Wonkbook: Likely deal will extend tax cuts and unemployment insurance; South Korea and U.S. finalize trade pact; Romer on uncertainty
Senate Republicans successfully filibustered middle-class tax cuts, reports Shailagh Murray: "The Senate on Saturday rejected two Democratic proposals to let tax cuts for the wealthiest Americans expire, a symbolic but bitter defeat that now forces the Democratic majority to compromise with Republicans or risk allowing tax breaks to lapse for virtually everyone at year's end. Efforts quickly shifted to negotiations that would temporarily extend the Bush-era tax cuts for all Americans, an outcome that seemed increasingly likely. The pair of nearly party-line votes - one to preserve the tax cuts for only the first $250,000 of family income, and the other for the first $1 million of income - also represented a final stand for Democrats."
A likely compromise would extend all of the tax cuts as well as unemployment insurance, report David Brown and Lori Montgomery: "The Senate Republican leadership telegraphed on the Sunday morning talk shows that a compromise to extend unemployment compensation and the George W. Bush-era tax cuts is in the offing. Senate Minority Leader Mitch McConnell (R-Ky.) and Sen. Jon Kyl (Ariz.), the Republican whip, told different interviewers that they expect Congress to vote for the tax cuts, which have been in effect for a decade, to continue unaltered for at least several years in exchange for an agreement to extend jobless benefits that are about to expire for millions of workers."
David Leonhardt names nine other things we could buy with the $60 billion-a-year it'll take to extend the tax cuts for the rich: http://nyti.ms/gg7IiB
The Bush tax cut fight isn't the main source of economic uncertainty, writes Christina Romer: "The biggest question is whether the top tax rate will be 35 or 39.6 percent. That is not the degree or kind of uncertainty that is likely to cause businesses and consumers to put hiring and spending decisions on hold. The more genuine source of tax uncertainty is related to the government’s long-run budget deficits. Congressional Budget Office projections show that the current budget trajectory is grossly unsustainable...The only way to resolve this fundamental uncertainty is to enact a credible long-run deficit reduction plan that shows what spending will be cut and what taxes will be raised, once the economy returns to full employment."
The US and South Korea have finalized a free trade pact, reports Howard Schneider: "U.S. and South Korean negotiators agreed Friday to a free-trade deal that the Obama administration hopes will increase American exports by billions of dollars annually and create momentum for a broader push on free trade in 2011. The pact is the administration's first major foray into the arena of free-trade politics, and officials said it may be followed by efforts to have Congress approve pending deals with Panama and Colombia, and reinvigorate the larger Doha round of global trade talks. The deal marks a victory for President Obama, who was widely criticized after failing to secure the pact during his Asia trip after last month's midterm elections."
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'90s flashback interlude: Pavement play "Kennel District" live.
Still to come: Wall Street is issuing bonuses now in case the Bush tax cuts lapse; Republicans plan to make Democrats choose between funding public health and funding a "doc fix"; the Department of Homeland Security is juking the stats on immigration; a Mexican draft proposal is starting off the Cancun climate summit; and dogs using laptops improperly.
Wall Street is moving up bonuses in case the Bush tax cuts do not expire, report Louise Story and Gretchen Morgenson: "Worried that lawmakers will allow taxes to rise for the wealthiest Americans beginning next year, financial firms are discussing whether to move up their bonus payouts from next year to this month...If Congress does not extend the Bush-era tax cuts for the highest income levels, a typical worker who earns a $1 million bonus would pay $40,000 to $50,000 more in taxes next year than this year, depending on base salary. Goldman Sachs is one of the companies discussing how to time bonus season, according to three people who have been briefed on the discussions. Pay consultants who work with major Wall Street companies say that just about every other large bank has also considered such a move in recent weeks."
Fed chair Ben Bernanke hinted more quantitative easing may be coming, reports John Maggs: "Federal Reserve Chairman Ben Bernanke is defending the Fed’s decision to borrow $600 billion to help stimulate the struggling economy, saying it's possible the Fed might spend even more...One reason why more economic stimulus might be needed is that the recovery is weak, said Bernanke. Asked whether the recovery was 'self-sustaining,' he replied 'It may not be. It’s very close to the border -- it takes about two and a half percent growth just to keep unemployment stable. And that’s about what we’re getting. We’re not very far from the level where the economy is not self-sustaining.'"
Elizabeth Warren could end free bank accounts, reports Tom Braithwaite: "Elizabeth Warren, the US administration’s consumer financial protection supremo, is working on a deal with banks that would lead to more transparent products but could spell the end of free bank accounts. Ms Warren is seeking - through transparency rather than prohibition - to wean the industry off 'hidden' fees, such as overdraft charges, which can represent up to a third of core revenues for some banks. She is pushing the industry to adopt a shorter mortgage form and clearer disclosure for credit cards."
Democrats should let the Bush tax cuts expire, writes Paul Krugman: "Think about the logic of the situation. Right now, the Republicans see themselves as successful blackmailers, holding a clear upper hand. President Obama, they believe, wouldn’t dare preside over a broad tax increase while the economy is depressed. And they therefore believe that he will give in to their demands. But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils."
European governments could learn from the 2008 American bailouts, writes Alistair Darling: http://nyti.ms/ifpmlt
Adorable, computer-illiterate animals interlude: 31 puppies use laptops incorrectly.
Republicans will force Democrats to choose between Medicare or health-care reform's public health initiative, reports Sarah Kliff: "Congressional Republicans are hoping to put Democrats in a no-win new year's jam: defund a big chunk of their health care overhaul or slash Medicare payments instead. Despite rampant repeal rhetoric, Republicans have so far struggled to dismantle any part of health reform. Now, they see a new path forward: pilfer health reform dollars to pay for the next 'doc fix,' the must-pass patch to Medicare doctor payments. Republican Senate aides familiar with the issue told POLITICO they are seriously looking at the new law's $15 billion public health commitment to finance a one-year doc fix in the next session of Congress."
The federal government is compiling a database of federal employees' health records: http://wapo.st/f0ndee
Arizona is leading the country in health care cuts, reports Kevin Sack: "The options available to states for cutting Medicaid have been limited because the federal stimulus package and the health care law have required them to maintain eligibility levels. That has left states to cut payments to providers and trim benefits not required by federal regulations. Many states, including Arizona, have done both. A September report by the Kaiser Family Foundation found that 39 states cut provider payments and 20 cut optional benefits in their 2010 fiscal years, with similar numbers planning to do so in 2011. Arizona reduced Medicaid payments to doctors by 5 percent last year and has frozen payments to hospitals and nursing homes for two years. All providers will undergo another 5 percent cut on April 1, Ms. Carusetta said."
The Senate will vote Wednesday on the DREAM Act: http://politi.co/fQfYQ4
The GOP wants to use tax-exempt bonds to force disclosures about pension funding, reports Michael Corkery: "A bill introduced last week by three prominent House Republicans to deny states and localities the ability to sell tax-exempt bonds—the lifeblood for many governments—unless they report their pension-fund liabilities to the Treasury Department...The goal, the congressmen say, is to get a better handle on funding woes of public pensions, which they say are not always forthcoming about the true extent of their financial exposure."
The Obama administration will require cars to have rear-view video cameras and monitors: http://on.wsj.com/g0t08w
SNES interlude: A guy proposes via EarthBound.
The Mexican government has issued a draft climate proposal at the Cancun summit, reports Fiona Harvey: "At the weekend, the Mexican hosts published a draft negotiating text that would require countries to try to prevent global warming of more than 2ºC above pre-industrial levels - viewed by scientists as the safety limit - while giving options for providing funding to developing countries and protecting forests. Jake Schmidt, of the US environmental group Natural Resources Defense Council, said: 'This text sets the stage for an agreement, but only if countries find ways to compromise. Narrowing down the differences that remain will not be easy.'"
Republicans are resisting attempts to regulate "fracking" http://politi.co/gjZYXA
Billions in ethanol subsidies could pass in the lame duck session, reports Darren Goode: "Senate Finance Committee Chairman Max Baucus (D-Mont.) undoubtedly gave comfort to backers of the corn-based gasoline additive when he included a sought-after one-year extension of a key expiring ethanol tax credit as part of a much-larger middle class tax cut package he unveiled Thursday...The credit cost taxpayers an estimated $5 billion this year and lowering it to 36 cents would bring the annual cost down to $3.8 billion. Baucus also proposed extending for a year the 54-cent-per-gallon tariff on imported ethanol, as well as extending a small ethanol producer’s tax credit through next year at 8 cents per gallon."
Rep. Joe Barton is gaining conservative support in his bid to chair the Energy and Commerce committe: http://politi.co/ff9Wmb
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.
| December 6, 2010; 6:48 AM ET
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