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Posted at 6:38 AM ET, 01/25/2011

Wonkbook: Social Security safe in SOTU; GOP skeptical of infrastructure spending; Cantor opposes state bankruptcy

By Ezra Klein

Thumbnail image for PH2010012704941.jpg

There are a fair number of speeches that Barack Obama has given that I can recall quite clearly. But the 2010 State of the Union isn't one of them. Looking back, I seem to have liked it well enough. And I apparently thought it had been sold as "a make-or-break speech for the president." But it wasn't. Single speeches virtually never are (for Obama, the 'race' speech in Philadelphia might be an exception). Presidents are too good at speeches to be broken by them, and Washington is too used to speeches to be transformed by them (though there was a time when that wasn't true). And the same goes for tonight's address.

Which is not to diminish the event too much: Tonight's speech will articulate the White House's agenda going forward for the next two years, or at least the next few months. It will lay out the sort of grand economic vision that both the public and the press have been asking for. With Republicans already resisting the speech's anticipated call for new investments, it will draw a clear line in the sand between the two parties on a central matter of economic policy. But for all of the evening's pomp and circumstance, it's worth keeping the power of a speech like this in perspective: New policy will still require the approval of John Boehner and seven or eight Senate Republicans to pass. Voters will still be looking to economic trends when it comes time to judge the president. And in 2012, there will be another State of the Union, and that one, we'll say, will really be make-or-break for the president...

Top Stories

Obama won't use the State of the Union to call for Social Security cuts, reports Lori Montgomery: "President Obama has decided not to endorse his deficit commission's recommendation to raise the retirement age, and otherwise reduce Social Security benefits, in Tuesday's State of the Union address, cheering liberals and drawing a stark line between the White House and key Republicans in Congress. Over the weekend, the White House informed Democratic lawmakers and advocates for seniors that Obama will emphasize the need to reduce record deficits in the speech, but that he will not call for reducing spending on Social Security - the single largest federal program - as part of that effort."

History lesson: The State of the Union over which "all official Washington was agape"!

Obama's infrastructure plans are going to run into a lot of congressional opposition, reports Michael Cooper: "The Obama administration’s priorities for expanding mass transit, passenger rail and what planners call “livability” is likely to be challenged by Republicans in Congress who come from more rural areas with different needs — a trend that gathered steam after the midterm elections. The median Democratic Congressional district now has a population density 11 times as large as the median Republican Congressional district, according to an analysis by Transportation Weekly, a trade publication that focuses on federal transportation spending. That kind of disparity can have big ramifications when it comes to deciding how much federal transportation money should be spent on, say, mass transit instead of highways."

House Majority Eric Cantor signaled the House won't allow states to declare bankruptcy, reports Michael Fletcher: "House Majority Leader Eric Cantor said Monday that he opposes changing the law that would allow fiscally pressed states to seek bankruptcy protection, an idea that has been raised by some conservatives. Speaking to reporters, Cantor, R-Va., also said state governments shouldn't expect Washington to solve their fiscal problems... Currently, cities, companies and individuals are allowed to file for bankruptcy, a legal protection that temporarily frees them from fiscal obligations and allows them to restructure their debts...The idea of giving states that option has been raised publicly by Republican former House Speaker Newt Gingrich and other conservative thinkers who see it as a way to allow states to escape crushing debt with little damage to taxpayers."

Senate reformers are balking at a proposed filibuster compromise, reports Scott Wong: "The three Democrats who proposed sweeping changes to Senate filibuster rules balked Monday at a scaled-down package negotiated by Senate leaders and called for a vote this week on their own reform plan. Sens. Tom Udall of New Mexico, Jeff Merkley of Oregon and Tom Harkin of Iowa are adamant that their proposal can be adopted by a simple majority of 51 senators rather than the usual 67 required for rules changes, using a controversial legislative tool known as the 'constitutional option.'...Others have warned that invoking the constitutional option - and holding a party-line vote on the changes - could come back to haunt Democrats if they lose the majority in 2012, leaving Republicans with broad authority to set rules."

Hard rock interlude: Queens of the Stone Age play "3s and 7s" live on the Late Show with David Letterman.

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

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Still to come: Congressional opposition could sink Obama's infrastructure plans; Republicans are now accusing health care reform of being too pro-business; farm subsidies are testing the resolve of fiscally conservative members of Congress; Carol Browner, Obama's top climate change advisor, is resigning; and a fox eating carrots.

Economy

Obama will only back corporate tax reform if it's revenue neutral, reports Tim Fernholz: "Sources familiar with meetings between Treasury Secretary Timothy Geithner and leaders from business, labor, and academia say the Obama administration is actively interested in a corporate tax overhaul and that the president will nod to the issue in his State of the Union address on Tuesday. But administration officials caution that they won't push for broad reform unless business groups agree to support a revenue-neutral approach -- a tax reform, not a tax reduction. 'We need to test the true appetite of business for reform that simplifies the system and lowers rates without making the deficit worse,' a senior administration official told National Journal on Friday."

House Republicans are facing heavy lobbying from the housing sector to retain a government backer for housing loans: http://on.wsj.com/hjLdgc

Congressional Democrats are making Rep. Paul Ryan's "budget roadmap" the center of attacks, report Jennifer Steinhauer and David Herszenhorn: "Representative Paul Ryan of Wisconsin, the Republican point man on spending cuts and designated responder to the State of the Union address, has emerged as the latest chew toy among Democrats. They spent Monday beginning a campaign to portray him as the architect of fiscal policies that they view as unwise and hope will prove unpopular among voters, including plans to partially privatize Social Security and Medicare... Mr. Ryan’s plan includes an option for retirees to invest some of their Social Security taxes in personal investment accounts and a new program that would give older Americans a fixed payment to buy certified private health insurance in place of traditional Medicare."

Fannie and Freddie have spent millions in taxpayer funds on legal defense: http://wapo.st/fkIbvf

States probably won't need to declare bankruptcy, writes Annie Lowrey: It probably won't ever be necessary for a state to declare bankruptcy--even Illinois or California. The total sums seem enormous and insurmountable on paper--states owe some $3 tillion in unfunded pension obligations, by some estimations. But on an annual basis, the sums seem much more manageable. According to the Center on Budget and Policy Priorities, bond payments remain comfortably within historical levels (4 percent or 5 percent of current state and local expenditures). And most states with serious budget problems have at least a decade to remedy pension and health-care-benefit shortfalls...There's no reason for bond holders to believe they'll be the ones holding the short end of the stick."

Gene Sperling will have more sway on policy than Bill Daley, writes Noam Scheiber: http://bit.ly/gWpXS3

Obama's speech should focus on building human capital, reports David Brooks: "First, government establishes an overall climate, with competitive tax rates and predictable regulations and fiscal balance. Tax rates don’t have to be rock bottom. Companies will pay more if there are other amenities to compensate. But everything should be structured to nurture new business formation. Then government actively concentrates talent. City governments are used to thinking in this way, while national governments lag...Finally, the government has to work aggressively to reduce the human capital inequalities that open up in an innovation economy. That means early and constant interventions so everybody has a chance to participate."

We're not in competition with China, write Ezra Klein: "The hard question, in the end, isn't what to do about China. It's what to do about America. Framing the global economy as a competition rather than a shared enterprise preys on our fear of rising powers such as China and India. But, to the White House, it's for a good cause: It gets America's competitive juices flowing, helping galvanize us into making the changes and investments needed to secure our own future. The true competition that the White House is setting up is not between the economic models of China and the United States, but between the economic policies of Democrats and Republicans."

Obama is giving business the attention they crave without the concessions they want, writes Noam Scheiber: "Despite all the talk about Obama’s political reinvention as we head into the State of the Union, it’s become increasingly clear that Obama isn’t caving to business. He’s shrewdly co-opting it...How did big business get outmaneuvered so easily? To understand this, you have to go back to the charges the corporate world began leveling against Obama in the summer of 2009. The first was that his reform agenda was stifling the recovery by creating massive “uncertainty.” This was spectacularly dishonest, for reasons my colleagues and I have laid out. But at least it was substantive: Business wanted less regulation and Obama was proposing more.

Adorable animals eating food adorably interlude: A fox eats carrots.

Health Care

Republicans' replacement health plan will seek to cut costs, not expand coverage, report David Nather and Carrie Budoff Brown: "The GOP’s main goal is cutting costs for people who already have health coverage...The differences could be stark. The closest model to what Republicans are suggesting now — a substitute plan they offered in the House in November 2009 — would have covered just 3 million of the uninsured. In fact, there is no House Republican plan yet, but the broad outlines of a GOP plan are becoming visible. The goals given to four committees drafting the plan suggest that Republicans will lean heavily on old GOP standbys, like cutting costs through medical malpractice reform, using small-business purchasing agreements to lower premium costs and putting patients with preexisting conditions into high-risk coverage pools.

Republicans are attacking health care reform for not being tough enough on business, reports David Nather: "Republicans used their response to President Barack Obama’s weekly radio address Saturday to launch a novel attack on health care reform: It goes too easy on some businesses. Without calling out business directly, Sen. John Barrasso of Wyoming attacked a series of 'special Washington waivers' that helped preserve so-called 'mini-med' plans -- health insurance with very narrow benefits that mainly enroll low-wage and temporary workers...Some of the waivers have gone to health plans offered by labor unions, like the United Federation of Teachers Welfare Fund. But most of them went to restaurants and other businesses with low-wage workers, as well as insurers like CIGNA that offer these kinds of limited-benefit plans."

The health care law sets up nonprofit "co-ops" to fail, writes Sabrina Corlette: "Essentially the co-op provision requires the Department of Health and Human Services to pay up to $6 billion in grants and loans for the creation of state-licensed nonprofit health plans, beginning in 2013...Setting up a new health plan in any market is extremely difficult. In addition to the significant capitalization needs, plans have a chicken-and-egg problem. They need sufficient enrollees to entice providers to participate and make price concessions. But most people and businesses don't want to sign up for a plan unless it's got an adequate provider network. Yet instead of giving co-ops every possible tool to succeed, the law does a number of things to hold them back."

Many state Medicaid programs are expanding access to birth control: http://politi.co/i5Rnpa

The Affordable Care Act offers a lot of room for high-deductible plans, writes Jon Cohn: "Look closely at the standards for coverage in the insurance exchanges: The minimal, or bronze, insurance option allows out-of-pocket spending of up to $12,500 for a family of four. The actuarial value is 60 percent, which means, very roughly, that the plan only covers about 60 percent of the average person's medical bills. Those are some pretty high deductibles! I haven't made the apples-to-apples comparison and I don't know anybody who has, but I'm pretty sure the overall exposure is comparable to what you get in a Health Savings Account, which is the model Douthat and conservatives generally say they want."

Domestic Policy

House Republicans are reticent to tackle farm subsidies, reports David Rogers: "Net cash farm income for 2010 is projected to finish near $92.5 billion -- a 41 percent increase even after subtracting payments from the government. Yet conservatives are almost tongue-tied, as seen last week with the Republican Study Committee’s proposal to eliminate relatively modest subsidies for an organic food growers program without mentioning the nearly $5 billion in much larger government direct payments to farm country -- including to the home districts of many of the RSC’s members. Indeed, 24 of the RSC’s estimated 165 members hail from the House Agriculture Committee, and total annual direct payments to their districts run more than $1.09 billion a year."

Internet providers are already being accused of violating the FCC's new rules: http://wapo.st/hncYe8

Obama has selected his new solicitor general, reports Jerry Markon: "President Obama intends to nominate White House official Donald B. Verrilli, Jr. as Solicitor General, the government's legal advocate before the U.S. Supreme Court, a White House official said Monday. Verrilli, a Deputy Counsel to the President, would replace Supreme Court Justice Elena Kagan, who served as Solicitor General before being nominated for the court. The job is among the most prestigious in the Washington legal world and has been held by luminaries such as Theodore B. Olson, who represented the government before the high court during the George W. Bush administration. Verrilli previously worked for the Justice Department as an associate deputy attorney general focusing on domestic and national security policy issues."

Federal workforce cuts will mostly hurt taxpayers, writes Joe Davidson: http://wapo.st/f5Rh26

Talk of cutting Social Security is needlessly cruel, writes Bob Herbert: "Without Social Security today, nearly half of all Americans aged 65 or older would be poor. With it, fewer than 10 percent live in poverty. The Center on Budget and Policy Priorities tells us that close to 90 percent of people 65 and older get at least some of their family income from Social Security. For more than half of the elderly, it provides the majority of their income. For many, it is the only income they have. When you see surveillance videos of some creep mugging an elderly person in an elevator or apartment lobby, the universal reaction is outrage. But when the fat cats and the ideologues want to hack away at the lifeline of Social Security, they are treated somehow as respectable, even enlightened members of the society."

Great moments in sports interlude: The best putt-putt golf shot ever.

Energy

Carol Browner, Obama's top advisor on climate issues, is leaving the administration, report Anne Kornblut and Steve Mufson: "Carol Browner, an key adviser to President Obama on energy and environmental issues, said Monday night that she plans to leave the White House. Her departure comes as something of a surprise. Browner had been a key part of the team helping to deal with and stop the Deepwater Horizon oil spill in the Gulf of Mexico last year. And she had been deeply involved in congressional negotiations over climate legislation...Environmentalists regarded her as a key liaison to the West Wing, and her leaving is certain to add to the anxiety of many on the political left already nervous about Obama's outreach to industry."

The TVA is researching charging stations for electric cars: http://bit.ly/hjUr8S

A new study raises doubts about alternative fuel programs in the military, reports Tom Zeller: "The United States would derive no meaningful military benefit from increased use of alternative fuels to power its jets, ships and other weapons systems, according to a government-commissioned study by the RAND Corporation scheduled for release Tuesday...In particular, the report argued that the Defense Department was spending too much time and money exploring experimental biofuels derived from sources like algae or the flowering plant camelina, and that more focus should be placed on energy efficiency as a way of combating greenhouse gas emissions. The report urged Congress to reconsider the military’s budget for alternative-fuel projects."

Sen. Richard Lugar wants to work with the administration on energy independence, reports Andrew Restuccia: "One day before President Obama’s State of the Union address, Sen. Richard Lugar (R-Ind.)...said he is planning to push broad energy legislation based on a bill he introduced last year. But the details of that legislation are still up in the air. Lugar has yet to determine whether one of the central components of the bill, the so-called 'diverse energy standard,' will be included in the legislation he introduces. The diverse energy standard included in the energy bill Lugar introduced last year would require 20 percent of the country’s electricity to come from renewable energy, nuclear, and coal with carbon capture technology by 2020."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Toni L. Sandys/the Washington Post Photo.

By Ezra Klein  | January 25, 2011; 6:38 AM ET
Categories:  Wonkbook  
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Next: Column: The problem with competitiveness -- and with Canada

Comments

Oh my gawwwd!

For over a year and a half I've been saying here that Obama is politically incompetent.

But now with this revelation he will declare SS safe, it appears he has pulled off a political master stroke.

He has shot two birds with one stone on this one.

Bird 1: There were rumors recently Obama would announce cuts to SS in the SOTU. By doing this he has apparently lured the GOP into a trap which he has now sprung tight. The GOP has selected Ryan to give their followup to Obama. You know, the man whose plans will severely curb SS in coming decades. What a contrast: Obama the SS protector and the GOP, the party that wants to cut SS. Talk about the gift that keeps on giving!

Bird 2: Obama has now marginalized the media's reporting on him. Talk about getting a story wrong. Trust in media's ability to report on political stories has just plummeted. This makes it look like Obama's mistrust in media is firmly credible.

P.S. I'm sort of pulling for Ryan's plan despite Obama's master stroke here. Our nation is too corrupt and too adventurous overseas for all this money to be spent. I read a stpry today about how taxpayers are still sending $100s billions to banks, and we aren't being told about it.

Posted by: lauren2010 | January 25, 2011 8:08 AM | Report abuse

I happen to agree (largely) with Ezra Klein's assessment of US/China competition. There's also a note of agreement from Senator Jim Webb (D-VA) -- who, by the way, remains considerably more popular among Virginia conservatives than is his current Republican opponent. Webb recently wrote that "Although China has a high net trade balance with us, they don’t have the highest balance of trade in the world. Germany does. They do this with quality products. They take care of their people. They export and they service the exports. The Germans do this with mid-sized corporations; they find niche manufacturing markets. We can do that here in America."

And from Senator Mark Warner (D-VA) in an interview with the Daily Caller: “What I hope he [The President] says – and I think this will make some folks on my side upset – even if he has an innovation and growth agenda … just growth alone isn’t going to get us out of this problem,” Warner said in an interview, referring to the nation’s looming deficits and debt. “We’re going to have to take on the size and role of government,” the first-term senator said, adding that “it’s the stuff that’s popular” like entitlement and defense spending that are the biggest drivers of the federal government’s unfunded spending.

Finally, Senate Democrats apparently now realize that passage of filibuster reform implies the end of the so-called progressive agenda: under proposed filibuster reform -- the product of the same folks who thought the PPACA would lead to savings, job creation, and electoral victory -- there is no way for the shrinking faction of progressive loyalists to block the will of the people.

Posted by: rmgregory | January 25, 2011 8:55 AM | Report abuse

Suspend the Davis Bacon Act. Thanks.

Posted by: krazen1211 | January 25, 2011 9:43 AM | Report abuse

Here's that story I mentioned....

http://economistsview.typepad.com/economistsview/2011/01/zero-interest-policies-as-hidden-subsidies-to-banks.html

"The authorities do not want to be charged with “nationalization” or “socialism.” So the banks have to be given the funds outright."

Posted by: lauren2010 | January 25, 2011 10:09 AM | Report abuse

Obama is finally learning, better late than never. You would have to wonder why on earth anybody would think he's stupid enough to take the hits on SS for the GOP. On the other hand, he's done some pretty dumb things in the last two years.

You were wondering about the effect of having Daley as COS. Maybe this is one good thing?

Posted by: johnmarshall5446 | January 25, 2011 11:06 AM | Report abuse

About state bankruptcy:

I would like to see someone introduce a bill that would limit the way the Federal government gives and takes money from the states. I would like to see the donor states get back, by law, at least 90% of what they send to Washington. And the receiver states get a maximum of about 110% of what they send.

I would like to see that for purely political reasons. It would stop the Right Wing from their remarks about the solvency of California, NJ and NY. And the Representatives from many Red States would stop many of their comments about welfare Washington provides.

And it would be a wedge issue along state lines, as opposed to political party lines. Which would make it fun to watch.

Posted by: grat_is | January 25, 2011 11:22 AM | Report abuse

Dick Lugar is just looking to safeguard the future of ethanol. He couldn't give a hoot about renewable energy.

Posted by: johnmarshall5446 | January 25, 2011 11:40 AM | Report abuse

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