Wonkbook: WH's new tax cut strategy; Bernanke's fears; Sorensen remembered
Here's a word you'll get to know well in the coming weeks: "Decoupling." It's the White House's term for pulling the Bush tax cuts for income over $250,000 out of the whole package and giving them their own vote -- maybe even a temporary extension. You could imagine a world in which the tax cuts for income under $250,000 were permanently extended, which is what the White House wants, while the tax cuts for the rich only got one or two years of added life.
But Republicans smell a trap. If the tax cuts for the rich come up on their own, it's more likely that they fail. And if they only get a year or two, and then have to be considered on their own next time, it's almost certain that they're voted down or vetoed. So they're pushing for a, well, "coupled" extension: if they can't get permanent extensions of the tax cuts, then they'd prefer a two or three year extension of all the tax cuts to a permanent extension of most and a temporary extension of the rest. They figure that'll make it easier to extend all of them the next time. But that puts them in the awkward situation of offering a compromise that extends fewer tax cuts than the option being pushed by the Democrats, and it also pits them against making the bulk of the tax cuts for non-wealthy people permanent.
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The White House may split the Bush tax cuts, reports Lori Montgomery: "The strategy calls for permanent extension of cuts that benefit families earning less than $250,000 a year, and temporary extension of cuts on income above that amount. The move would 'decouple' the two sets of provisions, Democrats said, and focus the debate when tax cuts for the rich expired next year or the year after. Republicans would be forced to defend carve-outs for a tiny minority populated by millionaires, an unpopular position that would be difficult to advance without the cover of a broad-based tax cut for everyone, aides in both parties said."
Josh Barro warns that this is "a trap" for Republicans: http://bit.ly/91V2Cv
John Cornyn suggested Senate Republicans would prefer a short extension to a "decoupling," reports John McKinnon: "'I think there is an increasing bipartisan support' for extending all the Bush-era tax cuts, at least for a while, Mr. Cornyn said today on ABC’s 'This Week.' 'I hope we’ll continue the current tax policy for the near term, perhaps the next couple of years. Perhaps there’s a bipartisan solution there.' Already, half a dozen Democratic senators have bucked their party leadership and signaled interest in extending all the current tax levels, at least while the economic recovery remains shaky. A few Democratic challengers also have taken up that position on the campaign trail."
Either under- or overshooting Fed asset purchases could hurt the economy, reports Neil Irwin: "Should the Fed overshoot in its plan to pump hundreds of billions of dollars into the economy, it could produce the same kind of bubbles in the housing and stock markets that caused the slowdown. Or the efforts could fall short and fail to energize the economy, leaving a clear impression that the mighty Fed is out of bullets - thus adding even more anxiety to an already dire situation. The meeting of Fed policymakers Tuesday and Wednesday is set to be a defining moment of Ben S. Bernanke's second term as chairman of the central bank."
Joe Stiglitz doubts QE2 will work, and isn't even sure we should try: http://wapo.st/dmcKRa
Kennedy advisor and Democratic elder statesman Ted Sorensen has died: http://wapo.st/bTKy96
James Fallows recalls his last years: "For most of the past nine years, Sorensen was practically blind. He acted in a gallant way as if this were not so, with his wife or a close friend with him to guide him around obstacles and give him cues about what he was seeing or who he was meeting. By chance I encountered him in Washington when my parents were visiting, about a year before my mother's death. 'You are looking absolutely beautiful today, Mrs. Fallows,' he told her. She was absolutely thrilled. I never told her the back story."
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Kitsch cover interlude: The Rondelles play "Like a Prayer".
Still to come: The foreclosure mess could have a silver lining for defaulting homeowners; the US is preparing for the next round of climate negotiations; the Justice Department's lawsuit against Arizona is returning to court; and a machine for pie-ing insects in mid-flight.
The foreclosure mess is providing a stealth stimulus in the form of free housing, reports Mark Whitehouse: "The mortgage-foreclosure mess could prove expensive for banks and investors. But in some states, it will also prolong an unintended economic stimulus: free housing for millions of defaulters...Defaulters living in their homes are getting a subsidy worth about $2.6 billion a month, according to a Wall Street Journal analysis based on mortgage data from LPS Applied Analytics and rent data from the Commerce Department. That's 0.25% of U.S. personal income, roughly equivalent to the benefit top earners receive from Bush-era tax breaks."
James Surowiecki thinks the housing market might actually be better off for the crisis http://nyr.kr/b9fnKN
Treasury officials have knives out for Elizabeth Warren, writes Zach Carter: "Treasury officials have leaked details about Warren to Politico as part of what appears to be an effort to paint her as some kind of prima donna... Warren is painting her office and making media appearances--exactly the sort of things you’d expect the head of a new federal agency to be doing during her first weeks on the job. But look at the frame Treasury is putting on the stories. In both, Warren is portrayed as an ego-centric fluff-monger, not a serious policymaker. Look at fancy Elizabeth Warren painting her office! Our humble boss Timothy Geithner would never do such a thing!"
Credit history matters more now than before the recession: http://wapo.st/9nPRav
Austerity measures are driven by a moralistic desire to punish, writes Paul Krugman: "So the moralizers are winning. More and more voters, both here and in Europe, are convinced that what we need is not more stimulus but more punishment. Governments must tighten their belts; debtors must pay what they owe. The irony is that in their determination to punish the undeserving, voters are punishing themselves: by rejecting fiscal stimulus and debt relief, they’re perpetuating high unemployment. They are, in effect, cutting off their own jobs to spite their neighbors. But they don’t know that. And because they don’t, the slump will go on."
Robo-signing is just the beginning of bank complicity in the economic downturn, writes Yves Smith: http://nyti.ms/a1ffns
The imminent vote on raising the debt ceiling shows the need for filibuster reform, writes David Waldmann: "Now, consider that the debt ceiling bill, unlike the budget resolution or reconciliation bills, enjoys no statutory protection from the filibuster. Add rampant teabaggery to the mix, and you're looking at a serious situation. Fineman's thinking 'booby trap,' but that's only the case if Republicans take over, as may be the case in the House. In the Senate, raising the debt ceiling might still be the Democrats' responsibility. And it'll still be the prerogative of the tea-infused Republicans to make that difficult, and try to put the Senate and the administration over a barrel."
Great moments in engineering interlude: A machine for throwing pies at insects.
Congressional losses will put the US in a weak negotiating position at climate talks, reports Juliet Eilperin: "Last year, administration officials assumed that a plan to cap U.S. greenhouse gases and allow emitters to trade carbon allowances would help funnel millions to developing countries for climate projects such as preserving tropical forests; now that approach is politically dead. And even the administration's ability to provide direct climate assistance to poor nations over the next two years is in doubt because a looming budget battle with Republicans could freeze U.S. foreign aid at this year's levels, or even cut it."
Environmental committee leadership in Congress will likely shuffle in January: http://bit.ly/cqsRE3
California's cap and trade system is starting to take shape, reports Felicity Barringer: "At the program’s inception in 2012, electric utilities will be awarded allowances free of charge that they can then resell to purveyors of wholesale electricity, which are responsible for the amount of carbon-dioxide emissions created in power agencies. State agencies will be able to act as consignment agents. Most of the coal-fired generating plants that supply power to Southern California are in Arizona and New Mexico... The allowances would initially be set to match existing emissions levels, and the program is intended to cushion industries and prevent the loss of jobs to states that are not trying to embed the price of carbon dioxide emissions into their goods and services."
High speed rail is just another brand of pork, writes Robert Samuelson: http://wapo.st/bnsp7l
A particular type of buyer will flock to electric cars initially, writes Katie Galbraith: "Many of the earliest adopters are likely to be urban homeowners with their own garages -- which is no surprise, because it is this wealthier demographic that can afford electric cars. So companies like NRG are preparing for a proliferation of home-based charging stations, with associated electricity payment plans. Apartment dwellers are likely to acquire electric cars later, experts say. Steve Smaha, an Austin-based investor in clean technology who owns a Tesla Roadster, noted that while there are likely to be some early showcase apartment buildings that install outlet infrastructure, most building owners are not going to be excited about paying for such a service."
Adorable animal in a ball pit interlude: A Yorkie tries to retrieve his stuffed animal from a ball pit.
An appeals court is taking up the Obama administration's challenge to Arizona's immigration law, reports Jerry Markon: "Government attorneys won the first round in July when U.S. District Judge Susan R. Bolton, seated in Phoenix, put on hold provisions that would require police to check immigration status if they stop someone while enforcing other laws, allow for warrantless arrests of suspected illegal immigrants and criminalize the failure of legal immigrants to carry their registration papers...It is also difficult to draw conclusions from the composition of the three-judge panel hearing the case. Judges John T. Noonan Jr. and Carlos T. Bea are appointees of Republican presidents, while judge Richard A. Paez is a Democratic appointee. But Bea and Paez are of Hispanic descent, and it is Hispanics who are most upset about the Arizona law."
Immigrants are benefiting from the economic recovery: http://bit.ly/dCzNTf
Even beyond Citizens United, the Roberts Court is dramatically lightening campaign finance law, reports Robert Barnes: "In Wisconsin Right to Life v. FEC, it gutted the law's restrictions on groups running 'issue' ads mentioning a specific candidate just before an election. The previous court majority had said such ads were simply a foil for getting around restrictions on express advocacy of a candidate...The same five justices a year later struck the law's 'millionaire's amendment,' which increased contribution limits for candidates who faced wealthy, self-funded opponents."
The FCC chair is counting on bipartisan agreement on broadband issues: http://politi.co/9gm3RT
Focusing on teacher quality can yield major gains in schools, write Michelle Rhee and Adrian Fenty: "Washington went from being the worst performing school district in the country to leading the nation in gains on the national gold-standard test, the National Assessment of Educational Progress. It was the only jurisdiction in which every student subgroup raised its performance. Graduation rates have increased, and this fall the D.C. public school system saw its first jump in enrollment in 41 years...SAT scores of District students are also rising: up 27 points this year, on average, with a 40-point jump for African-American students and a 54-point jump for male students."
Commercial media outlets should pay for public ones, writes Steve Coll: http://wapo.st/apeJNe
Immigration spurs job growth, writes Tyler Cowen: "The study notes that when companies move production offshore, they pull away not only low-wage jobs but also many related jobs, which can include high-skilled managers, tech repairmen and others. But hiring immigrants even for low-wage jobs helps keep many kinds of jobs in the United States, the authors say. In fact, when immigration is rising as a share of employment in an economic sector, offshoring tends to be falling, and vice versa, the study found. In other words, immigrants may be competing more with offshored workers than with other laborers in America. American economic sectors with much exposure to immigration fared better in employment growth than more insulated sectors, even for low-skilled labor, the authors found."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Paul Schutzer Photo
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