ALERT 1: Final vote on American Recovery and Reinvestment Act could be today. Call your Senators at 1-866-544-7573 and demand immediate passage of a big and bold economic recovery bill.
The Majority Fights Back
President Barack Obama follows yesterday’s forceful remarks reiterating the mandate for public investment and rejection of Bush-style tax cuts with W. Post oped:
This plan is more than a prescription for short-term spending — it’s a strategy for America’s long-term growth and opportunity in areas such as renewable energy, health care and education. And it’s a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent.
In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis — the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.
I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We’ve seen the tragic consequences when our bridges crumble and our levees fail.
Every day, our economy gets sicker — and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now.
Obama econ aide Christina Romer pens Atlanta Journal-Constitution oped (via Daily Kos):
Both our internal estimates and those of highly respected private forecasters suggest that the plan will be immensely helpful. As the President has often said, conditions will surely get worse before they get better. But, they will get better. The plan will save or create 3 to 4 million jobs by the end of 2010.
The program will not just deal with the immediate crisis, but will help the economy grow faster long after the recession and recovery are over. Repairing our infrastructure will help American businesses be more competitive and will make American commuters safer. The energy investments will put us on a path to a cleaner environment and energy independence, while the health information technology investments will lower medical costs and save lives by preventing mistakes. The spending on schools and education builds human infrastructure, which makes our workers more productive.
White House also releases state-by-state breakdown of the bill’s economic benefits, including estimated number of jobs created, and bipartisan letter of support from 19 governors.
W Post’s EJ Dionne reports GOP govs and mayors on board: “If Washington Republicans have decided to build a wall of opposition to the stimulus, Republican governors and mayors are eager for the money Obama wants to give them. Thus will Obama and his allies be touting strong support for the stimulus from the Republican governors of California, Connecticut, Florida and Vermont. Mayors will be called upon to move House Republicans still open to persuasion.”
FireDogLake’s Phoenix Woman: “America’s Mayors to GOP: PLEASE Vote for the Stimulus!”
As for the Republicans, they remain locked in Landonism. While retail chains topple like so many dominos as consumers cut back, the Republicans focus on cutting corporate taxes, as though the problem confronting American businesses was the tax on their profits rather than the fact that, in the absence of sales, they have no profits.
In particular, both the Republicans and the Blue Dog Democrats exhibit a Landonesque failure to appreciate the crisis of under-investment into which American finance, now as in the ’30s, has plunged the nation. The essence of the crisis, and what distinguishes both the Depression and the current meltdown from every recession between the ’30s and today, is that, left to their own devices, private lending and investment will not and cannot bounce back. Only the government can provide the capital to restart capitalism, which remains, absent diligent regulation, a periodically self-annihilating system.
Whenever the Republicans bring up anything in the stimulus bill that sounds a little weird, the Democrats have been pathetically eager to throw in the towel. Witness the Senate’s defeat of $246 million in tax breaks for Hollywood studios, which might not have sounded so silly if you were a college student whose father is a cameraman.
At the insistence of the White House, the Democrats eliminated $200 million to expand federal assistance to states that want to provide family-planning services to poor women. The Congressional Budget Office has estimated the money would eventually save about $400 million by cutting unwanted pregnancies. But it became a big rallying point for social conservatives. (“Won’t fewer people mean fewer taxpayers?” demanded columnist Cal Thomas.) So goodbye family planning.
The $200 million to fix up the National Mall was tossed out in the House. The much-decried money for disaster insurance for the honeybee industry, which is already the subject of snippy T-shirts, never existed, according to the Senate Appropriations Committee. Or if it did, it’s been whisked away and buried under the floorboards.
CQ Politics: Attempts by Senate conservatives to dramatically alter the plan’s thrust failed:
An amendment by Jim DeMint , R-S.C., that would prevent an increase in taxes scheduled in 2011, reduce the top business tax rate from 35 percent to 25 percent, and make other tax cuts that he said would create 18 million jobs over 10 years fell when a motion to waive the Budget Act was defeated, 36-61.
Similarly, an amendment by John Thune , R-S.D., to ensure that the bill is not used to expand the scope of the federal government by adding new spending programs was rejected, 35-62.
Grassroots Getting Fired Up
FireDogLake’s Ian Welsh: Hit The Phones To Stop a Depression. “It’s time to hit the phones for the stimulus bill. Calls are running at 100:1 against. Yes, it’s not that good a stimulus bill, I’ve said so myself, but it’s not a case of scrapping it and starting over, what looks likely to happen is that it gets badly watered down with bribes to Republicans and ‘moderate’ Democrats like Ben Nelson to get it through.”
I agree that Obama has lost some control of his message (as Josh Marshall and Nate Silver argue), and has, in Senate negotiations, given up some of his priorities (and mine) too easily–though I wouldn’t go as far as Jonathan; things are far from catastrophic.
The question is what to do about it. Avid armchair politician though I am, I think it’s time for lots of us to turn foot soldier instead. The way to amplify Obama’s message is to repeat it. The way to improve a big recovery package’s chances in the senate is to get many, many voters to give their senators the identical message that they favor it … Phone calls are effective and immediate.
HuffPost’s Art Levine on progressive grassroots efforts: “So far, the full power of Obama’s mighty Web-based grass-roots organization hasn’t yet been unleashed to support the President’s stimulus package in the battle now underway in Congress. So outside progressive groups have to take up the slack, but if grass-roots conservatives are out-lobbying progressives 100-to-1, then still more needs to be done — and you can join in to help.”
Will Senate Reduce Size of Bill?
Obama met yesterday with two Republicans, Maine Senators Olympia Snowe and Susan Collins, who may prove critical to passing the legislation. Both are pushing to strip billions from the plan, spending they say would do little to create jobs.
Snowe said she gave Obama a list of potential cuts, which she said she would like to see total “upwards to $100 billion.” She said Obama was “very amenable” to the suggestions.
“He’s prepared to be receptive to the ideas and to re- evaluating some of the spending measures,” Snowe said. “We really do need to remove those items that have nothing to do with the purpose of jump-starting the economy.”
Collins, who said she preferred a stimulus package totaling about $650 billion, said Obama made a “very strong pitch to have a bill that is considerably bigger than what I might like and argued that the economy is sufficiently troubled that legislation has to be large enough to have the kind of impact that we all want.” She said she is “committed to trying to get to a yes vote.”
Both Collins and Nelson said Obama was receptive to some of their critiques. But Collins said the president told her he was concerned that if too much is cut, the package will be too small to have the needed impact on the economy. Collins said she would like to see the package cost about $650 billion, a number Obama told her was too low.
“His concern is that the package be robust enough and large enough to give a real jolt to the economy,” Collins said.
Both senators said they are discussing what funding to cut with about 10 Democrats and 10 Republicans. The proposal could be ready by Thursday.
Nelson and Collins declined to say what they want removed from the bill. But Nelson said his bottom line for cuts would be a lot more than $30 billion. Earlier Wednesday his office put that figure at more than $50 billion.
Buy American compromise in Senate
Bloomberg reports: “Senators voted yesterday to stipulate that the bill’s ‘Buy American’ restrictions must be carried out in a way consistent with the nation’s trade agreements. The bill had required iron and steel used in projects funded by it be made in America. These provisions drew protests from foreign leaders and Obama, who said the restrictions could spark a trade war. In what Democrats said was compromise, the Senate approved by voice vote an amendment stipulating the provisions shall be ‘applied in a manner consistent with United States obligations under international agreements.’ A proposal by Arizona Republican Senator John McCain to delete the ‘Buy American’ provisions was defeated, 65-31.”
CQ Politics reports McCain did not care for the compromise: “…McCain said the clarification would do nothing to address the concerns of free-traders. ‘It is impossible to say that the section would be applied in a manner consistent with the United States’ obligations under international agreements and then say that anything that’s manufactured in the United States, whether iron, steel or manufactured goods, will have to be subject to “‘Buy America,”‘ McCain said.”
The free trade crew tells us that this Buy America provision will start a trade war. Why would our trading partners start a trade war over a bill that increases demand for their exports?
That’s right, the stimulus bill will increase demand for imports, including for imported steel. The bill will lead to more growth, which will increase demand for all products, including imported steel. That will be the case even if we have barriers that limit the use of imported steel for a small part of the stimulus. So, will our trading partners start a trade war because we are buying more of their products?
It is also worth comparing the protection that the “free traders” see compared to the protection that they don’t see. The government has already provided $350 billion in subsidized loans to our banks through the Troubled Asset Relief Program (TARP). The Fed has provided hundreds of billions more.
For some reason, these massive government subsidies, which hugely advantage U.S. banks relative to their foreign counterparts, have gotten no attention whatsoever from the so-called “free traders.” Every bad thing that they say about protection for steel can be said for protection for banks, but for some reason we haven’t heard any complaints about the bank bailouts.
Booman Tribune analyzes the Senate Republican vote patterns: “Collins and Snowe have voted with the Democrats over 80% of the time in the 111th Congress and they both voted against almost all of tonight’s amendments. Other than them, Lindsey Graham was the only Republican that voted against stripping the Buy American provisions who isn’t going to be facing the voters next year. I don’t know what motivated Graham (he normally does whatever John McCain tells him to do) but I can tell what motivated the others. Republicans want to do the bidding of their corporate masters but not if it means that they are going to be thrown out of office. All the safe Republicans and all the Republicans that aren’t going to be facing the voters for four-to-six years voted to strip the Buy American provisions.”
Meanwhile, Economic Populist reports on new “Hire American” Senate proposal: “In response to the Associated Press investigation that TARP bail out recipients were firing Americans while hiring foreign guest workers, Senators Bernie Sanders and Chuck Grassley are offering an amendment to demand these bank recipients of U.S. taxpayer dollars hire U.S. workers and stop this horrific practice of labor arbitrage.”
Senate Approves $15K New Home Tax Credit
The Senate on Wednesday voted to expand the economic stimulus package with a tax credit for homebuyers of up to $15,000, a provision championed by Republicans as addressing a root cause of the recession.
The tax break for homebuyers, which the Senate approved by voice vote without opposition, was the second amendment in two days intended to encourage consumers to make major purchases. On Tuesday, the Senate approved a tax incentive for car buyers, sponsored by Senator Barbara A. Mikulski, Democrat of Maryland, that would allow the deduction of sales tax and loan interest on purchases made this year.
But while both of those incentives were applauded by lawmakers who said that the bill should quickly induce consumer spending, some economists said they were short-sighted and lacked the forward-thinking approach Mr. Obama has demanded.
More Amendments Today
“Lawmakers are pushing amendments tied to the meltdown on Wall Street. Senator Ron Wyden, an Oregon Democrat, said he and Snowe will offer one aimed at financial institutions that take money from the government’s Troubled Asset Relief Program. Under the amendment, those companies would have to repay the cash portion of bonuses topping $100,000 that were paid to employees for work last year.
“It’s not enough to say these bonuses are wrong,” Wyden said. “They must be paid back.”
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he will offer an amendment requiring that at least $50 billion of the TARP money is used to stem housing foreclosures.
“This amendment would secure I think beyond any doubt that those resources that I’ve identified here would be allocated for foreclosure mitigation,” he said.
CQ Politics: “On Thursday, the Senate is slated to debate an amendment from John Ensign , R-Nev., that would have the government guarantee a 30-year interest rate of 4 percent to 4.5 percent for refinanced mortgages of $750,000 or less.”
Dean Baker warns pushing rates lower will lead to people losing money when home prices drop. Economist’s View rounds up conservative criticism.
Differing Views on Executive Compensation Rules
Bloomberg plays up concerns of loopholes: “Executives at Goldman Sachs Group Inc., JPMorgan Chase & Co. and hundreds of financial institutions receiving federal aid aren’t likely to be affected by pay restrictions announced yesterday by President Barack Obama. The rules, created in response to growing public anger about the record bonuses the financial industry doled out last year, will apply only to top executives at companies that need “exceptional” assistance in the future. The limits aren’t retroactive, meaning firms that have already taken government money won’t be subject to the restrictions unless they have to come back for more.”
LA Times notes this could just be a beginning if Wall Street continues its greedy ways:
“Some of it may be a bit of theater right now,” said Claudia Allen, chairwoman of the corporate-governance practice at Chicago-based law firm Neal, Gerber & Eisenberg, noting that the number of executives guaranteed to have their pay restricted by the rules is “a small universe.”
But the message Obama is sending may affect the behavior of many others, she said.
“He’s saying to corporate America, ‘You’ve got to get it right,’ ” she said. “We’re going to watch taxpayer funds very closely.”
Working Life’s Jonathan Tasini: “The CEO Pay Caps Are A Mirage … what the Treasury is saying is this: if you publicly disclose–meaning, put it in writing in some vague way–and you put it to a shareholder vote you know you will win, then, you can pay the executive whatever they want. If you want real changes in CEO pay, you have to start with the way power is distributed in a corporation–not by promulgating toothless rules.”
Modernizing Financial Regulation
Paul A. Volcker, the former Federal Reserve chairman who is leading President Obama’s Economic Recovery Advisory Board, called Wednesday for fundamental changes in the regulation of financial instruments and institutions, especially of those firms whose collapse can put the financial system at risk.
In testimony before the Senate Banking committee, Mr. Volcker called for the end of the mortgage lending giants Fannie Mae and Freddie Mac as hybrid public-private enterprises, saying instead that Washington should assist borrowers through “clearly designated government agencies.”
He also called for the registration of hedge and equity funds of any substantial size, as well as periodic reporting and disclosure from such firms.
For banks and other firms that are large enough to shake the entire financial system if they fail, he called for “particularly close regulation and supervision, meeting high and common international standards.”
While he did not offer details of how these more robust regulations would be enforced, he said that central banks, including the Federal Reserve, should accept “a continuing role in promoting and maintaining financial stability, not just in times of crisis, but in anticipating and dealing with points of vulnerability and risk.”
SCHIP Expanded, Conservatives Still Hate Helping Kids
…with Democrats now firmly in control of the White House and Congress, the party’s leaders easily pushed through a $33-billion bill that is expected to provide government-subsidized insurance to 4 million mostly low-income children.
That would reduce the number of uninsured children in America by about half over the next 4 1/2 years and boost the number covered by the program to 11 million…
…Bush vigorously opposed the move, twice vetoing SCHIP legislation despite substantial GOP support for the bills.
On Wednesday, Republican lawmakers echoed many of the former president’s critiques.
“The Democrats continue to push their government-run healthcare agenda — universal coverage, as they call it,” said Rep. Pete Sessions (R-Texas), who helped lead opposition to the bill.
Republicans also chafed at provisions that would allow states to provide insurance to the children of legal immigrants who have been in the country for less than five years…
Jonathan Cohn and Ezra Klein warn against TN Governor and former HMO chief Phil Bredesen for Health and Human Services Secretary
Conservative response to Obama’s dire warning of higher unemployment? Suck it up! Riehl World View: “It reached double digits in 82 and it didn’t take a trillion dollars of our money and mortgaging our children’s future to dig us out. It took calm and perseverance to endure some hardship, both of which you apparently lack.”