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Wonkbook: Two speeches, no progress

By Ezra Klein,

Jim Watson AP President Barack Obama addresses the nation from the East Room of the White House July 25 on the approaching debt limit deadline. If all you knew of the debt-ceiling debate came from the dueling speeches offered by President Obama and Speaker Boehner last night, you really wouldn't know much about the debt-ceiling debate.

Obama's speech seemed curiously detached from events on the Hill. The president was selling a grand bargain that Republicans in Congress aren't buying, and that Democrats in Congress have stopped trying to sell to them. Listening to his speech, it seemed the White House's new strategy was to enlist the people to change the GOP's mind. But this came after the White House had endorsed Senate Majority Leader Harry Reid's plan to raise the debt ceiling through a package that was all cuts and no revenues. It was almost as if the speech was written on Saturday and then delivered unchanged on Monday.

Boehner's address, meanwhile, was deaf to the politics of the issue. Where Obama spoke of compromise, Boehner made excuses for intransigence. Where Obama emphasized how much he had already conceded, Boehner detailed how little he was willing to give up. Where Obama argued for a grand bargain, Boehner declared his support for Cut, Cap and Balance. This speaks, perhaps, to the differences in their coalitions: Democrats and independents both prefer politicians who compromise over politicians who stand firm on principle; Republicans prefer politicians who stand firm on principle to politicians who compromise. But it also speaks to the trouble a Republican congressional leader with an eye on his base has going up against a president with an eye on the popular vote. Boehner is limited to saying only what a majority of his members will accept. Obama can say anything his political advisers think a majority of the country will rally around.

It was also unclear how the speeches were going to contribute to a deal. Obama emphasized a solution Republicans don't want and Boehner emphasized solutions Democrats can't accept. If you wanted to try and be clever in interpreting the evening's remarks, you might say that Obama, by making the case for a deal with revenues, was making it easier for a deal without revenues to pass -- a deal like, say, Reid's proposed compromise. His speech made such a deal look like more of a loss for him, which Republicans will like, and made his signature on a deal look like more of a concession by him, which his advisers will like.

But it's always wise to be skeptical of theories that rely on such 11-dimensional chess. The more likely explanation is that the White House is trying to set Republicans to take the blame if Congress fails to reach a deal and the debt ceiling caves in. They want voters to know they did everything they could to reach a compromise, but that the Republicans, led by the Tea Party, simply couldn't say yes. That's why they emphasized the grand bargain, which is both popular and based on concessions, and why the White House was probably pretty happy watching Boehner's address. Voters may not believe the president when he says the Republicans aren't very interested in compromise. After all, isn't that what you would expect him to say about the other party? But they will, presumably, believe the Speaker when he basically says the same thing.

Five in the morning

1) Harry Reid and John Boehner released debt-ceiling plans that were more similar than different, and perhaps suggest a clear path to a compromise: "The final plan could adopt Reid’s initial spending cuts, which are both slightly larger and more impressively stated than Boehner’s, and Reid’s longer debt-ceiling increase. But it could adopt Boehner’s idea for across-the-board spending cuts — perhaps in an augmented form that includes penalties designed to bring Republicans to the table — if a second round of deficit reduction doesn’t pass. It could also include a vote on a balanced-budget amendment, though I personally dislike this policy and consider it a mistake.That compromise would preserve the cuts that the two parties have now agreed to, end the uncertainty about whether Congress will violate America’s full faith and credit, and impose an enforcement mechanism that properly forces deficit reduction by threatening a more severe form of deficit reduction — as opposed to an unnecessary economic crisis — if Congress can’t come to an agreement."

Read Reid's plan: http://wapo.st/pQwdKO

Read Boehner's plan: http://wapo.st/pFMbcp

2) House conservatives are rejecting Boehner's plan, report Paul Kane and Lori Montgomery: "A new House Republican proposal to raise the federal debt ceiling was met with deep mis­givings Monday by conservatives who consider its spending cuts insufficient, leaving Congress at a standstill a week before the government risks its first default...With few House Democrats expected to support his approach, Boehner would need to win an overwhelming majority of his 240-member conference. But those hopes were rocked Monday when Rep. Jim Jordan (Ohio), who leads a conservative caucus of more than 170 GOP members, announced his opposition. Jordan, head of the Republican Study Committee, has insisted that the debt ceiling be increased only in return for Congress sending a constitutional amendment requiring a balanced budget to the states for ratification."

3) And so are conservative lobbying groups, reports Felicia Sonmez: "No sooner did House Speaker John Boehner (R-Ohio) unveil his plan to raise the country’s debt ceiling and avoid default than a coalition of conservative groups and lawmakers panned the proposal. The Cut, Cap and Balance Coalition is a group of more than 100 conservative groups and several dozen lawmakers in both chambers who have called for passage of a balanced budget amendment in exchange for a vote to raise the country’s debt ceiling. The group said in a statement Monday afternoon that the plan put forth by House Republican leaders 'falls short of meeting (the coalition’s) principles.'...The coalition also criticized Boehner’s proposal for allowing only 'a symbolic vote' on a balanced budget amendment to the Constitution, a move that it said 'minimizes (the) importance' of such an amendment."

4) New estimates suggest the US has a few more days after August 2 before default, reports Zachary Goldfarb: "The Treasury Department is standing by its estimate that the government will need to borrow more money after Aug. 2 to pay for all its obligations. But several new reports -- from UBS, Barclays and Wells Fargo -- have cast doubt on that estimate. Analysts have said that daily tax receipts have been higher than anticipated and that the Treasury has quite a bit of cash on hand. As of Friday, according to the Treasury, the government had $85 billion in cash. UBS estimates that the government will run out of money to pay all bills starting no sooner than Aug. 8. Barclays suggests Aug. 10. Wells Fargo Securities said the government might have to cut back on some spending but could pay most of its bill through August."

5) Employers are starting to screen out the unemployed when filling vacancies, reports Catherine Rampell: "The unemployed need not apply. That is the message being broadcast by many of the nation’s employers, making it even more difficult for 14 million jobless Americans to get back to work. A recent review of job vacancy postings on popular sites like Monster.com, CareerBuilder and Craigslist revealed hundreds that said employers would consider (or at least 'strongly prefer') only people currently employed or just recently laid off. Unemployed workers have long suspected that the gaping holes on their résumés left them less attractive to employers. But with the country in the worst jobs crisis since the Great Depression, many had hoped employers would be more forgiving...Legal experts say that the practice probably does not violate discrimination laws because unemployment is not a protected status."

Acoustic interlude: Sufjan Stevens plays "Pleasure Principle" on WNYC.

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

Still to come: Greek default is looking inevitable; fixing a "glitch" in health care reform could produce substantial savings; even lobbyists are befuddled by the debt debate; the House is moving forward with an EPA-cutting spending bill; and a robot band plays "Rock Lobster."

Economy

Moody's is now stating that Greece is certain to default, reports Howard Schneider: "Moody’s Investors Service again downgraded Greece’s credit standing Monday, setting the stage for a likely declaration that the country is in default as a newly approved rescue plan moves forward. In the first review by a ratings agency of the plan approved by European leaders last week, Moody’s cast doubt on the long-term impact on the conditions under which heavily indebted euro zone countries will be able to borrow money. The ratings service said the plan does improve Greece’s financial prospects for the next few years and probably will stop the problems in that country from undermining confidence in weaker nations such as Ireland and Portugal -- diminishing the risk that Europe’s financial troubles will spiral into a broader crisis."

Eric Cantor has a personal interest in preventing revenue changes, reports Alec MacGillis: "Leading the opposition to any deal that includes higher taxes is the new tribune of rank-and-file House Republicans: Majority Leader Eric Cantor of Virginia. Cantor’s pivotal role marks a rapid rise for the 48-year-old from the Richmond suburbs. It also represents a major coup for sectors of the investment community that Cantor has been striving to assist for years...Among the White House’s top demands for new revenue are changes in the tax code affecting hedge funds, private equity firms and real estate partnerships, which would raise an estimated $20 billion over 10 years. For the past four years, Cantor has taken the lead in the House on fighting the same changes...Last year, his two fundraising committees took in nearly $2 million from securities and investment firms and real estate companies."

John Boehner's proposal would produce more poverty than any law in modern U.S. history, writes Robert Greenstein: "To secure $1.5 trillion in entitlement savings over the next ten years would require draconian policy changes. Policymakers would essentially have three choices: 1) cut Social Security and Medicare benefits heavily for current retirees, something that all budget plans from both parties (including House Budget Committee Chairman Paul Ryan’s plan) have ruled out; 2) repeal the Affordable Care Act’s coverage expansions while retaining its measures that cut Medicare payments and raise tax revenues, even though Republicans seek to repeal many of those measures as well; or 3) eviscerate the safety net for low-income children, parents, senior citizens, and people with disabilities. There is no other plausible way to get $1.5 trillion in entitlement cuts in the next ten years."

Obama's condescension almost ruined chances of a deal, writes David Brooks: "Obama never should have gone in front of the cameras just minutes after the talks faltered Friday evening. His appearance was suffused with that 'I’m the only mature person in Washington' condescension that drives everybody else crazy. Obama lectured the leaders of the House and Senate in the sort of patronizing tone that a junior high principal might use with immature delinquents. He talked about unreturned phone calls and being left at the altar, personalizing the issue like a spurned prom date. Obama’s Friday appearance had a gigantic unintended consequence. It brought members of Congress together. They decided to take control. The White House is now on the sidelines. Democratic and Republican Congressional leaders are negotiating directly with one another."

The Wells Fargo settlement raises new and troubling questions about the Feds' ability to prosecute banks, writes Joe Nocera: "Last Wednesday, nearly lost in the furor over Rupert-gate and the debt ceiling crisis, came the surprising news that the Federal Reserve has issued a cease-and-desist order against a Too-Big-to-Fail bank. The bank was Wells Fargo, which was also fined $85 million and ordered to compensate customers it had unfairly -- indeed, illegally -- taken advantage of during the subprime bubble...Yet, for anyone still hoping for justice in the wake of the financial crisis, the news was hardly encouraging. First, the Fed did not force Wells Fargo to admit guilt...The $85 million fine was a joke; in just the last quarter, Wells Fargo’s revenues exceeded $20 billion...The settlement raises the question that just won’t go away: Why can’t the federal government prosecute financial wrongdoers?"

Adorable animals serving as guards interlude: This little dog thinks he's a guard dog.

Health Care

Fixing a "glitch" in health care reform could save big money, reports Julian Pecquet: "Budget scorekeepers said legislation to fix a 'glitch' in the healthcare reform law would cause fewer than one million people to lose access to Medicaid while saving $13 billion over the next 10 years, greatly helping chances of passage. Republicans in the House and Senate have introduced bills to count Social Security benefits when calculating eligibility for Medicaid and insurance subsidies under the law. The White House has also said it wants to change the law, which would cause some people to look richer and lose federal subsidies. The glitch has become a powerful argument for Republicans to criticize the law because it allows middle-income early retirees between the ages of 62 and 65 to sign up for Medicaid, which is meant to be for the poor."

Obama's Medicare drug proposal won't cut costs, writes Tomas Philipson: "The president and his allies in the House have proposed implementing precisely the kind of price controls in Part D that make other parts of Medicare so inefficient. Specifically, they want to force drug makers in the Part D program to give the government the same rebates that they are forced to offer under Medicaid...Advocates of this plan believe it will drive down the cost of care. They are wrong, for two main reasons. First, because the rebates would be based on prices outside the program, drug companies would have no incentive to discount prices for other consumers...Second, what matters to patients is the cost of better health, not drug spending per se. Having no drug to treat a condition makes patients worse off, even if they don't buy any drugs."

Domestic Policy

Lobbyists are having trouble keeping up with the debt debate, reports Rosalind Helderman: "Advocacy groups that have spent months anticipating exactly the stalemate Washington has now reached are working to apply pressure to nudge political leaders engaged in talks on raising the nation’s debt ceiling. But with the state of play changing by the moment, advocates are able to offer only the broadest of thoughts about how to proceed. For once, that most self-certain of Washington institutions -- lobbying -- has been left in the same state as the financial markets, the economy and the rest of the country: confused...For rank-and-file members of Congress, who have been receiving only sketchy updates from their leaders, the pressure from citizens and advocates alike feels insistent -- but vague."

Cheating scandals are putting testing-based education reforms in jeopardy, reports Bill Turque: "By the numbers, it’s a paltry handful. Of more than 100,000 public schools in the United States, about 300 recently have faced suspicions, allegations and, in some cases hard proof, that teachers and administrators cheated to inflate standardized test scores. But the impact of revelations in Atlanta, Baltimore, Philadelphia, Washington and other cities extends beyond those modest numbers. Questions raised in these incidents have sent tremors through the movement to hold schools and teachers accountable for student achievement through annual testing...Questions about possible cheating have focused on big cities at the center of the school reform debate, where rising scores had generated cautious optimism about efforts to raise the performance of children from poor families."

New Wave interlude: A robot band plays "Rock Lobster" by the B-52s.

Energy

The House's EPA-cutting spending bill is moving forward, reports Peter Kasperowicz: "The House early Monday afternoon approved a rule for a bill funding the Department of Interior, the Environmental Protection Agency (EPA) and other agencies, over bitter opposition from Democrats who argued that the bill would turn back decades of work to protect the environment. The rule for the bill, H.R. 2584, was passed in a partly-line vote of 205-131. During debate, Democrats said the bill included dozens of objectionable policy riders, including language that would slash EPA funding, ease pesticide regulations, make it harder to add animals to the Endangered Species List, and allow uranium mining near the Grand Canyon...Republicans defended the bill as a way to curb excessive federal overreach."

A new bill would codify post-BP changes in offshore drilling regulation into law, reports Andrew Restuccia: "House Natural Resources Committee Chairman Doc Hastings (R-Wash.) unveiled draft legislation Monday to reorganize the Interior Department’s offshore-drilling branch. The proposal comes more than a year after the Gulf of Mexico oil spill. The bill would codify a series of organizational changes imposed by the Interior Department in the aftermath of the spill and add additional layers of offshore-drilling oversight...The bill would split the former Minerals Management Service (MMS) into three separate branches...The legislation echoes a plan unveiled by Secretary Ken Salazar last year to restructure MMS in order to separate its conflicting missions of regulation and revenue collection."

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

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