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Obama supports the spending bill. Is he making a huge mistake?

"Hoo boy" is right.
"Hoo boy" is right.
Chip Somodevilla/Getty Images

Details keep trickling out about the House-Senate spending package, or "CRomnibus." It weakens school lunch regulations. It repeals part of the Dodd-Frank financial reform law. It increases contribution limits for political parties. It prevents marijuana legalization in Washington, DC despite an overwhelming referendum vote in favor.

If you're Barack Obama, or a liberal Democrat generally, most of these riders are setbacks, in some cases significant ones. Indeed, Obama's condemned the Dodd-Frank and campaign finance provisions. He could, in theory, reject the deal and demand that Congress send him a bill without changes to Dodd-Frank, or one that doesn't meddle in DC's affairs, etc. And yet he has come out in favor of House passage of the bill.

Is he making a massive mistake?

The case for a veto

india coal

Coal plants in developing countries like India (the pictured coal truck is in Ahmedabad) are getting a boost. (Sam Panthaky/AFP/Getty Images)

The basic case for a veto is that there's a whole lot of bad stuff in the deal. Let's do a brief rundown.

Financial reform: The spending deal repeals Section 716 of the Dodd-Frank act. That provision bans FDIC-insured banks from trading "custom swaps" like the Credit Default Swaps that helped generate the financial crisis. That means taxpayer money wouldn't be backing up particularly risky financial wagers. The goal, as economist Joseph Stiglitz put it, is that "banks will be forced to behave like banks, focusing on extending credit in a manner that builds economic strength as opposed to fostering worldwide economic instability." Without Section 716, banks are free to make risky bets that put taxpayers and the financial system as a whole at greater risk.

Marijuana legalization: On November 4, 69.4 percent of Washington, DC voters backed a referendum legalizing marijuana. The ballot measure didn't provide a mechanism for legal sales, but the DC Council was set to implement regulations and taxes similar to those in Washington and Colorado. The spending deal bars DC from implementing the ballot initiative or setting up a legal sales system. Leaving aside the merits of marijuana legalization, this is a pretty egregious way of disenfranchising DC voters, and it's prima facie offensive for representatives from the rest of the country to be overruling DC's citizens and elected officials.

Campaign finance reform: Currently, individuals are barred from giving more than $32,400 a year to a political party committee. The spending deal allows contributors to earmark donations for presidential conventions, national party headquarters buildings, and election recounts. Those contributions will be subject to higher limits. The net effect is that individuals can now, in practice, give $324,000 per year. That's a major step back from the McCain-Feingold campaign finance reform law, which was meant to curb party fundraising.

School lunch regulations: The Healthy, Hunger-Free Kids Act in 2010, backed by First Lady Michelle Obama, put in place new rules requiring grains in school lunches to be "whole grain-rich" and limiting the salt content of meals. The spending deal delays the latter requirement, and exempts schools from the whole grain rule if they can demonstrate they're having trouble finding acceptable whole-grain products. It's unclear how much effect those regulations were set to have, but it's hard to see how the spending deal's changes will improve school nutrition.

Obamacare tinkering: One of the most important rules in Obamacare requires insurance companies to keep their "medical loss ratio" (MLR), or the share of their premium revenue that goes to medical care rather than to profits and administration, at above 80 or 85 percent (depending on the plan). For-profit plans can count spending to improve health-care quality toward their MLR, even if it's not actually medical care, but not-for-profits (the biggest of which is Blue Cross/Blue Shield) can't; the tax code already favors them and the law's designers didn't want to give them another leg up. The spending bill gives not-for-profits the same allowance for quality improvement spending, in what many allege is an act of cronyism toward BC/BS.

Coal abroad: Earlier this year, the Obama administration issued regulations limiting financing for coal-fired power plants abroad. The spending deal bars the Export-Import Bank and the Overseas Private Investment Corporation from implementing those rules. It's not the biggest deal for climate change, but it certainly doesn't help.

Sleepier truckers: The spending deal reverses a regulation limiting truckers to 70 hour workweeks, to prevent drowsy driving, and enabled workweeks as long as 82 hours. This goes against the advice of safe driving advocates and the Transportation Department.

Too low spending: The other problem with the deal is that it codifies spending levels worked out by Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) last year, which are historically low for non-defense discretionary spending. If you think we need to be investing more in infrastructure or pre-K education or social safety net programs, that's bad news.

The case against a veto

thad cochran

Sen. Thad Cochran (R-MS), expected to chair the Senate Appropriations Committee next year. (Justin Sullivan/Getty Images)

The basic case against a veto is: yes, this is all very bad, but how exactly does a veto get us a better deal?

We have less than a month until the next Congress takes office. That means a new Republican majority in the Senate and a bigger Republican majority in the House. Is that Congress going to be any likelier to let marijuana legalization happen in DC, or keep Dodd-Frank as is, or reverse any of the problematic provisions in the spending deal?

Sure, there are still a few weeks of a Democratic Senate, which could conceivably pass a better bill. But there's still a chance in that case that House Republicans will insist on a status-quo stopgap bill to last through January, then using their total control of Congress to pass what will be, from Obama's perspective, an even worse package.

"There are a variety of things in the bill that are troubling," Center on Budget and Policy Priorities head Robert Greenstein tells me, "but I think the bottom line is that it could have been a lot worse, we don't want a government shutdown, and if one rejects the bill it's not going to get any better in the next round."

On the other hand, Obama will still have to deal with a Republican Congress's spending demands next year at some point. It's not clear that doing so in September rather than January or February will get him a better deal. And there's always the chance that a veto will cause Republicans to just back down. They decided that a shutdown over immigration was not politically worthwhile, and it's hard to imagine one over letting rich people give more money to campaigns and make riskier financial bets would be more favorable to them. If the choice is between a clean spending bill through January or February and then a more Republican-friendly bill, and the current spending bill with all its flaws through September and then a more Republican-friendly bill, it's not clear which is better for Obama.

The other reason, much less significant, to sign the bill is that there are a few — not many, but a few — riders that don't suck. Funding for crime victims is quadrupled, through a program that's particularly good at assisting community organizations serving domestic violence victims. The DEA is barred from raiding medical marijuana businesses that are legal in the states they're located. Those are both significant positive changes, and one of the ways a future deal could get worse is by stripping them.

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