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Wonkbook: Heads Republicans win, tails consumers lose

By Ezra Klein,

Joshua Roberts BLOOMBERG Elizabeth Warren, the White House and Treasury adviser in charge of setting up the Consumer Financial Protection Bureau, testifies at a House Oversight and Government Reform subcommittee hearing in Washington on Tuesday, May 24, 2011. A week ago, Nobel-prize winner Peter Diamond withdrew his nomination to the Federal Reserve’s Board of Governors. Republicans had blocked him for being unqualified, perhaps because the Nobel laureate had not also completed Hercules’ 12-feats of strength. That took one high-profile Obama nominee off the board. But it left the highest-profile candidate still in limbo. What about Elizabeth Warren, who bankers seemed to be warming to, even if Republican congressmen weren’t getting along with her?

Turns out “what about Elizabeth Warren?” is the wrong question. “It’s not Elizabeth Warren-specific,” Mitch McConnell spokesman Donald Stewart explained. “It’s any nominee.” As Ylan Mui reports today, the Republicans have vowed to block any nominee to the Consumer Financial Protection Bureau. Why? They simply don’t like the agency. Instead, they want it overseen by a commission rather than a director, they want more control over its funding and tougher oversight over its activities. They want it, in other words, leased and weakened. One might observe that if the GOP had been as interested in reining in Wall Street as they are in reining in the consumer-protection agency, we might be living in a very different economy today. But as the old saying goes, there’s no use crying over nine percent unemployment.

It’s rare for parties to attempt root-and-branch reform of an agency from the minority position. Republicans don’t hold the Senate or the White House. They cannot vote their changes into law. So instead, they’re taking the agency’s leadership hostage, threatening to withhold stability and staffing from the Consumer Financial Protection Bureau unless the Obama administration gives into their demands. The Obama administration is not going to sign off on these demands, of course. But perhaps that’s not the point. The Bureau’s scheduled launch date is July 21st. And as Mui explains, “if no director is named by then, the fledgling agency will have limited ability to write new rules or supervise certain financial firms that are not banks, such as payday lenders.” The point of the changes the Republicans want to make is that they’ll substantially weaken the agency. Refusing to approve any and all candidates for director of the agency will do the same thing. Heads Republicans win, tails consumers lose.

Five in the morning

1) The Biden debt talks are moving faster, reports Lori Montgomery: “Amid fresh signs of a faltering economic recovery, bipartisan negotiations to rein in the national debt shifted into high gear Thursday as lawmakers in both parties called for a quick resolution to the talks as the best medicine for the shaky economy. Vice President Biden met for the first time in two weeks with six congressional negotiators in a session focused largely on Democratic demands for more revenue as part of any debt-reduction deal. The group agreed to pick up the pace of the talks, with three sessions scheduled for next week...The slowing recovery has given rise to talk of a new round of economic stimulus, including discussions at the White House about allowing employers to take advantage of a temporary payroll tax holiday that currently benefits only workers.”

2) Senate Democrats want no Medicaid cuts in a debt deal, report Jason Millman and Jennifer Haberkorn: “Forty-one Senate Democrats are urging President Barack Obama to reject GOP proposals to dramatically change Medicaid, marking the party’s strongest defense yet of the federal-state health care program. The clear message: Medicaid block grants or other caps on federal Medicaid spending cannot get through the Senate. While Democrats have rallied against the Republican plan to transform Medicare into a voucher-like program, they had so far presented a less united front on a GOP proposal to block-grant Medicaid...In the main letter, Rockefeller and 36 other senators say they oppose block granting Medicaid and enacting other spending caps -- and urge the White House not to make Medicaid the ‘sacrificial lamb.’ Four other Democratic senators sent similar letters to the White House.”

Related: My interview with Sen. Jay Rockeller, who’s leading this charge.

3) Senate Republicans will block any Consumer Financial Protection Bureau nominee, reports Ylan Mui: “’It’s not sexist. It’s not Elizabeth Warren-specific,’ McConnell spokesman Donald Stewart said. ‘It’s any nominee.’ It takes only a single senator to hold up the confirmation indefinitely. President Obama could appoint someone during the next congressional recess, but Republicans can keep the Senate in session to block that move. Republicans want the bureau to be run by a five-member commission rather than a single director. They also called for tougher oversight of the bureau by existing banking regulators and said the new agency should be funded by congressional appropriations. Under the current structure, the bureau’s budget is carved from the Federal Reserve.”

4) The administration is set to nominate two new financial regulators, reports Binyamin Appelbaum: “The Obama administration, moving to fill vacancies at several financial regulatory agencies, is considering nominating Thomas J. Curry to head the Office of the Comptroller of the Currency, which oversees most of the nation’s large banks, according to several people with knowledge of the deliberations. Mr. Curry, a lawyer who served as state banking commissioner in Massachusetts, now sits on the board of the Federal Deposit Insurance Corporation. The White House would like to send Mr. Curry’s name to the Senate at the same time that it moves on its widely reported plan to nominate Martin J. Gruenberg as the new chairman of the F.D.I.C., those people said. Mr. Gruenberg, a longtime Democratic Senate staff member, has served since 2005 as the vice chairman of the F.D.I.C.”

5) The Senate has done a record amount of time-killing this Congress, reports David Fahrenthold: “These procedures, called ‘<a href=”http://www.senate.gov/reference/glossary_term/quorum_call.htm”>quorum calls</a>,’ usually serve no other purpose than to fill up empty minutes on the Senate floor. They are so boring, so quiet that C-SPAN adds in classical music: otherwise, viewers might think their TV was broken. This year -- even as Washington lurches closer to a debt crisis -- the Senate has spent a historic amount of time performing this time-killing ritual. Quorum calls have taken up about a third of its time since January, according to C-SPAN statistics: more than 17 eight-hour days’ worth of dead air...To an outsider, a quorum call looks like a serious -- if dull -- piece of congressional business. A clerk reads out senators’ names slowly, sometimes waiting 10 minutes or more between them. But it’s usually a sham. The senators aren’t coming. Nobody expects them to.”

’90s flashback interlude: Liz Phair plays “Never Said” on <em>120 Minutes.

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

Still to come: Tom Coburn will get his vote on killing ethanol subsidies; Ruth Marcus really does not like Tim Pawlenty’s economic plan; Paul Krugman on the GOP’s implicit affection for the rentier class; some health care reform programs still lack funding; the auto union is easing up in negotiations; the EPA is spurring utility companies to shut down coal plants; and a three-year-old gets stuck in a claw machine.

Economy

The Senate will vote next week on killing ethanol subsidies, reports Darren Goode: “Sen. Tom Coburn has pulled the trigger and is forcing a long-sought vote on an amendment repealing billions in annual tax incentives for ethanol. The Senate will vote Tuesday afternoon on Coburn’s motion limiting debate on his amendment that would do away with the 45 cent blender tax credit for ethanol -- worth about $6 billion this year -- and the 54 cent tariff on imported ethanol...’He was not able to give a heads up to either Reid or McConnell,’ Coburn spokesman John Hart said. ‘There was no agreement. Coburn just did this.’ It is the prerogative of any senator to file a cloture motion to file a vote on an amendment as long as there are 16 signatures. But it is more customary for senators to force a vote by filing a motion to suspend the rules -- which requires a higher 67-vote threshold than the 60 votes needed to overcome a filibuster.”

The Gang of Six is shopping a proposal around, reports Meredith Shiner: “The five remaining members of the Gang of Six on Thursday outlined to nearly 20 other senators the budget-cutting and fiscal changes they’ve reached consensus on -- a development that Budget Committee Chairman Kent Conrad said was a sign the group is ‘close to reaching conclusion.’ ‘We’ve reached a natural point at which it seemed like the next step, the next natural step, would be to share what we’ve been doing with other members and get their reaction,’ Conrad said. But sources close to the talks pushed back against Conrad’s statements, saying they were ‘a massive overstatement of where we are’ and noting that it was not the first time other senators have been briefed on the plan.”<p>

The recession has doubled the time it takes unemployed people to find a job, reports Arthur Delaney: “A new study from the Labor Department’s Bureau of Labor Statistics shows that the Great Recession that technically ended in 2009 has doubled the time it takes before the average unemployed person either finds a job or gives up looking for work. Each month, BLS announces the latest unemployment rate and several other characteristics of the workforce, including the length of time people have been jobless. Last Friday’s announcement brought news that the average unemployed person had been looking for work for 39.7 weeks as of May (the median length of unemployment rose to 22 weeks). According to a new paper by BLS economist Randy Ilg, by the end of 2010 the median successful job search lasted 10 weeks, up from five weeks in 2007.”

The GOP is finding new ways to block Dodd-Frank, reports Maya Jackson Randall: “A fairly noncontroversial U.S. Senate bill to support economic-development projects could quickly become contentious next week if Republican critics of the Dodd-Frank financial overhaul have their way. At least three GOP senators are considering taking a stab at attaching amendments to the economic-development measure that would rework key parts of the Dodd-Frank financial-overhaul law Congress passed last year. In fact, one amendment filed by tea-party Sen. Jim DeMint (R., S.C.) would repeal the whole financial law...Meanwhile, Sen. Jerry Moran (R, Kan.) has filed an amendment that would replace the new Consumer Financial Protection Bureau--a centerpiece of Dodd-Frank that would have broad powers over the financial industry--with a six-person board.”

Retailers’ swipe fee win may not help consumers, writes Annie Lowrey: “There is no indication that businesses will actually pass savings onto their customers. Swipe fees were always invisible to shoppers--barely anyone outside of the small-business or financial-services world had ever heard about them before last year. The savings that will take effect in July might well be invisible to customers, as many small businesses will probably just hold onto the newly retained cash. Of course, that means they can pay their workers more, hire more employees, invest, or consider dropping prices--and the change will benefit consumers indirectly, if not directly...Much more importantly, banks have openly promised to make up the $15 billion or so in lost revenue elsewhere: What they cannot charge to small businesses, they will instead charge to their card-holders.”

Interest group influence is stopping politicians from helping the unemployed, writes Paul Krugman: “Consciously or not, policy makers are catering almost exclusively to the interests of rentiers -- those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense. Of course, that’s not the way what I call the Pain Caucus makes its case. Instead, the argument against helping the unemployed is framed in terms of economic risks: Do anything to create jobs and interest rates will soar, runaway inflation will break out, and so on. But these risks keep not materializing. Interest rates remain near historic lows, while inflation outside the price of oil -- which is determined by world markets and events, not U.S. policy -- remains low.

Tim Pawlenty’s economic plan would be irresponsible even if it weren’t a joke, writes Ruth Marcus: “The Pawlenty campaign told me that -- even assuming his outlandish 5 percent growth projections come true -- the tax cut would bring in $2 trillion less in revenue over 10 years than currently projected. If growth remains at the expected level and does not soar in the wake of the Pawlenty tax cut, the cost would be a whopping $5.8 trillion. The nonpartisan Tax Policy Center puts the number even higher: at $11.6 trillion compared to current law, as the Pawlenty campaign also assumes. The top 1 percent of taxpayers would receive an average annual tax cut of $261,000. It is beyond irresponsible to consider another huge tax cut at a time of looming fiscal crisis.”

Adorable children getting trapped places interlude:A three-year-old gets stuck in a claw machine.

Health Care

A number of health care reform programs aren’t being funded, reports Phil Galewitz: “While the health care law has survived Republican efforts to repeal it, some of its individual initiatives are in limbo or limping along because of funding problems. The law authorized the new efforts but didn’t provide appropriations for them. That has to occur separately - and given current deficit woes, as well as wrangling between Democrats and Republicans, the programs might never get off the ground, some experts say...One of the higher-profile initiatives that has not received any funding is a $50 million program to help states test alternatives to resolve medical malpractice disputes...A separate program that is providing $25 million in grants to test malpractice reforms to improve patient safety hasn’t been affected. The White House approved those grants six months before the health care law was enacted.”

Patients can appeal their insurers’ decisions starting this year, reports Susan Jaffe: “Millions of Americans gained the right this year to appeal decisions made by health plans to an outside, independent decision-maker. But many of these consumers might not know they have the new option -- and when they find out, it might be too late...Federal officials say that, beginning this year, about 44 million people are entitled for the first time to an external appeal, under the 2010 health care law...In an external review, consumers who have been denied coverage make their cases to an arbiter -- who has no financial stake in the decision -- that the medical services are necessary and should be paid for by the health plan. A study by the Government Accountability Office this year found that consumers in plans already offering these outside reviews prevailed in as many as 54 percent of the cases.”

Blue Shield of California is capping its profits, report Julia Appleby, Christopher Weaver, and Phil Galewitz: “Blue Shield of California’s surprising announcement that it will cap profits at 2 percent and issue millions in policyholder refunds sparked hopes that other health insurers would follow suit, but many experts said yesterday that was unlikely. The company, which made the announcement Tuesday, is better positioned than most to make that move. For one thing, as a nonprofit, it has more leeway to cap profits than its for-profit cousins who have to meet Wall Street earnings targets, says Peter Kongstvedt, a managed care consultant in McLean, Va. The insurer, a major force in the California market with more than 3 million policyholders, also has substantial reserves and posted a profit margin of 3.1 percent last year, including income derived from its investments.”

We can reform Medicare without privatizing it, writes Joe Lieberman: “I am drafting legislation that will preserve Medicare without privatizing it by saving at least $200 billion in Medicare spending over the next 10 years and extending Medicare’s solvency by approximately 20 years...First, I will propose raising the Medicare eligibility age every year starting in 2014 by two months until it reaches 67 in 2025...I will propose reforming the complex Medicare benefit structure, which is wasteful, misunderstood by nearly all Medicare enrollees and prone to over-utilization and fraud...I will propose that we raise the premiums for all new enrollees in Part B (doctor’s services) and Part D (prescriptions) starting in 2014 to 35 percent of program costs...I will propose that higher-income Americans pay an additional 1 percent of every dollar they earn over $250,000 to help save the program.”

Domestic Polic y

The UAW is easing up its pay demands, reports Matthew Dolan: “The United Auto Workers union is open to discussing wider use of profit-sharing plans instead of fixed pay increases for its members, a key shift as the union nears contract talks with Detroit auto makers. UAW President Bob King said in an interview Thursday that the union will broach the subject when formal negotiations with Ford Motor Co., General Motors Co. and Chrysler Group LLC start in late July. The UAW has historically resisted linking large portions of workers’ pay to profits because its members would suffer in down years. Another fear: The auto makers were simply not making profits on a consistent basis. Tying more pay to profits would make it easier for the Detroit companies to be labor-cost competitive with the non-unionized U.S. plants of foreign-owned auto makers such as Toyota Motor Corp. and Hyundai Motor Co.”<p>

The HOME affordable housing program is working, writes Shaun Donovan: “The Post published a front-page story last month painting an ominous picture of local corruption fed by federal mismanagement on the part of officials who ‘largely looked the other way.’ The multipart series ‘Million-dollar wasteland’ on the HOME Investment Partnerships Program purported to uncover ‘a trail of failed developments in every corner of the country,’ with millions of taxpayer dollars wasted on ‘troubled developers’ and other bad actors. That’s a far cry from the program that I oversee as President Obama’s housing secretary...HOME produced more than a million affordable homes in the past two decades and leverages nearly $4 of private and other public investment for every dollar it invests. The program was a semifinalist for Harvard’s Innovations in American Government award in 2005.”

Optical illusion interlude: A plaza in Stockholm that makes you look like you’re on top of a high cliff.

Energy

The EPA is spurring utilities to shut coal plants, reports Steven Mufson: “AEP, the nation’s biggest coal-based utility, said it would shut down five aging coal plants, convert at least two others to natural gas and retrofit a dozen more as part of a $6 billion to $8 billion plan it said would help it comply with proposed Environmental Protection Agency regulations. AEP joins other utilities -- including the Tennessee Valley Authority, Dominion Resources and TransAlta -- that have decided to close coal plants and upgrade others for economic reasons or in conjunction with EPA negotiations. Coal-fired plants account for nearly 25,000 megawatts, or 65 percent, of AEP’s total generation capacity. AEP’s plan would close down 6,000 megawatts of coal-fired units. The five plants that will close include units dating back to 1944; the newest of those units is 51 years old.”

The top nuclear regulator sabotaged a waste project, reports Stephen Power: “The U.S.’s top nuclear-power regulator ‘strategically’ withheld information from his colleagues in an effort to stop work on a controversial proposed waste dump, according to a report by the agency’s internal watchdog, a finding likely to inflame debate about how to handle the nation’s nuclear waste. The June 6 report by Nuclear Regulatory Commission Inspector General Hubert T. Bell offers an unflattering portrait of the NRC and its leader, Gregory Jaczko, who is described as having a temper that makes it ‘difficult for people to work with him.’ At issue is a directive by Mr. Jaczko to agency staffers that effectively halted work on a key NRC report about a proposed waste repository at Nevada’s Yucca Mountain.”

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

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