Articles
Politico: Dems Plot Stimulating Post-Election Session
10/14/2008
By David Rogers
A post-election session of Congress seems all but certain next month with House Democrats beginning to focus on more permanent tax breaks for middle- and working-class families, along with shorter-term spending proposals to stimulate the economy.
The action comes as Treasury is to announce Tuesday its first investments in leading banks under a $700 billion rescue plan for the financial markets previously approved by Congress. Top executives from major banks met in Washington Monday in anticipation of the announcement, which could represent a commitment of up to $250 billion.
The recovery package now championed by Democrats would focus more on middle-class America, and House Speaker Nancy Pelosi (D-Calif.) said Monday that House committees will begin hearings on different elements in the remaining weeks before Nov. 4. While final decisions have not yet been made, officials confirmed that the tax discussions go beyond the one-time rebates enacted in the $152 billion stimulus bill signed by President Bush in February.
The slower-moving, filibuster-prone Senate remains a major obstacle even if the House acts next month — meaning all the speculation now could prove to be a lot of empty talk.
But in a letter to Pelosi on Monday, House Minority Leader John A. Boehner (R-Ohio) also said Congress “should not wait until January.” And Democratic presidential nominee Barack Obama has not discouraged a lame-duck session, even if he should prevail next month and stand to take over the White House in a matter of weeks.
“He’s pushing out ideas to get the economy going,” Jason Furman, an Obama economic adviser, told Politico. “He’s not telling his colleagues when to act.”
“We’ll have the hearings and see what the hearings yield,” Pelosi told reporters. “But we stand ready to take action when we are ready with the appropriate package to go forward.”
Pelosi’s comments followed a Capitol meeting Monday of her party leadership and a set of prominent economists including Joseph Stiglitz of Columbia University; Allen Sinai, president of Decision Economics Inc.; and former Treasury Secretary Lawrence Summers.
“Given the huge increase in the national debt over the last eight years, there has to be a big bang for the buck,” Stiglitz said. But the price tag for the recovery plan seems to be steadily rising, from the $61 billion bill hastily passed by the House weeks ago to a bill that’s two or three times as large.
The prospect of new tax cuts — which could also require some revenue offset in the House — accounts for some of this uncertainty. And Boehner’s letter Monday added his own list of Republican ideas, including a 10-percentage-point cut in the corporate tax rate and a proposal to suspend capital gains taxes for equities purchased over the next two years.
The major spending pieces in any package are largely familiar. Any Democratic recovery bill would almost certainly commit tens of billions to public infrastructure projects. And, in an effort to forestall layoffs at the state and local level, Washington would step in to pay a greater share of the state-federal Medicaid health care program for the poor and disadvantaged.
Unemployment benefits — left out of the first stimulus bill last winter — would be included, as would some increase in food stamp payments.
Critics argue that the result will be more of a jobs package for labor allies than one designed to stimulate the large economy. But this also raises the prospect of a post-election trade-off between the Democrats and the White House, which is still pressing for House action on the Colombia trade agreement in the last months of this year.
Pelosi has never ruled out dealing with Colombia. And for her and Obama, it could be an opportunity to show they are willing to govern more from the center than the left if successful in November. At the same time, the trade issue is still so hot with the labor movement that some Democrats question whether Pelosi could get it through the House, even if she were to make this gamble.
Monday’s Capitol meeting on the recovery package came as Treasury was rushing downtown to put together its own rescue plan for the financial markets approved by Congress 10 days ago. Executives from leading banks came to Washington to meet with Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke about the $700 billion initiative, and announcements are expected Tuesday on how the government will go forward.
Stocks surged during the day, with the Dow Jones Industrial Average gaining more than 900 points following last week’s losses. And more than first anticipated, Paulson will use his authority to invest in selected banks and take an equity interest for taxpayers.
This approach, encouraged by the British government, has won praise from many economists as a more direct way to insert capital into the banking system. But Treasury officials cautioned that this route will still account for less than half of the funds to be committed and is not intended to replace Paulson and Bernanke’s earlier plans to use auctions to buy up troubled mortgage assets — both to unclog the credit market and to help discover their true value.
The up to $250 billion investment figure reported Monday night is consistent with this explanation, but more details need to be seen to fully understand the mix.
House Financial Services Committee Chairman Barney Frank said he welcomed the greater flexibility shown by Paulson toward taking an equity interest in the banks he helps. “He didn’t want to do it. We said, you should,” Frank told Politico. But the Massachusetts Democrat also cautioned his friend, the secretary, to be more mindful of the concerns Congress had raised — such as access for minority firms — in implementing the program.
House Majority Whip Jim Clyburn (D-S.C.) has raised the issue in leadership discussions, and Treasury officials confirmed that Rep. Jesse Jackson Jr. (D-Ill.) brought the same complaint to the department.
“He lives in this bubble in which he focused on the market,” Frank said of Paulson. “He forgets he has a country to deal with. He’s looking at only the politics of the market and not at anybody else. It doesn’t work.”
But the chairman also defended the secretary against what’s become almost a new revisionism surrounding the government’s decision to not rescue Lehman Brothers. Frank said the politics were such at the time that it would have been hard for Paulson and Bernanke to have interceded as they did with Bear Stearns or, later, the insurance giant American International Group.
“On that one, he probably wanted to do it but was running into resistance. ... On Lehman, it was, ‘OK, they want to see what a belly-up looks like, let’s show them a belly-up,’” Frank said. “People look at a dead belly, it turns out to not be as much fun as they thought. It’s unfair to the Lehman people, but maybe ... we had to have the defeat [of the rescue package] on Monday and the crash to get people to understand it is real.
“It’s a democracy, and reality has to come into it and is a much more important thing here,” he said.