It is, of course, hard to backpedal on a deal that’s already been made. The public thought this was done, and it would’ve been suicide for Republicans to shut the government down by reneging on a solution they’d agreed to. But lessons learned today can be applied tomorrow. So one question emerging out of yesterday’s vote is whether conservatives who think they got a bit played -- $20-25 billion is not $38.5 billion, after all -- are going to be more skeptical of a deal on the debt ceiling. One happy thought you heard frequently from the shutdown negotiators was that this would “build trust” in advance of the next negotiation. But if a lot of Republicans feel they can’t rely on their leadership to get the exact deal it says it got, we may have more trust problems now than we did before.
Five in the morning
1) Congress passed the 2011 budget deal, report Paul Kane and Philip Rucker: “On his 100th day ruling the House, Speaker John A. Boehner (R-Ohio) watched a quarter of his troops abandon him. Boehner’s leadership team relied on a large bloc of Democrats on Thursday to muscle through the spending bill that was the product of six weeks of negotiations with the White House and Senate Democrats. With the fight over funding the federal government for the rest of the fiscal year behind him, Boehner is heading into a much more difficult and consequential showdown on raising the limit on the nation’s credit card with a potentially weaker hand...In the end, Boehner’s team relied on what might be called a 75-40 coalition: 75 percent of his Republican rank and file, along with 40 percent of Democrats, supported the pact.”
2) The CBO’s low estimate of cut totals affected the vote outcome, reports David Fahrenthold: “A federal budget compromise that was hailed as historic for proposing to cut about $38 billion would reduce federal spending by only $352 million this fiscal year, less than 1 percent of the bill’s advertised amount, according to the Congressional Budget Office...’It was a factor in what pushed me toward ‘no,’’ said Rep. Joe Walsh (Ill.), one of 28 Republican freshmen who voted against the deal. ‘This is just the way that both parties have done business for a long time. And I just don’t want to be a part of that stuff.’ Boehner rejected the idea that the cuts were not as large as they appeared. Rather, he said, the impact could be much larger: In part because it would shrink the baseline budget left to future Congresses, it might save up to $315 billion over 10 years.”
So how many cuts are there? $38.5 billion? $352 million? Neither. The real number is closer to $20-25 billion.
3) Nancy Pelosi has proposed starting tax increases at $1 million in income, not $250,000, reports Mike Lillis: “Predicting the next big budget battle will center on taxes on the wealthy, House Minority Leader Nancy Pelosi (D-Calif.) floated a plan Thursday to raise rates only on incomes above $1 million a year. The offer came just one day after President Obama endorsed a broader revenue-raising strategy that would hike taxes on those earning more than $250,000 annually, beginning in 2013. By scaling back the threshold to $1 million, Pelosi -- who has supported the $250,000 threshold in the past -- is acknowledging the political realities of a Congress half-controlled by Republicans who oppose any tax hikes at all Congress is poised to tackle tax reform this year, and polls consistently indicate that voters favor raising taxes on the wealthiest Americans as a way to rein in soaring deficit spending.”
4) A Republican rift on tax increases is heating up, report Peter Wallsten and Lori Montgomery: “Republicans are feuding over whether to abandon the party’s long-held opposition to higher taxes in pursuit of a deficit-cutting deal with Democrats. The rift in the Republican ranks has surfaced in a bitter back-and-forth between two heroes of the conservative movement: Sen. Tom Coburn of Oklahoma, who has been working with a bipartisan group of senators on a compromise to reduce government borrowing, and Grover Norquist, author of the no-tax-increase pledge that has become a rite of passage for GOP candidates...As the battle over the federal deficit escalates in Washington, the two men are sparring over Coburn’s seemingly narrow proposal to eliminate a $5 billion annual tax break awarded to companies that blend ethanol into gasoline.”
5) Budget “fail-safes” like the one Obama proposed Wednesday have failed in the past, report Zachary Goldfarb and Karen Tumulty: “During the great budget battle of an earlier generation, President Reagan and Congress agreed to write into law a fail-safe similar to the one President Obama suggested Wednesday in a major speech on reining in the nation’s debt...Reagan’s fail-safe was designed to automatically trigger sharp cuts in government spending if massive deficits continued to spin out of control. But politicians couldn’t keep their hands off the fail-safe, adjusting it when precious programs were threatened, and ultimately they killed the provision. The cuts were ‘too enormous to be politically tolerable,’ said Rudolph Penner, who at the time was head of the nonpartisan Congressional Budget Office.”
Radio session interlude: Yuck plays “Get Away” live at Radio 1.
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Still to come: “’Not only are we getting screwed by the Republicans but the Democrats are doing it too,’ said one union official”; the Obama budget may not raise taxes at all; Paul Ryan makes his case against the Obama budget; Paul Krugman makes his case for the Obama budget; David Brooks makes his case for Paul Ryan’s health-care reforms; Jon Cohn makes his case against Paul Ryan’s health-care reforms;; a group of Senators want Obama to issue an executive order easing up on deportations; climate activists are disappointed in Obama; and a very tired kitty.
My take: Don’t be so sure the Obama budget raises taxes by either as little or as much as it says it does. “The president’s proposal says it includes ‘three dollars of spending cuts and interest savings for every one dollar from tax reform.’ That’d make the ratio 3:1. But as Ethan Pollack, a senior fellow at the Economic Policy Institute and a former staffer on the Fiscal Commission, points out, another calculation — and one that’s just as valid — suggests it’s 2:1. Or maybe 1:1. Or maybe, in case you’re not sufficiently confused, there’s actually a big tax cut in the plan, and no new revenues whatsoever.”
Labor leaders are souring on the administration, report Ben Smith and John Bresnahan: http://politi.co/h2uCa7 “Top labor leaders excoriated President Barack Obama and Senate Majority Leader Harry Reid in a closed session of the AFL-CIO’s executive board meeting in Washington Wednesday, three labor sources said. Furious union presidents complained about budget cuts, a new trade agreement and what some view as their abandonment, even by their typically reliable allies among Senate Democrats. ‘Now, not only are we getting screwed by the Republicans but the Democrats are doing it too,’ said one union official, characterizing the mood at a summit of labor leaders who are worried that Democrats seem unlikely to go to the mat for them as an election year approaches.
Ratings practices at Moody’s haven’t changed much since the crisis, reports Jesse Eisinger: “In the aftermath of the financial crisis, nobody has gone to prison and there haven’t been any serious structural changes in the financial system. But at least everyone involved feels bad about it and has vowed to change, right? For Moody’s Investors Service, those pledges are empty, Bill Harrington says...Since then, the government has tried to change the ratings agencies. The Dodd-Frank financial reform law has some bold measures, like making the ratings firms liable for their judgments. Unfortunately, the rules are in danger of not being enforced because of budget constraints and resistance from the agencies. But the biggest problems at Moody’s may have been cultural. The dominant ethos during the boom, instilled by Brian M. Clarkson, the former president and chief operating officer, was that customer service was Job 1. And the customers were the bankers.”
Brazil, Russia, India, China, and South Africa (BRICS) are banding together to shape global economic policy, reports Keith Richburg: “Brazil, Russia, India, China and newcomer South Africa, collectively known by the acronym BRICS, used their third summit meeting here on this southern Chinese resort island to call for a restructuring of the World War II-era global financial system and an eventual end to the long reign of the U.S. dollar as the world’s reserve currency. The five run the gamut politically, from vibrant democracies to authoritarian regimes. Economically, they are as much competitors as partners. But what they share is a common sense of exclusion, and the idea that the main institutions of global governance — the World Bank, the International Monetary Fund, the World Trade Organization and the U.N. Security Council — were formed in a different era when the countries were economically weak and the United States was the world’s dominant superpower.”
Opposition to a 20 percent down payment requirement is growing, reports Dina ElBoghdady: “One of the leading Democratic lawmakers on housing policy and the Obama administration’s own housing agency criticized as too stringent an administration proposal that would push home buyers to come up with sizable down payments. Under the plan, banks would have to retain a stake in the home purchase loans they make to borrowers who put down less than 20 percent...At a House subcommittee hearing Thursday, Rep. Barney Frank (D-Mass.) said the arguments against setting such a high threshold are ‘persuasive.’ A 20 percent down payment ‘does seem very high,’ Frank said. Bob Ryan, acting commissioner of the Federal Housing Administration, agreed that the proposal has the potential to deny affordable loans to creditworthy borrowers.”
Obama’s debt plan is serious, writes Paul Krugman: “The president’s proposal isn’t perfect, by a long shot. My own view is that while the spending controls on Medicare he proposed are exactly the right way to go, he’s probably expecting too much payoff in the near term. And over the longer run, I believe that we’ll need modestly higher taxes on the middle class as well as the rich to pay for the kind of society we want. But the vision was right, and the numbers were far more credible than anything in the Ryan sales pitch. And the hissy fit -- I mean, criticism -- the Obama plan provoked from Mr. Ryan was deeply revealing, as the man who proposes using budget deficits as an excuse to cut taxes on the rich accused the president of being ‘partisan.’”
Paul Ryan takes aim at the president’s budget: “Missing was a credible way to curb out-of-control spending. Instead, the president called for greater reliance on government price controls, which would strictly limit the health-care options of current seniors while failing to control costs. The president would couple this approach with $1 trillion in tax increases, which would destroy jobs and hurt the economy. We cannot accept an approach that starts from the premise that ever-higher levels of spending and taxes represent America’s new normal. We have an obligation to fulfill the mission of health and retirement security for current retirees and future generations. We have a historic commitment to limited government and free enterprise.”
Steve Pearlstein is bemused by the GOP’s anger at President Obama’s speech: “Political demagoguery? In Washington? We’re shocked, shocked. Certainly we haven’t heard any demagoguery from Rep. Eric Cantor (R-Va.) or Sen. Mitch McConnell (R-Ky.) or Ryan himself? Of course not. The budget crisis is much too serious for that. News flash for Ryan: In deciding what to spend and whom to tax, lawmakers’ fights over budgets are always fights about values and priorities in which fairness has as rightful a place as fiscal rectitude and economic efficiency. If it’s legitimate to decry the immorality of leaving our grandchildren a legacy of crushing debt, which Ryan and the Republicans do ad nauseam, then it is no less legitimate to talk about the immorality of reducing deficits by cutting nutritional support for pregnant women and infants rather than raising taxes on millionaires.”
The choice is between selfishness and selflessness, writes Eugene Robinson: “The Republican plan would turn Medicare into a voucher program that subsidizes the purchase of private health insurance. So what if an individual’s insurance premiums are not covered by the voucher? So what if health costs, and premiums, continue to skyrocket? The free market will surely take care of all that, somehow or other. On Medicaid, Republicans want to shift the burden to the states, giving them block grants and essentially telling them to take care of the indigent however they choose. Some states would be diligent in providing adequate medical care. Some would not. Is this the kind of America we want? How selfish are we, really? How selfless? To what extent does this churchgoing nation take the biblical instruction to ‘love thy neighbor’ seriously?”
The GOP’s budget prescriptions aren’t fair, writes Steven Pearlstein: “One of the more comical features of the budget debate is to watch the ways in which Republicans refuse to engage on the issue of economic fairness. When pressed, they deny, dissemble and throw out poll-tested phrases such as ‘class warfare’ and ‘opportunity society.’ And if that doesn’t work, they begin to spin an elaborate fiction about the absolutely devastating impact that any tax increase will have on international competitiveness and job creation, as if that settles the issue completely. Is it fair that the market economy has directed virtually all of the benefits of economic growth to the top 10 percent of households? No answer. Given this increasingly unequal distribution of incomes, isn’t there room to make the tax code slightly more progressive? No answer.”
Adorable animal with a case of the Mondays interlude: A kitten doesn’t want to wake up.
Obama signed a repeal of the 1099 provision of health reform, reports Felicia Sonmez: “President Obama on Thursday signed into law a measure that repeals the unpopular 1099 tax-reporting provision of the national health-care law. The move marked the first successful effort by Congress to repeal a portion of Obama’s signature health-care legislation. The Senate earlier this month voted 87-to-12 to repeal the 1099 provision. The House passed the measure in March on a bipartisan 314-to-112 vote...Obama’s signing of the legislation into law marks the end of a nearly eight-month-long effort by lawmakers to do away with the 1099 tax-reporting provision. Sen. Mike Johanns (R-Neb.) had led the effort in the Senate, but each time repeal seemed close, the parties reached an impasse over how to pay for the repeal, which would result in the loss of an estimated $22 billion over the next decade.”
Oklahoma is rejecting a $54 million health care grant: http://politi.co/fpwtzl
Paul Ryan gets that market mechanisms are needed to keep down health care costs, writes David Brooks: “First, [Ryan] believes that aging populations, expensive new health care technologies and the extravagant political promises have made the current welfare state model unsustainable. Fundamental reform is necessary or the whole thing will collapse, here and in Europe. Second, he believes that seniors and the middle class cannot be excused from the benefit cuts that will have to be imposed to rebalance these systems. Third, he believes that health care costs will not be brought under control until consumers take responsibility for their decisions and providers have market-based incentives to reduce prices...Personally, I agree with Ryan on items 1-3.”
The Affordable Care Act’s cost controls are more realistic and humane than Ryan’s, writes Jonathan Cohn: “The health law’s formula doesn’t attempt to reduce spending by focusing exclusively on direct cuts to individual beneficiaries. On the contrary, the law distributes spending reductions across the health care system, affecting virtually everybody -- whether it’s reducing Medicare payments to hospitals, eliminating extra subsidies for private Medicare Advantage plans or demanding greater rebates from pharmaceutical companies that contract with government insurance programs. Most important, the Affordable Care Act doesn’t merely limit health care spending, in the faint hope that consumers, on their own, will produce a more efficient market. The law also introduces reforms that will put in place technological infrastructure and financial incentives to promote higher quality care. To some extent, that means sweeping, system-wide changes like the introduction of electronic medical records or the creation of an institute that will determine which treatments work better than others. But it also means dozens of more narrowly focused efforts, like a new public-private partnership to promote quality care or pilot programs in “smart malpractice reform.” The idea is to experiment with virtually every payment reform experts have tried successfully on a small scale, in the hopes of replicating the successful ones across the country.”
A group of 22 Senators wants Obama to slow deportations, reports Scott Wong: “A group of 22 Senate Democrats wants President Barack Obama to bypass Congress and use his executive power to delay deportations of illegal immigrants who were brought to the United States as children. Senate Majority Leader Harry Reid (D-Nev.), Majority Whip Dick Durbin (D-Ill.) and others sent a letter to Obama this week urging him to suspend deportation for thousands of immigrants who would have been affected by the DREAM Act. The immigration bill passed the Democrat-controlled House but came up five votes short in the Senate during December’s lame-duck session. The legislation has stalled with Republicans now in charge of the House...Deferred action is mostly used in humanitarian cases. But Republicans view deferred action for the entire DREAM Act population as little more than mass amnesty.”
A consumer safety database was spared from cuts, reports Lyndsey Layton: “A first-ever public database of consumer product safety complaints, which had been targeted for extinction by Republican lawmakers, emerged unscathed from budget negotiations this week. But critics of the database, found at www.saferproducts.gov, continue to push for changes and are pressing for legislation that would amend it along with other provisions of a landmark consumer product safety law passed by Congress in 2008. The $3 million searchable database publicizes complaints from virtually anyone who can provide details about a safety problem connected with any of the 15,000 kinds of consumer goods regulated by the Consumer Product Safety Commission. That agency manages the database, which went live in March.”
Republican governors are resisting pro-union wage rules: http://on.wsj.com/dMX6FP
The US may pass a smaller transportation bill due to falling gas tax revenue, reports Josh Mitchell: “Congress may have to consider a smaller highway-funding bill than initially planned because of a steep drop in revenue from the federal gasoline tax, Senate Finance Committee Chairman Max Baucus said Thursday. The Montana Democrat, speaking at a hearing on highway funding, said lawmakers may have to draft a funding bill covering two years instead of six, which effectively would freeze highway-construction funding at existing levels or lead to a decline. States and transportation lobbyists say a drop in funding and the uncertainty of future federal funding levels could further hurt states and the construction industry. The Obama administration has called for a six-year, $556 billion transportation bill to create jobs and spur the economy.”
Slapstick interlude: Chris Pratt’s best pratfalls on Parks and Recreation .
Climate activists congregating in DC are unhappy with Obama’s energy policy, reports Darryl Fears: “On Friday...10,000 young clean-energy advocates will open the third Power Shift conference at the Washington Convention Center in the District. The three-day climate summit takes place every other year. But instead of endorsing the president’s energy policy, as in 2009, they plan to lambaste it, saying that Obama is siding with what they consider to be the dark side -- big oil and coal-fired power plants. Organizers are planning a demonstration Monday with 5,000 participants outside the White House. ‘When I looked at that energy security speech, it seemed like something BP wrote,’ said Hight, 31, of Scottsdale, Ariz., who is co-director of Power Shift 2011.”
The TVA reached a deal with the EPA to shut down many of its coal plants: http://on.wsj.com/gXQu91
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.