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It's hard to know what to make of today's round of debt-ceiling negotiations. My instinct is to write them off as theatre. We're likely seeing the White House make a show of their interest in a compromise even though there's no compromise on the table. That fits with their general plan here: if the debt ceiling is going to cave in, they're going to make sure it does so on the Republicans. And the best way to get Democrats out of the way is to show that they did everything possible to make a deal while Republicans elevated the repetition of the word "no" into something approaching performance art.
But last night, the New York Times posted a peculiar story saying that President Obama wants to shoot for a $4 trillion deal, rather than the $2 trillion deal currently on the table, and that John Boehner secretly told the president that he was willing to consider up to $1 trillion in new revenues if they came through comprehensive tax reform.
The report on Boehner's bid was, of course, anonymously sourced. Meanwhile, Eric Cantor is on the record in the article opposing net increases in new revenues, and saying that he's happy to close loopholes but only if the savings are pumped into "offsetting tax cuts somewhere else." And David Krone, Senator Harry Reid chief of staff, says the deal “has to be balanced between spending and revenues, in terms of timing, specificity and dollars.” Including the words "timing" and "specificity" in there would seem to specifically reject a deal in which Democrats agree to massive spending cuts in return for vague tax increases that come through some future legislative vehicle.
So, for now, I'm sticking with my initial cynicism. If the relevant players can't agree on $2 trillion in spending cuts alongside $400 billion in new revenues, it doesn't seem likely that $3 trillion in cuts -- including major changes to Social Security and Medicare -- and $1 trillion in revenues will be an easier lift, particularly given how close we are to cracking through the debt ceiling. But I've been wrong before.
Five in the morning
1) Obama is open to a broader debt deal and John Boehner might -- might -- be open to higher taxes, reports Carl Hulse and Mark Landler: "Heading into a crucial negotiating session on a budget deal on Thursday, President Obama has raised his sights and wants to strike a far-reaching agreement on cutting the federal deficit as Speaker John A. Boehner has signaled new willingness to bargain on revenues. Mr. Obama, who is to meet at the White House with the bipartisan leadership of Congress in an effort to work out an agreement to raise the federal debt limit, wants to move well beyond the $2 trillion in savings sought in earlier negotiations and seek perhaps twice as much over the next decade, Democratic officials briefed on the negotiations said Wednesday...One source familiar with the talks said the speaker had put forward options on how to proceed, including making a commitment to a tax code overhaul...to generate substantial new revenue."
2) That bigger deal could include Social Security and Medicare cuts, reports Lori Montgomery: "President Obama is pressing congressional leaders to consider a far-reaching debt-reduction plan that would force Democrats to accept major changes to Social Security and Medicare in exchange for Republican support for fresh tax revenue. At a meeting with top House and Senate leaders set for Thursday morning, Obama plans to argue that a rare consensus has emerged about the size and scope of the nation’s budget problems and that policymakers should seize the moment to take dramatic action. As part of his pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security, according to people in both parties with knowledge of the proposal."
3) Senate Democrats are embracing Kent Conrad's debt plan, reports Alexander Bolton: "Senate Democrats on Wednesday embraced a budget proposal that is significantly to the left of President Obama’s plan on raising new tax revenues. The prospects of the blueprint passing the Senate are bleak, but its emergence after months of negotiation is aimed at countering GOP criticisms that Democrats haven’t passed a budget in two years. Democrats believe some of the proposal could be merged into a bipartisan agreement on raising the debt ceiling. The budget plan would reduce the deficit by $4 trillion over 10 years, according to the baseline used by its author, Senate Budget Committee Chairman Kent Conrad (D-N.D.). Using the benchmark assumptions of Obama’s fiscal commission, Conrad said his budget would reduce the deficit by nearly $5 trillion."
4) Obama dismissed the constitutional option on the debt limit, reports Zachary Goldfarb: "Law professors, Democratic senators and liberal commentators have recently raised a tantalizing possibility for ending the congressional wrangling over raising the federal limit on borrowing: President Obama could simply declare the debt ceiling unconstitutional and be done with it...On Wednesday at a White House question-and-answer session held via the Web service Twitter, Obama said the debate over raising the $14.3 trillion debt ceiling shouldn’t become a constitutional question. 'I don’t think we should even get to the constitutional issue. Congress has a responsibility to make sure we pay our bills. We’ve always paid them in the past,' Obama said. 'The notion that the U.S. is going to default on its debt is just irresponsible.'"
5) The GOP isn't preparing an escape hatch if talks collapse, report Jake Sherman and John Bresnahan: "When Speaker John Boehner (R-Ohio) was huddling this spring with top Democrats during the 2011 budget battle, House GOP aides were quietly engaged in a furious backroom effort to draft bills to ensure a shutdown of the federal government never happened. But as high-profile talks over raising the U.S. debt limit reach a critical stage, there isn’t any escape hatch this time, at least not yet. The House GOP leadership isn’t drafting alternative bills to boost the debt ceiling, and they’ve ruled out any short-term agreement to forestall a default by the U.S. government on its $14.4 trillion debt, an option that one House Republican lawmaker said could not muster more than 100 GOP votes."
Still to come: Obama admits he didn't do enough to combat the housing crisis; health exchange implementation is going slowly; states are opting for budget cuts over tax hikes; an ethanol deal could be done as soon as today; and a cupcake-shaped pillow.
Economy
Obama admitted he didn't do enough to address the housing crisis, report Peter Wallsten and Cecilia Kang: "President Obama made a rare admission of a policy misstep Wednesday, acknowledging that his administration failed to provide enough support to struggling homeowners and recognize the scope of the nation’s housing crisis...Obama first raised the issue Wednesday when a questioner during a town hall event asked what mistakes the president had made in handling the economy. 'The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected,' Obama responded. Later, he added, that his administration’s efforts to help struggling homeowners were 'not enough.' 'And so we’re going back to the drawing board,' he said."
The recovery is going better for men than women, report Neil Irwin and Brady Dennis: "In a rare turnabout, men are outpacing women in getting jobs as the economy struggles back to life -- and they’re doing it partly by taking work in fields long dominated by women. Men are accounting for a growing proportion of jobs in the private education and health-care industries -- economic bright spots of the past two years. Simultaneously, women are losing teaching and other local government jobs at a disproportionately high rate as municipalities cut back, according to a new study from the Pew Research Center. The trend is a partial reversal of the recession of 2007 to 2009, when men experienced a much higher rate of job loss than women...It also defies the historical trend; women fared better in the job market than men in the aftermath of each of the past five recessions."
The administration's head antitrust enforcer is leaving, reports Jia Lynn Yang: "President Obama’s top antitrust cop, Christine Varney, is stepping down from her post next month, the Justice Department announced Wednesday. Varney came into her job with high expectations that she would launch landmark cases against increasingly dominant firms such as Google. But she leaves for a senior position at the prestigious law firm Cravath, Swaine & Moore amid disappointment from some antitrust watchers and consumer advocates who say the Justice Department was too soft on industry giants during her tenure. Under Varney, the Justice Department approved a number of high-profile, controversial deals, including the marriage of Ticketmaster and LiveNation, Google’s acquisition of a powerful travel software firm, and NBC’s merger with Comcast."
Business needs to step up on the debt, writes Mark Warner: "Business leaders all tell me the same thing: Failing to raise the debt ceiling will increase interest rates, gut consumer confidence, and drag down business investment and job creation. Every one-point increase in interest rates increases the national debt by $1.3 trillion over a 10-year period, and who knows how much rates could increase. Yet with few exceptions, our business leaders have not demanded an end to the political brinkmanship. Wall Street, too, has been strangely silent. Two years after a near-collapse of our financial markets, even with ominous credit-watch pronouncements issued last month by Moody’s, Fitch and Standard & Poor’s, many business leaders yawn as some elected officials prepare to punt on the full faith and credit of the United States."
The difference between tax breaks and spending is often semantic, writes David Wessel: "The line between taxes and spending is clearer in rhetoric than in reality. For years, antipathy toward 'spending' and affection for 'tax cuts' have pushed Congress and presidents to pursue what lately has been labeled 'spending through the tax code.' Social Security beneficiaries didn't get a cost-of-living adjustment in 2011 because measured inflation was too low. When Mr. Obama wanted to give them each $250, the government didn't send checks.The $250 was fashioned as a tax cut, reducing taxes owed or increasing refunds sent. Voila, spending that didn't count as a spending increase. All the talk about 'tax reform' and stripping the tax code of its barnacles means eliminating some 'spending through the tax code' cherished by businesses and households who benefit."
The "carried interest" loophole has to go, writes Nicholas Kristof: "What’s at stake is the 'carried interest' loophole, and President Obama is pushing to close it. The White House estimates that this would raise $20 billion over a decade. But Congressional Republicans walked out of budget talks rather than discuss raising revenues from measures such as this one...This carried interest loophole benefits managers of financial partnerships such as hedge funds, private equity funds, venture capital funds and real estate funds -- who are among the highest-paid people in the world...These fund managers are compensated mostly with a performance bonus of 20 percent or more of the profits they make. Under this carried interest loophole, that 20 percent is eligible to be taxed at the long-term capital gains rate...of just 15 percent rather than the regular personal income rate of 35 percent."
Health Care
States are moving slowly in setting up health care exchanges, reports Sam Baker: "State insurance exchanges are not being set up fast enough to meet the 2014 deadline set by the healthcare law, advocates and policy experts say. The delay means that a number of state legislatures are at risk of handing over the central component of the reform effort to the federal government, which will set up the exchanges for states that fail to do so. Governors in 10 states have signed laws that establish an insurance exchange -- a new marketplace where individuals and small businesses will be able to buy insurance. 'I think that a year ago, many of us who work with states would have predicted that more states would have passed legislation,' said Anne Gauthier, senior program director at the National Academy of State Health Policy."
Health insurance makes people healthier, writes Ezra Klein: "In 2002, about 110,000 people were enrolled in Oregon’s Medicaid program. By 2008, budget cuts had reduced that number to 19,000. In fact, so many people were driven out that the state realized it had the money to cover 10,000 more residents. In the interest of fairness, officials set up a lottery -- and, quite accidentally, kicked off the most important health-care policy experiment since the 1970s...Compared with the uninsured group, those in the Medicaid sample got 30 percent more hospital care, 35 percent more outpatient care and 15 percent more prescription-drug care. There were similar gains for preventive care; mammograms were up 60 percent and cholesterol monitoring rose 20 percent."
Domestic Policy
States have largely opted for cuts rather than tax hikes, report Leslie Eaton and Kris Maher: "Forty-six states began a new fiscal year Friday after lawmakers spent the spring hashing out budgets that largely avoid big tax increases in favor of budget cuts and curbs on pay and benefits for public employees. While budget woes continued to dominate statehouses, issues such as abortion, immigration and voter identification also drove legislative action. And lawmakers continued to wrestle with soaring state obligations to help fund Medicaid, which pays for health care for low-income Americans. Political winds have shifted sharply in statehouses in the wake of the 2010 election. Republicans now control 25 legislatures, the most in at least five decades. Democrats prevail in 16, down from 27 in 2009, the last time all states tackled their budgets."
The parties are split sharply on infrastructure spending, reports Josh Mitchell: "House Republicans and Senate Democrats rolled out competing bills to pay for highway and other infrastructure projects, illustrating the divide between the two parties as Washington grapples with its fiscal crisis. The two-year, $109 billion Senate bill calls for finding some $12 billion in new tax money--from an unspecified source--to maintain existing funding levels for construction of roads, bridges and mass transit. The six-year, $230 billion House measure would slash transportation spending by about a third from existing levels, but its author said his bill would encourage private investors to make up the difference. Enacting big, multiyear highway bills was once a reliable ritual in Washington."
Energy
An ethanol deal could be done today, report Darren Goode and Robin Bravender: "A trio of senators should be able to reach a deal on ethanol subsidies by Thursday, a key Republican said. 'We should have something we will be able to report to you tomorrow about that,' Sen. John Thune (R-S.D.) said Wednesday afternoon. Thune has been in talks with fellow corn ethanol backer Sen. Amy Klobuchar (D-Minn.) and ethanol subsidy critic Sen. Dianne Feinstein (D-Calif.) about ending an existing tax credit for blending ethanol in gasoline but keeping alive for now other incentives for the gasoline additive. 'It needs to be worked on today,' Thune said, adding he is optimistic that "we're going to have, I think, everybody signed off on some final details" by Thursday."
A GOP spending bill includes another attempt to stop EPA regulation of climate change, reports Ben Geman: "A fiscal 2012 spending bill unveiled Wednesday by House Republican appropriators includes a policy rider that would prevent the Environmental Protection Agency (EPA) from regulating greenhouse gas emissions from power plants and refineries for one year. It is the latest effort by the House GOP to delay the agency’s climate regulations, which Republicans and some Democrats argue will impose huge costs on the economy. 'The bill reins in out-of-control regulation and provides the certainty that our economy needs to make a strong recovery,' said Rep. Mike Simpson (R-Idaho), chairman of the House Appropriations Committee’s Interior, Environment and Related Agencies panel."
EPA administrator Lisa Jackson isn't wavering in response to GOP pressure, reports John Broder: "In the next weeks and months, Lisa P. Jackson, the Environmental Protection Agency administrator, is scheduled to establish regulations on smog, mercury, carbon dioxide, mining waste and vehicle emissions that will affect every corner of the economy. She is working under intense pressure from opponents in Congress, from powerful industries, from impatient environmentalists and from the Supreme Court, which just affirmed the agency’s duty to address global warming emissions, a project that carries profound economic implications...Ms. Jackson describes the job as draining but says there are certain principles she will not compromise, including rapid and vigorous enforcement of some of the most far-reaching health-related rules ever considered by the agency."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.
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