Budget Passes With PAYGO Compromise
W. Post on final passage of the federal budget: “…Democrats overwhelmingly endorsed the president’s request for hundreds of billions of dollars in new spending over the next decade for college loans, early childhood education programs, veterans’ benefits and investments in renewable energy aimed at reducing the nation’s dependence on foreign oil. Lawmakers also agreed to use a powerful procedural tool known as reconciliation to advance the president’s proposal to expand health coverage for the uninsured — a move that ensures Republicans would not be able to filibuster the legislation … The budget resolution didn’t win a single vote from Republican lawmakers … Only 17 Democrats in the House and three in the Senate voted against it, as did Sen. Arlen Specter…”
The Hill on PAYGO compromise: “It took the Blue Dogs until Wednesday to get the promise of a new pay-go statute passed into law … Yet they acknowledged that they might have to settle for a codified version of the Democratic pay-go rule that allows for offsets to be found five or even 10 years after new spending is enacted.”
Politico analysis: “Congress’ new five-year budget plan, approved Wednesday, gives President Barack Obama a big leg up toward health care reform but could severely crimp the rest of his domestic agenda unless new savings and revenues are found.”
Wonk Room’s Pat Garofalo on the right-wing’s small biz shield: “Conrad Hits GOP’s Small Business Claim: Under Your Definition, Dick Cheney Is A Small Business Owner ”
Chrysler Headed For (Non-Fatal?) Bankruptcy
NYT on like Chrysler bankruptcy: “Last-minute efforts by the Treasury Department to win over recalcitrant Chrysler debtholders failed Wednesday night, setting up a near-certain bankruptcy filing by the American automaker”
CNN/Money.com on hopes bankruptcy won’t be fatal: “Late Wednesday night the United Auto Workers union announced that its membership at Chrysler had overwhelmingly ratified a concession contract … expectations grew that a Chrysler bankruptcy and eventual liquidation would close the business. But Obama said Wednesday the company is likely to survive, no matter how the process plays out in coming days … Fiat could finalize a deal with Chrysler even if the company is in bankruptcy…”
Bloomberg adds: “The president’s staff is aiming for Chrysler to file for Chapter 11 bankruptcy protection as early as today to pave the way for Fiat to take a 20 percent stake in the Auburn Hills, Michigan-based automaker, people familiar with the situation said. If Chrysler has to go through bankruptcy, it won’t take long, Obama said. ”
NYT contends UAW fares relatively well: “The prospect of a big ownership stake for the U.A.W. in G.M. has angered holders of billions of dollars in bonds, who stand to get only a fraction of the restructured company. As for Chrysler, the banks, hedge funds and others that lent it money have been promised only cash, not stock … The U.A.W. members at both automakers stand to lose some of their pay and benefits, but the cuts are not as deep as those faced by airline and steel workers when their companies went bankrupt. Under proposed deals devised by the Treasury Department, U.A.W. pensions and retiree health care benefits would largely be protected.”
Workplace Prof Blog disputes: “…I’m not sure that I’d call the UAW (or anyone save the foreign automakers) a ‘winner’ in this situation. It may be true that the union comes through in OK shape, but it’s going to lose a lot of members and those members are going to lose a lot of money and benefits. Any way you slice it, that’s still not a good thing.”
WSJ on GM bondholder counteroffer: “A committee representing institutions owning General Motors Corp. bonds will present a counteroffer to the company’s debt swap that will seek a majority stake in the car maker and ease fears about potential U.S. control of a major manufacturing company.”
CNN/Money.com on fundamental auto woes: “Chrysler and General Motors are making progress in their efforts to stay in business. But even if they succeed, don’t assume that means the problems are over for the battered auto industry. There is widespread agreement the industry is undergoing a deep, long-term downturn. Both successful and struggling automakers will continue to run up losses for some time. And that could lead to company failures, the disappearance of storied brands and forced mergers in the next few years.”
President Stresses Urgent Need For Carbon Cap
President Obama tells MO town hall we need carbon cap: “We can’t rest until we harness the renewable energy that can create millions of new jobs in new industries. You know, the recovery act will double the supply of renewable energy, but the only way to truly spark an energy transformation is through a gradual market-based cap on carbon pollution so that energy — clean energy — is the profitable kind of energy. And we can do that any way that creates jobs. That’s how we can grow our economy, enhance our security, and protect our planet at the same time.”
WSJ’s Environmental Capital: Avoiding catastrophic climate change looks to be even tougher than almost everybody thought. A pair of studies published in Nature take a fresh tack to determine how much wiggle room the world still has to limit potentially catastrophic temperature increases … Simply put, says Malte Meinshausen of the Potsdam Institute for Climate Impact Research, humanity can only emit 1 trillion metric tons of carbon dioxide between 2000 and 2050 to have a 75% chance of limiting temperature increases to 2 degrees celsisus. Since we already pumped out about 234 billion tons through 2006, that leaves only about 760 billion tons in the piggy bank, as it were. The implication: We need to stop using fossil fuels long before we run out of them.”
NYT’s Paul Krugman slams W. Post’s Robert Samuelson for climate misinformation: “[In] the key graf in which Samuelson tries to deny the results of the studies … I don’t think there’s a single thing there that’s right. What on earth do business cycles have to do with it? The models may assume growth based on past trends, but they DO ask whether emissions policy would greatly slow growth — and the answer is no. Consumers aren’t assumed to ‘quickly’ use less — the time frame in these models is decades long. And new supplies don’t ‘magically’ appear — they respond to price incentives, which is what economics usually says. I don’t especially mean to pick on Samuelson, but this column exemplifies a strange thing about the climate change debate. Opponents of a policy change generally believe that market economies are wonderful things, able to adapt to just about anything — anything, that is, except a government policy that puts a price on greenhouse gas emissions … Funny how that is.”
Right-wing ads peddle false info on climate bill. CQ: “Opponents of federal limits on greenhouse gases are launching ad campaigns in the districts of moderate Democrats negotiating a bill in the House Energy and Commerce Committee … The radio ads, sponsored by the American Energy Alliance … formed last year, is headed by Thomas J. Pyle, a former energy policy aide to onetime Majority Leader Tom DeLay, R-Texas (1985-2006). It is affiliated with the Institute for Energy Research … The new ads say the bill will amount to ‘the largest tax hike in history’ and could cost American families more than $3,100 a year. That figure is based on a Massachusetts Institute of Technology study … The author of the study has called this a misinterpretation…”
CQ Politics reports DCCC Chief Rep. Chris Van Hollen slowing down climate legislation in hopes of protecting first-term congresspeople: “Van Hollen pushed to shelve a plan for using reconciliation to advance a proposed cap-and-trade system for carbon emission allowances, a proposal that is controversial in heavily industrial states. Instead, he has called for fallback energy initiatives if an all-in-one energy bill loses traction. More recently, he suggested that leaders could delay consideration of climate change legislation until next year.”
Greenwire on House commitment to pass legislation: “House Democrats will not abandon plans to pass global warming and energy legislation this year despite concerns that similar proposals may fail to win the 60 votes needed for Senate approval, Majority Leader Steny Hoyer said…”
Canada’s Conservative government shifts. NYT’s Green Inc.: “…the election of President Obama introduced another change of heart among the Conservatives. The government has given up on its intensity-targets approach and proposed forming a continental climate change pact with the United States … [Jim Prentice, the environment minister] said that coal-fired electrical plants will have limits, or caps, imposed on their emissions, but they will also be allowed to purchase credits when they exceed those targets. The interesting twist is that Mr. Prentice also suggested that operators of coal-fired plants would be eventually required to replace them with plants using some other form of generation.”
Mother Jones: Wind Power Gets Stimulus Windfall, The Department of Energy will devote $93 million of stimulus money to wind power technology … Most of the money will be spent on turbine-related projects (allocation breakdown after the jump). But Cleantech Blog points out that the biggest obstacle facing wind power is actually pipeline problems:”
President Backs Public Health Plan Option At Presser
President relays conservation he had with Sen. Minority Leader: “I’ve said this to people like Mitch McConnell . I said, look, on health care reform, you may not agree with me that I — we should have a public plan. That may be philosophically just too much for you to swallow. On the other hand, there are some areas like reducing the costs of medical malpractice insurance where you do agree with me. If I’m taking some of your ideas and giving you credit for good ideas, the fact that you didn’t get 100 percent can’t be a reason every single time to oppose my position.”
NYT on reaction to Baucus-Grassley Medicare reform proposal: “Lobbyists for doctors and nursing homes expressed concern about some of the proposals. But John C. Rother, policy director of AARP, the lobby for older Americans, said the package would be good for patients.”
Wonk Room’s Igor Volsky analyzes: “Individually these reforms seem small. For instance, the document places some restraints on the use of data obtains from comparative effectiveness research (for instance, considering effects on ’subpopulations’ may very well prevent CMS from making serious reimbursement decisions) and does not call for the elimination of Medicare Advantage overpayments. But collectively, these reforms start the slow process of re-orienting the system from one that encourages providers to over-prescribe treatments, to one that rewards quality care and outcomes.”
New Health Dialogue’s Len Nichols adds: “The overall set of policy options, while moving in the right direction, could be strengthened with supplemental policies and stronger incentives to encourage adoption of best practices, improve quality, and lower cost growth.”
Health Care for America Now’s Jason Rosenbaum on leading conservative opponent of health care reform Rick Scott: “The Media Matters for America Action Network has just released the definitive research document to date on Rick Scott … what happened after Scott was forced out of Columbia/HCA? Turns out, there were more shady deals.”
Financial/Housing Crisis Update
Bloomberg on FDIC toxic assets offer: “The Federal Deposit Insurance Corp. may offer investors financing to buy distressed U.S. bank assets without requiring them to share an equity stake with the Treasury, people familiar with the matter said. Treasury capital probably won’t be applied to the FDIC’s pilot program to buy as much as $1 billion of so-called legacy loans that is planned for June, the people said on condition of anonymity because no final decision has been made. The proposal reflects officials’ efforts to make the program more attractive to hedge funds and other investors fearing government attempts to impose limits on their pay. Regulators are hoping the initiative will bolster lenders’ capital levels after stress tests to gauge their health are completed next week.”
FT on estimated bailout costs: “Efforts to stabilise the financial system could end up costing US taxpayers about 13.3 per cent of annual output, or $1,900bn over the next five years, according to analysis by the International Monetary Fund. The dollar estimate, calculated by the Financial Times, equates to about $6,200 (€4,650, £4,200) per head of the population. The assessment is part of a research project that was updated for last weekend’s IMF spring meeting. US officials yesterday challenged the methodology used in the analysis and said the cost estimate looked far too high … The Fed believes that loss rates on its loans will be a fraction of the 10 per cent the IMF uses for its conservative rule-of-thumb, while the FDIC claims its bank funding guarantees will be self-financing net of fees.”
House floor to consider credit card rules today. CQ: “…the lending industry [faces] one of its biggest legislative losses in years. The bill (HR 627), sponsored by Carolyn B. Maloney, D-N.Y., closely mirrors regulations the Federal Reserve will put into effect next year, but the House is likely to adopt amendments backed by the Obama administration that would make the measure stronger than those regulations. The legislation would bar card companies from raising rates on existing balances in most instances, with exceptions for promotional offers, rates pegged to a variable index and late payments by consumers. The measure would also restrict card companies from computing interest charges on balances from more than one billing cycle, which sometimes can lead to consumers paying interest on charges they have already paid off … The half-dozen Obama-backed amendments would require card issuers to apply payments in excess of the minimum to debts with the highest interest rate, mandate better disclosure of the long-term costs of paying only the minimum balance, and prevent card issuers from charging over-the-limit fees unless consumers affirmatively opt to exceed their credit limits.”
Differing Dem bills on offshore tax havens. Reuters: “The chairman of the U.S. Senate Finance Committee plans to introduce legislation in the coming weeks to give U.S. tax collectors more tools to police offshore tax evasion … the Baucus effort is narrower in scope and seen by some as more lenient than an earlier proposal introduced by Democrat Senator Carl Levin…”
WSJ on likely mortgage/bankruptcy reform defeat: “President Barack Obama’s proposal to give homeowners new relief in bankruptcy court appears headed to defeat in the Senate Thursday, barring a last-minute compromise.”
Predatory lending bill advances. CQ: “A House panel approved legislation Wednesday designed to crack down on predatory housing lending, sending to the floor a measure capable of changing the face of the mortgage market. The Financial Services Committee approved the bill (HR 1728) by a vote of 49-21, with eight Republicans joining committee Democrats in support. The legislation would require the licensing and registration of all mortgage lenders and proof of a borrower’s ability to repay a home loan.”
President Rebuts Social Security Naysayers, Pitches Lifting Payroll Tax Cap
It’s not that Social Security would go away … The problem would be that, by the time the retire, you’d be getting $0.75 for every dollar that was promised to you. So you’d get cheated out of a little bit of your Social Security.
That’s why when people say Social Security is going bankrupt, that’s not true. The problem is not that it’s going bankrupt. The problem is just that your benefit — it would be the equivalent of a benefit cut of about 25 percent if we don’t start making some changes.
Now, there are only a handful of ways to make these changes. Number one, you could just keep on trying to borrow a trillion dollars or a couple trillion or however much it takes from China, but that’s not such a good solution because you’d end up having to pay interest off them, and at some point, they’re just going to be tired of lending to us because they’ve got their own senior citizens that they want to take care of.
Second option is to gradually raise the retirement age. Now, I don’t think this is the best option just because we just talked to an auto worker over here. That’s hard work. And if people — if the retirement age is already 67, and now you want to get it up to 68 or 69, if you’re working on an assembly line and you’ve been doing that for 50 years or 40 years, that’s some tough stuff …
…You could cut benefits. You could raise the tax on everybody so everybody’s payroll tax goes up a little bit.
Or you can do what I think is probably the best solution, which is you can raise the cap on the payroll tax … Not everybody is wild about this idea, not surprisingly.
And so what — what I would like to do, I had a fiscal responsibility summit where I brought together Republicans, Democrats, experts on all these issues. How do we start dealing with our long-term deficits, our long-term debt? I actually think that we could get all those folks together and we could come up with a solution that would ensure stability of the Social Security system for a — a long, long time to come.
CNN: Coming soon to a battleground state near you: a new effort to revive the image of the Republican Party and to counter President Obama’s characterization of Republicans as “the party of ‘no.’” CNN has learned that the new initiative, called the National Council for a New America, will be announced Thursday … The first meeting is planned this Saturday in Arlington, Virginia, just outside of the nation’s capital … Sources familiar with the effort say it was born of conversations between Cantor and the members of the experts panel. After Bush and Romney agreed to take part, the conversations expanded and the idea won the blessing of both the House and Senate GOP leadership. Additional town halls are planned in the weeks ahead, each likely dedicated to a specific issue, with health care, the economy, energy and national security leading the issues menu the group says it hopes to discuss heading into the 2010 midterm elections, and possibly beyond.”
Terrance Heath contributed to the making of this Breakfast.