Tales from the Trail

from The Great Debate:

Political strategy in the Budget Control Act era

By Keith Hennessey
The opinions expressed are his own.

I cover three topics in this post: what important players won in this deal, the core concepts and tradeoffs within the deal, and what the different strategies might be this Fall under this bill when it becomes law. The President’s priorities

The President knows he will get debt limit increases through early 2013 no matter what House conservatives/Tea Party members do. Those Members can no longer “hold a debt limit increase hostage” before the 2012 election.

We could also describe this as eliminating liquidity risk through 2012.

Assuming someone doesn’t find a way out of the enforcement mechanisms in the bill (1 in 3 chance), there will be at least $2.1 T in deficit reduction over the next 10 years as a result. While I think that’s a big policy benefit, I’m not sure how important that is substantively to the President. (Is he for stimulus? Austerity? Who knows at this point.)

But given his recent public conversion to deficit hawk, the President will undoubtedly stress it publicly over the next 18 months and began doing so last night. At a minimum, the President will benefit politically with deficit hawk centrists, both for the policy result and the achievement of a bipartisan agreement. Prepare to watch the President seize political credit for spending cuts he fought.

The President also has an opportunity to push for tax increases as part of the Joint Committee deficit reduction process this fall. You will hear the corporate jets & Big Oil riffs ad nauseam.

Republican YouCut seeks to shear Mohair from budget

It’s worth about $1 million a year.

For most people that’s a lot of money. But in the context of a $3.7 trillion federal budget and a $1.5 trillion deficit, it’s small potatoes. Except in this case it’s a federal subsidy for mohair and it has more lives than an Angora cat.

Federal subsidies for mohair, which is produced from the hair of Angora goats, began in 1947 because the military was worried that there was not enough domestic wool production to supply its need for uniforms.

The development of synthetic fabrics has long made that concern irrelevant, yet apparently the government still writes checks to mohair producers despite repeated attempts by some lawmakers over the last two decades to get rid of it.

The First Draft: black tie before “Fiscal Responsibility Summit”

While Hollywood strutted the red carpet at the Academy Awards, President Barack Obama hosted a black-tie dinner on Sunday for U.S. governors — who are debating whether it’s a good idea to take federal bailout money — at the White House in advance of a self-described “Fiscal Responsibility Summit” on Monday. The afternoon event is part of the push to sell Obama’s broader economic package before his speech to Congress on Tuesday and the unveiling of his first federal budget on Thursday.

Even before U.S. markets or the White House got going this week, the U.S. banking regulators issued an early morning statement, saying the U.S. government “stands firmly behind the banking system.” The statement added that a new capital assistance program to ensure banks are appropriately capitalized will start on Wednesday.

Meanwhile, a notorious Washington “cold case” appears headed for resolution. The Washington Post and other media report police are seeking an arrest warrant in the death of Chandra Levy. Levy was the government intern from California whose disappearance was the hottest story of summer 2001. Her body was found in the city’s rambling Rock Creek Park.