(Speaker Boehner discusses debt plan. / Getty Images)

On Tuesday, the Congressional Budget Office assessed Boehner's proposal and concluded it would cut spending by about $950 billion over the next 10 years. Boehner had promised something closer to $1.2 trillion, and so his office immediately promised to head back to the drawing board and amp up the cuts. "We promised that we will cut spending more than we increase the debt limit – with no tax hikes – and we will keep that promise<" said Boehner spokesman Michael Steele. "As we speak, Congressional staff are looking at options to re-write the legislation to meet our pledge."

Enter OMB Director Jack Lew. Earlier in the day, his office had issued an almost-veto threat on behalf of the White House. So no one would mistake them as fans of the Boehner plan. But in a blog post Tuesday evening, Lew rallied to the plan's defense, arguing that Boehner's plan only undershot its spending target because the CBO tested it against the "adjusted March baseline," which includes the cuts passed as part of the appropriations deal that kept the government's lights on earlier this year.

Why does that matter? Because depending on which baseline you use, the cuts don't need to be as deep. Lew argues that the two parties have agreed we need to cut $4 trillion starting from the CBO's January estimate. And if you start from that estimate, Boehner's plan cuts $1.1 trillion.

According to Lew, the debate has, until now, proceeded from that baseline. "Both the House Republican budget proposal unveiled by Congressman Ryan on April 5 and the President’s fiscal framework that he introduced on April 13...were introduced before the agreement on appropriations for FY 2011, the baseline used for them did not reflect the spending cuts enacted this year in that legislation. Indeed, throughout our weeks of talks, all parties have worked off a January baseline because we all recognized that we needed to start from the same place." If the two sides stop using that baseline, then the ultimate cuts will need to be significantly deeper than what was discussed in the White House meetings.

Somehow, I doubt House Republicans will find Lew's logic convincing.

Five in the morning

1) The Boehner plan won't come up for a vote today after all, report Lori Montgomery, Felicia Sonmez, and Paul Kane: "Washington barreled closer to crisis Tuesday as House Speaker John A. Boehner and Senate Majority Leader Harry M. Reid scrambled to build support for rival plans to control the national debt, but both appeared doomed without significant bipartisan modifications. House Republicans delayed a vote on Boehner’s bill, which had been set for Wednesday, after congressional budget analysts dealt the legislation a potentially devastating setback by saying it would save far less over the next decade than the $1.2 trillion advertised. The Congressional Budget Office projected that the spending cuts would save only about $850 billion...House Republicans were racing Tuesday night to rewrite portions of the measure to bring the numbers into line. The vote could now come Thursday."

2) Big companies are beginning to brace for default, report Kate Linebaugh and Vipal Monga: "Many companies, chastened by the turmoil in short-term credit markets after the collapse of Lehman Brothers Holdings Inc. in 2008, were already holding more cash than usual. The prospect of trouble in the all-important market for Treasurys is only adding to their worries. 'Our main protection against something like that not going well, or having a rocky outcome, is to have a lot of liquidity,' General Electric Co. Chief Financial Officer Keith Sherin said in an interview last week. The company ended the second quarter with a record $91 billion of cash. GE isn't alone. Companies from Ford Motor Co. to Eaton Corp. stressed the importance of ample liquidity, in view of current uncertainties in the market—from the U.S. debt impasse to troubled European economies. 'This debt imbroglio is just giving companies another excuse not to do much,' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. 'They are going to hesitate to hire at a faster pace and probably be very cautious on their capital-spending outlook.'"

3) The Fed can't save us, reports Neil Irwin: "With the government about to run out of cash to pay its bills without an increase in the legal limit on how much debt it can issue, speculation has run rampant in financial and political circles that the Fed and its chairman, Ben S. Bernanke, could use their almost unlimited ability to print money to find a way out. Fed officials are monitoring the situation, and Bernanke and William C. Dudley, president of the Federal Reserve Bank of New York, met with Treasury Secretary Timothy F. Geithner late last week to discuss options...But...considerable legal restrictions on what the Fed can do make it hard to imagine the central bank being able to address the immediate crisis. And there is no appetite within the independent-minded Fed to intervene in a fundamentally political dispute."

4) Markets are starting to show concern, reports Zachary Goldfarb: "Put on your financial wonk hat. This week, there were three events in the world of exceedingly complicated financial markets that showed growing concern about the state of the debt negotiations in Washington: The dollar fell sharply against other currencies. Investors who make short-term loans to the government demanded a higher interest rate. Investors who wanted to buy insurance against a U.S. default on its debt had to pay vastly more. The three data points indicate that investors are getting antsy about whether leaders in Washington will actually forge a deal in the coming days. Still, the markets are not in freak-out mode. U.S. stock markets ended the day just a smidgen down, well within what could happen on any day."

5) House Democrats will whip against the Boehner plan, reports Mike Lillis: "House Democratic leaders plan to whip votes against a GOP plan to raise the debt limit and slash federal spending, the office of Rep. Steny Hoyer (D-Md.) said Tuesday. The move could prove crucial, as many conservative Republicans intend to oppose the bill, perhaps leaving GOP leaders reliant on Democratic votes to pass the measure. The precise number of GOP 'nays' remains unclear, but the Democrats’ strategy is not: They want to put the entire burden of passing the bill on the Republicans...Hoyer, the minority whip, declined to predict whether the GOP bill -- introduced late Monday night by House Speaker John Boehner (R-Ohio) -- could clear the House, but forecast that 'very few' Democrats would support the measure."

Swedish pop interlude: The Radio Dept. plays "Never Follow Suit" live.

Got tips, additions, or comments? E-mail me.

Still to come: Raj Date will replace Elizabeth Warren as special advisor for the Consumer Financial Protection Bureau; a bunch of drugs are set to go generic and plummet in price; the government sends out hundreds of millions of checks every month; David Leonhardt sums up what we know bout the economy; automakers are on board for stricter mileage rules; and a 3-year-old drives a four-wheeler.


The federal government sends out way more than 70 million checks a month, reports Alec MacGillis: "The figures used by Obama and Geithner were, if anything, too low. They relied on Treasury Department figures from June that include Social Security (56 million checks that month), veterans benefits (4.5 million checks), and spending on non-defense contractors and vendors (1.8 million checks). But those numbers do not include reimbursements to Medicare providers and vendors (100 million claims in June), and electronic transfers to the 21 million households receiving food stamps. Nor do they include most spending by the Defense Department, which has a payroll of 6.4 million active and retired employees and, on average, pays nearly 1 million invoices and 660,000 travel expense claims per month."

Raj Date is replacing Elizabeth Warren, reports Brady Dennis: "Raj Date, a top deputy to Elizabeth Warren at the Consumer Financial Protection Bureau, will take over day-to-day operations of the new watchdog agency when she departs at the end of this month, Treasury officials announced Tuesday. Warren has served since September overseeing the creation of the bureau, which officially opened its doors last week...She had hoped to stay on as the bureau’s inaugural director, and undoubtedly was the first choice of most consumer advocates. Nevertheless, President Obama last week instead nominated Richard Cordray, a former Ohio attorney general who this year became chief of the CFPB’s enforcement division."

The Chamber of Commerce is backing the Boehner plan, reports Damian Paletta: "The U.S. Chamber of Commerce offered its support Tuesday for House Speaker John Boehner's plan to raise the federal debt ceiling in two installments, despite White House opposition, as business groups belatedly mobilize to try to head off a government default. But the Chamber, finding itself in a political pickle, could still also back a competing plan being advanced in the Senate by Democratic Majority Leader Harry Reid. For months, business executives and their lobbying arms in Washington have urged a compromise to raise the government's $14.29 trillion debt limit and reduce the budget deficit, but they have been reluctant to pick sides between the White House and Republicans."

There are some things we really do know about the economy, writes David Leonhardt: "We...know that ever-rising levels of education are crucial to a country’s success. Not only is the evidence all around us -- the college wage premium has been higher than ever lately -- but careful studies have found that, on the margin, education itself tends to make people wealthier, healthier and happier. The next time you hear naysayers poormouth college, ask them if they plan to send their own children. We know that the federal government has promised more benefits than it can currently afford. The only way out of this problem involves some combination of tax increases and cuts to Medicare, Social Security and the military...We know this country spends vastly more on health care than any other country -- about 75 percent more per person than other rich countries -- without getting vastly better results."

Republicans might snatch default from the jaws of victory, writes Harold Meyerson: "By striking a deal with Reid, [Republicans] may escape their political corner, leaving Democrats stuck with a deal that undermines their party’s ideological foundations. But is that even what the Tea Party Republicans...really want? Many of the Tea Party House freshmen clearly see their role as voting for their Ayn Rand fantasies and then going home. With the House having passed the 'cut, cap and balance' bill (which would decimate entitlements) on a near-party-line vote last week, 'what else is there?' New York Republican Michael Grimm wondered, as The Post reported Monday. 'At this point, honestly, I don’t think there’s any more the House can do.' Pennsylvania freshman Mike Kelly echoed Grimm’s sentiments: 'The House has done everything it could do,' he said. 'Now, what’s the holdup?'"

Adorable children driving large vehicles interlude: A 3-year-old ride around in a four-wheeler.

Health Care

A bunch of drugs are about to get a lot cheaper, reports Mitch Dudek: "Cholesterol-fighting Lipitor, blood thinner Plavix and five more of the world’s best-selling prescription drugs will lose their patents over the next 14 months, and prices are expected to plunge as generic versions become available. It’s the start of an unprecedented wave of new generic drugs. In all, about 120 brand-name prescription medications will see their patent-protected exclusivity expire in the next decade or so, bringing a flood of new generic drugs to the market. That will make it much cheaper to buy popular medicines for high blood pressure, asthma, diabetes, depression, high triglycerides, HIV and bipolar disorder. 'Generics, on average, are about 70 percent cheaper than branded drugs,' said Dr. Caleb Alexander, a University of Chicago primary care physician."

Domestic Policy

Democrats are pushing to end the FAA funding showdown, reports Ashley Halsey: "With no other movement to resolve a congressional stalemate over aviation funding, House Democrats on Tuesday said they would introduce a bill to restore funding for the Federal Aviation Administration. Parts of the federal agency were shut down and 4,000 workers furloughed at midnight Friday when the House and Senate failed to reach agreement on stop-gap funding. The shutdown has cost the FAA an estimated $30 million a day in lost ticket-tax revenue...Both houses passed new long-term bills this year, but staff members have yet to resolve differences over funding levels, funding longevity, a controversial labor provision, restrictions on flights at Reagan National Airport and subsidized commercial air service to rural airports."

There's no way to guarantee Social Security checks will go out August 3, writes Jerome Powell: "The revenue stream for Social Security benefits comes from payroll taxes, which are credited to the Social Security Trust Fund -- accounting for the program’s finances separately from the rest of the budget. Since 2010 and for the foreseeable future, monthly payroll taxes will be less than the amount of monthly benefit payments...In normal times, at the beginning of each month, the federal government makes a cash advance to the Social Security Trust Fund called the 'normalized tax transfer,' in an amount equal to the estimated payroll taxes for the coming month...When the debt limit has been reached, the NTT cannot be invested because no additional securities can be placed into the Trust Fund (which counts as 'debt subject to limit')."

Adorable animals lacking skills interlude: The worst swimmer of the dog world.


Automakers have signed on to new mileage rules, reports Sharon Terlep and Stephen Power: "Five of the largest auto makers in the U.S. have endorsed a proposal by the Obama administration to set tougher fuel economy regulations, after the White House lowered its miles-per-gallon target and built in allowances for the large trucks that drive profits at Detroit car companies, people familiar with the talks said Tuesday. The administration is proposing auto makers increase corporate average fuel economy to 54.5 miles a gallon by 2025, down from its initial target of 56.2 mpg, people familiar with the matter said. The goal would roughly double requirements from existing levels. Most of the largest auto makers have signed off on the proposal, people familiar with the matter said."

The EPA is delaying a smog rule, reports Ben Geman: "The Environmental Protection Agency will not meet its July 29 deadline to issue final rules for tightening ozone standards that were put in place during the George W. Bush administration. The latest delay comes as major industry groups, many Republicans and some conservative Democrats are pressuring EPA and the White House to scuttle the rules. EPA spokesman Brendan Gilfillan said in a statement Tuesday that agency Administrator Lisa Jackson remains 'fully committed' to completing the rule, which is under review by the White House Office of Management and Budget...EPA's action did not seem to appease critics of the smog rules. 'Washington needs 2 cut red tape -- not just delay it,' Sen. John Barrasso (R-Wyo.) said in a tweet Tuesday afternoon."

The House voted to speed along an oil pipeline project, reports Tennille Tracy: "The House of Representatives on Tuesday voted to speed up the decision-making process for a controversial oil pipeline that TransCanada Corp. wants to build from Canada to Texas. In a vote of 279-147 Tuesday, the House approved a bill that forces the Obama administration to either approve or deny the Keystone XL pipeline proposal by Nov. 1. The pipeline, if constructed, would stretch nearly 1,700 miles and cross six U.S. states. Among them are Montana, Nebraska and Oklahoma...The White House said in a statement Monday that the imposition of a Nov. 1 deadline is 'unnecessary' and 'could prevent the thorough consideration of complex issues.'...Environmental groups oppose the Keystone XL pipeline, in large part because it would transport a type of oil known as tar sands oil."

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