The Stimulus Plot Thickens: Tax Break Changes Now on the Table
The complicated state of the Senate stimulus debate just got more intense.
Sen. Olympia Snowe (ME), one of the four Republicans considered genuinely open to cooperation with Democrats on a workable economic recovery bill, just released a statement saying she was approached by Majority Leader Harry Reid (D-NV) to come up with a list of trims from the $275 billion-plus tax section of the stimulus.
To be clear, this is separate from the $80 bilion-plus package of spending cuts that are being hashed out by a group of 15 or so centrist senators from both parties.
Pruning the tax section of the stimulus is an idea that could hold promise for liberals, many of whom are concerned about the hits that education and transit would take in the centrist senators' package of cuts. The portion Snowe is looking at contains plenty of cuts, for both businesses and individuals -- some of them added in the hopes of winning GOP support -- but also a number of tax credits that could take money out of government coffers in the short term while increasing economic growth in the long term.
All told, trimming the tax section while retaining its (partially questionable) economic benefits is a tricky balance, but one Snowe is uniquely qualified for as a popular member of the Finance Committee. Speaking of, senator, may I suggest that $15 billion could be saved by eliminating the questionable "carryback" tax credit extension?
But adding tax changes to the mix adds a new obstacle to Reid's goal of passing the stimulus by day's end.
Fundamentally, the talks at this point hinge on keeping enough Democrats on board with the proposed spending cuts while firming up the commitment of the 2-4 Republicans needed for passage. In the words of one of those GOPers, Arlen Specter (PA), "If [Reid] had [the votes], he would have used them last night."
Snowe's full statement is after the jump.
I was approached this morning and asked to work directly with leadership to amend the tax section of the stimulus bill in order to develop compromise language that could pass the Senate. The total reductions sought by leadership will closely resemble the amount I recommended to the President during our meeting on Wednesday. This is a critical time for our nation. Our economy shed another 598,000 jobs last month - the most since 1974 - propelling the national unemployment rate to 7.6 percent. Until we deliver to the American people an economic stimulus package that spurs significant job creation and helps those most affected during these trying economic times, I will continue to work, as I have for months, with leadership and the Administration.
Josh
Elana
Matt
Eric
I have a feeling I'll like Snowe's ideas much more so, than Nelson-Collins crapola.
Don't forget to call your Senators and tell them to vote NO on the Nelson-Collins Amendment.
February 6, 2009 2:28 PM | Reply | Permalink
OMG. I can hear the R's heads exploding from here.
February 6, 2009 2:37 PM | Reply | Permalink
GOOD ONE!!
February 6, 2009 5:15 PM | Reply | Permalink
This is Reid's response to McConnell's pious complaint that those mean Democrats forced the Republicans to act like reckless psychotic assholes by not "compromising" enough, as well as to the increasingly bizarre "savings" being found in the deliberations of the 15 so-called "moderates" who think they are a supergovernment with power to control both the executive and legislative branches.
"Hey, you want to trim the cost of this thing? Then lets trim out the the parts that give the least bang for the buck." He's creating leverage.
February 6, 2009 2:49 PM | Reply | Permalink
Yep, leverage.
February 6, 2009 5:34 PM | Reply | Permalink
I tend to think that being completely unified and in lockstep is not healthy for a political party (see for evidence, Republicans). But right now, I wish that Reid didn't have to spend time and effort to keep Democrats "on board".
WTF is wrong with them?
February 6, 2009 2:52 PM | Reply | Permalink
You, with that avatar, don't know what's wrong with Democrats? The board says "L__D_G D_MOC_R_TS _S L_K_ H_RD_NG C_TS."
Need to buy a vowel?
February 6, 2009 3:00 PM | Reply | Permalink
Having said that, however, how is what goes on in the Senate any different than what Democrats do here all the time? Every last cotton pickin' one of them thinks that they, and they alone, have the one, the only, the perfect solution to the problem, that they, and they alone, have a complete understanding of the situation, that their ideas, and their ideas alone, can save the Republic, and that the slightest deviation from their ideas will surely bring ruin.
Not unlike your average cat fight here in the TPM comments.
People constantly berate Reid for being "weak" or "ineffectual" and for not whippin' up on the Republicans hard enough, when the problem is his caucus. He's can be no stronger than they'll let him be.
February 6, 2009 3:06 PM | Reply | Permalink
Herding cats, herding faculty members...what's the diff?
To you, NCSteve, and Goofy, below: yes, I appreciate that Senate opinion isn't monolithic. And thank goodness it isn't.
But I'd like to see the Democrats, just once, unify and stop shooting themselves in the collective foot. Or mouth. Or something.
February 6, 2009 3:10 PM | Reply | Permalink
Well then, you'd be interested in Nate Silver's most recent article:
http://www.fivethirtyeight.com/2009/02/on-stimulus-democrats-beating-gop-on.html
February 6, 2009 3:15 PM | Reply | Permalink
Thanks for the link.
I'm going to go sit in the corner for whining without cause.
February 6, 2009 3:21 PM | Reply | Permalink
No debate from me. You're singing from my personal (and very short) hymnal.
February 6, 2009 3:44 PM | Reply | Permalink
The American public is not monolithic, either. The range of views of the Senate are a reflection of those.
Bratwurst, anyone?
February 6, 2009 3:00 PM | Reply | Permalink
The best possible outcome of this situation is that the far right wingnuts in the Senate abuse Snowe and other moderate Republicans so much that they jump ship and pull a Jim Jeffords.
February 6, 2009 2:53 PM | Reply | Permalink
Great Googly Moogly! Sounds like a bi-partisan approach, fer chrissakes!
Reid has always been such a wuss. But it sure is fun to see this, where he turns it all over to a powerful woman to get some work done. The fact that she is a Republican makes it so much more delightful.
Check and Mate, Mr. McConnell?
February 6, 2009 2:55 PM | Reply | Permalink
I hope so. But I sure would like to see a lot less political jockeying and a lot more stimulus.
February 6, 2009 3:06 PM | Reply | Permalink
Somebody explain to me why Reid won't challenge the Repubs to follow through on a filibuster.
February 6, 2009 3:00 PM | Reply | Permalink
It's not nice. The Senate Old'Boys Club shouldn't do that sort of thing to each other...
That's spineless Reid for you.
February 6, 2009 3:34 PM | Reply | Permalink
This is why the Dems should have allowed the Repubs to take the hit for ending the filibuster a few years ago. It is insanty, not to mention undemocratic, that 41% of the Senate get to dictate to the other 59%.
February 6, 2009 3:53 PM | Reply | Permalink
I wondered if and when the hell Reid was going to put the sacrosanct Repub tax cuts on the card bargaining table.
This should have been done several days ago with the call on the filibuster bluff immediately thereafter.
There are always times for negotiation. Time has run out on this issue.
February 6, 2009 3:06 PM | Reply | Permalink
In a Harry Reid senate it doesn't matter if the Dems have control or not because they will get steamed rolled by the repubs every time. Funny I don’t remember the dems stopping any of Bush's bills. Why is that? Well because what the repubs lack in ideas, policy and ideology they have abundance of balls and are not afraid to sell their shitty ideas. I have yet to see any Dems out on TV to strike back against the repubs. Even when the dems control everything the repubs still get to write the bills. Nice job Harry you fucking spineless loser
February 6, 2009 3:10 PM | Reply | Permalink
Good. Let's start by taking out the Isakson and Mikulski amendments in addition to the carry-back provision. That'll save $35 billion right there.
Then let's take out the college tuition and child care tax credit. The college tuition tax credit will just cause universities to jack up their prices even more. Pell Grants are much more effective. The child care tax credit just complicates the tax code.
February 6, 2009 3:20 PM | Reply | Permalink
The child care tax credit also is a lifesaver for a lot of middle class families who need two incomes to survive. The college tuition credit falls in the same category. Pell grants (or, for that matter any form of financial aid) is virtually impossible to get for anyone not in the bottom third of the income scale. Try to come up with $20k/year for your kid's tuition and expenses (even at a state school) on a middle-class income. Without some help, the only people that will be able to afford college are the poorest and the richest.
February 6, 2009 3:32 PM | Reply | Permalink
Why not employ some republican tactics and tricks. Like accusing any republican who votes against this bill as wanting America to fail or professing that the republicans are more concerned with winning the next election than helping the American people or just say what Obama has been saying, the American people have taken a huge shit on republican ideology and you can’t fix the economy by using the very tools that destroyed it.
Lets make it unmistakably clear that all blue state Republicans will lose their jobs if they vote no on this bill.
Hey Dems play hardball instead of the spineless, cave in pussy ball you always play
February 6, 2009 3:21 PM | Reply | Permalink
Okay get on the phones everyone - this crap must not stand.
In addition to my sens I called Reid, Nelson, and Collins' offices. Collins staffer claimed that Collins is not trying to strip out education funding ("where did you see that, on the internet?"). I said okay, is she supporting education funding as part of the stimulus? the staffer wouldn't say. Grrrrr.
February 6, 2009 3:23 PM | Reply | Permalink
Gillibrand's phone (202-224-4451) has been busy for an hour. Any NYers get thru or know a different number?
February 6, 2009 3:34 PM | Reply | Permalink
According to Kos, Limbaugh has his dittohead army clogging the phone lines.
February 6, 2009 3:35 PM | Reply | Permalink
I just read where Sen. Collins wants to cut billions on education and to be replaced by billions for defense spending. Great lets stimulate Halliburton again. Where does it say that when you control congress the party in power must cave in on every core conviction they believe. It does not matter if the Dems have control the republicans will always get what they want. I don’t think the Dems got the message in Nov, NO MORE REPUBLUBAN failed ideology. If this bill doesn’t pass so be it. Blame the failure on the republicans and say they want America to fail. You know the republicans would
February 6, 2009 3:40 PM | Reply | Permalink
Let's keep the handwringing focused.
The problem, as ever, is in the Senate where the wrath of the public is only felt every six years and so some of these folks have not yet felt that wrath. Civil rights was held up exactly here.
E-mail or call if you have a Senator in this mess. I do and I intend to inundate her damned office--the other guy is a hopeless GOP hack who, thankfully, is retiring.
The Senate is where the problem is.
February 6, 2009 3:54 PM | Reply | Permalink
Everyone needs to read this then call your Senators. Keep trying. This is nuts. The GOP won't be happy until this country is totally destroyed.
February 6, 2009 3:56 PM | Reply | Permalink
Democrats need to state clearly that they are not going to take economics lessons from the people who got us into this mess.
February 6, 2009 4:08 PM | Reply | Permalink
I just faxed my new Dem Senator (Kay Hagan). My other Senator (Richard Burr) is a right-wing Repub stooge, so I'm not going to bother.
Here's the body of the fax I sent:
I call upon you to please vote AGAINST the Stimulus Bill cuts being proposed by Senators Collins and Nelson. They appear to be intent on cutting away some of the most cost-efficient and socially beneficial items in the stimulus package. There is no need to make such an egregious concession to the more conservative elements of the Republican caucus. You (Democratic Senators) have the power in this debate, and need to remind your Republican (and wavering Democratic) colleagues of that fact.
If cuts must be made to reduce the cost of the total package, it would be more appropriate to trim away some of the tax cuts currently in the bill. This bill needs to be kept strong in order to provide the stimulus needed to keep our economy from taking a fatal plunge.
I trust that you will fight for what is right in these negotiations. Thank you!
February 6, 2009 4:56 PM | Reply | Permalink
Good note. Good job.
February 6, 2009 5:37 PM | Reply | Permalink
Cut tax breaks? I thought Obama wanted tax breaks for 95% of the American people. I guess I am a little confused.??????
February 6, 2009 5:08 PM | Reply | Permalink
Right, because this bill is absolutely the one and only chance the 111th Congress will have to enact those tax cuts.
February 6, 2009 5:13 PM | Reply | Permalink
Obama's tax breaks are off the table. The ones he proposed during the campaign at least are. I remember Obama saying those were "sancrosanct".
February 6, 2009 5:44 PM | Reply | Permalink
Here's the switchboard numbers for the Senate and House:
All U.S. Senators can be reached by calling 202-224-3121.
The U.S. House switchboard number is 202-225-3121.
CALL THEM RELENTLESSLY!
February 6, 2009 5:23 PM | Reply | Permalink
Is the Earned Income Tax Credit off the table? It
better be.
February 6, 2009 5:31 PM | Reply | Permalink
Georgia Dems/Progressives...call Senator Isakson and ask him to support the stimulus bill.
I just received an e-mail from his office which said: "I have not made a decision regarding my vote on the overall economic stimulus legislation. However, I believe there need to be major changes to the Senate bill. At this point, there is still too much funding for programs that should not be categorized as stimulus and will not do anything to help our economy."
Stop what you're doing (reading these comments), and call his office now! 202-224-3121.
February 6, 2009 5:42 PM | Reply | Permalink
Could we resolve to stop calling the Benedict Arnolds "centrists"? Could we remember that it is not the left, it is not the base, it is not the netroots, that is destroying any chance our party has to advance its agenda?
February 6, 2009 5:48 PM | Reply | Permalink
Obama wants this passed really bad...Who has threatened him so he wants to move so quickly. Could he be trying to pay up for all the contributions that was made for his campaign? For one that wants it NOW seems like something could happen to the dream if Obama doesn't get it soon. Someone gonna tell something if he don't get the bill passed now? I mean they all say no time to look and find a better package bill. Seems fishy to me. No to this vote for the stimulus. Don't do it Democrats or Republicans..Don't vote for it..
February 6, 2009 9:42 PM | Reply | Permalink
"talk to me like a sixth grader." city slickers
for every $1.00 spent on food stamps = $1.73 in economic stimulus
for every $1.00 spent on infrastructure = $1.54 in economic stimulus
for every $1.00 spent on tax cuts - $1.02 in economic stimulus.
the foundation of our economy is jobs. no tax cuts that do not produce jobs. only stimulus that produces jobs. no more/no less.
February 6, 2009 9:55 PM | Reply | Permalink
Best reply I've seen here, Factor. Here's my thoughts for what they're worth. This shouldn't be about Democrats & Republicans. It should be about what that bill actually includes, how much is allotted for each, and whether it will actually help pull us out of this recession. Secondly, the members of Congress (whether they be democrat or republican) are supposed to be there to represent us, the people of their respective states, not how good or bad it makes the president look. Nor are they there to babysit and sponsor big corporations. And it is not about name calling, so why don't all of you who that applies to just stop it. That is childish at best. GROW UP!!! I'm sure glad you all aren/t up there in those government seats--we'd be worse off than we already are.
February 6, 2009 10:05 PM | Reply | Permalink
Don't the Dems realize that they will be blamed if the stimulus package fails, no matter what is in it?
If they understood this, they would call the Republicans' (and the Blue Dogs')bluff, and work on a vote for the bill Obama wants. By watering the spending down, they aren't getting what they want, and they'll still take the fall.
Morons.
February 6, 2009 10:48 PM | Reply | Permalink
President Obama has started to play the "catastrophe" card to sell his economic stimulus plan, using yesterday's terrible January jobs report to predict doom unless Congress acts. No doubt he'll get his way, but the tragedy of this first great effort of the Obama Presidency is what a lost opportunity it is.
Everyone agrees that some kind of fiscal stimulus might help the economy, and that running budget deficits is appropriate in a recession. The stage was thus set for the popular President to forge a bipartisan consensus that combined ideas from both parties. A major cut in the corporate tax favored by Republicans could have been added to Democratic public works spending for a quick political triumph that might have done at least some economic good.
Instead, Mr. Obama chose to let House Democrats write the bill, and they did what comes naturally: They cleaned out their intellectual cupboards and wrote a bill that is 90% social policy, and 10% economic policy. (See here for a case study.) It is designed to support incomes with transfer payments, rather than grow incomes through job creation.
This is the reason the bill has run into political trouble, despite a new President with 65% job approval. The 11 Democrats who opposed it in the House didn't do so because they want to hand Mr. Obama a defeat. The same is true of the Senate moderates of both parties working to trim their $900 billion version. They've acted because they can't justify a vote for so much spending for so little economic effect. You know a piece of legislation is in trouble when even its authors begin to deny paternity, as economist Martin Feldstein has recently done.
Speaking to a House Democratic retreat on Thursday night, Mr. Obama took on those critics. "So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? (Laughter and applause.) That's the whole point. No, seriously. (Laughter.) That's the point. (Applause.)"
So there it is: Mr. Obama is now endorsing a sort of reductionist Keynesianism that argues that any government spending is an economic stimulus. This is so manifestly false that we doubt Mr. Obama really believes it. He has to know that it matters what the government spends the money on, as well as how it is financed. A dollar doled out in jobless benefits may well be spent by the worker who receives it. That $1 of spending will count as economic activity and add to GDP.
But that same dollar can't be conjured out of thin air. The government has to take that dollar away from someone else -- either in higher taxes, or by issuing new debt in the form of a bond. The person who is taxed or buys the bond will have $1 less to spend. If the beneficiary of that $1 spends it on something less productive than the taxed American or the lender would have, then the net impact on growth will be negative.
Some Democrats claim these transfer payments are stimulating because they go mainly to poor people, who immediately spend the money. Tax cuts for business or for incomes across the board won't work, they add, because those tax cuts go disproportionately to "the rich," who will save the money. But a saved $1 doesn't vanish from the economy, unless it is stuffed into a mattress. It enters the financial system, where it is lent to others; or it is invested in the stock market as capital for businesses; or it is invested in entirely new businesses, which are the real drivers of job creation and prosperity.
At the current moment, amid a capital strike, the latter is the kind of fiscal stimulus we really need. Yet there is virtually none of it in the bills now moving through Congress. Senate moderates may succeed in cutting $100 billion or so in spending from the bill, which is political window dressing. Even they aren't talking about adding the kind of tax cuts that would really help the economy now.
We should add how different this is from the 1980s or even the 1960s. Democrats added business tax cuts to the Reagan package of 1981, while Jack Kennedy's chief economist (Walter Heller) promoted marginal rate tax cuts on stimulus grounds in the 1960s. Yet Mr. Obama, on Thursday, dismissed any such tax cuts as "the same tired arguments and worn ideas that helped to create this crisis." That's rhetoric for a campaign, not for a President hoping to rally bipartisan support.
The biggest gamble with this stimulus is what it means if the economy doesn't recover. Monetary policy is already as stimulative as it can safely get, and the Obama Administration is set to announce its big financial fix on Monday. Stocks rallied Friday on expectations of the latter, despite the job loss report, with big bank stocks leading the way. If done right, this will help reduce risk aversion and gradually restore financial confidence.
We hope it does, because the size and waste of the stimulus means we won't have much ammunition left. The spending will take the U.S. budget deficit up to some 12% of GDP, about double the peak of the 1980s and into uncharted territory. The tragedy of the Obama stimulus is that we are getting so little for all that money.
February 7, 2009 10:42 AM | Reply | Permalink