Wonkbook: No increase in tax rates, no austerity crisis deal

December 5, 2012

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Wonkbook's Number of the Day: 10 percent. That's the amount by which the EPA could reduce the United States's carbon emissions using its existing authority under the Clean Air Act, according to a new report by the National Resources Defense Council, an environmental advocacy group. See Wonkblog's story on it for more.

Wonkblog's Graph of the Day: Women are having more babies, but later in life.

Today in Wonkbook: The austerity crisis, all day, all night, all the time; the disability treaty's implosion; what will happen to safety-net hospitals in the fiscal cliff; how to cut carbon emissions, George W. Bush's advice on immigration reform.

Top story: No increase in tax rates, no austerity crisis deal

Obama says the deal has got to include tax increases on high incomes. "'We’re going to have to see the rates on the top 2 percent go up. And we’re not going to be able to get a deal without it,' Obama told Bloomberg Television in his first television interview since the Nov. 6 election...Obama instead appeared to toughen his stance on tax rates, the central dispute between the two parties...In a news conference last month, Obama suggested that he might let the top rate rise to a level somewhat lower than 39.6 percent to satisfy Republicans who argue that higher rates would hurt small businesses. But on Tuesday, he seemed to block even that path to compromise." Lori Montgomery and Rosalind S. Helderman in The Washington Post.

@pourmecoffee: Goodnight cliff. Goodnight House jumping over the cliff.

...And Republicans see short-term stimulus as a no-go. "The Obama administration is arguing that the sluggish economy requires a shot in the arm, and it included tens of billions of dollars of little-noticed stimulus measures in its much-noticed proposal to Congressional leaders last week. But Republicans have countered that the country cannot afford to widen the deficit further, and have balked at including the measures in any eventual deal." Annie Lowrey in The New York Times.

@JimPethokoukis: And every year we wait to do something, the bigger the problem become. Waiting 10 yrs to reform Medicare negates the fiscal cliff debt cuts

...As they do a tax hike on capital gains. "Republicans in the House of Representatives are fighting tax increases on capital gains and dividends, ruling out investment income as an acceptable source of additional revenues in increasingly urgent talks to avert the fiscal cliff." James Politi in The Financial Times.

...But entitlements are definitively on the table. "Entitlement cuts should remain on the table as party leaders seek to hash out an end-of-the-year budget deal, Rep. Steny Hoyer (D-Md.) said Tuesday. A number of Democratic leaders -- including Reps. Nancy Pelosi (Calif.), John Larson (Conn.) and Xavier Becerra (Calif.) -- have said they would support some spending reductions in Medicare, but that cuts to direct benefits should not be a part of the negotiations. Along with Senate Majority Leader Harry Reid (D-Nev.), they also maintain that Social Security reform has no place at all in the 'fiscal cliff' talks. But Hoyer, the Democratic whip, warned that taking entitlement benefits off the table is a bad place to start the negotiations." Mike Lillis in The Hill.

@ObsoleteDogma: Why the gold standard is the only REAL solution to the fiscal cliff #zerohedgepitches

Believe it or not, this is what progress looks like. "President Obama says it’s 'out of balance.' The Heritage Foundation says it’s 'preemptive capitulation.' But the reactions on both left and right drive home the fact that House Speaker John Boehner’s proposal to stop the 'fiscal cliff' marks some progress in the ongoing negotiations, ending the standoff that’s been casting gloom over Washington over the last few days." Suzy Khimm in The Washington Post.

@sahilkapur: Boehner: "If the President really wants to avoid sending the economy over the fiscal cliff, he has done nothing to demonstrate it."

Debate: Can policy makers make a dent in the deficit without raising middle-class tax rates, ending tax breaks that benefit the middle class, or cutting programs that average Americans depend on?

Is the GOP looking for a way out of the austerity crisis? "With President Obama insisting on higher tax rates for affluent Americans and winning public support for the idea, Congressional Republicans find themselves in an increasingly difficult political spot and are quietly beginning to look for a way out...The leadership officials now say that if no deal can be struck to avert the automatic expiration of all the Bush-era tax cuts and the onset of deep, across-the-board spending cuts, they could foresee taking up and passing legislation this month to extend the tax cuts for the middle class and then resume the bitter fight over spending and taxes as the nation approaches the next hard deadline: its statutory borrowing limit, which could be reached in late January or February." Jonathan Weisman in The New York Times.

Wonkblog explains: 11 shocking, true facts about Simpson-Bowles.

@davidfrum: Fiscal cliff exists to demonstrate: "Almost no power on earth is as strong as a wrongheaded idea whose time has come."

@pourmecoffee: When fiscal cliff gets made into a Broadway play (words and music by Simpson/Bowles) this will be Boehner's fretful spotlight song time.

Here's how the Clintonites would solve the austerity crisis: "The $4 trillion deficit-reduction plan the group came up with raises $1.8 trillion in new revenue through tax reform, $1.5 trillion through enforcing existing budget caps, and $485 billion in cuts to Medicare and defense spending. It adds $400 billion in stimulus and infrastructure investments meant to help growth. If implemented, that proposal would get debt-to-GDP down to 72 percent in 2022, or about where it is today." Dylan Matthews in The Washington Post.

Read: The report from the Center for American Progress.

Governors think plunging into the austerity crisis is a bad idea. "A bipartisan group of governors came to Washington on Tuesday to urge President Obama and congressional leaders to act quickly to avert the 'fiscal cliff,' warning that the series of budget cuts and tax increases set to take effect in January would rock their states...States rely on the federal government for about a third of their revenue, and the automatic spending cuts that are set to take effect in January would reduce funding for an array of social service, education and housing programs. In addition, businesses that contract with the federal government also would face automatic budget cuts." Michael A. Fletcher and Rosalind S. Helderman in The Washington Post.

...And yet Wall Street is walking on sunshine. "In Washington, debate over the 'fiscal cliff' is cloaked in apocalyptic warnings of soaring tax rates and a crashing economy. On Wall Street, the tone is different: All will be fine. The stock market has been little changed in the past three weeks, with few wild swings. That comes despite the Jan. 1 deadline when tax hikes and spending cuts are to go into effect unless politicians reach a deal to avert them." Neil Irwin in The Washington Post.

If the U.S. goes off the 'fiscal cliff,' who gets the blame? "Most Americans appear poised to blame Republicans, not President Obama, if negotiators fail to act in time to avert a 'fiscal cliff' of automatic tax increases and spending cuts slated for January, according to a new Washington Post-Pew Research Center poll. The new poll finds little confidence that leaders in Washington will reach a deal before the Dec. 31 deadline, and the level of pessimism remains largely unchanged since a similar poll three weeks ago. By nearly 2 to 1, more respondents said Republicans in Congress would be to blame if there is no deal, a lopsided assessment little changed from the earlier poll." Scott Clement in The Washington Post.

Limiting deductions: It's not as easy as it sounds. "[The Committee for a Responsible Budget presented] three options for limiting deductions as an alternative to letting the top tax rates increase. According to the analysis, each option could allow the government to collect about as much new revenue as it would if the top Bush-era tax rates of 33 percent and 35 percent expire as scheduled on Dec. 31 and revert to the Clinton-era levels of 36 percent and 39.6 percent, respectively, for couples with income above $250,000 and singles above $200,000." Jackie Calmes in The New York Times.

How to measure the ratio of spending cuts to tax increases, or the dumbest debate in Washington. "Imagine that Boehner and Obama end with a deal that includes $1 trillion in new spending cuts and $1 trillion in new tax increases. If the BCA cuts are included, that’s a 2:1 deal (and it becomes a 3:1 deal if you include the drawdown of the wars in Iraq and Afghanistan as spending cuts, as you almost certainly should, but let’s leave that out for the moment). If the BCA cuts aren’t included, it’s a 1:1 deal. And Boehner can argue that it will be very hard to sell his members on a 1:1 deal." Ezra Klein in The Washington Post.

How much would a short dive off the 'fiscal cliff' cost? "Some Democratic lawmakers and economists say the White House and Congress could wait until January to complete a deal on the fiscal cliff, without doing much harm to the economy. But going over the cliff even temporarily—triggering a combination of tax increases and spending cuts at the start of next month and then quickly undoing them -- could hurt the economy in some important intangible ways, such as by prompting sharp market declines and damaging confidence, critics of the strategy say." Sudeep Reddy in The Wall Street Journal.

Most fiscal-cliff plans are somewhat imaginary. But this one actually is. "Panetta-Burns is a deficit reduction plan. Panetta-Burns is supported by 8 percent of Americans and opposed by 17 percent. But most importantly, Panetta-Burns is not real: It’s an imaginary policy plan created by Public Policy Polling to see how many Americans would profess to have an opinion on a policy that does not exist." Sarah Kliff in The Washington Post.

MILBANK: How Romney can make a difference on the fiscal cliff. "In his first public comments since election night, the defeated Republican presidential nominee issued a statement Monday announcing his next step. An appeal to national unity? A charitable initiative? No, he announced that he was rejoining the [Marriott] hotel chain’s board of directors...It was emblematic of the tone-deaf, I-have-some-great-friends-that-are-NASCAR-team-owners moments that contributed to his loss. The country is in a crisis, political leaders in a standoff, and Romney is joining his buddy’s corporate board...[H]is failure to engage now, at a time when he could have the most clout, reinforces the impression that his candidacy was less about principle and patriotism than about him." Dana Milbank in The Washington Post.

ORSZAG: What a good deal would look like. "Although it isn’t yet time to panic about the fiscal cliff, negotiations so far aren’t exactly going well. The Republicans are committing themselves to an unsustainable principle of no marginal tax-rate increases whatsoever. And the Democrats are failing to seize the moment to make progressive reforms to Medicare and Social Security." Peter Orszag in Bloomberg.

BLINDER: How to get a deal, not a cliff. "Dear Congress, Please don't drive our economy off the fiscal cliff. First of all, I really hate recessions -- and you should, too. If you take between 3% and 4% of total spending out of an economy, a recession is very likely to follow. People like me won't lose their jobs, or even take a pay cut. Neither will you—at least not until the next election. But millions of Americans will, and that's the main point. Millions of jobs will be destroyed, incomes and wealth will fall, and businesses will fail in droves—all because a bunch of politicians couldn't agree." Alan Blinder in The Wall Street Journal.

FIRESTONE: The other Republicans make Boehner look like a courageous moderate. "Distinguishing the extreme right wing from the Republican Party’s center can sometimes be difficult, but today the rejectionist front made the job a little easier by blasting Speaker John Boehner’s offer in the fiscal talks...Only if the offer is seen from the narrowest sectarian viewpoint -- that it dares to raise revenue by ending those tax deductions -- could it be seen as any kind of concession. Though Mr. Boehner adamantly states he opposes raising tax rates, which is the essential element for Mr. Obama, his willingness to bring in additional revenue violates the economic fundamentalism of the party’s far right." David Firestone in The New York Times.

Documentaries interlude: A trailer for "Breaking the Taboo," a new film on the war on drugs narrated by Morgan Freeman.

U.S. rejects U.N. disability treaty

Why the U.S. just rejected a treaty based on its own laws. "Here’s a lesson in America’s weird political institutions: How Christian conservatives lead the Republican party to reject a treaty that endorsed existing American law. The US Senate voted today on ratifying the UN Convention on the Rights of Disabled People 61-38, but the majority fell short of the 66 votes needed for ratification. The 38 votes against came from Republican senators, most of whom signed a letter promising not to support the bill. The letter was organized by Senator Mike Lee of Utah, who said the treaty threatened US sovereignty and could force the parents of disabled children to send them to public schools. It drew the support of home-schoolers who also fretted that the treaty was, among other things, a sly way to force America to adopt laws enshrining 'abortion rights, homosexual rights, and demands the complete disarmament of all people.'" Tim Fernholz in Quartz.

The rejection of the disability treaty is also Sen. Kerry's time to shine. "An international treaty promoting the rights of the disabled across the globe failed in the Senate on Tuesday, but it gave Sen. John F. Kerry, chairman of the Foreign Relations Committee, a chance to lay out a diplomatic vision that could serve as blueprint if he becomes President Obama’s next secretary of state. The point of the treaty, Kerry said, was to urge the world to be more like the United States." Paul Kane in The Washington Post.

...But it was a dark day for Frmr. Sen. Bob Dole. "Former Senator Bob Dole of Kansas sat slightly slumped in his wheelchair on the Senate floor on Tuesday, staring intently as Senator John Kerry gave his most impassioned speech all year, in defense of a United Nations treaty that would ban discrimination against people with disabilities. Senators from both parties went to greet Mr. Dole, leaning in to hear his wispy reply, as he sat in support of the treaty, which would require that people with disabilities have the same general rights as those without disabilities. Several members took the unusual step of voting aye while seated at their desks, out of respect for Mr. Dole, 89, a Republican who was the majority leader. Then, after Mr. Dole’s wife, Elizabeth, rolled him off the floor, Republicans quietly voted down the treaty that the ailing Mr. Dole, recently released from Walter Reed National Military Medical Center, so longed to see passed." Jennifer Steinhauer in The New York Times.

In case you ever run out interlude: theuselessweb.com/.

The banks vs. the Fed

Meet the Fed governor who wants to rein in the banks. "One of the most influential policymakers at the Federal Reserve, Daniel Tarullo, publicly debated options Tuesday for ending bailouts of big banks considered too big to fail, signaling that the contentious issue may move to the forefront in the coming year...One such step would be requiring large financial firms to set aside more money that could be tapped in the event of its failure...Tarullo also reiterated an idea that he’s been pitching for months: restricting the expansion of big banks by limiting their non-deposit liabilities -- funding that comes from sources other than consumer deposits in savings or other accounts." Danielle Douglas in The Washington Post.

Answers interlude: How tall can a Lego tower get before it collapses upon itself?.

The Republican Rethink

The 'Republican re-think' went into full gear, with speeches from Paul Ryan and Marco Rubio. "A month after Republicans lost their bid for the White House, a pair of party leaders said Tuesday that a greater emphasis should be placed on improving the lives of the middle class if Republicans hoped to expand their appeal and confront the nation’s changing demographics...The speeches on Tuesday evening offered Republicans an early preview of two potential candidates in the 2016 presidential election -- and themes that are likely to be at the heart of the agenda as the party works to rebuild." Jeff Zeleny in The New York Times.

@jeffzeleny: Rubio receives award at Kemp dinner. His speech excludes 3 items: Obama, Romney, immigration reform. Focuses on middle class, education.

...And George W. Bush says immigration policy needs 'benevolent spirit.' "Mr. Bush has remained largely out of the policy arena since leaving the White House four years ago, but immigration has long been one of his passions and he spent much of his presidency trying to make it easier for those in the United States illegally to come out of the shadows and earn legal status. In speaking out on Tuesday, Mr. Bush was pushing his party again at a time when some other Republicans are beginning to come around to his point of view" Peter Baker in The New York Times.

@ObsoleteDogma: Here's my entitlement reform plan: More immigration

Lampoon interlude: Stan Freberg's classic 1982 special, "The Federal Budget Review".

Health care is changing

Safety-net hospitals warn on Medicaid cuts. "A coalition of public hospitals has launched a new campaign against cuts to Medicaid that could come as part of a deficit-reduction deal...While Medicare has received more attention in the debate so far, advocates for Medicaid are concerned that the program may be seen as an easy target." Elise Viebeck in The Hill.

Is a doctor's visit online the same thing as in person? "University of Pittsburgh’s Ateev Mehrotra lead a team of researchers in comparing electronic and in-person visits to the doctor at four primary care clinics in Pittsburgh. They looked at two relatively simple conditions: sinus and urinary tract infections, where doctors either worked with patients face-to-face or via e-mail, with the patient filling out a series of questions about his or her condition and the doctor making a prognosis. Their results, published this month in the Journal of the American Medical Association, suggest that the outcomes are relatively similar." Sarah Kliff in The Washington Post.

Q&A: How the 'fiscal cliff' affects health care.

Music recommendations interlude: Frank Sinatra's 1970 album, "Watertown".

Cutting carbon emissions

How to cut U.S. carbon emissions by 10 percent -- without Congress lifting a finger. "Here’s how this would work: Thanks to a 2007 Supreme Court decision, the EPA already has the authority to use the Clean Air Act to regulate carbon-dioxide, which causes global warming. So far, the agency has used that power to craft new fuel-economy standards for cars and light trucks, as well as to impose strict carbon limits on any future power plants that get built. But the next step, [a National Resources Defense Council] report says, is to cut emissions from existing plants." Brad Plumer in The Washington Post.

Read: The NRDC report.

Why old power plants matter. "The old coal plants emit 40 percent of the nation’s total emissions...The proposal would offer ways to limit the regulation’s economic impact by letting states use different routes to meeting federal standards, including credits for utilities that implement wide-ranging energy efficiency programs. It would also let utilities average their emissions from old plants with the zero emissions from new renewable energy projects to meet guidelines." Steven Mufson in The Washington Post.

@mattyglesias: The climate cliff. #rebranding

DUENWALD: Can the NRDC plan work? "By 2020, the program could reduce U.S. CO2 emissions 17 percent from 2011 levels, according to the NRDC. It would cost about $4 billion annually, but would yield benefits worth at least six times as much...Energy companies can be expected to balk at this amount of greenhouse-gas reduction, arguing that it is too expensive or simply impossible. Perhaps they have other strategies they'd like to suggest. Ultimately, though, it is the EPA that will need to come up with a good, defensible plan. Next year would not be too soon." Mary Duenwald in Bloomberg.

@Ben_German: Senate energy committee already has two strongly pro-drilling/pro-coal Dems (Landrieu and Manchin). Barrier for Heitkamp if she wants seat?

Here's another way to prevent global warming: Stop flying over the North Pole. "A new study suggests one way that humans could slow the melting of the sea ice — by preventing international flights from crossing over the Arctic circle. These cross-polar flights are a surprisingly large source of black carbon pollution in the region. And if those planes diverted course, that could help fend off the day when the Arctic sea-ice collapses for good." Brad Plumer in The Washington Post.

Read: The study, "The effects of rerouting aircraft around the arctic circle on arctic and global climate".

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

Wonkbook is produced with help from Michelle Williams.

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