The line now is that we're either going to see a major debt-ceiling deal in the next 48 hours or we won't see any deal at all until we stop paying bills and public outcry or market panic forces a deal. So the question then becomes why would we see a deal in the next 48 hours? Has anything happened over the last few weeks that'd break the stalemate that doomed the fiscal commission, the Gang of Six, Paul Ryan's budget, and President Obama's April deficit speech?

Well, there's the pressure of debt ceiling, for one thing. But I don't buy it. The Republicans are doing a pretty good job convincing one another that the debt ceiling doesn't require compromise: either Obama will fold or the anticipated consequences will fizzle. There's no evidence that the GOP is really gripped by a fear of what might happen in early August.

The White House is emphasizing its willingness to look at entitlements, including Social Security, but it's not obvious that they're willing to go much further on them than they went in their April speech. So why will concessions that weren't sufficient then suddenly be sufficient now?

Republicans have drawn a much harder line on taxes, with Cantor stating that new revenues, rather than just higher rates, are off the table, and Boehner, McConnell, and pretty much every other Republican backing him up. So it seems, if anything, that it's become harder to cut a deal on revenues.

Perhaps some Republicans have come to see the politics of this turning against them as the Obama administration has done a pretty good job making the GOP seem truculent and unyielding. But if so, they're doing a pretty good job keeping this new concern to themselves.

Perhaps Boehner has simply decided that it's worth putting a $4 trillion deal on the table and seeing if the size of the promised deficit reduction is sufficient to lure members of his party to the table. But that seems like a pretty big risk for a speaker who's been relatively risk averse about signaling a willingness to compromise that exceeds that of his troops.

All in all, I'm just not seeing it. The groundwork isn't there for a $4 trillion deal to be struck and approved in the next week or so, or even the next few weeks. But as I said at the end of yesterday's Wonkbook, I've been wrong before.

Five in the morning

1) The parties say they're making progress in debt talks, report Lori Montgomery and Paul Kane: "Negotiations over the national debt entered a critical phase Thursday as President Obama challenged congressional leaders to embrace an ambitious but politically painful strategy to raise revenue and make changes to popular federal retirement programs. Top Democrats were open to the idea, and House Minority Leader Nancy Pelosi (D-Calif.) pledged her 'full cooperation' after meeting with Obama and other senior lawmakers at the White House. Republicans were more skeptical, with one prominent exception -- House Speaker John A. Boehner (R-Ohio). Boehner enthusiastically endorsed Obama’s call for a far-reaching plan. Later at the Capitol, Boehner made his own pitch to reluctant Senate Republicans, arguing in a closed-door luncheon that securing the nation’s economic future requires bold action."

2) The Treasury Department is preparing its plan B if the debt limit isn't raised, reports Richard Cowan: "Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money. But behind the scenes, top Treasury officials have been exploring ways to prevent a financial meltdown that would be triggered if the government were unable to pay its bills on time, sources told Reuters. Treasury has studied the following issues: Whether the administration can delay payments to try to manage cash flows after August 2. If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt. Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments."

3) House Democrats are drawing a line at Social Security and Medicare cuts, report Mike Lillis and Erik Wasson: "House Democrats are lining up in opposition to any debt-ceiling package that cuts benefits to Medicare or Social Security. Republican leaders have argued that cuts to the popular entitlement programs are necessary to reduce deficit spending and bring the nation's finances into balance. But a long list of House Democratic leaders and rank-and-file members said in separate appearances Thursday that cuts in Social Security or Medicare benefits are a non-starter. 'I...want to have clarity about where House Democrats stand,' House Minority Leader Nancy Pelosi (D-Calif.) said during a press conference at the Capitol. 'We do not support cuts in benefits to Social Security and Medicare.'"

4) Obama will veto a short-term debt limit increase, report Carrie Budoff Brown, Jake Sherman, and John Bresnahan: "President Barack Obama told congressional leaders Thursday that he would veto a short-term deficit deal, eliminating an option floated by Senate Republicans to extend the debt limit for only a few months, according to sources familiar with the negotiations. The president went further during his private meeting than he had a day earlier in public, when he simply said he opposed a short-term measure. By drawing a harder line, Obama aims to avoid revisiting the debt limit again until after the 2012 elections...Obama discussed three options with the congressional leaders: a short-term measure of only a few months, which the president opposes; a deal worth about $2.5 trillion; and a deal that tops $4 trillion."

5) Today's job report will clarify whether the current slump is temporary, reports Neil Irwin: "As the signs of a weakening economy mounted this spring, there was a common argument from analysts: The causes of the slump were temporary, and growth is poised to strengthen after those factors -- such as higher fuel prices and the Japanese earthquake -- dissipate. A report on the job market due out Friday morning will be the clearest evidence yet whether that theory is correct. The last report showed exceptionally weak job creation in May: Only 54,000 jobs were added that month, the Labor Department said -- a rate that, if sustained, would cause the unemployment rate to rise rather than fall...The question now is how weak the underlying pace of job growth really is. Was the lousy May number a true indication of the state of the job market? Or was it an aberration?"

Radio session interlude: Tanlines plays "Real Life" live at KEXP.

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

Still to come: The administration is extending aid to unemployed homeowners; a study confirms that Medicaid works; the FCC may crack down on big media; a group of Senators has reached an ethanol compromise; and a toddler and cat play on a trampoline.

Economy

The administration is lending a hand to unemployed homeowners, report Peter Wallsten and Brady Dennis: "The Obama administration said Thursday it would require lenders to allow unemployed homeowners to delay their monthly payments for up to a year without threat of foreclosure. The announcement came a day after the president made a rare admission of a policy misstep, acknowledging that his policies have failed to provide enough support to struggling homeowners and recognize the scope of the nation’s housing crisis. The Federal Housing Administration previously required banks to allow FHA borrowers to put off their mortgage payments for a minimum of four months while lenders worked out options to keep people in their homes."

Prosecutors are going easier on banks, report Gretchen Morgensen and Louise Story: "As the financial storm brewed in the summer of 2008 and institutions feared for their survival, a bit of good news bubbled through large banks and the law firms that defend them. Federal prosecutors officially adopted new guidelines about charging corporations with crimes -- a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis...The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to delay or cancel the prosecution if the companies promised to change their behavior."

Corporate jet lobbyists are pushing back at Obama, reports Eric Lichtblau: "Mr. Obama and Democratic leaders have made a rollback of tax breaks for corporate jets a frequent talking point in recent days in their efforts to persuade Republicans to agree to raise taxes as well as make spending cuts as part of the budget talks. But the drumbeat from Democrats has set off a counterattack from a small but powerful group of jet manufacturers and users, who have contributed millions of dollars over the years to lawmakers from both parties...Ending special deductions for the depreciation of corporate jets would raise an estimated $3 billion in tax revenues...'The president is vilifying an entire industry,' said Dan Hubbard, a senior vice president for the National Business Aviation Association, which represents 8,000 companies that use private planes."

The debt ceiling isn't unconstitutional, writes Laurence Tribe: "Some have argued that this principle prohibits any government action that 'jeopardizes' the validity of the public debt. By increasing the risk of default, they contend, any debt ceiling automatically violates the public debt clause. This argument goes too far. It would mean that any budget deficit, tax cut or spending increase could be attacked on constitutional grounds, because each of those actions slightly increases the probability of default...Other proponents of a constitutional deus ex machina have offered a more modest interpretation of the public debt clause, under which only actual default (as opposed to any action that merely increases the risk of default) is impermissible...But advocates...err in their next step: arguing that, because default would be unconstitutional, President Obama may violate the statutory debt ceiling to prevent it."

The 14th amendment gives Obama leverage, writes Bruce Bartlett: "A number of legal scholars point to Section 4of the 14th Amendment, which says, 'The validity of the public debt of the United States...shall not be questioned.' Some scholars, including Michael Abramowicz of George Washington University Law School and Garrett Epps of the University of Baltimore Law School, think this passage may make the debt limit unconstitutional...Thus Treasury may be able to just ignore the debt limit. Other scholars, such as Michael McConnell of Stanford Law School, say the 14th Amendment will force Obama to prioritize debt payments and unilaterally slash spending to pay bondholders. But this would involve the violation of laws requiring government spending. Either way, a failure to raise the debt limit would force the president to break the law."

Obama is turning rightward, writes Paul Krugman: "It’s getting harder and harder to trust Mr. Obama’s motives in the budget fight, given the way his economic rhetoric has veered to the right. In fact, if all you did was listen to his speeches, you might conclude that he basically shares the G.O.P.’s diagnosis of what ails our economy and what should be done to fix it...One striking example of this rightward shift came in last weekend’s presidential address, in which Mr. Obama had this to say about the economics of the budget: 'Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.' That’s three of the right’s favorite economic fallacies in just two sentences."

Some modest revenue changes could reap big deficit savings, writes Eugene Robinson: "Start by allowing the Bush-era tax cuts for households making more than $250,000 a year to expire; this would cut deficits by about $700 billion over a decade. Add in the revenue that would be gained by closing the tax loopholes that Obama keeps talking about...and soon you’re in the neighborhood of a trillion dollars. The nominal corporate tax rate of 35 percent is a joke, since big corporations don’t actually pay that much; those loopholes, too, could be eliminated. Then we could look at...hiking or eliminating the income cap for Social Security payroll contributions. The point is that it doesn’t take much imagination to get within shouting distance of $2 trillion in deficit reduction over 10 years -- looking at the revenue side alone. That’s half of the $4 trillion that both Republicans and Obama have set as a target."

This cat looks uncomfortable interlude: A toddler and a cat hang out on a trampoline.

Health Care

A new study confirms Medicaid works, reports Julie Rovner: "As high-level budget talks drag on in Washington, the Medicaid program for the poor remains a prime candidate for cuts. In recent months, Republicans have criticized Medicaid for badly serving its target population. But a new study -- the first of its kind in nearly four decades -- finds that Medicaid is making a bigger impact than even some of its supporters may have realized. The study, being published as a working paper by the National Bureau of Economic Research, has a distinctly bipartisan flavor. Among its authors are Katherine Baicker of Harvard, who was an economic adviser to President George W. Bush, and MIT economist Jonathan Gruber, who has advised the Obama administration. 'What we found in a nutshell is that having Medicaid makes a big difference in people's lives,' said Amy Finkelstein, another MIT economist and one of the study's principal investigators."

Domestic Policy

The FCC may have to get tougher on media consolidation, reports Amy Schatz: "Federal regulators may face more pressure to overhaul laws governing media ownership in the U.S. after a federal appeals court Thursday threw out a 2008 government decision to relax restrictions on companies seeking to control both newspapers and television stations. A panel of the U.S. Court of Appeals in Philadelphia rejected Federal Communications Commission rules that made it easier for media companies to own a TV station and newspaper in the same market. The court said the FCC erred by failing to give the public enough time to comment on the rules, and sent them back to the agency for further review...It returns the highly politicized issue of newspaper and television cross-ownership restrictions to an agency where power has shifted toward Democrats, and which has shown more interest lately in the Internet than older forms of media."

The debt limit fight bodes ill for the future of the Madisonian system, writes Matthew Yglesias: "In his classic 1990 article, 'The Perils of Presidentialism,' [PDF], Princeton’s Juan Linz observed that 'in a presidential system, the legislators, especially when they represent cohesive, disciplined parties that offer clear ideological and political alternatives, can also claim democratic legitimacy.' In other words, both an elected president and an elected House speaker can plausibly claim--and plausibly feel entitled to claim--that their agenda reflects the true desires of the people and deserves to carry the day...the experience of a majority of presidential systems has been for the conflict of priorities to lead to a breakdown of the constitutional order. Linz observes that 'the only presidential democracy with a long history of constitutional continuity is the United States.'"

We need serious defense cuts, writes Lawrence Korb: "The U.S. is better positioned now for a drawdown than the ones that occurred after the end of the Korean War, the Vietnam War and the Cold War...The defense budget has risen in real terms each year since 1998. In the 13 years from fiscal year 1998 to FY 2012, the baseline defense budget (in constant dollars and exclusive of war funding) has grown to $553 billion from $374 billion -- an increase of close to 50 percent. Such substantial growth over such an extended period of time is unprecedented...Unlike the Korean and Vietnam wars, the wars in Iraq and Afghanistan have been funded exclusively by supplementals...Not only have these supplementals allowed the Pentagon to sneak items, like the F-22 and missile defense into the supplementals, but they have also masked the true cost of defense."

Life imitating art interlude: The house from Up! is being built in real life, will cost $399,000.

Energy

A group of Senators has reached a deal on ending ethanol subsidies, reports Rosalind Helderman: "A bipartisan trio of senators announced Thursday that they have reached an agreement on a way to end ethanol subsidies immediately. Sens. Dianne Feinstein (D-Calif.), Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) told Senate leaders that their proposal would repeal the 45-cent ethanol blender credit at the end of July, saving $2 billion through the end of the year. It would also end a tariff of 54 cents a gallon on foreign ethanol this month. But it would extend a tax credit for green biofuels production for three years, expanding it to include fuels made from algae. The lawmakers said the deal would cut $1.33 billion from the federal debt over the next six months, while investing $668 million in new energy technologies."

The EPA has issued a new rule on power plant emissions, report Juliet Eilperin and Darryl Fears: "The Environmental Protection Agency announced Thursday that it finalized rules that compel 28 states and the District to curb air pollution that travels across states by wind and weather, the first in a series of federal restrictions aimed at improving the air Americans breathe. The Cross State Air Pollution Rule, which replaces a Bush-era regulation thrown out by federal courts in 2008, targets coal-fired power plants mainly in the eastern United States. The measure, along with a proposal aimed at cutting summertime smog in the Midwest, is projected to cost the utility industry about $2.4 billion in pollution-control upgrades over several years. EPA Administrator Lisa P. Jackson...predicted that it will prevent as many as 34,000 premature deaths annually and generate $280 billion in benefits."

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

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July 8, 2011