Oct. 3, 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.

Want to know why the shutdown -- and the coming debt-ceiling fight -- will be so difficult to resolve? Just ask Marlin Stutzman, a conservative congressman from Indiana.

"We're not going to be disrespected," he told the Washington Examiner's David Drucker. "We have to get something out of this. And I don't know what that even is."

Stutzman is right. The fight over the shutdown has become unmoored from any particular policy demands the GOP believes it can secure. It's become an issue of pride and politics. At this point, Republicans simply need something so they can tell themselves, and their base, that they didn't lose. They don't know what that something is, exactly. But it needs to be something.

By the same token, the Democrats literally can't give them anything without losing. Not until the shutdown ends, anyway. And, on CNBC on Wednesday, President Obama added that the Democrats can't give them anything until the debt ceiling is raised. "Until we get t[the shutdown] done, until we make sure that Congress allows treasury to pay for things that Congress itself already authorized, we are not going to engage in a series of negotiations," Obama said.

It's this dynamic that makes 2013 so much more dangerous than 2011. The negotiations in 2011 weren't zero sum. For one side to win, the other didn't have to lose. That's because the negotiations in 2013 were over policy -- in particular, over a broad deficit-reduction package. Since both sides wanted to reduce the deficit, it was conceivable that both sides could walk away feeling like they'd won some and lost some.

That's not true in 2013. The battle this year really is zero-sum. For one side to win, the other has to lose. And that's because this fight isn't over policy. It's over principle. In particular, it's over whether to legitimate for the GOP to demand concessions in return for keeping the government open and paying the country's bills.

Unlike a grand bargain over the deficit, that's a "yes/no" question. As Stutzman puts it, Republicans either get something out of this, or they end up feeling humiliated. Democrats either hold firm on this, or they end up feeling like they've created a terrible precedent that'll make governing impossible going forward.

A few weeks back Hill staffers mused about whether there was some way to manage negotiations such that Republicans could credibly tell their base they were negotiating over the shutdown and the debt ceiling and Democrats could credibly say they weren't negotiating over the shutdown and the debt ceiling. As of yet, nobody has discovered that how to create that quantum dealmaking structure. It's possible nobody will. But that means one side or the other has to clearly lose in order for the shutdown to end. And neither side wants to lose. Nobody wants to be disrespected.

Wonkbook's Number of the Day: 3. We're three days into the shutdown. Yeah, it's a bit of an obvious NotD.

Wonkbook's Graph of the Day: Due to the debt ceiling, the U.S. government is now paying less to borrow for six months than for one month. (Economists call this an "inverted yield curve" for Treasuries, in case you were wondering.)

Wonkbook's Top 5 Stories: 1) three days into the shutdown; 2) Obamacare overloaded; 3) Pelosi knocks at Goodlatte's door; 4) hiring slows, and that's no surprise; and 5) the NSA news keeps coming.

1) Top story: On the third day of shutdown, John Boehner gave to me...

Focus shifts to looming debt-ceiling deadline as shutdown talks at White House go nowhere. "The fight over the government shutdown quickly moved on Wednesday to a bigger showdown over raising the nation's debt ceiling, as the first White House talks to solve the fiscal standoff failed to make any progress toward a deal...On Capitol Hill, senior Republicans began to suggest that a broad agreement to overhaul entitlements and the tax code could be used as a resolution to both the shutdown and debt limit clash. But Democrats view that approach as hostage taking, and say Congress must reopen the government and authorize additional borrowing before serious negotiations can occur." Zachary A. Goldfarb in The Washington Post.

Whip count: How many House Republicans support a 'clean' CR?

...So is a 'grand bargain' the only way out? "Many pragmatic House Republicans have come to a simple conclusion: Navigating their way out of this fiscal mess won't be easy. They think their best chance to fund the government, raise the debt ceiling and extract any concession from President Barack Obama is to strike a big budget deal...When House Speaker John Boehner raised the idea at a White House meeting Wednesday with Obama and congressional leaders, "everybody laughed at him because they've heard this song and dance so many times before," said a Democratic aide briefed on the meeting." Jake Sherman and Carrie Budoff Brown in Politico.

Explainers: Decoding the jargon of a government shutdown. And 21 surprising effects of the government shutdown you haven't heard about. Jeff Simon and Caitlin Dewey in The Washington Post.

Shutdown won't hit the economy right away, but when it does, here's what that will look like. "The first signs of major economic distress should crop up here in the Washington region, which depends more on federal employment and contracting than any major metropolitan area in the country. That's not likely to happen until furloughed workers start pulling back on spending to prepare for one or more full lost paychecks...The Department of Veterans Affairs has said it will run out of money to pay disability claims or make pension payments for up to 3.6 million veterans if the shutdown lasts for more than two or three weeks. The Small Business Association has stopped issuing new loan guarantees, except for those relating to natural disasters." Jim Tankersley and Antonio Olivo in The Washington Post.

Look: This map shows how widespread the shutdown's impact is. Niraj Chokshi in The Wall Street Journal.

How both Democratic and Republican economic confidence has slipped -- in one chart. "There seems to be little that Democrats and Republicans agree upon in the fiscal standoff that has triggered a federal government shutdown and could bring the nation to the brink of its first default. But this much is clear: Their confidence in the economy has dropped in the last month, as the debate has ramped up. As a new Gallup poll shows, economic confidence among Democrats declined by nine points in September, while GOP confidence dropped four points. Confidence among independents dipped by two points." Sean Sullivan in The Washington Post.

@pbump: Can't believe some people think the Republican caucus shouldn't get a little something out of this whole shutdown thing. Rude.

Why big business failed to stop its worst nightmare in D.C. "[F]or all of Fix the Debt's efforts, the grand bargain never happened, and Washington is in worse shape than ever. Now, the government is actually shut down -- an outcome Republicans and Democrats avoided in 2011 -- and there's another debt-ceiling deadline fast approaching. CEOs are left wondering why their voices seem to have gone unheard...That feeling of neglect speaks to deep changes in the economic and political landscape since the financial crisis. Business leaders, after years of strong-arming legislators to get the small things they wanted, are at a loss for how to deal with the political reality they helped create." Lydia DePillis in The Washington Post.

How might Americans react? A guide from 1995. "The impact of a government shutdown will be sharper, with 800,000 workers set to be furloughed. But if 1995 experience is any guide, a relatively small share of the public will feel direct impact. Just 12 percent in Post-ABC polls during and after the shutdowns said they were personally inconvenienced, with between 4 and 6 percent saying it was a major inconvenience." Scott Clement in The Washington Post.

John Boehner, between a rock and a hard place on shutdown and debt limit. "House Speaker John A. Boehner (R-Ohio) has at his disposal the political tools to reopen the government at a moment's notice. But he would have to rely on an uneasy coalition of Democrats and a few moderate Republicans to pass a bill to fund federal agencies and national parks for the next six weeks. Such a move could provide a political escape hatch for Republicans who have been shouldering much of the public blame for the shutdown...The speaker's closest allies say he cannot afford to defy those on his right flank by ending the shutdown with largely Democratic votes." Paul Kane in The Washington Post.

Sen. Reid leading Democrats on shutdown. "Mr. Reid has emerged as the GOP's new public enemy No. 1 because he is the man driving his party's hard bargain against Republican leaders in the legislative back-and-forth over funding the government. Democrats have refused to negotiate with Republicans as long as they insist on delaying or defunding the 2010 health-care law. More than any other Democrat, Mr. Reid seems to be setting the tone of his party in the showdown over the shutdown." Patrick O'Connor and Janet Hook in The Wall Street Journal.

Interview: Grover Norquist on Ted Cruz: 'He pushed House Republicans into traffic and wandered away.' Ezra Klein in The Washington Post.

...And the shutdown is a victory of sorts for the Tea Party. "A core group of House Republicans elected in the tea party wave of 2010 has largely succeeded in its aim of scaling back federal spending, despite fervent opposition from President Obama and the Democratic controlled Senate...Even before the shutdown that began at midnight Monday, the tea party efforts greatly reduced the pace of federal spending. To the dismay of many Democrats and supporters of a robust federal government, the consequences of tea party efforts are likely to remain even when the shutdown ends." Zachary A. Goldfarb in The Washington Post.

Interview: With the Center for American Progress's Michael Linden, 'We've already essentially adopted that Ryan budget.' Dylan Matthews in The Washington Post.

Who gets hurt from a shutdown? The poor. "The federal government's partial shutdown began pinching a number of aid programs, with preschool activities, welfare benefits and vouchers for infant formula all seeing cuts...Many Head Start preschool programs, which offer educational programs for children and a variety of support services for their families, had secure funding, but those whose annual checks were scheduled for Oct. 1 delivery were being closed or were in jeopardy...The Special Supplemental Nutrition Program for Women, Infants and Children, known as WIC, provides vouchers for infant formula and food to low-income families with young children. Some programs were making do with money left in their accounts from the prior fiscal year. Others are stuck without funding." Laura Meckler and Rebecca Ballhaus in The Wall Street Journal.

Shutdown makes U.S. more vulnerable to terrorist attacks, intelligence officials warn. "Director of National Intelligence James R. Clapper Jr. testified that the furloughs of civilian employees could have an "insidious" effect, degrading intelligence-gathering capabilities in ways that may not become fully clear for weeks or months...[F]igures released this week by Clapper's office indicate that 72 percent of the intelligence community's civilian workforce has been temporarily sent home, creating holes in virtually every agency and department." Greg Miller in The Washington Post.

@pourmecoffee: The Astronomy Picture of the Day website is down due to shutdown. YOU MONSTERS LOOK WHAT YOU HAVE DONE!

Wall Street fears go beyond shutdown. "With Washington preoccupied by the government shutdown, Wall Street is shifting its attention to an even more worrisome situation: the possibility that the government could run out of money within the next few weeks, forcing an unprecedented default on its debt...[S]ome observers outside government in Washington and on Wall Street, citing a game theorylike approach, suggest that the president's position is more tactical than fundamental, since raising the possibility of a way out for the White House like the constitutional gambit would take the heat off Republicans in Congress to act on its own before the Oct. 17 deadline." Nelson D. Schwartz and Charlie Savage in The New York Times.

Debate: Can Obama ignore the debt ceiling? The New York Times.

...And guess what's coming? Even more budget cuts. "[T]here is growing evidence that the sequester's sting is going to get much worse with the next round in January...Many Republicans tend to worry more about the impact on defense from the next round of sequester cuts. Defense programs would see a reduction of almost $20 billion to $498 billion in 2014 from the $518 billion level authorized for 2013." John D. McKinnon in The Wall Street Journal.

@jbarro: The idea that resolving the shutdown becomes easier if you try to reform entitlements at the same time is so insane.

JOHNSON: The U.S. makes itself unexceptional. "[S]tupid fiscal policy threatens to bring the United States down. The primary cause of any public finance crisis is not the ability of people to pay their taxes, it's their willingness to pay their taxes -- or, as in the current situation in the United States, the willingness of their elected representatives to finance the government. And this willingness is always tied closely to the legitimacy of the government. Does enough of the population think that the people with political power won it in a fair manner and, consequently, are they willing to accept policies with which they do not necessarily agree?" Simon Johnson in The New York Times.

MATTHEWS: The shutdown is the Constitution's fault. "This week's shutdown is only the latest symptom of an underlying disease in our democracy whose origins lie in the Constitution and some supremely misguided ideas that made their way into it in 1787, and found their fullest exposition in Madison's Federalist no. 51. And that disease is rapidly getting worse...Scholars of comparative politics have shown that presidential systems with a separation of executive and legislative functions, like America's, are considerably more likely to collapse into dictatorship than are parliamentary systems where the executive and legislative branches are merged. That's because there are competing branches of government able to claim democratic legitimacy and steer the ship of state at the same time -- and when they disagree profoundly, there's no real mechanism for resolving the dispute." Dylan Matthews in The Washington Post.

CHAIT: Why the shutdown is leading to default. "The House leadership has evinced every tic of classic aggressive blunderers. The House leaders fell into their approach, being driven by internal political logic rather than any coherent strategy. They have no plan for success except hoping the opponent capitulates, without having any reason to believe it will happen. They have even fallen for the classic fallacy of believing they have already given up too much to back out now without a reward." Jonathan Chait in New York Magazine.

@SuzyKhimm: The reason we are here now, with debt ceiling fight & shutdown, is because Congress spent two years failing to get a grand fiscal bargain.

DIONNE: Why this shutdown is different. "It's different because the new health-care system got up and running on the very day the shutdown began. Conceding to the GOP would take health insurance away from people and ruin a program for which we now know there is a public appetite. It's not going to happen. It's different because Obama is different. In the past, he was always ready to negotiate and typically went out of his way not to cast showdowns in partisan terms. This time, he's freely calling out "House Republicans" as the culprits...And it's different because the Republicans have no coherent strategy." E.J. Dionne in The Washington Post.

Music recommendations interlude: The Beach Boys, "Shut Down," 1964.

Traffic interlude: This city has the most roundabouts in the U.S. And an extraordinarily low rate of traffic accidents.

2) Obamacare overloaded

Obamacare's biggest problem right now isn't glitches. It's traffic. "If you've been trying to buy health insurance coverage on the Obamacare marketplace, you're probably quite familiar with the screen above. It asks potential shoppers to hang on a moment because there are "a lot of visitors on the site."...Some of the Web developers I've spoken with who have walked me through some of the back-end error messages on the site generally agree that system overload is the big problem for those trying to sign up right now...The federal government says it's fixing this problem, adding more capacity for HealthCare.Gov by the hour. Outside experts estimate that increasing capacity for a project like this should take hours or days, but not necessarily weeks." Sarah Kliff in The Washington Post.

...And here's how officials are responding. "A Health and Human Services official said Wednesday that the government would be adding computer servers to the system to make it more robust...New York State's exchange doubled its computer capacity from Tuesday to Wednesday, said Donna Frescatore, the executive director, leading to smoother operation of a system that had been overwhelmed on the first day...In Maryland, with one of the most trouble-plagued state-run systems, enrollment counselors said they had to resort to paper applications for a second day because the state exchange Web site remained so slow." Richard Perez-Pena, Abby Goodnough, and Robert Pear in The New York Times.

Obamacare leaves millions of poor without insurance. "A sweeping national effort to extend health coverage to millions of Americans will leave out two-thirds of the poor blacks and single mothers and more than half of the low-wage workers who do not have insurance, the very kinds of people that the program was intended to help, according to an analysis of census data by The New York Times...The 26 states that have rejected the Medicaid expansion are home to about half of the country's population, but about 68 percent of poor, uninsured blacks and single mothers. About 60 percent of the country's uninsured working poor are in those states. Among those excluded are about 435,000 cashiers, 341,000 cooks and 253,000 nurses' aides." Sabrina Tavernese and Robert Gebeloff in The New York Times.

Watch: Cute animals are promoting Obamacare. Colbert is not amused. Sarah Kliff in The Washington Post.

What impact has Obamacare had on jobs? "To Speaker John A. Boehner, it is "job-killing." To Senator Ted Cruz, it is "hurting the American people." To Senator Mitch McConnell, it is a "big reason we are turning into a nation of part-time workers." But to many independent economic analysts, it remains too early to tell how the sweeping Affordable Care Act will affect the jobs market...Economists said that in time the law might have an enormous and varied impact on the labor market, including on the behavior of millions of workers and businesses. Part-time work may increase, as may worker mobility, job-switching and entrepreneurship rates. For some workers, hours may decrease. But the current data do not show the health law affecting job growth, wage growth or the proportion of part-timers in the labor force." Annie Lowrey and John Harwood in The New York Times.

WESSEL: Obamacare, gamechanger? "What if Obamacare actually works? More precisely, what if the new health-insurance marketplaces called exchanges work?...Given the current unpopularity of Obamacare, this may sound far-fetched. But flash back to the 2006 launch of the Medicare prescription-drug benefit." David Wessel in The Wall Street Journal.

MULLIGAN: Obamacare will make the poor lazy. "Regardless of whether redistribution is achieved by collecting more taxes from families with high incomes, levying employment taxes on businesses, providing more subsidies to families with low incomes, or all of the above, an essential consequence is the same: a reduction in the reward for working. In a National Bureau of Economic Research paper issued in August, I quantify the combined effect of the two redistribution waves and higher payroll taxes on the financial reward for working." Casey Mulligan in The Wall Street Journal.

Humor interlude: "Weiner Takes All: A Panel Discussion of People Named Weiner and Wiener."

3) Pelosi knocking at Goodlatte's door

What's in the House's latest immigration reform proposal? "Their plan is to take the comprehensive immigration reform legislation that passed the Senate with wide bipartisan margins in June, but without the so-called border surge amendment added in the final days of the floor debate. In its place, Democrats have inserted a bipartisan border-security bill whose chief sponsor is House Homeland Security Committee Chairman Mike McCaul (R-Texas)...[I]t's clear that Democrats -- who see immigration reform as a winning political issue -- want to show they're trying to advance a measure while the GOP is barely moving." Seung Min Kim in Politico.

Explainer: More on the similarities and differences between the House Democrats' and the Senate's approach to immigration reform. Brad Plumer in The Washington Post.

House Democrats unveil immigration plan in hopes of pressuring Republicans. "GOP aides quickly dismissed the proposal and said it was unlikely to get a vote in the chamber, reducing the bill to a symbolic attempt to keep immigration reform alive while Washington focuses on the government shutdown...Democrats fear that the Republican-controlled House is intent on killing momentum for immigration reform by dragging out the process. Pro-immigration advocates are planning a day of action Saturday in dozens of cities across the country, followed by an immigration rally and concert on the Mall on Tuesday. Organizers said the concert would take place on the West Lawn of the U.S. Capitol if the federal government remains closed next week." David Nakamura in The Washington Post.

Good questions interlude: Why read books if we can't remember what's in them?

4) Hiring slows, but who can blame them?

U.S. businesses add 166k jobs. "Private-sector employment gains picked up slightly in September, as businesses added 166,000 jobs, according to a hiring report that has taken on more importance as a timely measure of the labor market amid the likely delay of the government's monthly statistics...The August ADP employment increase was revised to 159,000 from 176,000 reported a month ago...The general tone of the ADP report indicates hiring by the private sector eased last month, perhaps limited by worries about the federal budget standoff and rising interest rates." Kathleen Madigan and Ruth Mantell in The Wall Street Journal.

SEC data to drive debate about high-speed trading overhaul. "In a speech Wednesday, SEC Chairman Mary Jo White said facts -- not anecdotes -- must drive the ongoing debate about whether to revamp the structure of the market, a venue dominated by high-speed traders and plagued in recent years by a series of disruptive technology glitches that have shaken confidence in the market's integrity. The agency's quest for data-driven policy decisions should be made easier by a technology adopted in January that enables the SEC to stream up-to-the-minute trading activity directly from the nation's exchanges into its Washington headquarters, White said. By analyzing those massive feeds, the SEC already has gleaned unexpected insights about the market's plumbing and debunked some assertions about trading behavior." Dina ElBoghdady in The Washington Post.

Guess which city's housing prices rose twice as fast as New York's in the last 13 years? "Washington, D.C. This, from a new paper out of the Cleveland Fed, is what happens when your city's economy booms while most of the country slogs through two recessions." Jim Tankersley in The Washington Post.

Wow just wow interlude: 21 amazing examples of shadow art.

5) The bottomless pit of NSA surveillance

NSA had test project to collect data on Americans' cellphone locations, director says. "The National Security Agency began a test project in 2010 to collect data on ordinary Americans' cellphone locations, but later discontinued it because it had no "operational value," the agency's director said Wednesday. In response to questioning at a Senate hearing, Gen. Keith Alexander said that the secret effort ended in 2011 and that the data collected were never available for intelligence analysis purposes." Ellen Nakashima in The Washington Post.

The email service that resisted the NSA. "On Aug. 8, Mr. Levison closed Lavabit rather than, in his view, betray his promise of secure e-mail to his customers. The move, which he explained in a letter on his Web site, drew fervent support from civil libertarians but was seen by prosecutors as an act of defiance that fell just short of a crime. The full story of what happened to Mr. Levison since May has not previously been told, in part because he was subject to a court's gag order. But on Wednesday, a federal judge unsealed documents in the case, allowing the tech entrepreneur to speak candidly for the first time about his experiences." Nicole Perlroth and Scott Shane in The New York Times.

NSA to hire token civil-liberties watchdog. "[T]he NSA has announced the creation of a new position, the "Civil Liberties & Privacy Officer," a "completely new role" in which the officer will "serve as the primary adviser to the Director of NSA for ensuring that privacy is protected and civil liberties are maintained" in the course of NSA activities." Denver Nicks in Time Magazine.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Obamacare's biggest problem right now isn't glitches. It's traffic. Sarah Kliff.

Grover Norquist on Ted Cruz: 'He pushed House Republicans into traffic and wandered away.' Ezra Klein.

House Democrats have released their own immigration bill. Here's what it does. Brad Plumer.

Guess which city's housing prices rose twice as fast as New York's in the last 13 years? Jim Tankersley.

The shutdown is the Constitution's fault. Dylan Matthews.

Why big business failed to stop its worst nightmare in D.C. Lydia DePillis.

Democrats can use this one weird trick to end the government shutdown. Steven Pearlstein.

It's not just D.C. Here's where the shutdown is hitting across the country. Brad Plumer.

'We've already essentially adopted that Ryan budget.' Dylan Matthews.

Et Cetera

Tom Clancy dies. Julie Bosman in The New York Times.

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