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Republicans think Paul Ryan's last budget spent too much

March 5, 2013

Welcome to Wonkbook, Ezra Klein and Evan Soltas’s morning policy news primer. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

Wonkbook’s Number of the Day: $33 billion. That’s the amount by which Republicans have lowered their offer on government funding from the last Ryan budget to their latest proposal. More below.

Wonkblog’s Graph of the Day: Venn diagrams to help you name your child so that he or she will get into Yale.

Wonkbook’s Top 5 Stories: 1) The first Republican offer on the continuing resolution ; 2) the basics on Obama’s Cabinet nominees; 3) the trade-off between the deficit and the economy; 4) ending fee-for-service in medicine; and 5) gun-control measure on trafficking advances.

1) Top story: The Republican budget plan piles on the austerity

House GOP reveals six-month spending plan. “House Republicans moved ahead Monday behind a six-month stopgap spending bill that would keep the government funded through September but also lock in appropriations at a far lower level than even Rep. Paul Ryan's budget envisioned last spring…New estimates Monday by the Congressional Budget Office show that current appropriations levels will drop by about $59 billion from $1.043 trillion to $984 billion for 2013. That's $33 billion below the ceiling set by House Republicans last spring. And having just won reelection, Obama is being put in a remarkable situation in which he must manage the government with fewer real discretionary dollars than his Republican predecessor President George W. Bush had five years ago.” David Rogers in Politico.

@GroverNorquist: Ryan budget has entitlement reform and no tax hike. Simpson Bowles rises tax burden from 18.5% of GDP to 21%–a $5 Trillion hike over 10.

It makes the sequester’s cuts less indiscriminate. But it doesn’t undo them. “Republicans propose to offset that money with cuts elsewhere, such as extending a salary freeze for federal employees and members of Congress…These relatively modest changes amount to nibbling around the edges of the new austerity plan introduced with the sequester.” Rosalind S. Helderman in The Washington Post.

…All heck hasn’t broken loose at the airports, anyway. “Major airports reported smooth operations Monday after the Obama administration called attention to delays at two big airports over the weekend, suggesting that the impact on air travel from forced government spending cuts may be less abrupt and in some ways less dramatic than many feared.” Jack Nicas and Susan Carey in The Wall Street Journal.

Explainer: 3 sequestration scenarios. Jake Sherman and Carrie Budoff Brown in Politico.

Republicans’ balanced-budget goal requires cuts so massive, they scare Republicans. “Anxiety is rising among House Republicans about a strategy of appeasement toward fiscal hard-liners that could require them to embrace not only the sequester but also sharp new cuts to federal health and retirement programs…GOP leaders say the strategy has been necessary to persuade their right wing to postpone a fight over the debt ceiling until later this summer, and to support a bill on the floor this week to fund the government through the end of September. The payoff, they say, will be a budget framework that holds the promise of paying down the national debt without higher taxes.” Lori Montgomery in The Washington Post.

At cabinet meeting, Obama pledges good sequester management. “President Obama assembled the first Cabinet meeting of his second term Monday, welcoming the newest members of his team as he kicked off a discussion he said would involve ways to mitigate the impact of the deep federal spending cuts that began kicking in last Friday…In addition to fiscal issues, Obama also said he planned to discuss immigration reform, education and reducing gun violence with his Cabinet. He vowed not to let the sequester halt his administration's work in other areas.” Sean Sullivan in The Washington Post.

@noamscheiber: A nugget from re-reading Woodward, p. 360: Boehner tells House GOP leadership sequester “wld be devastating to DoD…never going to happen”

…But he sees political costs and risks from overstating the sequester’s impact. “ Mr. Obama is carefully navigating between maximizing heat on Republicans to undo the cuts while mobilizing efforts to make sure that the steep spending cuts do not hurt Americans. His advisers acknowledge the potential political perils ahead as the president struggles to find the right kind of balance.” Michael D. Shear in The New York Times.

CHAIT: The GOP’s budget divide. “[T]he vast bulk of the Republican Party right now…do[es]n't follow the ins and outs of the policy debate. They don't like taxes or spending. Many of them -- enough to pass a bargain through the House, with Democratic support -- could be persuaded to support a compromise in theory. But their sense of what a fair bargain might look like is determined almost entirely by partisan signals. If Obama is willing to do something, they figure, that thing can't be good enough.” Jonathan Chait in New York Magazine.

Music recommendations interlude: Cold War Kids, “Hospital Beds,” 2006.

Top op-eds

FISHER, MCCLELLAN, AND SHORTELL: The real promise of ‘accountable care.’ “The early evidence from private and public ACOs suggests that real savings are possible. The right direction for health-care policy is to build on ACO successes through further steps to reward low-cost innovation, while steering support away from health-care providers who are unwilling to change.” Elliott Fisher, Mark McClellan, and Stephen Shortell in The Wall Street Journal.

SUNSTEIN: Gay marriage and the long arc of history. ”Until very recently, it would have been adventurous, and possibly even absurd, for anyone to suggest that the court should apply heightened scrutiny to discrimination on the basis of sexual orientation. In these circumstances, it is historic that the Department of Justice has so argued, especially in the context of marriage.” Cass R. Sunstein in Bloomberg.

JOHNSON: Why we shouldn’t meddle in the market for natural gas. “Does anyone really think that Congress or the Department of Energy, years in advance, can predict supply and demand or determine which of the 16 applicants can procure the billions of dollars and decades-long contracts necessary to build an LNG export facility? The free market might not always lead to everyone’s definition of the sweet spot, but experience has shown that it is a better allocator and regulator than bureaucrats and politicians.” J. Bennett Johnson in The Wall Street Journal.

PONNURU: Do conservatives really want to win? “[S]ome Republicans have seemed to dislike one another more than they like defeating Democrats and enacting conservative policies. After elections in which conservatives attracted the allegiance of only a minority of voters, they have reacted by trying to kick people out rather than bring people in.” Ramesh Ponnuru in Bloomberg.

BARRO: Why government ought to grow. “There are two key reasons why the ideal spending-to-GDP ratio should change over time, and be higher in the future than it was in the past. First, in the future, a smaller percentage of Americans will be of working age. That means spending on entitlements for the elderly should rise as a share of the economy…Second, our policy priorities have changed. The key conceit behind the Patient Protection and Affordable Care Act was that the federal government ought to be doing something that it wasn't: providing a universal health care entitlement.” Josh Barro in Bloomberg.

Harsh interlude: Is this the meanest PSA ever?

2) What you need to know about Obama’s new Cabinet nominees

In the second term, Obama’s Cabinet will play a higher-profile role. “President Obama, facing a limited window of time to enact an ambitious second-term agenda, is rounding out his Cabinet with relative outsiders and empowering them with more policymaking responsibility than secretaries had during his first term. Obama reached outside his circle of confidants to formally name three new Cabinet nominees at the White House on Monday -- Massachusetts Institute of Technology professor Ernest Moniz as energy secretary, career environmental official Gina McCarthy as Environmental Protection Agency administrator and Wal-Mart Foundation President Sylvia Mathews Burwell as White House budget director.” Philip Rucker and Juliet Eilperin in The Washington Post.

Why Gina McCarthy could be Obama’s MVP nominee. “The vast majority of President Obama's second-term agenda on climate change and energy will go through the Environmental Protection Agency (EPA). And now we know who Obama wants to carry it all out: Gina McCarthy.” Brad Plumer in The Washington Post.

Explainer: What you need to know about the Energy Secretary nominee’s views on natural gas. Brad Plumer in The Washington Post.

For Obama’s budget picks, all roads don’t lead to Rome. They lead to Rubin. “One of the most influential people in the formation of the White House’s economics team is someone who isn’t even there--former Treasury Secretary Robert Rubin…The economics team Mr. Obama built in his first term to deal with the financial crisis has mostly exited. As the White House retools advisers for the second term, it is assembling a cadre of budget experts from the Clinton administration. Ms. Burwell, Mr. Lew and Mr. Sperling joined Mr. Rubin in helping the Clinton administration erase annual deficits and build a budget surplus.” Damian Paletta in The Wall Street Journal.

Profile: Sylvia Mathews Burwell. “Burwell served on President Bill Clinton's economic team for his entire tenure, finishing as deputy director of the Office of Management and Budget. At the end of the administration, she left to to play a senior role at the Gates Foundation in Seattle and later became president of the Wal-Mart Foundation, where she oversees nearly $1 billion in annual gifts -- cash and in-kind donations -- to support childhood nutrition and other philanthropic activities.” Zachary A. Goldfarb in The Washington Post.

White House adds diversity, but not enough to some. “For an administration under fire for lacking gender and ethnic diversity in its top posts, the nominations President Obama unveiled Monday have quieted some amount of the criticism -- but not much. Obama's choice of Sylvia Mathews Burwell to head the Office of Management and Budget and Gina McCarthy to direct the Environmental Protection Agency adds two women to the Cabinet, in addition to Interior Secretary nominee Sally Jewell.” Juliet Eilperin in The Washington Post.

Woah interlude: Volcanic eruption on video and close-up.

3) The trade-off between the deficit and the economy

We’ve reduced the deficit. But we’ve hurt the economy in the short run. “[T]he austerity the federal government has enacted has also been a significant drag on short-term economic growth. In 2011, government austerity slowed GDP growth by 0.7 percentage points -- about half of which came from federal spending cuts and half from state/local fiscal consolidation, estimates Dean Maki, chief U.S. economist at Barclays. In 2012, the total drag was 0.3 percentage points, about two-thirds of which came from federal cuts. In 2013, the fiscal drag from government austerity is expected to be between 1.5 and 2.0 percentage points -- depending on whether the full sequester stays in place all year -- the vast majority of which is because of federal spending cuts and tax hikes.” Suzy Khimm in The Washington Post.

Explainer: The U.S. economy isn’t what it used to be. Here are five reasons why. Jim Tankersley in The Washington Post.

Despite student loans, young people are less indebted than they’ve been in 15 years. “Young people are racking up larger amounts of student debt than ever before, but fresh data suggest they are becoming warier of borrowing in general: Total debt among young adults dropped in the last decade to the lowest level in 15 years. A typical young U.S. household--defined as one led by someone under age 35--had $15,000 in total debt in 2010, down from $18,000 in 2001 and the lowest since 1995, according to a recent Pew Research Center report and government data.” Neil Shah in The Wall Street Journal.

WonkTalk: Is America doomed? Ezra Klein and Jim Tankersley in The Washington Post.

The optimistic case for the economy. “Health-care costs are slowing, and not just because of the recession. If the cost controls being rolled out in Obamacare can hold the trend, much in the U.S. economy, from the budget deficit to wages, looks much brighter…Housing is turning around. And if housing turns, then the Federal Reserve's super-low interest rates could really begin to drive a recovery.” Ezra Klein in The Washington Post.

…On that point, there is some good economic news to report. “Manufacturing grew in February at the fastest pace in 20 months, according to a report from the Institute for Supply Management. And a survey from the University of Michigan showed that consumer sentiment rose last month to its highest level since November.Other data showed strength in job growth and the housing market.” The Associated Press.

Ben Bernanke, Janet Yellen grow dove wings. “Yellen did provide some clues to the debate that has divided the Fed: how and when the central bank should end its bond-buying program. Officially, the Fed has said it would continue purchasing Treasury bonds and mortgage-backed securities until there was ‘significant improvement’ in the labor market. Of course, it didn't define what that meant, and minutes of the Fed's policy-making meetings show some officials have already begun calling for a slowdown or outright stop before the end of the year. But Yellen said the labor market is still ‘far from healed.’” Ylan Q. Mui in The Washington Post.

Read: Yellen’s speech transcript, as prepared for delivery.

Obama has a big choice to make: the next head of the Fed. “In these speeches, we have, in effect, a glimpse into the future of the U.S. monetary policy debate. Inflation has been remarkably well-contained, and even the monetary hawks have lately been emphasizing these risks of financial bubbles in arguing against easy money policies. So the debate for the coming years will likely come down to some variety of that which has played out in this round of Fed speeches. So where does Barack Obama come in? Bernanke's term as chairman ends January 31, 2014, less than a year from now. In his decision of whom to appoint to the job, Obama will have to decide which broad philosophy around this question he finds most persuasive.” Neil Irwin in The Washington Post.

Urban interlude: Reinvention in Dayton, OH.

4) Ending fee-for-service in medicine

Is it time to end medical fee-for-service? This commission says so. “The National Commission on Physician Payment Reform is calling for eliminating the fee-for-service model within seven years, starting with a five-year transition period to a blended payment system…The group says there is still a place for fee-for-service and recommends several proposals to update that system. It calls for gradually leveling higher payments for treatments done in a hospital that can be done in a physician's office, using quality metrics more often and encouraging small practices to form virtual partnerships with other offices.” Jennifer Haberkorn in Politico.

Obamacare requires employers to offer insurance. What if it’s too expensive? “Millions of lower-income workers may gain access to employer-sponsored health insurance under the Affordable Care Act--but they may decide not to purchase that coverage. Most of the lowest-income workers currently offered health benefits elect not to enroll, according to a new study from the ADP Research Institute. While the Affordable Care Act does require large employers to offer coverage, this study raises the possibility that Americans may still decide to forgo the option.” Sarah Kliff in The Washington Post.

Why corporate wellness programs aren’t saving a ton of dough. “For most Americans, Safeway does not generally conjure up much by way of thrills or excitement -- it is, after all, a grocery store. Look to the health-policy world though, and some see the grocery chain as the key to bending the health-care cost curve -- and not just by selling healthy foods. Since 2005, the chain has kept its health costs flat by tethering premiums to how healthy employees are -- or, alternatively, how healthy they try to be. The company was among the first to give employees a financial stake in their own care.” Sarah Kliff in The Washington Post.

Adorable animals interlude: This dog needs a playmate.

5) Gun control bill advances

Senators reach bipartisan agreement on gun-trafficking bill. “Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) announced details of the new bill Monday afternoon on the Senate floor, saying that the proposal will help law enforcement officials prosecute gun crimes. The bill would make the practice of gun trafficking a federal crime for the first time, with penalties of up to 20 years for ‘straw purchasers,’ or people who buy a firearm for someone legally barred from doing so -- a group including felons and illegal immigrants. The bill also would punish the person who illegally sells weapons to a straw purchaser.” Ed O’Keefe in The Washington Post.

…And it’s going to a vote on Thursday. “The measure is a marriage of a gun-trafficking bill designed by Senator Patrick J. Leahy, Democrat of Vermont and chairman of the committee, and a similar bill that was being put together between Senators Kirsten Gillibrand, Democrat of New York, and Mark Steven Kirk, Republican of Illinois. It will be co-sponsored by Senators Susan Collins, Republican of Maine, Richard J. Durbin, Democrat of Illinois, and Richard Blumenthal, Democrat of Connecticut. Most significantly, the bill has received intense interest from Senator Charles E. Grassley of Iowa, the top Republican on the Judiciary Committee, who has a strong rating from the National Rifle Association.” Jennifer Steinhauer in The New York Times.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

One study explains why it’s tough to pass liberal laws. Dylan Matthews.

We’ve reduced the deficit, hurting the economy in the short term. Suzy Khimm.

Is fracking a bridge to a clean-energy future? Brad Plumer.

Corporate wellness programs: not quite the cost savers. Sarah Kliff.

The case for economic optimism. Ezra Klein.

WonkTalk: Is the American economy doomed? Ezra Klein and Jim Tankersley.

What if the economy just isn’t its old self? Jim Tankersley.

Profile: Gina McCarthy, the EPA head nominee. Brad Plumer.

Bernanke and Yellen, two doves. Ylan Q. Mui.

3 Fed speeches and Obama’s most important decision of the year. Neil Irwin.