Wonkbook: GOP opposes entitlement reform, and other economic and policy news

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By Ezra Klein
Friday, March 11, 2011; 7:13 AM

With John Boehner fighting the Democrats' offer to put entitlements and taxes on the table -- "that's what the next budget process is for," he said -- it's worth stepping back to look at what this continuing resoution fight is about.

It's not about reducing the deficit. If it was, then the tax deal wouldn't have passed in December, entitlements would've been in the mix from the beginning, tax expenditures and defense spending would be on the table, etc. It's not about cutting spending. if it was, then the cuts wouldn't be limited to 12 percent of the budget. Rather, it's about cutting non-defense discretionary spending -- and only non-defense discretionary spending. Boehner frequently says that "the American people want us to cut spending," but he never says that "the American people want us to cut non-defense discretionary spending." And that's because they don't: poll after poll has found Americans resistant to the sort of cuts you find in the non-defense discretionary bucket, which include cuts to education, worker retraining, nutrition programs, heating-oil subsidies, etc. They'd much prefer tax increases on the rich, or cuts to defense spending.

But Republicans wouldn't prefer tax increases on the rich, or cuts to defense spending. And they know that if entitlements get opened up, tax increases will immediately be on the table -- one of the easiest and most popular ways to cut Social Security's shortfall is to lift the cap on payroll taxes. But for Republicans at this moment in time, that's unthinkable. The beauty of focusing on non-defense discretionary spending is that it's spending they don't really like and that's totally disconnected from any sort of tax -- the same can't be said for Medicare or Social Security. And that gets to what this debate is really about: not cutting spending or reducing the deficit, but cutting spending Republicans don't like while avoiding any and all tax increases -- even if that means the country has higher deficits and the middle- and working-class bear more of the burden. The difficulty for Republicans is they've not wanted to clearly explain that philosophy to the American people, and so now they're in the odd position of arguing against Democratic efforts to do more for the deficit and do more to cut spending but not really being able to say why they oppose those efforts.

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Congress will likely pass another three-week funding extension, reports Carl Hulse: "With little hope of a budget deal being reached before the end of next week, House Republicans are preparing another short-term spending measure to give the House and Senate a chance to come to agreement over a broader plan to keep the government operating through Sept. 30. Lawmakers and top aides on Thursday said stopgap legislation to be considered next week would most likely cover three weeks and include an additional $6 billion in cuts, possibly drawn from spending reductions offered by Democrats and the White House in earlier budget talks. The current two-week law expires next Friday and carries $4 billion in cuts. Movement toward another short-term solution came after the Senate on Wednesday rejected competing Republican and Democratic budget measures."

House Speaker John Boehner doesn't want to debate entitlements just yet, reports Simmi Aujla: "House Speaker John Boehner accused Democrats on Thursday of trying to 'muddle' the budget debate with their calls for reforms to entitlement programs. Boehner told reporters that Democrats who want to include a debate about Social Security, Medicare and Medicaid and tax increases are getting way ahead of themselves. 'The American people want us to cut spending. Because they know that cutting spending will in fact create a better environment for job creation,' he said. 'To try to muddle the current issue with entitlement programs, tax increases -- that's what the next budget process is for. We'll have plenty of opportunity to talk about that,' he said."

Wisconsin's anti-union bill passed the legislature, reports Karen Tumulty: "Wisconsin Gov. Scott Walker won his drive to strip the state's government workers of nearly all of their collective-bargaining rights Thursday, after a three-week standoff that brought tens of thousands of protesters to the Capitol. The new legislation represents a major setback for organized labor, but the political battle over public employees and their rights to bargain is likely to continue - not only in Madison. The state Assembly passed Walker's proposal a day after Republican senators outmaneuvered the 14 Democratic senators who had fled Wisconsin to deny a quorum needed for passing a budget measure. By stripping the bill of its spending language, they were able to pass it with only Republicans present."

Still to come: The House voted to cut a foreclosure prevention program; the CBO says repealing the individual mandate would increase the ranks of the uninsured, but cut the deficit; Obama is pushing for a government reorganization plan; Obama will address higher gas prices today; and the world's fastest popcorn popper.

Economy

The House voted to cut a foreclosure prevention program, reports Felicia Sonmez: "The House on Thursday voted to end the Federal Housing Administration Refinance Program, one of two federal foreclosure-assistance programs on the chopping block this week. The measure, H.R. 830, passed on a 256-to-171 vote, with 18 Democrats breaking ranks to join Republicans in backing it. One Republican, Rep. Joe Heck (Nev.), joined Democrats in opposing the proposal; Heck represents Nevada's third district, which was the district hardest-hit by foreclosure in 2010...The program has used only $50 million of the more than $8 billion that has been set aside for it, leading to criticism from Republicans that it ought to be terminated and the money used to pay down the federal deficit. The Senate is unlikely to take up the bill, however, and the White House earlier this week issued a veto threat."

Banks are saying that principal write-down will "slow the recovery," report Nick Timiraos and Dan Fitzpatrick: "Bankers are ratcheting up their rhetoric as they fight a mortgage-servicing settlement proposal, predicting lasting damage to the U.S. economy in an effort to force regulators to soften terms of any penalties. On Thursday, Wells Fargo & Co. Chief Executive John Stumpf said extensive loan principal reduction would increase the U.S. deficit if taxpayers are forced to pay for write-downs of loans held by government-controlled Fannie Mae and Freddie Mac. 'It's important to the country so that whatever happens does not slow down the recovery,' Mr. Stumpf said. Bank of America executives issued similar warnings on Tuesday, calling principal reductions 'no panacea' and questioning the fairness of the approach."

The Federal Housing Administration's head is leaving: http://wapo.st/fAq3wF


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