Wonkbook: McConnell to House: Don't shut down the government

at 07:53 AM ET, 04/20/2012

Something happened in the Senate on Thursday. Something surprising. Something encouraging. Something almost...functional.


Senate Minority Leader Mitch McConnell of Kentucky gestures during a news conference in Washington in February. (J. Scott Applewhite - AP)
You might remember that, in August 2011, Congress almost defaulted on the national debt. Eventually, the two parties reached a deal -- the Budget Control Act -- that would, among other things, cut more than $900 billion from the discretionary side of the budget over the next 10 years. This wasn't exactly a shining moment in the history of the United States Congress -- "and that, kids, is how the government decided not to create an unnecessary financial crisis in the middle of a fragile recovery" -- but at least we could move forward. Or so we thought.

In recent months, Republicans have begun arguing that the spending levels set out in the Budget Control Act aren't low enough. Those are "ceilings," they say, not "floors." And so, where the BCA permits $1.047 trillion in discretionary spending, the House budget resolution dragged that down to $1.028 trillion. And remember, if the House and Senate don't agree on a spending level, the federal government shuts down.

On Wednesday, the administration sent House Republicans a letter saying there would be no further negotiation on this point. "Until the House of Representatives indicates that it will abide by last Summer's agreement, the President will not be able to sign any appropriations bills." If Republicans wanted a shutdown, in other words, they could have one.

But then a funny thing happened in the Senate. Daniel Inouye, the Democratic Chairman of the Appropriations Committee, tried to get his committee to agree on spending levels for fiscal year 2013. Tried, and succeeded. The vote, which was in essence a vote to abide by the caps in the BCA, passed his committee 27-2. Even Minority Leader Mitch McConnell voted for it. "His support now, together with [Lamar] Alexander, allows the process to move forward and seems to put to rest fears that he would obstruct out of loyalty to the House leadership," reported David Rogers.

This doesn't mean we'll have an agreement. The House could simply refuse to play ball. Key Senate Republicans could come under Tea Party pressure and change their minds. But, for now, the fact that Senate Republicans have signed off on the BCA makes it more difficult for House Republicans to shut the government down over it.

Top stories

CBO: Mandatory spending in one infographic.

1) The Senate got bipartisan support for sticking to the spending levels laid out in the debt deal. "With the blessing of top Republican leaders, the Senate Appropriations Committee gave quick approval Thursday to spending allocations for the coming year--consistent with the August debt deal but also significantly higher than the levels set by the House GOP for domestic programs. Senate Minority Leader Mitch McConnell (R-Ky.) and Sen. Lamar Alexander (R-Tenn.), also a veteran of the GOP leadership, joined in support as members of the committee. Two freshman Republicans, Sens. Jerry Moran of Kansas and Ron Johnson of Wisconsin, dissented, but the 27-2 bipartisan roll call was a boost for Chairman Daniel Inouye (D-Hawaii) as he tries to make some headway before the November elections. The path ahead is still not easy given the potential for filibusters and delays on the Senate floor. But the greater issue is the House’s decision to break with appropriations targets set out in the Budget Control Act last summer." David Rogers in Politico.

2) The House GOP wants cuts to healthcare, not defense. "Guns or bandages. That’s the choice House Republicans are framing for the White House in the early phases of a battle over budget cuts that will hammer the Pentagon later this year if Congress and President Barack Obama don’t slash other programs. GOP lawmakers are moving to eliminate so-called slush funds in Obama’s health care law, save $44 billion by cracking down on overpayments to people who are insured through its new health exchanges and wring out tens of billions of dollars more by limiting medical malpractice awards and overhauling Medicaid...The Republicans are making their preferences clear: Better to cut the health reform law that much of the country hates -- and basically dare the Democrats to defend it -- than allow the defense cuts to go through. At a time when the government has racked up nearly $16 trillion in debt, it’s a matter of picking losers, not winners, if Washington is to avoid automatic 'sequestration' cuts of $1.2 trillion." Jennifer Haberkorn and Jonathan Allen in Politico.

3) Jobless claims data was worse than expected. "First-time claims for unemployment insurance in the US fell last week while revisions to the previous data were larger than normal, raising questions about whether recent payroll gains that have pushed unemployment to a three-year low may be shortlived. First-time claims for unemployment insurance in the US fell last week while revisions to the previous data were larger than normal, raising questions about whether recent payroll gains that have pushed unemployment to a three-year low may be shortlived. Thursday’s report illustrates the vulnerability of closely watched indicators to revisions, which can cloud a clear picture of the economy. The figures for the week ending April 7 were revised up by 8,000 to 388,000 - the highest level since January. After an upward revision to 370,000 from an initial estimate of 360,000, the numbers for the week before were revised back down to 362,000, Thursday’s release showed." Anjli Raval in The Financial Times.

@justinwolfers: Place your hands together, and pray it's just the Easter seasonals: Initial claims are now at 386k, and last week was revised up to 388k.

@bencasselman: I understand the focus on the revisions, but isn't the bigger deal here that we now have a clear month-long trend of rising claims?

4) An increasing number of congressional Democrats are backing Keystone XL. "President Obama is finding himself increasingly boxed in on the Keystone pipeline fight as more Congressional Democrats are joining Republicans in backing the project...On Wednesday, the House passed a short-term transportation bill that included a provision that would pave the way for the construction of the next stage of the oil pipeline, a measure that Mr. Obama has said he would veto. The bill passed 293 to 127, with 69 Democrats supporting it. It is the fourth time the House has passed a measure to expedite the project; one failed narrowly in the Senate only after Mr. Obama personally lobbied some Democrats to vote no. With the House vote, Mr. Obama finds himself, for the first time in his presidency, threatening a veto on a significant piece of legislation that enjoys the support of an increasing number of Democrats, as well as the vast majority of Republicans in Congress." Jennifer Steinhauer in The New York Times.

5) Obama will begin a big push on student loans. "President Obama begins an all-out push on Friday to get Congress to extend the low interest rate on federal student loans, White House officials said, an effort that is likely to become a heated battle along party lines. If Congress fails to act, the interest rate on the loans, which are taken out by nearly eight million students each year, will double on July 1, to 6.8 percent...At a time when Americans owe more on student loans than on credit cards -- student debt is topping $1 trillion for the first time -- and the Occupy movement has highlighted the rising furor over spiraling student debt, the issue has moved higher on the political agenda...The low interest rate stemmed from the 2007 College Cost Reduction and Access Act, which reduced interest rates on subsidized Stafford loans over the following four academic years -- from 6.8 percent to the current 3.4 percent -- with the proviso that the rates would revert to 6.8 percent this July." Tamar Lewin in The New York Times.

Top op-eds

1) KLEIN: America isn't on the road to Europe. "I’m always surprised, in my conversations with conservatives, how often they distill the deficit down to a simple question: Do you really want the United States to go the way of Europe? Interestingly, I’m now hearing it from liberals, too...The conservative argument is that unchecked deficits could lead to a bond-market crisis, much as they have in Greece. The liberal argument is that austerity could lead to riots, as it has in Greece. Both arguments, I think, miss just how much trouble Europe is in-- and how much better shape we’re in...What separates Europe from America isn’t the economic pain of the average European. It’s the fact that investors aren’t confident the euro zone will exist in 10 years...America’s got a debt problem. But it’s been around for hundreds of years. Our political system, for all its inanities and disappointments, is fairly well understood and quite widely trusted...There’s nothing obvious that could force a rethinking of America as a continuing, surviving enterprise in the way that we’ve seen in Europe." Ezra Klein in The Washington Post.

2) BLINDER: The Supreme Court shouldn't be deciding economic policy. "Economically, the individual mandate and insurance reforms form an unbreakable pair. Legally, they are separate. So the mandate could be ruled unconstitutional while the insurance reforms are not. After all, there is no question that health insurance is interstate commerce, and no question that the federal government can regulate interstate commerce. So what happens if the justices void the mandate but leave the insurance reforms in place? The answer is: We get incoherence. Which, of course, is why you don't want judges making economic policy...I have a simple model of Supreme Court decision making which rarely errs. In cases in which there are clear Democratic and Republican positions on an issue--which certainly includes this case--the Court will vote 5-to-4 Republican. Think Bush v. Gore or Citizens United...If we are going to have political decision-making, at least elected politicians should do the deciding. Come to think of it, they already have." Alan Blinder in The Wall Street Journal.

3) BROOKS: Colleges should better measure learning. "There’s an atmosphere of grand fragility hanging over America’s colleges. The grandeur comes from the surging application rates, the international renown, the fancy new dining and athletic facilities. The fragility comes from the fact that colleges are charging more money, but it’s not clear how much actual benefit they are providing...One part of the solution is found in three little words: value-added assessments. Colleges have to test more to find out how they’re doing. It’s not enough to just measure inputs, the way the U.S. News-style rankings mostly do. Colleges and universities have to be able to provide prospective parents with data that will give them some sense of how much their students learn. There has to be some way to reward schools that actually do provide learning and punish schools that don’t. There has to be a better way to get data so schools themselves can figure out how they’re doing in comparison with their peers." David Brooks in The New York Times.

4) SPITZNAGEL: The Fed helps drive income inequality. "A major issue in this year's presidential campaign is the growing disparity between rich and poor, the 1% versus the 99%. While the president's solutions differ from those of his likely Republican opponent, they both ignore a principal source of this growing disparity. The source is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price. (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm: the Federal Reserve. The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power...The Fed is transferring immense wealth from the middle class to the most affluent, from the least privileged to the most privileged. This coercive redistribution has been a far more egregious source of disparity than the president's presumption of tax unfairness...or deregulation." Mark Spitznagel in The Wall Street Journal.

5) BERNSTEIN: TARP worked, but we still need financial reform. "The Troubled Assets Relief Program (TARP) worked a lot better, and at a much lower cost, than is commonly recognized...Banks are recapitalized and less dependent on short-term funding, which makes them less vulnerable to the dynamics of the 2008 crash (the collapse of the overnight funds market was a major catalyst). But the Dodd-Frank financial reform law is far from implemented, and special interests are aggressively working to defang it. The arsonists have not left the scene...The TARP-led financial rescue worked, and we should learn from its success. That said, the damage caused by the bursting bubble goes far beyond any expected profits from the bailouts. If our government doesn’t put in place the regulatory framework to deal with the inherent instability in financial markets, we’ll be back in the bailout business again before we know it." Jared Bernstein in The Washington Post.

Top long reads

Ron Fournier and Sophie Quinton examine Americans' shrinking trust in their institutions: "Seven in 10 Americans believe that the country is on the wrong track; eight in 10 are dissatisfied with the way the nation is being governed. Only 23 percent have confidence in banks, and just 19 percent have confidence in big business. Less than half the population expresses “a great deal” of confidence in the public-school system or organized religion. 'We have lost our gods,' says Laura Hansen, an assistant professor of sociology at Western New England University in Springfield, Mass. 'We lost [faith] in the media: Remember Walter Cronkite? We lost it in our culture: You can’t point to a movie star who might inspire us, because we know too much about them. We lost it in politics, because we know too much about politicians’ lives. We’ve lost it--that basic sense of trust and confidence--in everything.'"

The Economist on Mitt Romney's rightward shift on economic policy: "The rightward drift of Mr Romney has taken him a long way from where he started. His 2010 book, 'No Apology', reads more like a McKinsey report than a memoir (in fact, it regularly quotes McKinsey, a consultancy). It ranges from the business practices of Japanese doctors to how much profit Comcast, a cable company, invests. Leaf through it and last September’s policy platform with its 59 specific proposals, and you will encounter sober discussion of ways to deal with greenhouse gases, international trade and retraining...For the most part, though, Mr Romney has been tugged to the right. As his opponents called for the head of Ben Bernanke, the Federal Reserve chairman, Mr Romney joined in, saying he would not reappoint him--an odd way to treat someone who has done what Mr Romney says the Fed should do, namely keep inflation near 2%."

Wistful pop interlude: Belle & Sebastian play "Dress Up In You" live on KCRW.

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Still to come: The SEC grants lots of exemptions; Obamacare would mean more continuous coverage; postal reform will hit the floor next week; offshore drilling is still a big risk; and a squirrel enjoys a flower for lunch.

Economy

The euro-debt crisis is weakening Europe's influence. "Europeans may discover this week that the debt crisis is not only threatening the euro zone economy and the integrity of the common currency, but also diminishing Europe’s influence in world affairs. For the second year in a row, Europe’s problems are the major preoccupation as government officials and monetary policy makers gather in Washington for the spring meetings of the International Monetary Fund and World Bank, which last through Sunday...The failure of European leaders to convince the rest of the world that they have a grip on the crisis is more than just embarrassing. It may also give them less weight in debates on other issues, and hasten the shift of power away from developed countries and toward cash-rich and fast-growing emerging nations, like China, India and Brazil...Outside Europe, there remains concern that the Continent’s problems are undercutting world growth." Annie Lowrey and Jack Ewing in The New York Times.

@AnnieLowrey: Lagarde at the IMF: There is a “light recovery blowing in a spring wind” with “dark clouds on the horizon.”

Previously owned home sales fell unexpectedly. "Sales of previously owned U.S. homes in March unexpectedly fell for the third time in the last four months, showing an uneven recovery in the housing market. Purchases dropped 2.6 percent to a 4.48 million annual rate from 4.6 million in February, the National Association of Realtors reported today in Washington. The median forecast of economists in a Bloomberg News survey called for an increase to 4.61 million. In January, sales at a 4.63 million rate were the strongest since May 2010. Residential real estate remains the economy’s soft spot, challenged by stricter lending standards, lower home values and the threat of more foreclosures. An improved labor market and mortgage rates near historic lows have yet to stoke bigger gains in demand...Existing-home sales, tabulated when a contract closes, climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995." Lorraine Woellert in Bloomberg.

@NickTimiraos: The riddle for housing: stronger than one year ago, but not showing strong monthly gains.

The SEC frequently grants exemptions to its regulations. "At a time when the Securities and Exchange Commission is under pressure to enforce existing rules and write new ones, it has been busy giving companies permission to ignore the law. Companies that bump against legal restrictions -- brokerages, stock exchanges, life insurance companies, and mutual fund managers, for example -- routinely argue that no harm would come from cutting them slack. The SEC often agrees...Currently, for instance, the agency is preparing new restrictions for money-market mutual funds, still haunted by the meltdown of 2008, when a major fund was overwhelmed by customers demanding their money back and the government put taxpayer dollars on the line to backstop the industry...But in December, the agency issued an exemption allowing individual mutual funds administered by John Hancock to lend money to each other, potentially exposing them to each others’ troubles." David Hilzenrath in The Washington Post.

@Kelly_Evans: "The unemployment rate for recent high school grads not in college was 33.6%, vs 21.1% for [job-seeking] grads in college." -Labor Dept

Legos are excellent interlude: Recreating Famous Cartoon Characters Using the Least Lego Pieces.

Health Care

Obamacare would increase continuous coverage. "Twenty-six percent of American adults were uninsured for a period of time in 2011, a new study by The Commonwealth Fund shows -- and for the most part, people went without health insurance because they lost or switched jobs. It’s one of the problems the health care reform law was intended to solve, and one of the study’s authors said the problem could become less serious in 2014 -- if the law survives. Almost seven out of 10 of these adults who had gaps in coverage went without it for a year or more, the study said. Americans who had gaps in insurance were more likely to miss regular preventive care screenings and not have a designated physician...Commonwealth found that most adults who sought out plans in the individual market found it costly and difficult to compare benefits. Forty-five percent of them ended up without a health plan." Kathryn Smith in Politico.

Domestic Policy

Postal reform is headed towards a vote next week. "The Senate is on track to finish work on a postal reform bill next week after Senate leaders reached an agreement to consider 39 amendments to the measure, including a proposal to pass the House version. 'We’ve ended up with a process here that will allow discussion and votes on a wide range of amendments on both sides,' said Sen. Joe Lieberman, chairman of the Homeland Security and Governmental Affairs Committee, which oversees the U.S. Postal Service. The Connecticut Independent said he doesn’t expect all of the amendments to require roll call votes, which would speed up the process of considering the amendments. Final passage could come as soon as Tuesday...The substitute amendment, being offered by Sen. John McCain (R-Ariz.), would replace the bill with the House version of the reform bill, which would set up a board to oversee the USPS and implement measures to cut costs." Humberto Sanchez in Roll Call.

A Republican Senator proposed an alternative to the DREAM Act. "Florida Sen. Marco Rubio has thrust himself into the raging illegal immigration debate, proposing a plan that would create a path to legal status for children of illegal immigrants -- putting him at odds with an immoveable wing of the Republican Party on this issue...Rubio understands full well he’s swimming in turbulent waters. He invited reporters to his office on Thursday to talk about his own version of the Democratic DREAM Act, which would allow some children of illegal immigrants to obtain legal status in the United States. Rubio’s version does not have a citizenship option, as Democrats propose, but it would open the door for children of illegal immigrants who have completed high school to be awarded 'non-immigrant visas' before obtaining a more permanent status...Rubio’s plan would not affect children brought to the U.S. in the future, only ones who currently reside in the country." Manu Raju in Politico.

Adorable animals eating flowers interlude: A squirrel eats a rose.

Energy

High-speed rail is not a cost-effective way to cut carbon emission: "The California High Speed Rail Authority claims that by 2030, if the train ran entirely on renewable energy, then it would start reducing the state’s carbon emissions by about 5.4 million metric tons per year. That would mean the rail network would cut California’s emissions at a cost of, at the very low end, $250 per ton of carbon dioxide over the ensuing 50 years, given the system’s current price tag. (This is being extremely generous, since it ignores the energy used to build the system — by some estimates, high-speed rail would actually increase emissions in its first few decades.) And that’s a pricey way to cut carbon. To put this in perspective, research has suggested that you could plant 100 million acres of trees and help reforest the United States for a cost of somewhere betwen $21 to $91 per ton of carbon dioxide. Alternatively, a study by Dan Kammen of UC Berkeley found that it would cost somewhere between $59 and $87 per ton of carbon dioxide to phase out coal power in the Western United States and replace it with solar, wind and geothermal. If reducing greenhouse gases is your primary goal, then there are a slew of more cost-effective ways to do it than building a bullet train." Brad Plumer in The Washington Post.

Two years after the BP spill, offshore drilling remains risky. "Two years after a blowout on BP’s Macondo well killed 11 men and triggered the largest oil spill in U.S. history, oil companies are again plying the waters of the Gulf of Mexico. Forty-one deep-water rigs are in the gulf. The vast majority of them are drilling new holes or working over old ones, while the other behemoths are idle as they await work or repairs. A brand new rig -- the South Korean-built Pacific Santa Ana, capable of drilling to a depth of 7.5 miles -- is on its way to a Chevron well. But three recent incidents in other parts of the world show just how risky and sensitive offshore drilling remains...Many experts say that even with tougher regulations here in the United States, such incidents are inevitable...With the anniversary of the BP spill, many experts are reassessing U.S. progress since the accident. And environmentalists are assessing damages." Steven Mufson in The Washington Post.

Winning oil manipulation settlements is challenging. "President Barack Obama's announcement on Tuesday that he would pursue tougher penalties for oil manipulators shined a spotlight on commodities regulators, who have won relatively few cases in the murky world of energy trading. Two days later, the Commodity Futures Trading Commission announced a $14 million penalty--its largest ever in an oil manipulation case and its first in five years--against Dutch company Optiver Holding BV, its U.S. subsidiary and three officers. The CFTC says Optiver was responsible for manipulating the market for crude oil, heating oil and gasoline...Settlements are the main way the CFTC has confronted manipulative activity in the energy markets. Taking cases through the courts has proved difficult. In the past 35 years, the Commodity Futures Trading Commission has brought dozens of cases alleging manipulation in energy markets. It was successful in proving only one in court." Jerry Dicolo, Dan Strumpf, and Jamila Trindle in The Wall Street Journal.

@drgrist: The wind-power "wedge" of a climate solution would involve building 12 3MW wind turbines every hour for the rest of the century. One wedge!

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

 
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