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Wonkbook: GOP doubles down on Bush tax cuts; possible recess appointment for Warren; EPA vote

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Republicans spent much of yesterday walking back John Boehner's conciliatory comments on the Bush tax cuts. Mitch McConnell and the Senate GOP, in particular, made it clear that either everyone -- including the rich -- get their tax cuts, or no one does. It's good to see American politicians so deeply concerned with inequality, though rare to see that concern focus mainly on the treatment of the very rich. Either way, this sets up a possible fight in which Republicans don't budge and, buoyed by poll numbers showing extension of the cuts for the wealthy is unpopular, neither does the White House. But unlike a normal legislative battle, no agreement doesn't mean no change. Absent a compromise, we could see all the cuts simply expire.

There's also talk that the White House is considering a recess appointment for Elizabeth Warren, though it would be over Chris Dodd's strong objections. The White House is now denying the reports. And keep an eye on the upcoming vote to strip the EPA of its power to regulate carbon. There's little chance that even a successful effort could overcome the president's veto, but Republicans' increasing insistence on this could make it a major issue if they capture one or both houses of Congress in November's election.

Welcome to Wonkbook.

Top Stories

House and Senate Republicans are rejecting John Boehner's offer to vote for Obama's tax proposal, report Shailagh Murray and Lori Montgomery: "McConnell's bill would permanently reduce the estate tax, as well as codify Bush-era reductions in income tax rates and the alternative-minimum tax - an addition that would push the total cost of the package to well more than $4 trillion by 2020. House Minority Whip Eric Cantor (R-Va.) echoed that view, vowing in a statement to 'do everything in my power to stop President Obama and Speaker Pelosi from raising taxes on working families, small-business people and investors.'"

There's buzz that Elizabeth Warren may receive a recess appointment, reports Brady Dennis: "The Treasury secretary has interim authority, under the far-reaching financial overhaul bill recently signed into law, to set up the new regulator. Putting Warren in charge of that effort would, at least temporarily, avoid the uncertainty of trying to force her nomination through a divided Senate. People familiar with the deliberations caution that President Obama has yet to make a final decision on the matter, and it is still plausible that Obama could nominate Warren outright for the job or that he could settle on another candidate. "

But the White House firmly denies it: http://politi.co/aDHSUI

An amendment stripping the EPA's authority on greenhouse gasses will likely receive a vote Thursday, reports Darren Samuelsohn: "Such an amendment has a serious chance of passing given widespread backing on the issue from Republicans and moderate Democrats -- so much so that environmentalists were asking committee leaders to punt on the markup entirely...Obama officials have spoken out previously against efforts to block the EPA regulations. A White House official told POLITICO in July that the president would likely veto a bill stopping the agency."

AIG wants to speed up an end to its government assistance, report Serena Ng and Deborah Solomon: http://bit.ly/auEYv6

David Brooks reminds Republicans that their party has a long and decent tradition of economic interventionism: "The story Republicans are telling each other, which Ryan and Brooks have reinforced, is an oversimplified version of American history, with dangerous implications. The fact is, the American story is not just the story of limited governments; it is the story of limited but energetic governments that used aggressive federal power to promote growth and social mobility...Abraham Lincoln supported state-sponsored banks to encourage development, lavish infrastructure projects, increased spending on public education. Franklin Roosevelt provided basic security so people were freer to move and dare. The Republican sponsors of welfare reform increased regulations and government spending — demanding work in exchange for dollars."

"Throughout American history, in other words, there have been leaders who regarded government like fire — a useful tool when used judiciously and a dangerous menace when it gets out of control. They didn’t build their political philosophy on whether government was big or not. Government is a means, not an end. They built their philosophy on making America virtuous, dynamic and great. They supported government action when it furthered those ends and opposed it when it didn’t."

Live music interlude: The Walkmen play a set in Paris.

Still to come: More banks are missing their payments for TARP; a proposal to strip the EPA of its power over greenhouse gas emissions is up for a vote; the White House is backing a change to health care reform; and how the Soviet Union played video games.


Economy/FinReg

Smaller banks are still not paying back their TARP receipts, reports Brady Dennis: "The latest report from the agency shows that more than 120 institutions - nearly all of them small banks - have missed their scheduled quarterly dividend payments, which is more than a sixth of the banks that received federal aid during the financial crisis. In addition, five banks that received capital injections from the controversial $700 billion Troubled Assets Relief Program have failed altogether, making it highly unlikely that taxpayers will recover the nearly $3 billion poured into those institutions."

Business groups are joining forces to oppose Obama's jobs agenda: http://bit.ly/cqoYPC

The transition to Basel III's requirements will likely be slow-going, reports Howard Schneider: "Each country, for example, is being left to decide whether to force its banks to set aside even more capital in good times as a way to restrain lending and avoid the type of run-up in asset prices that can lead to a crash. Also, it has not been decided whether large firms that are heavily intertwined with the global financial system should set aside yet more money because of the broader risks they pose if they run into trouble...U.S. officials said the tenets of the Basel proposal could be met through new regulations from banking oversight agencies and would not require new legislation."

Republicans want to force a vote on a complete Bush tax cut extension: http://politi.co/cFgtIy

Neil Irwin explains what the current economic situation means for homebuyers: "Lesson: If you expect inflation to be high in the coming years, buying a house is a more attractive proposition. That's bad news, actually. Economists are now expecting many years of very low inflation. And some analysts worry that inflation could fall even further, perhaps into negative territory -- a dangerous, self-reinforcing cycle called deflation. That would be a very bad situation for homeowners, making debt more onerous and putting downward pressure on the value of the homes."

The budget deficit shrunk last month: http://bit.ly/dlWFzV

Applications for Social Security disability benefits are soaring, reports Michael Fletcher: "About half of all applicants eventually make it onto the disability rolls - a percentage that has not changed appreciably with the recent spike in applications, Social Security officials say. The average age of new recipients is 49 - and less than 1 percent of them return to work, according to the Congressional Budget Office. Social Security officials say they are confident that their vetting process screens out most people who might try to get benefits without being qualified. But, they acknowledge, when jobs are scarce, more workers who might otherwise struggle through with their ailments try to secure disability benefits."

Joe Stiglitz criticizes Basel III's implementation delay: http://bit.ly/dfPRl8

Bob Herbert blames the slow recovery on economic inequality: "A male worker earning the median wage in 2007 earned less than the median wage, adjusted for inflation, of a male worker 30 years earlier. A typical son, in other words, is earning less than his dad did at the same age. This is what has happened with ordinary workers as the wealth at the top has soared into the stratosphere. With so much of the middle class and the rest of working America tapped out, there is not enough consumer demand for the goods and services that the U.S. economy is capable of producing. Without that demand, there are precious few prospects for a robust recovery."

Soviet kitsch interlude: Arcade games from the USSR.

Energy

Political disputes are hampering research into the Gulf spill: http://nyti.ms/ceTdWA

Emissions reductions could reduce health spending, reports James Kanter: "The study found that as greenhouse gases fall, so do other pollutants that set off respiratory diseases and other illnesses, which reduce in health care costs. Savings could also be achieved on health care costs associated with heat waves, floods, reduced food production and infectious diseases, the study said."

Drilling regulator Michael Bromwich is standing by his rules on shallow water drilling: http://bit.ly/bXfeOd

The Justice Department will likely file a civil suit over the Deepwater Horizon spill, reports Thomas Catan: "In a court filing, the department said the U.S. government had 'potential civil claims arising from the spill,' citing several statutes under which the federal government could bring suits and claim damages, including the Clean Water Act and the Oil Pollution Act. 'At this juncture, the United States expects that it may file a civil complaint related to the Deepwater Horizon disaster under these provisions and possibly others,' the Justice Department said in its filing. BP declined to comment. The Justice Department has parallel civil and criminal investigations into the Gulf oil spill."

Federal prosecutors are scrutinizing BP's spill reports: http://bit.ly/aYjpWM

George Shultz makes the conservative case for climate change action: "There is a long history here of the pessimists underestimating what American ingenuity can do. In the congressional debate over the 1990 Clean Air Act, auto industry executives claimed that reducing auto emissions would have a devastating impact. Congress passed laws that called for a 39 percent reduction in hydrocarbons and a 60 percent reduction in nitrogen oxides in auto emissions. The auto industry met its emissions reductions targets and enjoyed record profits for the next decade. The lesson of history is very clear: Every time we challenge American industries with higher standards, they meet them earlier, for less money and invent new products for export along the way."

TED interlude: Rachel Sussman photographs the world's oldest living things.

Domestic Policy

Obama wants Congress to ease a tax reporting requirement in health care reform, reports Jennifer Haberkorn: "The law requires businesses to track all cumulative purchases from vendors that total $600 or more in one year. The provision was designed to raise revenue for the health care law but has been universally panned by the business community, which anticipates a mountain of new paperwork to comply. The amendment, from Sen. Bill Nelson (D-Fla.), would scale back the reporting requirements to cumulative purchases of more than $5,000 per year and exclude companies with fewer than 25 employees. So far, no Republicans have voiced support for the amendment."

Charter schools are having a hard time getting space: http://bit.ly/9m1ic2

Medicare chief Donald Berwick is countering claims he supports rationing care, reports Ricardo Alonso-Zaldivar: "Berwick broke his silence Monday, telling an audience of health insurance industry representatives that pushing back against unsustainable costs cannot and should not involve 'withholding from us, or our neighbors, any care that helps' or 'harming one hair on anyone's head.' He also said he does not think federal bureaucrats have all the answers when it comes to remaking the system. "A massive top-down national project is not the way to do this," he told a conference held by America's Health Insurance Plans, the industry lobbying group."

Conservative activists want the GOP to commit to defunding health care reform: http://politi.co/a9EWdb

A Senate proposal being voted on today threatens the individual mandate in health care reform: http://bit.ly/aBWFWE

Work-based visas should be the primary path to immigration, write Pia Orrenius and Madeline Zavodny: "The visas would be 'portable' -- that is, the holder wouldn’t be tied to one employer -- to ensure that workers are treated fairly. But because these visas would be tied to employment, immigrants would have to leave the country if the economy deteriorated and they couldn’t find work. In place of our current system’s lotteries and 'first-come, first-served' policies, the government should hold regular auctions where companies can bid for permits to bring in foreign workers. Employers would bid highest for the most-valued workers, creating a selection mechanism that wouldn’t rely on the judgment of bureaucrats or the paperwork skills of immigration lawyers."

Closing credit: Wonkbook is compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: White House.

By Ezra Klein  |  September 14, 2010; 6:31 AM ET
Categories:  Wonkbook  
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Next: Remember the community colleges

Comments

Hmmm, I'm very skeptical of this, but maybe this was the Dems plan all along? Get behind a popular but bad policy in an indefinite extension of the Bush tax cuts knowing that the Republicans, as they have for the first two years, would have some initial talk of support before they managed to rally the troops around a full extension of all the cuts. So now the difference between them is only on taxes for people making over $250k/year. Might play well, and letting the cuts actually expire could be pinned on Republicans. Then maybe after the election they can pass a temporary extension since it won't be an election issue anymore.

Posted by: MosBen | September 14, 2010 7:30 AM | Report abuse

Perhaps mr mcconnell should answer how extending the bush tax cuts to the wealhy would create jobs. The bush admin created less than 3 million jobs in 8 years - is this the result of the tax cuts? They were, after all, enacted to spur on job creation. It would appear, based on the cost of the cuts, and the actual outcome, the stimulus provided by the cuts were a very expensive failure.

I personally don't think it's outrageous to ask those that prospered expnentially over the last 10 years to go back to the previous tax rates and pay the additiona 4% on income over $250,001. They are not sharing the burden of this economy, the working class is saddling it all. They are the ones that deserve the break, not the rich who continue to prosper. It's called shared sacrifice, and at one time it would be considered soundly american to do what's right for the common good. I guess these days, greed trumps the common good and overall health of our nation.

Posted by: notfooledbydistractions1 | September 14, 2010 7:43 AM | Report abuse

President Obama is providing a permanent tax cut for every American on their first $250,000 of adjusted gross income. The affluent are not victims; they enjoy a tax cut too. The Republicans are mounting a campaign against a permanent tax cut for everyone because it doesn't provide extra perks for the affluent.

Tax cuts do not and have not created jobs. The Bush tax cuts were sold as part of a job creating bill. Look at the name of the legislation. The tax cuts didn't generate jobs. That's because Americans pay taxes on their net incomes after expenses and employees are a pre-tax expense. The tax rate has nothing to do with pre-tax expenses.

Posted by: binckeslaw | September 14, 2010 8:39 AM | Report abuse

Based on Orszag's times op-ed and the fact the Dems aren't proposing any new bill to provide a tax cut for the middle-class when the Bush tax cuts expire, the Dems SECRET plan is to extend Bush's tax cuts for the wealthy.

Dems should force a vote RIGHT NOW to extend middle-class tax cuts after the Bush tax cuts expire. The fact they don't, even as the GOP is trying to force a vote RIGHT NOW to extend the tax cuts reveals the true motivations of wealthy Dems.

Posted by: lauren2010 | September 14, 2010 8:58 AM | Report abuse

President Obama tried to distance himself from his own remarks just last sept. that
keeping the bush tax cuts would not create a single job, and would just be foolish politics.

Posted by: simonsays1 | September 14, 2010 9:31 AM | Report abuse

Here's hoping that whatever compromise they reach,it involves a temporary extension.

Whatever Chris Dodd is agin, is bound to be a positive thing. Warren would be a good appointment.

Posted by: bgmma50 | September 14, 2010 9:52 AM | Report abuse

The question as to which party ultimately gets to make hay of this issue revolves around who is defined as "rich." Calling a person who makes $250k or more "rich" is pretty ridiculous, although I doubt the people collecting welfare benefits and food stamps care much about the distinction, which Obama knows (and all of whom likely voted for Obama and his ilk). The question as to who is "rich" requires a deeper investigation: Where does the person live? How large a family does the person support? What kind of business is being operated to produce the $250k, i.e. how hard is this person working, is his family involved, etc..? Very many households making $250k are just married couples in which both persons work. The typical married couple making $250k is a far cry different from the Bill Gates' of the world. Obama preaches to his minions that everyone making over $250k is a "Bill Gates," and they most certainly are not. Most are just hard-working people who went to school, studied hard, and ultimately made something of themselves by providing goods and services that others wanted to buy. Compare them with those who either never picked up a book or dropped out of school. Yes, the world needs ditch-diggers too, but they shouldn't expect to receive the same wages as the person who is designing the project for which the ditch is being dug.

In any event, why should Bill Gates be forced to provide more than his share to an administration who merely seeks to redistribute his wealth (hence effectively enslaving those who receive it)? Does Bill have a larger footprint on the sidewalk, leave a bigger imprint on the interstate highway, or require more military protection than any of the rest of us? No, he doesn't. But think about how many jobs Bill has created versus how many the average welfare receipient has created.

I say let Bill and all other people making $250k or more keep their money. They will most definitely do a lot more good with it than the federal goverment. (Check out the projects funded by the Gates' charitable foundation if you don't believe that).

Posted by: flintston | September 14, 2010 9:58 AM | Report abuse

Wow, flinston, where to begin?

1) Yes, there are many two income professional couples (although mostly in cities on the East and West coasts, I suspect), who have incomes in the $250,000 range. THESE HOUSEHOLDS WOULD GET THE TAX CUT, as would EVERYONE - but only on the income UP TO $250,000.

2. How does 'how hard you work' affect whether or not a given level of income makes you rich? If you get $250,000 a year by sitting on your (ass)ets inherited from daddy, are you poorer than if you work and earn $250,000? I would argue you are richer - you have both the money and the time.

3. Gates may not have a bigger footprint on the sidewalk than others, but he sure has benefited from living under our system of government more than the average person. He recognizes that, even if you don't.

BTW, I don't understand why the Democrats do not have a bill on the floor yet to extend the under $250,00 tax cuts. So what if the Republicans try to block it? That's surely a winning argument for the Dems, and in the end the chances are overwhelming, IMHO, that at least one Republican would cross over to allow the bill to be voted on if failing to pass it meant a tax increase for 98% of the public - either Scott Brown or one of the retiring Senators, most likely Voinivich. If the Dems can't get this done, then I have to question what the point of having a Dem majority is, anyway.

Posted by: guesswhosue | September 14, 2010 10:29 AM | Report abuse

flinston, that we have super rich in this country does not mean that we don't have plain old vanilla rich people doo. People making over $250k/year are in the top couple percentiles of income earners. I don't care where you live, if you're in the top few percentiles, you're rich. Should we think of all rich people as Bill Gates? Of course not. On the other hand, they earn more than the vast majority of Americans. That we have this distinction is all the more reason to have one or two new tax brackets.

Posted by: MosBen | September 14, 2010 10:31 AM | Report abuse

Berwick: "A massive top-down national project is not the way to do this"

And then, being a man of principle, standing behind the words he'd just uttered, he announced his resignation from his position as lead man in charge of the massive top-down national project on health care.

Posted by: msoja | September 14, 2010 10:32 AM | Report abuse

guesswhosue, I'm just baffled by how badly the Dems are playing this. I mean, I'm not surprised, but it's still impressive. I mean, you'd expect that they'd be able to find one Senator from a safe liberal seat who could float some legislation either extending the tax cuts below $250k/year for another year or three (not two, so as to avoid the election mania), or possibly doing the equivalent spending of a temporary extension of the cuts but targeted differently (a payroll tax holiday, for instance).

Posted by: MosBen | September 14, 2010 10:41 AM | Report abuse

Health care news Klein "missed":

//cite
States across the country are reporting lower than expected participation in the high-risk pools for people with pre-existing conditions, raising concerns that a lack of public engagement could affect the program's success — and that of health reform more generally.

[...]

Iowa, for example, had received only 32 applications by the middle of this week

[...]

[T]he high cost of premiums and out-of-pocket costs was to blame for the slow movement in Kansas, where only 17 people had enrolled by Friday in a program that started taking applications in mid-August.
//end cite

http://thehill.com/blogs/healthwatch/health-reform-implementation/118245-healthcare-reform-faces-low-participation-in-high-risk-pools

I tell ya, people can't be left to their own devices. They must be *forced* to comply. For their own good.

Posted by: msoja | September 14, 2010 10:44 AM | Report abuse

It is becoming all too obvious that the Obstructionist Republican Party of No is determined to kill progress and relief for struggling families yet again here. The same way they fight, every one of them to stop the unemployed from getting a check. The Republicans will fight for their HUGE tax cuts for the wealthy and end up sabotaging the tax cuts for the average middle class American with their filibuster when these cuts expire all together for everyone due to this rampant Republican greed. So go right ahead and vote for the Republicans in November stupid people, don't say the smartest among us didn't warn you. Here I will say it RIGHT NOW, when the Republicans some of you plan on voting for get elected and then screw you over the same way they did under that pinhead Bush, remember these words -- What did you think they were going to do?!

Posted by: Hillary08 | September 14, 2010 12:47 PM | Report abuse

If Congress just lets the tax cuts expire, we might find a RepublicanCcongress passing them next January and Obama forced to veto a tax cut bill.

Posted by: zosima | September 15, 2010 12:00 AM | Report abuse

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