How to Break Bread With Republicans

In a new opinion piece for the New York Times Gregory Mankiw has put together a list of ways that President Obama can work with the new Republican majority in the House. I’m thinking President Obama will not be so keen on these tactics.

From NYTimes.com:

FOCUS ON THE LONG RUN

Charles L. Schultze, chief economist for former President Jimmy Carter, once proposed a simple test for telling a conservative economist from a liberal one. Ask each to fill in the blanks in this sentence with the words “long” and “short”: “Take care of the ____ run and the ____ run will take care of itself.”

Liberals, Mr. Schultze suggested, tend to worry most about short-run policy. And, indeed, starting with the stimulus package in early 2009, your economic policy has focused on the short-run problem of promoting recovery from the financial crisis and economic downturn.

But now it is time to pivot and address the long-term fiscal problem. In last year’s proposed budget, you projected a rising debt-to-G.D.P. ratio for as far as the eye can see. That is not sustainable. Conservatives believe that if the nation credibly addresses this long-term problem, such a change will bolster confidence and have positive short-run effects as well.

Fortunately, the fiscal commission you appointed assembled a good set of spending and tax reforms. The question you now face is whether to embrace their sensible but politically difficult proposals in your own budget.

THINK AT THE MARGIN

Republicans worry about the adverse incentive effects of high marginal tax rates. A marginal tax rate is the additional tax that a person pays on an extra dollar of income.

From this perspective, many of the tax cuts you have championed look more like tax increases. For example, the so-called Making Work Pay Tax Credit is phased out for individuals making more than $75,000 a year. That is, because many Americans lose some of the credit as they earn more, the credit reduces their incentive to work. In effect, it is an increase in their marginal tax rate.

Read more here

Secret GOP Plan: Push States to Declare Bankruptcy and Smash Unions

Reuters reports that Republicans in Washington are systematically working to destroy government employee unions once and for all. This is shaping up to be the political battle of 2011; leaving us all wondering, how will this hurt/help our struggling economy? Will California really declare bankruptcy?

From Reuters.com:

Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.

That’s why the most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds program. BABs now account for more than 20 percent of new debt sold by states and local governments thanks to a federal rebate equal to 35 percent of interest costs on the bonds. The subsidy program ends on Dec. 31. And my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.”

In short, the lack of a BAB program would make it harder for states to borrow to cover a $140 billion budgetary shortfall next year, as estimated by the Center for Budget and Policy Priorities. The long-term numbers are even scarier. Estimates of states’ unfunded liabilities to pay for retiree benefits range from $750 billion to more than $3 trillion.

Republicans in the House of Representatives already want to stop state and local governments from issuing tax-exempt bonds unless they are more forthright about these future obligations. Republican Representatives Devin Nunes and Darrell Issa of California and Paul Ryan of Wisconsin have introduced a bill that would require state and local governments to estimate the size of public pension liabilities if their assets earned a more conservative rate of return than many plans currently expect. Failure to do so would result in the suspension of their ability to issue tax-exempt bonds.

White House Denies Folding on Bush Tax Cuts, but Still ‘Open to Compromise’

From WashingtonIndependent.com:

A lot of hubbub this morning surrounding a Huffington Post article that suggested the White House was willing to cave on its position of permanently extending tax cuts for most Americans while only temporarily extending those for the upper two percent and instead accept the idea of a temporary extension of all the tax cuts. Following the story’s publication, White House Communications Director Dan Pfeiffer emailed Greg Sargent to set the record straight:

The story is overwritten. Nothing has changed from what the President said last week. We believe we need to extend the middle class tax cuts, we cannot afford to borrow 700 billion to pay for extending the tax cuts for the wealthiest Americans, and we are open to compromise and are looking forward to talking to the Congressional leadership next week to discuss how to move forward. Full Stop, period, end of sentence.

That still leaves unclear, however, whether the White House will keep demanding that the majority of the tax cuts be permanent while the ones for individuals making more than $200,000 be temporary. Republicans are pretty much categorically opposed to “decoupling” the time frames of tax cuts for these two groups, because then they’d be forced to advocate for an extension of tax cuts just for the rich at some point down the line.

Republicans Oppose Compromise with President Obama on Tax Cuts

From Chicago Tribune.com:

In another ominous sign of new political gridlock developing in Washington, House Republican leaders Sunday took a hard line on compromising with President Obama on extending tax cuts that are due to expire at the end of this year.

"I really want to see that we can come together and agree upon the notion that Washington doesn't need more revenues right now," Rep. Eric Cantor of Virginia, the No. 2 House Republican, said on "Fox News Sunday."

"And to sit here and say we're just going to go about halfway, or we're going to send a signal that it's going to be uncertain for job creators and investors to put capital to work, that's exactly what we don't need right now."

Obama has proposed permanently extending tax cuts for American households making less than $250,000 a year, but he has argued that the country cannot afford to extend those cuts for the wealthiest Americans.

The president repeated that proposal in his weekly address this weekend.

"At a time when we are going to ask folks across the board to make such difficult sacrifices, I don't see how we can afford to borrow an additional $700 billion from other countries to make all the Bush tax cuts permanent, even for the wealthiest 2% of Americans," he said.

Republicans and Democrats Spar Over Tax Cuts, Economy as Election Nears

From AdvisorOne.com:

As the hours dwindle down to the election on Tuesday, the talk Sunday was still about the economy and the two-sided coin of tax cuts and the deficit. On This Week with Christiane Amanpour, Sens. Robert Menendez, D-N.J., and John Cornyn, R-Texas, squared off about both.

Amanpour’s question to Menendez about whether this election would be “as bad as 1994” brought a resounding no. He stated that the Republican brand’s “image was much better [in 1994] than it is today,” and that Democrats are faring better than they did then. He added that the Democrats’ “goal is to have them understand and channel their anger on election day against the Republican Party that brought us to the verge of economic collapse in November of 2008, when financial institutions in this country were ready to collapse.”

Amanpour challenged him about that. “A recent Bloomberg poll found that most Americans think that taxes have gone up since President Obama took office;” she said, “that the economy has shrunk; that TARP, the corporate bailout, won't be mostly paid back. I mean, all of those are untrue. Why is the messaging so bad?”

Menendez replied that “I think the challenge is, when you're hurting economically—and we have gone from negative job growth to positive job growth, from negative GDP growth to positive GDP growth—but if you're still unemployed, none of that news makes that much difference to you.”

Cornyn agreed about the cause of voters’ reactions, but disagreed about the cause of the economic problems. Amanpour turned the conversation to the subject of taxes and asked him about Obama’s plan “to raise taxes on the wealthiest and preserve them for the middle class.” Cornyn replied, “I don't believe we ought to raise taxes on anyone during a fragile economic recovery. …”

Republicans Accuse Dems of Using IRS Audits to Bully Conservative Groups

From TheBlaze.com:

Congressional Republicans are accusing Democrats and administration officials of leaking privileged IRS information and using invasive audits to bully conservative groups, the New York Times says, and they are not happy about it.

The first charge by Republicans Senators centers around a senior Obama administration official who may have improperly accessed the tax records of Koch Industries, an oil company whose owners are major conservative donors, while the second charge lambastes Senator Max Baucus (D-MT) for scoping the funding activities of historically conservative tax-exempt groups.

According to the Times, the Treasury Department has opened up an investigation regarding allegations by Sen. Chuck Grassley (R-IA)* and six other Republican senators who claim a senior administration official disclosed confidential taxpayer information regarding Koch Industries — whose owners are major conservative donors — during a conference call with journalists.

During that call, the official pointed to Koch Industries as an example of “multibillion-dollar businesses that are structured as partnerships in ways that allow them to avoid paying sizable corporate taxes.”

Obama: GOP 'Holding Middle Class Tax Relief Hostage'

From ABCNews.com:

In his first press conference since May, President Obama talked about the economy and announced that he is appointing University of Chicago economist Austan Goolsbee to be chair of his Council of Economic Advisers, administration sources tell ABC News.

He took aim at the previous administration and the "partisan minority" that he says are blocking his economic proposals.

"Policies of the previous decades have left our economy weaker and our middle class struggling," the president said.

President Obama acknowledged that progress has been "painfully slow."

"Since I am the president and Democrats have control of the House and the Senate, it's understandable that people are saying, you know, what have you done?" President Obama said. "We've still got a long ways to go."

Democrats' Tax Bill Moves Toward Vote In US Senate

The Senate is scheduled to vote on the new tax bill designed to extend unemployment insurance tomorrow. In order for the bill to pass, 60 of the 100 Senators will need to vote in favor of the legislation. Many Republicans and fiscally conservative Democrats are still weary of the bills price tag, and some bloggers are predicting the bill will not pass. Read more from this Reuters.com story below.

According to Reuters.com, Majority Leader Harry Reid moved toward an initial vote on the $126 billion earlier this week.

Under Senate rules, the vote on whether to limit debate on the legislation will likely occur Wednesday. Sixty votes are needed out of the 100-member Senate.

Complaints by fiscally conservative Democrats about the plan's price tag and opposition by some Democrats to the investment fund manager tax has stalled the proposal.

According to several lobbyists, the majority Democrats remain shy of the 60 votes necessary. They need to attract as least one Republican plus keep all of the 59 votes they generally hold in the chamber.

Over the next 10 years, the Senate proposal would increase direct spending by $126 billion and add $22 billion in funding to prevent a 21 percent payment cut to doctors in the Medicare program, the Congressional Budget Office estimated.

Continue reading at Reuters.com…

GOP wants website to put policy in hands of voters

Do you think you would be able to make great public policy decisions—possibly better than those made by past and current government officials? Many people think of politics as something that happens despite their opinion on the matter.

If you could Tweet Congress, would you? What issues would you like the House to focus on during this election year? Would you interact on a website that is read by actual government officials? To encourage this type of community and conversation, the House of Representatives’ Republicans are going to launch a new website on Tuesday, June 1st. The new GOP website, Americaspeakingout.com, will make the Republican 2010 midterm policy agenda accessible to Americans. It will also use different types of social media so that Americans can interact and talk about what policies they think Congress should be working on.

According to CNN.com, “the new GOP website is an official government project, supported by leadership staff and funded with taxpayer dollars.” The website aims to give control to voters, and was a team effort by the GOP and Microsoft. After creating a profile, users will choose their username and accumulate “points” every time they submit an idea or engage in an online debate. This will encourage people to visit the website and get involved in politics. California Republican Representative Kevin McCarthy stated that the feedback leaders get from the site will lead to the development of legislation that Republicans will try to enact this year.

Read the full article here.

Republicans Introduce Bill to Prevent Euro Bailout

Republicans in Congress are trying to prevent a Euro bailout, and recently introduced a bill to make it a law not to help the European Union. The legislation presses European countries with financial struggles – such as Greece – to get fix their own financial problems instead of looking to American taxpayers for help.

"This legislation would require that countries, like Greece, cut spending and put their own fiscal house in order," says U.S. Congressman Mike Pence, backed up by other members of the House GOP, "instead of looking to the United States for a bailout. We face record unemployment and a debt crisis of our own, and American taxpayers should not be forced to bear the risk for nations that have avoided making tough choices."

The full release is below the fold, with the detail that the bill "does not permanently prohibit the IMF from lending" to the troubled counties. Nevertheless, Ezra Klein is not a fan of this proposal.

U.S. Congressman Mike Pence, Chairman of the House Republican Conference, joined Conference Vice-Chair Cathy McMorris Rodgers, Ranking Member of the House Appropriations Committee Rep. Jerry Lewis, Rep. Jeb Hensarling, and Rep. Kay Granger in introducing legislation today to stop U.S. tax dollars from being used by the International Monetary Fund (IMF) for bailouts for European countries. Rep. Pence released the following statement today as the European Bailout Protection Act was introduced:

“The American people are fed up with taxpayer-funded bailouts and deserve to know we are bailing out Greece and possibly other European countries. If the Obama Administration has its way, the U.S. will contribute to a nearly trillion dollar bailout of European countries with economic crises that are a direct result of wasteful government spending.

Continue reading at Washington Post.com…

GOP's New Youth Ambassador: Lady Gaga?

According to CNN Republicans attending a GOP weekly conference meeting earlier in the week were shown a video titled “Just Tax.” The viral video was made with the same tune and style of popular recording artist Lady Gaga’s “Just Dance,” only those words were replaced with “Just Tax”. It was made by 23 year old Peter Cowman, a recent graduate from the university of Washington, and was shown to GOP leaders as an example of how they could reach out to younger voters. Check out the full video below.

Let's Drill Our Way To Lower Taxes

From the Wall Street Journal:

“As the tide of public opinion seems to shift in favor of House Republicans' demand for a vote on domestic energy exploration, one supporting argument has yet to be discussed: drilling as a way to lower your taxes.

Opening our vast domestic resources, both on and offshore, to responsible oil and gas development would produce an influx of tax revenue from additional lease sales and royalties, as well as from income and excise taxes. These additional collections could be used, for example, to offset the alternative minimum tax (AMT).

The Congressional Research Service recently estimated the potential federal revenue from Arctic National Wildlife Refuge (ANWR) oil development at $191 billion over 30 years -- roughly $18.36 per barrel, based on projections of recoverable reserves. Applying that formula to the 107 billion-plus barrels of recoverable oil that federal agencies estimate is in ANWR, the nearby National Petroleum Reserve and offshore tells us that sensible drilling could yield nearly $2 trillion in overall revenue over 30 years, or an average of about $65.5 billion per year.

Meanwhile, the ‘cost’ in lost tax collections of protecting 22 million families from the AMT this year stands at about $62 billion. That figure is sure to balloon in the future as more and more Americans are ensnared by the complex system. Tax-hungry politicians defend the AMT by pointing to all the federal revenue that would be lost by ending it. (Never mind the fact that AMT revenue is ill-gotten in the first place, or that the estimated ‘costs’ of its repeal to the federal budget ignore the benefits to economic growth and resulting additional revenues.) While oil and gas development won't fill government's coffers overnight, it will provide a down payment in the near-term, and big windfalls in the out-years that can help deal with some of the most intractable tax problems we face.

We helped create our energy supply problem by putting resources off-limits. Let's develop those resources and use the revenue to help alleviate tax burdens in this difficult economy. More supply, lower gas prices, greater energy security, and lower taxes. What are we waiting for?”