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Posted at 7:54 AM ET, 02/ 4/2011

Wonkbook: $32 billion in cuts; decreased mortgage backing; efficiency initiative

By Dylan Matthews

Matthews is writing Wonkbook while Ezra is traveling.

Top Stories

House Republicans have proposed $32 billion in cuts, reports Lori Montgomery: "House Republicans pledged Thursday to slice more than $32 billion from agency budgets over the next few months, firing the opening shot in a battle over government spending that is likely to dominate debate heading into the 2012 presidential campaign. The figure, announced by House Budget Committee Chairman Paul Ryan (R-Wis.), represents an unprecedented rollback that would force some domestic agencies to immediately slash spending by as much as 20 percent, independent budget analysts said...A group of conservative Republicans is demanding even deeper cuts and vowing to offer a plan to slash $100 billion from agency budgets when House leaders bring a spending bill to the floor Feb. 14."

The White House will propose reducing government backing for mortgages, report Zachary Goldfarb and Brady Dennis: "The Obama administration is likely to recommend reducing the size of mortgages eligible for government backing, according to current and former officials, a move that could make getting a home loan in high-priced areas such as the Washington region more expensive. Administration officials, who are preparing a white paper on overhauling the nation's housing finance system, are looking at scaling back the support provided during the mortgage crisis to help the ailing real estate market...The report, which will in part address the fate of the troubled mortgage giants Fannie Mae and Freddie Mac, is scheduled to be released as soon as next week."

President Obama unveiled a new energy efficiency plan in a speech yesterday: "Today, here at Penn State, I’m announcing what we’re calling the Better Buildings Initiative, and it’s a plan to dramatically improve the energy efficiency of America’s businesses over the next decade...What we’re saying to people is if you’re willing to make your buildings more energy-efficient, we’ll provide new tax credits and financing opportunities for you to do so. And this plan would build on the HOMESTAR program we proposed last year, which would have provided rebates of up to $3,000 for homeowners to make their own homes more energy-efficient.  And these are upgrades that could save families hundreds of dollars each year in energy costs."

Music video interlude: The Go! Team's "Ready to Go Steady".

Still to come: Tim Geithner's talks on corporate tax are getting mixed reactions; Virginia's attorney general wants quick Supreme Court review of health care reform; Harry Reid may ask for earmarks next year; public health groups are backing EPA action on climate change; and two corgis play tetherball.

Economy

Stakeholders are skeptical that Tim Geithner's corporate tax talk will result in action, reports Brady Dennis: "Timothy F. Geithner can't seem to talk enough these days about corporate tax reform. From D.C. to Davos, the Treasury secretary has chatted up chief executives and academics, bankers and labor groups, Republicans and Democrats, all in the name of fixing a tax code that most everyone agrees could use a major overhaul...Some of those who attended the powwows have left with the impression that little real action lies ahead...Others, however, see an administration determined to pursue real changes."

Tim Geithner says Sen. Pat Toomey's default-avoidance ideas would be "quite harmful if enacted".

Ben Bernanke thinks the unemployment recovery will take years, reports Neil Irwin: "The economy is poised to grow more rapidly this year, Federal Reserve Chairman Ben S. Bernanke said Thursday, dismissing fears that rising fuel prices will trigger broad-based inflation. But he emphasized that it will still take several years before the unemployment rate comes down to normal levels. Speaking at the National Press Club and, in a rare step, taking questions from journalists, Bernanke gave a mixed assessment of the nation's economic prospects but left little doubt that he views getting the job market on track as the top priority for the Fed."

Behavioral economics supports government welfare spending, writes Mike Konczal: "Shouldn’t loss aversion, overconfidence, time-inconsistent discounting and difficulty following statistical probabilities lead a behavioral person to be made better off by universal health care and old age pensions? The probability of managing an individual investment portfolio as well as estimating the chances and subjective experience of being destitute in old age is difficult to estimate individually and the tail risk of the loss that occurs in poverty would be particularly painful. The same statement should be true for health care."

A new paper suggests another economic crisis could come in four years, writes Annie Lowrey:

Tax expenditures should be capped alongside spending, writes Howard Gleckman: "If Congress is going to freeze direct spending, why shouldn’t it also cap those tax subsidies that are essentially identical to spending? These tax expenditures are effectively spending programs run through the revenue code. They include the tax exclusion for employer-sponsored health insurance, the mortgage interest deduction, tax-free interest on state and local bonds, and dozens of others. Think of it this way: Congress could write you a check for, say, $300, to help underwrite your monthly mortgage payment, or it could give you a deduction that cuts your taxes by the same $300. Economically, it makes no difference. "

Adorable animals being athletic interlude: Two corgis play tetherball.


Health Care

Virginia's attorney general wants the Supreme Court to review it now, reports Rosalind Helderman: "Virginia will ask that the U.S. Supreme Court immediately review the state's constitutional challenge to the federal health-care overhaul, a rare legal request to bypass appeals and ask for early intervention from the nation's highest court, Attorney General Ken T. Cuccinelli II said Thursday....The Justice Department will oppose the motion, saying that the case should be fully heard by lower courts before the Supreme Court takes action. The high court has granted such requests infrequently, and many experts said they think Cuccinelli's filing is a longshot."

The administration's head of health care IT is leaving.

The Obama administration is advising states on how to save money on Medicaid, reports Robert Pear: "Fearing wholesale cuts in Medicaid by states with severe budget problems, the Obama administration told governors on Thursday how they could save money by selectively and judiciously reducing benefits, curbing overuse of costly prescription drugs and attacking fraud. However, the administration refused to say whether it would allow states to adopt stricter eligibility standards that would, in effect, throw low-income people off the Medicaid rolls and eliminate their insurance coverage...Governors said the ideas, though constructive, were not nearly enough."

If the individual mandate is unconstitutional, so is Social Security privatization, writes Jonathan Cohn.

Domestic Policy

Harry Reid might request earmarks next year, reports Manu Raju: "It turns out Senate Majority Leader Harry Reid may seek earmarks next year, after all.  Speaking to reporters Thursday in the Capitol, Reid responded to the earmark ban announced by the Senate Appropriations Committee this week, saying it amounts to a 'one-year moratorium' necessary to 'get the appropriations bills done, and with [President Barack Obama’s veto threat] hanging over, we can’t get them done,' he said. Asked if he might seek earmarks in 2012, Reid told POLITICO, 'Sure.'"

A quarter of for-profit college students who take out loans default on them.

The GOP spending plan includes billions in defense spending, reports Tim Fernholz: "House Republicans...have included a surprise cut of $16 billion for defense and other security programs...Because House appropriators have the authority to set specific limits for all categories of discretionary spending, they could choose to ignore Ryan's call to allocate some of the cuts to security programs. Alternatively, the security cuts could simply hit programs that Defense Secretary Roberts Gates has already targeted for cancellation, such as the Marine Corps' Expeditionary Fighting Vehicle produced by General Dynamics and the Army's surface-launched advanced medium-range air-to-air missile developed by Raytheon."

Patent reform has hit a wall.

Simpsons interlude: Every McBain movie clip, edited together.

Energy

Public health groups are backing the EPA's climate regulations, reports Andrew Restuccia: "A coalition of public health organizations in the coming weeks plans to step up efforts to oppose legislation that would block or delay Environmental Protection Agency climate rules. The American Lung Association recently hired Peter Iwanowicz, a former New York state environmental official, to head up a new campaign to pressure lawmakers to reject efforts to limit EPA's authority to regulate greenhouse gas emissions. Iwanowicz is working to build a coalition of public health groups to inform lawmakers about the health risks of increased levels of pollutants like carbon dioxide in the atmosphere."

The government is backing an $1 billion plan to make gasoline from wood.

Events in Egypt may spur Senate action on energy, reports Darren Goode: "The heads of the Senate Energy and Natural Resources Committee said today that rising tensions in Egypt should spur action on reducing foreign oil imports. But what was evident at a hearing in the panel this morning on the outlook of the energy and oil market was that the direct effect of Middle East protests on oil and gas prices is murky at best and may be short-lived...Energy and Natural Resources ranking member Lisa Murkowski (R-Alaska) said the rising tensions in Egypt and elsewhere in North Africa should be 'a wake-up call' for the United States to pursue an energy policy 'that promotes all forms of energy' domestically."

A GOP House member is backing anti-EPA legislation despite voting for cap and trade in 2009.

Dylan Matthews is a student at Harvard and a researcher at The Washington Post.

By Dylan Matthews  | February 4, 2011; 7:54 AM ET
 
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Comments

"The high court has granted such requests infrequently, and many experts said they think Cuccinelli's filing is a longshot."

That's what they said about Bush v Gore, Citizen's United, and the recent gun law decisions.

Posted by: lauren2010 | February 4, 2011 9:29 AM | Report abuse

"That's what they said about Bush v Gore, Citizen's United, and the recent gun law decisions."

What moron said that?

Posted by: krazen1211 | February 4, 2011 10:19 AM | Report abuse

"However, the administration refused to say whether it would allow states to adopt stricter eligibility standards that would, in effect, throw low-income people off the Medicaid rolls and eliminate their insurance coverage...Governors said the ideas, though constructive, were not nearly enough.""

That last bit is by far the most logical way to reduce deficit hiking Medicaid spending.

Posted by: krazen1211 | February 4, 2011 10:22 AM | Report abuse

"What moron said that?"

I agree all those constitutional "scholars" who claimed the Justices were beyond politics and activism leading up to those cases are indeed morons.

Posted by: lauren2010 | February 4, 2011 10:26 AM | Report abuse

$16 billion isn't enough of a cut for defense spending. If Republicans want to be taken seriously as fiscally responsible they need to have that just be a drop in the bucket. They need to stop the crap lines about "if we stop this multibillion dollar project that no one wants it'll cost jobs". Sorry that's a load of crap. Then they can realistically go after entitlement reforms that are needed. Attack your own pet projects first and then the naysayers can't touch you when you attack their pet projects.

re: reduced government backing of mortgages. Its about time! Only about 10 years too late.

Posted by: visionbrkr | February 4, 2011 10:27 AM | Report abuse

"If the individual mandate is unconstitutional, so is Social Security privatization, writes Jonathan Cohn."

Believe that would be consistent. My sense is that the mandate is constitutional, in the sense that the constitution doesn't do much to limit government anymore.

"The truth, I think, is what I said yesterday: Some of the Affordable Care Act's critics are mere opportunists"

Would agree.

"while the rest are more extreme libertarians who oppose all mandatory schemes of social insurance."

Would also agree.

I'm fine with the implied trade - don't force me to buy products from health insurance companies, and I won't force you to buy products from Wall Street.

"But even the hard-core libertarians understand political reality. Social Security is too sacrosanct to attack, politically and constitutionally, so they will make do with privatizing it."

Well, not so much hard-core libertarians. Those types tend to oppose mandates of all stripes. I would agree that many pragmatic libertarians were in favor of privatizing Social Security for that reason.

And this is the sort of dilemma you get into if you are guided by expediency rather than principle.

Posted by: justin84 | February 4, 2011 10:28 AM | Report abuse

With these activist conservative judges nowadays, does anyone believe the Obama admin will go to court arguing that SS is unconstitutional if the mandate is?

I doubt they are "that" stupid.

Posted by: lauren2010 | February 4, 2011 10:29 AM | Report abuse

"The government is backing an $1 billion plan to make gasoline from wood."

Please, just stop with the ethanol subsidies.

If it makes economic sense, you don't need subsidies to make it happen.

Posted by: justin84 | February 4, 2011 10:33 AM | Report abuse

"If it makes economic sense, you don't need subsidies to make it happen."

There are many hidden subsidies. The DoD budget, for example, provides subsidies to the oil industry because the DoD in large part protects oil shipments.

Also, airlines would have a hard time making profits if they also had to build their airports.

And truckers would be out of business if they had to build their own roads.

And railroads were given large amounts of land for free.

The energy industry also benefits from special tax breaks and in many cases does not pay for royalties for resources taken from the commons.

So while what you said is a nice sound bite, it is unrealistic. I do agree though we pay far too many subsidies.

At this point I am hoping the Rand Paul's of America succeed with their plans to bring America back to an agrarian and peaceful society by forcing a balanced budget.

Posted by: lauren2010 | February 4, 2011 10:42 AM | Report abuse

"The economy is poised to grow more rapidly this year, Federal Reserve Chairman Ben S. Bernanke said Thursday, dismissing fears that rising fuel prices will trigger broad-based inflation."

I love Ben in a big way, but this is sheer nonsense. The ten year Treasury is about 3.6 this morning, and has been moving up all week at a time when in theory it should have been going down as more bidders see it as a safe haven internationally.

The fact that it went up instead says that everybody at the top levels of finance see inflation as a problem, even by the end of this year.

Posted by: johnmarshall5446 | February 4, 2011 12:01 PM | Report abuse

"The heads of the Senate Energy and Natural Resources Committee said today that rising tensions in Egypt should spur action on reducing foreign oil imports"

If you could ask me what one phrase to ban from our American discourse it would be that one above, reduce our dependence on foreign oil imports. When we first started hearing it in 1973, we imported about 35% of our oil needs. Now, it's about double that.

Despite everything that we consider semi-catastrophic in the world and the economy today, few of us who were around then would argue that the world was a better place in 1973.

We'll use the oil until it's either substantially reduced in supply by exhaustion or until it makes economic sense to switch to an alternative. We'll NEVER EVER reduce our dependence on foreign oil, as long as we are still using oil in any major way in the economy! It doesn't matter at all where the oil comes from.

Posted by: johnmarshall5446 | February 4, 2011 12:11 PM | Report abuse


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Posted by: evayard | February 5, 2011 3:45 AM | Report abuse

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