Wonkbook: Is July 22nd the new debt-ceiling day?

at 07:53 AM ET, 07/01/2011


(Andrew Harrer - BLOOMBERG)
You've probably heard that Aug. 2nd is the drop-dead date for a debt-ceiling deal. Nuh-uh, the White House tells Damian Paletta. It's actually July 22nd. Writing and passing the legislation takes some time, as does working the money through the Treasury Department. This can't be left until the last moment.

But why are they telling us this now? Debt talks have completely broken down. The two parties's negotiating positions are spinning further apart, not coming closer together. Republicans are now pushing a balanced budget amendment they've specifically designed to repel even conservative Democrats. The GOP increasingly doubts that the debt ceiling matters and needs to be raised with any real expediency, while Democrats -- potentially including Treasury Secretary Tim Geithner -- increasingly doubt that the debt ceiling is constitutional and Republican demands ultimately need to be met. This doesn't seem like an environment in which moving the date of doomsday up by two weeks is going to have much effect.

Perhaps this is just buying more time to begin emergency maneuvers later this month. No one wants -- or should want -- a series of short-term increases in the debt ceiling. Senate Minority Leader Mitch McConnell floated the idea a week or two ago only to be shot down by House Majority Leader Eric Cantor. Senate Democrats have floated it to the White House and did not receive a warm reception. And with good reason: pushing this further into the election would be a terrible, no-good, totally insane idea. But it's how Washington bought itself time on the government shutdown, and it's increasingly likely to be how they buy themselves time on the debt ceiling. Setting an earlier drop-dead date might give the various players room to move to a temporary solution before the financial system goes into cardiac arrest.

Five in the morning

1) The administration is setting July 22 as the debt deal due-date, reports Damian Paletta: "The Obama administration believes congressional leaders must agree to a deficit-reduction deal by July 22 in order to raise the government's borrowing limit in time to avoid a default in early August, according to Democratic officials with knowledge of the negotiations. The government needs a week or two to write and pass the necessary legislation and take the steps necessary to avoid missing a payment. 'We're down to the wire,' one official said. President Barack Obama and Senate leaders have agreed on the outline of an agreement to cut federal spending by about $1 trillion over at least 10 years, but are deadlocked over whether to include some tax increases, as Democrats insist, or take them off the table, as Republicans want."

2) Geithner has signaled he thinks the debt limit is unconstitutional, report Ryan Grim and Samuel Haass: "At a Politico Playbook breakfast on May 25, Geithner was asked by host Mike Allen about the negotiations over default and the debt ceiling. 'I think there are some people who are pretending not to understand it, who think there's leverage for them in threatening a default," Geithner said. "I don't understand it as a negotiating position. I mean really think about it, you're going to say that-- can I read you the 14th amendment?'...'So as a negotiating strategy you say: 'If you don't do things my way, I'm going to force the United States to default--not pay the legacy of bills accumulated by my predecessors in Congress.' It's not a credible negotiating strategy, and it's not going to happen,' Geithner insisted."

3) He also might be on the way out after the debt deal, reports Zachary Goldfarb: "Treasury Secretary Timothy F. Geithner, an architect of the Obama administration’s economic strategy, has told the president that he may seek as soon as this summer to resign, according to people familiar with the matter. Geithner’s departure would mark the loss of Obama’s longest-serving economic adviser at a time when the recovery has slowed and the unemployment rate remains stubbornly high. Geithner has told the White House he will wait until the conclusion of talks with Congress over the nation’s debt before deciding whether to leave, according to the people familiar with the matter. An administration official said Geithner recognizes the conclusion of these negotiations could provide a 'window' for him to leave."

James Pethokoukis names some possible successors: But would Facebook COO Sheryl Sandberg do it?

4) "I yearn for the days of the Gingrich revolution compared to these people," Rep. Peter DeFazio tells Jake Sherman and Marin Cogan: Republicans have plenty of ways to push a constitutional amendment to balance the budget. One option contains hard spending caps and a two-thirds supermajority vote for any tax increases. This version is embraced by the right but has little chance of passing.Another option would drop those provisions, have roughly a dozen Democratic co-sponsors and stick to a straight majority rule for tax increases. This one actually would have a shot at getting the two-thirds vote needed to clear the House. But nothing in this Congress comes easily, and Republicans have decided to go with the version that’s almost certain to fail but is beloved by the conservative base...'They’re clearly just looking for something to take and put balanced-budget Democrats like me on the spot and say, ‘He doesn’t really support a balanced-budget amendment.’ Well, I do, but I want an honest one,” said Oregon Democrat Peter DeFazio, who voted for the 1995 bill. 'I yearn for the days of the Gingrich revolution compared to these people. I never thought I’d be saying that.'"

5) Only 30 House Republicans oppose significant defense cuts, report Erik Wasson and John Bennett: "Defense cuts proposed by the White House are unlikely to keep a debt-ceiling deal from passing Congress, sources say. As few as 30 House Republicans would likely consider voting against a debt-ceiling deal that cuts $300 billion from security spending, according to a GOP aide. The relatively small bloc of opposition to the level of defense cuts floated by the White House suggests the GOP’s traditional opposition to reducing military spending has taken a backseat to warding off tax increases. 'Robust defense spending and lower taxes have been two hallmarks of the Republican Party for years,' one former GOP House staffer said. 'And those two things are going to be in direct competition with one another' in the debt talks."

Festival interlude: Braids play "Lemonade" at SXSW.

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

Still to come: The Senate is stalling again on trade; Ryancare actually won't save that much; the FEC doesn't want lawmakers raising unlimited funds for third-party groups; chances of a clean energy standard look dim; and two stand-up comics perform simultaneously.

Economy

The bailout of Greece is moving forward, reports Howard Schneider: "European officials pushed forward Thursday with efforts to avert a bond default by Greece, with lawmakers in Athens approving legislation and German officials saying their banks were prepared to help. The Greek parliamentary vote, the second in as many days, means Prime Minister George Papandreou will head to a summit of European leaders this weekend with a fresh commitment by his nation: $40 billion in spending cuts and tax increases and a promise to sell off major state assets to raise another $70 billion. European leaders and the International Monetary Fund have demanded such assurances as a condition for granting more international loans to the financially strapped country. Greece needs $17 billion in coming days to make payments to bondholders and keep the government running."

Senate action on trade deals is once again stalled, report Howard Schneider and Felicia Sonmez: "Senate Republicans on Thursday boycotted a hearing on three pending free-trade agreements, delaying action on a centerpiece of the Obama administration’s effort to boost U.S. exports. Republicans object to a worker assistance program the administration wants to include as part of a free-trade agreement with South Korea. The Trade Adjustment Assistance program costs about $1 billion and has drawn bipartisan support in the past. But in the charged environment over spending and debt negotiations, the dispute is complicating what the administration had hoped would be an easy push to broaden trade with South Korea, Colombia and Panama. Senate Finance Committee Chairman Max Baucus (D-Mont.) called a meeting of his panel at the Capitol at 3 p.m. Thursday, but the 11 Republicans on the committee failed to show up."

Obama's jet tax proposal is drawing fire, reports John McKinnon: "President Barack Obama on Wednesday targeted a tax break for corporate-jet ownership, aiming to put Republicans in the position of defending a luxury perk. In a news conference, Mr. Obama repeatedly indicated that Congress should consider limiting the depreciation break for corporate-jet owners, which allows companies to rapidly deduct from their taxable income the decline in the jets' value. Almost immediately, however, business leaders and some union officials criticized the president, saying such a move could jeopardize the executive-aircraft sector's still-fragile recovery. Mr. Obama's corporate-jet challenge drew scoffs from deficit hawks for its tiny budgetary impact."

Real talk: Want to bet the White House political team isn't all that unhappy to see defenders of a tax break for corporate jets keeping a tax break for corporate jets in the news? Has anyone mentioned a tax break for corporate jets yet?

Foreclosure processing delays are holding back the housing market, reports Brady Dennis: "Across the country, states are wrestling with mounting foreclosure backlogs, exacerbated by borrowers who continue to fall behind on their mortgages. That has left the housing market languishing long after the financial crisis, and it has hindered the nation’s broader economic recovery. 'Housing has always led the way . . . and it’s just not doing that,' said Christopher Mayer, a professor of real estate at Columbia Business School in New York. 'It’s very hard to imagine the economy’s really going to pick up without housing doing more.' Skepticism about the prospects for a quick housing recovery seems warranted, given recent numbers."

We need a payroll tax cut tied to the unemployment rate, writes Peter Orszag: "Official projections for the federal budget show fiscal tightening in excess of 2 percent of GDP from fiscal year 2011 to 2012. To put that percentage in context, consider that the fiscal tightening in the U.K. from 2010 to 2011 -- which has received so much attention in the news media -- amounted to less than 1.5 percent of GDP. To mitigate the harm to the labor market from this fiscal drag, policy makers should provide additional macroeconomic support in 2012 by extending the existing payroll tax holiday. But more than that, Congress should link the payroll tax to the unemployment rate. This would allow the tax holiday to automatically calibrate itself to existing conditions, providing support only when the economy is weak. If necessary, the underlying payroll tax rate could be raised to make this mechanism budget-neutral."

The GOP is holding the debt limit hostage because of Obama's history of folding, writes Paul Krugman: "What’s really going on is extortion pure and simple. As Mike Konczal of the Roosevelt Institute puts it, the G.O.P. has, in effect, come around with baseball bats and declared, 'Nice economy you have here. A real shame if something happened to it.' And the reason Republicans are doing this is because they must believe that it will work: Mr. Obama caved in over tax cuts, and they expect him to cave again. They believe that they have the upper hand, because the public will blame the president for the economic crisis they’re threatening to create. In fact, it’s hard to avoid the suspicion that G.O.P. leaders actually want the economy to perform badly. Republicans believe, in short, that they’ve got Mr. Obama’s number."

Daft Punk interlude: This dance to "One More Time" is the best dance to "One More Time".

Health Care

Ryancare wouldn't save that much, reports Jeffrey Young: "Giving wealthy seniors less for Medicare, a component of a budget plan by Representative Paul Ryan that made the Wisconsin Republican a polarizing figure in the U.S., would barely dent health spending, a Bloomberg Government study shows. The plan would replace the current Medicare system of guaranteed benefits with payments to make up for the cost of obtaining private health insurance. It offers less assistance to seniors with the highest incomes, a policy known as 'means testing' that Ryan has said will reduce the budget deficit.
Ryan would make the wealthiest 8 percent of 65-year-olds pay a larger share of their health-care bills in 2022, the first year the plan would take effect. Smaller U.S. subsidies would be 4.4 percent, or $1.2 billion, cheaper than if all beneficiaries got the same assistance, according to the study."

Domestic Policy

The FEC says lawmakers can't raise an unlimited amount for "super-PACs", reports Derek Willis: "The agency’s six commissioners ruled that members of Congress and other federal officials would not be allowed to raise unlimited contributions for super political action committees. They will still be permitted to raise money for super PACs, but only up to the legal limits already in place. The commission’s ruling came after James Bopp Jr., a Republican lawyer, established a committee to serve as a clearinghouse for independent spending activities...The commission’s opinion said lawmakers and national party officials could attend and speak at fund-raising events for super PACs, but could solicit contributions only in amounts allowed by law -- in most cases, $5,000 per year from an individual or political action committee."

Pentagon costs are rising fast, reports Walter Pincus: "The Congressional Budget Office on Thursday projected that higher costs for weapons systems and health care will increase the Pentagon budget by $40 billion over the next five years at a time when President Obama and many lawmakers are looking to cut military spending. The new projection, of $594 billion in spending for 2016, is $25 billion higher than the Pentagon’s estimates. The report notes that health-care costs for the Defense Department have outpaced those elsewhere. It also says that 'the costs of developing and buying weapons have historically been, on average, 20 percent to 30 percent higher' than Pentagon estimates. Defense officials already were concerned about the rapid growth of the Military Health Care System. Next year’s request for $51 billion represents about 9 percent of the overall Defense Department base budget."

A judge ruled against Boeing in its union fight, reports Melanie Trottman: "Boeing Co. was dealt a blow Thursday in its effort to make the NLRB’s complaint against the company go away. The National Labor Relations Board judge hearing the case ruled against what he called Boeing’s 'impassioned' motion to dismiss it. The NLRB has alleged that the company illegally shifted work to a nonunion factory in South Carolina from union facilities in Washington state. 'The motion to strike these allegations is without merit and should be denied,' Judge Clifford Anderson said in his 19-page ruling issued Thursday. The administrative law judge reasoned that much of Boeing’s argument couldn’t be proven at this early, 'pre-evidentiary' phase of the hearing."

Online sales should be subject to sales taxes, reports Dan Crippen: "The most pernicious erosion of state sales tax bases is the proliferation of the sales of goods and services on the Internet -- goods and services that if purchased from a local business would have sales tax collected. In other words, Internet sellers receive a tax subsidy for much of what they sell. This is unfair to local retailers that not only collect sales taxes but also contribute to the local economy, pay state and local taxes, operate as showrooms for Internet sales and technical services, create most of our jobs and contribute to our communities by sponsoring Little League teams and more. Legislation under consideration, known as the Main Street Fairness Act, would reverse the decades-old federal court case that created this problem."

The GOP's vision of America is not as extreme as some think, writes Michael Gerson: Apart from Ron Paul, Republican candidates do not recommend a retreat from the federal role in providing health care to the elderly. They propose, instead, to achieve that goal through premium supports, individual choice and market competition. This is the guilty secret of the Republican presidential field: From Huntsman to Bachmann, the candidates accept many of the goals of the Great Society, if pursued by conservative and free-market methods. They are following the example of Ronald Reagan, whose early opposition to Medicare ended in a politically realistic accommodation with the program. (One reason Paul has described Reagan’s presidency as a “failure.”) The ideological certainties of the conservative movement often contrast with the conduct of conservative politicians. Activists may regard the New Deal as soft socialism, but conservative politicians do not seek the end of Social Security or unemployment insurance. Conservative talk show hosts may call the progressive movement of the late 19th century a “cancer in America,” but most presidential hopefuls do not oppose antitrust legislation, the direct election of senators or the inspection of meat-packing plants.

Duelin' comedians interlude: Conan double-books Jon Dore and Rory Scovel, has them perform at the same time.

Energy

A Senate deal on a "clean energy standard" looks unlikely, reports Ben Geman: "A top aide to Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) said Thursday that Murkowski and Committee Chairman Jeff Bingaman (D-N.M.) have a 'bedrock' disagreement over President Obama's proposal to mandate a major expansion of low-carbon power generation. Obama is pushing a 'clean energy standard' (CES) that would require power companies to jointly supply 80 percent of U.S. electricity from 'clean' sources like nuclear, renewables and natural gas by 2035. But McKie Campbell, Murkowski's staff director, said Thursday that Bingaman and Murkowski are at odds over Murkowski's view that a CES should replace federal greenhouse gas regulations, and said he does not see a path forward."

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

 
Read what others are saying

    Most Read: Business

    DJIA
    0.47%
    S&P 500
    0.33%
    NASDAQ
    0.30%
     Last Update: 02:02 PM 11/21/2014

    World Markets from      

     

    Other Market Data from      

     

    Key Rates from