Budget Battle Begins
White House Chief of Staff Rahm Emanuel portrayed the president’s budget — which envisions huge investments in alternative energy, education and health care while raising taxes on top income earners and oil and gas companies — as essential to reshaping the nation’s economy. “It rejects the past and says we are going to be a culture and a society that invests and saves,” he said on CBS’s “Face the Nation.” …
…”I think it’s terrifying in the policy implications as well as mind-boggling in the numbers,” Sen. Jon Kyl (R-Ariz.) said on “Fox News Sunday.”
Speaking on the same program, Rep. Paul D. Ryan (R-Wis.) called Obama’s proposed budget “probably the biggest rewrite or transformation of our federal budget since the New Deal.”
Mortgage Reform Delayed By Right-Leaning Dems
CNN/Money.com on vote delay of mortgage bill: “President Obama is in danger of losing the biggest stick in his foreclosure prevention arsenal. The administration’s plan to stem the housing crisis depends on Congress amending the bankruptcy laws to allow judges to modify mortgages, in particular by reducing principal to make monthly payments more affordable … The House postponed a vote on the measure until early this week after a group of centrist Democrats voiced concerns. And its future in the Senate remains in doubt with many powerful Republicans strongly opposed to the legislation … While Citigroup, which is under the close watch of federal regulators, has said it would support the measure, many key players in the financial industry are lobbying against the measure.”
In a private meeting last week, Speaker Nancy Pelosi laid down a challenge to her moderate members who were complaining about a provision in the housing bill. Stand up and air your grievances, she said.
A handful of those moderate members did just that, taking to the microphone to gripe that the provision, which would allow bankruptcy judges to rework loans for homeowners, needed to be more restrictive.
Then a surprising thing happened. Pelosi, who disagreed with this critique, huddled at the side of the room with her top deputies — and then buckled. She suspended consideration of the housing bill so more thought could be put into the bankruptcy item.
This hardly amounts to a breakthrough win for party moderates — or a major concession by the speaker. But it was a consequential moment in the minds of moderate leaders who often find themselves marginalized in a caucus dominated by liberals.
“It shows we have bench strength, and it shows we can flex,” said California Rep. Ellen O. Tauscher, who chairs the New Democrat Coalition and played a central role in negotiations over the bankruptcy bill.
Flex? Sure. Win? That’s another matter.
Moderates won modest concessions in the housing measure. But the Senate could go much further by drastically curtailing who qualifies under the law.
Americans for Fairness in Lending urge calls to House members, with web tool to get contact info for your representative, and simple talking points.
Bank Bailout Update
Bloomberg on AIG: “American International Group Inc., the insurer deemed too important to fail, may get as much as $30 billion in new capital and have debts to the U.S. forgiven in the firm’s third bailout, people familiar with the matter said. AIG agreed to give stakes in its two biggest international life insurance divisions to the government to erase some of the New York-based firm’s approximately $37 billion in debt, said three people, who declined to be named because the plan hasn’t been announced yet. AIG may post a record fourth-quarter loss of about $60 billion, the people said.”
NYT on AIG: “Federal officials, who worked feverishly over the weekend to complete the restructuring, said they thought they had no choice but to prop up A.I.G., because its business and trading activities are so intricately woven through the world’s banking system. But the deal also presents more financial risks to taxpayers at a time when the public and Congress have been sharply questioning the wisdom of risking federal money to bail out private enterprises.”
Calculated Risk: “AIG: a black hole.”
Angry Bear’s Ken Houghton, “this one makes some form of sense”: “The difference [between AIG and Citigroup] is that there is a possible end in sight. AIG-Prime could go back to doing the things AIG knew how to do, and stay away from the things that made Hank Greenberg rich and pauperized U.S. taxpayers.”
Portfolio.com’s Felix Salmon, “What’s Happening to Citigroup?”: “…secured bondholders are senior to depositors, and Geithner’s going to make sure that depositors are untouched. It’s entirely logical, however, that if the preferred-for-common stock doesn’t work (and I have yet to see an independent observer who thinks it is going to work), then the senior unsecured is next in line for conversion into some kind of equity.”
End of Swiss Banking?
Swiss and US law chiefs to meet today. FT: “Switzerland’s justice minister will on Monday meet her US counterpart in a crucial week in UBS’s efforts to fight attempts to reveal to US authorities more names of rich American clients with undeclared accounts … last month [UBS] agreed a $780m deal with the US Department of Justice to settle criminal charges about its private banking activities … the world’s biggest wealth manager still faces a civil action as the US Internal Revenue Service presses ahead with demands for information about 52,000 accounts allegedly held by US citizens. The demand – and perceived US bullying of a friendly nation – has incensed Swiss public opinion. But it has also triggered frenzied debate about the future of bank secrecy, a bedrock of Switzerland’s success as a financial centre.”
AMERICAblog: “UBS increasing salaries”
Sebelius to HHS
W. Post: “Sebelius’s Political Skills, Experience Win Plaudits”: “‘She has a clear, substantive grasp of the issue,’ said Kenneth E. Thorpe, a professor of health policy at Emory University who was an adviser to President Bill Clinton. ‘She also understands the politics. She has been trying to do health-care reform in a very difficult political environment.’”
But the industry is also taking a very public role in voicing concern about some of the proposals being floated. In supporting legislation that would prevent the companies from refusing to cover people with existing medical conditions, the insurers have said the government must require everyone to buy insurance, subsidizing the cost for those who cannot afford it.
For private insurers, the more troubling specter in health care reform is an expansion of the Medicare program to those under 65. The program has lower expenses and generally pays much less for medical care than private insurers, so it would probably translate into a lower-cost plan for consumers. To help lead opposition to the idea, which they say puts them at an unfair disadvantage, insurers have joined with hospitals to argue that Medicare pays too little so that any expansion would significantly hurt providers.
But by acknowledging a need for a greater government role, the industry hopes it can persuade the president and Congress that it makes the most sense to work together. “Whatever we do has to be a public-private partnership,” said Mr. Williams, the Aetna C.E.O.
Obama’s innovation was outlining how he would pay for his health plan before he had fully formulated the plan itself. Earlier presidents were always a bit vague on the funding question. Obama proposed at the outset to increase taxes on high-income earners by cutting their deductions for such items as state taxes, mortgage interest and charitable deductions.
That was smart politics, and it gives his plan a much better shot at getting passed than President Clinton’s had 16 years ago. A tax hike will be easier for members of Congress to support if it’s going to a popular cause, and fiscal hawks will be happier about voting for health reform if they know it’s being paid for…
…get ready to learn a lot more about risk pools, adverse selection and Medicare reimbursement rates. This will be the national-policy Olympics of 2009. Obama has seized the offensive. So far, he faces no organized resistance; that won’t last.
WH Chief of Staff says health care summit to convene on Thursday.
Coal Faces Civil Disobedience in Capital
Capitol Climate Action today leads a “multi-generational act of civil disobedience at the Capitol Power Plant”: “We expect 2,500 dedicated activists to stand tall at the Capitol Power Plant and demonstrate that the course of history bends toward progress. Make sure to
follow the day right here as it unfolds.”
Speaker Pelosi and Sen. Maj. Leader Reid have expressed their “desire” to fully switch to natural gas, per
The Hill finds some significant coal supporters ducking this fight: “…big energy lobbyists like the National Mining Association said it had no problem with the CPP discontinuing its use of coal and switching to total natural gas consumption … Sen. Byrd, a long-time supporter of coal burning at the CPP, came out in support of making the switch to natural gas last week, saying, ‘it is regrettable that over the past three decades that we were not able to do more to invest in the necessary resources into developing clean coal technologies.’”
Grist’s Glenn Hurowitz mocks a planned counter-protest
There’s been some amount of disgruntlement regarding President Barack Obama’s proposed carbon cap-and-trade system, as laid out in the budget he just submitted to Congress. David really doesn’t like the Brad Plumer objects both to the “timid” emissions cuts baked into the plan as well as to the low estimate for the price of carbon under the proposed system. Meanwhile, Kevin Drum wonders why the revenue estimates are so low.
But Ezra explains it all to you: “this really seems a case where the administration is on the cutting edge of the political conversation, but the political conversation is lagging far behind the severity of the crisis.”
Exactly. And the “political conversation” isn’t just between Democrats and the GOP. Or between coastal Green State Dems and Midwestern Brown State Dems. Remember that Obama first had to negotiate the split between climate czar Carol Browner’s support for cap-and-trade with economics adviser Larry Summers’ and OMB head Peter Orzsag’s support for a carbon tax. I’m not surprised that the budget stayed light on details.
Orzsag responds to Newt Gingrich attack line that cap-and-trade amounts to a tax on individuals, on ABC’s This Week: “Let’s be fair about this. Either you’re going to look at what is collected through the tax code and what’s returned through the tax code. And on that basis, there’s a tax cut for 95 percent of Americans, or you have to go all in. Let’s also count the benefits that families get through Pell Grants, the benefits that they’ll receive through constraining health care costs, the benefits that they get from weatherizing their homes, and so on. All in, this budget makes the vast majority of American families much better off.”
Climate Progress on possible plan to use budget rules to avoid Senate filibuster: strategy: “When I first read the E&E News PM story ‘Boxer eyeing bold move to thwart GOP filibuster on emissions bill,’ I was skeptical of the strategy described … But I think Boxer’s strategy may be worth considering.”
Labor is pinning its biggest hopes on the passage of the Employee Free Choice Act, a bill that unions hope will add millions of new members by giving workers the right to union recognition as soon as a majority of employees at a workplace sign pro-union cards. The bill would take away management’s ability to insist on a secret ballot election.
Business leaders have warned of Armageddon in their fight to kill the bill, which Democratic leaders say will come up for a vote in May, June or July. Union leaders voice confidence that they will muster the 60 Senate votes needed to overcome a filibuster, while Republicans expect to defeat the bill in the Senate.
Republican and business strategists say they are focusing on lobbying several Democratic senators, especially Mark Pryor and Blanche Lincoln of Arkansas, Mark Warner of Virginia, Ben Nelson of Nebraska and Mary Landrieu of Louisiana, to help deny the 60 Senate votes needed for passage.
Canadian PM on Afghan Strategy
PRIME MINISTER HARPER: The issue that Canadians ask is, are we being successful? And…
ZAKARIA: What’s your answer to that right now?
HARPER: Right now, we have made gains. Those gains are not irreversible, so the success has been modest.
ZAKARIA: So then, why leave?
HARPER: We’re not going to win this war just by staying. We’re not going to — in fact, my own judgment, Fareed, is, quite frankly, we are not going to ever defeat the insurgency. Afghanistan has probably had — my reading of Afghanistan history, it’s probably had an insurgency forever, of some kind.
What has to happen in Afghanistan is, we have to have an Afghan government that is capable of managing that insurgency and improving its own governance.
ZAKARIA: So, we are never going to defeat the insurgency. The best we can do is train Afghan forces that can take it on, and then we withdraw.
HARPER: Absolutely. Because I think, you know, a part of the calculation there is the fact that, ultimately, the source of authority in Afghanistan has to be perceived as being indigenous.
If it’s perceived as being foreign — and I still think we’re welcome there — but if it’s perceived as being foreign, it will always have a significant degree of opposition.
The Big Picture questions if the Santelli rant was a staged event, following investigation by Playboy.
GOP losing the public: “Americans identifying themselves as Democrats outnumber those who say they are Republicans by 10 percentage points, the largest gap in party identification in 24 years,” according to NYT.
AP notes congresspeople are playing to their narrowly-drawn districts: “The GOP’s united stand against the Democratic president seems to play well in conservative districts. But it could hurt their party’s national image and its efforts to regain control in Washington.”
State government budgets face deficits after stimulus. AP: “In the short-term, the massive stimulus will help balance budgets and keep key services, such as Medicaid, going. But economists agree the money will not quickly eradicate high unemployment, low consumer spending or distress in the housing market — the triple threats behind a nationwide tax-collection shortfall that is expected to drag on even after the economy begins to rebound. Without higher taxes, bigger cuts to government services — or yet more federal funding — states face budget gaps that could reach $120 billion nationwide in their 2011 budgets,”
More funds needed to expand broadband access to urban poor. W. Post: “One provision in the stimulus plan could provide about $250 million for service and training in urban areas … but interest groups say the amount is not enough to help an estimated 21 million low-income people get online … Access isn’t the issue for them … What many do not have is the money to hop on the information superhighway … Free Press, a public interest group that advocates for universal access to the Web, has called for $1.2 billion…”
Climate Progress praises House for abandoning poorly constructed carbon offsets.
Boston Globe: The faltering US economy is fueling a dramatic turnaround in military recruiting, with new statistics showing that the Army is experiencing the highest rate of new enlistments in six years.
Right-Wing Nut House lambastes fellow conservatives for weak “Tea Party” strategy.
Terrance Heath contributed to the making of this Breakfast.