One of the most discouraging things about the last two years was seeing swing voters in focus groups, when asked what President Obama's economic strategy was, repeat different versions of "Well, I know he said we needed to save the banks. Beyond that, I'm not sure." When Obama in his first State of the Union gave a vigorous defense of bailing out the banks, saying he knew it about as popular as a root canal, and saying "I get it", it was very memorable to voters. But when his predictions about what would happen when the banks were stabilized -- they would start making loans to businesses, and businesses would start hiring -- didn't happen, and instead the banks gave themselves record breaking bonuses, voters turned on Obama fast. In exit polls on Nov. 2nd, when asked who was most to blame for the bad economy, voters by a wide margin said Wall St. was most to blame, and the voters who said that went Republican by a 14-point margin.
Obviously, saving the banks hasn't been the President's only economic strategy. The stimulus bill, while too small, was an important job creator/saver. Saving the American auto industry was an incredibly important thing to do. Health care reform was in part a long term economic strategy. The infrastructure bank idea is a great potential job creator. Extending unemployment insurance helps keep money in the economy. And all the tax cutting going on is clearly meant to have some stimulative effect, although how much is highly debatable.
However, there have certainly been times where Secretary Geithner, who has been the main driver of the economic strategy, seems to think and act as if helping the big banks and helping the economy amount to the same thing. The tepid reaction to the foreclosure crisis has sure felt that way -- apparently we can't freeze foreclosures or do much to help homeowners because it might "endanger" the banks. In fact, I would argue the exact opposite: that our number one economic strategy right now should be to shift money from the big banks to the real economy, to Main Street businesses and workers and consumers. The big banks are hoarding extraordinary amounts of money, and they are clearly not investing it in job creating businesses. They are speculating with it, they are trading with it, they are investing in complicated financial instruments that do nothing to create jobs- in fact, they are sucking capital out of the real economy that might actually create jobs. These massive financial conglomerates have way too much concentrated wealth and market power, and that is weakening the rest of the economy.
This is one reason why, as I wrote a couple of times last week, it is so important to write down the mortgages of homeowners who are underwater. Taking that money out of the bankers' hands and putting it in the hands of the hard pressed middle class would do more to stimulate the economy than any other thing the President could do right now. This is also why the Federal Reserve's new proposed rule, out last week, on swipe fees is so good. It would generally limit swipe fees to 12 cents per transaction. Right now the average is 44 cents, and with most small businesses it's quite a bit higher. If this rule is upheld, this is money that will go straight from the big banks' profit margins into the main street economy -- all told, probably a $15 billion boost going back to retailers, restaurant owners, taxi cab drivers, and hopefully consumers. $15 billion going from Wall Street, speculative economy into the real economy is a nice lift right now. This is why I have been working with retail business leaders and consumer groups to support this new regulation.
Unfortunately, not all Democrats see it this way. Tom Carper and Mark Warner tried to head off the amendment that made this regulation happen in the Senate, and have been lobbying the Federal Reserve against a strong regulation on the subject ever since they lost the legislative fight. And Barney Frank, who is a great liberal on social issues but spends way too much time with bank lobbyists, was whining on Friday how unfair the proposed rule was to the poor bankers.
Barney, you got this one wrong. Democrats should not be looking out for the bankers, we should be looking for every single opportunity we can to drain the Wall St. swamp. The big banks are hoarding money. They have way too much market power, and when their profits expand, they put that money into the speculative economy rather than the real economy that manufactures goods, sells products and services, and creates jobs. When we take a dollar away from them, and put it into the real economy, there is actually a multiplier effect as people on Main Street spend or invest the money in real products. When mortgages get written down, it helps the real economy. When swipe fees on credit or debit card transactions get lessened, it helps the real economy. If we instituted a transactions tax on every trade made on Wall St, and put that money into a jobs program, that would help the real economy.
The big banks are hoarding our money. Our best economic program right now is to shift money from the banks, and put it into the hands of consumers who might actually buy products and businesses who might actually hire more workers.
Here's the problem with funding 2011's government using 2010's budget: When the 2010 budget passed, neither financial regulation nor health-care reform had passed. And so the 2010 budget didn't include the new funds necessary to support their implementation. We're not talking about a lot of money here, of course, but certainly some. And for the health of these bills, it's important money.
But after the collapse of the omnibus spending bill, the Democrats have moved to funding the government using a resolution that simply continues 2010's funding levels. And that means starving some of their signature accomplishments of implementation funds. This hasn't been lost on Republicans, of course: Mitch McConnell's key argument for turning GOP senators who'd pledged to vote for the omnibus was that it included funds for health-care reform. The Democrats, however, seemed less attuned to this dimension of the funding fight. And even those who do see the problem aren't making much noise about it: Though there was lots of tough talk in recent months about how Democrays would risk a government shutdown rather than seeing their accomplishments defunded, that didn't prove true, at least this time.
Top Stories
The Census Bureau will announce which states gained and lost House seats today, reports Charles Babington: "The 2010 census report coming out Tuesday will include a boatload of good political news for Republicans and grim data for Democrats hoping to re-elect President Barack Obama and rebound from last month's devastating elections. The population continues to shift from Democratic-leaning Rust Belt states to Republican-leaning Sun Belt states, a trend the Census Bureau will detail in its once-a-decade report to the president. Political clout shifts, too, because the nation must reapportion the 435 House districts to make them roughly equal in population, based on the latest census figures. The biggest gainer will be Texas, a GOP-dominated state expected to gain up to four new House seats."
The federal funding resolution Congress is considering doesn't include money for the implementation of health-care reform, report Jessica Holzer and Josh Mitchell: "Democrats last week sought $1 billion to expand federal agencies to cope with health-care demands as part of a proposed $1.1 trillion spending bill. That measure died after Senate Republicans closed ranks against it under pressure from conservative activists...Congressional Republicans have said they will try to defund enactment of the health-care law's least popular provisions, particularly Internal Revenue Service efforts to enforce the requirement that most Americans carry health insurance."
Nor for FinReg, reports Pat Garofalo: "The resolution does not include funding for the implementation of the Dodd-Frank financial reform law. Under the omnibus, the Securities and Exchange Commission would have seen its budget increase to $1.3 billion from $1.1 billion, and the CFTC would have gone from $169 million to $286 million. Already, the SEC has halted implementation of a variety of measures under the law as it waits for funding."
The FCC is set to enact "net neutrality" rules, reports Cecilia Kang: "Federal regulators are poised to enact controversial new rules affecting Internet access, marking the government's strongest move yet to ensure that Facebook updates, Google searches and Skype calls reach consumers' homes unimpeded. Under the regulations, companies that carry the Internet into American homes would not be allowed to block Web sites that offer rival services, nor would they be permitted to play favorites by dividing delivery of Internet content into fast and slow lanes. The rules are set to win passage in a vote Tuesday by the Federal Communications Commission, after a majority of the panel's five members said they planned to vote in favor of the measure."
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Surf-rock interlude: Surfer Blood plays "Twin Peaks".
Still to come: Regulators are taking aim at executive pay; Mark Warner and Saxby Chambliss will push a deficit-reduction package; Bill Gates and Randi Weingarten talk education reform; and an infant learns to drive.
Economy
Sens. Mark Warner (D-Va.) and Saxby Chambliss (R-Ga.) will introduce a debt reduction package in the next Congress, reports Heidi Przybyla: "Senators Mark Warner and Saxby Chambliss will seek to put the U.S. debt atop the agenda early in next year's Congress by proposing legislation to slash government spending, reduce popular tax breaks and trim entitlement programs. Warner, a Virginia Democrat, and Chambliss, a Georgia Republican, have been working over the past six months to court a group of 25 senators from both sides of the political aisle in hopes of gathering support for their bill, Warner said today in an interview. The legislation is based on a plan by the co-chairs of President Barack Obama's debt-reduction panel that earlier this month failed to get enough support for its recommendations to be sent to Congress."
The US is considering a crackdown on Wall Street executive pay, report Aaron Lucchetti and Sara Schaefer Munoz: "U.S. regulators are considering whether to require large financial firms to hold onto a chunk of executive pay to discourage the excessive risk-taking that contributed to the financial crisis, according to people familiar with the situation...The discussions by the Federal Reserve, Securities and Exchange Commission and other federal banking agencies are the result of a provision in the Dodd-Frank financial-overhaul law that instructs regulators to prohibit any bonus plan that "encourages inappropriate risks" at financial firms with more than $1 billion in assets."
The Fed is limiting its purchases of Treasury assets: http://bit.ly/ep64hK
The tax compromise provides a preview of new OMB director Jack Lew's style, reports Jackie Calmes: "While the deal drew fire from both parties, liberal Democrats were especially enraged by a two-year extension of Bush-era tax cuts for high incomes and wealthy estates and a reduction in payroll taxes for Social Security. In private caucuses, some turned their anger at the White House on Mr. Lew. 'This is not a package we could have supported if it didn’t take care of the workers who are most vulnerable,' Mr. Lew said in an interview, echoing the pitch he made to Democrats in private...With both Mr. Obama and Republicans vowing to bring down annual deficits swelling the nation’s debt -- in very different ways -- Mr. Lew becomes an even more crucial figure in the cabinet than budget directors typically are."
Public respect for government workers is on the wane, report Karen Tumulty and Ed O'Keefe: "Three-quarters of those who were surveyed in an October Washington Post poll said they believe federal workers get better pay and benefits than people doing similar jobs outside the government, and 52 percent said government employees are overpaid. When the NBC/Wall Street Journal poll this month sampled public opinion on the major proposals that were put forward by the president's deficit and debt reduction commission, the most popular by far - and the only one deemed 'totally acceptable' by a majority of respondents - was freezing the salaries of federal employees and members of Congress for three years."
The St. Louis Fed president calls quantitative easing "moderately successful" so far: http://on.wsj.com/fBbxaE
The spending package's March expiration date won't make raising the debt ceiling easier, writes Stan Collender: "Because the existing debt ceiling currently is assumed to be reached close to the same date the the CR will expire, won't the two issues be combined into a single piece of legislation?...Combining the two issues would certainly be possible and perhaps even likely in a rational world where efficiency is the goal. But in the hyper political and partisan world that will exist in Washington next year, will it really make any sense for the GOP voluntarily to give up one of what it will believe will be its two major points of leverage over the White House? Even if the two need to be dealt with at close to the same time, why would the GOP not use both opportunities to exert influence that it otherwise won't have?"
Tom Coburn's "Wastebook" is misleading, writes Brad Plumer: http://bit.ly/en6ujQ
Adorable infant acquiring life skills interlude: A Russian baby learns to drive.
Health Care
Sen. Tom Coburn is blocking a bill to provide health care to 9/11 first responders: http://politi.co/eFpn6x
The Justice Department is suing Blue Cross Blue Shield on antitrust grounds, reports Reed Abelson: "When the Justice Department filed an antitrust lawsuit against Blue Cross Blue Shield of Michigan in October, the unusual action was widely seen as a warning shot to dominant health insurance carriers in many other states...The case is viewed as a test for the Obama administration’s introduction of the federal health care law, which is aimed at spurring competition and driving down costs. About half the states in the country, including Alabama, Rhode Island and Iowa, share circumstances similar to Michigan’s, in their relationships with a big single insurance carrier."
Domestic Policy
The spending bill Congress is considering will implement a federal pay freeze, reports Stephen Ohlemacher: "Federal workers would face a two-year pay freeze under a spending bill Congress will take up this week to keep the government operating through March 4. The bill would protect student Pell grants, veteran's benefits and a program that helps low-income families pay their heating bills. A small business loan program would be extended...Three weeks ago, President Barack Obama proposed a two-year salary freeze for some 2 million federal workers, seizing on an initiative popular among Republicans. Public employee unions are lobbying lawmakers to reject the pay freeze."
State attorneys general are going to war with Google over privacy concerns, reports Tony Romm: "More legal wrangling could be in store for Google now that it has refused to turn over to state investigators the e-mails and other data it accidentally collected while mapping neighborhoods. The Mountain View, Calif.-based company declined to deliver that trove of information to Connecticut Attorney General and soon-to-be senator Richard Blumenthal by his Friday deadline. That could set up a legal showdown between the two less than a month before Blumenthal is set to become his state’s newest Democratic senator."
Bill Gates and Randi Weingarten discuss school reform: http://bit.ly/fj40lh
The tax compromise will not affect the Social Security trust fund, writes Allan Sloan: "Next year, as you probably know, workers subject to Social Security taxes will pay only 4.2 percent of their "covered wages" -wages up to $106,800 - rather than the normal 6.2 percent. This will reduce Social Security's cash proceeds by $112 billion, according to Congress' Joint Committee on Taxation. What impact will this cash shortfall have on the Social Security trust fund? None. Zero. Zip. How can a $112 billion cut in Social Security revenues not affect the trust fund? Because Treasury will give the trust fund the same amount of bonds it would have gotten had the two-percentage-point tax holiday didn't exist."
Modest proposal interlude: Craig Rowin would like someone to give him $1 million.
Energy
Republicans may actually defend spending on renewable energy, reports Sharon Begley: "This region--Texas, Oklahoma, and on up to the Dakotas--is to wind power what Nebraska is to corn. The investment tax credit for building wind and other renewable installations expires Dec. 31. Once it does, those projects will come to a halt, and thousands of people who are employed in building them will be out of work. Those workers, of course, are the constituents of newly elected officials, the companies behind the projects are crucial economic engines in the districts and states of those legislators, and both are going to give their reps an earful if the projects don’t resume."
The EPA is touting the success of cap and trade in fighting acid rain: http://bit.ly/hM57vU
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams.
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