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Wonkbook's Number of the Day: $2.6 trillion. That's the tax increase we'd get if we passed the Simpson-Bowles plan today. Speaker Boehner's counteroffer, which he traces back to Bowles, includes $800 billion in taxes, or a bit less than a third of what the Simpson-Bowles plan calls for. Perhaps that's why Erskine Bowles says the Boehner plan is not his plan.

Wonkblog's Graphs of the DayTwo terrifying charts for newspapers.

Today in Wonkbook: The Republicans make their counteroffer on the austerity crisis; special coverage of the austerity crisis and the Republican re-think; our continuing coverage of the economy, health care, and energy.

Top story: Boehner vs. Bowles

Boehner, House GOP leaders offer austerity-crisis counterproposal. "House GOP leaders endorsed a debt-reduction plan Monday that would raise tax collections by $800 billion over the next decade, but they refused to budge on higher tax rates for the wealthy, the central issue dividing Republicans and Democrats...That framework aims to raise new revenue through an overhaul of the tax code. It also calls for slicing $600 billion from federal health programs, in part by increasing the Medicare eligibility age from 65 to 67, and saving $200 billion by applying a less generous measure of inflation to all federal programs, including Social Security benefits, according to GOP aides." Lori Montgomery in The Washington Post.

Read: Boehner’s new counterproposal.

@ObsoleteDogma: Would you rather fight one horse-sized fiscal cliff or 100 duck-sized fiscal cliffs?

Boehner calls for a mulligan. "[I]t’s a far more centrist proposal than anything Boehner has offered in public before now. But it’s essentially identical to what he offered in his talks with Obama, and to what Bowles offered Republicans during the supercommittee talks. Which is understandable. Those deals must be looking pretty good to Boehner about now...It is not surprising that Boehner wishes he could go back in time and accept the president’s offer from 2011, or fight for the compromise Bowles outlined before the supercommittee. Those are, from his vantage point today, quite good deals. But elections have consequences, and the consequence of this election is that those offers are no longer on the table." Ezra Klein in The Washington Post.

Erskine Bowles says Boehner's plan is not his plan: "While I'm flattered the Speaker would call something 'the Bowles plan,' the approach outlined in the letter Speaker Boehner sent to the President does not represent the Simpson-Bowles plan, nor is it the Bowles plan. In my testimony before the Joint Select Committee on Deficit Reduction, I simply took the mid-point of the public offers put forward during the negotiations to demonstrate where I thought a deal could be reached at that time. The Joint Select Committee failed to reach a deal, and circumstances have changed since then. It is up to negotiators to figure out where the middle ground is today."

Reminder: What was actually in Simpson-Bowles.

Wonkbookmark: hastheusgoneoffthefiscalcliff.com.

@sahilkapur: Today's fiscal cliff debate is basically a two-part seminar on the definition of the word "serious."

...But Boehner’s latest tax offer is $150 billion less than he offered in 2011. "Boehner had agreed to raise revenue equivalent to expiration of the high-income tax cuts, including allowing the estate tax to go back to ’09 parameters. That’s $800 billion (well, $819 billion according to the latest Treasury scoring) through 2021. Through 2022 (the current deal-making window), the total is actually $950 billion (or, more exactly, $952 billion according to the same Treasury scoring)." Ezra Klein in The Washington Post.

@ObsoleteDogma: If the fiscal cliff did not exist, Congress would have to invent it. Wait....

BROOKS: How the Republicans must compromise. "Republicans have to realize that they are going to cave on tax rates. The only question is what they get in return. What they should demand is this: That the year 2013 will be spent putting together a pro-growth tax and entitlement reform package that will put this country on a sound financial footing through 2040. Republicans should go to the White House and say they are willing to see top tax rates go up to 36 percent or 37 percent and they are willing to forgo a debt-ceiling fight for this year." David Brooks in The New York Times.

@ReformedBroker: President Obama using Twitter to answer Fiscal Cliff questions today. Just like Millard Fillmore.

STEVENSON AND WOLFERS: Forget the cliff; do tax reform. "The real danger, then, is not that we’ll fall off the cliff. It’s that Congress will solve the problem badly, missing a once-in-a-generation opportunity to design a better tax system...A better system would require Congress to reauthorize each tax expenditure annually, a reform that would help eliminate wasteful loopholes and simplify the system. Just capping deductions at $25,000, as lawmakers are currently considering doing, isn’t enough. It’s Congress at its least courageous, refusing to ask the harder question of which tax breaks make sense." Betsey Stevenson and Justin Wolfers in Bloomberg.

@grossdm: For 1st few weeks, I thought covering fiscal cliff as hostage situation was clever. Now it turns out I'm the hostage.

BARRO: What's wrong with the Republican counteroffer. "House Republicans are out with their response to the President's opening bid on the fiscal cliff, and it's not very impressive...It's not really a proposal -- it's just a set of headline numbers without specific policies. The letter says Republicans want to cut $900 billion from mandatory spending and $300 billion from discretionary spending, but they don't say what or how they want to cut." Josh Barro in Bloomberg.

@jbarro: Not raising rates is a major priority for the GOP, and getting them to acquiesce on it will be costly -- meaning a worse cliff deal overal

BARTLETT: The real 'fiscal cliff' is the debt limit. "At the risk of stating the obvious, the debt limit is nuts. It serves no useful purpose to allow members of Congress to vote for vast cuts in taxation and increases in spending and then tell the Treasury it is not permitted to sell bonds to cover the deficits Congress created. To my knowledge, no other nation has such a screwy system." Bruce Bartlett in The New York Times.

@ModeledBehavior: Obama should say "I will commit to not allowing us to go over the fiscal cliff if the GOP will do the same".

BARRO: White House irresponsibility on the fiscal-cliff edge. "The president has a variety of objectives, including avoiding the imposition of most austerity measures, implementing a little bit of additional stimulus and raising tax rates at the top. Republicans have other objectives, including avoiding tax rate increases and imposing near-term austerity. As a result, insisting on raising taxes on the wealthy does not create room for other fiscal stimulus. It actually reduces the room for fiscal stimulus: If he holds the line on his tax demand, Obama has less ability to extract concessions from the Republicans on other austerity measures, like the sequesters." Josh Barro in Bloomberg.

@jbarro: Worrying trend: liberals saying it's A-OK to wait until early 2013 to fix fiscal cliff.

Top op-eds

PONNURU: How Republicans could benefit from filibuster reform. "The key to the mystery is that passing more legislation isn’t the Senate Democrats’ immediate objective. They know the Republican House will block any partisan measure they pass. What they want, first, is to set a precedent for changing the Senate rules with 51 votes. That way, they can restrict the filibuster more in the future should it become useful to do so -- and even before then, Republicans will know, in case they use the filibuster too often, that Democrats have the power to abolish it." Ramesh Ponnuru in Bloomberg.

WELCH: Bill Buckley, where art thou? "In the 1960s, Buckley, largely through his position at the helm of National Review, displayed political courage and sanity by taking on the John Birch Society, an influential anti-Communist group whose members saw conspiracies everywhere they looked. Fast forward half a century. The modern-day Birchers are the Tea Party...The absence of a Buckley-esque gatekeeper today has allowed extreme, untested candidates to take center stage and then commit predictable gaffes and issue moon-bat pronouncements." David Welch in The New York Times.

CONARD: Why Buffett is wrong on taxes. "If we tax, redistribute and consume income that otherwise would have been invested, the investable pool of savings declines. With a smaller pool of capital, less-attractive investment opportunities remain unfunded. Buffett tautologically claims investors will continue to invest in opportunities with expected returns above the cutoff point. Of course they will. Investment is lost at the margin." Edward Conard in Bloomberg.

Memes Wonkbook doesn't understand interlude: Advice from mallards? A cute animal interlude, perhaps.

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

The Austerity Crisis

Today in the ‘fiscal cliff’: Cliff-diving or bust. "Both sides have dug in their heels on the 'fiscal cliff' with little signs of progress. It might be tempting to interpret their bluster as the kind of political theater that inevitably plays out before a deal is reached...On the left, there have been plenty of cliff-divers who believe that going over would be the best way to get Republicans to concede on taxes. But now there are also multiple reports that Obama himself is willing, however reluctantly, to go over the cliff should Republicans refuse to raise taxes on the top two percent of Americans. At the same time, as the prospects of going over the cliff seem to have increased, some on the right are urging Republicans to consider giving in on taxes." Suzy Khimm in The Washington Post.

The Fix explains: The White House’s fiscal cliff wish list.

Do Democrats actually want to go over the fiscal cliff? "Republicans have whispered for weeks now that they believe Democrats and the White House want to go over the fiscal cliff and that the President’s initial offer late last week -- $1.6 trillion in revenue increases, $400 billion in entitlement cuts, $50 billion in stimulus spending and the ceding of the power to raise the debt limit to the executive branch -- is blunt evidence that the White House is interested in making it appear as though they are willing to deal without actually being willing to deal." Chris Cillizza in The Washington Post.

How Obama would cut Medicare spending in a deficit deal. "The two cuts that generate the biggest savings are applying Medicaid drug rebates to the Medicare Part D program and reducing the reimbursement rate to post-acute care providers, like nursing homes and assisted living facilities...The HHS Office of the Inspector General estimates that the Medicare Part D program gets a 19 percent discount on drugs, compared to the 45 percent discount that Medicaid negotiates." Sarah Kliff in The Washington Post.

What will the next ‘fiscal cliff’ look like? "[M]ost expect Congress to build some kind of framework to delay those punishments and buy ever more time to craft a fiscal deal. But that means they need a new set of punishments to force that deal. It’s fiscal cliffs all the way down, but what kind of fiscal cliffs? Here are some options that have been floated as potential triggers to be included in a fiscal cliff deal." Dylan Matthews in The Washington Post.

Business owners warn against a fiscal cliff deal that sacrifices entitlements to save tax cuts. "As lawmakers try to strike a deal to avert the 'fiscal cliff,' many small business owners have expressed concerns about the impact of potential changes to the tax code. In particular, their attention has been focused on the fate of the Bush-era cuts and several temporary tax breaks intended to benefit companies on Main Street. But with the precipice less than a month away, some small employers say those tax discussions are overshadowing an even greater threat to their businesses -- cuts to entitlement programs." J.D. Harrison in The Washington Post.

A third tax option for the austerity crisis. "The Center for Science in the Public Interest, a watchdog group focusing on nutritional issues, is launching a campaign to address the fiscal cliff by raising the tax on alcohol and introducing one on sugary drinks like sodas...They claim that a 1¢ per ounce tax on soda would raise about $16 billion a year, or $160 billion over 10 years, and cut consumption by about 12 percent, a major dent in a primary cause of the obesity epidemic. Raising the liquor tax, which hasn’t increased since 1991, to where it would be if it had kept up with inflation, and equalizing the taxation of hard liquor and beer and wine, would raise $14 billion a year." Dylan Matthews in The Washington Post.

The Republican Re-Think

GOP strips committee spots from House ultraconservatives. "Perhaps presaging a year in which revolts by rank-and-file members will be less tolerated, Republican leaders on Monday removed members with obstinate voting patterns from key committees. Most notably, Representative Tim Huelskamp, Republican of Kansas, one of the most conservative members of the House, was removed from the budget committee as well as the agriculture committee. Joining Mr. Huelskamp, a second-term representative, on the budget committee bye-bye list was Representative Justin Amash of Michigan." Jennifer Steinhauer in The New York Times.

The move continues a narrative of Republicans turning against their right wing. "House Republican leaders on Monday ousted lawmakers from plum committee assignments, sending a clear message that they are demanding more unity from rank-and-file members. The moves appear in line with Speaker John Boehner’s (R-Ohio) effort to tighten his grip on his unruly conference. However, the decisions are already sparking outcry from Republican lawmakers and conservatives off Capitol Hill." Peter Schroeder in The Hill.

Romney campaign regrets immigration stance. "[H]is campaign manager [Matt Rhoades] now says that the forceful posture taken against immigration in the Republican primary inflicted lingering damage with Latino voters in the general election." Jeff Zeleny in The New York Times.

So pro-immigration conservative activists are planning a new strategy. "Rather than dwelling on the politics of the issue, these conservative leaders plan to cast the issue based on how they see it in their communities -- in moral and economic terms...It also underscores a shift in tactics by immigrant advocates, who for years have made it their central goal to win a pathway to citizenship for the millions of illegal immigrants currently residing in the United States. Now, joining forces with conservative leaders, some advocates on the left say they are willing to consider a scaled-back approach, perhaps a legalization plan that stops short of citizenship, if it would bring House Republicans to the table." Peter Wallsten in The Washington Post.


Manufacturing reports come in weak. "American manufacturing declined in November to its weakest level since July 2009, one month after the recession ended. Worries about automatic tax increases next year cut demand for factory orders and manufacturing jobs. The Institute for Supply Management, a trade group of purchasing managers, said on Monday that its index of manufacturing conditions fell to a reading of 49.5. That is down from 51.7 in October." The Associated Press.

Is the U.S. economy growing weaker just as the world is bouncing back? "Just a few months ago, the global economy seemed to be stuck in a precarious state. Huge swaths of the world economy were either slowing down or contracting outright, and it wasn’t at all clear whether global economic policymakers would have enough gas left in their stimulus tanks to stop things from spiraling into a bad place. But the latest data in a wave of reports on the manufacturing sectors in nations around the world overnight and Monday morning suggest that the world has avoided that fate. The same cannot be said of the United States, however." Neil Irwin in The Washington Post.

IMF drops opposition to capital controls. "The International Monetary Fund has cemented a substantial ideological shift by accepting the use of direct controls to calm volatile cross-border capital flows, as employed by emerging market countries in recent years. Although the fund continued to warn that such controls should be 'targeted, transparent, and generally temporary,' the policy, announced in a staff paper released on Monday, is a sharp change from the fund’s enthusiasm for liberalising capital accounts during the 1990s." Alan Beattie in The Financial Times.

Read: The IMF paper on capital controls.

Photography interlude: Planes taking flight.

Health Care

Generic drug makers see a revenue squeeze coming. "This year, more than 40 brand-name drugs -- valued at $35 billion in annual sales -- lost their patent protection, meaning that generic companies were permitted to make their own lower-priced versions of well-known drugs like Plavix, Lexapro and Seroquel -- and share in the profits that had exclusively belonged to the brands." Katie Thomas in The New York Times.

The massive $5B drug subsidy. "The Obama administration on Monday touted the healthcare law for saving people on Medicare $5.1 billion on prescription drugs. The Health and Human Services (HHS) Department said almost 2.8 million people have saved an average of $677 on their medications so far this year...The law requires the government to cover more and more of the value of brand-name and generic drugs until 2020, when seniors will be responsible for 25 percent of the cost for each." Elise Viebeck in The Hill.

Dems: Federal health programs should cover DREAMers. "Federal healthcare programs should cover the children of illegal immigrants, a group of House Democrats says. Democrats are asking the Obama administration to make healthcare available to children who are able to stay in the U.S. under the deferred-action immigration policy that President Obama announced earlier this year...The administration has said DREAMers are not eligible for Medicaid, the Children's Health Insurance Program or the federal subsides provided under Obama's signature healthcare law." Sam Baker in The Hill.

Could competition make Obamacare more expensive? "The Affordable Care Act makes a bet on competition. It wagers that pitting private insurance plans against each other will be a good thing...That’s the hope, at least. But new analysis from three health-care economists suggests that the exact opposite could happen: Increasing competition among health insurers might actually lead to higher premiums." Sarah Kliff in The Washington Post.

What raising the Medicare age would do. "House Speaker John Boehner has made his counter-offer on deficit reduction and, as my colleague Lori Montgomery reports, it floats the idea of raising the Medicare eligibility age from 65 to 67...[But] Medicare tends to be a pretty efficient program. Its costs have grown slower than private health insurance plans. The Center for Budget Priorities and Policy estimates that, while the federal government would save $5.7 billion, the rest of the health care system would end up spending $11.4 billion more to provide those same benefits." Sarah Kliff in The Washington Post.

Americans trust their doctors. "Medical professionals are some of the most trusted people in the U.S., according to new data from Gallup...Nurses polled the best, with 85 percent saying they have high or very high ethical standards. They were followed by pharmacists (75 percent high or very high) and doctors (70 percent). Also among the top 10 most-trusted professions were dentists, psychiatrists and chiropractors." Sam Baker in The Hill.

Life hacks interlude: Seven ways to open a wine bottle without a corkscrew.


Sen. Alexander: Double DOE research funding, end wind credit to grow revenues. "Sen. Lamar Alexander (R-Tenn.) said Congress should double the Energy Department’s (DOE) research and development funding to generate breakthroughs that would reduce oil dependency and close the federal deficit. Alexander said he would pay for part of that $6 billion bump by eliminating a tax incentive for wind power production that he has long opposed." Zack Colman in The Hill.

The pieces of a grand climate bargain? "As leaders in Washington obsess about the fiscal cliff, President Barack Obama is putting in place the building blocks for a climate treaty requiring the first fossil- fuel emissions cuts from both the U.S. and China. State Department envoy Todd Stern is in Doha this week working to clear the path for an international agreement by 2015. While Obama failed to deliver on his promise to start a cap-and-trade program in his first term, he’s working on policies that may help cut greenhouse gases 17 percent by 2020 in the U.S., historically the world’s biggest polluter." Kim Chipman in Bloomberg Businessweek.

U.S. to get gas-to-liquid energy plant. "In an ambitious bet that the glut of cheap natural gas in the United States will last for many years, a South African energy company announced on Monday that it would build America’s first commercial plant to convert natural gas to diesel and other liquid fuels...Sasol estimated that the plant would create at least 1,200 permanent jobs and 7,000 construction jobs. Production is scheduled to begin in 2018." Clifford Krauss in The New York Times.

Fossil fuel subsidies are five times greater than climate spending. "Rich countries spend five times more on fossil-fuel subsidies than on aid to help developing nations cut their emissions and protect against the effects of climate change, the Oil Change International campaign group said. In 2011, 22 industrialized nations paid $58.7 billion in subsidies to the oil, coal and gas industries and to consumers of the fuels, compared with climate-aid flows of $11.2 billion, according to calculations by the Washington-based group." Alex Morales in The Washington Post.

Wonkbook is produced with help from Michelle Williams.