The World According To TARP
NYT sees Congress acquiescing to Bush and Obama and permitting the next $350B to go to the TARP fund: “Republican and Democratic Senate leaders signaled on Monday that they would support the release of the second half of the Treasury’s $700 billion financial system bailout fund, despite anger among many rank-and-file lawmakers over the Bush administration’s management of the program … President Bush on Monday formally requested the $350 billion from Congress at the urging of Mr. Obama. Under the bailout law, Congress can block the money but only if the House and Senate act to do so. The Senate is expected to vote on the request as early as Thursday. ”
USA Today finds more opposition among congressional Republicans.
Speaker Pelosi issues statement backing Rep. Barney’s Frank TARP reform bill: “Chairman Frank’s legislation makes significant changes to the financial rescue package – from requiring strengthened oversight and transparency to additional foreclosure relief. At a minimum, the legislation will require $40 billion from the TARP for initiatives to keep families in their homes. The legislation will require that financial institutions specify how they will spend taxpayer dollars, ensuring that the second $350 billion in TARP comes with clear and specific strings attached.”
The Hill reports “Senate Democrats have yet to indicate whether they will take up similar legislation [as Frank's].” NYT: “some Democratic aides said it was difficult to envision approval of the money without Mr. Frank’s bill also being adopted.”
LA Times finds senators in line with Frank’s thinking: “‘I said if we don’t get involved in trying to solve this housing crisis, then we’re never going to’ alleviate the problem, [Sen. Barbara] Boxer said she told Obama after leaving a meeting with reporters in her office two times to field his calls. ‘He agreed with that. . . . He’s going to lay out what he feels the money is needed for, and that [housing] would be one of the things it’s needed for.’ Boxer said she wanted Obama to make those commitments publicly. [Sen. Kent] Conrad echoed that view. ‘I think it’s going to take more than a letter from Mr. Summers to assure people this money is going to be used in a way that is appropriate and is in line with congressional intent,’ he said. ‘It’s going to take those who have responsibility for actually spending the funds to put in writing their intentions.’”
Huffington Post reports that Obama will visit the Senate Democratic Caucus today to make his case.
Holes In the TARP?
OurFuture.org’s David Sirota argues that while Frank’s bill is an improvement, it “still has some gaping loopholes. For example, the allow executives to pay themselves absurd salaries. Additionally, while it’s good that Frank wants to force some of the new bailout money to be used to help homeowners, that money needs to be accompanied with bankruptcy law reform (ie. giving judges the power to renegotiate loans), so that the money isn’t used to subsidize banks’ bad loans and can be used in the most effective way that actually helps homeowners and the middle-class. Of course, word today is that Frank is now backing off even his modest legislation…”
D-Day sees potential economic benefit, but also wants it in writing: “This $350 billion, if allocated correctly, can be credibly seen as a boost to what most economists think is a too-small recovery package. Using TARP money to limit foreclosures would produce an economic lift, for example. The current Treasury Department says that no other monies are needed, but that’s under the current iteration of the program. If the money is channeled differently, suddenly an $800 billion dollar recovery becomes a $1.1 trillion dollar one. TARP as stimulus would be a good idea to get things going quickly, but Congress needs to set the parameters, as per their job description. Failing that, I tend to agree with Sirota.”
Talking Points Memo on the current lack of transparency: “The level of transparency is so bad with the TARP program (and most of the rest of the what the Treasury is doing), that sometimes a new big new piece of information will get pried loose and it’s something that I hadn’t even realized wasn’t available already. As a case in point, Sen. Levin (D-MI) just put out a press release announcing that the Treasury has agreed to release the contracts for the massive amounts of TARP money the Treasury
gave invested in banks like Goldman Sachs, Bank of America, Morgan Stanley, et al.” Also from TPM: Who’s Running TARP? You Might Not Wanna Know.
Obama Bends to Dems, GOP Regroups and Ideas Keep Coming on Economic Recovery
Bowing to widespread Democratic skepticism, President-elect Barack Obama will drop his bid to include a business tax break he once touted in the economic stimulus bill now taking shape on Capitol Hill, aides said last night … Obama suggested the $3,000-per-job credit last week as one of five individual and business tax incentives aimed at winning Republican support … When no champion for the proposal came forward, the president-elect decided to sideline the incentive…
…Obama advisers said further adjustments may be made to the president-elect’s tax priorities, including to a proposed $500 payroll tax credit for individuals. Many Democrats have criticized Obama’s idea of distributing the benefit over 12 months, saying it would amount to about $20 per paycheck for workers who are paid every two weeks. They would prefer to distribute the credit over a shorter period.
Obama also has suggested tax incentives for businesses to make capital investments. Such benefits are popular across party lines and have been successful in recent years. But another Obama proposal, to allow companies to deduct larger portions of recent losses, has raised eyebrows on the Hill, where lawmakers see it as a costly reward for behavior that was possibly irresponsible.
Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) announced last week that he would seek to increase unemployment benefits in the plan. Democrats also are floating generous incentives for domestic energy production and for college tuition relief.
USA Today delivers a state-by-state summary of budget crises, notes that increased Medicaid funding is particularly critical.
Politico reports congressional Dems see education funds, in addition to Medicaid, as a prime way to help states: “Federal aid for education could grow as much as $140 billion under a two-year economic stimulus bill now taking shape in Congress, where Democrats are proposing a new block grant for states and a $15 billion expansion of annual Pell grants to low-income college students … ‘When the recession ends, you are still going to need teachers, firemen, policemen, and the question is do we step in now or pay more to rebuild later,’ a House Democratic leadership aide told Politico.”
BUT “…Democrats are looking at a block-grant structure that could end after two years and not be built into the base funding for existing programs such as Title I aid for public schools.”
EbonyJet.com’s Brian Gilmore urges Obama to learn from Carter’s stimulus mistake: “[President Jimmy] Carter got elected partly because of that lousy economy and he immediately proposed a significant stimulus package to get the economy going again. The amount initially was $31 billion ($111 billion in 2007 dollars) for the same kinds of things that Obama is calling for: jobs, tax cuts, investment. Everyone thought it was a good thing. But Carter, encouraged a little by improvements in the job market in 1977 made a critical mistake that Obama should heed. Carter changed his plans at the last minute and reduced his stimulus package by half including eliminating a proposed consumer tax cut. The economy tanked by 1978 and Carter never was able to get it under control.”
TNR’s Brad Plumer pushes for refundable tax credits for renewable energy. Meanwhile, Earth2Tech reports: “Solar Firms Are Slashing Jobs”
IBM CEO in the WSJ: “Smarter infrastructure is by far our best path to creating new jobs and stimulating growth … a $30 billion stimulus investment in just three areas — smart grids, health-care IT and broadband — could yield almost one million new jobs within one year.”
Brad DeLong adds to FiveThirtyEight’s criticism of Greg Mankiw for distorting the stimulus views of Obama econ aide Christina Romer.
NYT’s Bob Herbert proposes a revenue raiser: “At some point, however, someone is going to have to talk about raising revenue. The dreaded T-word is going to come up: taxes. … The economist Dean Baker is a strong advocate of a financial transactions tax. This would impose a small fee — ranging up to, say, 0.25 percent — on the sale or transfer of stocks, bonds and other financial assets, including the seemingly endless variety of exotic financial instruments that have been in the news so much lately … the fees would be a trivial expense for what the general public tends to think of as ordinary traders — people investing in stocks, bonds or other assets for some reasonable period of time — they would amount to a much heavier lift for speculators, the folks who bring a manic quality to the markets, who treat it like a casino.”
National Review’s David Freddoso reports on GOP attempts to shape the package: “[House Republians] will be holding an unofficial hearing in the Cannon office building on Thursday morning [to get] input from leaders (such as Mitt Romney) and economic experts … The purpose … is to gather ideas that can be presented to Obama after his inauguration next week. … Republicans see a possible opportunity to have some input through the president, even if they are largely locked out of the legislative process … All ideas are on the table, including not only tax cuts that will help small businesses create jobs, but also a reduction in the bottom income tax rates, exemption of unemployment benefits from the income tax, and perhaps some measures aimed at the housing market as well.”
Politico reports Obama will meet congressional GOPers shortly after his inauguration.
IOUSA Not OK
OurFuture.org’s Digby rips CNN for airing the anti-investment, anti-Social Security, anti-Medicare documentary “I.O.U.S.A” without challenge: “It is an amazing piece of propaganda, which, if it isn’t designed to destroy any chance of enacting a necessary stimulus, will persuade more than a few Americans that the biggest problem we face at this moment is long term debt caused by entitlements—and nothing short of massive spending cuts can save us … It couldn’t be more in keeping with the post-partisan, non-ideological zeitgeist. Except it’s ideological to the core.”
CEPR offers the point-by-point takedown of I.O.U.S.A.
Dean Baker criticizes movie backer and star Pete Peterson for falsely attacking Social Security and Medicare.
OurFuture.org launches letter-writing campaign: “Tell CNN: IOUSA Not OK, Demand Equal Time.”
New Congress Recognizes Immigrants Get Sick Too
The House Democratic leader, Representative Steny H. Hoyer of Maryland, said the bill [expanding the State Children's Health Insurance Program to cover 4M more], scheduled for a vote in the House this week, was “very much like” legislation twice vetoed by President Bush in 2007 … Congressional Democrats said they had decided to add a major provision allowing states to restore health insurance benefits to legal immigrants under 21, a goal of Hispanic groups since those benefits were terminated in 1996…
…House Democrats are taking their bill directly to the floor, but in the Senate, Democratic leaders plan to work through the Finance Committee, led by Senator Max Baucus, Democrat of Montana. Mr. Baucus has drafted a bill similar to the House measure. As of late Monday, his proposal did not include benefits for immigrants. But other Democratic senators, like Jeff Bingaman of New Mexico and John D. Rockefeller IV of West Virginia, have said that they, like Mr. Obama, want to allow states to cover children who are legal immigrants.
FDL’s Christy Hardin Smith warns: “Look for the usual screeching from ‘scary immigrant’ wingnut corners. Fiscal responsibility may be the underpinning, but fiscal conservatism doesn’t exactly tug at wingnutty heartstrings these days, or beat the shouting tom toms like scary brown people obviously do. Sad. From a public health perspective, though, immunization for children entering the country seems logical to me: prevention of the spread of potentially virulent and communicable diseases brought into the country is just plain common sense.”
Wyden On Health Care Prospects
Talking Points Memo interviews Sen. Ron Wyden:
Wyden believes there is “a real path to 65 to 70 votes” in the Senate for a health bill that gives all Americans access to “good-quality, affordable coverage”.
The health care package Wyden envisions would be shepherded by two powerful chairman, Max Baucus (D-MT) of the Senate Finance Committee and Ted Kennedy (D-MA) of the Senate health committee.
Early reports from the Capitol have depicted Baucus and Kennedy as potential rivals on strategy and process, quoting Kennedy’s camp as focused on a single reform bill while Baucus leaves room for two separate bills. But to hear Wyden tell it, the two old bulls are ready to agree on four principles:
1. “You’ve got to cover everybody.”
2. “You’ve got to have a new insurance model,” one that does not entice insurers to shed risk by refusing coverage.
3. Diminishing inefficiency in health care by promoting health IT and other cost-saving goals.
4. Emphasizing prevention.
As for points of disagreement between Baucus and Kennedy, Wyden mentioned one biggie: the tax code. The Center for American Progress has pointed to two tax proposals in Baucus’ recent health reform plan: limiting the amount of health insurance premiums that can be deducted from wages, and structuring the deduction to benefit lower-income people. This doesn’t sound like something that Kennedy would be opposed to out of hand, but we should know more soon …
Wyden did not talk about prospects for a public plan option, a key provision that is not included in his own legislation.