Wonkbook: Energy bill cometh; Dems rallying to Kagan; Oil regulators get split in two
The action today is in the Senate (and that's not just because the House and White House didn't tell me what was on their schedules). Elena Kagan will spend her day meeting with senators; the senators will spend their day voting on amendments to financial reform; and John Kerry and Joe Lieberman will spend their day trying to sell their new, Lindsey Graham-less climate bill. Oh, and Neil Armstrong will testify before the Commerce Committee.
Welcome to Wonkbook.
Jeanne Cummings reports on a draft version of the Kerry-Lieberman energy bill: According to the summary of the bill, roughly two-thirds of the revenues generated by the new law would be passed back to consumers through energy bill discounts or direct rebates. The legislation would also provide assistance to businesses that are heavy energy users or trade sensitive.
The vast majority of the revenue envisioned in the legislation would come through a variety of programs aimed at putting a price on carbon emissions. However, the draft version offered scant details about how those programs would work. For instance, to put a price on the carbon in exhaust emissions, the legislation is expected to set a cap on them and require transportation firms to buy permits for each ton of carbon emissions. But those details are not in the summary.
Democratic senators are rallying round Elena Kagan, reports Manu Raju: “She’s a Democrat’s Democrat,” said Sen. Ted Kaufman (D-Del.), a liberal member of the Judiciary Committee. Some abortion-rights activists are worried about a memo Kagan authored in 1997 urging President Bill Clinton to support a compromise ban on late-term abortions to avoid a standoff with Republicans in Congress. But Sen. Barbara Boxer (D-Calif.), a leader in Congress for abortion rights, downplayed the memo in an interview with POLITICO Tuesday, saying that the compromise included an exception in cases where a mother’s health was in danger. “That was definitely something that everybody had supported at that time,” Boxer said.
Asked what gave her assurances that Kagan would uphold Roe v. Wade, Boxer said: “I have no reason to think anything else except that she would be a very strong supporter of privacy rights because everyone she worked for held that view.”
The agency that regulates (or was supposed to regulate) offshore oil drilling is being split in two, report Siobhan Hughes and Stephen Power: The Interior Department plans to announce Tuesday its intent to split the Minerals Management Service into two divisions, one focusing on gathering royalties from oil and gas companies and another focused on safety inspections. An Interior Department official confirmed the plan. Interior Secretary Ken Salazar will make an announcement at 1 p.m. EDT.
Google-will-save-journalism interlude: Find out how.
Table of Contents: Congress set to expand the child-tax credit (and more economic news); Senate passes Fed audit and rejects Fannie and Freddie reforms (and more FinReg news); energy bill is not kind to offshore oil drilling (and other energy news); Elena Kagan was a lawyer for the Washington Post (and other Kagan news); and CBO estimates potential discretionary costs for health-care reform (and other health care news).
Members of Congress are trying to expand the child-care tax credit, reports Martin Vaughan: "A bill introduced Tuesday in the U.S. House of Representatives would give middle-class working parents a larger tax credit to offset child-care costs, following a similar proposal from U.S. President Barack Obama...It would allow a family with two children making $50,000 to claim a tax credit of up to $2,100 for child-care costs, while under current law the same family could receive a maximum credit of $1,200."
Europe is bedeviled by its bailouts, reports Stephen Findler: "Fiscal responsibility in the euro zone was meant to be guaranteed by the European Stability and Growth Pact aimed at limiting government budget deficits to 3% of gross domestic product and their debt to 60%. But, in practice, the pact had no bite. Now, in the space of two weeks, prospects for fiscal discipline have taken two further severe blows: the €110 billion rescue package for Greece and the mammoth bailout assembled over the weekend. These packages circumvented rules that many people had assumed prohibited bailouts within the euro zone. They also weakened market incentives for governments to get their houses in order."
Greece's current problems and the US's long-term problems are basically the same, writes David Leonhardt: The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today. The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.
We, the people, are.
Bernanke is defending the swap lines to Europe, reports Luca di Leo: "Sen. Richard Shelby, the top Republican on the Senate Banking Committee, said at the end of the closed-door meeting that Mr. Bernanke had warned the European crisis could have 'ramifications' for the U.S. banking system...Sen. Bob Corker (R., Tenn.) said the Fed's swap lines are just a liquidity tool between central banks and not a loan by U.S. taxpayers, a point he said Mr. Bernanke made during the meeting. Mr. Bernanke was given a lot of time to explain the facility and there wasn't a pushback from senators, he added.
Steve Pearlstein details his plan to eliminate the deficit: http://bit.ly/9dK3zx
The Bush tax cuts on the wealthy should be extended until the economy recovers, writes Martin Feldstein: President Obama proposes to increase tax rates on high-income households while making the existing tax rates permanent for taxpayers below the top tax brackets. While the increase would hit only a relatively small fraction of all households, that group represents a large share of total taxes and of private spending. Raising their tax rates would be a substantial blow to overall spending and therefore to GDP growth. Small business investment and hiring would also be adversely affected because half of all profits, including most of small business income, is taxed at personal rates rather than at the corporate rate.
The recession has made for a fractured economy for Millenials, writes Ronald Brownstein: "Millions in the generation are navigating the transition to adulthood through the howling gale of the worst economic downturn since the Depression. Federal statistics tell a bracing story. The unemployment rate among 20-to-24-year-olds stood at nearly 16 percent in March, more than double the level of three years earlier, before the recession began. For those 25 to 29, unemployment stood at 11.5 percent, also more than double the level of three years ago. For teenagers, 20-something African-Americans and Hispanics, and young people without a college degree, the unemployment rates spike as high as 28 percent -- debilitating levels of the kind that Americans haven't seen in decades."
Nostalgia interlude: Ben Folds Five covers Elliot Smith.
The Senate agreed to audit the Fed and rejected a proposal to remove Fannie and Freddie from federal conservatorship, reports Brady Dennis: The Fed amendment was submitted by Sen. Bernard Sanders (I-Vt.) and co-sponsored by colleagues on both sides of the aisle. It gives the Government Accountability Office expanded power to audit the Fed and requires the central bank to disclose details about firms that received emergency aid during the financial crisis.…Meanwhile, in a mostly party-line vote later Tuesday, 56 to 43, Democrats defeated a GOP effort to include a provision in the financial overhaul bill to wind down the government's role in Fannie Mae and Freddie Mac.
Centrist Democrats want the federal consumer regulator to be able to preempt state regulators, reports Silla Brush: Four centrist Senate Democrats are leading an effort to modify the Wall Street overhaul bill to give the federal government greater power than states on consumer regulations. Democratic Sens. Tom Carper (Del.), Mark Warner (Va.), Tim Johnson (S.D.) and Evan Bayh (Ind.) are supporting an amendment that would give federal regulators more power to pre-empt state consumer financial regulations. They are joined by Republican Sens. Bob Corker (Tenn.) and John Ensign (Nev.) on an amendment filed this week.
One trader may be responsible for last week's stock crash, report Edward Wyatt and Graham Bowley: Gary Gensler, the chairman of the Commodity Futures Trading Commission, said at a Congressional hearing on Tuesday that during that crucial time period, the futures trader, whom he would not identify, accounted for about 9 percent of trading volume in the most actively traded stock-index derivative contract, known as the 500 e-mini futures contract.
All of the trader’s orders were to sell, Mr. Gensler said, while most of the other 250 traders who were active in the same market that day were both buying and selling securities. As the trader’s orders went through, the futures index on the Chicago Mercantile Exchange began to plummet.
FDIC wants banks to submit "living wills", reports Michael Crittenden: "Federal Deposit Insurance Corp. staff on Tuesday proposed requiring roughly the 40 largest banks to submit detailed plans of how they could be split off from their parent company and be wound down by federal regulators. The plans would include detailed information on a bank's exposure to various counterparties, its capital structure and whether it is systemically important to the broader economy."
The energy bill will limit drilling expansion, reports Jeanne Cummings: The massive oil spill in the Gulf of Mexico has prompted the sponsors of an energy and climate reform bill to limit the expansion of offshore oil drilling included in the legislation scheduled for release Wednesday. According to sources, a plank that would have allowed drilling in the eastern part of the gulf has been dropped, which could ease filibuster threats from Sen. Bill Nelson (D-Fla.). The revisions will also give the Department of Interior new power to assess the environmental impact of drilling.
Companies exchanged blame for the BP spill before the Senate, report Siobhan Hughes and Corey Boles: "Executives of the three main companies connected with the Gulf of Mexico oil spill pointed fingers at each other in Senate testimony Tuesday...Senators pressed executives from BP PLC, the well's owner, Transocean Ltd., the rig owner, and Halliburton Co., a major drilling operations contractor, for answers as to what caused the explosion that ultimately sank the Deepwater Horizon rig. In response, the company executives highlighted questions about another company's performance."
But some GOP senators didn't want the executives present at all, reports Jake Sherman: "While Democrats blasted the oil drilling industry and its regulators at a Tuesday afternoon hearing, a few Senate Republicans wondered why oil executives even needed to come to Washington. Oklahoma Sen. Jim Inhofe, the top Republican on the Senate Environment and Public Works Committee, insisted that top executives from BP, Halliburton and Transocean 'should be spending their valuable time assisting with the response effort' rather than testifying before the Senate."
Not-so-adorable-now interlude: Babies are not so cute when viewed through night-vision goggles.
Elena Kagan performed well as a lawyer for the Washington Post, writes Al Kamen: Fact is, Kagan is a brilliant lawyer and we at In the Loop think she's eminently qualified for the court. We know this because she worked on a couple cases for The Washington Post 20 years ago when she was at Williams & Connolly.
Ivy League culture on the Supreme Court runs deep, report Sarah Kaufman and Dan Zak: In the current climate, diversity of one kind (gender, racial or ethnic) seems to outweigh diversity of another (economic, geographic or experience outside the law). Gone are the days when a Supreme Court justice could be plucked from outside the East Coast, Ivy-centric ranks. In the '20s and '30s, Warren E. Burger combined a day job at an insurance agency with night school at St. Paul College of Law in Minnesota and went on to become chief justice. Sandra Day O'Connor was born, raised and educated west of the Mississippi. She grew up on an Arizona cattle ranch without electricity or running water, graduated from Stanford Law School and became the first female justice in 1981.
Kagan may not have single-handedly turned Harvard Law around, reports Laura Meckler: The case for Ms. Kagan as the primary healer on the once-divided campus is sometimes overstated. Much of the work to defuse the bitter atmosphere, which included ideologically driven standoffs over whom to hire, took place under Ms. Kagan's predecessor, Robert Clark, dean for 14 years. He calmed tensions and expanded the faculty. Those trends accelerated under Ms. Kagan's leadership. Charles Fried, solicitor general under President Ronald Reagan and a Harvard Law faculty member since 1961, said Mr. Clark "was trying, but it was a struggle every time." Ms. Kagan, he said, "was just incredibly politically skillful" at recruitment and at selling faculty on her choices.
He also credits her with arranging a faculty lounge so it offered free lunch and large tables, where faculty could sit and get to know one another. "It was an absolute stroke of genius," Mr. Fried said.
Elena Kagan knows -- or knew -- that Elena Kagan should be forthcoming before the Senate, writes Ruth Marcus: Reviewing Yale law professor Stephen Carter's book about the Supreme Court nomination process, "The Confirmation Mess," Kagan concluded that the real mess was "not that the Senate focused too much on a nominee's legal views, but that it did so far too little." As she wrote in the University of Chicago Law Review, "When the Senate ceases to engage nominees in meaningful discussion of legal issues, the confirmation process takes on an air of vacuity and farce, and the Senate becomes incapable of either properly evaluating nominees or appropriately educating the public."
New Yorkers like Elena Kagan aren't "ordinary Americans," writes Kathleen Parker: President Obama has made clear his desire to nominate justices who are in touch with "ordinary Americans."...Enter Kagan?
Certainly New York City dwellers would argue that they struggle with ordinary concerns, just in a more dense environment. But New York, like other urban areas, tends to be more liberal than the vast rest of the country. More than half the country also happens to be Protestant, yet with Kagan, the court will feature three Jews, six Catholics and nary a Protestant. Fewer than one-fourth of Americans are Catholic, and 1.7 percent are Jewish.
Elena Kagan is the best that libertarians and conservatives can hope for from Obama, writes Ilya Somin: There is at least a small chance that Kagan's left-wing critics have divined her true views correctly. Her First Amendment scholarship, for example, suggests skepticism about some liberal views. In one of her articles, she rejects the standard left-wing argument for banning "hate speech": the claim that it can be suppressed because of the harm that it might cause to women or racial minorities.
In another piece, she expresses skepticism about claims that the Constitution gives government wide-ranging power to restrict campaign-related speech by corporations and some other interest groups, in order to redress supposed imbalances of political influence, a position that has become orthodox on the legal left. Both articles are sufficiently equivocal that it is not easy to divine Kagan's ultimate views. However, the interpretation given here is consistent with that of several other scholars who have considered Kagan's work, including libertarian First Amendment expert Eugene Volokh of UCLA, and liberal law professor Marvin Ammori.
Kagan is no conservative or libertarian. But she might be less liberal than administration supporters hope.
Facebook-is-watching-you interlude: A cool chart that shows how steadily Facebook has encroached on our privacy in recent years.
CBO estimates potential discretionary spending for health-care reform at $115 billion, reports Ricardo Alonso-Zalvidar: "President Barack Obama's new health care law could potentially add at least $115 billion more to government health care spending over the next 10 years, congressional budget referees said Tuesday. If Congress approves all the additional spending called for in the legislation, it would push the ten-year cost of the overhaul above $1 trillion - an unofficial limit the Obama administration set early on."
The Center for Budget and Policy Priorities thinks people are misunderstanding discretionary-cost estimates: Scroll to the seventh "claim." http://bit.ly/bZvVDy
The White House is gearing up a campaign to defend health care reform, reports Shailagh Murray: The Obama administration's campaign to sell the new health-care law to a skeptical public is beginning to take shape, with a focus on short-term changes that kick in before the November midterm elections. On Saturday, President Obama chose health care as the subject of his weekly radio address, passing over more immediate concerns like the oil spill, the attempted Times Square terrorist attack and the financial overhaul bill now before the Senate. And in a May 10 letter to congressional leaders, Health and Human Services Secretary Kathleen Sebelius outlined specific health-care benefits that are available now or will be soon -- in some cases ahead of schedule.
Have you read 'Landmark,' the Washington Post's book on the health-care bill? http://amzn.to/b9lBzW
Some in Congress are trying to expand health care transparency, reports Jennifer Haberkorn: "Rep. Steve Kagen (D-Wis.), a physician, has introduced a bill that would require all health care providers — from hospitals to insurance companies — to disclose publicly all prices on a continual basis...The bill’s backers say that consumer prices would be lower if companies had to disclose them publicly. It is unclear how likely it is that the bills would make it to the House floor this year, but similar pieces of legislation have been introduced by Republicans, signaling a chance for bipartisan support."
Closing credit: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Scott J. Ferrell/congressional Quarterly Photo
May 12, 2010; 7:15 AM ET
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