Wonkbook: Time for ‘Plan C’?

December 19, 2012

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

Wonkbook's Number of the Day: $245 billion. That's how much a permanent solution to the 'doc-fix' would cost. The doc-fix is an annual ritual where Congress "delays" cuts to Medicare providers mandated by the 'sustainable growth rate' rule. If they didn't delay those cuts, doctors would see their payments drop by more than 30 percent, and many would leave the program. So Congress isn't making those cuts. But every year or so, they have to go through an aching ritual in which they delay them. President Obama has proposed permanently solving the doc-fix problem, as Sarah Kliff reports in The Washington Post.

Wonkblog's Graph of the Day: The fiscal cliff offers and counteroffers, in one chart.

Today in Wonkbook: Boehner's 'Plan B'; gun control after Newtown, Conn.; the energy revolution; and, oh yeah, a little thing called the economy.

Top story: Boehner's 'Plan B'

Boehner’s backup tax plan shakes up ‘fiscal cliff’ negotiations. "House Speaker John A. Boehner (R-Ohio) veered off the bipartisan course he had been charting toward a broad tax-and-entitlement deal with President Obama and instead Tuesday pushed a GOP package to extend tax cuts for income up to $1 million. The move shook the Capitol after several days of significant progress between Obama and Boehner, who had moved closer to a pact raising taxes on the wealthy and curbing government spending, including on Social Security." Paul Kane and Lori Montgomery in The Washington Post.

@pourmecoffee: Seeing reports Boehner going with a "Plan B" on fiscal cliff, which I assume is bill to repeal Obamacare and name something after Reagan.

Boehner's 'Plan B,' explained. "House Speaker John A. Boehner has pushed back against the White House’s latest fiscal cliff offer with a ploy he’s calling 'Plan B': He plans to hold a vote in the House that would let the Bush tax cuts expire for income above $1 million -- and nothing else." Suzy Khimm in The Washington Post.

The White House rejects it, of corse. "The White House has come out against the 'Plan B' proposed by House Speaker John Boehner (R-Ohio), which would raise taxes on income over $1 million a year." Rachel Weiner in The Washington Post.

@moorehn: One of the great disappointments of journalism: that @sarahkliff is on the Obamacare story and not, sadly, the fiscal cliff. #lostpuns

It's been a rough 24 hours for the White House. "Between Monday night and Tuesday morning, Boehner apparently got an earful from his leadership team. They were angry, I’m told, over three main elements of the emerging deal...The question inside the White House now is what’s behind Boehner’s 'Plan B'? Is he trying to show nervous conservatives that he’s playing hardball? Or is Boehner signaling that he can’t go any further and is now preparing to bolt the talks if the White House doesn’t make further concessions?" Ezra Klein in The Washington Post.

Wonkblog explains: Five sticking points in the fiscal cliff deal.

Important, but boring: Do we count interest payments? "Obama's debt ceiling counteroffer to Republicans Monday night amounted to $1.22 trillion in spending cuts according to a source familiar with the negotiations, including $290 billion saved from lower-interest payments. House Republicans discount those spending cuts, with Speaker of the House John Boehner spokesman Brendan Buck saying the Obama plan only included "$930 billion in spending cuts.' But Republicans have employed this very same tool — counting the billions saved from not having to borrow billions more — to pad the size of deficit reduction, sometimes to placate their own restless base." Zeke Miller at Buzzfeed.

Who told Rep. Ryan to lay low? "With talks at a crucial phase, Republicans are keeping close tabs on their recent vice-presidential nominee. His support for a compromise could stem conservative defections. His opposition could sink the deal entirely...For now, Mr. Ryan isn't talking. The Wisconsin Republican has kept a deliberately low profile since the election. He no longer fields reporters' questions in the Capitol hallways and has talked infrequently with reporters for outlets in Wisconsin, home to his district." Patrick O'Connor in The Wall Street Journal.

@petersuderman: What happens if you're scaling the fiscal cliff and your carabiner breaks?

...And who got Rep. Cantor to fall in line? "In a breach of bedrock conservative principles, House Speaker John A. Boehner laid out a proposal Tuesday to allow tax rates to rise for Americans making more than $1 million a year. And standing side by side with Boehner as he outlined what many Republicans consider an apostasy -- but what Boehner argues is the only way to spare most people from a tax increase -- was House Majority Leader Eric Cantor, who has worked hard in recent months to play the loyal lieutenant." Rosalind S. Helderman in The Washington Post.

@justinwolfers: Liberals say they hate the potential cliff deal either because they hate it, or because they don't want Conservatives to know they love it.

Explainer: An etymological history of the phrase 'fiscal cliff'.

Chained CPI, Washington's trick to cut Social Security and Medicare. "Let’s get something straight: 'Chained-CPI' cuts Social Security benefits and increases taxes. That’s why it’s part of the negotiations. Full stop. But you often wouldn’t know it. The policy typically gets sold on extremely technocratic grounds." Ezra Klein in The Washington Post.

That would put Social Security up for negotiation. "As part of a deal being negotiated by President Obama and Speaker John A. Boehner to avert the worst of the year-end tax increases and spending cuts, Social Security payments might be lower in the future for millions of Americans...But the White House seemed willing to make a concession to Republicans with a switch in the formula that ensures that Social Security payments keep up with the pace of inflation -- an idea that immediately proved unpopular with its liberal base." Annie Lowrey in The New York Times.

Wonkblog explains: Three potential cuts to Social Security that would be way, way more progressive than chained CPI.

BARRO: The real problem with chained CPI. "Our income tax and old-age benefit policies are linked, for dubious reasons, to price inflation. They shouldn't be. Instead of tightening our price inflation measure, we should move in the opposite direction: less price indexing, more wage indexing." Josh Barro in Bloomberg.

Obama’s new fiscal cliff offer would repeal the ‘doc-fix’. "A permanent fix would come with a $245 billion price tag and it’s still unclear how -- or if -- Congress would pay for a policy meant to stabilize doctor salaries. For doctor groups, repealing the sustainable growth rate is something of a holy grail: This is the formula that determines how much Medicare providers get paid, by tethering their salaries to overall growth in the economy." Sarah Kliff in The Washington Post.

Boehner has dropped the Medicare-age demand. "Congress doesn't need to raise the Medicare eligibility age this year, House Speaker John Boehner (R-Ohio) said Tuesday. Raising the eligibility age from 65 to 67 was on the table in earlier debt talks, and has been floated again as Boehner and President Obama look for a way to avoid the looming fiscal cliff." Sam Baker in The Hill.

Interview: Zeke Emanuel on health care spending in an age of austerity.

Hospitals worry they are about to get smacked around by fiscal cliff. "As President Obama and Congress try to thrash out a budget deal, the question is not whether they will squeeze money out of Medicare, but how much and who will bear the brunt of the cuts...With growing pressure to reach an agreement on deficit reduction by the end of the year, some consensus is building around the idea that the largest Medicare savings should come from hospitals and other institutional providers of care." Robert Pear and Reed Abelson in The New York Times.

Reviewing the fiscal-cliff tax math. "For starters, paychecks almost certainly will be smaller -- by an average $942 per household for the year, because it appears the two parties will agree to let a temporary payroll-tax holiday expire. The break, instituted for 2011 and 2012, reduced a worker's share of the Social Security payroll tax to 4.2% from 6.2%...Upper-income households are likely to see significant tax increases, though it still isn't clear exactly who will be hit. Mr. Obama is now proposing to let the top rate rise on income above $400,000 annually, up from the $250,000 threshold he had been pushing until Monday. Mr. Boehner (R., Ohio) wants to limit the increases to households earning more than $1 million. Some congressional aides said this could presage a final deal with a cutoff in the $500,000 range." John D. McKinnon in The Wall Street Journal.

@grossdm: Finance types tend to think two sides split the difference on money negotiations, which explains wall street optimism on cliff avoidance

Music recommendations interlude: Slate’s Definitive Christmas Playlist.

Top op-eds

YGLESIAS: Why 'president pro tem' makes no sense. "Imagine some disastrous scenario -- a terrorist attack most likely -- that simultaneously kills or disabled the president, vice president, and House speaker all at once while they’re negotiating the latest budget crisis. Who’s next in line? The president pro tempore of the United States Senate, someone nobody intended to put in any kind of position of national leadership. Indeed, it is almost invariably someone his colleagues have passed over as caucus leader in favor of a senator who is younger and more reflective of the current spirit of politics. The president pro tempore is in the order of succession thanks to the kind of logic that makes a lot of sense in the halls of Congress and no sense outside of it." Matthew Yglesias in Slate.

PORTER: Goodbye, government. "The frenzied partisan horse-trading has glossed over what is arguably the central issue of any debate over long-term fiscal policy: the kind of role we expect the government to play in the nation’s future. Not only have our political leaders failed to lay out a vision of what they hope the budget will achieve, they are pulling the wool over Americans’ eyes about the kind of budget we are about to get. The truth is that both the president and House Republicans have agreed to shrink a critical part of the government to its smallest in at least half a century. This is regardless of which trillion-dollar proposal gains the upper hand." Eduardo Porter in The New York Times.

STEVENSON AND WOLFERS: How top colleges overlook many top students. "[Q]ualified students from low-income families followed a completely different pattern. Most didn’t apply to any selective college or university, and some didn’t apply to college at all. Too often, the best schools they approached should have been their safety schools. They effectively gave up a chance for upward mobility the day they sent in their college applications...Among applicants to selective colleges, high-achieving, high-income students outnumber their low-income peers by 15 to 1, leading colleges to perceive the latter as a rare species. But this is wrong. The true ratio of high-income to low-income high achievers is roughly 2.5 to 1, according to Hoxby and Avery." Betsey Stevenson and Justin Wolfers in Bloomberg.

Wow interlude: How cows survive car crashes.

Gun control after Newtown, Conn.

What the White House is thinking about gun control. "The White House threw its support behind several gun-control measures Tuesday, including requiring background checks at gun shows and for other private sales -- ideas likely to face stiff opposition from most congressional Republicans and the powerful gun lobby. President Barack Obama also wants to renew the expired ban on assault weapons and consider limits on high-capacity ammunition magazines, said his spokesman, Jay Carney." Colleen McCain Nelson and Laura Meckler in The Wall Street Journal.

...But the policy focus is turning to mental health. "The debate over gun rights in the wake of the mass shooting in Newtown, Conn., has yielded one point of agreement among Republican and Democratic political leaders in Washington: laws on access to firearms among the mentally ill must be reviewed." Gary Fields and Ashby Jones in The Wall Street Journal.

There'll also be legislative action at the state level on gun control. "The first concrete responses to the massacre in Newtown, Conn., began emerging on Tuesday, as state leaders proposed measures to curb gun violence...In California, Democratic leaders introduced legislation that would mandate background checks and one-year permits for anyone who wanted to buy ammunition there. In Michigan, a Republican governor vetoed legislation that would have permitted concealed weapons in schools." Adam Nagourney in The New York Times.

Chart: The NRA’s big spending edge.

The social roots of school shootings. "A decade ago, at the urging of the National Research Council, sociologist Katherine Newman and a team of researchers...examined 18 small-town school shootings since 1970 and spent years studying two extensively -- one at Heath High School in Kentucky, the other at Westside Middle School in Arkansas. And in her 2004 book, 'Rampage: The Social Roots of School Shootings,' Newman concluded that many of these small-town massacres followed a few striking patterns. One thing they discovered was that it was often boys at the margins of society who carried out these shootings. They weren’t loners. But they were often socially awkward and struggling to fit in. And the atmosphere of small towns could exacerbate the problem." Brad Plumer in The Washington Post.

Gun industry recoiling after mass shooting. "The U.S. gun industry faced a new set of challenges to its financial and political power Tuesday as more of its Washington allies called for gun control and a major investor sought to get out of the firearms business entirely. In Washington, a trio of new senators -- all elected with National Rifle Association backing -- said they were willing to discuss tightening gun laws. The White House gave a stronger signal of President Obama’s support for reinstating a ban on assault weapons." Brad Plumer and David A. Fahrenthold in The Washington Post.

KLEIN: A better target for gun control. "I’ll tell you what scares me: I don’t think we know how to prevent a tragedy like the Newtown massacre. The more information that emerges on the killings, the less effective any of the potential policy remedies appear to be...It’s a depressing thought, but maybe it shouldn’t be. Yes, in the aftermath of the massacre in Newton, we want to stop the next one. It is possible, and perhaps even likely, that we can’t. Though these rampages have come with searing frequency over the past two years, they shock us so deeply because they remain so rare...While we may not be able to stop every gun death, there are lots and lots and lots of gun deaths to stop. And if a deadly mass shooting like the one in Newtown is specific and idiosyncratic in ways that make it very difficult to confront through policy, the average gun death follows a much clearer pattern...While we may not be able to stop every gun death, there are lots and lots and lots of gun deaths to stop. And if a deadly mass shooting like the one in Newtown is specific and idiosyncratic in ways that make it very difficult to confront through policy, the average gun death follows a much clearer pattern." Ezra Klein in The Washington Post.

Research interlude: Northwestern University Prof. Ellen Shearer's project on nonvoters in America.

Economy

U.S. trade deficit shrinks, thanks to cheaper oil. "The nation’s trade deficit narrowed in the July-September quarter to the smallest level since late 2010, the Commerce Department said on Tuesday. The deficit fell to $107.5 billion in the third quarter, down 9 percent from the second-quarter imbalance of $118.1 billion, the agency said. It was the lowest trade gap since the final three months of 2010." The Associated Press.

Homebuilder confidence hits high. "US home-builder confidence has risen to its strongest level for more than six years this month, reinforcing the view that the housing market is on track for further improvement and will help the US economy. The NAHB/Wells Fargo Housing Market index rose to 47 in December, its highest level since April 2006, from a downwardly revised 45 in November, the National Association of Home Builders said on Tuesday." Reuters.

UN is an economic bear. "World economic growth has weakened substantially this year and faces the confluence of a triple threat -- the so-called fiscal cliff in the United States, the European debt crisis and a sharp slowdown in China, the United Nations said in a report released on Tuesday. The worst case, the report said, could be a new global recession that mires many countries in a cycle of austerity and unemployment for years...[I]t could take until at least 2017 just to recoup the jobs lost in the United States and Europe since the 2008-9 recession. He forecast world growth for 2013 at 2.4 percent, 'a significant downgrade' from the United Nations’ midyear forecast of 3.1 percent. He said the 2012 growth rate was 2.2 percent, versus the midyear forecast of 2.5 percent." Rick Gladstone in The New York Times.

The fiscal cliff economic drag suit. "Many forecasters say an increase in the payroll tax rate would damp consumer spending, weighing on the recovery. J.P. Morgan forecasts it would slow growth in 2012 by 0.6 percentage point, a sizable drag for an economy projected to expand by around 2% next year." Sudeep Reddy in The Wall Street Journal.

IRWIN: How the fiscal cliff could hurt the economy. "There are still no guarantees of a deal by the Jan. 1 onset of the austerity crisis. But there is enough on the table now that we can start examining what it would mean for the economy in 2013 and beyond. In a nutshell it’s this: There should be an immediate boost to the economy from taking the fiscal cliff off the table; uncertain effects from a deficit-reduction plan could possibly raise business confidence; expected tax hikes on the affluent would be a mild negative; and the expiration of the payroll tax holiday would be a significant negative. In the very short run, a deal -- almost any deal -- is clearly positive for the economy." Neil Irwin in The Washington Post.

Not-so-adorable animals interlude: Golden eagle snatches kid.

Energy revolution

Is the U.S. coal industry's future dark as, well, coal? The IEA thinks so. "The U.S. coal industry faces a difficult period at home as shale gas reduces the fuel's share in power generation, but its problems are set to worsen as export markets diminish and large swaths of the industry could have to shut, the International Energy Agency warned on Tuesday. U.S. coal consumption will fall by 14% between 2011 and 2017 as power stations burn increasing amounts of cheap shale gas, but the European export outlet that has helped sustain the industry through the early stages of this shift won't last as carbon-emissions regulations there tighten, the IEA said. The result is likely to be mine closures and job losses in some of the poorest U.S. regions, it said." Sarah Kent in The Wall Street Journal.

A weekly 'climate change clearinghouse'? "Senate Democrats -- and any interested Republicans -- will huddle weekly on climate change in the next Congress in an 'open forum' to help craft and support legislation, the plan’s architect said. Senate Environment and Public Works Committee Chairwoman Barbara Boxer (D-Calif.) told The Hill on Tuesday that the 'climate change clearinghouse' will also focus on working with the Obama administration and keeping members of abreast of the latest science." Ben German in The Hill.

Movies interlude: What's the most laugh-generating movie ever made? 'Airplane,' and Wonkbook can confirm from personal ha, ha, has.

Et Cetera

House passes bills on small business, patents, economic espionage. Pete Kasperowicz in The Hill.

Why does Obama keep raiding the Senate for his cabinet? Joshua Spivak in The Week.

Dodd-Frank vs. African blood minerals. Katrina Manson in The FT.

Did the FTC go easy on Google? Craig Timberg in The Washington Post.

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

Wonkbook is produced with help from Michelle Williams.

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Sarah Kliff · December 18, 2012