.

3) VEDDER: It's time to end student loans. "A huge part of the problem relates to federal financial-aid programs. Annual student loans, Pell Grants, tax credits and other federal assistance totaled some $169 billion a year in 2010-11 -- more than 1 percent of national output. These programs are based on two erroneous premises: that almost everyone needs higher education for vocational success, and that they reduce student costs...Consequently, we have millions of underqualified college students borrowing or getting Pell Grants to finance college. More than 40 percent of them don’t even graduate within six years, and many who do have marginal academic records. Because the average college student spends fewer than 30 hours a week on all academic activities, for about 30 weeks a year, never have so many dollars gone to teach so many students for so little vocational gain." Richard Vedder in Bloomberg.

4) LESSIG: The U.S. needs a constitutional amendment for public financing. "We today don’t have much of a problem with the improper influence of 'Kings, Princes or foreign states.' American congressmen don’t retire to the French Riviera, or the Bulgarian Black Sea. Instead, the improper dependencies of today are all domestic. It is our domestic kings and princes who provide the temptations to corrupting allegiances. And not so much through any literal 'present, Emolument, Office, or Title,' but certainly through a kind of 'present, Emolument, Office, or Title'--namely the endless campaign support that they give to members of Congress during their time in office, and the plush retirement they enable through lobbying once the members leave...The complete fix requires removing the competing dependence. And the only way to do this is through an amendment that requires that citizens--only citizens and all citizens--participate in the funding of campaigns." Lawrence Lessig in Slate.

5) DONOHUE AND GARFIELD: Protectionism has returned. "Despite the stunning power of innovation, there are forces trying to stifle it and replace it with economic schemes that threaten global trade and recovery. A new kind of protectionism is turning innovation policy on its head, unfairly benefiting domestic firms at the expense of foreign players...Sometimes branded as 'indigenous innovation,' these policies are really designed to boost domestic manufacturing, plus high-technology and R&D capabilities, by discriminating against foreign companies...Among the policies are forced technology transfer; local sourcing requirements; requirements to disclose sensitive designs as a condition of market access; domestic-standards mandates that ignore international standards; and restrictions on the free flow of data...Unchallenged, these practices risk damaging the fragile global economy. The nations at the center of this trend are too big and influential, and their policies too troubling, for us to ignore." Thomas Donohue and Dean Garfield in The Wall Street Journal.

Top long reads

Ezra Klein on the psychology of the flip-flop, and Republican opposition to the individual mandate: "Each of us can have firsthand knowledge of just a small number of topics--our jobs, our studies, our personal experiences. But as citizens--and as elected officials--we are routinely asked to make judgments on issues as diverse and as complex as the Iranian nuclear program, the environmental impact of an international oil pipeline, and the likely outcomes of branding China a 'currency manipulator.' According to the political-science literature, one of the key roles that political parties play is helping us navigate these decisions. In theory, we join parties because they share our values and our goals--values and goals that may have been passed on to us by the most important groups in our lives, such as our families and our communities--and so we trust that their policy judgments will match the ones we would come up with if we had unlimited time to study the issues. But parties, though based on a set of principles, aren’t disinterested teachers in search of truth."

Krissah Thompson on the recession's impact on 25 students who Barack Obama met in 2008: "Diamond has been an arrow aimed at college for as long as she can remember. Her parents think she could be the first member of her family to get a degree. Her teachers and counselor at Granby High School have pushed her to sign up for Advanced Placement classes, take the SAT and apply to four-year universities. Even the president of the United States once challenged her to set the bar high. Barack Obama was on his way to becoming the first black leader of the nation when he visited Diamond’s freshman leadership class on Sept. 10, 2008. She and two dozen classmates were just starting high school, and Obama’s heady message of hope resonated with many of them. But in a matter of days, a financial meltdown plunged the country into its worst economic crisis since the Great Depression -- a crash that would take its toll on Diamond, her parents, and many of her friends and classmates."

Alec MacGillis on uninsured patients unaware of the Affordable Care Act: "As Robin Layman, a mother of two who has major health troubles but no insurance, arrived at a free clinic here, she had a big personal stake in the Supreme Court's imminent decision on the new national health care law. Not that she realized that. 'What new law?' she said. 'I've not heard anything about that.' Layman was one of 600 people who on a recent weekend came from across southeastern Tennessee for the clinic held by Remote Area Medical, a Knoxville-based organization that for two decades has been providing free medical, dental and vision care in underserved areas...Layman was hardly the only patient unaware that the law aims to help people like her, by expanding health insurance beginning in 2014. And this gets to the heart of the political dilemma for Democrats: Despite spending tremendous political capital to pass the law, the party is unlikely to win many votes from the law's future beneficiaries, most of whom live in Republican-dominated states in the South and West."

@sahilkapur: Uninsured mom: "What new law? I've not heard anything about that."

Saint Paul rock interlude: Hüsker Dü plays "Could You Be The One" on The Joan Rivers Show.

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Still to come: A deal coming to streamline refinancing; the healthcare ruling will be a big deal for Medicaid; big news on immigration; highway bill hopes fade; and a duck goes for a run.

Economy

CEO pay rose last year. "Probably the most-heard complaint about big business these days, one seemingly tailored for the 99 percent, is how much money corporate C.E.O.’s routinely pull down. Many ordinary Americans probably cheered when stockholders -- that is, the people who actually own public companies -- finally began to say, 'Enough.' Yeah, well. Despite a lot of noise from shareholders and a few victories at big names like Citigroup and Hewlett-Packard, executive pay just keeps climbing...Now that 2011 proxy statements have been filed, the extent of executive pay last year has finally become clear. Median pay of the nation’s 200 top-paid C.E.O.’s was $14.5 million, according to a study conducted for The New York Times by Equilar, a compensation data firm based in Redwood City, Calif. The median pay raise among those C.E.O.’s was 5 percent...That 5 percent raise is smaller than last year’s. But it comes at a time of stubbornly high unemployment and declining wealth for many ordinary Americans." Nathaniel Popper in The New York Times.

Senators are working on a deal to streamline refinancing for homeowners. "Momentum is building in the Senate behind a bill that would streamline refinancing for homeowners as lawmakers work toward an agreement that could lead to passage by the August recess. Time is running short as Senate Banking Committee members try to reach a deal on amendments that would ensure the legislation remains narrowly tailored in making changes to the Home Affordable Refinance Program (HARP). The streamlined bill aims to help homeowners who are current on their payments and have loans through Fannie Mae and Freddie Mac rework their mortgages...The concern is that while Republicans and Democrats on the panel have expressed support for the core function of the measure, some lawmakers, of late, have expressed an interest in moving forward on an overhaul of government-controlled mortgage giants Fannie Mae and Freddie Mac. An amendment of that magnitude would likely derail the measure indefinitely." Vicki Needham in The Hill.

Fed action could come this week. "The US Federal Reserve meets this week with the economy wobbling for the third summer in a row. The outcome is unusually open - Greek elections and a meeting of the leaders of the G20 group mean that relevant information will be arriving until the very last minute - but there is a good chance of some policy movement. The rate-setting Federal Open Market Committee will wrap up its meeting on Wednesday and doing nothing has its own dangers: an unchanged statement would probably push down asset prices and push up market interest rates at a fragile moment. What the Fed might do depends on how it defines the danger to the economy. On one hand, if it thinks that domestic US growth is stalling the Fed could give the economy a direct but modest boost, most likely by switching more of its balance sheet into longer-term assets via an extended Operation Twist. On the other hand, if their main fear is a huge shock from the eurozone, Fed officials could offer some conditional assurance." Robin Harding in The Financial Times.

More data threw cold water on the recovery. "The U.S. economy is continuing to lose momentum just as global events that could derail the recovery gather steam. New data this week provided more evidence that the economic recovery is sputtering for the third year in a row. Layoffs are rising, factory output is falling and consumers are cutting spending amid rising uncertainty. Moreover, those warning signs mostly predate the worst of the recent turmoil in Europe, which has hit financial markets and hurt demand for American products overseas...Now that optimism is fading. On Wednesday, the Commerce Department said that retail sales growth stalled in May and that April's gains were smaller than initially believed. On Thursday, the Labor Department said first-time claims for jobless benefits rose last week and the less volatile four-week moving average hit its highest level since early April. On Friday, the Federal Reserve said industrial production fell in May for the second time in three months." Ben Casselman and Phil Izzo in The Wall Street Journal.

Regulators are poised to ease a key part of Basel III. "International regulators are poised to ease a core element of new banking rules that were designed to improve the safety of the financial system, with some regulators fearing that plowing ahead with the tougher requirements could exacerbate the current European crisis, according to people involved in the talks. Following months of intense industry pressure, regulators say they now plan to make it easier for banks to comply with a key provision of new international banking rules that will require lenders to maintain sufficiently deep pools of safe, liquid assets--like cash and government bonds--that can survive market meltdowns and other crises. The rules are known as the Basel accords, named after the Swiss city where they were hammered out...Among the planned changes, one would allow a wider variety of assets--such as gold and equities--to count toward banks' liquidity buffers, according to people involved in the talks." David Enrich and Victoria McGrane in The Wall Street Journal.

HAMP will boost big banks. "A government program that helps struggling homeowners take advantage of low interest rates to cut monthly mortgage payments is providing an unexpected revenue boost to large banks such as Wells Fargo & Co. and J.P. Morgan Chase & Co...Banks that collect those payments, known as mortgage servicers, could get as much as $12 billion in revenue this year refinancing mortgages under the federal Home Affordable Refinance Program, according to data compiled by Nomura Holdings Inc. Borrowers who refinance mortgages through HARP, on the other hand, stand to save between $2.5 billion and $5 billion this year, according to an analysis by The Wall Street Journal of Nomura's figures...The new HARP rules make it easier for borrowers to refinance their loans with existing lenders. That, the critics say, allows large lenders to charge a captive customer base above-market interest rates on the refinanced loans." Christian Berthelsen and Alan Zibel in The Wall Street Journal.

@BCAppelbaum: Gov't paying hefty ransoms to get big banks to take advantage of customers, which they used to do for free.

Art history interlude: The Evolution of 8-Bit Art.

Health Care

Washington State's attempt at healthcare reform is instructive. "If the Supreme Court overturns the health-care reform law’s individual mandate -- a decision that could come as soon as Monday -- it won’t be totally unknown territory. For Washington state, it would be quite familiar. In 1993, Washington state passed a law guaranteeing all residents access to private health-care insurance, regardless of their health, and requiring them to purchase coverage. The state legislature, however, repealed that last provision two years later. With the guaranteed-access provisions still standing, the state saw premiums rise and enrollment drop, as residents purchased coverage only when they needed it. Health insurers fled the state and, by 1999, it was impossible to buy an individual plan in Washington -- no company was selling. Washington is among a handful of states that have pursued universal access to health insurance. The challenges they have faced could give some clues about the federal overhaul’s fate should the individual mandate get struck down." Sarah Kliff in The Washington Post.

The healthcare ruling will have big implications for Medicaid. "The expansion of Medicaid -- if it is upheld by the Supreme Court -- is among the most significant parts of the law, as it will provide coverage to people with the greatest financial needs. Many health care advocates support the expansion, saying it will allow poor people to receive needed care, while many state officials, especially Republicans, worry that it will bring budget-breaking new costs. The expansion may also strain the health care system, given the shortage in some places of primary care doctors, who will be vital to expanded coverage. The Supreme Court, which is expected to rule on the health care law this month, devoted more than an hour of argument to the Medicaid provision...Under the new law, the federal government will pay the full cost of covering those newly eligible for Medicaid for three years, from 2014 to 2016, and the federal share will then gradually decline to 90 percent in 2020 and later years." Robert Pear in The New York Times.

@sarahkliff: "I have an expert who can talk to you about what the Supreme Court decision on health care means" - Every healthcare flack ever

Domestic Policy

The Obama administration allowed many young undocumented immigrants to stay in the U.S.. "Hundreds of thousands of illegal immigrants who came to the United States as children will be allowed to remain in the country without fear of deportation and able to work, under an executive action the Obama administration announced on Friday...The policy, while not granting any permanent legal status, clears the way for young illegal immigrants to come out of the shadows, work legally and obtain driver’s licenses and many other documents they have lacked...Under the change, the Department of Homeland Security will no longer initiate the deportation of illegal immigrants who came to the United States before age 16, have lived here for at least five years, and are in school, are high school graduates or are military veterans in good standing. The immigrants must also be under 30 and have clean criminal records." Julia Preston and John Cushman Jr. in The New York Times.

@conorsen: "the 21% who favor increased immigration is the largest percentage Gallup has measured." [going back to the 1980's]

Adorable animals getting exercise interlude: Charley the duck goes for a run.

Energy

Hopes for the highway bill are fading. "Advocates for a new federal transportation bill think even bumping negotiations up to Senate Majority Leader Harry Reid (D-Nev.) and House Speaker John Boehner (R-Ohio) may not be enough to save the measure from this year’s legislative scrapheap. Traditionally in bicameral negotiations, issues that cannot be resolved by conferees are bumped up to the leaders of the respective chambers. But the pointed shots taken recently by the leaders of the conference committee -- that for a month has been attempting to negotiate an agreement between the House and Senate on the bill -- has caused some transportation advocates to ponder whether a deal is any longer possible, even if Reid and Boehner assume the helm of the talks. 'I think the bill’s dead,' a transportation industry source said to The Hill on Friday...Lawmakers have until June 30 to reach a deal on transportation spending before the current funding mechanism for road and transit projects runs out." Keith Laing in The Hill.

Senators are trying to use the farm bill to go after the EPA. "Senators in both parties are trying to use the farm bill to go after EPA regulations and permits as a potential last-ditch effort to affect agency policy before the election. The amendments range from the usual moves against the agency’s renewable fuels mandate and so-called farm dust controls to efforts to limit pesticide permits and boost the power of the agency’s liaison to farmers. Several amendments bear the fingerprints of Missouri Democratic Sen. Claire McCaskill. For example, she’s on a bipartisan list of senators behind an amendment from Sen. Kay Hagan (D-N.C.) exempting some pesticides already covered under the Federal Insecticide, Fungicide and Rodenticide Act from Clean Water Act permits...McCaskill also is pushing an amendment codifying the role of chief agriculture counsel at EPA and requiring that this farming liaison weigh in on regulations before they are issued." Darren Goode in Politico.

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

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