Wonkbook: Senate Democrats inching towards a budget

at 08:03 AM ET, 04/10/2012

On the politics of the budget, House Republicans are from Mars and Senate Democrats from Venus.


Dusk sets in over the U.S. Capitol building in Washington Jan. 24. (JONATHAN ERNST - REUTERS)
Both sides face the same problem: Nothing they produce has any chance of passing. But to House Republicans, that's been a reason to go big on the annual budget resolution. Unshackled from the need to write legislation the Senate can pass and the president will sign, House Republicans have used their budgets to detail a dramatic, sweeping vision for how they would remake the federal government. For Senate Democrats, it's been just the opposite: Since nothing they produce will make it through the House, they've mostly ignored the annual budget resolution and saved their political capital for the inevitable end-of-year dealmaking.

Both approaches have had their weaknesses. House Republicans ended up going too far, signing onto unpopular Medicare reforms that they tried to walk back in this year's budget and proposing deep cuts that have given the president an easy target. But Senate Democrats have developed a reputation for cowardice on fiscal issues, and Republicans have delighted in noting that we have gone more than 1,000 days without the Senate passing a budget.

If I were David Brooks, I could spin this into a profound insight about the differing psychological and cultural make-ups of the two parties. You see, scientists have found that if you give toddlers a choice between a Toyota Prius and a Ford Excursion, the ones that choose the Prius are far likelier to hide their blocks from you. That's pretty much what's going on here.

Okay, that's not true. At least, I don't think it is. I take the actual explanation to be that this is a predictable outcome of differing coalitions: John Boehner's biggest problem is keeping the extreme wing of his party happy, and that means taking more dangerous votes, while Harry Reid's biggest problem is keeping his moderates in line, and that means protecting them from dangerous votes.

This year, however, both approaches are being changed, at least a bit. Republicans have eased up on their efforts to eliminate the traditional Medicare program in their budget. And the Senate Budget Committee, led by Democrat Kent Conrad, is readying "a longer-term plan" -- short-term funding levels were set in the debt-ceiling compromise -- that will be marked up next week. The plan may or may not end up passing. But it will at least be out there.

This is, by the way, a good moment to offer an overdue correction: Last week, I offhandedly mentioned that the House Democrats didn't have a budget. I was wrong. Their budget didn't pass the House, but it certainly exists, and you can read it here.

Top stories

1) The CFPB is planning an overhaul of the mortgage industry. "The Consumer Financial Protection Bureau (CFPB) is looking to overhaul the mortgage servicing industry, arguing that the problem-plagued sector is unaccountable and opaque. The CFPB announced Monday that it was mulling rules to reform that industry, which has been hotly criticized because as foreclosures mounted, so too did evidence of shoddy business practices...Under the CFPB's proposal, if a homeowner gets behind on their mortgage and is facing foreclosure, the servicer would be required to make a 'good faith' effort to contact the borrower and explain the foreclosure process, as well as provide counseling options...While the CFPB announced the project Monday, the actual proposed rule will be published sometime this summer, and is expected to be finalized by the beginning of 2013. After that, the bureau can allow up to a year for implementation." Peter Schroeder in The Hill.

2) Regulators are grappling with what to do about 'shadow banking'. "When it came to reforming the global financial system, regulators focused on the banks. Weakened by the 2008 crisis, destabilised by the eurozone sovereign debt mess and then hit with higher capital requirements, traditional lenders are on the retreat. The 'shadow banking' system, meanwhile, a phrase used to encompass a broad range of institutions and mechanisms, from hedge funds to 'repo' markets, has recovered more rapidly and is poised to usurp banks in a variety of ways. Regulators are now grappling with how to deal with a vast sector that has, as its name suggests, little or no supervision...Shadow banking was not born of the crisis but was a fundamental cause; it is a not separate phenomenon from banking but a deeply related one. In the run-up to 2008, Countrywide, a lightly-regulated mortgage originator, wrote bad loans but sold them on to buyers including banks." Patrick Jenkins, Tom Braithwaite, and Brooke Masters in The Financial Times.

Related: Private shadow money is the new money.

3) The Senate Budget Committee will begin marking up a budget soon. "The move to proceed with a budget resolution in committee is counter to the initial desires of Democratic leaders, who are reluctant to bring a resolution to the floor. Though leaders rarely state this publicly, they have feared political repercussions, such as the threat of a limitless number of show votes or forcing vulnerable Members up for re-election to take politically undesirable votes. But aides in both parties suggested today that they have been instructed to expect a markup to begin as early as April 17 and to stretch as long as April 19...Some sources suggest that Democrats will try to project the budget as 'the Conrad Budget' in order to try to distance themselves from whatever plan is moved through committee in the event they have to vote against it, either on the panel or on the floor." Meredith Shiner in Roll Call.

4) There's a new push to boost the minimum wage. "As the nation’s economy slowly recovers and income inequality emerges as a crucial issue in the presidential campaign, lawmakers are facing growing pressure to raise the minimum wage, which was last increased at the federal level to $7.25 an hour in July 2009. State legislators in New York, New Jersey, Connecticut, Illinois and elsewhere are pushing to raise the minimum wage...These moves are giving momentum to an effort to persuade Congress to embrace a higher national minimum wage. Some liberal and labor groups, capitalizing on the energy and message of the Occupy Wall Street movement, are urging Senator Tom Harkin, Democrat of Iowa and chairman of the Senate Labor Committee, to head a Congressional effort to raise the federal minimum to $9.80 an hour by 2014...Although some states raise the minimum wage automatically every year as the cost of living increases, federal law does not provides for an automatic increase." Steven Greenhouse in The New York Times.

5) Democrats' campaign for the Buffett Rule kicked into high gear. "Democrats are going to make sure you hear a lot about the 'Buffett Rule' this week. The Obama campaign and key Hill Democrats launched a weeklong offensive Monday to drum up support for the Buffett Rule, which would ensure taxpayers earning more than $1 million pay at least 30 percent of their incoming in taxes...Senate Majority Leader Harry Reid (D-Nev.) has teed up a procedural vote on the Buffett Rule - which would ensure taxpayers earning in excess of $1 million are paying an effective 30 percent tax rate - for April 16, the first day back in Washington for Congress after a two-week recess, and the day before the annual tax deadline. It’s sure to go nowhere, but Senate leaders have vowed to bring up the measure repeatedly before November to ensure the issue stays front and center...Implementing the Buffett Rule would raise about $46.7 billion over a decade, according to the Joint Committee on Taxation." Seung Min Kim in Politico.

@ezraklein: Don't understand the argument that Buffett rule is worthless because it only raises $47b. How much money does defunding NPR get you, again?

@ezraklein: Both sides focus on cuts and tax changes that symbolize their larger fiscal agendas. That's what the Buffett rule is for Dems.

@katebrower: Obama's Buffett Rule push pivots away from focus on those making more than $250,000: better to single out .3% than 4.2% of U.S. households.

Top op-eds

1) KLEIN: Welfare reform doesn't prove you can cut the safety net without consequences. " In 1996, before welfare reform passed, 68 of 100 families living in poverty with children received welfare benefits. In 2010, two years into the worst economy since the Great Depression, only 27 of every 100 such families were receiving benefits. And that’s not because they were all holding good jobs or because states had somehow managed to make the grants go further. Quite the opposite, actually. Liz Schott, a senior fellow at the Center on Budget and Policy Priorities, explains that states use about 30 percent of their block grants to fund basic assistance — what most of us would think of as 'welfare.' An additional 15 percent goes to subsidized child care. Eleven percent goes to work supports. And the other 44 percent? Miscellaneous other things, including closing state budget holes. The end result is that fewer families get welfare. That’s not a 'reform.' It’s a cut." Ezra Klein in The Washington Post.

2) PONNURU: Obama may be planning to let the Bush tax cuts expire. "Here’s the dilemma. We can’t maintain the country’s historic rate of taxation and its current entitlement structure. If you want significantly more non-entitlement domestic spending than Ryan provides, you either have to restrain entitlements even more than Ryan does or collect even more tax revenue than Obama has suggested, or both...Obama, you may recall, has said he wants to keep the bulk of President George W. Bush’s tax cuts, allowing only those for high earners and investors to expire in 2013. But many Democrats have argued that he should let them all expire. If that is Obama’s plan, one could envision a strategy that gets him there without too much political suffering. He would continue to claim that he wants to avoid middle-class tax increases. He would win re-election. And then he would try to blame any increase in middle-class taxes on congressional Republicans." Ramesh Ponnuru in Bloomberg.

3) CARRINGTON: The Supreme Court needs term limits. "The the very real possibility that the Supreme Court will overturn the Affordable Care Act, liberals are concerned that the right-wing tilt of five justices and lifelong appointments ensure a decades-long assault on the power of Congress. This is especially likely given the relative youth of the bloc’s conservative members: an average of 66 years old, when the last 10 justices to retire did so at an average age of 78. The situation brings to mind a proposal voiced most prominently by Gov. Rick Perry during his run for the Republican presidential nomination: judicial term limits...If five of our present justices broadly prohibit the federal government from providing accessible health care, Congress should consider using its constitutional power again to add two more justices -- and impose a reasonable limit on the length of time that a mere mortal should hold so much political power." Paul Carrington in The New York Times.

4) COHN: Obama was right about Lochner. "Striking down this sort of economic legislation, Obama said, would be unprecedented in the modern era--and reminiscent of early the early 20th Century, when the Court threw out multiple pieces of economic regulations from the Progressive Era and then the New Deal. Obama's critics are questioning that assertion, too. But it's on target...When a government lawyer raised the specter of Lochner during oral arguments two years ago, Chief Justice John Roberts sternly made the very same argument Taranto did: Lochner was about state regulation, not federal regulation. But I'm pretty sure both Obama and his administration's lawyer were saying something different when they invoked Lochner: That, by invalidating the Affordable Care Act, the Supreme Court would be resurrecting a vision of limited government authority over economic issues that rightly went out of fashion a long time ago." Jonathan Cohn in The New Republic.

5) BROOKS: America has two economies. "There are two interrelated American economies. On the one hand, there is the globalized tradable sector -- companies that have to compete with everybody everywhere. These companies, with the sword of foreign competition hanging over them, have become relentlessly dynamic and very (sometimes brutally) efficient. On the other hand, there is a large sector of the economy that does not face this global competition -- health care, education and government. Leaders in this economy try to improve productivity and use new technologies, but they are not compelled by do-or-die pressure, and their pace of change is slower. A rift is opening up. The first, globalized sector is producing a lot of the productivity gains, but it is not producing a lot of the jobs. The second more protected sector is producing more jobs, but not as many productivity gains. The hypercompetitive globalized economy generates enormous profits, while the second, less tradable economy is where more Americans actually live." David Brooks in The New York Times.

Cover interlude: Regina Spektor plays Radiohead's "No Surprises" live on Triple J.

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Still to come: Food stamps held down poverty; the IRS gets money to implement Obamacare; lobbyists want to change lobbying; the unintended impacts of biofuels regulations; and Ze Frank returns.

Economy

Many see job growth remaining on a good trajectory. "The March setback in hiring will prove temporary as the U.S. economy, in its third year of expansion, now is better equipped to overcome a slowdown in Europe and rising fuel costs, economists said. Growing sales and profits may give business leaders the confidence to take on staff at a faster clip than last month’s 120,000 gain in payrolls, according to analysts at JPMorgan Chase & Co. and Deutsche Bank Securities Inc. They say the data don’t signal a repeat of 2010 and 2011 -- when hiring was derailed after promising starts by concern about government debt, energy costs and natural disasters -- even though the total was weaker than all the estimates from 80 economists surveyed by Bloomberg News. That sentiment isn’t universal, with economists at Bank of America Corp. among those projecting employment will slump in the second half of the year as the government prepares to put the brakes on spending to tame the budget deficit." Timothy Homan and Carlos Torres in Bloomberg.

Food stamps reduced poverty during the recession. "A new study by the Agriculture Department has found that food stamps, one of the country’s largest social safety net programs, reduced the poverty rate substantially during the recent recession. The food stamp program, formally known as the Supplemental Nutrition Assistance Program, or SNAP, reduced the poverty rate by nearly 8 percent in 2009, the most recent year included in the study, a significant impact for a social program whose effects often go unnoticed by policy makers...Enrollment in the food stamp program grew substantially during the recession and immediately after, rising by 45 percent from January of 2009 to January of this year, according to monthly figures on the U.S.D.A. Web site. The stimulus package pushed by President Obama and enacted by Congress significantly boosted funding for the program as a temporary relief for families who had fallen on hard times in the recession." Sabrina Tavernise in The New York Times.

Demand for skilled-worker visas has soared. "In a sign of the improving economy, the U.S. government saw a sharp rise in petitions for skilled-foreign-worker visas during the first week of this year's application season. The U.S. Citizenship and Immigration Services has received 25,600 petitions for H-1B visas since April 2, nearly twice as many as it received for the entire first month of last year's application period. The agency began accepting H-1B petitions last week for jobs with a start date of Oct. 1 or later, typically in computer programming, engineering and other high-tech fields where there is sometimes a shortage of qualified Americans...The H-1Bs fall into two categories. Each year, a maximum 65,000 visas are granted in a general category of skilled workers. An additional 20,000 H-1Bs are allotted to foreign nationals who hold an advanced degree. Last week, the immigration agency received 17,400 petitions in the general category and 8,200 in the advanced category, for individuals who usually have a Master's degree." Miriam Jordan in The Wall Street Journal.

Bernanke backed additional regulation of money market funds. "More regulatory action may be needed to safeguard the money-market mutual-fund industry, Federal Reserve Chairman Ben Bernanke said in a Monday speech, putting his weight behind other officials who want to toughen oversight of the $2.7 trillion industry. In an address largely focused on scrutinizing murky corners of the financial system--the shadow banking system--Mr. Bernanke emphasized the need to establish regulations that protect the system as a whole from the risks that threatened it during the financial crisis...During the financial crisis, the Treasury Department and Federal Reserve headed off a building panic by pledging to backstop all money funds after a large money fund with exposure to Lehman Brothers Holdings, Inc. debt 'broke the buck,' when a fund's net asset value falls below $1. The Securities and Exchange Commission imposed rules on the kinds of investments that money funds could hold in 2010, and SEC Chairman Mary Schapiro has advocated additional measures, which Mr. Bernanke said Monday night may be necessary." Kristina Peterson and Michael Derby in The Wall Street Journal.

Jim Yong Kim would make some changes to the World Bank. "Dr. Jim Yong Kim, the anthropologist and physician who is President Obama’s surprise choice to run the World Bank, does not have a detailed public record laying out his views of economic development, the bank’s central mission. He is not a development scholar nor, like previous presidents, a banker or foreign policy éminence grise. But in a wide-ranging interview on Monday, Dr. Kim, currently the president of Dartmouth College, sketched out a vision for the World Bank that would make it more focused on results and would do more to heed the views of the poorer countries that receive its financing. He also responded to some of the criticism that has greeted his nomination, including concerns about a decade-old book in which he critiqued the bank’s development philosophy and questions about whether he has enough experience to manage the bank’s global portfolio." Annie Lowrey in The New York Times.

@grossdm: America is in decline because it can't create companies from scratch that are worth $1 b after 551 days in existence.

Historical tidbit interlude: Arthur C. Clarke predicts computers and the internet in 1974.

Health Care

The Obama administration is diverting money to the IRS for health reform. "The Obama administration is quietly diverting roughly $500 million to the IRS to help implement the president’s healthcare law. The money is only part of the IRS’s total implementation spending, and it is being provided outside the normal appropriations process. The tax agency is responsible for several key provisions of the new law, including the unpopular individual mandate. Republican lawmakers have tried to cut off funding to implement the healthcare law, at least until after the Supreme Court decides whether to strike it down. That ruling is expected by June, and oral arguments last week indicated the justices might well overturn at least the individual mandate, if not the whole law...The Obama administration has plowed ahead despite the legal and political challenges." Sam Baker in The Hill.

Some of Romney's healthcare advisers don't like Romneycare. "If Mitt Romney needs any reminder of how unpopular his Massachusetts health care plan is with conservatives, he need only look at his closest health advisers. Two of the five members of Romney’s recently announced Health Care Policy Advisory Group have a record of opposition to his Massachusetts health care reform plan...The diversity of the group’s opinions on the Massachusetts plan underscores the conflicting views conservatives have of Romney’s health plan. Some hold Romney responsible for setting the table for Obama’s national health plan -- a meme Democrats push -- while others say that a state has every right to pursue its own health plan, even with a requirement to buy health insurance. It’s also proof that, as the Romney campaign expands, it may have to include conservative health care thinkers who aren’t really fans of his record." Jennifer Haberkorn in Politico.

A new study claims Obamacare will add to the deficit. "President Obama’s landmark health-care initiative, long touted as a means to control costs, will actually add more than $340 billion to the nation’s budget woes over the next decade, according to a new study by a Republican member of the board that oversees Medicare financing. The study is set to be released Tuesday by Charles Blahous, a conservative policy analyst whom Obama approved in 2010 as the GOP trustee for Medicare and Social Security. His analysis challenges the conventional wisdom that the health-care law, which calls for an expensive expansion of coverage for the uninsured beginning in 2014, will nonetheless reduce deficits by raising taxes and cutting payments to Medicare providers...Administration officials dismissed the study, arguing that it departs from bipartisan budget rules used to measure every major deficit-reduction effort for the past four decades." Lori Montgomery in The Washington Post.

@JimPethokoukis: US healthcare needs disruptive technologies and business models. Would Obamacare help or hinder?

Domestic Policy

The F.C.C. wants a website for political ad spending. "The government is moving forward with a plan to make local television stations post information about political advertising on a central Web site. Owners of local stations have tried to block the proposal, but it appears likely to be approved by the commissioners of the Federal Communications Commission when they convene later this month. By law, stations are required to keep so-called public files at their offices for inspection by members of the public. The files typically include information about programming, staffing and spending on political ads. But few people know the files exist, and even fewer go to stations to view them. The F.C.C. wants to change that by having the stations upload the files to an F.C.C. Web site. The agency first tried to do so back in 2007, but was stymied by legal challenges. It renewed the effort last fall, leading to complaints from major TV broadcasters." Brian Stelter in The New York Times.

A lobbyists group is pushing for changes to lobbying. "Washington’s corps of registered lobbyists could swell under a long-awaited reform plan from the American League of Lobbyists (ALL). The league’s board of directors unanimously approved a proposal on Monday that would overhaul the Lobbying Disclosure Act (LDA), a law that determines who is and isn’t required to register as a lobbyist. Under LDA, individuals who spend 20 percent or more of their time on lobbying and contact at least two government officials are required to register. Those standards have been criticized as too lax, because registration can be avoided by simply limiting face-to-face lobbying work...The league wants to toughen the registration requirements for in-house lobbyists by requiring them to register when they spend at least 10 percent of their time on lobbying and contact at least one government official. The rules would be even more stringent for lobbyists at independent firms, who would be required to register for contacting just one government official." Kevin Bogardus in The Hill.

@elisefoley: 1,062,040 people became legal permanent residents last year. Congrats, 1,062,040 people!

Vlogging interlude: Ze Frank is back.

Energy

Biofuels regulations have had some strange impacts. "US imports of ethanol from Brazil have risen to their highest since 2008 as a result of environmental regulations that favour Brazilian fuels produced from sugar over US product made from corn...The rise in imports predates the end of a 54-cent-a-gallon tariff on ethanol imports that was allowed to lapse at the end of last year. Instead, analysts say the increase was due to the fact that Brazil’s sugar cane ethanol, unlike US corn ethanol, meets the US Environmental Protection Agency’s standard for an advanced biofuel...Under the 2007 Energy Independence and Security Act, the EPA sets targets each year for the volumes of corn-based and advanced biofuels that refiners must blend into the fuel that they sell. For 2012, it has mandated 2bn gallons of advanced biofuel, equivalent to about 11 per cent of all biofuels and 1.1 per cent of total US fuel sales." Ed Crooks in The Financial Times.

@ModeledBehavior: Our subsidies to oil companies are double-whammy for enviros: pollution and proof we suck at industrial policy

Scientists continue to search for CCS technology. "In a complex of World War II-era brick buildings on a quiet, wooded campus 12 miles from Pittsburgh, government scientists subject samples of coal to heat and pressure, blend it with wood, grass or other materials and conduct myriad other experiments in search of the cleanest possible way to burn the ancient fuel. To some, the work at the Strategic Center for Coal may seem quixotic: Last month, the Environmental Protection Agency proposed tough new limits on utilities' greenhouse-gas emissions that are viewed by many as the death knell for future coal-fired power plants...But the scientists at the coal center, which is operated by the Department of Energy, take a longer view. They note the U.S. has a 250-year supply of coal, and that technological breakthroughs have repeatedly given new life to the fossil-fuel industry...The Energy Department's stated goal is to have a commercial demonstration project ready by 2020 that would capture 90% of the carbon from industrial sources while capping the cost increase to electricity users at 35%." Kris Maher in The Wall Street Journal.

@mattyglesias: How is "synthetic natural gas" a thing?

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

 
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