Wonkbook: Budget negotiations breaking down

at 07:17 AM ET, 03/29/2011


(Alex Wong - GETTY IMAGES)
April 8th. That’s the deadline for Republicans and Democrats to reach a deal on funding for the remainder of 2011. No deal? Then the government shuts down. And if I were a betting man, that’s where my money would be right now: the negotiations have become too acrimonious, the issues at their heart too numerous and personal to the parties, to make a deal likely even in normal circumstances. But in circumstances in which newly elected Republicans are trying to prove to their base that they won’t catch Beltway fever and compromise while Democrats are trying to prove they won’t get pushed around by a party that controls a minority of the federal government? A deal seems near impossible.

One way you know that talks are going poorly is that, over the last 24 hours, reporters have suddenly been showered with leaks and inside information about what’s holding up the talks. It’s not just that Republicans want to cut deeper than Democrats and pass a series of riders accomplishing longtime conservative priorities like defunding Planned Parenthood. It’s also that Republicans are insisting that the House’s spending bill serve as a starting point for all negotiations and Democrats are insisting that if Republicans want so many cuts, they need to be open to the cuts coming from outside the non-defense discretionary bucket. So the fights over “what” and “how much” have been joined by fights over “from where” and “based off what.” It’s not a good sign, at this late stage in the negotiations, for the points of contention to be multiplying.

Top Stories

Congress’ budget negotiations have reached an impasse, reports Paul Kane: “With the possibility of a government shutdown again drawing closer, Congress is set to resume discussing federal funding for the remainder of fiscal year 2011, although a staff-level impasse remains unresolved...Those discussions broke down when the participants could not agree on the starting point from which to begin reaching middle ground, according to those familiar with the talks. All sides are pushing for a comprehensive deal before the current funding resolution expires April 8, because neither side wants to approve another short-term extension of funding...Still unsettled among the aides is what to do with dozens of policy prescriptions on contentious social and regulatory issues that were attached to the House legislation.”

The war in Libya is making defense cuts less likely, reports Carrie Budoff Brown: “For once, the unthinkable in Washington seemed within reach. From liberals to tea party conservatives to a defense secretary who served in a Republican administration, all agreed -- it was time to begin reining in the Pentagon budget. Then along came Libya. Just as the debt debate ramps up on Capitol Hill, the lead role the United States is playing in the military action against Libya threatens to scramble an emerging consensus over the need to trim defense to reduce the deficit...The airstrikes are already being used by some in the Republican establishment to blunt momentum in favor of the cuts, long considered heretical in a town in which defense contractors constitute a formidable lobby and members of Congress view the Pentagon budget as a jobs program and fear being tagged as unpatriotic.”

The GOP will unveil its plans for Fannie and Freddie today, reports Zachary Goldfarb: “A month-and-a-half after the White House announced its plan to wind down Fannie Mae and Freddie Mac, House Republicans on Tuesday plan to introduce their own. According to congressional sources familiar with the matter, a series of eight bills by Republicans will call for hiking fees charged to borrowers in two years and taking other steps to shrink the companies’ footprint in the housing market. The bills will call on Fannie and Freddie to begin to sell their massive portfolios of mortgage investments, which keep rates low, and would take away other advantages enjoyed by the companies that banks and private-sector firms don’t have...What’s striking about the new GOP plan is that in many ways it mirrors the Obama administration’s approach to shutting down the taxpayer-backed mortgage giants but only on a faster timetable.”

There’s a pro-Social Security case for Social Security reform, writes Ezra Klein: “GI’m on record saying Social Security is the last place in the federal government we should look for cuts. It’s a lean, efficient program that, if anything, is too spartan. In 2009, the average monthly benefit was slightly more than $1,000 — hardly lavish. That makes it one of the stingiest national-pension programs in the developed world, actually. And once we finish phasing in the cuts passed in the ’80s, it’ll only replace about 31 percent of the average beneficiary’s income. In a time of underfunded 401(k)s and high unemployment, that’s just not enough for many retirees. Saying Social Security is too generous is like saying a Mini Cooper is too roomy. But the program’s problems don’t end there. It’s underfunded, ill-designed for certain features and facts of the modern world, and — probably most important — overused. Beyond Social Security, America’s retirement system is, in general, patchy and insufficient, which leaves retirees too reliant on Social Security. They then learn the hard way that the program is not what they’d hoped. We should do better. And we can.”

Revenge music interlude: After Radiohead publishes a newspaper, The Guardian staff performs a cover of “Creep”.

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Still to come: Regulators are finalizing new securities rules; Senate Democrats are trying to sink 1099 tax reporting repeal; the Supreme Court looks ready to overturn Arizona’s public financing system; a group of Senators is looking into whether oil prices are being manipulated; and Peanuts loses its final panel, and gets even sadder.

Economy

Regulators are readying new rules on mortgage securities, reports Floyd Norris: “Banks will be forced to retain some risk when they securitize all but the most conservative mortgages under rules that regulators are expected to vote on Tuesday. But the banks are likely to be given wide leeway in determining what risks to keep. Major banks, hoping to revive the mortgage securitization market that crumbled when many securitizations proved to be anything but safe, had asked regulators to define almost any mortgage -- except for the most extreme types no longer being written anyway -- as a ‘qualified residential mortgage.’ But a summary of the proposal..showed that the regulators rejected that advice and decided that only the most conservative mortgages would qualify.”

Corporations are starting to spend their record stockpiles of cash: http://bit.ly/gBuJY0

A revolving door is in place between the White House and the tech industry, reports Cecilia Kang: “The Obama administration brought Facebook and Twitter to politics. And now it’s giving back, as staffers leave the White House and take key jobs at Silicon Valley firms. In the past year, Facebook hired Marne Levine, a former White House economic official, and is reportedly courting former West Wing spokesman Robert Gibbs. Google’s philanthropy arm snagged Jared Cohen, the State Department’s social media guru. Twitter hired former White House and State Department staffer Katie Stanton...The hires come as popular Internet applications from Google, Facebook and Apple attract special attention from lawmakers and regulators concerned about issues of privacy, competition, pricing and other aspects of the rapidly changing online economy.”

Few Congressmen participate in a salary give-back program to reduce the debt, reports David Fahrenthold: “It sounds like the perfect political gesture for the moment. Congress is getting ready for an epic fight over the national debt, and House rules allow members to give back a portion of their salaries for debt reduction. Two of them do. Sometimes, up to three. Last fall -- as the issue of spending helped Republicans storm back to power in the House -- exactly one sitting Republican and one Democrat chose to dock their pay for the cause. Together, they donated $2,610.39 that quarter. ‘Even if all members of Congress returned their full salaries in order to pay off the debt,’ it would barely make a dent, wrote Rep. Henry Cuellar (D-Tex.) in an e-mail...He does not give any of his salary back.”

The debt commission’s plan will make America weaker, writes Joseph Stiglitz: “The ballooning of the deficit since the crisis struck has understandably moved deficit reduction to the center of the debate. But the best way to reduce the deficit is to put America back to work. Overwhelmingly, the deficit increase has been caused by the enormous shortfall between the economy’s potential and actual output. Even as growth has resumed, the ‘output gap’--reflecting in high unemployment--has persisted. The Bowles-Simpson recommendations, if adopted, would constitute a near-suicide pact: Growth would slow, tax revenues would diminish, the improvement in the deficit would be minimal. What matters for sustainability is the debt to gross domestic product ratio -- and that likely could worsen.”

Developed countries shouldn’t engage in a “race to the top” on corporate taxation, writes Jeffrey Sachs: http://on.ft.com/hPfmxh

Adorable animals being adorable interlude: Busch Gardens’ new cheetah cub.

Health Care

Senate Democrats are trying to sink a GOP approach to 1099 tax reporting repeal, reports Jennifer Haberkorn: “Trying to thwart a Republican repeal of the health reform law’s 1099 tax reporting requirements, Senate Democrats are working on an amendment that could kill the proposal down the road. Sen. Robert Menendez (D-N.J.) has crafted a second-degree amendment to Nebraska Republican Sen. Mike Johanns’s 1099 repeal amendment that would require an Obama administration study to see how the Republicans’ amendment would affect small businesses’ premium prices and access to coverage, sources tell POLITICO. According to a copy of the amendment, if the study finds that the Republican amendment increases costs or reduces access, the Johanns amendment won’t go into effect.”

Obama’s malpractice reform proposal needs better guidelines, writes Ronen Avraham: “It’S been a year since health care reform was signed into law, and since then both Republicans and Democrats have been trying to address one item it left out: medical malpractice reform. In last month’s budget proposal, the Obama administration offered a solution: a plan to encourage evidence-based medicine by limiting the malpractice liability of doctors who follow clinical practice guidelines -- in effect, granting them immunity...Unfortunately, the proposal will not achieve the noble goal of providing quality care at a reasonable cost because the current guidelines, written by nonprofit medical groups and for-profit insurance companies, are not good enough.”

Young people have every reason to support health reform, writes Labor Secretary Hilda Solis: http://bit.ly/ieN3XC

Domestic Policy

The Supreme Court looks ready to strike down Arizona’s public financing system, reports Robert Barnes: “The Supreme Court majority that in recent years has struck down campaign spending restrictions as assaults on free speech seemed ready Monday to do the same with Arizona’s public financing plan...’Do you think it would be a fair characterization of this law to say that its purpose and its effect are to produce less speech in political campaigns?’ Justice Anthony M. Kennedy asked the lawyer for groups challenging Arizona’s Citizens Clean Elections Act. ‘I believe that that is a goal, and I believe that’s the effect,’ answered William R. Maurer, a lawyer for the Institute for Justice, which represented independent groups objecting to the law’s restrictions.”

The foreign same-sex spouses of U.S. citizens can now apply for green cards: http://wapo.st/etPuJ2

Michigan has signed into law stiff unemployment benefit cuts, reports Michael Cooper: “Michigan, whose unemployment rate has topped 10 percent longer than that of any other state, is about to set another record: its new Republican governor, Rick Snyder, signed a law Monday that will lead the state to pay fewer weeks of unemployment benefits next year than any other state. Democrats and advocates for the unemployed expressed outrage that a such a hard-hit state will become the most miserly when it comes to how long it pays benefits to those who have lost their jobs. All states currently pay 26 weeks of unemployment benefits, before extended benefits paid by the federal government kick in. Michigan’s new law means that starting next year, when the federal benefits are now set to end, the state will stop paying benefits to the jobless after just 20 weeks.”

Indifference and racism have denied D.C. federal representatives, writes Kate Masur: http://nyti.ms/fi7lHK

Altered comics interlude: 3eanuts, Peanuts without the final, optimistic panel.

Energy

A group of Senators want an investigation into market manipulation on oil prices, reports Ben Geman: “Five senators are pressing the Federal Trade Commission to use its powers under a 2007 law to probe whether recent oil price spikes - and the attendant rise in pump prices - stem from market manipulation. ‘We are writing to inquire whether the Federal Trade Commission (FTC) is fully utilizing the regulatory authority granted to it by Congress to ensure American consumers are paying a fair price for gasoline. We urge you to use this authority aggressively to ensure that recent crude oil market price spikes and volatility are not the result of manipulative practices or anticompetitive behavior,’ states a letter to the FTC from Sens. Maria Cantwell (D-Wash.), Olympia Snowe (R-Maine), Jay Rockefeller (D-W.Va.), Mark Pryor (D-Ark.) and Ron Wyden (D-Ore.).”

A spree of Senate votes on limiting the EPA’s climate regulating powers are set to occur this week: http://bit.ly/dGd5Rq

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

 
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