Wonkbook: Democrats' demands and other economic and policy news

By Ezra Klein
Wednesday, March 9, 2011; 7:40 AM

I was wondering when this would finally happen: "Senate Democratic leaders, seeking to break an impasse over Republican-backed spending cuts, on Tuesday proposed broadening the scope of budget negotiations into more politically volatile terrain that includes taxes, subsidies and entitlement programs." It's about time. There's not much money to begin with in non-security discretionary spending, and because it's such a popular place to search for cuts, there's not much waste, either. It's like trying to clean your house by doing more and more to organize the hallway closet. It might help the first few times, but eventually, you have to head elsewhere.

We're not going to find any real answers to our budget woes by cutting discretionary spending. That's not where the problem is. Entitlements, tax expenditures and rates, and even defense spending make more sense for a deficit-reduction deal. Moreover, if we're looking for deficit reduction, it makes sense to prioritize policies that work over many years, rather than just one year: a bill that saves $100 billion over the next five years is better for the deficit than a bill that saves $60 billion over the next fives months -- and it'll do less damage to a shaky recovery.

But because a more comprehensive deal might include tax increases, Republicans are resisting this broader conversation. "Right now we need to crawl before we can walk, and that means finishing last year's business and complete a spending bill," said Michael Steel, a spokesman for House Speaker John Boehner. "[The Democrats] answer is to raise taxes, not to cut spending, and that's not something anyone else is talking about," said Don Stewart, a spokesman for Senate Republican Leader Mitch McConnell (and as you'll see in the Bloomberg poll below, that's not quite true: the American people seem to quite like the idea of deficit reduction through taxes on the wealthy). And if you read down in Wonkbook, you'll see a Politico piece on Grover Norquist taking aim at Tom Coburn for considering revenue as part of a tax deal. Tom Coburn!

This might prove a clarifying moment. If Republicans are only willing to consider cuts to non-defense discretionary spending as part of a deficit-reduction deal, then whatever their aim is, it's not really deficit reduction. That's not how you reduce the deficit. If they're only willing to consider deep cuts to this year, as opposed to policies that would save a larger amount of money over the next few years, then it'll raise the possibility that they're motivated more by the specifics of an unwise campaign promise than by concern over the budget. Either "we're broke" or we're not. But if the answer is that we are -- and that's certainly what John Boehner has said in the past -- then it's time we started acting like it. The idea that you can balance the budget simply by doing things liberals don't like and Americans don't notice is a campaign fiction, not a plausible fiscal philosophy.

Top Stories

The Senate will stage votes on the GOP and Democratic budget proposals today, report Paul Kane and Felicia Sonmez: "Senate leaders delayed until Wednesday consideration of a bill to fund the government through Sept. 30, as Democrats accused Republicans of reneging on an agreement to stage side-by-side votes on two competing plans to cut spending. Senate Majority Leader Harry M. Reid (D-Nev.) charged that GOP senators were afraid to vote on a House proposal to cut $61 billion from domestic agencies over the next six months, a bill Reid derided as the 'tea party plan.'...With a March 18 deadline looming, the White House and Senate Democrats have offered a plan to cut less than $5 billion from domestic agencies through the remainder of the fiscal year, a proposal that even some moderate Democrats have criticized as insufficient in light of record budget deficits."

Senate Democrats want to open up discussions on tax and entitlement reform, reports Janet Hook: "Senate Democratic leaders, seeking to break an impasse over Republican-backed spending cuts, on Tuesday proposed broadening the scope of budget negotiations into more politically volatile terrain that includes taxes, subsidies and entitlement programs. Senate Majority Leader Harry Reid (D., Nev.) said that efforts to bridge the parties' $50 billion difference in proposed budget cuts for the remainder of fiscal-year 2011 could reach beyond domestic discretionary spending and move into tax policy and programs such as farm subsidies...Sen. Charles Schumer (D., N.Y.) is expected to echo that suggestion in a speech Wednesday and argue that tens of billions of dollars of deficit-reduction measures could be found if budget talks are broadened."

Grover Norquist is targeting Republican Senators working on a debt deal, reports Carrie Budoff Brown: "Coburn and Norquist, two of Washington's most unfailing apostles of starving the government, are locked in a low-grade duel over whether ideological purity on taxes is a realistic position in the face of skyrocketing national debt and growing deficits. Norquist says it's simple: No new taxes means no new taxes. Under no circumstances should Congress raise new revenues to solve the problem, he says. Coburn usually would agree. But when it comes to taming the $14 trillion debt ¿ a challenge Coburn has called 'a matter of national survival' ¿ he won't rule it out...The differences, detailed in an unusual series of letters last month and in interviews with POLITICO, offered the first flicker of what is already a burgeoning debate on the right over the role of taxes in any comprehensive effort to reduce the deficit.

A new Bloomberg poll shows Americans want deficit reduction, bipartisan compromise, and few serious spending cuts: "Almost 8 in 10 people say Republicans and Democrats should reach a compromise on a plan to reduce the federal budget deficit to keep the government running, a Bloomberg National Poll shows. At the same time, lopsided margins oppose cuts to Medicare, education, environmental protection, medical research and community-renewal programs. While Americans say it's important to improve the government's fiscal situation, among the few deficit-reducing moves they back are cutting foreign aid, pulling U.S. troops out of Afghanistan and Iraq, and repealing the Bush-era tax cuts for households earning more than $250,000 a year."

The White House is trying to mend its relationship with the Cabinet, reports Anne Kornblut: "News this week of the first departure of a Cabinet secretary from the Obama administration comes amid a wide-ranging effort under the new chief of staff, William M. Daley, to repair badly frayed relations between the White House and the Cabinet. During the first two years of President Obama's term, the administration fully embraced just a few of his superstar picks - people such as Defense Secretary Robert M. Gates and Education Secretary Arne Duncan. But many more agency chiefs conducted their business in relative anonymity, sometimes after running afoul of White House officials. Both sides were deeply disgruntled. Agency heads privately complained that the White House was a 'fortress' that was unwilling to accept input and that micromanaged their departments."

Still to come: The Senate has passed a patent overhaul; the White House is appealing an anti-health care reform ruling; the Wisconsin battle is spurring recall campaigns; the House GOP's effort to strip the EPA of its power to regulate the climate is moving ahead; and a full crib of baby pandas.


State and local pensions are burdened by bad actors gaming the system, reports Karen Tumulty: "AFSCME, which is the largest public-employee union, says that its average member earns less than $45,000 a year and receives an annual pension of roughly $19,000. But many retirees from state and local government jobs do much better than that. When the advocacy group California Foundation for Fiscal Responsibility requested state retirement system records in 2009, it discovered that nearly 15,000 of the state's retired government employees were receiving pensions of more than $100,000 a year, with Malkenhorst topping the list."

The Senate passed a patent overhaul, reports Edward Wyatt: "The Senate easily passed a bill on Tuesday that would overhaul the nation's patent system, giving the Patent and Trademark Office more flexibility to control its own financing and changing the system to one that rewards the first inventor to file a valid application. But the House is unlikely to take up a patent bill anytime soon, and people with an interest in the patent system say they expect its bill to be significantly different. That means that for the foreseeable future, patents will continue be awarded to the first to invent a new product, even if the inventor was not the first to file an application. The Senate voted 95 to 5 to approve the America Invents Act."

The AARP is suing HUD for its policy on "reverse mortgages": http://nyti.ms/dPRtC2

Even moderate Republicans could oppose a debt limit increase, reports Scott Wong: "When the requests were coming from President George W. Bush, moderate Republicans in the Senate such as Susan Collins and Dick Lugar had no problem voting to hike the federal debt ceiling year after year. Now, with a Democrat in the White House and full-blown deficit anxiety taking over Congress, these Republicans are avoiding taking a firm stand, realizing that unquestioned support for increasing the U.S. borrowing limit is politically toxic with voters -- not to mention many in the right wing of their party. Indiana's Lugar, who almost certainly will face a tea party primary challenge in 2012, hasn't made up his mind on the debt ceiling, saying, 'We're just in the opening innings.' And Maine's two GOP senators -- Olympia Snowe and Collins -- have spoken about the issue only in broad generalities."

Nobelist Peter Diamond's Fed nomination still faces opposition: http://on.wsj.com/h1AL5N

The recovery could be sputtering, writes David Leonhardt: "All in all, the situation is uncomfortably reminiscent of last spring. Back then, companies were just starting to hire again, before a combination of events -- including Europe's debt crisis and the fading of the stimulus program here -- spooked them and cut short the recovery. It's easy to imagine how energy costs and government cuts could do the same this year. But no branch of the federal government seems to be taking these risks seriously enough. At the Federal Reserve, some top officials still argue that the economy is at risk of overheating, even though they have been wrong on this point for months and still don't have much data on their side...The Obama administration, for its part, seems confident a true recovery is under way -- much as it was confident a year ago, to its detriment."

Most people aren't feeling the recovery, writes Harold Meyerson: http://wapo.st/fblMDs

The computer revolution hasn't done much for economic growth, writes Annie Lowrey: "A quarter century ago, with new technologies starting to saturate American homes and businesses, economists looked around and expected to find computer-fueled growth everywhere. But signs of increased productivity or bolstered growth were few and far between. Sure, computers and the Web transformed thousands of businesses and hundreds of industries. But overall, things looked much the same. The GDP growth rate did not tick up significantly, nor did productivity. As economist Robert Solow put it in 1987: 'You can see the computer age everywhere but in the productivity statistics.'... Perhaps the Internet is just not as revolutionary as we think it is."

Adorable animals gaining adorableness in numbers interlude: A crib full of baby pandas.

Health Care

The Obama administration is appealing a Florida judge's anti-health reform ruling, reports Jennifer Haberkorn: "The Obama administration Tuesday appealed Judge Roger Vinson's ruling that the entire health reform law is unconstitutional. The quick action of the government prevents the judge's order from taking effect and shutting down implementation of the law for now. The 11th Circuit Court of Appeals could hear oral arguments in the case in late summer or early fall. Twenty-six states and the National Federation of Independent Business are suing to block implementation of the law, arguing that it is unconstitutional. Vinson ruled the law unconstitutional in January. On Thursday, he stayed his ruling on the condition that the administration file its appeal within seven days, as it did Tuesday."

Health care reform is spurring those with flexible spending accounts to get prescriptions for over-the-counter medication: http://on.wsj.com/gvHQPP

A bill that's passed the House would undermine health reform, writes Ezra Klein: "If you've been paying attention to the debate over the Affordable Care Act, you've probably heard about the 1099 provision. Essentially, small businesses manage to avoid paying taxes on a lot of small transactions. The 1099 provision would've forced them to report those transactions, raising about $20 billion over 10 years. But it would've require a lot of paperwork...When the Senate repealed the provision, they paid for it by canceling other spending that Congress had authorized, but that hadn't yet been put to a particular purpose. House Republicans took a different approach. They're trying to sharply increase the amount of subsidies that families will have to pay back if their income increases during the course of a year."

Republicans' rhetorical opposition to Medicare cuts is coming back to bite them: http://politi.co/e3tEic

Domestic Policy

Both sides are seeking state senate recalls in Wisconsin, report Douglas Belkin and Kris Maher: "In Wisconsin, recall efforts are gaining steam with the help of groups from outside the state. Eight Republican and six Democratic senators have been targeted for recall. Nationwide liberal groups Progressive Change Campaign Committee, based in Washington, and Democracy for America, based in Vermont, have raised more than $500,000 online in the past week. The groups are using the money to pay for television ads targeting Republican senators Randy Hopper in Green Bay, Dan Kapanke in La Crosse and Alberta Darling in Milwaukee. The senators appear to be vulnerable to recall because they won their districts by relatively narrow margins, and President Barack Obama carried all three districts, in two cases with 51% of the vote, the groups said."

Idaho has okayed a bill limiting collective bargaining: http://politi.co/g4kcu7

The House will start targeting net neutrality rules today, reports Cecilia Kang: "A day before House lawmakers put controversial net neutrality rules under scrutiny, leading Republican lawmakers said the chairman of the Federal Communications Commission hasn't convinced them that the reasons behind the rules were good enough. In a statement, House Energy and Commerce Committee chairman Fred Upton (R-Mich.) and Communications and Technology Subcommittee leaders Greg Walden (R-Ore.) and Lee Terry (R-Neb.) said an economic analysis provided by the FCC for its Internet access rules 'failed to provide a compelling justification for its power-grab.' The FCC implemented in December first-time Internet access rules that prevent cable and telecom operators from blocking or arbitrarily slowing traffic on their networks."

Florida is implementing a performance pay system for teachers: http://nyti.ms/i5249c


The House GOP's effort to strip the EPA's climate regulating authority is moving ahead, reports John Broder: "Science and politics rarely play nicely together, and a House hearing Tuesday on a bill to strip the Environmental Protection Agency of its power to regulate greenhouse gas emissions proved no exception. Democrats on the Energy and Commerce Committee's subcommittee on energy and power demanded the hearing in the hope of slowing the inexorable progress of the bill, known as the Energy Tax Prevention Act of 2011, which enjoys the near-unanimous support of the Republican House majority. They appear to have failed. Despite some fireworks, the handful of members from both parties who attended the hearing left with the views they arrived with. The subcommittee is expected to approve the bill later this week."

A bipartisan group of lawmakers who pushed an energy compromise in 2008 is getting back together: http://bit.ly/iffCYk

Lawmakers in both parties are skeptical of opening the Strategic Petroleum Reserve, reports Tennille Tracy: "Lawmakers on both sides of the aisle Tuesday urged the president to steer clear of the Strategic Petroleum Reserve until its use was "absolutely necessary," countering earlier calls by some Democrats to open the supplies in advance of the summer driving season. The strategic reserve 'is our nation's insurance policy against serious disruptions in oil supply,' said Alaska Sen. Lisa Murkowsi, the ranking Republican on the Senate energy committee. 'If we empty our strategic reserves now, and then face an actual shortage, we will literally have nowhere to turn.' U.S. House Minority Whip Steny Hoyer (D., Md.) also came out against releasing oil from the nation's emergency stockpile to deal with rising gasoline prices."

Products should be required to disclose the energy required to make them, writes Amanda Little: "The problem is that there is no easy way to quantify how much total energy we consume. Fortunately, there's a great model already in widespread use: the nutritional information that appears on the back of every food product. Why not create the same sort of system for energy? Americans use more oil than people in any other developed country, about twice as much per capita, on average, as Britons...And because we don't see how much energy goes into the products and services we purchase, we're shielded from knowing the full extent of our personal energy demands -- and unprepared when rising fuel prices increase the cost of everything else."

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

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