Wonkbook: Tax plan proceeds with high public support; judge rules against health mandate; Summers final speech
The tax plan easily passed its first cloture vote through the Senate, and seems likely to sail through the body. But then comes the House, where Democrats are considerably less favorably inclined, and a single question: Are the negotiations still open?
House Democrats want to change the estate tax provision in the law. They'd bring the exemption down from $5 million to $3.5 million, and the rate up from 35 percent to 45 percent. It wouldn't be a huge change in the law, actually. It would save $10 billion over the next two years, and simply restore the estate tax levels present in the ninth year of the Bush tax cuts (which had been the lowest estate tax levels in recent history -- at least until the 10th year eliminated the tax altogether).
The problem is that conservatives are starting to wonder if the tax deal is such a good deal for them. Charles Krauthammer opposes it, and "the Tea Party Patriots" are comparing it to TARP. Erick Erickson, founder of RedState.com, says the "deal must now die," and Rush Limbaugh and Sarah Palin agree with him. If the deal gets opened back up in the House, expect conservative grumbling to turn into open revolt, which could scotch approval when the deal then goes back to the Senate.
And many House Democrats would be fine with that outcome: They've been wanting to fight Republicans over the tax cuts for the rich, and this would give them their chance. So they may not be as afraid of the bill going down as they would be in other contexts. This deal, in other words, is not done yet.
The tax deal will pass the Senate, report Aaron Blake and Shailagh Murray: "President Obama's tax package easily cleared its first hurdle Monday, with the Senate voting overwhelmingly to move forward with the bill. But the real battle awaits in the House...With about two-thirds of the chamber voting, the measure had passed the 60-vote threshold late Monday afternoon. The procedural vote clears the way for a final vote Tuesday on the package, which Obama negotiated with Republicans and would prevent tax-rate increases from hitting most American workers starting Jan. 1...Rep. Chris Van Hollen (D-Md.), who is soon to be the ranking member of the House Budget Committee, said Sunday that the main sticking point is the change in the estate tax. "
Only fifteen Senators opposed the deal: http://bit.ly/ekNNdK
Polling suggests most Americans support the tax deal, reports Jon Cohen: "A slender 11 percent of those polled back all four of the deal's primary tax provisions: an across-the-board extension of Bush-era tax cuts, additional jobless benefits, a payroll tax holiday and a $5 million threshold for inheritance taxes. Just 38 percent support even two of the components. But put all four items together, and 69 percent of all Americans support the package. Large majorities of Democrats, Republicans and independents alike favor the agreement, which has drawn stiff opposition from some Democrats in the House. In the poll, 69 percent of liberal Democrats support the agreement, which Obama has called a framework for legislation."
A district court judge ruled health care reform's individual mandate unconstitutional (two others have ruled previously and found it constitutional), reports Rosalind Helderman: "A federal judge in Virginia ruled Monday that a key provision of the nation's sweeping health-care overhaul is unconstitutional, the most significant legal setback so far for President Obama's signature domestic initiative. U.S. District Court Judge Henry E. Hudson found that Congress could not order individuals to buy health insurance. In a 42-page opinion, Hudson said the provision of the law that requires most individuals to get insurance or pay a fine by 2014 is an unprecedented expansion of federal power that cannot be supported by Congress's power to regulate interstate trade."
But he didn't stop the bill's implementation or suggest the mandate should invalidate the rest of the legislation, writes Ezra Klein: "Hudson ruled against the government, but he didn't stop it (you can read the full opinion here). He refused the plaintiff's request for an injunction against the legislation's continued implementation...He [also] refused to overrule anything but the individual mandate itself....'The Court will sever only Section 1501 [the individual mandate] and directly-dependent provisions which make specific reference to 1501.' That last clause has made a lot of pro-reform legal analysts very happy. Go to the text of the health-care law and run a search for '1501.' It appears exactly twice in the bill: In the table of contents, and in the title of the section...The attachment of the 'specific reference' language appears to sharply limit the scope of the court's action."
And conservatives may come to regret this line of attack: "The individual mandate was created by conservatives who realized that it was the only way to get universal coverage into the private market. Otherwise, insurers turn away the sick, public anger rises, and, eventually, you get some kind of government-run, single-payer system, much as they did in Europe, and much as we have with Medicare. If Republicans succeed in taking it off the table, they may sign the death warrant for private insurers in America: Eventually, rising cost pressures will force more aggressive reforms than even Obama has proposed, and if conservative judges have made the private market unfixable by removing the most effective way to deal with adverse selection problems, the only alternative will be the very constitutional, but decidedly non-conservative, single-payer path."
Folk-pop interlude: Joanna Newsom plays "Good Intentions Paving Company".
Still to come: Larry Summers calls for stimulus on the way out; Republicans won't support a tweak to health care reform; Obama signed the First Lady's child nutrition bill into law; future international climate talks will only get tougher; and a 5-year-old reads a Walt Whitman poem.
Larry Summers called for more stimulus in his final speech as a White House aide, reports Perry Bacon: "Lawrence H. Summers urged that spending on highways and other infrastructure be increased in his final major address as President Obama's top economic adviser, saying that Americans' impulse to save more money means the government must spend more to ensure economic growth and job creation. Summers announced in September that he would leave his job as head of the National Economic Council to return to his professorship at Harvard University by year's end. In his remarks, he avoided using the word 'stimulus' but said that less consumer spending would hobble the economy for years. He said the decrease, however, could be offset in part by the public sector."
Read the speech: http://bit.ly/g3MUpM
Manufacturers say breaks in the tax package will spur them to hire, reports David Kocieniewski: "To many manufacturing companies, the tax cut proposal now being considered in Washington may be just enough to spur additional spending and hiring. At Yushin America, a Rhode Island company that makes and maintains robotic manufacturing equipment, executives say that the business tax breaks would allow them to invest in new machinery, new employees and even a new roof. 'It’s a chance for us to put it back in the business and grow,' said Michael Greenhalgh, operations manager of the company in Cranston, which employs 60 people and has annual sales of about $21 million."
Even the Fed's main dissenter would keep interest rates low: http://nyti.ms/gybLRU
House Democrats want to amend the tax plan to raise the estate tax, reports Jonathan Allen: "House Democratic efforts to change the tax deal struck by President Obama and congressional Republicans are focusing on an amendment to the estate tax provision, according to senior party sources familiar with a Monday leadership meeting...The House estate tax proposal, originally written by Rep. Earl Pomeroy (D-N.D.), would apply a 45 percent levy to wealth over $3.5 million. It was adopted 225-220. The president and congressional Republicans agreed to a rate of 35 percent for the next two years, with an exemption for the first $5 million."
The number of "temporary" tax provisions is unprecedented: http://on.wsj.com/fMpiY2
Quantitative easing two is working, writes Jeremy Siegel: "Those who look only at interest rates to judge whether monetary policy is too loose or too tight are making a mistake that monetary economists have long warned against. As a colleague of Milton Friedman at the University of Chicago in the 1970s, I remember him stressing that the extremely low interest rates of the early 1930s were not indicative of an easy monetary policy. They were instead the result of the Fed's drastically tight policy, which did not provide enough reserves to failing banks and drove the economy into the Great Depression. Similarly, the double-digit interest rates that we witnessed in the 1970s were not indicative of the Fed's brave stance against inflation but of a far-too-easy policy that inflated the money supply and heightened inflationary expectations."
We should worry about social mobility, not economic inequality, writes Michael Gerson: http://wapo.st/ghhcQ8
Adorable children who contain multitudes interlude: A 5-year-old recites "O Captain, My Captain" by Walt Whitman.
Republicans are blocking a fix to health-care reform's tax reporting provision, report Sarah Kliff and Jennifer Haberkorn: "Republicans rebuffed a Democratic effort to repeal health reform’s universally panned 1099 IRS reporting requirements as a piggyback in the tax cut deal, congressional aides on both sides of the aisle confirm to POLITICO. The move leaves 1099 rollback in play for the next Congress, giving Republicans an easy target in an otherwise challenging landscape for health reform repeal. Democratic aides allege Republicans are stalling on repeal of the unpopular measure for political benefit. Health reform’s 1099 tax reporting provision requires businesses to file IRS paperwork on any vendor purchases moer than $600. Both parties have failed in multiple attempts to dial back the unpopular provision."
Republicans want to expedite the individual mandate lawsuit to the Supreme Court: http://politi.co/ghBAh1
The individual mandate is needed for health care reform to work, write Attorney General Eric Holder and HHS secretary Kathleen Sebelius: "If we want to prevent insurers from denying coverage to people with preexisting conditions, it's essential that everyone have coverage. Imagine what would happen if everyone waited to buy car insurance until after they got in an accident. Premiums would skyrocket, coverage would be unaffordable, and responsible drivers would be priced out of the market. The same is true for health insurance. Without an individual responsibility provision, controlling costs and ending discrimination against people with preexisting conditions doesn't work."
Policies other than a mandate could have the same effect and be less vulnerable to legal challenges, writes Derek Thompson: http://bit.ly/gzV2W0
Obama signed into law Michelle Obama's child nutrition bill, reports Nia-Malika Henderson: "The Healthy, Hunger-Free Kids Act will expand the number of children in school lunch programs by 115,000, increase the reimbursement rate to school districts for meals by six cents and replace the junk food available outside the cafeteria, such as in vending machines, with more healthful options...Before supporting the law, liberal Democrats needed assurance from the White House that the $2 billion cut from the food stamp program to fund it would be restored."
The new Republican immigration subcommittee chair wants to cancel tax deductions for employers that hire illegal immigrants: http://nyti.ms/gKFYw0
Net neutrality lobbying is heating up, reports Cecilia Kang: "Expect lobbying around net neutrality to reach fever pitch through Tuesday. After that, the Federal Communications Commission will go into its bunker to deliberate a draft of rules that will be voted on Dec. 21. One group, Free Press, plans to let the FCC know that it doesn't like what it has heard so far. The public interest group will deliver a petition to the agency, with 2 million signatures, saying draft rules that don't regulate wireless networks with anti-discrimination provisions do not go far enough... AT&T executive vice president Jim Cicconi continued to make his rounds at the FCC last week, meeting with Chairman Jules Genachowski's staff and Republican commissioners Robert McDowell and Meredith Attwell Baker."
The lame duck session may last past this week in the Senate: http://politi.co/e0mS8r
Conservatives should give up on fighting the social safety net, writes Jim Manzi: "While it is always possible that some future society will find a way to cultivate widespread wealth and stability without a welfare system, or that existing welfare systems will wither away, the welfare state appears to be concomitant with the growth that capitalism creates. As far as can be determined from history, the idea of an advanced capitalist society without a welfare system is misplaced nostalgia -- or more accurately, an anachronism. It is like wishing for a commercial jet aircraft without wing stabilizers. If it is not advisable to eliminate the welfare system, we can at least understand reforms to it as attempts to create a check on a check."
Man versus nature interlude: A horse joins a bicycle race.
International climate negotiations aren't getting any easier, report Alex Morales, Kim Chipman, and Jim Efstathiou: "No new targets for curbing greenhouse gases were set, and debate on the future of the Kyoto Protocol, which limits emissions by developed countries until 2012, was put off until the next meeting in Durban, South Africa, in December 2011. With President Barack Obama struggling to salvage his energy agenda and richer and poorer nations in conflict over extending Kyoto’s emission limits, a new worldwide climate treaty may be 20 years away, said Tim Wirth, who in 1997 led the U.S. delegation in Kyoto, Japan. Such a delay endangers the future of $2.7 billion a year in pollution credits sold under a UN program based on the Kyoto agreement."
Mark Begich and Lindsay Graham will lead Senate efforts on energy policy next year: http://bit.ly/fIK2Ny
A Swedish town has basically eliminated fossil fuel usage, reports Elisabeth Rosenthal: "Kristianstad has already crossed a crucial threshold: the city and surrounding county, with a population of 80,000, essentially use no oil, natural gas or coal to heat homes and businesses, even during the long frigid winters. It is a complete reversal from 20 years ago, when all of their heat came from fossil fuels. But this area in southern Sweden, best known as the home of Absolut vodka, has not generally substituted solar panels or wind turbines for the traditional fuels it has forsaken. Instead, as befits a region that is an epicenter of farming and food processing, it generates energy from a motley assortment of ingredients like potato peels, manure, used cooking oil, stale cookies and pig intestines."
A "clean" energy standard's chances of passing are increasing, reports Ben Geman: "A leading Democrat on energy policy signaled Monday that he’s open to a 'clean' energy standard for utilities -- a GOP-backed proposal that’s favorable to new nuclear plants and low-emissions coal projects. Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) has long championed a renewable electricity standard that would require utilities to supply escalating amounts of power from sources like wind and solar. Bingaman said in the Capitol Monday that he’d look at a wider standard that includes non-renewable forms of energy -- but only if it doesn’t crowd out the renewables."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.
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