Five in the morning

1) Gang of Six negotiations are breaking down, report Lori Montgomery and Philip Rucker: "A bipartisan effort to rein in the national debt stalled Tuesday, as members of the Senate’s so-called Gang of Six signaled that an agreement is unlikely to come this week in time for the start of White House-led budget talks. The absence of a deal deprives policymakers of a bipartisan centerpiece that could smooth the way toward agreement in the contentious battle between Democrats and Republicans over the appropriate size and shape of government. Members of the Gang of Six said Tuesday that they are continuing to meet daily and that a deal is still possible. However, one of the six, Sen. Tom Coburn (R-Okla.), left town abruptly Tuesday because of a family emergency."

2) So Sen. Kent Conrad came up with his own debt plan, reports David Rogers: "Senate Budget Committee Chairman Kent Conrad (D-N.D) said Tuesday he will push for a 10-year plan cutting $4 trillion from future deficits--a political gamble that builds on last year’s debt commission report but worries fellow Democrats without more certainty first of Senate Republican support. 'I really want to get $4 trillion. I think it’s critical,' Conrad said. 'And I’m talking $4 trillion, 10 years and on the same basis as the fiscal commission...Conrad said he hoped to lay down a markup document as early as next week, but the timing could change given the fluid political situation--and continued disruptions in what’s proven a roller-coaster set of bipartisan talks."

3) And Conrad's colleagues hate it, report Ryan Grim and Michael McAuliff: "Sen. Kent Conrad (D-N.D.) has been bargaining for months in secret with Republicans in the so-called Gang of Six to craft a budget that might win bipartisan acceptance. On Tuesday, Conrad abruptly dropped the veil and rolled out his own offering for party colleagues -- to brutal reviews...The problem for Democrats is that, rather than put down a firm Democratic marker from which the party can negotiate, Conrad has adopted a plan that resembles the work he's done with legislators across the aisle. In bringing it forward himself, Conrad sets the starting point for the Democratic position in a more conservative spot than President Barack Obama's budget -- and that was already a compromise."

4) The House might hold a standalone vote on raising the debt ceiling, reports Jake Sherman: "Majority Leader Eric Cantor (R-Va.) said Tuesday he’d consider holding a symbolic test vote on the debt ceiling just to prove to Democrats that the nation’s borrowing limit won’t be raised by House Republicans unless it’s packaged with serious spending reductions. Cantor told reporters in the Capitol that 'if it is necessary for us to tell the president that [a clean vote] is dead on arrival in the House, I believe we can do that.' Democrats, including Senate Majority Leader Harry Reid (D-Nev.), have called for a stand-alone vote to avoid the nation defaulting on its debts, but some House Republicans privately griped about even the prospect of an up-or-down vote."

5) Obama is giving immigration reform another push, reports Perry Bacon: "The Obama administration is beginning another effort to change the nation’s immigration laws, despite little enthusiasm from Republicans in Congress. President Obama met for more than an hour Tuesday with members of the Congressional Hispanic Caucus, his third session on the issue at the White House in the past three weeks. White House aides promised a renewed push to try to persuade Congress and the American public to back Obama’s proposals, which would combine stronger enforcement of current immigration laws with the creation of a pathway to citizenship for illegal immigrants."

Acoustic cover interlude: Rocky Votolato and Matt Pond PA play "Don't You Want Me" by The Human League.

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

Still to come: The House GOP is trying to gut the Consumer Financial Protection Bureau; it also knows its health care repeal efforts will fail; states are raising taxes to pay their unemployment bills; Republicans want to increase drilling in the Gulf only a year after the BP debacle; and a man play Angry Birds using mind control.

Economy

The House GOP will try to gut the Consumer Financial Protection Bureau, report Brady Dennis and Ylan Mui: "The political tug of war over the new Consumer Financial Protection Bureau will enter another round Wednesday, when House Republicans forge ahead with legislation aimed at curbing the fledgling watchdog’s powers even before it officially opens its doors in July. The House Financial Services Committee is scheduled to vote on a trio of GOP-backed bills, each of which encapsulates arguments that have lingered since Congress created the consumer regulator last year. One bill, sponsored by the committee’s chairman, Rep. Spencer Bachus (R-Ala.), would replace the bureau’s independent director position with a five-member commission."

Senate Republicans have released their own jobs plan: http://wapo.st/kSmjah

The economic recovery is speeding the dollar's fall, reports Neil Irwin: "The U.S. government has pulled out all the stops to try to get the economy back on track after the Great Recession: It is running a huge budget deficit, the financial sector has been bailed out, and the Federal Reserve is keeping interest rates ultra-low. But the efforts to get the economy going again create risks of their own. One of the biggest is that the value of the dollar could decline in ways that are abrupt and disruptive. The dollar has already been drifting gradually downward as a result of large U.S. trade and budget deficits and the growing economic might of the rest of the world. It is down 36 percent against six other major currencies over the past decade."

Barney Frank wants to weaken regional Fed banks, reports Luca di Leo: "U.S. Rep. Barney Frank (D., Mass) Tuesday introduced a bill that would let interest rates be set only by Federal Reserve officials picked by the government, a new attempt to move power away from regional Fed officials chosen by the private sector. The bill would remove from the 12-member policy-setting Federal Open Market Committee the five members who represent regional Fed banks. Only the seven-member board in Washington, which currently has two vacant seats, would get to vote on interest rates. The congressman said this would make the Fed more democratic and increase 'transparency and accountability on the FOMC' by eliminating those officials who are effectively picked by business executives."

The US is suing Deutsche Bank for mortgage fraud, reports Jia Lynn Yang: "U.S. prosecutors filed a civil suit Tuesday against Deutsche Bank, saying it repeatedly lied to the government and used shoddy lending standards that cost taxpayers hundreds of millions of dollars. The government’s fraud allegations come as regulators and prosecutors face pressure to hold banks responsible for actions that led to the financial crisis. The suit, which seeks $1 billion in damages, says that Deutsche Bank lied about the quality of its lending practices in order to get access to the government’s massive mortgage insurance program...As of February, the government had paid more than $386 million in insurance claims and other costs for loans approved by the bank that went bad."

Foreclosing on homeowners just got harder in South Carolina: http://wapo.st/ly1w9S

The Treasury's "extraordinary measures for avoiding the debt ceiling aren't that extraordinary, writes Joshua Green: "This report (WARNING: wonky) on the recent history of the debt limit from the Government Accountability Office breaks down the numbers. Suspending slugs? It's happened six times in the last 15 years. Cutting off G-Fund investments? That's happened five times. Likewise for the civil service fund. These actions may be extraordinary, but they're not unusual.  That doesn't mean the issue should be be ignored or taken lightly--just understood a bit differently. What's extraordinary is not the steps that Treasury is about to take. It's that a group of Republican (and some Democrats) say they're seriously willing to default if they don't get their way."

Congress needs to do more to prevent an economic backslide, writes David Leonhardt: "At the end of this year, about $225 billion of temporary tax cuts and emergency jobless benefits are scheduled to expire. These provisions were part of the compromise bill in last year’s lame-duck Congressional session that also extended the Bush tax cuts. The Bush tax cuts were extended through 2012, however, while the other provisions -- including a payroll tax cut for households and a tax cut for expanding businesses -- expire at the end of 2011. Given the legitimate concern about the deficit, many members of Congress will want to let these temporary tax cuts lapse. But if the economy remains weak, continuing them for one more year will make sense."

We already know what a debt deal will look like, writes Steven Pearlstein: "Discretionary spending cuts will be split evenly between domestic and national security. Social Security will be returned to long-term actuarial balance through a combination of progressive reductions to the cost-of-living formula, increases in the cap on income subject to the payroll tax and very gradual increases in the retirement age. Medicare and Medicaid spending will be capped at a growth rate of GDP plus 1 percent per year...On taxes, the top marginal earned rate of 35 percent will be left in place, but limits on deductions will increase revenue...If you locked 100 Americans in a room with a team of technical budget experts and told them they couldn’t leave until 60 of them could agree on a budget plan, this is what would emerge."

Stupid human tricks interlude: A self-described samurai successfully slices a BB pellet in midair using a katana.

Health Care

Republicans know their piecemeal health care repeal bills are doomed, reports David Nather: "The bills are getting smaller and narrower -- going after shrinking slices of President Barack Obama’s health care law, rather than the whole thing. The main one on Tuesday’s agenda, which passed the House 238-183, repeals the mandatory funding for the state-based health insurance exchanges. The other, which is expected to pass Wednesday, would get rid of the mandatory funds for building school-based health centers...Still, Republican lawmakers and GOP strategists say the House has to keep taking the votes -- even if they’re narrow and temporarily overshadowed -- so Republicans can keep building the case to their base that they’ve tried everything to get rid of the health care law."

Ryancare also includes an individual mandate, writes Simon Lazarus: "Under both provisions, the result is the same: People who choose to carry health insurance have a lower tax bill than they would if they chose not to. In terms of their respective potential impact on individuals' bank accounts and tax liability, the manner in which they affect individuals' financial incentives, and hence the constraining effect on individuals' financial choices to either buy or forgo health insurance, the two 'mandate' provisions are identical. (Indeed, in most cases, the financial difference for the individual taxpayer made by the Republican tax credit would be greater--i.e., more 'coercive'--than the ACA tax penalty.)"

Domestic Policy

States are boosting business taxes to pay for unemployment insurance, reports Sara Murray: "States are turning to tax increases on businesses this year to shore up their unemployment insurance programs and pay interest on loans they’ve borrowed from Washington. Unprepared for such a deep economic downturn with stubbornly high unemployment, many states exhausted their unemployment insurance funds and turned to the federal government for loans...Some 35 states said they expect their unemployment tax revenue to rise this year by about 16.5%. While part of the rising tax revenue could come from an improving economy, most states said they expect it to come from higher taxes on employers."

Cyborg interlude: Playing Angry Birds using a brain-scanning headset.

Energy

A year after the BP disaster, the GOP is trying to expand offshore drilling, reports Juliet Eilperin: "Just one year after the explosion of the Deepwater Horizon killed 11 and triggered a massive oil spill, there’s little appetite among legislators for new safety regulations. Instead, a single concern is prompting a drive for more drilling: $4-a-gallon gas. Increased drilling won’t bring down the immediate cost U.S. consumers pay at the pump, but soaring fuel prices have transformed the U.S. energy debate, motivating the House this week to take up at least one of three bills that would ease the way for more energy exploration off both coasts and in the Gulf of Mexico. The first bill likely to hit the floor would revive canceled lease sales off Virginia and in the gulf."

Democrats are prepping alternatives to GOP drilling proposals, reports Pete Kasperowicz: "House Democrats on Tuesday morning indicated they were preparing alternatives to two bills the House is expected to take up Thursday aimed at increasing offshore drilling for oil and gas. Speaking on the House floor, Rep. Gerry Connolly (D-Va.) said he would offer an amendment later in the week that would increase taxes on oil companies by $37 billion and give that money to licensed U.S. drivers. Connolly said that change would amount to about $185 per driver, equivalent to a reduction in gas prices of about 27 cents per gallon."

A vote on repealing oil subsidies likely won't happen this week: http://bit.ly/l0KBCV

Sen. Mark Begich wants taxpayers to be able to save gas money tax-free, reports Andrew Restuccia: "Workers would be able to divert a portion of their paychecks into an untaxed account that can be used to pay for gas and other fuels under new legislation set to be introduced in the Senate this week. The legislation, authored by Sen. Mark Begich (D-Alaska), is aimed at lessening the burden of high gas prices on consumers. The bill comes as lawmakers on both sides of the aisle are scrambling to do something about gas prices, which are nearing $4 a gallon. Begich, in a short interview with The Hill Tuesday, said he modeled the legislation on medical savings accounts, which allow the public to set aside a certain portion of money before taxes for medical expenses."

Congress' fight over ethanol subsidies is heating up, reports John McKinnon: "A Republican critic of the biofuel’s federal subsidies, Sen. Tom Coburn of Oklahoma, is combining forces with a Democratic critic, Sen. Dianne Feinstein of California. They introduced a measure Tuesday that would repeal the big tax credit and the import tariff that have helped nurture the industry. Critics contend that the subsidies have long since outlived their usefulness, especially as fuel prices have soared. Mr. Coburn is hoping to pass the new measure as an amendment to a small-business bill on the Senate floor. Aides say they believe they’re getting close to the high 67-vote threshold they would have to clear because of procedural hurdles."

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.

http://newslettersKETBS5.1053750@email.washingtonpost.com

May 4, 2011