Wonkbook: Bush tax cuts could balance the budget; Obama hints at payroll tax; defunding HCR will be hard
Here's a fact that should dominate much of next week's debate over taxes: Letting the Bush tax cuts expire would be just about enough to hit Obama's goal of balancing the budget (minus interest payments) by 2015. That's all they'd need: One non-act. Better: There'd be no sixty-vote threshold. You'd just need a veto of any extension bills and 34 votes to protect the veto in the Senate. And it's not as if there are no compromises available here. If Congress doesn't want to do it while the economy is weak, but could commit to doing it in two or three years, that would be almost as good.
But nobody thinks it'll happen. With the exception of retiring Sen. George Voinovich, few politicians have broached the possibility publicly. Congress's deficit hawks have not clamored for this idea. Republicans who warn about mounting debt have not embraced it (or, for all their talk of spending cuts, come up with any proportionate to their tax cut plan). Democrats who never wanted Bush's tax cuts and currently support the fiscal commission have no intention of getting behind a tax increase. In Washington, deficits are abstract. Taxes are real. If the much-feared bond market had designed a test to see whether we were serious about reducing the long-term deficit or whether we were just using deficit rhetoric as a partisan cudgel, it couldn't have done better than this. And we're failing.
Welcome to Wonkbook.
Letting the Bush tax cuts expire would close most of the budget deficit in the long run, reports Lori Montgomery: "Official and independent budget estimates show that letting tax rates spring back to pre-Bush levels for all taxpayers would bring the country within striking distance of meeting President Obama's goal of balancing the budget, excluding interest payments on the debt, by 2015...A paper to be released Tuesday by the Center for American Progress (CAP) shows how difficult it would be to stabilize the debt solely through spending cuts. If all the tax cuts were extended, Congress would have to cut $325 billion in 2015 alone to get the deficit down to Obama's target of 3 percent of the gross domestic product. If the cuts were preserved only for the household incomes less than $250,000 a year, as Obama has proposed, Congress would still have to cut $255 billion."
Obama told a CNBC Town Hall may ditch his economic team and back a payroll tax holiday, reports Jonathan Weisman: "Obama also told Scaramucci the White House may still propose a temporary cut to Social Security and Medicare payroll taxes to encourage new hiring. Asked about the future of his economic team, the president praised Treasury Secretary Tim Geithner and National Economic Council Chairman Larry Summers, but he said: 'I have not made any determinations about personnel. I think Larry Summers and Tim Geithner have done an outstanding job, as have my whole economic team. This is tough, the work that they do. They’ve been at it for two years. And, you know, they’re going to have a whole range of decisions about family that’ll factor into this as well.'"
Read a transcript of the event: http://bit.ly/cgbvLR
Defunding health-care reform may be harder than Republicans think, reports Carrie Budoff Brown: "Experts -- and even some Republicans -- say a GOP-controlled Congress next year would have to struggle to erase nearly $1 trillion in health reform spending over 10 years with the flick of a pen. Key parts of the bill, like new Medicaid entitlements, would require free-standing legislation, not merely routine changes during the appropriations process...'I wouldn’t dismiss it, but I would be surprised if it actually happened,' said Gail Wilensky, administrator of the Health Care Financing Administration from 1990 to 1992 under former President George H.W. Bush."
Indie video interlude: Sleigh Bells' "Infinity Guitars".
Still to come: The recession officially ended last summer; Bingaman and Brownback to introduce bipartisan renewable energy bill; genetically engineered salmon nears approval; and a class for kids to learn important Jedi skills.
The recession ended in June 2009, according to the National Bureau of Economic Research, reports Neil Irwin: "In other words, economic activity peaked at the end of 2007, fell for a year and a half, and has been rising since then. But it hasn't risen back to its pre-recession levels yet. Moreover, the committee said, 'any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007.' The committee moves slowly and cautiously in its pronouncements, aiming not to characterize the economy in real time but rather to establish historical benchmarks for when periods of economic expansion and contraction begin and end."
A Wall Street Journal graphic summarizes the Fed's current asset holdings: http://bit.ly/9KOBC9
Bureaucracy is preventing stimulus money from being spent, report Louise Radnofsky: "Weatherization isn't the only stimulus infrastructure project slowed by bureaucracy. Awards worth $8 billion for high-speed rail connections were announced in January, but the Federal Railroad Administration has only distributed 7% of the funds to date. Much of the money is being held up as state and railroad officials struggle to hammer out partnership deals with railroad companies. Few recipients of awards to expand the nation's broadband network have actually started laying cables; the rest are performing work such as environmental assessments and getting local approvals to attach fiber to utility poles."
A major mortgage lender is suspending evictions: http://bit.ly/aG1Rwx
Good bond ratings suggest Europe's bailout is succeeding, reports David Jolly: "The European Financial Stability Facility, as the fund is known, was rated AAA by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. The ratings are preliminary because no member state has yet called on the facility for help, and it has thus issued no debt. 'The central scenario for me and euro zone finance ministers is that we don’t need to become operational,' Klaus Regling, the stability fund’s chief executive, told Reuters on Monday. He said there was no point in the fund’s issuing bonds unless and until it was called upon to help a member state."
Foreign investors may be part of the federal government's GM sell off: http://bit.ly/cVbxEF
Capital gains tax cuts are an effective job creation tool, argues Allen Sinai: "Taken to its logical conclusion, moving to a zero capital gains tax rate would have an even bigger effect, increasing growth in real GDP by over 0.2 percentage points per year and approximately 1.3 million additional jobs per year...The net impact on the federal budget deficit of a reduction in the capital gains tax rate to 0% is a decline in tax receipts of $23 billion per year after the positive effects of stronger economic growth on payroll, personal and corporate income taxes are taken into account."
Gerald Seib sees a test for protectionist politics in Ohio: http://bit.ly/bkF3OQ
Robert Shiller explains why we may be in deep economic pain for another seven years: "Reinharts and Rogoff found, for example, that median annual growth rates of real per capita GDP for advanced countries were one percentage point lower in the decade following a crisis, while median unemployment rates were five percentage points higher. How did this happen? They note that, in general, debt levels and leverage rose during the decade preceding these crises, propelling increases in asset prices for a long time. Reinhart and Rogoff describe a 'this time is different syndrome' during the pre-crisis boom, whereby these bubbles are allowed to continue for far too long, because people think that past episodes are irrelevant."
Great moments in education interlude: Maryland kids learn how to use light sabers.
Jeff Bingaman and Sam Brownback will introduce a renewable energy bill together, reports Josh Voorhees: "Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) and Sens. Sam Brownback (R-Kan.), Susan Collins (R-Maine), Byron Dorgan (D-N.D.) and Tom Udall (D-N.M.) will formally unveil their bill in the Capitol, according to Bingaman’s office. The actual legislation is expected to be a version of the RES that came out of Bingaman’s panel last year, possibly with a few minor tweaks. That bill would require utilities to provide 15 percent of their power from renewable sources like wind and solar by 2021."
Tom Carper and Lamar Alexander's bill targeting power plant emissions is dead: http://politi.co/cy8f2v
Environmentalists are switching to defense, reports Jason Voorhees: "'Our top priority is defeating Proposition 23,' said Tony Massaro, senior vice president of political affairs for the League of Conservation Voters, referring to the California ballot initiative that would undercut the state’s law regulating greenhouse gas emissions. ;That’s our biggest single priority: to hold onto the No. 1 global warming bill in the country.'...Unique or not, the shifting political mood in the country has forced greens’ hands, causing them to reroute money and manpower from challenging industry-friendly lawmakers to protecting their friends in Washington."
Some climate activists are hoping for an Senate Environment Committee without Barbara Boxer: http://politi.co/9mchTg
Freight railroads are opposing high speed rail, reports Jennifer Levitz: "Norfolk Southern Corp., Union Pacific Corp. and other railroad companies are balking at sharing their tracks or rights-of-way with trains that would run between 90 and 200-plus miles an hour. They argue that mixing high-speed passenger trains with slower freight trains would create safety risks, prevent future expansion and cause congestion. Cargo would be pushed to their competitors--trucking firms--the railroads argue, just as freight loads are picking up after the recession. Weekly average carloads in August were the highest since November 2008, according to the Association of American Railroads, the industry's main trade group."
A proposal for a "green bank" is gaining ground on Capitol Hill: http://bit.ly/cmPKcq
Big business is defending California's climate rules, writes Adam Werbach: "As younger workers in forward-looking companies begin to assume management positions, they demand that their employers be ahead of the curve...Companies like General Electric and Google view the clean energy boom as a business opportunity, and must rationalize their policy positions with their business objectives. As new analyst groups, like the Goldman-Sachs Sustain framework, gain more prominence, companies that have more of their portfolio hedged against commodity shocks and climate change will become more highly valued."
Stupid animal tricks interlude: A cat climbs into a pot.
A federal advisory committee is leaning toward allowing genetically modified salmon, reports Andrew Pollack: "Committee members, who were not asked to vote on whether the fish should be approved, did not point out anything about the fish that would seem dangerous, despite one study suggesting a possible increase in the potential to cause allergic reactions. They said the chance the fish would escape into the wild was low...Still some panel members did say the studies the F.D.A. relied on to reach its own conclusion that the salmon would be safe were flawed, often using only a few dozen fish or even fewer."
Democratic senators are targeting specific insurers for rate hikes: http://bit.ly/cT9FSD
Higher drug prices could dull the effect of closing the Medicare "doughnut hole", reports David Hilzenrath: "Beginning next year, at the expense of pharmaceutical companies, millions of senior citizens in the Medicare coverage gap known as the 'doughnut hole' will receive 50 percent discounts off the price of brand-name prescription drugs. The government does not control the underlying prices; the law leaves that to the market. 'There is legitimate concern that some manufacturers will steeply increase the price of drugs in order to offset the cost of the discount to the manufacturers at the expense of both consumers and the Medicare program itself,' the Center for Medicare Advocacy and the Medicare Rights Center said in a letter to the agency that oversees the federal health insurance program."
Republicans are expected to outline specific health-care cuts this week: http://nyti.ms/9nEIlp
Corporations and consumer groups are working together on food safety, reports Alicia Mundy: "The coalition lobbying Monday included the Food Marketing Institute, the U.S. Chamber of Commerce, the Snack Food Association and consumer advocates such as the Consumers Union and the Center for Science in the Public Interest. 'The FDA Food Safety Modernization Act is too important to delay passage any further,' said Scott Faber, a lobbyist for the Grocery Manufacturers Association, at a news conference. The legislation, which has enjoyed bipartisan support, allows the Food and Drug Administration to mandate stricter food-safety standards among producers and gives the agency power to order food recalls. It passed the House more than a year ago."
Spending in an election can't be treated as a normal business decision, writes Lucien Bebchuk: http://bit.ly/bSnEoK
Help for families is in jeopardy due to the recession, writes Nancy Folbre: "Mothers are even less likely than children to receive assistance. According to a recent report from the Institute for Women’s Policy Research, only about 12 percent of impoverished adult women with dependent children reported receiving cash assistance from the program in 2008, with even lower rates typical in most states in the South. Federal block grants to the states to support aid to needy families have declined substantially in inflation-adjusted dollars since 1996, and the cash benefits now provided amount to half or less of the poverty level in all states."
Closing credits: Wonkbook compiled with help from Dylan Matthews and Mike Shepard. Photo credit: White House.
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