(Evan Vucci/AP)

Whether you call it the Tea Party or not, the hardline of the modern Republican Party has demonstrated its willingness and skill at deposing incumbent Republicans who are too willing to compromise with the other side. Deposing the Speaker of the House, however, is hard. But it’s a bit less hard if you have another option waiting in the wings. An option like Eric Cantor. As David Rogers and Jake Sherman note, Cantor has been separating himself from Boehner’s “I’m not going to put any options on the table or take any options off the table” and making it clear that he both opposes a short-term CR and hasn’t been informed about a range of compromise discussions. It’s an odd public stance for the Majority Leader to take. But it’s right in line with a Republican Party where the conservative caucus has promised to counter Paul Ryan’s budget with an even-more conservative document -- even though no one has yet seen Ryan’s budget!

To a degree that freshman Republicans may not realize, however, Boehner’s allergy to a shutdown is in their best interests. If you buy the Mitch McConnell line that the GOP’s top priority should be denying President Obama reelection, then you want the government to stay open. Evidence that political scientists collected from almost 170 instances of late budgets or shutdowns on the state level showed that fiscal chaos hurts incumbent legislators from both parties win reelection but helps the executive when he runs. They theorized that this is because it makes Congress look small and the executive big. And sure enough, Obama has stayed out of the fray, and is set to announce a major new initiative on green energy today -- the exact sort of forward-looking, let’s-get-on-with-the-people’s-problems initiative that will contrast badly with a Congress unable to come to a reasonable compromise on 2011 funding.

Top Stories

GOP leaders are looking to moderate Dems rather than the Tea Party for support, reports Paul Kane: “Having difficulty finding consensus within their own ranks, House Republican leaders have begun courting moderate Democrats on several key fiscal issues, including a deal to avoid a government shutdown at the end of next week. The basic outline would involve more than $30 billion in cuts for the 2011 spending package, well short of the $61 billion initially demanded by freshman Republicans and other conservatives, according to senior aides in both parties. Such a deal probably would be acceptable to Senate leaders and President Obama as long as the House didn’t impose funding restrictions on certain social and regulatory programs supported by Democrats, Senate and administration aides said.”

Democrats may allow policy riders in a budget deal, report Janet Hook and Carol Lee: “Democrats and the White House are considering whether they can agree to any of a series of conservative policy restrictions backed by Republicans--and opposed by most Democrats--that could help break an impasse in budget talks, Senate Majority Leader Harry Reid said Tuesday. The proposals, known as riders, would use the budget process to undercut policies backed by Democrats, for instance by eliminating money to implement the new health-care law, regulate greenhouse gases or help fund Planned Parenthood. ‘We’re happy to look at the policy riders,’ said Mr. Reid. ‘There aren’t many of them that excite me. But we’re willing to look at them. In fact, we’ve already started looking at some of the policy riders.’”

The House leadership is split on passing another stopgap spending bill, report David Rogers and Jake Sherman: “Moving to the right of Speaker John Boehner, House Majority Leader Eric Cantor distanced himself Tuesday from spending compromises discussed with the White House and took a harder line on whether Republicans should keep the government open absent a budget deal next week. ‘Time is up here,’ said the Virginia Republican, telling reporters that a short-term continuing resolution ‘without a long-term commitment is unacceptable’ and that the leadership must push for the full $61 billion in spending cuts approved by the House last month. ‘That is the House position. That is what we are driving for,’ Cantor said.”

Evidence from the states suggests budget chaos can help the executive even as it harms legislators from both parties, reports Ezra Klein: Political scientists Asger Lau Andersen, David Dreyer Lassen and Lasse Holbøll Westh Nielsen tallied up 167 instances since 1988 alone. But then they went a step further and tried to isolate the fiscal mismanagement they had on the next election. They succeeded. Voters respond to budgetary chaos, and they do so angrily and predictably. The big takeaway is that blame is not shared equally: “Governors are subjected to an electoral penalty only under unified government, while legislatures are always held accountable.”...]W]hen Congress fails to pass a budget on time, voters turn on Congress, not just the minority or majority party. The researchers calculate that a budgetary breakdown under divided government reduces the chances that incumbent legislators from either party will get reelected, though it helps the governor’s party in the gubernatorial elections. That’d suggest that a shutdown would be bad for everyone serving in Congress, but good for Obama.

Though note that Chuck Schumer tweeted: “we will not accept EPA or planned parenthood riders.”

House conservatives are proposing their own budget, report Jake Sherman and jonathan Allen: “If House Republican leaders are looking to tighten the nation’s fiscal belt, the budget hawks in the conservative Republican Study Committee want to apply it as a tourniquet. Their tool: an ambitious fiscal 2012 alternative budget that will challenge the official GOP leadership’s spending plan and once again reveal divides within the Republican Party over how deep to cut the government. Never mind that Republican leaders like John Boehner and Eric Cantor are promising to slash basic annual budgets for government agencies and cut entitlement programs such as Medicare and Social Security. The die-hards writing the rogue budget at the RSC are sure to paint them as a bit squishy on spending...But the threat of internal discord is serious enough that GOP budget aides met with RSC staff late Monday to compare notes. ‘We’re now caught in this squeeze from both the left and right,’ said a top GOP leadership aide, speaking on condition of anonymity. ‘It doesn’t give us much room to maneuver.’”

Music video with adorable children interlude: tUnE-yArDs’ “Bizness”.

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Still to come: The financial sector is the only sector really raking in the profits these days; new rules would reserve the best mortgage rates for homeowners putting down 20 percent down payments; the White House would welcome employers transitioning toward using exchanges; Ohio’s anti-union bill is moving forward; the administration is announcing new energy proposals; and robotic helicopters play tennis.


The economy’s profits are being driven by financial firms, writes Annie Lowrey: “For most of 2009 and 2010, a range of U.S. corporations saw post-recession rebounds in profits. The manufacturing sector, for instance, made about $140 billion in annualized profits in the second quarter of 2009, a recession-era low. Last quarter, it made about $241 billion. Similarly, auto manufacturers lost about $50 billion in the last quarter of 2008. Today, the sector is breaking even. But in the last quarter of 2010, the story was all about Wall Street. Profits actually decreased a bit at nonfinancial firms. But companies like investment banks and insurers saw profits climb to an annualized $426.5 billion. The financial sector now accounts for about 30 percent of the economy’s overall operating profits.”

Federal regulators will require a 20 percent downpayment to get prime mortgage rates, reports Zachary Goldfarb: “If you want to buy a $300,000 house, you’ll need $60,000 as a down payment to get the best interest rate on your home loan, according to a proposal released Tuesday by federal regulators. A group of federal agencies announced a high standard for home buyers to get the best mortgage rates: Only those who can make a 20 percent down payment and have not had problems paying mortgages in the recent past would be eligible. The regulators are trying to prevent the kinds of practices that dumped so many risky mortgages into the financial system several years ago. But the proposal has sparked concerns from some groups, which worry that a 20 percent down payment is too onerous for many working-class borrowers.”

State and local revenues are up: http://wapo.st/flkDKg

Banks are offering concessions toward a mortgage settlement with states, reports Brady Dennis: “On the eve of planned settlement negotiations between state and federal authorities and the nation’s largest mortgage servicers, the companies have submitted detailed changes they are willing to make to alter past practices and aid troubled homeowners in the months ahead, people familiar with the matter said. The five banks at the center of the settlement negotiations over shoddy foreclosure practices -- Ally Financial, Bank of America, Citibank, J.P. Morgan Chase and Wells Fargo -- submitted the proposal to government officials ahead of the first planned face-to-face meetings between the groups Wednesday in Washington... At the same time, the banks’ proposal doesn’t offer the extent of concessions requested in a 27-page ‘term sheet’ submitted earlier this month by a core group of state attorneys general.”

The Fed is being overly timid, writes David Leonhardt: “Whenever officials at the Federal Reserve confront a big decision, they have to weigh two competing risks. Are they doing too much to speed up economic growth and touching off inflation? Or are they doing too little and allowing unemployment to stay high? It’s clear which way the Fed has erred recently. It has done too little. It stopped trying to bring down long-term interest rates early last year under the wishful assumption that a recovery had taken hold, only to be forced to reverse course by the end of year. Given this recent history, you might think Fed officials would now be doing everything possible to ensure a solid recovery. But they’re not. Once again, many of them are worried that the Fed is doing too much. And once again, the odds are rising that it’s doing too little.”

Senators should oppose an increase in the debt limit, writes Sen. Marco Rubio: http://on.wsj.com/i4PYvg

The bailout failed to restore home prices, writes Neil Barofsky: “Though there is no question that the country benefited by avoiding a meltdown of the financial system, this cannot be the only yardstick by which TARP’s legacy is measured. The legislation that created TARP, the Emergency Economic Stabilization Act, had far broader goals, including protecting home values and preserving homeownership. These Main Street-oriented goals were not, as the Treasury Department is now suggesting, mere window dressing that needed only to be taken ‘into account.’ Rather, they were a central part of the compromise with reluctant members of Congress to cast a vote that in many cases proved to be political suicide...But it has done little to abide by this legislative bargain.”

Rise of Skynet interlude: Two quadrocopters play tennis.

Health Care

The White House is welcoming a shift to exchange-based coverage, reports Jason Millman: “Big companies may eventually look to dump their employees onto new state-run health insurance markets in the future if a key aspect of healthcare reform turns out to be successful, an Obama administration health official predicted Tuesday morning...Joel Ario, who oversees the exchanges for the Department of Health and Human Services, said fears about the blow to the employer-sponsored health system have been overstated. In the interest of remaining competitive, major employers won’t drop their health insurance right away, Ario said...However, if the exchanges prove to be a source for better and cheaper coverage, then employers will be incentivized to scrap their health plans.”

Julie Appleby offers a primer on health care reform’s exchanges: “What is an exchange, as envisioned by the health-care law? It’s a marketplace where individuals and small employers will be able to shop for insurance coverage. They must be set up by Jan. 1, 2014. The exchanges will also direct people to Medicaid, if they’re eligible. Will all states have exchanges? States have the option of setting up their own exchanges, forming coalitions with other states to create regional exchanges or opting out altogether. In that case, the federal government would run the exchanges...Will anyone be allowed to buy from the exchanges? No. Initially, exchanges will be open to individuals buying their own coverage and employees of firms with 100 or fewer workers (50 or fewer, in some states).”

Mitch Daniels’ health plan is too expensive, writes Jonathan Cohn: http://bit.ly/fYaln5

Domestic Policy

An anti-union bill is advancing in Ohio, reports Emma Fitzsimmons: “Ohio moved closer to completing legislation to limit collective bargaining rights for public sector workers on Tuesday, while legislation in Wisconsin continued to be tied up in the courts. The bill in Ohio passed a State House committee on Tuesday after Republicans added provisions that Democrats said would further hurt unions. The legislation was expected to pass the full House as early as Wednesday. Republicans said they had made some of the changes to accommodate unions, but Democrats said the revised bill was worse than the original, especially a new provision that would prohibit nonunion employees from paying fees to unions. With little hope of stopping the bill in a legislature controlled by Republicans, Democrats vowed to take the bill to voters in a referendum this fall.”

The Supreme Court looks set to rule against a sex discrimination suit targeting Wal-Mart: http://wapo.st/eIxX0O

It’s no surprise that school districts with high-stakes testing have more cheating, writes Dana Goldstein: “In the social sciences, there is an oft-repeated maxim called Campbell’s Law, named after Donald Campbell, a psychologist who studied human creativity. Campbell’s Law states that incentives corrupt. In other words, the more punishments and rewards--such as merit pay--are associated with the results of any given test, the more likely it is that the test’s results will be rendered meaningless, either through outright cheating or through teaching to the test in a way that narrows the curriculum and renders real learning obsolete. In the era of No Child Left Behind, Campbell’s Law has proved true again and again.”

A Wisconsin judge is blocking the state’s anti-union law: http://wapo.st/eeJP9Z

Adorable children listening to hip-hop interlude: A baby in a car-seat gets really into Kid Cudi.


Obama is outlining new energy initiatives today, reports Laura Meckler: “President Barack Obama, under pressure to respond to rising gas prices, will outline Wednesday a series of initiatives to cut the nation’s reliance on foreign oil, including new initiatives to expand oil production, increase the use of natural gas to power vehicles and increase production of ethanol. Mr. Obama’s latest attempt to take the initiative on energy policy comes as Republicans in Congress are stepping up criticism of the administration for not allowing more oil and gas drilling in the United States...Mr. Obama will put forward an overall goal of reducing oil imports by one third over a decade, with half the reduction from decreasing consumption and half from increasing domestic supply, according to two people briefed by the White House.”

Republicans are considering a series of bills to expand offshore drilling: http://bit.ly/fcFjYg

The Senate is set to vote on restricting EPA climate rules today, reports Andrew Restuccia: “Senate Majority Leader Harry Reid (D-Nev.) is planning to hold a vote Wednesday on an amendment to small business legislation that would permanently block the Environmental Protection Agency’s climate rules. The amendment, offered by Senate Minority Leader Mitch McConnell (R-Ky.), would prohibit EPA from regulating greenhouse gas emissions. ‘I think we’re at a point where in the morning we can vote on the McConnell Amendment dealing with the EPA and a couple of other amendments relating to EPA to get rid of that issue one way or the other,’ Reid said on the floor Tuesday. Reid will discuss how to proceed on the amendment, as well as two other amendments that would limit EPA’s climate authority, at a meeting Tuesday with his fellow Democrats, a Senate Democratic leadership aide said.”

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