Wonkbook: Obama to back Simpson-Bowles

at 07:21 AM ET, 04/12/2011


U.S. President Barack Obama speaks with former Republican Senate Whip Alan Simpson (R) as he walks out of the Oval office. (YURI GRIPAS - REUTERS)
It’s been a little unclear what, exactly, President Obama could say on Wednesday that would count as a new plan for long-term deficit reduction. His pledge to avoid raising taxes on people making less than $250,000 means most taxes are off the table. The Affordable Care Act means most of his health-care reform ideas have already passed into law. The five-year non-security discretionary spending freeze got announced in his 2012 budget proposal, and though you could imagine defense cuts entering the picture, the White House hasn’t seemed eager to go down that road. That leaves tax reform and Social Security, neither of which the administration would be interested in attempting alone.

Now it’s getting a little clearer: Obama will throw his support behind the bipartisan effort in the Senate to turn the Simpson-Bowles plan into legislation (sidenote: called it). This will raise as many questions as it answers -- if Obama is such a fan of this approach, for instance, why didn’t he say more about it during his budget? -- but it is, at base, a more realistic plan both in terms of policy and politics.

For one thing, it’s plausibly bipartisan. Ryan’s budget was almost a calculated effort to appall Democrats, which means it has little chance of passing through the Senate. Simpson-Bowles was an effort to attract votes from both parties. The reason it can be bipartisan is that, unlike the House GOP’s proposal, it doesn’t use deficit reduction as cover to sneak in ideological changes to the state: there’s no effort at privatizing Medicare or block granting Medicaid, no decision to go after programs for the poor while exempting both revenues and defense cuts. The plan’s theory is that cutting the deficit is hard enough without also engaging a couple of long-running ideological wars about the shape and responsibilities of the America state. So it dodges those wars, and in endorsing it, Obama will too.

But if the president was actually interested in passing Simpson-Bowles, this was a bit of an odd way to go about it. Leaving it out of his budget and State of the Union speeches meant it didn’t become the central issue on the table. That gave Ryan room to make his proposal, and the early signs are that his proposal has turned many Republicans against Simpson-Bowles, as they’d prefer Ryan’s plan and don’t want to weaken their negotiation position. If the process then becomes a compromise between a centrist plan like Simpson-Bowles and a hardline conservative plan like Ryan’s, that’s not going to produce something Democrats are happy with, and Obama will be blamed for not taking the initative and forcing everyone to simply consider Simpson-Bowles when he had a chance.

Five in the morning

1) Obama’s debt reduction plan will rely on Bowles-Simpson commission recommendations, report Lori Montgomery and Zachary Goldfarb: “President Obama plans this week to respond to a Republican blueprint for tackling the soaring national debt by promoting a bipartisan approach pioneered by an independent presidential commission rather than introducing his own detailed plan. Obama will not blaze a fresh path when he delivers a much-anticipated speech Wednesday afternoon at George Washington University. Instead, he is expected to offer support for the commission’s work and a related effort underway in the Senate to develop a strategy for curbing borrowing. Obama will frame the approach as a responsible alternative to the 2012 plan unveiled last week by House Republicans, according to people briefed by the White House.”

2) Details of the $38 billion in cuts in this year’s budget are becoming clearer, reports Philip Rucker: “More than half of the $38 billion in spending cuts that lawmakers agreed to last week in the 2011 budget compromise that averted a government shutdown would hit education, labor and health programs. Funding for federal Pell grants, job training and a children’s health-care initiative would face cuts, senior congressional aides said. A multitude of other programs -- from highway and high-speed rail projects to rural development initiatives -- also would experience significant reductions. But some of the worst-sounding trims are not quite what they seem, and officials said they would not necessarily result in lost jobs or service cutbacks. In several cases, what look like large reductions are actually accounting gimmicks.”

3) The bond market doesn’t care about the budget battle, reports Neil Irwin: “There is one surprising group of people who are not terribly worried about the budget brinksmanship in Washington: the investors who lend the U.S. government billions of dollars. Last week’s showdown (and near-shutdown) over funding the government through September was a high-stakes drama in Washington. The upcoming battle over raising the government’s debt ceiling is poised to feature more of the same, complete with dire warnings about the federal government defaulting on its debt. But the market for Treasury bonds lately has been exceedingly calm. While the money managers who invest in those bonds say they monitored last week’s drama over a potential shutdown, it wasn’t the major driver of ups and downs in the market.”

4) Obama is open to a compromise on a debt limit increase, report Damian Paletta and Carol Lee: “White House officials have opened the door to a deal with Republicans that would allow the U.S. to increase its ability to borrow...Softening the administration’s earlier insistence that Congress raise the so-called debt ceiling without conditions, officials now say they won’t rule out linking an increase of the borrowing cap with cuts aimed at reducing the deficit--even though they’d prefer to keep the issues separate...Coupling the debt ceiling with deficit reduction suggests a scenario in which some of the many deficit-reduction measures flooding Washington could become reality...Until this weekend, the White House had taken pains to talk about the debt-ceiling vote as a standalone piece of legislation.”

5) The budget deal could still face a fight in the House, report Naftali Bendavid and Patrick O’Connor: “The 2011 spending deal sealed to much fanfare by party leaders faces a rough ride in Congress this week. That is especially true in the House, where many conservatives are disappointed that the agreement does not cut more than $38.5 billion this year, and that it doesn’t do more to restrict abortion or defund President Barack Obama’s health law. Many lawmakers say the vote could be close, but they expect it to pass, if only because few members of either party are eager to reopen the negotiations. But if significant numbers on both sides defect, it could damage the standing of House Speaker John Boehner (R., Ohio) and Mr. Obama within their own parties, since both have thrown their prestige behind the high-profile deal.”

Motown interlude: The Four Tops play “I Can’t Help Myself (Sugar Pie Honey Bunch)” live.

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Still to come: Senators are resisting proposed rules on down payments; new piecemeal health care repeal measures are being readied for floor votes in the House; a federal appeals court ruled against Arizona’s immigration law; the Senate GOP may have inadvertently saved the EPA from being gutted in the budget deal; and a cat and a dolphin play together.

Economy

I detail the do-nothing plan for deficit reduction: “If we do nothing...the budget comes roughly into balance. Our problems are solved! But nothing is hard to do. This nothing, for instance, includes three crucial elements: (1) All the Bush tax cuts expire, as they’re currently scheduled to do; (2) The Medicare doc fix is either implemented or its repeal is paid for over the next 70 years; and (3) the Affordable Care Act is implemented, and all of its spending targets are met and all of its taxes are collected. Except for No. 3, this isn’t the Obama administration’s plan.”

Senators are upset about new down payment rules, reports Dina ElBoghdady: “Senators involved in writing part of a broad financial overhaul measure say they are dismayed that the Obama administration proposes carrying out their plan by pushing home buyers to come up with hefty sums of cash at the closing table. The legislation, enacted last year, required banks that pool mortgages and sell them as securities to retain at least a 5 percent stake in those loans. The idea was that banks should have some ‘skin in the game’ instead of selling off the loans and hence avoiding losses should the loans go bad. At the time, a group of senators -- led by Sens. Johnny Isakson (R-Ga.), Mary Landrieu (D-La.) and Kay Hagan (D-N.C.) -- successfully pushed to carve out exceptions for certain types of relatively safe mortgages. They left it up to regulators to determine which loans should be exempt.”

Fed officials don’t look likely to tighten monetary policy any time soon: http://on.wsj.com/fizFx3

China’s trade deficit suggests some global rebalancing is occurring, reports Howard Schneider: “The $100-a-barrel oil will be good for Saudi Arabia and other petroleum exporters. The nearly 60 percent jump in the value of iron ore imports will be welcomed in Brazil. China’s surprise trade deficit for the first three months of the year -- its first quarterly trade shortfall since 2004 -- might spell a windfall in many places around the world. What’s less clear is what it means for the United States, the nation where China’s trade dominance has been most politically charged and where politicians have argued most pointedly for more balanced ties. The new data were dismissed by some analysts as a seasonal anomaly and cited by others as evidence that China might be developing more even trade relationships with the rest of the world as a whole. But there was little suggestion of a boon for the United States.”

Chances for a foreclosure deal appear to be dimming: http://on.wsj.com/h4zCtt

The IMF thinks governments need to do more to regulate banks, reports Howard Schneider: “Since the Wall Street bank Lehman Brothers failed more than two years ago, bringing the global economy to the brink of collapse, countries have spent hundreds of billions of dollars to prop up their markets, intensified regulation of financial companies and deepened government involvement in the economy. For International Monetary Fund managing director Dominique Strauss-Kahn, the job is only half done, as he has been leading the fund through a fundamental rethinking of its economic theory. In recent remarks, he has provided a broad summary of the conclusions: State regulation of markets needs to be more extensive; global policies need to create a more even distribution of income; central banks need to do more to prevent lending and asset prices from expanding too fast.”

Sen. Orrin Hatch is proposing a pause on Dodd-Frank’s financial regulations: http://on.wsj.com/dFe292

The debt limit fight will be different from the budget battle, writes Keith Hennessey: “You have to increase the debt limit, but there isn’t a precise deadline. Treasury has tools to manage its cash and borrowing from financial markets. There are tricks Treasury can use to dip into other, special purpose emergency reserves of cash (or other borrowing authorities) so that the debt subject to limit doesn’t increase quite as quickly as under normal operations...Some of these tricks can buy Treasury days, and a couple of them can buy them weeks. In extremis, Treasury can go for a few months past when they’d like to go. They begin with the least damaging techniques, and work their way to more damaging ones as needed. Treasury hates doing this, and the Secretary of Treasury will quite justifiably complain that he is being put in the position of doing bad policy and damaging American credibility in financial markets.”

Ryan’s budget would leave us less able to control health-care costs, not more, I write: “Just over a year ago, I wrote a column praising Rep. Paul Ryan’s Roadmap. I called its ambition “welcome, and all too rare.” I said its dismissal of the status quo was “a point in its favor.” When the inevitable backlash came, I defended Ryan against accusations that he was a fraud, and that technical mistakes in his tax projections should be taken as evidence of dishonesty. I also, for the record, like Ryan personally, and appreciate his policy-oriented approach to politics. So I believe I have some credibility when I say that the budget Ryan released last week is not courageous or serious or significant. It’s a joke, and a bad one.”

Adorable animals collaborating interlude: A cat and dolphin play together.

Health Care

More piecemeal health-care repeal measures are coming up for House votes, reports Felicia Sonmez: “The battles over the fiscal 2011 and 2012 budgets are the center of attention this week on the Hill, but the House is also poised to consider a measure that would repeal another portion of the national health-care law. The bill...will be voted on by the House this Wednesday. The measure would repeal the health-care law’s Prevention and Public Health Fund, which provides $15 billion in mandatory funds over the next decade to state- and community-based preventive care services...The measure is one of five health care-related bills that the Energy and Commerce Committee approved last week. The others, which target state-based insurance exchanges, school-based health centers and health-related grants, have yet to be scheduled for votes.”

Missouri’s Democratic attorney general is backing legal challenges to health care reform: http://nyti.ms/eJOt3x

The Justice Department and FTC are fighting over Accountable Care Organizations, reports Thomas Catan: “The latest standoff between the Justice Department and Federal Trade Commission centers on a key piece of the Obama administration’s health-care overhaul... At the center of this latest dispute is a new type of health-care provider called Accountable Care Organizations. ACOs are designed to rein in soaring medical costs by letting doctors and hospitals join together. The outcome of the ACO battle could help determine how far doctors and hospitals will be able to collaborate without running afoul of antitrust law. Both the FTC and the Justice Department have been maneuvering to be the agency that reviews whether the proposed ACOs violate antitrust law...The Justice Department is widely seen to be more receptive to the entities because of the consumer benefits they could provide.”

Health care reform could double the caseload at community health centers: http://bit.ly/hAzD9o

Domestic Policy

An appeals court has ruled against Arizona’s immigration law, reports Jerry Markon: “A federal appeals court ruled Monday that the most contested provisions of an Arizona immigration law passed last year will remain blocked from taking effect, handing the Obama administration a victory in its efforts to overturn the legislation. The U.S. Court of Appeals for the 9th Circuit upheld a lower court ruling that put on hold key provisions of the Arizona law, which empowers police to question people whom they have a ‘reasonable suspicion’ are illegal immigrants...In a split decision, a three-judge panel found that U.S. District Judge Susan R. Bolton ‘did not abuse’ her discretion in blocking parts of the law that, among other things, require police to check immigration status if they stop someone while enforcing other laws.”

The Justice Department and the FTC both want to take on Google: http://politi.co/fzxMAY

Colorado is launching the biggest experiment in high-stakes education testing ever, writes Dana Goldstein: “In May, the Colorado Legislature narrowly passed Senate Bill 191, or ‘The Great Teachers and Leaders Bill.’ Taking cues from the Obama administration’s education-reform agenda, a narrow bipartisan majority voted to overhaul the way Colorado’s teachers are evaluated and granted tenure. Beginning in 2013, 51 percent of every teacher’s annual professional evaluation score must be based on student-achievement data. Once the law goes into full effect, any teacher in the state can lose tenure if he earns unsatisfactory performance evaluations two years in a row. If he then fails remediation efforts and loses his job, he won’t be guaranteed a new one; after one year without a classroom assignment, he will be let go.”

Better immigration and education policies are needed to spur innovation, writes Vinton Cerf, one of the inventors of the Internet: “There are absolutely more smart people outside the U.S. than there are living here. It is in our best interest to attract talent from anywhere in the world to participate in our innovation engine. Even if visitors return to their homelands after attending an American university, we will benefit from their contributions while they were here and, in all likelihood, even after they have returned home. Despite our well-developed college and post-college system, America simply is not producing enough of our own innovators, and the cause is twofold--a deteriorating K-12 education system and a national culture that does not emphasize the importance of education and the value of engineering and science.”

Celebrity tricks interlude: Ellen Page shows off her juggling skills.

Energy

The Senate GOP may have doomed anti-EPA riders it supported, reports Darren Samuelsohn: “Senate Minority Leader Mitch McConnell may have played a starring role in ensuring a last-minute spending deal didn’t include controversial environmental riders. By insisting on a Senate floor vote on stand-alone legislation to handcuff the EPA’s climate change policies, the Kentucky Republican handed President Barack Obama and Majority Leader Harry Reid exactly the ammunition they needed to prevent similar language from making its way into the final spending deal that emerged late Friday to avert a government shutdown...’We made it clear the Senate had spoken,’ a senior Senate Democratic aide told reporters in the Capitol on Friday night, just minutes after Obama, Reid and Boehner outlined the broad contours of their late-night budget deal that excluded any restrictions on the EPA.”

Congress should pass T. Boone Pickens’ energy plan, writes Joe Nocera: “On Wednesday, amid all the hullabaloo over the budget battles, a simple, discrete and largely overlooked bill was dropped into the Congressional hopper. Sponsored by two Democrats and two Republicans -- that’s right: an actual bipartisan piece of legislation -- its official title is the New Alternative Transportation to Give Americans Solutions Act, or the Nat Gas Act, for short. People in the know, however, call it the Boone Pickens bill...The Pickens bill creates tax incentives -- $1 billion a year for five years -- to encourage manufacturers to begin building heavy-duty trucks that will be powered by natural gas instead of diesel...Just moving the country’s big trucks to natural gas, [Pickens] says, could cut our OPEC imports in half.

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

 
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