Boehner, Reid compete to set agenda

Senate Majority Leader Harry Reid and House Speaker John Boehner are competing to set the order in which votes will be taken on a bill to fund the United States federal government for the next few months. According to an article from CNN, Boehner has threatened to revise the Senate’s version of the bill - which got rid of a controversial provision to remove all funding for the President’s healthcare law - and send it back to the Senate. This would make the government shut down while the bill was in the Senate, making him look less responsible. Reid then tried to make Boehner look responsible by announcing that, if the House rejects this current bill, the Senate has a very slow procedure that will cause the bill to not be passed in time.

Since we can assume that the Senate and House are both split with a large liberal faction, a large conservative faction, and a group of moderates from both parties in the middle, the leader who gets to set the agenda can decide what bill gets passed. Each leader wants the other chamber to have to vote last. If Reid gets to choose, he will force Republicans in the House to choose between shutting down the government or passing a funding bill that allows the President’s healthcare law to go through. If Boehner gets to choose, he will force Democrats in the Senate to choose between shutting down the government and passing a budget bill that does not fund the President’s healthcare law. Just as our model suggests, being the agenda setter in a divided voting body allows the leader to get the outcome they want.

Cap-and-Fail

A hot topic in the news these days is whether the cap and trade approach should be incorporated into the United States budget. Cap and trade works to first set a limit on the amount of pollution emissions (the “cap”) and then to open up a market for different firms to sell and buy pollution permits from each other (the “trade”.) The idea behind this approach is that it is efficient in how it minimizes pollution while internalizing the externality, so that government intervention is kept to a minimum.

The problem with this approach, according to a recent New York Times article, is that it works like a tax, in that it limits firms from producing where they want to produce so they charge a higher price and consumers must pay more, and that it redistributes rights to large firms. The simple idea of cap and trade had twisted into a complex system of exemptions in which “those with the most muscle got the best deals,” coining it the new name “tax-and-redistribution.” Instead of auctioning off these pollutions rights, the government was simply giving away rights to big companies.

Senators Maria Cantwell and Susan Collins worked up a new alternative they called “cap and dividend,” in which permits are auctioned off to firms and then rebates are returned to consumers to make up for the higher costs. The success of this bill passing however, will depend on the elasticity of the senators’ support, which is ironically swayed by large firm lobbying.