Wonkbook: 2011 ends, and 2012 begins

(Dennis Brack - VIA BLOOMBERG) The streams are crossing in Washington today. In the next four days, we either need a deal on federal funding for 2011 or the government shuts down. But as they say on the infomercials: that’s not all! Rep. Paul Ryan is about to unveil his 2012 budget, which is reported to privatize and voucherize Medicare while block-granting Medicaid. And President Obama is officially annoucing his reelection campaign, complete with the roll-out of a new web site. In other words: Happy Monday.

First thing’s first: will the government stay open? Well, maybe! The 2011 fight is increasingly centered around the seemingly hilarious question of where the cuts should come from CHIMPS or not. In this case, however, CHIMPS are not, well, chimps, but CHanges In Mandatory Program Spending. Democrats aren’t willing to let the 2011 budget’s cuts fall so heavily on the programs in the non-defense discretionary bucket, as that means sharp cuts to education and R&D and social services. They want to move to so-called mandatory spending. Republicans, despite having proposed about $10 billion in CHIMPS of their own, don’t want to zoom out to those programs. So the talks continue. But even if the leaders strike a deal, they’ve agreed that no deal is final until their members sign off on it. It’s entirely plausible that Boehner will present a compromise to his members only to have it roundly rejected.

When trying to evaluate Paul Ryan’s proposed budget for 2012, ask yourself why it’s being unveiled this week, smack in the middle of the final 2011 negotiations, rather than being held until the deal on this year’s funding is finished. The answer, most think, is that it’s meant to make a compromise easier now by focusing the GOP’s attention on the prospect of passing much more hardline legislation later. And make no mistake: Ryan’s proposals are quite dramatic. If the early reports are correct, his budget would turn Medicare over to private insurers and reduce the federal commitment to merely helping seniors purchase insurance, not making certain that they actually have it. He’ll also propose huge cuts in Medicaid, though he’ll give the states the authority to decide how those cuts will fall. You have to give Ryan and the GOP credit for sticking to their guns: these proposals are the most ambitious effort to remake Medicare and Medicaid in a generation, and perhaps ever.

Amidst all of this, President Obama is announcing his reelection campaign. Like with Ryan’s budget, you have to ask after the timing: he could have waited till a quieter week. That he didn’t is being taken as evidence that his campaign wants to draw attention away from the fights in Washington. Of course, there’s another possibility, too: That he wants to use them as the opening bell for the race, a way to remind Obama’s supporters why they support the president and not the other guys. If so, he’s going to have plenty of material to work with by the week’s end.

Five in the morning

1) The 2011 budget talks are stuck on where the cuts come from, reports David Rogers: “With a shutdown looming, budget negotiations this week will rise or fall on two major issues: policy riders demanded by Republicans and an estimated $6 billion to $8 billion in new savings in mandatory programs offered by the White House to forestall deeper cuts in domestic appropriations. The administration is prepared to accelerate proposed reforms in the Pell Grant program for low-income college students and cut billions elsewhere from one of the initiatives enacted under health care reform: the establishment of new nonprofit health cooperatives, a priority of Senate Budget Committee Chairman Kent Conrad (D-N.D.). The Children’s Health Insurance Program, extending Medicaid coverage to the children of working class families, is a third potential target, together with billions to be saved from rescinding highway contract authority.”

2) Congressional leaders will not announce a deal until their members sign off on it, reports Paul Kane: “Both Democratic and Republican aides said efforts continued over the weekend to fashion a bill with $33 billion in spending cuts, but they also said neither side intends to officially announce a ‘deal’ on that plan. Instead, once staff members from the House and Senate appropriations committees finish their effort, the legislation will be presented to rank-and-file lawmakers to determine if there are enough votes to pass it. The wild card remains the 87 House Republican freshmen who won in the fall largely on tea party pledges to slash government spending and who are pushing for much deeper cuts.”

3) The House GOP’s 2012 budget, prepared by Rep. Paul Ryan, will privatize Medicare, block grant Medicaid, and cost $4 trillion over a decade, reports Naftali Bendavid: “Republicans will present this week a 2012 budget proposal that would cut more than $4 trillion from federal spending projected over the next decade and transform the Medicare health program for the elderly, a move that will dramatically reshape the budget debate in Washington...The plan would essentially end Medicare, which now pays most of the health-care bills for 48 million elderly and disabled Americans, as a program that directly pays those bills...Mr. Ryan’s proposal would apply to those currently under the age of 55, and for those Americans would convert Medicare into a ‘premium support’ system...The proposal would also convert Medicaid, the health program for the poor, into a series of block grants to give states more flexibility.”

4) Ryan’s budget is an opportunity for Obama -- if he choose to take it, writes EJ Dionne: “So far, our nation’s budget debate has been a desultory affair focused on whether a small slice of the federal government’s outlays should be cut by $33 billion or $61 billion, or whatever. But Americans are about to learn how much is at stake in our larger budget fight, how radical the new conservatives in Washington are, and the extent to which some politicians would transfer even more resources from the have-nots and have-a-littles to the have-a-lots. And you wonder: Will President Obama welcome the responsibility of engaging the country in this big argument, or will he shrink from it? Will his political advisers remain robotically obsessed with poll results about the 2012 election, or will they embrace Obama’s historic obligation — and opportunity — to win the most important struggle over the role of government since the New Deal?”

5) The Fed is split on what to do next, reports Jon Hilsenrath: “As the U.S. economy slowly improves, battle lines are being drawn at the Federal Reserve for the coming debate about when and how to tighten the central bank’s easy monetary policy. A slew of regional Federal Reserve bank presidents have taken to the public speaking circuit in recent weeks to begin staking out positions on the economy and the Fed’s next moves. A vocal minority is pushing for an early and aggressive shift to push interest rates higher, possibly later this year. But New York Fed President William Dudley sent a clear sign Friday that the Fed’s most powerful decision makers don’t necessarily share that view...The Fed’s dual mandate is to maintain low unemployment and stable inflation. Many officials believe unemployment, at 8.8%, is still far too high and inflation is below its objective of 2%.”

Ironic cover interlude: Stephen Colbert, the Roots, Jimmy Fallon, and Taylor Hicks cover “Friday” by Rebecca Black.

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Still to come: Obama is involving himself more aggressively in the budget negotiations; the unemployment rate is continuing to fall; the health law is proving to be a boon for health care consultants; HHS released its menu labeling regulations; the Domestic Policy Council is gaining influence on economic policy; BP is preparing to start drilling in the Gulf again; and baconnaise!

Economy

Obama is stepping up his personal involvement in budget negotiations, reports Felicia Sonmez: “President Obama placed calls to House Speaker John A. Boehner (R-Ohio) and Senate Majority Leader Harry M. Reid (D-Nev.) on Saturday, a sign that the president is stepping up his personal involvement in negotiations over keeping the federal government funded. Obama’s participation in the budget talks - which he had previously delegated to Vice President Biden and Office of Management and Budget Director Jacob J. Lew -- came six days from the deadline by which Congress must pass a budget measure to avoid a government shutdown...The $73 billion figure stated by the White House is relative to Obama’s fiscal year 2011 budget, which was never enacted; in actuality, the $73 billion would represent cuts of more than $30 billion from current spending levels.”

The unemployment rate fell substantially in March, reports Neil Irwin: “The improving economy is finally starting to translate into meaningful job creation, with new data Friday showing that employers shrugged off rising fuel prices and other concerns to keep hiring in March. The unemployment rate has now fallen a full percentage point since November, and private employers created more jobs in the first three months of the year than in any similar span since 2006. The plight of American workers, nonetheless, remains difficult, with the jobless rate at 8.8 percent, down from 8.9 percent a month earlier. At the current pace of economic growth, it will take years for the rate to return to healthy levels. But the numbers released Friday by the Labor Department confirm that a series of upbeat readings on the job market in recent weeks were more than blips and reflected a significant trend.”

Sens. Rand Paul and Mike Lee are blocking a vote on a small business bill until the Libya intervention comes up for a vote: http://wapo.st/i9sZIt

A new report tries to assess how much money workers need to attain “economic stability,” and worries that many of the jobs being created in the recovery won’t get them there, reports Mokoto Rich: “According to the report, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, and nearly twice the federal minimum wage of $7.25 an hour. A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.”

http://nyti.ms/hOaA2y

Low Fed rates are disrupting retirement plans for some, reports Mark Whitehouse: “The longer the central bank keeps interest rates low to stimulate the economy, the more money it pulls out of the pockets of millions of savers. Among the most vulnerable are retirees, who have few options to restore lost income on investments built up over entire lifetimes. In 2009, according to the most recent data available from the Labor Department, average annual investment income for the 24.6 million American households headed by people 65 and older amounted to $2,564. That figure is down 34% from 2007, and is the lowest since 2003. A recent survey by the Employee Benefit Research Institute indicated that one in three retirees had dipped deeper than planned into their savings to pay for basic expenses in 2010.”

The top 1 percent of earners control American politics, writes Joseph Stiglitz: “The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift--through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price--it should not come as cause for wonder...Given the power of the top 1 percent, this is the way you would expect the system to work.”

The amount of work needed to maintain a middle-class lifestyle has increased in recent decades, writes Robert Frank: http://nyti.ms/ed1RvW

We should hike capital gains and dividend taxes as part of corporate tax reform, writes Robert Samuelson: “Just in case you missed it, the New York Times recently ran a blockbuster story reporting that General Electric -- with $14.2 billion in worldwide operating profits in 2010 -- owed no U.S. corporate taxes for the year. Gulp...The question is: Can we do anything about it? The answer is ‘yes,’ but the right response is counterintuitive. It’s not to raise taxes on multinational companies but to lower them. To offset that tax loss and cut budget deficits, we should then increase individuals’ taxes on corporate dividends and capital gains (profits from sales of stock or property). They enjoy a ridiculously low top rate of 15 percent -- a giveaway to the rich that makes no sense as economic policy. The wealthiest 1 percent of Americans receives two-thirds of capital gains and dividends.”

Gluttonous interlude: How to make baconnaise. Mmmm.

Health Care

”Accountable care organizations” are turning into a payday for health-care consultants, reports Bara Vaida: “Much of the activity -- and the prospect of glitteringly high fees -- is swirling around a widely discussed provision that encourages doctors, hospitals and insurers to team up in treating patients. Initially, these “accountable care organizations,” as envisioned in the law, will treat only Medicare patients, and will get bonuses for providing better care at lower cost. But if they work, ACOs will likely spread to private patients as well. The ACO issue ‘has all the pieces that drive consulting,’ said Morrison. ‘There are legal, information technology and cultural changes needed to make it work, so lawyers are happy as hell, IT people are happy as hell and so are the management consultants.’”

Doctors refusing Medicaid patients is becoming a huge barrier to care, reports Robert Pear: “Eight-year-old Draven Smith was expelled from school last year for disruptive behavior, and he is being expelled again this year. But his mother and his pediatrician cannot find a mental health specialist to treat him because he is on Medicaid, and the program, which provides health coverage for the poor, pays doctors so little that many refuse to take its patients. Ms. Smith said she has tried for more than a year to find a psychiatrist to treat her son Draven, 8, who is on Medicaid. The problem is common here and across the country, especially as states, scrambling to balance their budgets, look for cuts in Medicaid, which is one of their biggest expenditures.”

Virginia is adding abortion restrictions to its insurance exchange: http://wapo.st/hfZymG

Food vendors are preparing for health reform’s calorie disclosure rules, reports Janet Adamy: “The FDA estimates that the regulation, as proposed, would apply to 278,600 establishments, out of an estimated 600,000 restaurants nationwide, according to the National Restaurant Association. It projects the initial cost of complying with the proposed requirements is $315.1 million, with an estimated ongoing cost of $44.2 million. Per restaurant establishment, that averages $1,100, the FDA says. For consumers, the new regulations will mean that the calorie counts of everything from a Chipotle burrito to a Starbucks Frappuccino must be posted in a font size that is ‘clear and conspicuous’ and color that’s ‘at least as conspicuous as” the print listing the menu item, according to the agency’s guidance.’”

Adorable animals being adorable in groups interlude: Baby bears cuddle with a baby tiger.

Domestic Policy

White House Domestic Policy Council chairwoman Melody Barnes is gaining influence on economic policy, reports Zachary Goldfarb: “One group of aides is emerging as highly influential as President Obama shifts the focus of his economic policy from crisis management to trying to stimulate and manage growth: the Domestic Policy Council, led by Melody Barnes. Barnes, a onetime top lawyer to the late Sen. Edward M. Kennedy (D-Mass.), and her team have navigated to the center of the administration’s economic strategy. They’ve helped to craft policies on education and clean energy, which Obama has said are key to securing the nation’s economic future -- what he has called a ‘competitiveness’ agenda...For Barnes, education, above all else, is the linchpin for economic and domestic policy.”

The true cost of state pensions has been hidden, writes Josh Barro: http://bit.ly/gUdJap

Obama is set to start taking money from big donors, report Dan Eggen and Perry Bacon: “Facing an energized Republican Party and deep-pocketed conservative groups, President Obama is kicking off his 2012 reelection campaign with a concerted push for help from wealthy donors and liberal groups unbound by spending limits. The strategy -- which could begin in earnest as early as Monday with the formation of an official presidential committee -- suggests a notable shift in emphasis for a president who has long decried the outsize role of money in politics. Obama frequently points with pride to the role that smaller donors played in his 2008 election, when his campaign also openly discouraged spending by outside organizations.”

Union activism in the Midwest carries on Martin Luther King’s mission, write Benjamin Jealous and Mary Kay Henry: http://wapo.st/fvh13Z

Donors to political nonprofits should be subject to disclosure requirements, writes David Callahan: “Individuals must disclose on their tax returns the details of large gifts to charitable organizations, known as 501(c)3 groups from the section of the tax code governing them. But this information is kept private by the Internal Revenue Service. While gifts given directly through foundations must be made public, the wealthy can give without leaving fingerprints by routing money through ‘donor-advised funds’ sponsored by 501(c)3 groups -- which don’t have to publicly name their donors. And, thanks to the Supreme Court decision in the Citizens United case, things are getting even worse. That decision now allows organizations that can engage in overt partisan work, called 501(c)4 groups, to take unlimited corporate money -- again, without revealing their donors.”

Film supercut interlude: This year’s movies have a lot of explosions in them.

Energy

BP is in talks to resume deepwater drilling in the Gulf of Mexico, reports Steven Mufson: “BP is in talks with the Interior Department about permits that would allow it to resume deep-water drilling in the Gulf of Mexico, according to two sources familiar with the discussions. The company hopes that it can restart several projects sometime this summer. The discussions come just before the anniversary of the April 20 blowout on the Deep water Horizon rig that BP leased for an exploration well called Macondo. The blowout killed 11 workers, set the rig on fire and triggered a huge oil spill that gushed for 87 days. BP is seeking permission to drill about 10 wells to boost output in fields that are already producing oil; none of them would be an exploration well, one of the sources said.”

The House is set to vote on anti-EPA legislation this week: http://bit.ly/gBIHbc

House climate science hearings are an anti-scientific farce, writes Paul Krugman: “For years now, large numbers of prominent scientists have been warning, with increasing urgency, that if we continue with business as usual, the results will be very bad, perhaps catastrophic. They could be wrong. But if you’re going to assert that they are in fact wrong, you have a moral responsibility to approach the topic with high seriousness and an open mind. After all, if the scientists are right, you’ll be doing a great deal of damage. But what we had, instead of high seriousness, was a farce: a supposedly crucial hearing stacked with people who had no business being there and instant ostracism for a climate skeptic who was actually willing to change his mind in the face of evidence.”

Environmentalists are upset at the White House for not pushing back harder at anti-EPA legislation: http://politi.co/gjSkvk

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.