Wonkbook: Obama’s budget calls the GOP’s bluffs

April 10, 2013

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(Andrew Harrer/Bloomberg)
(Andrew Harrer/Bloomberg)

Over these last few months, the White House has been engaged in a systematic effort to call the GOP's various bluffs.

One bluff was that the problem in American politics was that President Obama didn't spend enough time directly reaching out to congressional Republicans. So the White House began its charm offensive, scheduling dinners, lunches, coffees, meetings, and long walks on the beach with an array of GOP legislators. There will be another dinner with Senate Republicans tonight. At this point, rank-and-file Republicans are probably getting tired of watching Obama pick at green salads.

Another bluff was that Obama would never actually agree to cut Medicare and Social Security -- that he was as intransigent on spending as the GOP is on taxes. When the Wall Street Journal asked Mitch McConnell what he'd need to move on taxes, he said "higher Medicare premiums for the wealthy, an increase in the Medicare eligibility age and slowing cost-of-living increases for Social Security." For the first time, two of those three are in the president's budget.

So is McConnell celebrating? Not quite. "It's quite similar, frankly, to his budget last year, and it's two months late," he said on Tuesday. "We're not sure this is a serious exercise."

Today's budget is the White House's effort to reach the bedrock of the fiscal debate. Half of its purpose is showing what they're willing to do. They want a budget compromise, and this budget proves it. There are now liberals protesting on the White House lawn. But the other half is revealing what the GOP is -- or, more to the point, isn't -- willing to do. Republicans don't want a budget compromise, and this budget is likely to prove that, too.

As the White House sees it, there are two possible outcomes to this budget. One is that it actually leads to a grand bargain, either now or in a couple of months. Another is that it proves to the press and the public that Republican intransigence is what's standing in the way of a grand bargain.

To liberals, that looks like a pyrrhic victory at best. The Obama administration has put Medicare and Social Security cuts on the table in order to gain a bit of applause from the nation's editorial pages. The White House sees it differently.

The conventional wisdom in Washington is that the sequester has been a bust. Republicans, in particular, have convinced themselves it was all a ruse. But the White House's Office of Management and Budget, which is implementing sequestration, sees it differently. The small number of cuts that have already happened, including White House tours, have provoked an outsized level of political outrage. But the cuts mostly haven't begun.

They begin rolling out in earnest this month. Unemployment checks for people who've been without a job for more than 26 weeks are about to get cut by 11 percent. Military contracts are about to get canceled. Medicare patients are being turned away from cancer clinics. Schools will lay off teachers. Infrastructure projects will stop. There will be much more demand for a compromise than there is now. There will be much more political anger than there is now.

This budget sets up that debate. Republicans are, at this point, out of excuses. They can't say the president isn't reaching out to them. They can't say he's not willing to make painful concessions -- or, to rephrase, they can say that, but given all the on-the-record quotes of Republican leaders demanding the White House accept means-testing Medicare and chained-CPI, no one will take them seriously. The White House is calling their bluff. The question is whether, as the pressure mounts, they double down against compromise, or they begin to fold.

Wonkbook's Number of the Day: 45 percent. That's the share of 450 chief financial officers who said in a survey that low interest rates on corporate debt had led them to increase borrowing. Fifty percent are using the money for capital investments. Twenty-five percent are using it to expand their domestic operations. Ten percent are using it to hire. More on the power of monetary stimulus below. 

Wonkblog's Graph of the Day: Median number of judicial vacancies, by year.

Wonkbook's Top 5 Stories: 1) the Obama budget lands; 2) Senate to have first procedural vote on gun control tomorrow 3) next week, immigration reform; 4) the much overlooked issue of Senate confirmations; and 5) what monetary easing does and doesn't do .

1) Top story: Happy budget day!

The Obama budget lands today. "President Obama will unveil his 2014 spending plan Wednesday, 65 days late and several trillion dollars short, by Republican standards, of effectively reining in the national debt. But the more relevant fact about the White House budget may be the yawning political void into which it is about to fall on Capitol Hill. Administration officials say their plan offers a path to compromise, a centrist course that avoids the extreme spending cuts of the House Republican budget as well as the $1 trillion tax hike endorsed last month by Senate Democrats." Lori Montgomery in The Washington Post.

DYLAN MATTHEWS DELIVERS: Check out this interactive showing that presidents don't always get the budgets they want.

Another dinner tonight between Obama and GOP. "President Barack Obama will attempt to spur new budget negotiations Wednesday, first offering a broad plan he hopes can attract bipartisan interest and later dining with a dozen Republican senators to try and pave the way for talks...A second dinner, to be held Wednesday at the White House, will include a new batch of GOP lawmakers, including Sens. Johnny Isakson of Georgia and Orrin Hatch of Utah." Damian Paletta in The Wall Street Journal.

So, about those Social Security cuts. In a briefing with reporters at the White House on Tuesday, senior administration officials characterized the official adoption of Chained CPI as both a recognition that rounding out a ground bargain will require making concessions to the GOP, and as a final gesture of good faith to Republicans in Congress, who've been demanding Obama propose and take ownership of entitlement cuts for years. But the officials also stressed that Chained CPI will never become law unless Republicans respond (in unlikely fashion) by agreeing to limit tax expenditures benefiting high-income earners. If they don't, it will mark the end of Obama's two-year quest to secure trillions of dollars in deficit reduction on a bipartisan basis. Brian Beutler at Talking Points Memo.

Dave Camp just made Paul Ryan's tax reform plan impossible. "The tax reform goals set out in Rep. Paul Ryan’s budget would be impossible to achieve while maintaining the tax code’s current level of progressivity. But the detailed tax reform instructions in the budget do not require House Ways and Means Chairman Dave Camp to maintain progressivity. So that looked to be the trick: Republicans would pay for their tax cuts by shifting the burden down toward the middle class. The Camp/Baucus op-ed, however, explicitly disavows that escape hatch...This seems like a big deal. It would appear to make the tax reform plan in the Ryan budget utterly impossible." Ezra Klein in The Washington Post.

...But will Sen. Baucus undermine the Democratic position on taxes? "It’s unlikely that Baucus would move tax-reform legislation Reid loathes. After all, where would the effort get him? The bill would just die on the floor — if indeed it ever made it to the floor — and all Baucus’s work would be for naught. But it’s a lot harder to predict where Baucus will end up than it would be if the Finance Committee were led by a Democrat in a safer seat. Some might say there are political advantages in that for the Democrats. Where House Republicans are being dragged rightward by their budget chairman, Senate Democrats are kept closer to the center by their finance chairman." Ezra Klein in The Washington Post.

Interactive: Presidents rarely get the budget they wantDylan Matthews in The Washington Post.

Meet the conservative group that wants to reverse sequestration. "As one of the country’s largest and oldest conservative advocacy groups, the American Conservative Union has long fought to rein in federal spending and limit the size of government. But behind the scenes, the group has formed a partnership with business lobbyists to tame the activists who have pushed Republican leaders in Congress to adopt some of the most austere spending limits in decades. In a draft proposal circulated to defense and transportation industry executives in recent weeks, the union is offering to use its grass-roots organization, annual conference and movement clout to lobby against cuts to federal military and infrastructure spending." Nicholas Confessore in The New York Times.

More spiders interlude: Sri Lanka is home to a newly-discovered species of giant tarantula. Arachnophobes, you have been warned about the link.

Top op-eds

SUNSTEIN: The power of the default rule. "The instructive study has been done by Kareem Haggag of the University of Chicago and Giovanni Paci of Columbia University, who have compiled data on more than 13 million New York taxi rides. Using the standard social-science jargon, Haggag and Paci describe the suggested percentages as “defaults,” in the sense that they establish what customers will do if they don’t exert extra effort...The main finding is that the higher defaults lead to a significant increase in tips -- by an average of more than 10 percent." Cass R. Sunstein in Bloomberg.

MILBANK: Are progressives intransigent? "At a Republican presidential debate in 2011, all eight candidates on the stage said they would reject a budget deal that raised taxes even if it had $10 of spending cuts for every dollar of tax increases. At Tuesday’s protest, I put the reverse question to participants: Could they accept a dollar of cuts in Medicare and Social Security benefits for every $10 of increased taxes on corporations and the wealthy? All those I asked said they would decline. “Not for me, no,” said Rep. Rick Nolan (D-Minn.). “I’m not taking your offer,” said Stephanie Taylor, co-founder of the Progressive Change Campaign Committee. “No, it’s not negotiable,” said Damon Silvers, the AFL-CIO’s policy director. “Uh, no,” said Jim Dean, the chairman of Democracy for America." Dana Milbank in The Washington Post.

BLOW: Pot and the public. "The latest remarkable change concerns the decriminalization of the use of marijuana. A poll released Thursday by the Pew Research Center found that for the first time more Americans support legalizing marijuana use than oppose it...Millennials’ views on a broad range of policy issues are so different from older Americans’ perspectives that they are likely to reshape the political dialogue faster than the political class can catch up." Charles M. Blow in The New York Times.

PARKER: The limits to gun control. "Should we insist that buyers at gun shows submit to a quick background check as they would at any gun store? Sure. Why not? Federally licensed vendors at gun shows already have to conduct background checks, but everyday people who sell among themselves at the shows do not. Few beyond the gun lobby object to this step, but even this wouldn’t have prevented Newtown...If a law isn’t enforceable, is it a good law? Does it prevent Newtown for neighbors to run through a little ritual that creates yet another level of government oversight for no real practical purpose other than to create a gun registry, which gun-control advocates insist they don’t want?" Kathleen Parker in The Washington Post.

Ok, this is awesome and must be seen interlude: The Google Street View hyperlapse.

2) Gun control to see first major procedural vote on Thursday

Gun vote set for Thursday as Democrats beat back Republican filibuster. "The Senate will hold the first key procedural vote on a bill to curb gun violence Thursday as more than a half-dozen Republicans announced that they will join with Democrats to stop any attempt to block popular legislation drafted in response to a deadly shooting at a Connecticut elementary school. The vote would formally start the the most wide-ranging and ambitious battle over gun control in 20 years...If the vote to proceed is successful, the Senate is expected to spend the remainder of April debating and voting on a bill that would expand the gun background-check system, make gun trafficking a federal crime for the first time and provide $40 million in federal funding to help revamp school security programs." Aaron Blake and Ed O'Keefe in The Washington Post.

...And that's largely because of crumbling GOP support for a filibuster. "Georgia Sen. Johnny Isakson broke with 14 of his Republican colleagues Tuesday, saying he believes gun control legislation deserves a “vote up or down.”...Ariz. Sen. John McCain said Sunday he “doesn’t understand” why his GOP colleagues are threatening a filibuster." Kevin Robillard in Politico.

Are we on the verge of a gun deal? Sen. Manchin says so. "Signaling that they had reached consensus, Manchin and Toomey announced Tuesday night they would be holding a joint press conference on expanded background checks on Wednesday at 11 a.m...The Manchin-Toomey bill would be offered as an amendment to an existing Democratic gun bill." John Bresnahan and Reid J. Epstein in Politico.

...And watch: The new ad pressuring Sen. Toomey from Bloomberg's gun-control groupReid J. Epstein in Politico.

Wonkblog exclusive: Obama budget includes $235M in new mental-health spending. "President Obama’s budget proposal will include $235 million in funding for new mental health programs, focused initiatives to help schools detect early warning signs and train thousands of new mental health professionals...The new budget plan will propose $130 million for programs that train teachers and other adults to help recognize early signs of mental illness, referring them to help when they detect such warnings...Another $50 million in funds would go toward training masters-level mental health specialists such as psychologists, nurses and counselors who work in schools." Sarah Kliff in The Washington Post.

Biden makes emotional plea for gun bill. "An emotional Vice President Biden urged Congress Tuesday to vote on each of the Obama administration’s gun-control proposals, imploring lawmakers that “it is time to stand up and be counted.”...Biden expressed angry dismay that a group of U.S. senators had threatened to filibuster a vote on gun-control proposals less than four months after the Sandy Hook shooting." Scott Wilson in The Washington Post.

...And Michelle Obama will speak on gun control. It's a big deal. "When she returns home here Wednesday to deliver a speech on gun violence, first lady Michelle Obama will be making a rare foray into the politics of the day that could presage a more activist role during her husband’s second term. Obama is taking what aides described as an intentional step outside her narrow focus on military families and childhood nutrition to confront the dark reality of young people being gunned down on the streets of America’s cities...White House officials say that the first lady will speak from the perspective of a mother, not as a gun-control booster. And unlike the president, aides said, she will not call on Congress to do anything." Philip Rucker and Krissah Thompson in The Washington Post.

...And Harry Reid cites his father's suicide. "Senate Majority Leader Harry Reid again took the Senate floor to make a very personal plea on Tuesday morning for a vote on gun control legislation. The Nevada Democrat mentioned the suicide of his father, which happened in 1972. Reid pointed out that as a state lawmaker, he authored a bill to require waiting periods for handgun purchases." Ginger Gibson in Politico.

Can we use sales taxes to do gun control? "State and local officials are pushing a new way to expand gun control: taxes. Gun owners in and around Chicago last week started paying a new $25 tax on every firearm they purchase. In California, a statehouse panel on April 15 will hear testimony on a nickel-per-bullet tax measure, and in New Jersey, lawmakers want to slap an additional 5 percent sales tax on guns and ammo...The effort to impose new taxes on guns and bullets faces serious opposition from pro-gun groups, but it shows how far some states and localities are willing to go in this new frontier on gun control — especially as Washington struggles to find consensus even on the most scaled-back gun proposals being debated in Congress." Rachael Bade in Politico.

Animals interlude: Jumping spiders go on a terrifying date.

3) Next week, immigration reform

Tentative deal reached on foreign farm workers. "Sen. Dianne Feinstein said Tuesday there’s a “tentative” deal between farm workers and industry groups over a new program to bring foreign agriculture workers into the United States, potentially removing a major obstacle facing a comprehensive immigration bill...Feinstein, a chief negotiator on the farm issue, said it will be clear within 24 hours whether a deal is in hand that would allow senators to begin crafting the bill." Manu Raju in Politico.

Bipartisan immigration reform bill expected next week. "A bipartisan Senate group is likely to announce a proposal to overhaul the nation’s immigration system in the next several days, and a committee hearing could be held on the legislation as early as next week, people familiar with the negotiations said Tuesday...Seven group members spoke with Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Judiciary Committee, who agreed to schedule a hearing on the bill after it is introduced, those involved in the discussions said. Several weeks of debate during which senators could offer amendments are likely to begin in early May." David Nakamura and Paul Kane in The Washington Post.

Details emerge on high-skilled immigration reform. "Senate Majority Whip Dick Durbin (D-Ill.) said he was close to resolving a lingering dispute with Rubio, the Florida Republican, over the number of H1-B visas to provide high-skill foreign workers. Senate negotiators are closing in on a proposal floated by Durbin that would award visas to 30 percent of foreign workers for every 70 percent of U.S. workers in high-skill jobs. This has upset many in the tech community who wanted more foreign workers, according to a tech lobbyist close to the negotiations." Manu Raju and Anna Palmer in Politico.

Data interlude: The most accurate map of NFL loyalties ever created.

4) The battle for Senate confirmation, and why it matters

3 Obama nominees encounter no opposition in Senate. "President Obama’s three nominees to run Medicare and Medicaid, the Energy Department and the Office of Management and Budget sailed through their separate Senate confirmation hearings on Tuesday and appeared to be on track to win approval from the committees, though none of the panels voted on the nominations." Matthew L. Wald and Robert Pear in The New York Times.

@Amy_NJ: With confirmation hearing of Moniz over, here are topics that barely, if at all, came up: Keystone XL pipeline, loan guarantees & Solyndra.

...And why do Republicans like Marilyn Tavenner? "The Medicare administrator position is considered so politically toxic that no one has even survived confirmation since 2006...Tavenner gave reporters a bit of her perspective on the issue after the hearing, noting that she has already worked at the agency, serving 18 months as acting administrator. When senators of either party have problems like these in their states, they reach out to Tavenner...Health policy is certainly an ideological issue for legislators on Capitol Hill. At the same time, it’s also a practical issue of ensuring that the many services CMS offers get delivered to the people who need them." Sarah Kliff in The Washington Post.

@sarahkliff: For six years Senate has avoided Medicare confirmation hearings b/c too political. Wouldn't know it from Tavenner hearing, all very tame.

For the D.C. appeals court, Obama wants Sri Srinivasan. "With a coordination and an energy that echo a Supreme Court nomination fight, the Obama administration is pushing for the confirmation of a senior Justice Department lawyer to the country’s most prestigious appellate court. If the effort fails, it could lead to a confrontation with the Senate over the long-simmering issue of judicial nominees...The nomination will test an aggressive new strategy that the White House and Democrats are hoping will put Republicans in a bind: approve the highly regarded Mr. Srinivasan or risk forcing a change to Senate rules that could prevent Republicans from filibustering nominees." Jeremy W. Peters in The New York Times.

...And another reason why Srinivasan really matters. "The next Supreme Court confirmation hearing begins on Wednesday afternoon, April 10th. Technically, Sri Srinivasan is just a candidate for the United States Court of Appeals for the D.C. Circuit, but few are misled. The stakes in this nomination are clear: if Srinivasan passes this test and wins confirmation, he’ll be on the Supreme Court before President Obama’s term ends." Jeffrey Toobin in The New Yorker.

...And the bigger picture on Obama's judicial nominees. "In a sign that President Obama’s judicial nominees may be gaining momentum, the Senate voted 64 to 34 to seat Magistrate Judge Patty Shwartz on the 3rd Circuit on Tuesday. The vote — which came 397 days after the Senate Judiciary Committee initially approved Shwartz’s nomination — came as the White House has stepped up efforts to install several of its nominees on the federal bench." Juliet Eilperin in The Washington Post.

3 nominated for NLRB posts as House threatens to freeze board. "President Obama nominated three candidates for full terms to the National Labor Relations Board on Tuesday, urging the Senate to confirm the nominees quickly...The Preventing Greater Uncertainty in Labor-Management Relations Act, sponsored by Rep. Phil Roe (R-Tenn.), would prohibit the NLRB from taking any actions that require a panel quorum until the Supreme Court issues a decision on the constitutionality of the recess appointments or until all members of the board are confirmed by the Senate...The president’s latest nominees are Harry I. Johnson and Phillip A. Miscimarra and Mark Gaston Pearce, a current NLRB board member whose term expires in August." Josh Hicks in The Washington Post. 

Music recommendations interlude: Eric Clapton, "Lay Down Sally," 1985.

5) What monetary easing does, and doesn't do

IMF: Easy money now poses no risk of high inflation. "[I]n new research released before the IMF’s spring meeting next week, the fund said it believes the nature of inflation has changed in recent decades, becoming less volatile and less likely to rise or fall in response to underlying changes in the economy...In technical jargon, it means that the Phillips curve has become nearly flat, so that any rise or fall in the jobless rate has less of an effect on inflation." Howard Schneider in The Washington Post.

...But easy money is spurring new corporate spending. "450 CFOs responded to questions about the effect of low interest rates on company borrowing and debt management over the past 12 to 18 months for a survey conducted by Duke University and CFO Magazine...CFOs at 202 firms, about 45% of the survey respondents, said low interest rates had led them to increase borrowing. The poll also drilled down on what firms are doing with the borrowed funds, finding that half of the financial officers who are borrowing more said they're spending the proceeds on new capital investments. About one in four of those borrowing more said they had used the funds to increase mergers and acquisitions, and about a fourth said they had expanded their domestic operations. About one in 10 said they had increased hiring." Victoria McGrane in The Wall Street Journal.

Who will get the spoils of a recovering economy? Shareholders or workers? "If you want to know where that extra profit is coming from, one major answer is simple: Companies are spending less on paying their workers. With unemployment high, workers haven’t been able to demand big pay increases, and many companies seem to have become more efficient in the recession and its aftermath, being able to produce more with fewer workers." Neil Irwin in The Washington Post.

Good economic news: Inventories fall as sales rise. "Wholesalers reduced their inventories in February by the most in 17 months. But their sales jumped, suggesting that businesses had underestimated consumer demand. The Commerce Department said Tuesday that inventories at the wholesale level declined 0.3 percent in February...Sales at the wholesale level rose 1.7 percent, the most since November. The increase was led by large gains in gasoline, clothes and computers." The Associated Press.

...And U.S. land values are rising. "Land values across the U.S. rose on average 13% in 2012, the first annual gain since 2005, according to estimates in a March report by Zelman & Associates, a housing consultancy. The increase was fueled primarily by growing demand among builders for finished lots, or ready-to-build home sites with roads, sewage lines, electrical-power hookups and other infrastructure in place." Robbie Whelan in The Wall Street Journal.

Puzzling economic news: Rising job openings but high unemployment. "The Labor Department has released its latest report on job openings and labor turnover today, which showed that job vacancies were at their post-recession high in February. But we still have a strangely high unemployment rate relative to the job openings rate, at least when compared with the relationship these two variables had before the recession began." Catherine Rampell in The New York Times.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

New bill would reverse sequester's cancer cutsSarah Kliff.

Wonktalk: Ezra's civil conversation -- a.k.a. wonk smackdown -- with Ben Domenech on health policy.

The $100 bill, a top American exportBrad Plumer.

Sherrod Brown and David Vitter have a new bipartisan bill to end Too Big to Fail. Here’s what it doesMike Konczal.

3 charts show the U.S. spends too little on energy researchBrad Plumer.

Et Cetera

Alabama, the latest state to tighten its abortion lawsAaron Blake in The Washington Post.

Banks used small-business aid money to repay TARP loansJeffrey Sparshott in The Wall Street Journal.

Obamacare needs "navigators" for insurance exchangesSam Baker in The Hill.

...And the award for most arcane-sounding news story goes to: White House budget would eliminate duplicative catfish inspectionsJosh Hicks in The Washington Post.

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

Wonkbook is produced with help from Michelle Williams.

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