Let's start with what's in President Obama's deficit plan: $1.5 trillion in higher taxes, $1.1 trillion in reduced war spending, $1 trillion in non-defense discretionary spending cuts from the debt-ceiling deal, $600 billion in cuts to mandatory spending (of which more than $300 billion will come from Medicare and Medicaid), and $430 billion in reduced interest payments. So slightly more than $4 trillion in deficit reduction. On the other side of the ledger, of course, is about $450 billion in new jobs spending. The administration says the plan stabilizes the debt-to-GDP ratio under both OMB and CBO projections.
The core of this plan, in other words, is not a major concession to the GOP, or a high-profile display of the Obama administration's independence from party. It's a populist proposal for increasing taxes on the rich, and a veto threat against cutting Medicare benefits without increasing taxes on the rich.
The White House acknowledges as much. "It's his vision and not a legislative compromise being crafted to garner some number of votes in the House and the Senate," says the official.
Congressional Republicans are not amused. Don Stewart, spokesman for Senate Minority Leader Mitch McConnell, spent much of Sunday evening retweeting newspaper articles that described the president's plan as unlikely to garner bipartisan support. Brad Dayspring, communications director for House Majority Leader Eric Cantor, wrote that "the President's plan would put more Americans out of work, reduce investment, and put more small businesses out of business." He even attached the hashtage "#antigrowth."
The White House's strategy here isn't to appear so reasonable that Republicans can't help but cut a deal. They feel they tried that during the debt-ceiling debate, and it failed. The White House's strategy here is to produce a popular plan that strikes directly at Republican vulnerabilities on taxes and Medicare. If that scares the GOP and makes them more interested in coming to an agreement in the supercommittee process, then great. If not, it gives the White House a message to base its reelection campaign off of.
Five in the morning
1) Obama is unveiling his $3 trillion debt reduction plan today, reports Zachary Goldfarb: "President Obama will announce a proposal on Monday to tame the nation’s rocketing federal debt, calling for $1.5 trillion in new revenue as part of a plan to find more than $3 trillion in budget savings over a decade, senior administration officials said...Obama will propose new taxes on the wealthy, a special new tax for millionaires, and eliminating or scaling back a variety of loopholes and deductions, officials say. About half of the tax savings would come from the expiration next year of the George W. Bush administration tax cuts for the wealthy. But the president won’t call for any changes in Social Security, officials say, and is seeking less-aggressive changes to Medicare and Medicaid than previously considered. He will propose $320 billion in health-care savings but will not include raising the Medicare eligibility age from 65 to 67, officials said."
@RyanLizza: "This may be the first time in a major negotiation with Repubs where Obama didn't give away everything in his opening bid."
2) The millionaire's tax hike will be known as the "Buffett Rule", reports Lori Montgomery: "Republicans Sunday criticized President Obama’s plan to call for a new minimum tax rate on millionaires as 'class warfare' that would do little to create new jobs and instead would hurt the small businesses that drive the economy. 'Class warfare...may make for good politics, but it makes a rotten economics,' Rep. Paul Ryan (R-Wisc.), chairman of the House budget committee, said on 'Fox News Sunday.' 'We don’t need a system that seeks to divide people...We need a system that creates jobs and innovation.'...According to a White House official who requested anonymity because the proposal has not been announced publicly, Obama plans to call it the 'Buffett Rule,' after Warren E. Buffett, the billionaire investor...Buffett has long complained that the current system taxes him at a far lower rate than his employees."
3) Republicans face a conservative revolt over the omnibus spending bill, report Jake Sherman and John Bresnahan: "House Republicans have backed themselves into a corner: How do they keep the government open and pass year-end spending bills without wrapping them all into a monstrous omnibus bill -- just the kind that conservatives despise and Speaker John Boehner himself slammed when Democrats ran the House? But that’s exactly where Republicans are headed as the Sept. 30 end to the fiscal year looms, and Boehner may now have to rely on Democrats and the White House to pass an all-inclusive spending bill. Conservative Republicans are already complaining about the possibility of a massive omnibus bill making its way through Congress this fall. 'We hate omnibus bills,' Rep. Jason Chaffetz (R-Utah) said, referring to House conservatives."
4) The House GOP found some things to like in Obama's jobs plan, reports Jennifer Steinhauer: "House Republican leaders rejected some main elements of President Obama’s jobs plan on Friday but told their rank-and-file members that they would support other components. Approvals ranged from the well-publicized parts, like an extension of the payroll tax holiday, to the more obscure, like continuing depreciation write-offs for businesses. After a week of gingerly walking the line of conciliation, Speaker John A. Boehner and Representative Eric Cantor, the majority leader, sent a letter to their members specifying a few areas where they found common ground with Mr. Obama, who presented his proposed list of tax cuts and spending programs to Congress this month...Republicans said they opposed the proposed $30 billion in aid to state and local governments."
5) Europe hasn't come to an agreement on rescuing Greece, reports Michael Birnbaum: "European officials ended a two-day financial summit Saturday with no new concrete plans to help support euro-area countries that are having difficulty repaying their debts, as deep divisions remained about the best course for the coming weeks and months. On Saturday, the officials discussed but failed to agree on a proposal to tax financial transactions. Greece is likely to run out of cash by mid-October if it does not receive billions of euros of bailout money, potentially setting off a financial contagion that could hop from bank to bank and country to country. But European officials remain undecided on whether Greece has done enough of the spending cuts and reforms that it had promised to carry out as a condition of taking the money. Officials said Friday that a decision on Greece would probably wait until early October, disappointing investors who had hoped for earlier certainty about what could happen to the country’s debts."
Country-rock interlude: Wilco plays "Monday" live.
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Still to come: The Fed might set more explicit targets at its meeting this week; states are considering banding together to buck health care reform; members of Congress are making more and more money outside the office; the Solyndra affair is hurting the administration's ability to push green jobs; and a corgi gets the hiccups.
Most tax breaks benefits middle-class households, not corporations, reports Lori Montgomery: "As President Obama and congressional Republicans argue over how to rewrite the U.S. tax code, the debate has revolved around 'loopholes' for corporate jets and ending 'carve-outs' for well-heeled special interests. But if the goal is debt reduction, that’s not where the money is. Broad tax breaks granted to millions of families at all income levels dwarf the corporate giveaways. Over the past two years, largely because of these popular benefits in the federal income tax code, the government has reached a rare milestone in tax collection -- it has given away nearly as much as it takes in. The number of tax breaks has nearly doubled since the last major tax overhaul 25 years ago, with lawmakers adding new benefits for children, college tuition, retirement savings and investment."
The Fed is considering more explicit targeting, reports Jon Hilsenrath: "Federal Reserve officials...are examining whether to adopt more explicit economic targets to clarify their strategy for lowering unemployment without fueling inflation. Fed Chairman Ben Bernanke has asked Philadelphia Fed President Charles Plosser and Chicago Fed President Charles Evans, two intellectual adversaries, to work with Vice Chairwoman Janet Yellen on how the Fed can better explain its economic goals to the public. One issue high on the agenda: Detail what changes in unemployment and inflation it would take to make the central bank veer from its low interest-rate policy, according to people familiar with the matter. Fed officials are likely to consider other steps they might take to boost the ailing economy in the short-run when they meet Tuesday and Wednesday, including altering the composition of the Fed's portfolio of securities so that it holds more long-term debt."
House Democrats want to end the debt ceiling, reports Julian Pecquet: "Three congressional Democrats are introducing a bill Wednesday that would abolish the federal debt ceiling. The lawmakers say that the recent debate to raise the ceiling and avoid default had a 'disastrous' effect on the U.S economy, and that the legislation would keep parties from using a potential default as a hostage in future budget debates. 'The debt ceiling is truly arbitrary and has nothing to do with the deficit,' Rep. Jerrold Nadler (D-N.Y.) said in a statement last Wednesday...Virginia Democrat Jim Moran and Georgia Democrat Hank Johnson will join Nadler in introducing the legislation. But the bill is unlikely to gain traction, especially in the Republican-controlled House. Members of the GOP were encouraged that they were able to use the debt ceiling as leverage to attain deep budget cuts during negotiations with President Obama and the Senate."
Companies are still hoarding cash, report Ben Casselman and Justin Lahart: "Corporations have a higher share of cash on their balance sheets than at any time in nearly half a century, as businesses build up buffers rather than invest in new plants or hiring. Nonfinancial companies held more than $2 trillion in cash and other liquid assets at the end of June, the Federal Reserve reported Friday, up more than $88 billion from the end of March. Cash accounted for 7.1% of all company assets, everything from buildings to bonds, the highest level since 1963. That has some critics pressing companies to put more money into investments and hiring. But the cash could provide an important cushion for U.S. companies if European banking woes trigger a global financial crisis...The Federal Reserve figures don't include the substantial amount of cash held at many U.S. companies' foreign subsidiaries, which would be subject to taxation if the companies repatriated it."
Deliberately spurring inflation is too dangerous, writes Paul Volcker: "My point is not that we are on the edge today of serious inflation, which is unlikely if the Fed remains vigilant. Rather, the danger is that if, in desperation, we turn to deliberately seeking inflation to solve real problems -- our economic imbalances, sluggish productivity, and excessive leverage -- we would soon find that a little inflation doesn’t work. Then the instinct will be to do a little more -- a seemingly temporary and 'reasonable' 4 percent becomes 5, and then 6 and so on. What we know, or should know, from the past is that once inflation becomes anticipated and ingrained -- as it eventually would -- then the stimulating effects are lost. Once an independent central bank does not simply tolerate a low level of inflation as consistent with 'stability,' but invokes inflation as a policy, it becomes very difficult to eliminate."
Austerity makes no sense now, writes Paul Krugman: "But, say apologists for the bad results so far, shouldn’t we be focused on the long run rather than short-run pain? Actually, no: the economy needs real help now, not hypothetical payoffs a decade from now. In any case, evidence is starting to emerge that the economy’s 'short run' troubles -- now in their fourth year, and being made worse by the focus on austerity -- are taking a toll on its long-run prospects as well. Consider, in particular, what is happening to America’s manufacturing base. In normal times manufacturing capacity rises 2 or 3 percent every year. But faced with a persistently weak economy, industry has been reducing, not increasing, its productive capacity. At this point, according to Federal Reserve estimates, manufacturing capacity is almost 5 percent lower than it was in December 2007."
We need to spur a major refinancing spree, writes Steven Pearlstein: "The best proposal I’ve seen comes from Glenn Hubbard, a former economic adviser in the Bush White House, Chris Mayer, his colleague at Columbia Business School, and Alan Boyce, a trader in mortgage bonds. The trio’s idea is to order Fannie and Freddie to reduce its fee to a flat 4 / 10 of a percent for refinancing any fully paid-up loan that it already guarantees. The process would be streamlined, eliminating appraisals and income verification. The fee would be lower than now, but higher than it has been in normal times, and sufficient to offset the reduced monthly cash flow from refinanced borrowers. As for the banks, those that accept a lower refinancing fee of 3 / 10 of one percent would be granted immunity from lawsuits stemming from loans issued during the bubble -- a huge cloud that hangs over the big banks."
Obama's attempts to energize his base are failing, writes E.J. Dionne: "The president’s fiery rhetoric and his challenge to Republicans directly respond to long-simmering Democratic frustration over his reluctance to confront the GOP. Yet this strategy works only when Obama can concentrate on a single political front without the distraction of dissent from his own ranks. When Republican Minority Leader Mitch McConnell can take to the Senate floor and cite Democratic criticism of the president’s jobs bill, as he did last week, it undercuts the entire campaign. The president’s proposals this week for a long-term balanced budget will be more to the liking of Democrats than were the concessions he made to House Speaker John Boehner during the debt-ceiling battle (concessions Boehner turned down), and many Democrats will cheer his proposed millionaires’ tax. But some of the cuts Obama suggests will present a new target for his critics inside the party."
Failed charity interlude: A balloons for orphans event goes awry.
States are planning an interstate "compact" to get out of health reform, reports Guy Gugliotta: "State governors and legislators opposed to the federal health-care law are eyeing a novel approach to escape its provisions: joining an "interstate compact" that would replace federal programs -- including Medicare and Medicaid -- with block grants to the states. To date, legislation has been drafted or introduced in 14 states and brought to the floor by lawmakers in at least nine. Three Republican governors -- in Georgia, Oklahoma and Texas -- have signed the compact into law, while Missouri Gov. Jay Nixon (D) let the compact become law without signing it. Supporters say they hope to get 40 states to put it on the legislative calendar in 2012. If a significant number of states pass the compact, supporters plan to submit it to Congress for approval in the same way that the body approves interstate compacts regulating commerce, transportation, and resource conservation and development."
Members of Congress are making more and more money outside of their day jobs, report Danny Yadron and Brody Mullins: "The national economy is struggling to keep its head above water. On Capitol Hill, it's a different story. Members of Congress last year tripled their income since 2006 from private-sector jobs and companies they own, according to a Wall Street Journal analysis of financial-disclosure statements. In 2010, 68 lawmakers took in such outside income, totaling at least $27.5 million. This ranged from a Louisiana House member who received millions of dollars from a chain of restaurants to a Missouri senator who reported a $280 gain from selling chestnuts. During 2006, 75 senators and representatives reported outside income from private-sector jobs and companies, totaling at least $7.8 million. The growth in recent years reflects in part the cost of modern electioneering"
Americans spend billions of hours a year filling out forms, reports Louise Radnofsky: "The effort needed to comply with federal bureaucracy now has a number. According to new government estimates released this week, Americans spent 8.8 billion hours filling out government forms in fiscal 2010. The good news? That's lower than the 9.8 billion hours logged the previous year. The bad news? The drop is mostly due to a change in how federal agencies estimate how long it takes to complete their paperwork. In all, the paperwork burden has increased by around 19% over the past decade, up from 7.4 billion hours in fiscal 2000, the White House Office of Management and Budget said. The numbers are grist for the debate about the effect of government regulation on the economy, with Republicans contending that the Obama White House has hindered the recovery with financial, environmental and health-care rules."
We can't afford to cut food safety spending, writes Joe Nocera: "Government’s food inspection has not kept pace. The result was a bill, the Food Safety Modernization Act, whose contours had the approval of both industry and groups like the Center for Science in the Public Interest...As for paying for this overhaul, the bill included an eminently sensible mechanism: a fee on the industry...In the Senate, however, with its ever-present threat of Republican filibuster, the fee never had a chance...When President Obama submitted his 2012 budget to Congress, he asked for $955 million for food safety, a $120 million increase. The increase was necessary, of course, because without the fee, the F.D.A. was going to be hard-pressed as it began the expensive process of changing how it inspected food. Needless to say, that increase never had a chance either. With the House firmly in Republican hands, it slashed the agency’s food budget by $87 million, to $750 million."
Corgis are excellent interlude: A Cardigan Welsh Corgi puppy has the hiccups.
Solyndra has thrown a wrench into Obama's energy agenda, reports Bob King: "President Barack Obama’s green-energy agenda may survive Solyndra, but he might need to keep his distance for a while. Tours of clean-technology companies have been a hallmark of Obama’s presidency, giving him a chance to tout green jobs, the success of his administration’s stimulus program and the promise of a new era of American leadership. But now, with Solyndra’s odor seemingly everywhere and even 'The Daily Show' mocking Obama’s May 2010 visit to the solar company, the president’s personal stamp may no longer be helping. And while the White House is remaining steadfast in its efforts to champion clean energy, supporting the technology doesn’t necessarily require having the president tour the factory floor and speak in shirtsleeves in front of television cameras."
The number of people who believe in global warming is growing, reports Ben Geman: "A new poll shows that a large majority of Americans believe global warming is occurring, but reveals a sharp partisan divide over its causes. The Ipsos poll released Friday finds that 83 percent of Americans believe the planet is warming, up from 75 percent in 2010. Seventy-two percent of Republicans believe it’s happening, compared to 92 percent of Democrats, according to the poll conducted for Stanford University and Reuters. 'A large majority (71%) believe that if warming has been happening, it has been caused either partly (45%) or mostly (27%) by things people have been doing. 27% believe warming to be the result of natural causes,' a summary states. But from there a major partisan split emerges about whether humans are to blame."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.