With Deal Announced, The White House Makes It’s Case
So the final deal has been announced, pending approval by the House, and one of the key new pieces of the compromise is that the Congressional committee tasked with coming up with a second round of spending cuts in exchange for the later debt ceiling hike would be forced to act by the new “trigger.” In the event that the committee deadlocks, that trigger would force an even division of non-defense and defense cuts, and since the latter is anathema to Republicans, they would not have any incentive to deliberately sabotage the committee in order to force the deep entitlements cuts they want.
The White House’s argument is that even if the deal is far short of what liberals hoped for, Republicans have effectively surrendered the amount of leverage they were expected to have over entitlements cuts. Now that the committee — which is half Republicans and Democrats — will all but certainly advance a package of cuts in exchange for the later debt ceiling hike, the argument is that Democrats can live to fight it out another day on entitlements.
The White House is also arguing that the deal sets the stage for a re-litigation of the tax cut fight, and it’s now distributing talking points to outside allies that are heavily devoted to making that case on entitlement and taxes, an argument that seems designed to quiet angst and criticism among liberals:
* Expedited Process for Balanced Deficit Reduction: Puts in place a longer term process for additional $1.5 trillion in deficit reduction through a committee structure that will put everything on the table, including tax and entitlement reform. To prevent either side from using procedural tricks to prevent Congress from acting, the committee’s recommendations will receive fast track authority, which means they can’t be amended or filibustered.
* Sets the Stage for a Balanced Package Including Revenues: The American people and a growing number of Republicans agree that any deficit reduction package must be balanced and included revenue.
* Even Speaker Boehner was open to a deal with $800 billion in revenues, and nearly 20 GOP senators were supportive of the Gang of 6 framework, which had more than $2 trillion in revenue.
* If the Committee does not succeed in meaningful balanced deficit reduction with revenue-raising tax reform on the most well-off by the end of 2012, the President can use his veto pen to raise nearly $1 trillion from the most well-off by vetoing any extension of the Bush high income tax cuts.
By;: Greg Sargent, Washington Post-The Plum Line, July 31, 2011
From Crazy To Insane: Conservatives Still Want More In Debt Ceiling Deal
Over on the progressive side of politics, they’re nursing their wounds and drowning their sorrows as details of the deal to increase the debt ceiling emerge. They feel like they lost to a Republican party that dug in and used the debt ceiling to achieve their goal of dramatically shrinking government spending and solving the deficit problem without raising a single penny in new revenue.
So they might be surprised to know that conservatives don’t think they won, either. The right, despite apparently negotiating Obama into a corner that pits him against large parts of his base, still isn’t satisfied.
“While this deal is moving in the right direction rhetorically thanks to pressure from conservatives, it still falls well short of the standards we have consistently laid out,” wrote the Heritage Action’s Michael Needham.
The group, a sister organization to the Heritage Foundation, says the upfront cuts included in the reported deal are “insufficient” and the super committee in charge of creating the next round of deficit reduction is a bad idea as reported.
“This deal highlights how dysfunctional Washington has become and we will continue to oppose it as insufficient to the task at hand,” Needham wrote.
On TV Sunday morning, Sen. Lindsey Graham (R-SC) said he expected a large number of conservatives to share Heritage’s view.
“It’s a $3 trillion package that will allow $7 trillion to be added to the debt in the next decade,” Graham said, dismissively. “So how much celebrating are you going to do?”
Graham said he expected around half of the House GOP caucus to vote against the deal. It doesn’t have his vote yet, either.
One of the patron saints of those hardcore conservative Republicans in the House, blogger Erick Erickson, is also underwhelmed by the deal (it’s not the first time.)
Despite the fact that progressives and Democrats are publicly lamenting the reported deal as indicative of the effect of rhetoric like Erickson’s has had on Washington, Erickson sounds as if he feels as betrayed as some on the left.
“What we know about the pending deal is that the Democrats and Republicans are agreeing to a Deficit Commission,” Erickson wrote Sunday. “Despite the media spin — and the spin of some Republican sycophants — the deficit commission, which will be a super committee of the Congress, will have the power to come up with new tax revenue.”
By: Evan McMorris-Santero, Talking Points Memo, July 31, 2011
Extortion Politics: A New Form Of Governing
Josh Marshall made an interesting point in passing yesterday, asking whether conservative Republicans could achieve massive spending cuts through “old-fashioned majority votes.” Josh answered his own question: “Of course not.” The cuts on the table were only made possible by Republicans “threatening the health” of the United States.
I think this arguably one of the more important realizations to take away from the current political landscape. Republicans aren’t just radicalized, aren’t just pursuing an extreme agenda, and aren’t just allergic to compromise. The congressional GOP is also changing the very nature of governing in ways with no modern precedent.
Welcome to the normalization of extortion politics.
Consider, for example, the Republican decision to reject any and all nominees to the Consumer Financial Protection Bureau, regardless of merit, unless and until Democrats accepted changes to the agency’s structure. Traditionally, if the GOP wanted to alter the powers of the CFPB, it would write legislation, send it to committee, bring it to the floor, send it to the other chamber, etc. But that takes time and effort, and in a divided government, this “old fashioned” approach to policymaking probably wouldn’t produce the desired result.
Instead, we see the latest in a series of extortion strategies: Republicans will force Democrats to accept changes to the agency, or Republicans won’t allow the agency to function. Jonathan Cohn wrote a good piece on this a couple of weeks ago, noting the frequency with which this strategy is utilized.
Republican threats to block nominees to the consumer board are at peace with their opposition to Don Berwick, Obama’s first choice to run the Center for Medicare and Medicaid Services; to Peter Diamond, whom Obama tapped to sit on the Federal Reserve Board; and most recently to John Bryson, Obama’s nominee to take over the Commerce Department. It’s nothing short of a power grab by the Republican Party — an effort to achieve, through the confirmation process, what they could not achieve through legislation. And it seems unprecedented, at least in modern times.
Republicans effectively tell the administration, over and over again, that the normal system of American governance can continue … just as soon as Democrats agree to policy changes the GOP can’t otherwise pass.
The traditional American model would tell Republicans to win an election. If that doesn’t work, Republicans should work with rivals to pass legislation that moves them closer to their goal. In 2011, the GOP has decided these old-school norms are of no value. Why bother with them when Republicans can force through policy changes by way of a series of hostage strategies? Why should the legislative branch use its powers through legislative action when extortion is more effective?
It’s offensive when it comes to nominees like CFPB nominee Richard Cordray, but using the full faith and credit of the United States to force through desired policy changes takes this dynamic to a very different level. And since it’s working, this will be repeated and establishes a new precedent.
Indeed, it’s a reminder that of all the qualities Republicans lack — wisdom, humility, shame, integrity — it’s their nonexistent appreciation for limits that’s arguably the scariest.
By: Steve Benen, Contributing Writer, Washington Monthly-Political Animal, July 31, 2011
In Cantor, Hedge Funds And Private Equity Firms Have Voice At Debt Ceiling Negotiations
As the debt-ceiling talks tick down to the Aug. 2 deadline, leading the opposition to any deal that includes higher taxes is the new tribune of rank-and-file House Republicans: Majority Leader Eric Cantor of Virginia.
Cantor’s pivotal role marks a rapid rise for the 48-year-old from the Richmond suburbs. It also represents a major coup for sectors of the investment community that Cantor has been striving to assist for years — on the same tax issues that have been at stake this month. And so far, he has prevailed on those issues.
Among the White House’s top demands for new revenue are changes in the tax code affecting hedge funds, private equity firms and real estate partnerships, which would raise an estimated $20 billion over 10 years.
For the past four years, Cantor has taken the lead in the House on fighting the same changes. He also has been one of the top recipients of contributions from those industries — last year, his two fundraising committees took in nearly $2 million from securities and investment firms and real estate companies, more than double the figure for Boehner (R-Ohio).
The hedge fund and private equity proposals were at the center of Cantor’s decision to exit talks with Vice President Biden this month. Since then, the prospect for any immediate tax increases has declined, with the focus turning to spending cuts and broader tax reform postponed.
This dismays Democrats, in part because Cantor has cast his defense of the investment tax treatment as part of the broader tea party-fueled anti-tax orthodoxy. To Democrats, Cantor embodies the convergence of tea party and business interests, which is often obscured by the movement’s anti-Wall Street rhetoric.
“This [anti-tax stance] isn’t all coming up from the grass roots,” said Rep. Chris Van Hollen (D-Md.). “This goes to some longtime cozy relationships between House Republicans and hedge fund managers in the financial sector.”
A spokesman for Cantor noted that he always has opposed raising the investment taxes in question but declined to comment further.
Cantor has said repeatedly that Obama and other Democrats are exaggerating the value of closing tax loopholes for financiers. Although Cantor opposes closing them to raise revenue, he says he is open to doing so as part of broader tax reform that lowers overall rates.
“So I know it makes for good politics to throw the shiny ball out there . . . that somehow Republicans are wed to that kind of policy to sustain these preferences, when all along, in our budget and in our plan, we have said we’re for tax reform, we have said we’re for bringing down rates on everybody,” he said on the House floor last week.
Jennifer Thompson, a political science professor at Virginia Commonwealth University and former Republican campaign operative, said Cantor’s longtime opposition to the investment tax provisions is a sincere reflection of his conservatively inclined district.
“Eric Cantor is a Virginian and you can’t separate too much from that fact,” she said. “His constituents are very much aligned with the no taxes and being back in the black and that’s what Eric Cantor represents.”
Lawmakers from both parties have cultivated the investment community, but Cantor, whose wife is a former Goldman Sachs vice president, has had particularly strong connections. In 2006, his campaign committee and his leadership PAC, established to support other Republicans, collected $682,500 from securities and investment and real estate firms, far more than any other Republican on the Ways and Means Committee and nearly double the take of then-Chairman Charles B. Rangel (D-N.Y.).
Cantor sprang into action in 2007, when Democrats proposed the two major tax code changes that have been at the center of the debt talks. He formed the Coalition for the Freedom of American Investors and Retirees and invited several dozen industry groups to the opening meeting.
One of the changes revolves around “carried interest” — the pay managers receive for gains they produce for investors — which is taxed at the long-term capital gains rate of 15 percent. Many tax experts argue that it should be taxed at the 35 percent rate for ordinary income because it is the managers’ compensation for services performed, not the result of their own capital investment.
Another proposal would tax profits from the sale of hedge funds as ordinary income.
Since 2007, Cantor has railed against the proposals, saying that the carried interest proposal would “raise taxes on innovation and opportunity in America” and harm “mom and pop” businesses.
Democrats dismiss that argument. “There is virtually no evidence that having these people pay ordinary income would inhibit business development,” said Rep. Sander M. Levin (Mich.).
The proposals passed the House, which was then under Democratic control, but fell short of a filibuster-proof majority in the Senate last year.
Cantor’s support from the industries soared. Contributions to his two campaign committees from the real estate and securities and investment sectors jumped to $916,307 in 2008 and doubled to $1.85 million in 2010, according to the Center for Responsive Politics.
The top 10 contributors to Cantor’s two committees in 2010 included three investment firms: employees at SAC Capitol Advisers, the hedge fund founded by Steven Cohen, gave $64,964; those at the private equity firm KKR gave $52,600; and those at Elliott Management, the hedge fund founded by Paul Singer, gave $44,198. The Blackstone Group, the hedge fund run by Steve Schwarzman, and its employees gave $26,100.
The main private equity and hedge fund trade groups have ramped up their lobbying amid the debt talks, spending $4.2 million this year.
By: Alec MacGillis, The Washington Post, July 25, 2011
Boehner’s New Proposal Could Produce Greatest Increase In Poverty And Hardship Of Any Law In Modern U.S. History
House Speaker John Boehner’s new budget proposal would require deep cuts in the years immediately ahead in Social Security and Medicare benefits for current retirees, the repeal of health reform’s coverage expansions, or wholesale evisceration of basic assistance programs for vulnerable Americans.
The plan is, thus, tantamount to a form of “class warfare.” If enacted, it could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history.
This may sound hyperbolic, but it is not. The mathematics are inexorable.
The Boehner plan calls for large cuts in discretionary programs of $1.2 trillion over the next ten years, and it then requires additional cuts that are large enough to produce another $1.8 trillion in savings to be enacted by the end of the year as a condition for raising the debt ceiling again at that time.
The Boehner plan contains no tax increases. The entire $1.8 trillion would come from budget cuts.
Because the first round of cuts will hit discretionary programs hard — through austere discretionary caps that Congress will struggle to meet — discretionary cuts will largely or entirely be off the table when it comes to achieving the further $1.8 trillion in budget reductions.
As a result, virtually all of that $1.8 trillion would come from entitlement programs. They would have to be cut more than $1.5 trillion in order to produce sufficient interest savings to achieve $1.8 trillion in total savings.
To secure $1.5 trillion in entitlement savings over the next ten years would require draconian policy changes. Policymakers would essentially have three choices: 1) cut Social Security and Medicare benefits heavily for current retirees, something that all budget plans from both parties (including House Budget Committee Chairman Paul Ryan’s plan) have ruled out; 2) repeal the Affordable Care Act’s coverage expansions while retaining its measures that cut Medicare payments and raise tax revenues, even though Republicans seek to repeal many of those measures as well; or 3) eviscerate the safety net for low-income children, parents, senior citizens, and people with disabilities. There is no other plausible way to get $1.5 trillion in entitlement cuts in the next ten years.
The evidence for this conclusion is abundant.
The “Gang of Six” plan, with its very tough and controversial entitlement cuts, contains total entitlement reductions of $640 to $760 billion over the next ten years not counting Social Security, and $755 billion to $875 billion including Social Security. (That’s before netting out $300 billion in entitlement costs that the plan includes for a permanent fix to the scheduled cuts in Medicare physician payments that Congress regularly cancels; with these costs netted out, the Gang of Six entitlement savings come to $455 to $575 billion.)
The budget deal between President Obama and Speaker Boehner that fell apart last Friday, which included cuts in Social Security cost-of-living adjustments and Medicare benefits as well as an increase in the Medicare eligibility age, contained total entitlement cuts of $650 billion (under the last Obama offer) to $700 billion (under the last Boehner offer).
The Ryan budget that the House passed in April contained no savings in Social Security over the next ten years and $279 billion in Medicare cuts.
To be sure, the House-passed Ryan budget included much larger overall entitlement cuts over the next 10 years. But that was largely because it eviscerated the safety net and repealed health reform’s coverage expansions. The Ryan plan included cuts in Medicaid and health reform of a remarkable $2.2 trillion, from severely slashing Medicaid and killing health reform’s coverage expansions. The Ryan plan also included stunning cuts of $127 billion in the SNAP program (formerly known as food stamps) and $126 billion in Pell Grants and other student financial assistance.
That House Republicans would likely seek to reach the Boehner budget’s $1.8 trillion target in substantial part by cutting programs for the poorest and most vulnerable Americans is given strong credence by the “Cut, Cap, and Balance” bill that the House recently approved. That bill would establish global spending caps and enforce them with across-the-board budget cuts —exempting Medicare and Social Security from the across-the-board cuts while subjecting programs for the poor to the across-the-board axe.
This would turn a quarter century of bipartisan budget legislation on its head; starting with the 1985 Gramm-Rudman-Hollings law, all federal laws of the last 26 years that have set budget targets enforced by across-the-board cuts have exempted the core assistance programs for the poor from those cuts while including Medicare among programs subject to the cuts. This component of the “Cut, Cap, and Balance” bill strongly suggests that, especially in the face of an approaching election, House Republicans looking for entitlement cuts would heavily target means-tested programs for people of lesser means (and less political power).
In short, the Boehner plan would force policymakers to choose among cutting the incomes and health benefits of ordinary retirees, repealing the guts of health reform and leaving an estimated 34 million more Americans uninsured, and savaging the safety net for the poor. It would do so even as it shielded all tax breaks, including the many lucrative tax breaks for the wealthiest and most powerful individuals and corporations.
President Obama has said that, while we must reduce looming deficits, we must take a balanced approach. The Boehner proposal badly fails this test of basic decency. The President should veto the bill if it reaches his desk. Congress should find a fairer, more decent way to avoid a default.
By: Robert Greenstein, President, Center on Budget and Policy Priorities, July 25, 2011
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