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Posted at 6:41 AM ET, 12/ 3/2010

Wonkbook: Tons o' tax cut votes; Simpson-Bowles likely to win a majority vote

By Ezra Klein


When Mitch McConnell demanded that Senate Democrats bring the Bush tax cuts for a vote before moving onto other business, I don't think this is what he meant. Yesterday, House Democrats passed an extension of the Bush tax cuts -- but only for income under $250,000. The tax cuts for income over $250,000 never saw a vote. Now the Senate is moving to do much the same thing, though it'll vote on two different proposals: First, the tax cuts for income under $250,000, and then the Schumer compromise extending the breaks for all income under $1,000,000.

Of course, Hill staffers have been perfectly clear that they're viewing these as messaging votes. The bipartisan talks led by Jack Lew and Tim Geithner are ongoing, and there's talk of a deal in which all the tax cuts would be temporarily extended and so too would $150 billion of further tax breaks and stimulus measures (notably an extension of both unemployment insurance and Obama's Making Work Pay tax credit). So the tax cuts being passed this week don't mark the end of this process. They mark the beginning of the end.

Meanwhile, the fiscal commission is set to vote today. Expectations are that 10 of 18 members -- including Sens. Dick Durbin, Kent Conrad, Mike Crapo, and Tom Coburn -- will support the measure. That's well below the 14-person supermajority needed to furnish a recommendation, but it's the next best thing -- a solid majority backed by some powerful legislators. It's hard to be confident about the prospects of a difficult package designed to address a long-term problem when you watch the difficulty Congress is having addressing the urgent expiration of a popular raft of tax cuts, but this will at least give the fiscal commission an argument to push forward: A 10-person majority that includes both Durbin and Coburn is sufficient for the package's supporters to credibly argue the commission's report deserves consideration by Congress and may indeed be the starting point for a compromise.

Top Stories

The House has voted to extend tax cuts for income $250,000, reports Janet Hook: "The House approved legislation Thursday that would extend current tax rates on income up to $250,000 while allowing taxes on higher earnings to rise, a largely symbolic vote that pointed to divisions among Democrats in the waning days of their dominance on Capitol Hill. The bill passed 234-188, but 20 Democrats opposed it-- mostly lawmakers who lost on Election Day and who agree with Republicans that it is bad policy to let any tax rates rise amid a fragile economy. Three Republicans voted for the bill. The legislation is doomed in the Senate, and President Barack Obama has signaled a willingness to give ground to the Republican position."

The Senate will hold two tax cut votes Saturday, reports Felicia Sonmez: "A bipartisan plan that would have brought four competing proposals for extending the Bush-era tax cuts to the Senate floor fell through Thursday night, leaving both parties again pointing fingers at each other. Democrats said a last-minute objection by a Republican senator scotched the deal, and they accused the GOP of opposing progress on the issue it has touted as its top priority for the lame-duck session...Reid (D-Nev.) told reporters late Thursday that, following the collapse of the deal, the Senate is now poised to file cloture on only the two Democratic proposals, with a vote slated to take place on Saturday."

Obama will likely agree to a temporary extension of all Bush tax cuts, report Lori Montgomery and Shailagh Murray: "The White House and congressional Republicans have begun working behind the scenes toward a broad deal that would prevent taxes from going up for virtually every U.S. family and authorize billions of dollars in fresh spending to bolster the economy. Negotiations have accelerated in recent days as Congress has confronted deadlines for extending a series of tax cuts that expire at the end of the month, renewing emergency jobless benefits and keeping the government funded into next year. The talks mark the dawn of a new era on Capitol Hill, with resurgent Republicans holding far more leverage and commanding a more prominent role in crafting legislation."

The debt commission's plan will receive a majority, but not the supermajority required to get the commission's recommendation, reports Jackie Calmes: "Thursday, 10 of the 18 commission members had endorsed the package put forward this week by the panel’s co-chairmen, former Senator Alan K. Simpson, Republican of Wyoming, and Erskine B. Bowles, former chief of staff to President Bill Clinton. But five members announced their opposition and a sixth -- Andy Stern, former president of the Service Employees International Union -- privately told the chairmen he would vote no."

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Indie cover interlude: Yo La Tengo play Cat Stevens' "Here Comes My Baby".

Still to come: Long-term unemployment might become permanent unemployment for many workers; how the Fed saved Toyota and Harley Davidson, not to mention the world; the child nutrition bill passed; a group of Senators is fighting to preserve ethanol subsidies; and a cat who's quite good at camouflage.


A stopgap spending bill cleared Congress:

Many currently unemployed workers might never work again, reports Catherine Rampell: "The longer people stay out of work, the more trouble they have finding new work. That is a fact of life that much of Europe, with its underclass of permanently idle workers, knows all too well. But it is a lesson that the United States seems to be just learning. This country has some of the highest levels of long-term unemployment -- out of work longer than six months -- it has ever recorded. Meanwhile, job growth has been, and looks to remain, disappointingly slow, indicating that those out of work for a while are likely to remain so for the foreseeable future."

The White House argues 600,000 people could lose their jobs if unemployment benefits are not extended:

A big deficit reduction package would net the economy 750,000 jobs, guess Steven Pearlstein: "I'd argue that pushing through a grand budget compromise would be the most effective thing we could do for the economy, even in the short run. Lifting that black cloud and demonstrating to ourselves and the world that our political system can function would provide a big boost to the confidence of consumers, investors and business executives whose 'animal spirits' have been in hibernation. How large a boost? Here's a wild guess: 1,500 points on the Dow Jones industrial average, half a percentage point off the yield on 30-year Treasury bonds, 750,000 jobs created and an extra percentage point of gross domestic product growth in 2011. Longer run, the impact would be even greater."

Three reasons that the short-term deficit isn't as big a problem as you think:

In 2008, the Fed became the global central bank of last resort, reports Annie Lowrey: "The cache also shows that a much broader range of companies used the Fed facilities than previously imagined. For instance, the Fed, via its commercial paper facility, aided hog-builder Harley Davidson, Japanese carmaker Toyota, and construction equipment giant Caterpillar. It also helped a plethora of foreign banks, from the Swiss bank UBS to the government-owned Korean Development Bank...."We knew the Fed helped foreign companies," Petrou says. "But this speaks to the Fed's credit. In the midst of a global financial crisis, the Fed mustered liquidity support when all of the other central banks were acting slowly. The Fed became the global central bank."

Adorable animals being sneaky interlude: Cat camouflage.

Health Care

Arizona's Medicaid cuts could leave some low-income patients to die, reports Marc Lacey: "Effective at the beginning of October, Arizona stopped financing certain transplant operations under the state’s version of Medicaid. Many doctors say the decision amounts to a death sentence for some low-income patients, who have little chance of survival without transplants and lack the hundreds of thousands of dollars needed to pay for them...Arizona’s transplant specialists are alarmed that patients who were in line to receive transplants one day were, after the state’s budget cuts to its Medicaid program, ruled ineligible the next -- unless they raised the money themselves."

Rep. Joe Barton wants to increase House hours to fight health care reform:

Repealing any of health care reform will be hard, writes Jonathan Cohn: "Critics of health care reform this week thought they would get their first win in the campaign to repeal the Patient Protection and Affordable Care Act. Instead they got a lesson in just how politically challenging a wholesale repeal might be. At issue was an obscure, but unpopular, provision within the new health law that requires businesses to file 1099 tax forms anytime they purchase goods or services worth more than $600...For several months, they have been promising to strip the provision -- and to replace it with something better. It's the 'replace' part that got tricky on the Senate floor."

The managed-care miracle of the 1990s was mostly a function of high GDP growth, not slow health-care spending growth, graphs Aaron Carroll:

Domestic Policy

The House passed Michelle Obama's child nutrition bill, reports Nick Anderson: "The Democrat-led House voted Thursday to send President Obama a bill that would enable more poor children to receive free meals at school, raise the nutritional quality of cafeteria fare and reduce the junk food and sugary beverages sold in school vending machines. The bill, which cleared the Senate in the summer, won House approval on a 264 to 157 vote. Seventeen Republicans broke party ranks to join Democrats in favor of the bill. Four Democrats were opposed. The bill, a priority for the president and first lady Michelle Obama, would boost spending on child nutrition $4.5 billion over 10 years and raise federal reimbursements for school lunches more than the inflation rate for the first time since 1973."

Homeland Security secretary Janet Napolitano says the DREAM Act will make immigration enforcement easier:

Harry Reid wants to legalize online poker, reports Alexandra Berzon: "Staffers for Senate Majority Leader Harry Reid are circulating a bill to legalize poker playing on the Internet that's backed by large casino interests. The Nevada casino companies pushing the measure were among the Democrat's biggest donors during his fierce re-election fight. They argue the bill would provide consumer protection for poker players and would provide some tax revenue for federal and state governments. On Wednesday, three Republican lawmakers sent a letter to Mr. Reid and Minority Leader Mitch McConnell (R., Ky.) opposing any efforts to pass Internet poker legislation during the lame-duck session."

Harry Reid should go nuclear on Senate rules, writes Jonathan Bernstein:

Promising college funding can boost school performance, writes Conor Williams: "A group of residents anonymously established and endowed 'The Kalamazoo Promise,' offering Kalamazoo public school graduates full tuition at any of Michigan's prestigious public universities or colleges. The goal was to revitalize the schools, but also the local economy and community. Even in the program's infancy, the results have been dramatic, halting the community's hemorrhaging of jobs, population and money, according to a study by the consulting firm McKinsey & Co. In the Promise's first two years, real estate values rose by 8 to 10 percent (compared to an average statewide loss of 2 percent). Kalamazoo public school enrollment increased by more than 1,000 students."

Time lapse interlude: A kid ages ten years in a minute and a half.


Farm state Senators are working to defend ethanol subsidies, reports John Collins Rudolf: "Shortly after a bipartisan group of senators circulated a letter calling for an end to federal ethanol subsidies and tariffs this week, a group of Corn Belt senators have released their own declaration calling for renewal of the measures. A federal subsidy of 45 cents a gallon for blending ethanol into gasoline and a 54-cent per gallon tariff on imported ethanol will both expire automatically at the end of the year without Congressional action. A bill introduced in April by Charles Grassley, Republican of Iowa, and Kent Conrad, Democrat of North Dakota, would extend the measures until 2015...The letter was signed by 16 senators, including Al Franken, Democrat of Minnesota, and John Thune, Republican of South Dakota."

The EPA turned 40 yesterday:

The agency that oversees deepwater drilling has not revamped its inspection system, report Leslie Eaton, Stephen Power, and Russell Gold: "Seven months after the Deepwater Horizon exploded in the Gulf of Mexico, the troubled federal agency that oversees offshore drilling has been revamped, renamed and given a new leader with a mandate to turn what critics called an industry lapdog into an effective watchdog. But there's at least one big change the agency hasn't made: fixing its deeply flawed inspection program. As it has for four decades, that program sends inspectors armed with little more than checklists and pencils into the Gulf to ensure the safety of more than 3,500 oil platforms and drilling rigs."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Melina Mara/The Washington Post.

By Ezra Klein  | December 3, 2010; 6:41 AM ET
Categories:  Wonkbook  
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Next: An ugly jobs report


The White House argues 600,000 people could lose their jobs if unemployment benefits are not extended

so a whole new message starts. the link was blocked for non-subscribers but i think its safe to assume that the new talking points are if jobless benefits aren't extended then those people wouldn't spend that money and thus people would lose jobs based upon businesses slowing etc? While I agree that they should be extended why not also talk about how jobs will be affected by not passing the tax cuts for everyone or everyone above 500k or everyone above $1 million. Again we get half the story of the talking point machine that is the Obama White House. Its nothing new in politics just not the hope and change we were promised.

And its nice to see Harry Reid paying OFF his casino buddies that helped shove him across the finish line and nicer still for Ezra to actually post it here as opposed to him ignoring the issue of SEIU and its dropping of children from their healthcare at the end of the year.

Posted by: visionbrkr | December 3, 2010 7:53 AM | Report abuse

"why not also talk about how jobs will be affected by not passing the tax cuts for everyone or everyone above 500k or everyone above $1 million."

Oh gosh, I hate starting a conversation with an idiot, but here goes.

Do you SERIOUSLY believe that giving more tax breaks to people who make more than a million dollars (or even $500,000) a year will create any kind of serious amount of new jobs?

What are you smoking?

Those people are already filthy rich. Businesses hire people to make money. If more money was to be made by hiring more people, they'd already do it, because after all, they already have the money needed to hire more people. I am fairly certain you will not understand what I just said in this paragraph. Please read it a few times and let it sink in before you ask me a bunch of inane or distracting questions or call me a conspiracy theorist.

Giving these filthy rich people $100s billions dollars will be a complete waste.

That money is better spent on keeping the deficits down or in paying for unemployment or new jobs programs that will create THOUSANDS and THOUSANDS of new jobs (instead of maybe creating the dozen or so jobs in foreign resorts where the rich will play if they get $100s billion more in tax breaks).

There is abundant data (google it) showing that the rich and big business is hoarding historic amounts of cash as they await consumers to start buying again. Big business is not hiring, not because they don't have money to hire people, but because consumers aren't buying. Giving money to the rich does not alter that equation. DO YOU GET IT YET???? Giving them more money solves NOTHING. There are 1000s of ways to use that money to better effect than letting it rot in the bank accounts of multi-millionaires and billionaires.

Posted by: lauren2010 | December 3, 2010 9:23 AM | Report abuse

both bush tax rates and the unemployment extensions expiring are pretty important step towards recovery.

i do hate how unemployment benefit expiration is set up though: those who have been on unemployment and seeking a job for just 5 months are about to get cut off, where those who have been on unemployment (and looking really hard i'm sure) for 18 months will still be able to pick up checks through april.

i'd think it would make much more sense for extensions to 'decay', go from 99 weeks available to 98, 97, 96 etc. i'd think a little more than 26 weeks makes sense right now, but artificially inflating unemployment numbers when you know businesses are waiting for dropping unemployment rate as a sign to start hiring is dangerously stupid.

Posted by: eggnogfool | December 3, 2010 9:48 AM | Report abuse

Ezra, I have yet another great idea for your column. Stop writing about turkeys and Chinese infidelity, and throw a dart at your wonkbook post and force yourself to write about whatever link it lands on. It's the MOST interesting part of your column, and also the least developed.

No, don't thank me!

Posted by: 54465446 | December 3, 2010 10:05 AM | Report abuse

Shouldn't "a solid majority" be more than 50% + 1? That's more like "the weakest majority;" one less person and they won't have a majority at all.

Posted by: westofthedc | December 3, 2010 10:48 AM | Report abuse

"The White House argues 600,000 people could lose their jobs if unemployment benefits are not extended"

This reminded me of a post by Dylan Matthews:

"Using the most recent estimate of the size of the labor force, a 0.4 oercent increase in the unemployment rate represents 614,964 people. This is not a trivial number, but losing the stimulative effect of unemployment benefits would increase the unemployment rate as well, likely canceling out this effect."

Posted by: justin84 | December 3, 2010 12:10 PM | Report abuse


i won't call you an idiot and be a condascending jerk like yourself but please spell out to me where i said that tax cuts should be approved for all, or for those that make over 1 million or 500,000 or $250k? I said to TALK ABOUT what kind of affect it would have on it. You have so much hatred built up for this mythical "rich person" that you can't even read straight. Why do I waste my time trying to explain simply how to read properly to you? I'm starting to ask myself that question more and more.

And would you please stop using google as if everything printed on the internet is gospel truth? I thought we had this conversation months ago about how google works.

Posted by: visionbrkr | December 3, 2010 2:19 PM | Report abuse

Major brands giving out samples on their favorite products search online for "123 Get Samples" I received my samples. No credit card required.

Posted by: rubywest | December 4, 2010 1:48 AM | Report abuse

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