The White House is promising that the end of the debt debate will mark a "pivot" towards jobs. In a Washington Post op-ed today, Treasury Secretary Timothy Geithner previewed that message, arguing that "It is not enough for Congress to have prevented a disaster it brought on itself. Lawmakers should return in September prepared to act to strengthen the economy and get more Americans back to work."
But few expect serious action from Congress. Geithner brings up the payroll tax cut, extending unemployment benefits and financing a massive investment in infrastructure. But note that the first two aren't new stimulus: they're simply a continuation of current policies. If the administration wins those fights, it will have simply succeeded in doing no harm. And though infrastructure is a no-brainer, it's also not likely to happen unless Democrats can find some way to pay for it that Republicans support. Back in Ronald Reagan's day, that was the gas tax, which Reagan himself raised to fund further infrastructure investment. Something tells me that's not going to fly today. Nor is an expansion of the payroll tax cut, further aid to states and cities, or any of the other ideas for a significant boost in economic relief likely to burst onto the agenda.
So there's not much support coming from Congress. And as Neil Irwin reports, there's not likely to be that much coming from the Federal Reserve, either. "Anything the Fed does to try to address the weak job market may well cause inflation to rise above its leaders’ comfort level," he writes. That doesn't mean the central bank won't do anything, and there are certainly those who have put forward creative and aggressive plans for further monetary intervention. But the smart money says they won't do much.
Which leaves us, well, here. But here isn't a very good place to be. We live in a moment where the only problems Congress seems able to solve are the problems it creates for us. The problems we actually have, meanwhile, go unsolved, and the people they afflict go on suffering.
Five in the morning
1) With the debt deal done, it's time to focus on job creation, writes Timothy Geithner: "By locking in long-term savings, Congress will have more room in the fall to pass additional short-term measures to strengthen the economy — such as extending the payroll tax cut, which provides an average of a thousand dollars to the after-tax incomes of working Americans; extending unemployment benefits; and financing infrastructure investments. After all, strengthening growth and putting more Americans back to work are among the most important things we can do to improve our fiscal situation today and over the long term...It is not enough for Congress to have prevented a disaster it brought on itself. Lawmakers should return in September prepared to act to strengthen the economy and get more Americans back to work. Doing so will help repair the damage this fractious debate inflicted on an economy that was already slowing, not just here but around the world."
2) We need stimulus now, and expiration of the Bush tax cuts later, writes Larry Summers: "Soon, relief will give way to alarm about the United States’ economic future. Among all the machinations ahead, two issues stand out: First, the single largest and easiest method of deficit reduction available is the non-extension of the Bush tax cuts for upper incomes. President Obama should make clear that he will not accept their extension on any terms. Clarity on that trillion-dollar point, along with very modest entitlement reform, will be sufficient to hit current targets for deficit reduction. Second, it is essential that the payroll tax cut be extended and that further measures, such as infrastructure maintenance and extension of unemployment insurance, be taken to spur demand. There is still time to confirm Churchill’s maxim that the United States always does the right thing after exhausting all the alternatives."
3) The Fed is running out of good options to boost the economy, reports Neil Irwin: "The basic challenge for the Fed is this: It is charged by Congress with maintaining stable prices and maximum employment. But when those goals are in conflict with each other, that makes it hard to decide what to do. And right now, the nation seems to be losing ground on jobs, adding them too slowly to reduce unemployment. Yet prices are rising at about the 2 percent or so annual pace that the Fed considers to be stable. Anything the Fed does to try to address the weak job market may well cause inflation to rise above its leaders’ comfort level. The policy changes the Fed might consider -- as laid out by Bernanke in congressional testimony last month -- would include committing to keeping the Fed’s policy of ultra-low interest rates and massive holdings of bonds on its balance sheet in place for a specific period of time."
4) The debt limit fight will have a lasting impact on firms, reports Francisco Guerrera: "A fundamental difference between the summer of 2011 and the run-up to the collapse of Lehman Brothers in 2008 is that, this time, Wall Street and American corporations had time to prepare for the unthinkable. And prepare they did. While politicians haggled, money-market funds, which pride themselves on being one of the safest investments around, rushed to sell securities to raise billions of dollars. They used part of the proceeds to pay higher-than-usual redemptions requests from jittery investors and parked the rest in cash. Such moves reduced the amount of short-term loans made by money-market funds to companies and banks in the commercial-paper market, gumming up an important pipe in the financial edifice."
5) Federal spending is still going to increase, reports Binyamin Appelbaum: "There is something you should know about the deal to cut federal spending that President Obama signed into law on Tuesday: It does not actually reduce federal spending. By the end of the 10-year deal, the federal debt would be much larger than it is today. Indeed, both the government and its debts will continue to grow faster than the American economy, primarily because the new law does not address federal spending on health care...Economists disagree about the amount of debt a nation can safely carry relative to the size of its economy, but there is widespread concern that 100 percent is too much, and that the weight of debt would begin to suppress economic activity. Stabilizing that ratio would require about $4 trillion in cuts over the next decade, according to a number of independent analysts."
West Side Story interlude: Best Coast's video for "Our Deal."
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Still to come: Moderate Democrats are drafting their own balanced-budget amendment; the difference between how BIll Clinton and Barack Obama handled their debt fights; the deal could open the door to major Medicare changes; lobbyists are already gearing up to influence the Supercommittee; a fight over the federal gas tax could be next; and an NYC construction worker spends his lunch break crooning for passersby.
Moderate Democrats are drafting a balanced budget amendment, reports Peter Wallsten: "One of the big victories by tea-party Republicans in the debt-ceiling measure signed into law Tuesday was securing a requirement that Congress vote later this year on a balanced budget amendment to the Constitution. The measure would need a two-thirds vote in each chamber, and then ratification by 38 states, to succeed. And most observers believe passage in the Democratic-controlled Senate is all but impossible. Enter Sen. Mark Udall, the centrist Democrat from Colorado, who has introduced an amendment proposal and said Tuesday that Democratic leaders have chosen his legislation to be considered in the fall...Many...co-sponsors - including Sens. Claire McCaskill (Mo.), Joe Manchin (W. Va.), Bill Nelson (Fla.) and Ben Nelson (Neb.) - are running this year and need support from centrists."
Bill Clinton handled his debt fight better, writes Kara Brandeisky: “'Nobody should assume we’re going to have a debt-limit extension,' John Boehner warned. 'If the vote were held today, it would not pass.' Sound familiar? This was Boehner in November of 1995, when he was the House Republican Conference chairman and his party was refusing to raise the debt ceiling unless President Bill Clinton agreed to a package of sweeping spending cuts. The big difference is that back then, Republicans backed down, whereas today they’re on the verge of winning major policy concessions in exchange for a deal. How did President Bill Clinton head off this threat where Obama failed?"
US creditors weren't persuaded by the debt deal, reports Zachary Goldfarb: "After President Obama and Congress agreed to a deal over the federal debt ceiling this weekend, Treasury Secretary Timothy F. Geithner called the heads of big companies and banks to get their views on the agreement. They told him it would soothe the markets, and that the greatest dangers to the global economy lay far from U.S. shores. But the countries that have lent the United States trillions of dollars had a sharply different opinion, reacting to news of the deal -- which calls for cutting the national debt by at least $2.1 trillion over a decade -- with skepticism, if not outright disdain. The newspaper of China’s ruling party said that 'debt problems remain unresolved' and have been 'merely pushed off.' Russian Prime Minister Vladimir Putin said that the United States is a 'parasite' that is 'living in debt.'"
We already have some idea of who's going to be on the Supercommittee, reports Suzy Khimm: "Republicans, for their part, are unlikely to appoint anyone who’s publicly supported including revenue as part of a debt deal, namely in the form of tax increases. That would eliminate even fiscal hawks such as Sen. Tom Coburn, who’s made new enemies on the right by saying revenue should be on the table. Many Hill watchers expect the GOP to appoint Rep. Paul Ryan, whose original 2012 budget plan set the hard-line tone for the incoming House Republicans...On the Democratic side, fiscal hawks and centrists will probably back Senate Finance Committee Chairman Max Baucus, who reportedly pushed for cutbacks to Medicaid, food stamps and other entitlements as a member of Vice President Biden’s working group, according to sources close to the talks."
Nancy Pelosi says her picks will all oppose entitlement cuts, reports Brian Beutler: "At a pre-recess press conference Tuesday afternoon, TPM asked House Minority Leader Nancy Pelosi (D-CA) whether the people she appoints to the committee will make the same stand she made during the debt limit fight -- that entitlement benefits -- as opposed to provider payments, waste and other Medicare spending -- should be off limits. In short, yes. 'That is a priority for us,' Pelosi said. 'But let me say it is more than a priority - it is a value... it's an ethic for the American people. It is one that all of the members of our caucus share. So that I know that whoever's at that table will be someone who will fight to protect those benefits.'"
This deal just postpones the crisis, write Erskine Bowles and Alan Simpson: "This country needs a plan to reduce our deficits by no less than $4 trillion in the next decade. It needs a plan to cut more wasteful spending in the defense and nondefense budgets than this deal does. In addition, we must address the unsustainable growth of our entitlement programs and reform the tax code to make it more competitive and more efficient. The bipartisan committee must take on these challenges. It should find savings of far more than $1.2 trillion to get the deficit on track toward sustainability and to reassure markets, maintain our credibility, keep interest rates down and restore Americans’ faith in the political system. To do this, it cannot avoid addressing the 'big ticket' items -- Medicare, Medicaid, Social Security solvency and tax reform."
Even if we make deep spending cuts, we're going to need to significantly raise taxes, writes Ezra Klein: "The proof is in the plans. The Simpson-Bowles commission called for almost $2 trillion in new revenue over the next 10 years. It got $800 billion of that from letting the Bush tax cuts for the rich expire, and the rest from clearing loopholes and spending programs out of the tax code...The Rivlin-Domenici commission’s plan would have raised even more money by adding a value-added tax on top of its tax reform proposal, and it won the backing of the panel’s Republicans...The debt-ceiling deal simply proves the point. Let’s say the spending cuts go exactly as the Republicans hope: We cut $900 billion now and $1.5 trillion later. That’s more cuts than the White House says it would ever agree to, but ignore that for a moment. Now let’s say the tax side goes according to the White House’s plan: Most of the Bush tax cuts are extended, but the break for income of more than $250,000 a year expires. Are we done? I asked Jim Horney of the Center on Budget and Policy Priorities to run the numbers. In 2021, that scenario would leave the debt above 75 percent of GDP — and growing. That’s well above the 60 percent of GDP most deficit hawks think we should shoot for, and it doesn’t leave us at all prepared to deal with costs related to the retiring baby boomers."
Adorable animals taking hostages interlude: A bulldog who really doesn't want to let go of his owner's slipper.
The debt deal could open the door for permanent Medicare changes, reports Janet Adamy: "Health-industry lobbyists and policy experts say Sunday's deal between the White House and congressional leaders effectively opens the door to another round of talks in which lawmakers are likely to weigh increasing the Medicare eligibility age and setting up a means test that might require wealthier people to pay more for the program. A provision in the deal that allows for payment cuts to health-care providers who treat Medicare recipients could lead hospitals to cut services, industry officials said. Health-care stocks took a broad hit Monday over concerns about the implications of the debt deal. Investors are 'waking up to the fact' that health-care spending 'will be in the crosshairs' as Congress looks for more cuts, ISI Group analyst Joe Ruggieri wrote in a research note."
Raising the Medicare retirement age could threaten the structure of the Affordable Care Act, reports Sarah Kliff: "Some health-care experts who support the Affordable Care Act have begun to worry that, though health-care reform makes raising the Medicare age more palatable, actually doing so undermines the law by causing premiums to rise on the exchanges as millions of older and sicker Americans flood into the new marketplace...A recent Kaiser Family Foundation report found that premiums in the exchanges would rise about 3 percent if all eligible 65- and 66-year-olds enrolled. Medicare would see a similar premium increase, with its youngest, healthier subscribers leaving the program. That bump in premiums could put the exchange marketplace in a precarious position, driving away precisely the subscribers it needs to thrive: young, healthy Americans with low health-care costs."
The team tasked with setting up exchanges is changing, reports Sam Baker: "The Health and Human Services Department will split up the workload of overseeing insurance exchanges after its top exchanges official leaves the department this month. The head of HHS' exchanges office, Joel Ario, is leaving his post next month. Steve Larsen, who runs the health reform office that includes exchanges planning and many other functions, said in an e-mail to agency employees that he and another HHS official will take over planning for the exchanges -- a cornerstone of the new health law. Larsen will share the task with Tim Hill, a deputy director of the health reform office who has also held several other positions within HHS."
Lobbyists are already gearing up for the Supercommittee, reports Anna Palmer: "K Street wasted little time putting clients on notice about the next phase of the debt ceiling debate with a simple message: Nobody is safe from the super committee. Lobby shops say a much-broader-than-expected range of budget cuts and tax provisions could be in play, especially compared with the relatively small group of industries that were afraid of getting a haircut during the earlier debt ceiling negotiations led by Vice President Joe Biden...Several lobbyists said they expect companies and industry groups to put a full-court press on Capitol Hill engaging grass roots, advertising and old-fashioned, shoe-leather lobbying to try to minimize the severity of the cuts."
Congress is letting the FAA go unfunded through September, reports Ashley Halsey: "A last-minute Obama administration effort to get the Senate to accept a funding extension that would have returned 4,000 Federal Aviation Administration employees and about 70,000 others to work failed Tuesday as Congress headed home until September. With House members already departed and senators packing their bags for the summer recess, Transportation Secretary Ray LaHood pressed hard in a final round of meetings and calls with Majority Leader Harry M. Reid (D-Nev.) and other key senators. LaHood implored them to accept a funding extension sent over by the House that contained provisions some senators found unpalatable, but he told them it was the only avenue left that would return people to work and avert the lost of $1.2 billion in ticket tax revenue."
Obama won't be able to make recess appointments for the next month, reports Scott Wong: "Following the House, the Senate will hold a series of 'pro forma' sessions over the next month, effectively blocking President Barack Obama from making any appointments during Congress’ August recess. That means Obama won’t be able to seat his pick to lead the new Consumer Financial Protection Bureau, former Ohio Attorney General Richard Cordray, whose nomination Republicans have vowed to oppose until Obama makes changes watering down the agency’s authority. After passing the debt limit legislation on Monday, House leaders announced they would hold pro forma sessions through August, a procedural move that forced the Senate to follow suit. The Constitution requires that for either chamber to take more than a three-day break, the other chamber must give its approval."
States are bracing for cuts in federal support, reports Michael Fletcher: "The domestic spending cuts contemplated in the debt-ceiling deal are sure to compound the dire fiscal situation confronting the states...The measure signed into law by President Obama on Tuesday does not lay out specific reductions, but with federal dollars accounting for a third of state revenues, analysts said steep cuts would be unavoidable. 'The debt-limit deal inevitably will lead to large federal cuts in programs for state and local governments,' said Nicholas Johnson, vice president for state fiscal policy at the Center on Budget and Policy Priorities. 'This is going to begin in the middle of the worst year for state budgets.' Cutbacks at the state and local levels are a primary reason that the nation’s economic growth has slowed to a crawl."
Street performer interlude: Gary Russo, a New York City construction worker, sings Sinatra standards on his lunch breaks.
The next Congressional fight might be over the gas tax, report Byron Tau and Ben Smith: "In normal times, renewing the federal excise tax on gasoline would be another routine vote in Congress. But as the past month of rancorous and intensely partisan debate about raising the debt ceiling has shown, the times are anything but normal. And with most of the 18.4-cent tax per gallon of gasoline set to expire Sept. 30, renewing the tax could be the next political controversy to spark a brawl in an ever more deeply divided Capitol Hill. Congress has already come to the brink of a government shutdown and is only now wrapping up an eleventh-hour compromise to save the country from a first-ever default....With the level of partisan vitriol and anti-spending sentiment at an all-time high, some advocates are worried that the nation’s highway fund will be the next victim -- while some conservatives sense an opportunity."
The energy industry is still waiting for policy results from the GOP, report Darren Samuelsohn and Darren Goode: "Industry is still waiting for its big payday after supporting the House Republicans’ rise to power. Sure, the U.S. Chamber of Commerce, oil and electric utility companies and other fossil-fuel types relish the perpetual onslaught of bills slapping the EPA around. But for all the symbolic votes critical of environmental regulators run amok, the hard truth remains that little of industry’s energy legislative agenda has been accomplished in 2011. 'Virtually everyone in every sector with every interest is being disappointed by this Congress,' said Joshua Freed, director of the clean energy program at Third Way. 'I cannot remember a Congress that has achieved less or been more crippled by gridlock than the 112th.'"
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.