Wonkbook: Fed commits $600 billion; tax cut negotiations; Obama offers deficit hints
The Fed will buy $600 billion worth of new assets to speed up the economic recovery, reports Neil Irwin: "Fed officials concluded that growth is too slow to bring down the 9.6 percent unemployment rate and is at risk of staying that way for some time absent new action. They were also concerned that inflation has been running too low and were looking for a way to encourage modest price increases, which would give consumers and businesses more reason to spend money before its value declined and help energize the economy. ... The Fed plans to create money, essentially out of thin air, and then pump it into the economy by buying Treasury bonds on the open market. These purchases are to be finished by the end of June, the Fed said."
President Obama and Majority Leader Harry Reid expressed willingness to compromise with congressional Republicans on extending the Bush tax cuts, reports Lori Montgomery: "Lobbyists and other congressional analysts expect lawmakers to approve a quick-fix measure that would extend the most critical provisions -- including all the Bush-administration tax breaks for individuals -- at least through next year. ... Senate Majority Leader Harry M. Reid (D-Nev.) said he supports Obama's plan to let taxes rise for the wealthiest 2 percent of taxpayers, but 'I'm not bullheaded.' Republicans, for their part, say they have no incentive to compromise on the tax cuts, citing a mandate from voters to keep taxes low."
Obama's post-election speech offered clues as to how he'll seek to cut the deficit, reports Damian Paletta: "He said, though, that he wouldn’t allow reductions in the deficit to mean 'cutting into education, that is going to help define whether or not we can compete around the world.' He also signaled that he would protect spending as it related to research and development. 'In these budget discussions the key is to be able to distinguish between stuff that isn’t adding to our growth, isn’t an investment in our future, and those things that are absolutely necessary for us to be able to increase job growth in the future, as well.'"
D.C. indie interlude: Ted Leo/Pharmacists play "Biomusicology" live.
Still to come: The new House financial services chair is already lobbying regulators; cap and trade supporters took a beating Tuesday; state insurance commissioner elections could affect health-care reform's implementation; and every time Don Draper has ever asked, "What?"
The new House financial services chair is already lobbying regulators to ease up on banks, reports Tom Braithwaite: "Spencer Bachus, a potential Republican chairman of the House financial services committee, has fired the first salvo in a battle with regulators -- warning them against harming US banks by curbing their trading activity. In a letter sent to the Financial Stability Oversight Council, Mr Bachus says that a ban on proprietary trading -- known as the Volcker rule -- that was included in the new Dodd-Frank financial reform law will 'impose substantial costs on the American economy and market participants' with 'doubtful' benefits."
Catherine Rampell rounds up economists who think the Fed's plan will work, and others who are skeptical:
The future of Fannie and Freddie is uncertain, reports Binyamin Appelbaum: "The Obama administration wants to replace Fannie and Freddie with some new form of federal subsidy. ... But House Republicans campaigned on the repeated promise to liquidate the companies, and to allow nothing similar to take their place. Some Democrats, meanwhile, say privately that they do not mind the status quo. The companies are serving their purpose, making sure that families get mortgage loans. Meanwhile, government ownership means the companies are no longer free to chase after profits, which is how they got into trouble."
Ron Paul will head up Fed oversight in the House, reports Simmi Aujla: "Paul is the ranking member of the Subcommittee on Domestic Monetary Policy and Technology on the Financial Services , which oversees the Federal Reserve, the U.S. Mint and American involvement with international development groups like the World Bank. Unless someone bumps him, he's next in line for the subcommittee gavel. Paul is critical of all the institutions he would oversee. He's long called for killing the Federal Reserve, and this year tried to get an audit of the Fed into the Wall Street reform bill. He's asserted that the dollar should be tied to the gold standard in order to keep it from losing its value."
The Iowa attorney general leading the foreclosure investigation won reelection:
The Fed did what was necessary to jump start the economy, writes Ben Bernanke: "Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation. We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. The Fed is committed to both parts of its dual mandate and will take all measures necessary to keep inflation low and stable. The Federal Reserve cannot solve all the economy's problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector."
The election results could be good for Social Security, writes Peter Orszag:
The Fed's new asset buys might not go far enough, writes David Leonhardt: "What’s striking about the last six months, however, is how much more accurate the doves’ diagnosis of the economy has looked than the hawks’. Early this year, for example, Thomas Hoenig, president of the Kansas City Fed and probably the most prominent hawk, gave a speech in Washington warning about the risks of an overheated economy and inflation. Mr. Hoenig suggested that the kind of severe inflation that the United States experienced in the 1970s or even that Germany did in the 1920s was a real possibility. When he gave the speech, annual inflation was 2.7 percent. Today, it’s 1.1 percent."
Mad Men supercut interlude: Every instance of Don Draper saying "What?"
House members who voted for cap and trade were hit big on Tuesday, report Darren Samuelsohn and Robin Bravender: "Over two dozen lawmakers who favored efforts to clamp down on heat-trapping emissions were swept away on Tuesday's anti-incumbent wave, ushering in a new class of Republicans who doubt global warming science. ... [Rick]Boucher's defeat is perhaps the most stinging given the central role he played in brokering key pieces of the legislation to make it more friendly to his home state's coal industry. Over the last 18 months, Boucher has defended his work on the climate bill, saying it's much better than the alternative of Environmental Protection Agency emission control regulations."
House Speaker-elect John Boehner is cool, at most, toward climate change legislation, reports John Collins Rudolf: "'The idea that carbon dioxide is a carcinogen that is harmful to our environment is almost comical,' Mr. Boehner told ABC News in an April 2009 interview. 'Every time we exhale, we exhale carbon dioxide. Every cow in the world, you know, when they do what they do, you’ve got more carbon dioxide.' ... The American Energy Act, an energy plan introduced by House Republicans last year, offers some clues to Mr. Boehner’s latest thinking. It calls for expanding domestic oil and gas drilling and nuclear power and would subsidize some clean energy development, but makes no provisions for curbing carbon dioxide emissions."
BP gives its own Alaskan oil pipelines an "F" for safety:
Newly elected Midwestern governors could derail high-speed rail projects, reports Amy Merrick: "In Ohio, Mr. Kasich has said the proposed $450 million train connecting Ohio's three major cities--Cleveland, Columbus and Cincinnati -- would cost too much and run too slowly to be more convenient than driving or flying. Wisconsin's Mr. Walker made opposing the train, which he deemed too expensive, a major part of his campaign. He has said he would like Congress to allow him to use the $810 million allocated to Wisconsin for a high-speed line between Madison and Milwaukee to repair the state's roads and bridges instead."
There is a four-way race for chairman of the House Energy and Commerce Committee:
"Sustainable bonds" are being designed to finance green projects, reports Sonia Kolesnikov-Jessop: "So far, international institutions have driven green bond issuance. The World Bank has led the pack with more than $1.6 billion worth of green bonds issued since 2008, through 24 transactions. Proceeds from these bonds rated AAA go into a special account for lending to approved projects. ... Several proposals to expand the market are being discussed. One suggestion, from the International Monetary Fund, proposes the creation of a multibillion-dollar 'Green Fund' financed by bond sales to help developing countries deal with the effects of global warming."
Adorable animals being used as projectiles interlude: A cat that loves being tossed repeatedly onto a bed.
Tuesday's state insurance commissioner races could affect how health-care reform is implemented, reports Leslie Scism: "In Oklahoma, John Doak, a Republican challenger for the elected insurance commissioner's post, ousted an incumbent Democrat, Kim Holland, in an election that focused heavily on the Republican's opposition to the federal health-care act. A significant amount of responsibility for implementing the federal program is in the hands of state officials....In Kansas, the incumbent commissioner, Republican Sandy Praeger, was re-elected. She heads a committee at the National Association of Insurance Commissioners that is focused on implementation issues of the federal health-care act for state insurance departments."
House transportation chair James Oberstar lost reelection unexpectedly:
Rep. Rick Boucher's loss and Sen.-elect Richard Blumenthal's win will have major tech policy ramifications, reports Tony Romm: "Boucher has been at the forefront of the online privacy debate. ... He's been just as active on a slew of other issues too -- including reform a fund to bolster phone service to hard to reach areas, rules that would ensure all Web traffic is treated equally and efforts to free up airwaves for more mobile phone and data use... Blumenthal has been the public face of a more than 30-state probe of Google, launched after news broke that its Street View cars accidentally collected user information while mapping out U.S. areas."
New House oversight chair Darrell Issa wants to give inspectors general subpoena power, crack down on "czars":
The White House staff may see a shakeup, reports Marc Ambinder: "Mona Sutphen, the deputy chief of staff for policy, has told friends that she may scale back her commitment to the White House in order to spend more time with her young children. Carol Browner, the former Clinton EPA chief who coordinates energy policy, might be in line for the policy role, aides said. As the Atlantic reported last month, the president has come to value her counsel on matters beyond her portfolio. But Browner has not yet indicated whether she wants to stay."
A compromise is likely on health-care reform's small-business disclosure provisions:
Republican deficit hawks should want to save health-care reform, writes Peter Orszag: "The health care reform act includes hundreds of billions of dollars worth of cuts in payments to providers...It creates penalties for hospitals with high rates of readmission and hospital-acquired infections. It expands the practice of making a single payment for treating a specific condition rather than paying for each treatment. ... Perhaps most important, the legislation creates an Independent Payment Advisory Board, a panel of independent medical experts who will look for more ways to improve Medicare’s cost-effectiveness. ... All this may not fit on a bumper sticker, but it is more promising than anything that would."
Dylan Matthews is a student at Harvard and a researcher at The Washington Post.
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