Wonkbook: BP cap test ambiguous; GOP fights for Arizona law; job retraining fails

Coast Guard commandant Thad Allen says the BP oil cap's success is not certain yet; Republican members of Congress are pushing legislation that would halt the Justice Department's challenge to Arizona's immigration law; the market says California and Illinois are likelier to default than Portugal; job retraining doesn't appear to be working; and, in the day's most depressing story, wait till you hear the three words Harry Reid won't say aloud.

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The administration is noting concerning signs from BP's new oil well cap, reports David Fahrenthold: "A day that seemed destined for success ended in ambiguity Sunday. The blown-out well at the bottom of the Gulf of Mexico remained shut for the fourth day, but the national incident commander reported concerns about seepage around the well and ordered BP to improve its monitoring of possible problems. A seep would be a serious setback if it indicated oil or gas escaping from the capped well and burbling up through the seafloor."

Congressional Republicans are attempting to block the Justice Department's lawsuit against Arizona's immigration law, reports Scott Wong: "This week, Sens. Jim DeMint of South Carolina and David Vitter of Louisiana introduced legislation that would block the Obama administration from suing Arizona over its new law to crack down on illegal immigration. Sen. John McCain of Arizona donated $5,000 to a legal defense fund to fight challenges to the law. And the GOP-dominated House Immigration Reform Caucus will file a friend of the court brief early next week, backing Republican Gov. Jan Brewer as she seeks to defend the law from a Justice Department lawsuit."

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The market thinks Illinois and California are more likely to default than Portugal, writes Peter Coy: "According to investors in credit default swaps, an insurance-like derivative, as of July 13, Illinois and California are greater credit risks than Portugal. Michigan, New York, and New Jersey are deemed a bit better than Portugal but still chancier than Ireland and Spain, indebted weaklings of the single-currency euro zone."

Job training isn't helping the unemployed, reports Peter Goodman: "A study conducted for the Labor Department tracking the experience of 160,000 laid-off workers in 12 states from mid-2003 to mid-2005 -- a time of economic expansion -- found that those who went through training wound up earning little more than those who did not, even three and four years later. 'Over all, it appears possible that ultimate gains from participation are small or nonexistent,' the study concluded."

Indie interlude: Cut Copy's "Where I'm Going".

Still to come: Towards a 'green' measure of GDP; The New Yorker's John Casside profiles Paul Volcker; Krugman lays down blame for the midterms; the DISCLOSE Act's Senate prospects are dimming; a baby tries to eat his way out of a watermelon; and the three words Harry Reid refuses to say out loud.Economy/FinReg

Inflation is far below the Fed's target: http://bit.ly/b2erZU

Paul Krugman argues that the administration's early stimulus decisions are to blame for their current economic woes: "The best way for Mr. Obama to have avoided an electoral setback this fall would have been enacting a stimulus that matched the scale of the economic crisis. Obviously, he didn’t do that. Maybe he couldn’t have passed an adequate-sized plan, but the fact is that he didn’t even try. True, senior economic officials reportedly downplayed the need for a really big effort, in effect overruling their staff; but it’s also clear that political advisers believed that a smaller package would get more friendly headlines, and that the administration would look better if it won its first big Congressional test."

Obama's agenda is pro-business, argues Roger Altman: http://nyti.ms/b21TSE

John Cassidy profiles Paul Volcker: "Volcker retired from the Fed in 1987, and during the latter years of the tenure of his successor, Alan Greenspan, he was widely regarded as an out-of-touch fuddy-duddy. In the previous six months, however, he had emerged as a de-facto arbitrator for the various factions involved in financial reform: the lobbyists, the politicians, and the public-interest advocates. Barney Frank, the Democratic congressman from Massachusetts, who helped lead the process of reconciling the House and Senate bills, told me in late May, "When the banks come to me opposing various things, I say to them, ‘If I were you, I would go and see Paul Volcker. If you can persuade him, you might have a chance. I think you are not going to see anything in this bill that Paul objects to.’"

Wall Street is feeling optimistic after the Goldman settlement: http://nyti.ms/bqyziN

The inspector general for TARP is criticizing the administration's push to close auto dealerships following the GM and Chrysler bailouts, reports Tom Barkley: "'Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses and thereby potentially adding tens of thousands of workers to the already lengthy unemployment rolls -- all based on a theory and without sufficient consideration of the decisions' broader economic impact,' said the 45-page report."

Expired unemployment benefits leave some former workers without any income at all: http://nyti.ms/94N1d0

Tyler Cowen thinks the US can learn about debt from Germany: "Amid the sluggish economies of much of Europe, Germany has booming exports and is nearing full capacity utilization. And many of its workers are postponing vacations to produce, and earn, more. The unemployment rate in Germany is 7.5 percent -- below that of the United States -- and falling...many investors consider German bonds a haven, in part because the government has a reputation for addressing fiscal issues promptly and responsibly. It is working to cut government spending, although not in crucial long-term areas of research and education."

States are cracking down on consumers borrowing on their car titles: http://bit.ly/9hVjn6

Alan Blinder argues for funding fiscal stimulus with the Bush tax cuts: "Let the upper-income tax cuts expire on schedule at year end. That would save the government an estimated $75 billion over the next two years. However, it would also diminish aggregate demand a bit. So, instead of using the $75 billion to reduce the deficit, spend it on unemployment benefits, food stamps and the like for two years...The budgetary trade I just recommended would add almost $100 billion to aggregate demand over the next two years--without adding a dime to the deficit. That translates to about 500,000 more jobs each year."

Adorable children being adorable interlude: A baby tries to eat his way out of a watermelon.

Domestic Policy

The DISCLOSE Act does not appear to have the votes in the Senate, reports Meredith Shiner: "Snowe, who has joined Democrats on major legislation such as Wall Street reform and temporary unemployment extensions, added that while she has begun to review the campaign finance language, changes would be required before she could support it...With Brown's firm rejection of the bill and Snowe’s hesitations, the bill that Democrats say is 'vital' to pass could have to wait until September - or even a lame duck session for Senate floor time."

Evangelicals are allying with Obama on immigration: http://nyti.ms/bUXXmx

In response to health care reform, insurers are pushing plans that limit doctor choice, reports Reed Abelson: "The size of these networks is typically much smaller than traditional plans. In New York, for example, Aetna offers a narrow-network plan that has about half the doctors and two-thirds of the hospitals the insurer typically offers. People enrolled in this plan are covered only if they go to a doctor or hospital within the network, but insurers are also experimenting with plans that allow a patient to see someone outside the network but pay much more than they would in a traditional plan offering out-of-network benefits."

Massachusetts' hasn't managed to truly control health-care costs, writes Robert Samuelson: "State leaders have proved powerless to control these costs. Facing a tough reelection campaign, Gov. Deval Patrick effectively ordered his insurance commissioner to reject premium increases for small employers (50 workers or fewer) and individuals -- an unprecedented step. Commissioner Joseph Murphy then disallowed premium increases ranging from 7 percent to 34 percent. The insurers appealed; hearing examiners ruled Murphy's action illegal. Murphy has now settled with one insurer allowing premium increases, he says, of 7 to 11 percent."

The administration's defense of the individual mandate in court classifies it as a tax, reports Robert Pear: "The law describes the levy on the uninsured as a 'penalty' rather than a tax. The Justice Department brushes aside the distinction, saying 'the statutory label' does not matter. The constitutionality of a tax law depends on 'its practical operation,' not the precise form of words used to describe it, the department says, citing a long line of Supreme Court cases."

Pete Vanderveen argues that pharmacists can help fill the doctor shortage: http://bit.ly/d9BAMx

Peter Schrag argues that strengthening the US-Mexico border will only increase the presence of permanent illegal immigrants: "Princeton University sociologist Douglas Massey pointed out nearly a decade ago that measures to secure the border seemed to produce almost the opposite of what was intended. By making the northward crossing more dangerous and expensive, Massey and co-authors Jorge Durand and Nolan J. Malone wrote in 2002, the border buildup discouraged seasonal laborers from going back to Mexico when they were not working."

The government is behind the curve on patents, writes Gordon Crovitz: "It will take real work to distinguish among different industries and determine what types of patents would best promote what the Constitution calls "the Progress of Science and useful Arts." The pharmaceutical industry, which must invest fortunes to clear regulatory hurdles for new drugs, needs a different approach to patents than do software companies. The "machine or transformation" test that courts crafted doesn't provide clear guidance for digital innovations of software code that sometimes lead to a new physical object and sometimes don't. [But] Congress has punted on its task.

Stop motion interlude: The best wall painting animation you'll ever see.

Energy

Harry Reid refuses to use the words "cap-and-trade," reports Darrel Samuelsohn: "Senate Majority Leader Harry Reid played dumb last week when a reporter asked him if the energy and climate bill headed to the floor would come with a 'cap' on greenhouse gas emissions. 'I don’t use that,' the Nevada Democrat replied. 'Those words are not in my vocabulary. We’re going to work on pollution.'”

There are reasons to believe the Gulf can recover environmentally: http://nyti.ms/cJm5Cg

Kenneth Feinberg explains the BP recovery fund he heads to Gulf residents, reports John Schwartz: "It begins with the relatively easy process of getting emergency payments, available without obligation to eligible claimants who can prove their losses, up to six months’ worth of damages at a time. (BP has paid out more than $200 million from 36 claims offices to more than 32,000 claimants so far.) Then, 90 days after the well is finally plugged, comes the tougher phase of the three-year program: negotiating with each claimant for the lump sum to cover economic losses from the spill. Those who accept the payment will have to sign a waiver stating that they will not sue BP."

West Virginia's new senator opposes cap-and-trade: http://politi.co/dufVtL

The losses incurred by oil spills show the shortcomings of purely economic measures of well-being, writes Wayne Arnold: "Some Asian governments, China’s included, have been trying to recalibrate gross domestic product to include the cost of growth to the environment, creating a green gross domestic product. Such efforts, said Mr. Tan, the Nanyang professor, have been frustrated by the difficulty in determining the future cost of environmental destruction. "

Bobby Jindal argues the deep-water drilling ban hurts residents of the Gulf more than it helps: http://bit.ly/a7nKTk

Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Graphic credit: Bonnie Berkowitz and Alberto Cuadra/The Washington Post.

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