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Posted at 6:36 AM ET, 12/ 1/2010

Wonkbook: White House takes over Bush tax cuts; Senate passes food safety but rejects earmark ban; fiscal commission report coming

By Ezra Klein


The outcome of yesterday's long-awaited powwow between President Obama and the Republican congressional leadership was a plan for further powwows -- these helmed by OMB director Jack Lew and Treasury Secretary Tim Geithner and including one negotiator from both parties from both chambers -- meant to get past the impasse over the Bush tax cuts. Which is to say, the White House just took ownership of this process. A bad deal is now their bad deal. A failure to reach a deal is now their failure to reach a deal. And one of those outcomes is probably more likely than a great deal that somehow makes everyone happy.

The White House could've left this to Congress and simply run against -- and vetoed -- any outcomes they didn't like. That they're inserting themselves this directly is surprising considering that many in the building believe the legislator-in-chief role Obama assumed over the last two years yoked them to congressional dealmaking and sunk their popularity. It suggests, actually, that this approach is encoded deeper in the administration's DNA than some previously thought.

Top Stories

Obama and Congressional Republicans launched negotiations on extending the Bush tax cuts yesterday, report Shailagh Murray and Perry Bacon: "The most tangible publicly announced accomplishment in the two-hour closed-door session was an agreement to form a bipartisan group to seek a solution to the impasse over taxes. The group - Treasury Secretary Timothy F. Geithner, White House budget director Jacob Lew and two lawmakers from each party - held its first meeting Tuesday afternoon...What could break the logjam is a deal to extend all the cuts temporarily, along with horse-trading on other issues important to both parties, according to people present at the White House meeting."

The fiscal commission will release -- but will probably not agree on -- a plan, reports Lori Montgomery: "Co-chairmen Erskine Bowles and Alan K. Simpson said they would release their final blueprint when the commission convenes Wednesday morning. Like the original, they said the new plan would offer an aggressive prescription for reducing deficits by nearly $4 trillion by the end of the decade. But the panel's 18 members - including a dozen sitting lawmakers from both parties - will have until Friday to review the document and decide whether to support it. After two days of one-on-one meetings with their members, Bowles and Simpson acknowledged that it will be difficult to assemble the 14 votes that would allow them to issue official recommendations."

The commission will release its report at 9:30am today: And you'll be able to download it here.

The Senate passed major food safety legislation, reports Lyndsey Layton: "The Senate on Tuesday approved the biggest overhaul to the nation's food safety laws since the 1930s. The 73-to-25 vote gives vast new authorities to the Food and Drug Administration, places new responsibilities on farmers and food companies to prevent contamination, and -- for the first time - sets safety standards for imported foods, a growing part of the American diet. The legislation follows a spate of national outbreaks of food poisoning involving products as varied as eggs, peanuts and spinach in which thousands of people were sickened and more than a dozen died."

But rejected a moratorium on earmarks, reports Felicia Sonmez: "The Senate on Tuesday rejected a plan that would impose a two-year moratorium on federal earmarking for lawmakers' pet projects, with a handful of Republicans joining with most Democrats to defeat the measure. The proposal, which would have needed a two-thirds majority to pass, failed by a 39-to-56 margin. Seven Democrats voted for the ban, including Sens. Mark Udall (Colo.) and Claire McCaskill (Mo.) (who were among the bill's co-sponsors), Evan Bayh (Ind.), Michael Bennet (Colo.), Russ Feingold (Wis.), Bill Nelson (Fla.), and Mark Warner (Va.). McCaskill and Nelson are both up for re-election in 2012 and are likely to face tough battles to hold onto their seats."

Real talk: There are a lot of Republican senators who voted for the earmark ban but who are very thankful to their Democratic colleagues for killing the idea. Think Mitch McConnell, Olympia Snowe, and other longtime defenders of earmarks who didn't feel politically secure saying no to the tea parties on this one.

Got tips, additions, or comments? E-mail me.

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Cartoon band interlude: Gorillaz plays "Glitter Freeze" on Late Night with David Letterman.

Still to come: The fiscal commission is still split; a challenge to health care reform has been dismissed in court; the Senate has rejected an earmarks ban; a bipartisan group of Senators is fighting ethanol subsidies; and a bulldog goes to war with a doorstop.


TARP will ultimately cost $25 billion, reports Jim Puzzanghera: "The projected cost of the $700-billion financial bailout fund -- initially feared to be a huge hit to taxpayers -- continues to drop, with the nonpartisan Congressional Budget Office estimating Monday that losses would amount to just $25 billion. That's a sharp drop from the CBO's last estimate, in August, of a $66-billion loss for the Troubled Asset Relief Program, known as TARP. Going back to March, the budget office estimated that the program would cost taxpayers $109 billion. The new, more optimistic forecast largely reflects money the Treasury Department has received as banks have repaid their loans and repurchased stock warrants."

Real talk: So in the end, we'll have spent $25 billion to save the economy? There's an increasingly strong case that TARP may have been the most cost-effective economic policy ever passed.

John Boehner's economic braintrust:

The White House is skeptical of a millionaire's tax hike, reports Brian Beutler: "Democratic leaders (other than Schumer) and Obama himself oppose the plan for a few reasons. At the meeting yesterday, according to a source familiar with the discussions, 'the concerns expressed were about the cost [to the deficit] and the risk of redefining the middle class as those making over one million.' (Estimates suggest that lifting the threshold from $250,000 to $1 million could cost as much as $400 billion over 10 years.) A Senate Democratic aide said that, for these reasons, the idea hasn't really gained wide traction in the caucus. And a third source noted that a number of progressive members don't want to start negotiations by giving up what they really want: a vote to let the Bush tax cuts expire above a threshold of $250,000 a year."

The economic case for a millionaire's tax hike is strong, writes David Leonhardt: "The country, as you’ve no doubt heard, is facing a huge budget deficit. To reduce the deficit to a level economists consider sustainable, Washington needs to find about $400 billion in annual tax revenue and spending cuts by 2015. A millionaire’s tax would be a good start, producing about $30 billion a year. By comparison, Mr. Obama’s plan to freeze federal workers’ pay would save about $5 billion a year. A millionaire’s tax would also fall on an income group that, by almost any definition, can best handle a tax increase. Since 1980, pretax income for households making at least $1 million has more than tripled, after adjusting for inflation. Pretax income for households in the dead middle of the income distribution, making roughly $50,000, has risen just 13 percent."

Bowles and Simpsons are relying on fear to push deficit reduction, writes Annie Lowrey:

Short-selling is fundamentally unfair, writes Steven Pearlstein: "The fallacy behind the traditional defense of short selling is that there is some rough equivalent between those who are betting that a company will succeed and those who are betting that it will fail. The Wall Street view starts from the assumption that financial markets are an end unto themselves. But if you start with the assumption that markets are meant to help companies create real value, then treating 'longs' and 'shorts' as economically equivalent looks pretty absurd. A second fallacy is that all financial instruments have the same economic value."

Adorable animals fighting stationary objects interlude: A bulldog does battle with a mounted doorstop.

Health Care

A federal judge tossed out a challenge to health care reform, reports Jennifer Haberkorn: "A federal judge in Virginia threw out a case brought by Liberty University that claimed the health care reform law is unconstitutional and would allow the religious institution’s insurance payments to cover abortions...Liberty University, a Christian university in Lynchburg, Va., had argued that the legislation’s requirement that nearly all Americans purchase insurance coverage and its incentives for large employers to cover employees would allow the university’s money to cover abortions, violating the religious values of the institution. The court flatly rejected that argument."

Domestic Policy

Senate Majority Leader Harry Reid has filed cloture on the DREAM Act, reports Julie Hirschfeld Davis: "The top Senate Democrat said Tuesday he'd move to force a test vote this week on a measure to give tens of thousands of young illegal immigrants a path to legal status. Sen. Harry Reid, D-Nev., said he'd move to schedule action on the so-called Dream Act, which would give more than 100,000 young immigrants brought to the United States before the age of 16 a chance to become legal residents if they attend college or join the military. It's unclear whether Reid can muster the 60 votes necessary to move to an up-or-down vote on the measure."

The GOP is considering term limits for leadership:

The FCC chair has introduced a net neutrality proposal, reports Cecilia Kang: "The chairman of the Federal Communications Commission plans to announce Wednesday a controversial proposal that would prohibit Internet providers from favoring or discriminating against any traffic that goes over their networks. He would do so, however, without resorting to the more drastic step of changing the way the FCC regulates broadband providers, a move that would have more clearly asserted the government's authority over Internet access. In a statement provided to reporters in advance of Wednesday's announcement, FCC Chairman Julius Genachowski said he thinks he has 'a sound legal basis' to pursue so-called net-neutrality rules that would prevent companies such as Verizon, Comcast and AT&T from blocking or serving up some Web sites faster and at better quality than others."

Always connected interlude: A block toy for babies that can send status updates.


A bipartisan group of Senators is pushing for an end to ethanol subsidies, reports Greg Sargent: "In a clear sign of momentum against ethanol subsidies, a bipartisan group of more than a dozen senators has signed onto a letter urging Senate leaders to let the subsidies expire during this Congress...The letter, which I obtained from a source, was authored by senators Dianne Feinstein and Jon Kyl, and includes a number of Democrats and Republicans, including John McCain, Susan Collins, Richard Burr, and Mike Enzi. This is key, because the question of whether the subsidies should expire is emerging as a key test -- just like earmarks -- of whether Republicans are serious about reining in spending and the deficit."

Every candidate for House Science Committee chair denies climate change:

House Energy and Commerce chairman candidates made their cases yesterday, report Darren Goode and Robin Bravender: "Rep. Fred Upton exuded confidence that he’ll win the chairmanship of the Energy and Commerce Committee after pitching his case to his GOP colleagues Tuesday, but he may have to wrest the gavel - literally - from Rep. Joe Barton. Upton, Barton and Reps. John Shimkus and Cliff Stearns all made their presentations to the GOP Steering Committee Tuesday. The panel, loaded with loyalists to incoming Speaker John Boehner, is expected to make its decision by next Tuesday. The favorite is Upton, but Barton, who’s fighting to retain his spot as the panel’s top Republican, isn’t planning to stand aside."

GM is hiring 1,000 workers just to build green vehicles:

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.

By Ezra Klein  | December 1, 2010; 6:36 AM ET
Categories:  Wonkbook  
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Next: The best and the worst of the fiscal commission's final report


The President would be blamed for what happens with the tax cuts whether he "took ownership" of the process, or not. And rightfully so. Because the buck stops with him. The real issue is whether he is willing to use a veto. He can have negotiations and then call them off if the sides don't agree.

Posted by: jfung79 | December 1, 2010 7:33 AM | Report abuse

Another thing, the President has hardly been legislator-in-chief. He has not taken leadership and really lobbied Congress on climate change, immigration reform, or almost any major issue. Even with health care, he was hands-off until the end, and his silence on the public option is part of what killed it.

Posted by: jfung79 | December 1, 2010 7:36 AM | Report abuse

"GM is hiring 1,000 workers just to build green vehicles:"

Green vehicles or electric vehicles? There is a difference...

"And what of electric cars’ environmental credentials? Electric cars are being hugely subsidised by taxpayers—£5,000 ($7,940) in Britain and up to $7,500 in America—on the ground that they are zero-emission vehicles. Makers of electric cars claim that this is an efficient way to reduce greenhouse-gas emissions. Road transport accounts for a tenth of such emissions worldwide; the sorts of biofuels currently in use are not much greener than petrol; and next-generation biofuels are proving slow to come to the market.

Although electric cars may not themselves produce greenhouse gases, generating the electricity they use does. How green they are depends on the fuel mix at the power plants in the country in which they are driven. An electric car in Britain today, for instance, produces around 20% less in CO2 emissions than a car with a petrol engine. Even if the generating mix gets greener, electric vehicles are so expensive to produce, that they will still be a relatively costly way of abating CO2 emissions. Sceptics therefore doubt that the subsidy is a good use of public money. According to Richard Pike, chief executive of the Royal Society of Chemistry, replacing all of Britain’s cars with subsidised electric cars would cost the taxpayer £150 billion and, with Britain’s current fuel mix, cut CO2 emissions from cars by about 2%. For the same money, Britain could replace its entire power-generation stock with solar cells and cut its emissions by a third."

But that's government for you. Let's massively subsidize the sale of a product that isn't really ready for the mass market, and claim that we are being green even though coal fired electricity isn't a green energy source.

There's nothing wrong with GM refining the technology for a few more years until it can build an electric car people might be willing to buy without a hefty subsidy. Even with the subsidy, GM only expects to sell ~50,000 volts over the next two years.

"“We’ve gone 450 miles and we’ve used 1.2 gallons of gas,” he said. “I haven’t seen a gas station for six weeks.”

The Volt, which is priced at $41,000"

Brilliant. So GM's CEO spends $20,000+ extra on a car - $7,500 of which wasn't even his - and in return he saves at best ~$1,000 on fuel and doesn't have to suffer spending a few minutes at the gas station.

Posted by: justin84 | December 1, 2010 9:15 AM | Report abuse

The President would be blamed for what happens with the tax cuts whether he "took ownership" of the process, or not. And rightfully so. Because the buck stops with him. The real issue is whether he is willing to use a veto. He can have negotiations and then call them off if the sides don't agree.

Posted by: jfung79 | December 1, 2010 7:33 AM | Report abuse

Really? Because EVERYWHERE including the MSM its still being called the "bush tax cuts". I don't think that narrative's changing anytime soon.

And I'm guessing Ezra will be getting to SEIU cutting off children's coverage and blaming it on PPACA later in the day. I can't wait!

Also can't wait to get Ezra's take on the Comcast/Level 3 controversy. Many left wing bloggers are already blasting Comcast as the big corporate giant yet Level 3 did the same thing recently. Also why should comcast have to pay for services that Netflix is making a bundle off of? I guess that's a general bias against large companies and in favor of small and innovative ones.

Posted by: visionbrkr | December 1, 2010 9:49 AM | Report abuse


Obviously there is no real point in doing anything for environmental purposes until a carbon tax / carbon cap/trade is in place.

However, economically, jobs are jobs. Those pyramids won't build themselves. And more optimistically, a mature electric car technology might be intrinsically (i.e., in unsubsidized form) competitive overseas, in countries with modernized energy policies. Competitive export products would be nice to have.

Posted by: eggnogfool | December 1, 2010 9:52 AM | Report abuse

Maybe Harry Reid needs a refresher course on the Constitution:

"A food safety bill that has burned up precious days of the Senate’s lame-duck session appears headed back to the chamber because Democrats violated a constitutional provision requiring that tax provisions originate in the House."

Posted by: msoja | December 1, 2010 10:01 AM | Report abuse

eggnofool wrote:

"Obviously there is no real point in doing anything for environmental purposes until a carbon tax / carbon cap/trade is in place."

And what would you expect such a tax to do? Who would it benefit?

Posted by: 54465446 | December 1, 2010 11:46 AM | Report abuse

Unimportant side note: David Letterman hosts "The Late Show", Jimmy Fallon hosts "Late Night".

Posted by: JohnnyMcNugget | December 1, 2010 12:14 PM | Report abuse


Who would a carbon tax benefit?

Besides earthlings 100-500 years from now?

Economically and now, it depends on the implementation.

Given (A) a ****ty carbon tax implementation (B) a competent carbon tax implementation, it would benefit (A) our trade partners or (B) american workers and their families.

Posted by: eggnogfool | December 1, 2010 4:12 PM | Report abuse

Dear Mr. President and Congress

I'm one of your shrinking middle class workers. I just received a 7.62% pay reduction for all of 2011. You are currently debating the so called "Bush Tax Cuts". I would like you to hear my voice for a change and I hope you listen for I speak for the good of the United States of America.

I would rather pay more taxes than see you extend the tax cuts for the few wealthy Americans who can most easily afford to pay into the system that has given them the opportunity to amass their great wealth. I speak for most of us when I say that I don't begrudge them in any way for what they have earned/amassed etc.

Yes you all need to reprioritize and make deep cuts everywhere. But please do not lose sight of this one fact. The rich got what they have now from the hard work of all the Americans that work in their companies, buy their goods etc. If the middle class dies the American Dream and the future of our children surely will follow.

So I clearly state that I would rather see these Tax breaks expire then see them extended one day for the people who are not suffering and can easily afford to pay them when our country needs it the most. NOW!!


A Patriot, Great, Great … Grandson of the Founding Fathers of this Republic

Posted by: J-Dub | December 1, 2010 6:44 PM | Report abuse

Tax cuts are NOT going to help as long as there is corruption and stock market manipulation. See the movie "Stock Shock-The Short Selling of the American Dream" for a look at how things really work. If you are on a budget, buy the movie at the site and save a few bucks. It is an education we all need.

Posted by: DeniseHubbard | December 4, 2010 10:25 AM | Report abuse

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