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Wonkbook: Why some Democrats want a shutdown

By Ezra Klein,

Another week, another shutdown threat. This time, for better or worse, the stakes are very, very low. As my colleague Suzy Khimm explained on Friday, the disagreement is over $1.6 billion in offsets for disaster aid. Democrats say that offsetting disaster aid is a new precedent, and one they don't want to set. Republicans say it's common-sense budgeting. Either way, it's a pittance when compared to the whole of the federal budget. Which, perversely, might make it likelier that a shutdown actually happens.

Andrew Harrer

BLOOMBERG

The Capitol building stands in Washington in April.

In recent months, the deadlocks between the Democrats and the Republicans have been resolved because the costs of not resolving them were simply too high. The debt ceiling was eventually lifted because the alternative was a congressionally induced financial crisis. The original shutdown debate in March of 2011 ended because Republicans didn't want their first act in the majority to be a 1995-esque government shutdown and the White House wanted to prove that they could govern cooperatively with Speaker John Boehner. A shutdown would have been a political failure for both parties.

But now? A shutdown wouldn't be a good thing for the economy, but it wouldn't be a fiasco on the scale of defaulting on the national debt. Similarly, a shutdown wouldn't make any politicians in Washington look particularly good, but at this point, there might be more upside for the two parties in confrontation than there is in continued unsatisfying compromises.

That's a particularly popular interpretation among Democrats, who worry that Republicans have become too accustomed to legislating through fiscal brinksmanship, and the only way to reset the budget process and end these constant threats of shutdowns and defaults is to let a shutdown actually happen and show Republicans what that means for them, both economically and politically. This shutdown, because it's over relatively little money, and because Democrats feel comfortable saying "we shouldn't be cutting jobs spending to pay for disaster aid" over and over again, offers a way to carry that strategy out in a relatively controlled fashion.

The smart money is probably still on some sort of resolution in the next week. But it's by no means a sure thing. There are a lot of Democrats out there who feel that Boehner's bluff eventually needs to be called, and this is as good a time as any, and perhaps a better time than most.

Top stories

1) There's been 'no progress' on a compromise to avert a shutdown, report Rosalind Helderman and Paul Kane: "With time running out, Congress returns Monday to try to pass a short-term funding measure to avert a government shutdown and avoid yet another market-rattling showdown over the federal budget. The Democratic-led Senate, which on Friday blocked a GOP House measure to fund the government through Nov. 18, will vote late Monday on its own version of the bill. The Senate bill includes dollars for disaster relief without an offsetting spending cut elsewhere that the House GOP demands. It is not clear how the dispute will be resolved. A spokesman for House Speaker John A. Boehner (R-Ohio) said Sunday that leaders have been in touch, but other congressional aides said there was no progress toward a compromise over the weekend."

2) Europe's bailout talks are still deadlocked, report Sudeep Reddy, Bob Davis, and Marcus Walker: "European officials are debating ways to boost the firepower of their financial-bailout fund after the world's finance ministers, worried about the potential for a market meltdown, ratcheted up pressure on euro-zone officials to act. During meetings of the International Monetary Fund in Washington over the weekend, the U.S. and other major nations pressed European leaders to increase the effective size of their €440 billion ($594 billion) rescue fund to perhaps trillions of euros by borrowing against it. The talks are at a early stage, and it is far from clear they can forge a political consensus to act. German officials say the idea is moot as long as the European Central Bank continues to reject it. Some European officials hope the central bank might soften its stance under incoming president Mario Draghi, but his views on the issue aren't known."

Quote of the day, via @JimPethokoukis: "'If a generous sovereign from Mars came down and paid off every penny of Greece's debt tomorrow, the fundamentals of the European crisis would not be altered,' said former White House economic adviser Lawrence Summers."

3) Lefties are worried the administration will fold to banks during mortgage settlement talks, reports Edward-Isaac Dovere: "President Barack Obama’s liberal base says he’s on the verge of selling out to the banks again. This time, the problem is a subprime mortgage settlement that his administration is pressuring state attorneys general to sign off on -- a deal that could stop many state investigations and prosecutions about mortgage lending practices. That settlement, a collaboration between the Justice Department and the 50 state attorneys general much like the one that produced the landmark 1998 agreement with tobacco companies, would mean a lump-sum payment from the banks in exchange for a release from liability. But with negotiators in Washington this week trying to finalize a deal, it’s become the latest flashpoint of left-wing disenchantment with Obama."

4) Obama formally unveiled his long-awaited No Child Left Behind waiver program, report Laura Meckler and Stephanie Banchero: "President Barack Obama is replacing key planks of former President George W. Bush's signature No Child Left Behind education law, allowing many schools to escape looming punishment if their states adopt a new set of standards...To qualify, states must meet three tests. First is the rigorous evaluation system for teachers and principals. Second, they must set high achievement standards. Under existing law, states can set their own standards, and Education Secretary Arne Duncan has said many set the bar too low. Under the new waiver program, students who meet standards must be considered ready for college or a career. Third, states must develop strategies targeted to the worst-performing schools."

Top op-eds

1) Arguments against the jobs bill don't hold up, writes Christina Romer: "Martin Feldstein, the Harvard economist, recently combined private estimates that the president’s plan would raise employment by about two million in 2012, with its cost of about $450 billion. His conclusion was startling: each job produced by the plan would cost about $200,000. This calculation is attention-getting, but it’s misleading. First, many of the jobs would be in 2012, but not all. Infrastructure spending, for example, would be spread out over several years, so the total number of years of employment created over the life of the program would most likely be substantially larger than two million. More fundamentally, the program wouldn’t just create jobs. Consider the proposed $140 billion for roads, bridges, school repair and teachers."

2) The economy needs a break from regulations, writes Susan Collins: "I have asked employers in my state what it would take to help them add jobs. No matter their business or the size of their work force, they tell me that Washington must stop imposing crushing new regulations. America needs a 'time-out' from the regulations that discourage job creation and hurt our economy. I have introduced legislation to impose a one-year moratorium on any 'significant' new rules that would have an adverse impact on jobs, the economy, or America's international competitiveness. A one-year moratorium on such regulations is a common-sense solution that would help create jobs. Under my bill, certain rules would be exempt from the moratorium: those that are needed in emergencies, such as to respond to imminent threats to public health or safety, and those affecting crime, the military and foreign affairs."

3) Austerity will only make Europe's troubles worse, writes Paul Krugman: "Is it possible to be both terrified and bored? That’s how I feel about the negotiations now under way over how to respond to Europe’s economic crisis, and I suspect other observers share the sentiment...Europe’s answer has been to demand harsh fiscal austerity, especially sharp cuts in public spending, from troubled debtors, meanwhile providing stopgap financing until private-investor confidence returns. Can this strategy work? Not for Greece, which actually was fiscally profligate during the good years, and owes more than it can plausibly repay. Probably not for Ireland and Portugal, which for different reasons also have heavy debt burdens. But given a favorable external environment -- specifically, a strong overall European economy with moderate inflation -- Spain, which even now has relatively low debt, and Italy, which has a high level of debt but surprisingly small deficits, could possibly pull it off. Unfortunately, European policy makers seem determined to deny those debtors the environment they need."

4) This is the third-party stump speech we need, writes Matt Miller: "Democrats and Republicans will tell you, as I do, that they want to make America competitive again, keep faith with our deepest values of fairness and opportunity, and fix our broken political system. But the Democrats’ timid half-measures and the Republicans’ mindless anti-government creed can’t begin to get us there. Both parties are prisoner to interest groups and ideological litmus tests that prevent them from blending the best of liberal and conservative thinking. And neither party trusts you enough to lay out the facts and explain the steps we need to take to truly fix things — in fact, their pollsters tell them that if they do, you’ll vote them out."

5) The government may not be on its best behavior, but neither's the private sector, writes Steven Pearlstein: "Don’t you wish government could get its act together and perform with the efficiency and competence of the private sector? Hewlett-Packard, for example. It’s hard to imagine how, in the space of a decade, a group of executives and directors managed to take one of the world’s most respected and profitable companies, the very heart and soul of Silicon Valley’s innovation culture, and turn it into a real-life corporate soap opera, complete with sex, revenge, betrayal, behind-the-scenes back-stabbing, press leaks, illegal snooping and dynastic intrigue...It is a reminder that costly and embarrassing scandals, like those involving $16 muffins and soured $500 million loan guarantees, are hardly limited to the public sector."

Radio session interlude: Low play "Especially Me" live on WFUV.

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Still to come: Tim Geithner is pushing Europe to adopt bank reforms; another appeals court is sounding skeptical notes about health reform; Obama unveiled his long-awaited No Child Left Behind waiver program; the House voted to reverse EPA air pollution rules; and two black bear cubs wrestle.

Economy

Tim Geithner is pushing central bank reforms in Europe, reports Howard Schneider: "Treasury Secretary Timothy F. Geithner is pushing to make the European Central Bank the ultimate guarantor of bonds issued by the 17 countries that share the euro, a fundamental shift he maintains is the only sure way to solve a crisis threatening the global recovery. In meetings in recent weeks in France, Poland and now Washington, Geithner has made the case that without strong backing from their central bank, governments in the euro area will be hampered for years by suspicion that their bonds are risky bets for investors. That lack of confidence has rocked global markets in recent weeks and could continue to threaten the European economy and banking system. The proposal to expand the ECB’s role has divided European officials and bankers."

China won't bail out Europe, reports Bob Davis: "China to Europe: Don't expect a bailout from us. That was the message delivered by a number of Chinese officials during meetings at the International Monetary Fund, where China was widely seen as an answer to the euro zone's problems, either as a purchaser of European debt or as a country that could further goose its economic growth rate. We can't just go save someone,' said Gao Xiqing, president of China Investment Corp., China's huge sovereign wealth fund. 'We're not saviors. We have to save ourselves,' he said at a weekend panel discussion...That appeared to rule out CIC buying debt from Italy, Greece and other troubled euro-zone nations that are having the toughest time finding buyers. Chinese central banker Zhou Xiaochuan was just as adamant that China shouldn't be expected to boost its growth rate in an unsustainable fashion to help out the global economy."

The Fed may not be able to boost mortgage lending, reports Brady Dennis: "The Federal Reserve’s latest push to revive the economy this week had a key aim: Drive low mortgage rates even lower to strengthen the ailing housing market and help cash-strapped borrowers get out from under higher-interest loans. But that attempt to throw a lifeline to struggling homeowners faces a stark reality: Despite historically low interest rates, the very people most in need of the kind of relief that could come from refinancing their homes have found it difficult to qualify. Even as the Fed undertook new measures, a study released by the central bank this week found that tight lending standards and the continuing drop in home prices prevented 2.3 million homeowners from refinancing last year."

Easter Egg interlude: Google's doodle on the occasion of Jim Henson's 75th birthday.

Health Care

Another appeals court is sounding skeptical about health reform, reports Brent Kendall: "Judges on a federal appellate court suggested Friday that last year's health-care overhaul was an unprecedented assertion of power by the government, but they didn't clearly signal a readiness to strike down the law. The court at times questioned whether it even had jurisdiction to consider the case, an issue that could delay an ultimate resolution on the law's constitutionality. Judges Brett Kavanaugh and Laurence Silberman, conservative members of a three-judge panel that presided over two hours of oral argument, said they worried about the implications of allowing Congress to require that individuals either purchase health insurance or pay a penalty...Three federal appellate courts have already ruled on the issue, with two ruling in favor of the Obama administration and a third finding the individual mandate unconstitutional."

Congressional Dems are pledging to defense the CLASS Act, reports Julian Pecquet: "Congressional champions of the health law's controversial CLASS Act said they'll do all they can to keep it alive after reports Thursday that the Obama administration is putting the long-term care program on ice. The Department of Health and Human Services recently asked Senate appropriators to strike $120 million that had been planned next fiscal year to implement the benefit for disabled Americans. And this past week, the administration was left scrambling to reassure advocates after the program's departing actuary said the CLASS Act office was closing down. 'It's sad,' said Sen. Barbara Mikulski (D-Md.), a champion of the program that was developed in her Senate HELP Committee by the late Sen. Edward Kennedy (D-Mass.). 'We're evaluating our strategy now.'"

Domestic Policy

Unions are using the Citizens United ruling to their advantage, reports Steven Greenhouse: "Labor unions are seizing on last year’s landmark Supreme Court campaign finance ruling to change how they engage in politics, developing ambitious plans to influence nonunion households in the 2012 election and counter corporate money flowing into outside conservative groups. Labor unions had initially assailed the ruling, known as Citizens United, for allowing corporations and wealthy donors to vastly expand their spending on campaigns. That has indeed happened, with the proliferation of a new generation of political action committees, known as Super PACs, that can accept unlimited donations. But the ruling also changed the rules for unions, effectively ending a prohibition on outreach to nonunion households. Now, unions can use their formidable numbers to reach out to sympathetic nonunion voters."

The Pentagon may soon cap defense executives' salaries, reports Brian Friel: "Lockheed Martin and other defense contractors won’t be able to bill the government for more than $693,951 a year in total salary and compensation for any executives under a proposal headed for congressional approval. The Senate is mulling an expansion to all executives from current rules limiting the cap to contractors’ top five executives. The House has approved a cap on all employees of defense vendors. While the full Senate has yet to vote on its committee-approved version, and the two chambers must still reconcile their differences, the expanded executive pay limit has a good chance to survive...The House-passed version of the 2012 defense authorization bill would apply the cap to all employees of contractors who do business with the Pentagon. The Senate Armed Services Committee’s version would apply the cap only to managers and executives."

The White House is taking steps to help women thrive economically, write Valerie Jarrett and Tina Tchen: "Even as we wait for Congress to act, the Obama administration is taking steps to create economic opportunities for women and girls. On Monday, for example, the National Science Foundation (NSF) will announce new steps to make it easier for women to pursue careers in engineering and the sciences -- fields that are critical to our nation’s economic growth...To support female innovators and help women contribute to the economy, the NSF is taking steps to allow researchers to balance their responsibilities in the lab with their responsibilities at home. For example, if a researcher needs to delay the start of a funded project for a family-related reason, such as taking care of a young child or an aging parent, the NSF will work with her to make that possible without causing her to lose her grant."

Adorable animals brawling interlude: Two black bear cubs wrestle.

Energy

The House voted to reverse EPA air pollution rules, reports Ryan Tracy: "The House voted Friday to force the Environmental Protection Agency to delay and possibly scale back several air-pollution rules. The bill, approved by a 249-169 vote with support from 19 Democrats, also would require a cabinet-level study of the impact of the agency's actions. It is unlikely to pass the Senate and become law, but is the loudest salvo yet in an ongoing clash over the EPA, which is finalizing or enforcing a host of rules affecting coal-fired power plants, cement plants and industrial boilers...As spending bills move through Congress, lawmakers may well try to use them as a vehicle for legislation that could affect the agency. Senate Democrats and the Obama administration have said they will stand behind the EPA."

Solyndra execs took the Fifth before Congress, report Carol Leonnig and Joe Stephens: "Top executives of Solyndra, the shuttered solar company that received a half-billion dollar federal loan before filing for bankruptcy, refused to answer questions from a congressional subcommittee Friday. They instead invoked their rights against self-incrimination. Furious Republican lawmakers described the loan as a 'taxpayer rip-off' -- and they pledged to continue probing whether the firm misled the government and whether the Obama administration rushed its loan approval...Both Republican and Democratic members asked how Solyndra executives could tell them in July that the Silicon Valley firm was doubling sales of its solar panels and then file for bankruptcy Aug. 31...Solyndra’s two top executives, sitting grimly at the witness table, said they could not provide any answers."

Some federally backed renewable energy companies will fail, and that's the point, writes Joe Nocera: "If we could just stop playing gotcha for a second, we might realize that federal loan programs -- especially loans for innovative energy technologies -- virtually require the government to take risks the private sector won’t take. Indeed, risk-taking is what these programs are all about. Sometimes, the risks pay off. Other times, they don’t. It’s not a taxpayer ripoff if you don’t bat 1.000; on the contrary, a zero failure rate likely means that the program is too risk-averse. Thus, the real question the Solyndra case poses is this: Are the potential successes significant enough to negate the inevitable failures? I have a hard time answering 'no.' Most electricity today is generated by coal-fired power plants...These plants have built-in cost advantages that no new technology can overcome without help."

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

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