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Wonkbook: Do Republicans need a grand bargain?

By Ezra Klein,

Joshua Roberts BLOOMBERG Here's the Republican Party's problem: The politicians know they can't keep pushing the Ryan budget. In fact, some of them are now leaking that they knew they couldn't push the Ryan budget from the beginning, and said so, loudly, at heated, closed-door meetings. But as Newt Gingrich learned, the base won't let them abandon it, either. So they're stuck with a plan they can't pass, can't sell, and can't throw overboard.

Jonathan Chait thinks the only answer is to layer a new plan on top of it. "The one way out," he writes, "is to cut a grand deficit bargain with Obama." Then the Ryan plan looks like the opening gambit in an ultimately successful bid for deficit reduction and Republicans can supplant it with a more popular proposal even as it remains the official Republican position.

But the Ryan plan will make a grand deficit bargain more difficult in a couple of ways. First, by convincing Republicans the budget can be balanced without tax increases, it's made it harder to convince them to embrace a final deal that includes tax increases -- and tax increases are in the very definition of "grand deficit bargain." Second, Democrats smell blood in the water, and are likely to view a bailout of the Republican Party, and possible depoliticization of the Ryan budget, more skeptically now than they would've a few months ago.

The wild card in all of this, of course, is the debt ceiling, which gives Republicans the leverage they need to force a deal Democrats may not want. But it's important to make a distinction here: the debt ceiling doesn't demand, and likely can't support, a budget deal. It needs to be raised too quickly, and even though the ultimate bargain will dramatically affect the budget going forward, it doesn't supplant the budget process: we still need a 2012 budget, or at least instructions for funding the government in 2012. Republicans and Democrats have both been clear about that. But if Republicans lose the special election in New York and, increasingly desperate, decide that the debt ceiling -- which is to say, the country's credit rating -- is their only leverage to squeak out of this thing with a win, the endgame here could get very ugly. The debt-ceiling debate can hardly handle the pressure being put on it now. It would be dangerous indeed to add the pressure of the budget debate.

Five in the morning

1) The GOP knew Ryancare would be very unpopular, report Glenn Thrush and Jake Sherman: "It might be a political time bomb -- that’s what GOP pollsters warned as House Republicans prepared for the April 15 vote on Rep. Paul Ryan’s proposed budget, with its plan to dramatically remake Medicare. No matter how favorably pollsters with the Tarrance Group or other firms spun the bill in their pitch -- casting it as the only path to saving the beloved health entitlement for seniors -- the Ryan budget’s approval rating barely budged above the high 30s or its disapproval below 50 percent, according to a Republican operative familiar with the presentation...The outward unity projected by House Republicans masked weeks of fierce debate, even infighting, and doubt over a measure that stands virtually no chance of becoming law."

Survey says? " An Associated Press-GfK poll showed that 54 percent of Americans think that the budget can be balanced without cuts to Medicare, while 59 percent said the same about Social Security."

2) Ryancare goes too far, writes Sen. Scott Brown: "Why can’t I go along with the Ryan Medicare plan? First, I fear that as health inflation rises, the cost of private plans will outgrow the government premium support-- and the elderly will be forced to pay ever higher deductibles and co-pays. Protecting those who have been counting on the current system their entire adult lives should be the key principle of reform. Second, Medicare has already taken significant cuts to help pay for Obama’s health care plan. The president and Congress cut a half trillion dollars to the private side of Medicare -- meaning seniors are at risk of losing their Medicare Advantage coverage. Another key principle is that seniors should not have to bear a disproportionate burden."

3) Presidential candidate Tim Pawlenty proposed cutting ethanol subsidies. In Iowa. Eric Kleefeld reports: "Former Minnesota Gov. Tim Pawlenty made a potentially risky move during his campaign launch speech in Iowa: he called for a phaseout of ethanol subsidies. 'The hard truth is that there are no longer any sacred programs,' said Pawlenty. 'The truth about federal energy subsidies, including federal subsidies for ethanol, is that they have to be phased out. We need to do it gradually. We need to do it fairly. But we need to do it.' Many political observers have long said that Iowa's place at the kickoff for presidential nomination contests has ensured continuous support for ethanol by national politicians. As a counter-example, Sen. John McCain (R-AZ) has long opposed ethanol subsidies, and as a result he largely skipped the 2008 caucuses."

Arne Carlson, the Republican governor of Minnesota from 1990 to 1998, argues that Tim Pawlenty is not fiscally disciplined: http://bit.ly/leXpb6

4) French Finance Minister Christine Lagrande looks like a lock to be the next IMF chair, reports Howard Schneider: "French Finance Minister Christine Lagarde, who is emerging as Europe’s favorite to replace Dominque Strauss-Kahn as head of the International Monetary Fund, would enter any contest for the position with as many as a third of the votes on the agency’s board already locked up. The prospect that Lagarde could be all but anointed before the competition even begins is casting doubt on whether it will be an open process, as the board has promised. This is putting the Obama administration in a sensitive position as the arbiter between Europe and developing nations, which are eager to see one of their own in the top post...Major European powers including Germany and Britain have already committed to Lagarde -- without knowing the full list of candidates."

5) Everything you thought you knew about college majors is probably right, reports Peter Whoriskey: "Some defenders of the humanities have said that their students are endowed with 'critical thinking' and other skills that could enable them to catch up to other students in earnings. Turns out, on average, they were wrong. Over a lifetime, the earnings of workers who have majored in engineering, computer science or business are as much as 50 percent higher than the earnings of those who major in the humanities, the arts, education and psychology, according to an analysis by researchers at Georgetown University’s Center on Education and the Workforce...According to the study, the median annual earnings for someone with a bachelor’s degree in engineering was $75,000. The median wage was $47,000 in the humanities."

Acoustic version interlude: Frightened Rabbit plays "Old Old Fashioned" for Italian radio.

Got tips, additions, or comments? E-mail me.

Still to come: Companies are mad about an SEC proposal to help whistleblowers; organized labor and the Chamber of Commerce haven't had much success getting Congress to greenlight more infrastructure spending; what can go wrong, will go wrong, and we're making it worse; John Boehner has become a judicial activist; and learn how to properly tie your shoe.

Economy

Companies are upset about an SEC proposal to reward whistleblowers, reports David Hilzenrath: "Business groups are alarmed about a federal plan to reward company insiders and other tipsters for blowing the whistle on corporate fraud. The Securities and Exchange Commission is scheduled to vote Wednesday on a far-reaching proposal to combat corporate wrongdoing by paying private employees to join the fight. The bounties could give tipsters a powerful incentive to expose the kind of abuses that have cost investors dearly, from the Enron and WorldCom accounting frauds of a decade ago to the Fannie Mae and Freddie Mac scandals of later years and alleged misrepresentations involving toxic mortgages...Businesses say that before whistleblowers share information with the SEC, they should alert the company they are accusing and give the company a chance to address the alleged misconduct."

Anti-China tariffs are backfiring, reports Andrew Higgins: "China’s export juggernaut is not unstoppable: Just ask Lawrence Yen, president of Woodworth Wooden Industries. His factory here in southern China used to ship 400 containers of bedroom furniture to the United States each month. It now sends 60. That is just what Yen’s struggling American competitors were hoping would happen when, back in January 2005, the Commerce Department slapped import tariffs on Chinese-made beds, nightstands and related wares. What happened next, though, was not part of the plan: Yen opened a factory in Vietnam and began exporting to the United States from there. Others did the same...The result: Imports now account for about 70 percent of the U.S. market for beds and similar items, up from 58 percent before Washington intervened."

The labor/Chamber alliance is faltering, reports Chris Frates: "When the AFL-CIO and U.S. Chamber of Commerce jointly announced support for President Barack Obama’s call for more infrastructure spending, the news turned heads and raised expectations. Here was a political power couple that could get it done -- or so went the conventional wisdom. But even with broad agreement across party lines that the nation’s crumbling roads, bridges and public transit must be updated, the powerhouse duo has so far been unable to pierce the anti-spending mood hanging over Washington. When House and Senate leaders release their transportation spending plans this summer, business and labor officials don’t expect the number to come anywhere near Obama’s $550 billion investment."

A top Fed official is heading off to a bank, reports Jon Hilsenrath: "Brian Madigan, who ran the Federal Reserve’s powerful monetary affairs group, is joining Barclays Capital as a senior policy adviser, according to an internal memo announcing the hire. Mr. Madigan left the Fed board in Washington in 2010 after running its monetary affairs group for three years. In that spot, he was one of Fed chairman Ben Bernanke’s top staff advisors and played a central role in designing many of the Fed’s emergency rescue programs during the financial crisis. He also played a central role in crafting Fed policy and the statements that the Fed releases to explain its policy decisions. Mr. Madigan had been at the Fed since 1979. He will report to Larry Kantor, Barclays Capital’s head of research and will advise the firm’s research group on economic policy and regulation."

My column: if it can go wrong, it probably will go wrong. So why aren't we preparing? There are plenty of crises we can predict "Here’s what we should’ve learned from the events of the past decade: Murphy was right. What can go wrong, will go wrong — and we need to plan accordingly. Because terrorist attacks? They happen. Credit bubbles? They burst. Underregulated Wall Street banks? They fail. Poorly designed offshore drilling platforms? They explode. Overleveraged European economies? They can’t pay their debts. Broken-down levees in hurricane country? They breach. But we haven’t learned our lesson. Forget preparing for the 'black swans,' investor Nassim Taleb’s name for the unpredictable crises that disrupt and damage our lives. We’ve stopped preparing for what economist Nouriel Roubini calls the 'white swans': the crises we can predict, and could even prevent."

To survive the Ryan plan, Republicans need to cut a budget deal with Obama, writes Jon Chait. "If Obama and the Republicans make a budget deal, that is something the House GOP can use to get past the Ryan budget. Then they can paint it as a conversation-starter -- we forced Obama to come to the table! -- rather than a blueprint for future action. If they cut a deal, then they can say the debt crisis has been addressed, and the radical measures they voted for (in order to call people's attention to the problem, of course -- they didn't want to do that stuff) are no longer needed. Obviously, a big winner out of a deal like that would be Obama himself, who could take a major issue off the table and demonstrate his ability to work in a bipartisan fashion, and solidify himself amongst affluent independents. There would, however, be a couple huge losers. One is the Republican presidential nominee, who could still run on the economy but would face a steeper climb. The other, bigger loser is House Democrats, who would forfeit what might be their only chance for a long time to take back the House."

Adorable animals dealing with loneliness interlude: A deer befriends a spacehopper.

Health Care

Lisa Murkowski is wary of Ryancare, reports Jennifer Haberkorn: "Sen. Lisa Murkowski has become the latest Senate Republican to shy away from Rep. Paul Ryan’s Medicare plan, saying she may not vote for the House budget later this week because of her concerns about how it might affect Medicare...She’s the fourth Senate Republican who has either come out against the House Medicare plan or expressed doubts about it. Sens. Susan Collins of Maine and Scott Brown of Massachusetts have said they won’t support it when it comes up for a Senate vote later this week. Sen. Olympia Snowe of Maine has been vocal with her criticism of the Medicare plan, too, but hasn’t said how she will vote. Murkowski is already concerned that seniors on Medicare might not have enough access to doctors."

Rand Paul doesn't think it goes far enough: http://politi.co/iwyIhz

Ryancare plan has trapped the GOP, writes Eugene Robinson: " the Medicare issue really that toxic? Newt Gingrich clearly thought it was, or else he’d never have called it 'right-wing social engineering' and gotten himself in such trouble with his fellow Republicans...Leading Democrats, such as Senate Majority Leader Harry Reid, think the Ryan plan is toxic, too. Reid plans to hold a vote this week in which Republican senators will have to go on record as supporting, or opposing, the House-passed budget bill -- which includes the Ryan plan to fundamentally transform Medicare as we know it. Minority Leader Mitch McConnell, seeing the trap that Reid has laid, says each GOP senator will be free to vote his or her conscience."

Domestic Policy

John Boehner has grown fonder of judicial interventions into politics, reports Richard E. Cohen: "For much of his political career, House Speaker John Boehner has railed against judicial over-reach and the harmful effects of excessive litigating. But while the congressman from Ohio and his Republican Party have a long history of bashing trial lawyers, the speaker himself has shown that he can be quite the litigator. Backed by an activist conservative group, Boehner has filed legal briefs in the Florida lawsuit in which 26 state attorneys general have challenged the constitutionality of last year’s health reform law. Boehner has also signed on and hired outside lawyers to back the controversial Defense of Marriage Act."

The Supreme Court ordered the release of thousands of inmates, reports Robert Barnes: "A bitterly divided Supreme Court on Monday upheld a judicial order that could result in the release of nearly 40,000 prisoners from a California penal system so overcrowded that its conditions are, the court wrote, 'incompatible with the concept of human dignity.' Justice Anthony M. Kennedy, a California native, joined the court’s four consistent liberals in agreeing that, after nearly two decades of litigation, it is time for the courts to force the state to act. 'The release of prisoners in large numbers -- assuming the state finds no other way to comply with the order -- is a matter of undoubted, grave concern,' Kennedy wrote. 'Yet so too is the continuing injury and harm resulting from these serious constitutional violations.'"

Groups receiving stimulus money owe $750 million in taxes, reports Ed O'Keefe: "Thousands of companies and nonprofits that received funds from the Obama administration’s economic stimulus program owe hundreds of millions of dollars in unpaid taxes, according to estimates in a new government report. A Government Accountability Office investigation set for release Tuesday found that at least 3,700 recipients receiving $24 billion in stimulus contracts and grants owe more than $750 million to the government. Corporate income taxes made up $417 million, or about 55 percent of the estimated unpaid taxes, GAO said. Payroll taxes totaled $207 million, or about 27 percent; unpaid excise, unemployment and other taxes equaled another $133 million."

A report says Toyota's indifference to customer complaints lead to its safety problems, reports Peter Whoriskey: "Toyota management gave too little weight to feedback from customers, regulators and independent rating agencies, and centered too much control in its Japanese headquarters, according to the report of a special review panel convened after complaints of unintended acceleration forced the automaker to recall millions of cars. The panel, chaired by former U.S. Transportation secretary Rodney Slater, reported that the company apparently did not apply some of its principles of continuous improvement 'as quickly and thoroughly as it could have in investigating and seeking out the root causes of customer complaints' about problems such as unintended acceleration."

Correct your technique interlude: You are probably tying your shoes wrong. Terry Moore demonstrates how to tie them properly.

Energy

Maybe, just maybe, climate change is contributing to this year's freak weather events, writes Bill McKibben: "If you did wonder, you see, you would also have to wonder about whether this year’s record snowfalls and rainfalls across the Midwest -- resulting in record flooding along the Mississippi -- could somehow be related. And then you might find your thoughts wandering to, oh, global warming, and to the fact that climatologists have been predicting for years that as we flood the atmosphere with carbon we will also start both drying and flooding the planet, since warm air holds more water vapor than cold air. It’s far smarter to repeat to yourself the comforting mantra that no single weather event can ever be directly tied to climate change. There have been tornadoes before, and floods -- that’s the important thing."

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

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