Matthews is writing Wonkbook while Ezra is traveling.
Five in the morning
1) Top Dems are dismissing Joe Lieberman and Tom Coburn's Medicare plan, report Rosalind Helderman and Paul Kane: "Leading Congressional Democrats immediately recoiled Tuesday from a new proposal to cut $600 billion in Medicare spending over the next decade -- in part by raising the eligibility age. Sens. Joseph I. Lieberman (I-Conn.) and Tom Coburn (R-Okla.) unveiled the proposal as part of a bipartisan effort to produce the kind of savings necessary to achieve the $2 trillion in debt reduction both parties say is needed to convince reticent lawmakers to vote to raise the debt ceiling. It would raise Medicare’s eligibility age from 65 to 67 and assess higher premiums on wealthier seniors...Senate Majority Leader Harry M. Reid (D-Nev.) termed it 'a bad idea.' House Minority Leader Nancy Pelosi (D-Calif.) called it 'unacceptable.'"
2) The White House and Congress have reached a deal on long-delayed trade agreements, report Felicia Sonmez and Rosalind Helderman: "The White House and congressional negotiators have cleared an impasse over three key trade pacts, ending weeks of wrangling and setting in motion the congressional approval process for the long-pending deals. But the announcement Tuesday was met with some disapproval from leading Republicans who said they remain opposed to pairing the South Korea, Colombia and Panama trade deals with a renewal of the Trade Adjustment Assistance (TAA) program. The aid and retraining program for workers who lost their jobs because of outsourcing is an Obama administration priority that Republicans have sharply criticized as costly and unnecessary."
3) Christine Lagarde is officially the new IMF head, reports Howard Schneider: "French Finance Minister Christine Lagarde on Tuesday became the first woman and the first non-economist appointed to head the International Monetary Fund, an agency that is facing some of its deepest challenges since its founding 66 years ago. She will have to jump immediately into crisis negotiations over Greece, navigate demands from developing nations for more power in the agency, and cope with the internal fallout from the sexual assault arrest of former managing director Dominique Strauss-Kahn. Lagarde is a lawyer by training and a skilled diplomat by reputation, and her ability to tackle those issues -- more the province of a negotiator than the PhD economists that have run the fund since it was founded after World War II -- will define the success or failure of a five-year term that will begin July 5."
4) The White House is starting another push for the DREAM Act, report Seung Min Kim and Jennifer Epstein: "Top White House officials made their case for the long-simmering immigration law, the DREAM Act, on Tuesday at a a Senate hearing packed with attendees, including Jose Antonio Vargas, a journalist who took the Internet by storm last week with a first-person account of working for major news outlets while an illegal immigrant. Vargas, who detailed his tale in the Sunday New York Times Magazine, was invited to attend the hearing, which was the first-ever for the decade-old bill that would create a pathway to citizenship for illegal immigrants brought to the United States as children...With interest in the bill high across the political spectrum, observers and journalists crammed the hearing room as big guns, like Education Secretary Arne Duncan and Homeland Security Secretary Janet Napolitano made their case for the DREAM Act."
5) Mitch McConnell's holding his ground on taxes, reports Seung Min Kim: "Senate Minority Leader Mitch McConnell made his first public remarks on Monday’s deficit meeting with President Barack Obama at the White House on Tuesday afternoon, blaming Democrats for the lack of progress on negotiations by insisting on an increase in taxes. 'So far, they’re saying that it’s essential,' McConnell told reporters Tuesday. 'We think it’s a job-killing step that shouldn’t be taken, and Republicans are not interested in going in that direction.' McConnell and Senate Majority Leader Harry Reid sat down separately with Obama and Vice President Joe Biden on Monday to discuss continuing negotiations on a deficit deal. McConnell acknowledged that they had a 'good discussion' but reiterated any agreement involving tax increases was still a non-starter for Republicans."
'50s cover interlude: Fiona Apple and Jon Brion play "Everyday" by Buddy Holly.
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Still to come: Bank of America is paying billions to settle a mortgage crisis lawsuit; the administration's sinking a survey program launched as part of health care reform; the two leaders of the Senate Democratic caucus are moving apart; the Senate is near a deal on ethanol subsidies; and the long-awaited meeting of Cirque de Soleil and professional baseball.
Bank of America is paying billions to settle a lawsuit resulting from the mortgage crisis, report Nelson Schwartz and Eric Dash: "Bank of America is completing an agreement to pay $8.5 billion to settle claims by investors that purchased mortgage securities that soured when the housing bubble burst, according to people briefed on the deal. It represents what is likely to be the single biggest settlement tied to the subprime mortgage boom and the subsequent financial crisis of 2008. The settlement would wipe out all of the company’s earnings in the first half of this year, while encouraging powerful private investors to extract payouts from other banks that bundled troubled home loans and sold them as sound investments...The proposed settlement is with a group of more than 20 investors that include the asset managers Pimco, Metropolitan Life and BlackRock, as well as the Federal Reserve Bank of New York."
The Fed is extending a lending program to help Europe, reports Luca di Leo: "The Federal Reserve, amid persistent worries about Europe's sovereign debt crisis, last week quietly approved the extension of a crisis-lending program that allows the European Central Bank to tap the U.S. for dollars, Federal Reserve Bank of St. Louis President James Bullard said. The Fed's dollar-lending agreements with the ECB--as well as the central banks of England, Canada, Japan and Switzerland--were scheduled to expire Aug. 1. The Fed and other central banks haven't yet disclosed renewal of the agreements, known as swap lines. Fed officials voted to extend the program, which was first launched during the financial crisis, at their latest Federal Open Market Committee meeting June 21-22, Mr. Bullard said in an interview Tuesday."
States are pushing back against Dodd-Frank, reports Louise Story: "One of the most classic American political debates -- state versus federal law -- is surfacing again in the banking sector, as regulators work to put in place the financial reforms passed a year ago in Washington. At issue is whether state banking regulators will be undercut by their federal counterparts when it comes to consumer financial protection laws. Banks, state regulators and consumer advocates have been sparring in legalese-filled comment letters over the last month in response to rules proposed by the Office of the Comptroller of the Currency, which regulates national banks. Even the Treasury Department has criticized the comptroller’s rules and sided with state officials, saying the rules do not hew closely enough to the Dodd-Frank legislation intended to rein in Wall Street."
Debt negotiators don't have schedules that match the seriousness of the problem, writes Steven Pearlstein: "If the issues involved here are as important as all the political leaders claim, then why isn’t this a 10-hour-a-day, 6-day-a-week marathon to nail down an agreement? Why is the president still running around the country holding fundraisers on Wall Street and visiting yet another 'green' factory? And why haven’t members of Congress been told that they’ll be spending the July 4 holiday right here in Washington--and every day thereafter--until the necessary deal is hammered out? Certainly that is what leaders would do if they were trying to prepare the country politically to make some painful sacrifices and accommodations in the years ahead."
Obama needs to get serious about the optics of job policy, writes Ron Klain: "What’s needed is not so much new thinking but a decision by the White House to package those proposals in a presidential initiative on job creation, one that can then be championed in the face of congressional resistance and public anxiety over spending. In doing so, the administration shouldn’t be shy about price tags: Spending on policies that obviously and directly create jobs will garner support, even in these budget-conscious times. But at the same time, the administration shouldn’t fall into the political trap of equating more spending per se with more job creation. And some ideas that are favorites with policy wonks (even when they are effective job creators), like more state and local fiscal relief, shouldn’t be part of the administration’s package because they are political nonstarters."
The administration is ending a health care survey program before it started, reports Robert Pear: "The Obama administration said Tuesday that it had shelved plans for a survey in which 'mystery shoppers' posing as patients would call doctors’ offices to see how difficult it was to get appointments. 'We have determined that now is not the time to move forward with this research project,' the Department of Health and Human Services said in a statement late Tuesday. The decision, following criticism from doctors and politicians, represents an abrupt turnabout. On Sunday night, officials at the health department and the White House staunchly defended the survey as a way to measure access to primary care, and they insisted that it posed no threat to anyone’s privacy."
The AMA wants a permanent "doc fix" in the debt deal, reports Sam Baker: "More than 100 groups representing doctors said Monday that an agreement on the U.S. debt ceiling should include a permanent fix to the formula that Medicare uses to pay doctors. Republican negotiators have poured cold water on the idea of using the debt-ceiling vote to tackle the 'sustainable growth rate' formula (SGR). But the American Medical Association and other doctors groups say the two go hand-in-hand. The SGR has become a perennial headache for doctors and Congress alike. The formula calls for a payment cut of nearly 30 percent in January 2012 -- when the latest temporary fix is set to expire. Congress consistently blocks scheduled cuts from taking effect, and has to come up with new offsets each time."
The Coburn-Lieberman Medicare plan is impressive, writes Avik Roy: "The heart of the Lieberman-Coburn bill is its reform of cost-sharing. A big part of the reason why Medicare spending is through the roof is because seniors pay for almost none of their own care, and therefore have no incentive to be mindful of unneeded or excessive treatments and tests. Lieberman-Coburn proposes important reforms to this system, by combining Medicare Parts A and B into a single annual deductible of $550, capping out-of-pocket costs for most Americans at $7,500 a year, and barring supplemental 'Medigap' policies from paying any of the $550 or $7,500. In addition, the bill increases the minimum premium to 35 percent of the program’s costs...These provisions would have significant long-term effects on the growth of Medicare spending, and should be a core component of any attempt at Medicare reform."
The Senate Democratic caucus's two leaders are moving apart, report Manu Raju and Scott Wong: "Senate Majority Whip Dick Durbin (D-Ill.) has put a ton of political capital into the Senate Gang of Six -- now five -- only to have Majority Leader Harry Reid (D-Nev.) dismiss such Senate 'gangs.'...Reid doesn’t want to touch Social Security, but Durbin has suggested that there could be changes to the entitlement program to keep it solvent. And as Reid scheduled votes to kill ethanol subsidies, Durbin -- who hails from a corn-producing state -- voted to save tax preferences for that industry. The gulf between the No. 1 and No. 2 leaders on key issues points to the larger problem facing Senate Democrats this year: There is little desire to hold a firm party line, leaving politically vulnerable Democrats to decide for themselves how to vote on any number of issues."
State tax revenues are on the rise, reports Conor Dougherty: "State and local tax collections rose in the first quarter as an expanding economy and tax increases passed during the recession eased city and state budget woes. State and local tax revenue grew 4.7% to $321.6 billion in the first three months of 2011 compared with the same period a year earlier, the Census Bureau said Tuesday. State revenue grew 9.3% in the quarter, a far better showing than that of local governments, where revenue fell 0.64% in the second consecutive quarter of declines. Despite the first-quarter improvement, which marks the sixth consecutive period of year-over-year state and local tax revenue growth, non-federal tax collections remain below pre-recession levels."
America needs to tame its "hidden welfare state", writes Suzanne Mettler: "Social tax expenditures comprise a major part of what I call the 'submerged state.' By that I mean that they are public policies designed in a manner that channels resources to citizens indirectly, through subsidies for private activities, rather than directly through payments or services from government. As a result, they are largely hidden from the public: through them, government benefits people, providing them with opportunities and relieving their financial burdens, often without them even knowing it. Appearing to emanate from the private sector, such policies obscure the role of the government and exaggerate that of the market. What’s more, the vast majority of Americans garner only modest assistance, if any, from the submerged state."
Competition, not labor law, has led to unions' decline, writes Ramesh Ponnuru: "Government policy did have a lot to do with the decline of unions. But it wasn’t labor law that mattered...Economist Henry Farber and sociologist Bruce Western found that the chief reason was that nonunionized companies grew faster than unionized ones...You might be thinking that unionized companies shrank mainly because they tended to be in declining industries. But you would be wrong. Economist Barry T. Hirsch has found that only 20 percent of the decline in unions between 1983 and 2002 resulted from shrinking unionized industries...Government abetted the decline by encouraging competition among companies: For example, by liberalizing trade and deregulating product markets such as trucking. The more competitive markets became, Hirsch concludes, the worse unionized workforces did."
Solstice celebration interlude: The Polish city Poznań releases 11,000 floating paper lanterns.
Senators are near a deal on ethanol subsidies, reports Ben Geman: "A trio of senators is nearing agreement on a plan to end a major ethanol tax credit and import tariff while extending incentives for next-wave biofuels. Sen. Dianne Feinstein (D-Calif.) said Tuesday that she had reached an agreement with Sens. Amy Klobuchar (D-Minn.) and John Thune (R-S.D.), although the lawmakers say there is not yet a final deal...Feinstein said she would like the agreement, which she said would help reduce the deficit, to be part of legislation to raise the debt ceiling, citing the absence of a tax bill to serve as an obvious vehicle. According to Feinstein -- who along with Sen. Tom Coburn (R-Okla.) has led the charge to kill ethanol subsidies -- the planned deal would quickly end the ethanol blenders’ credit, which is worth an estimated $6 billion annually, and the tariff."
Lawmakers are calling for probes of the natural gas industry, reports Ian Urbina: "Federal lawmakers called Tuesday on several agencies, including the federal Securities and Exchange Commission, the Energy Information Administration and the Government Accountability Office, to investigate whether the natural gas industry has provided an accurate picture to investors of the long-term profitability of their wells and the amount of gas these wells can produce...The calls for investigations came amid growing questions about the environmental and financial risks surrounding natural gas drilling and especially a technique known as hydraulic fracturing, or hydrofracking, used to release gas trapped underground in shale formations. Members of the House Committee on Natural Resources said they hoped to hold a hearing in the next several weeks to discuss natural gas drilling."
Closing credits: Dylan Matthews is a student at Harvard and a researcher at The Washington Post. Wonkbook is compiled and produced with help from Michelle Williams.