Conventional wisdom in Washington is that Boehner's plan will pass the House today. It will get virtually no Democratic support, but Republicans will respond to the full-court press of their leadership team and fall into line. The next step then is the Senate, where Boehner's bill doesn't have a chance. So we're back to, if not square one, whatever square we've been at for the past few days.

For weeks, this has been the story of the debt-ceiling negotiations: A lot happening, nothing changing. Graybeards will tell you that this is all necessary. That the various players and parties and sides can't really compromise until they see their bills fail, feel the pressure of a deadline, and come to believe their leaders did everything in their power to push for a purer outcome. Anyone who thought we were going to resolve this before the last minute was sorely mistaken. Washington never resolves anything before the last minute, and that's because it's only at the last minute that the two parties are so exhausted, disappointed and fearful that they're prepared to cut a deal to get the whole thing over with. So long as there's two months, two weeks, two days or even, at times, two hours left on the clock, there's always hope you can get something better.

That's how it went during the government shutdown. We passed the deal six minutes after midnight. Technically, the federal government had already shut down. But if that bill had failed, it wouldn't have been the end of the world. A government shutdown isn't desirable, but nor is it unprecedented. Default, or debt prioritization, or whatever you want to call it, is -- and no, don't tell me about that time in 1979 when Treasury's staff got overwhelmed and they sent out some checks late. If it's August 1st or the wee hours of August 2nd and the two parties come out with some ugly compromise that no one likes and that fails in a TARP-esque vote on the floor of the House, we don't really know what will happen next in the market, or in the economy, or even in Washington. But by waiting till the last minute, we're risking finding out.

Five in the morning

 

1) The House will vote on Boehner's plan today, report Paul Kane and Lori Montgomery: "House GOP leaders mounted a furious bid Wednesday to win support for legislation designed to ease the nation’s debt crisis, delivering a tongue-lashing to their most conservative lawmakers and casting Thursday’s roll call as nothing less than a vote of confidence in their stewardship of the chamber. House Speaker John A. Boehner (Ohio) began Wednesday by ordering his fellow Republicans to fall in line and continued pushing for support throughout the day. He and his lieutenants repeatedly warned rank-and-file Republicans that Boehner’s plan was their only alternative to a Democratic option offered by Senate Majority Leader Harry M. Reid (Nev.) or the financial calamity that could be precipitated by a government default."

The bill is DOA in the Senate: http://bit.ly/qDvNyP

2) The revised Boehner plan is, like Reid's plan, more focused on immediate cuts and thus worse for the recovery: "Boehner 2.0 got scored by the Congressional Budget Office today, and the results (pdf) aren’t as different from Boehner 1.0 as you might think. The spending cuts jumped from $850 billion to $915 billion. Bigger, but not that much bigger. The real change is in the timing: the original bill had only $5 billion in spending cuts next year. Like Reid’s bill, this version has more than $20 billion. Remember that these spending cuts aren’t alone. Unless future legislation changes this, they’re alongside the expiration of the $160 billion payroll tax cut and the $60 billion in expanded unemployment insurance that the administration negotiated in the 2010 tax deal. So that means the economy — which is very weak right now — is losing something in the neighborhood of $250 billion in federal support."

3) The Treasury will pay bills in the order that they're due, reports Binyamin Appelbaum: "The Treasury Department is preparing to answer a question that it has dodged and rebuffed for months: If there’s not enough money for everyone, who is left empty-handed? Officials said Wednesday that the department would address the issue later this week unless it became clear that Congress would vote by Aug. 2 to let the government borrow more money. The outlines of the answer, however, already are clear. Officials have said repeatedly that Treasury does not have the legal authority to pay bills based on political, moral or economic considerations. It cannot, for instance, set aside invoices from weapons companies to preserve money for children’s programs. The implication is that the government will need to pay bills in the order that they come due."

4) Boehner is twisting arms to get his plan through, report David Fahrenthold and Aaron Blake: "With his power -- and his party -- in danger of a humiliating collapse, John A. Boehner had to become the politician he had promised he was not. Boehner, a genial Ohioan famous for crying in public, had pledged that he would not be an arm-twister like some House speakers of the past. When he took the gavel in January, Boehner (R) promised to allow the House to 'work its will.' By Wednesday, that strategy had led him to a bad place. His party was in revolt. Many Republican lawmakers were publicly critical of his new plan to raise the national debt ceiling, and the bill’s prospects were seriously in doubt...So Boehner reversed himself and morphed into a nascent arm-twister. 'Get your ass in line,' he told Republicans in a closed-door meeting."

5) The latest data confirms the economy is losing steam, reports Neil Irwin: "The latest evidence on the economy suggests that the tense standoff between Congress and the Obama administration over raising the debt ceiling is coming at a terrible time -- not in a period of robust or even passable growth, but at a time the U.S. economy is barely eking out any expansion at all...On Friday, the government will release its broadest measure of economic activity for the spring, and forecasters are expecting it to show a painfully weak recovery. Gross domestic product is forecast to have risen 1.8 percent in the three months ended June 30...The new installment of the Federal Reserve’s 'beige book,' its regular compilation of anecdotal reports from businesses around the country, found that the pace of growth has 'moderated' in most places, particularly in the eastern United States."

LEGO-fied interlude: LCD Soundsystem's "All My Friends", in LEGO form.

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

Still to come: Obama's consumer financial protection nominee faces a tough road to confirmation; a health care reform challenge is being appealed to the Supreme Court; the White House is reassuring progressives in advance of a debt deal; the administration is set to announce new mileage rules; and a dog who just can't quite jump over a hedge.

Economy

 

S&P might not downgrade US debt even if a "big deal" isn't reached, reports Cezary Podkul: "The president of a major credit rating agency said Wednesday that some of the plans being considered by lawmakers to reduce the deficit by less than $4 trillion could still preserve the United States’ sterling credit rating. The remarks by Deven Sharma of Standard & Poor’s clarified a July 14 research note in which the company said a $4 trillion cut would allow the country to avoid a credit downgrade. Sharma said media reports 'misquoted' that paper and inaccurately stated that the company was calling for that specific threshold. Sharma, who was speaking at a congressional hearing, was careful not to take sides between the competing plans proposed by Democrats and Republicans. His comments...frustrated some lawmakers, who found his answers vague."

Consumer finance nominee Richard Cordray isn't likely to get a vote, report Ylan Mui and Brady Dennis: "Richard Cordray is no stranger to defeat. A soft-spoken man who pads around in socks and admires the writings of Supreme Court justice Louis Brandeis, he has run for office in his native Ohio nine times in the past 20 years, losing nearly as many races as he’s won. Now, he faces an entirely different kind of vote, one that won’t be decided at the polls but rather in a U.S. Senate full of political enemies. As President Obama’s nominee to lead the controversial new Consumer Financial Protection Bureau, Cordray faces an uphill confirmation battle over which he has little control. Senate Republicans have vowed to block him. The House recently passed a bill that would abolish the director’s position. Some other Obama appointments have either languished for months or never gotten a hearing."

A default could spur an asset-buying spree, reports David Hilzenrath: "If the showdown over the debt ceiling ends badly, it could be good for some investors. They might get a long-awaited chance to snap up stocks and bonds at bargain prices. 'Chaos creates opportunity,' said Stewart R. Massey, chief investment officer at Massey, Quick & Co., which helps endowments, foundations and wealthy families manage more than $3 billion of investments. If the stock market plunges by more than 10 percent, 'we would start to be fairly aggressive buyers,' Massey said. With less than a week remaining before the U.S. government could default on its debt, some investors are thinking about worst-case scenarios, and as they see it even a disaster could have a silver lining...According to one school of thought, the political deadlock and the shock to the market would be temporary, even if there are lasting effects."

The 1990 budget battle set the stage for the current showdown, reports Steven Mufson: "A scorching summer. A struggling economy. A stalemate in budget talks. A Republican leader reluctant to break his no-new-taxes pledge...It was 1990, the year Congress passed one of the biggest deficit-reduction packages in American history. But before it was cemented into law, the country endured months of bickering and brinksmanship. Sound familiar? By some measures, the 1990 budget deal was a success: It helped shrink the deficit, then at 5 percent of gross domestic product, by $492 billion -- $850 billion in today’s dollars -- over just five years. And it passed with support from both parties. But in other ways, the 1990 budget deal set the stage for today’s fiscal deadlock...Many Republican lawmakers thought the deal and its aftermath proved the folly of compromise."

The Treasury insists August 2 is a firm deadline, reports Jennifer Epstein: "The Treasury Department is disputing a claim that the U.S. government has taken in higher-than-anticipated tax receipts and says it can’t guarantee all the bills will be paid after August 2. 'Tax receipts were as expected for June and July,' Treasury spokeswoman Colleen Murray said in a statement to POLITICO on Wednesday afternoon. 'The fact remains the U.S. will exhaust borrowing authority on August 2nd and after that date there is no way to guarantee we will be able to meet all of the nation’s obligations.' The statement comes after Barclays Capital said that the real deadline to avert the U.S. government’s default is August 10 because the government has been taking in more in tax money than anticipated, something that Treasury says is not true but was being reported as fact."

Conservatives should support the Boehner plan, writes Keith Hennessey: "I agree with the conservative complaint that, since neither the Boehner bill nor the Reid bill solve our underlying fiscal problem, neither is likely to significantly improve the chance of avoiding a downgrade by the ratings agencies. That is a huge deal for me, but other than accepting the President’s proposed tax increases (which I wouldn’t do), I don’t see any way to avoid it, so we are stuck for the moment with whatever the rating agencies decide. I will set aside my concerns with the rating agencies for another day...I don’t have a viable strategy to enact...an improved bill, and, as best I can tell, neither do those conservatives who oppose the Boehner bill. I think it is a mistake to oppose a bill that improves on current law if you don’t have both a better policy and a strategy to achieve it."

Democrats will lose this battle, but could win the next one, writes Ezra Klein: "Democrats are going to lose this one. Whatever deal emerges to raise the debt ceiling, we can be pretty sure it won’t include revenue, it won’t include stimulus, and it will let Republicans pocket a trillion dollars or more in cuts without offering anything to Democrats in return...Yet Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is -- nothing."

A deficit downgrade's effects are unclear, writes David Wessel: "Very little happens automatically if the U.S. Treasury long-term debt is stamped AA by S&P. A few institutions with strict rules about holding only AAA paper would have to sell, or change their charters. And no one knows precisely what will happen in the big 'repo market,' where institutions make short-term loans collateralized by U.S. Treasury debt. But money market mutual funds--which hold $684 billion in U.S. government debt--wouldn't have to dump Treasurys or stop buying them, their trade association says. Life-insurance companies could still hold U.S. Treasurys, their trade association says. U.S. banks, under current rules, wouldn't have to retain bigger capital cushions against U.S. Treasury holdings. The Federal Reserve would still accept U.S. Treasurys as collateral after a downgrade."

Adorable animals not quite making it interlude: A dog jumps directly into, rather than over, a hedge.

Health Care

 

A health care reform challenge is being appealed to the Supreme Court, reports Jason Kane: "The Thomas More Law Center formally asked the Supreme Court Tuesday to reverse an appeals court decision upholding the health care reform law. Marking the first appeal of its kind to reach the nation's highest court, the conservative legal group continues to insist the mandate requiring all Americans to purchase health insurance is unconstitutional. Chiefly, its lawyers say the Affordable Care Act violates the Constitution's Commerce Clause, which allows Congress to regulate economic activity between states. The decision not to purchase health insurance is not an economic activity and is therefore not subject to regulation, the group contends. On June 29, the Cincinnati-based Sixth Circuit Court of Appeals ruled against that idea."

Medicare part D is reducing hospital spending, reports Alex Wayne: "Offering prescription drug coverage to the federal Medicare program’s elderly beneficiaries reduced spending on hospitals and nursing homes, a study found. The effort increased access to medicines and improved patients’ adherence to drug regimens, according to the study published today in the Journal of the American Medical Association. The results support arguments of advocates of the so-called Part D benefit Congress created in 2003...The drug program 'has been even more beneficial than we previously knew,' said J. Michael McWilliams, an assistant professor of health policy at Harvard Medical School in Boston, and lead author of the study."

Domestic Policy

 

The White House is trying to shore up its base in anticipation of a debt deal, reports Peter Wallsten: "The White House is waging an aggressive behind-the-scenes campaign to reassure core Democratic activists, following weeks of criticism from liberals who fear that President Obama has given too much ground in his debt-ceiling talks with Republicans. Senior aides are holding conference calls to take questions from leaders of black and Hispanic organizations, local elected officials, and other political allies nationwide. Obama spoke by phone this week to a group of college student body presidents to seek their help in lobbying for a compromise. And top economic advisers have huddled in the West Wing in recent days with pastors and advocates for seniors, children and the poor -- including one session with Easter Seals and families it serves to discuss the importance of Medicaid to disabled children."

Decaying infrastructure is costing the US billions, reports Ashley Halsey: "As Congress debates how to meet the nation’s long-term transportation needs, decaying roads, bridges, railroads and transit systems are costing the United States $129 billion a year, according to a report issued Wednesday by a professional group whose members are responsible for designing and building such infrastructure. Complex calculations done for the American Society of Civil Engineers indicate that infrastructure deficiencies add $97  billion a year to the cost of operating vehicles and result in travel delays that cost $32 billion. 'If investments in surface transportation infrastructure are not made soon, these costs are expected to grow exponentially,' the ASCE said."

The Labor Department is increasing regulation of retirement accounts, reports Aaron Lucchetti: "Securities firms already have a headache over looming rules by U.S. regulators that could require brokers to do only what is best for clients. Now, the pain may be getting more intense. The Labor Department is plowing ahead with plans to expand its oversight of pension plans, 401(k) plans and individual retirement accounts despite resistance from Wall Street. Under proposed rules, the agency would apply what is known as the fiduciary-duty standard among a wider pool of brokers and financial advisers who provide investment advice for a fee to retirement plans and IRA holders. The Labor Department's current powers are far narrower using the fiduciary standard, which requires brokers and others to act in the best interests of the retirement-plan client."

We need better summer school, writes Jeff Smink: "According to a report released last month by the RAND Corporation, the average summer learning loss in math and reading for American students amounts to one month per year. More troubling is that it disproportionately affects low-income students...This waste is preventable. According to the RAND report, good summer programs with individualized instruction, parental involvement and small classes can keep children from falling behind and reduce the achievement gap...Districts in Pittsburgh, Chicago, Providence and Baltimore have begun to move away from the remedial model and embrace a new vision of summer school that is both fun and an essential component of their education reform agendas."

Adorable children busting moves interlude: A toddler choreographs a Lady Gaga song in real time.

Energy

 

The White House is rolling out new mileage rules on Friday, reports Juliet Eilperin: "The Obama administration and major auto manufacturers have reached a deal to raise fuel efficiency standards for cars and light trucks between 2017 and 2025, resolving a contentious negotiation over how to cut vehicles’ greenhouse gas emissions. The agreement would require U.S. vehicle fleets to average 54.5 miles per gallon or 163 grams per mile of carbon dioxide equivalent by 2025, which represents a 50 percent cut in greenhouse gases and a 40 percent reduction in fuel consumption compared with today’s vehicles...the proposal falls short of the 62-mpg standard that environmental and public health groups had lobbied for...The White House press office issued a statement Wednesday saying the president would unveil the details of the program Friday at the Walter E. Washington Convention Center."

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

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July 28, 2011