During the 2011 debt ceiling debacle — when House Republicans threatened to push the country into default unless they received policy concessions — Sen. Pat Toomey (R-PA) attempted to fix the situation with the “Full Faith and Credit Act.” The bill would supposedly prevent default by prioritizing certain federal payments in the event that the debt limit was reached and borrowing shut off.
Now that Congress has to raise the debt ceiling again in the next few months, Toomey is back with his bill, as Slate’s Dave Weigel reported:
On Laura Ingraham’s show today, Toomey averred that “we have to raise the debt ceiling” as a “stop along this path” to fiscal sanity. And then he resurrected Full Faith and Credit.
“We should pass a bill out of the House,” he said, “saying there will be certain priorities attached to certain things, namely payment of debt services and payment of our military.”
As ThinkProgress explained at the time, Toomey’s plan is unworkable and doesn’t prevent the U.S. from defaulting on its obligations. These charts from the Bipartisan Policy Center show why. Once the debt ceiling has been breached and Treasury has exhausted the extraordinary measures at its disposal to avoid default, the government will be limited to only the revenue that comes in each day. BPC lays out what happens:
Toomey’s bill doesn’t fix this problem and doesn’t prevent the U.S. from stiffing someone who is legally owed money.
Although the Great Recession has taken an outsized toll on African-Americans and Hispanics, new research suggests that the economic downturn has forced Americans across all racial groups to equally cut back on their medical services.
After researchers at the University of Maryland analyzed more than 54,000 U.S. adults’ health care use, they found that — despite their assumptions that the demographic groups struggling the most as the result of the Great Recession would also struggle the most to access health care — the declining economy impacted all Americans’ ability to get the care they need. During the recession, the average number of doctor visits and prescription drug refills dropped about the same amount for whites, African-Americans, and Latinos. Visits to the emergency room were also essentially unchanged across all groups.
Of course, that doesn’t mean Americans across all racial and economic groups have equal access to health services. There were significant racial disparities in medical care before the Great Recession hit — for example, while whites visited the doctor an average of about 7 times a year around 2005, the average rate was closer to 5.75 for blacks and 4.5 for Latinos during that time period. African-Americans were, and still remain, more likely to be hospitalized than other groups. Earlier reports from the Census Bureau have found that 40 percent of the Americans living in poverty did not visit a doctor in 2010, and confirmed that Hispanics were the least likely group to make a trip to the doctor’s office that year.
But, as the lead researchers for the new study point out, at least the growing economic inequality between whites and racial minorities during the recent recession hasn’t widened the gulf when it comes to health care. “Although minorities bore the brunt of the recession in terms of losses in employment, income and insurance, our findings suggest that trends in [medical] use patterns were similar across race and ethnicity,” the study concludes.
Since passage of the deal to avert the so-called “fiscal cliff,” Congressional Republicans have attempted to portray it as the “last word” on taxes going forward. “The tax issue is behind us,” said Senate Minority Leader Mitch McConnell (R-KY).
Democrats, meanwhile, have said that any forthcoming budget deal should be composed of equal parts revenue and spending cuts. But even doing that would mean the bulk of deficit reduction will have been achieved through spending cuts, because, as the Center for American Progress’ Michael Linden and Michael Ettlinger show, three-quarters of deficit reduction since 2011 has been due to spending cuts:
Since the start of fiscal year 2011, President Barack Obama has signed into law approximately $2.4 trillion of deficit reduction for the years 2013 through 2022. Nearly three-quarters of that deficit reduction is in the form of spending cuts, while the remaining one-quarter comes from revenue increases. As a result of that deficit reduction, the projected rise in debt levels from today through 2022 has decreased by nearly 10 full percentage points of gross domestic product. In fact, under today’s policies, debt levels in 2022—as a share of GDP—will be only slightly higher than they are expected to be by the end of next year.
Goldman Sachs chief executive Lloyd Blankfein has said repeatedly that his bank would comply with the Volcker Rule, a new regulation from the Dodd-Frank Wall Street Reform Act meant to eliminate the most risky trades from banks that have the backing of the federal government and its taxpayers. Despite those promises, the bank has set up a secret fund that is still engaging in those trades, Bloomberg reports:
That may come as a surprise to people working in a secretive Goldman Sachs group called Multi-Strategy Investing, or MSI. It wagers about $1 billion of the New York-based firm’s own funds on the stocks and bonds of companies, including a mortgage servicer and a cement producer, according to interviews with more than 20 people who worked for and with the group, some as recently as last year. The unit, headed by two 1999 Princeton University classmates, has no clients, the people said.
Multiple sources Bloomberg cited referred to MSI as a “hedge fund,” the type of entity to which the Volcker Rule was meant to steer risky proprietary trading. But those funds, under the intent of the rule, were supposed to be independent from banks that have taxpayer backing. Goldman Sachs, an investment bank until the 2008 financial crisis, was classified as a bank holding company that year to give it access to the Federal Reserve’s emergency lending programs and federal government backing. Under the Volcker Rule, banks must give up such access, and the taxpayer backing that comes with it, to engage in prop trades.
Federal regulators yesterday announced an $8.5 billion settlement with 10 of the nation’s biggest banks over various foreclosure abuses. According to the Office of the Comptroller of the Currency, “The sum includes $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments.”
“I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered,” said Rep. Elijah E. Cummings, D.- Md., a member of the House Committee on Oversight and Government Reform and a vocal critical of the government regulators handling of the mortgage crisis.
Other housing and fair lending advocates agree. “For many people this will be the end of the line,” said Diane Thompson, an attorney with the National Consumer Law Center. “This is a much lower number for the banks compared to what they were at risk for.” “The regulators have decided to replace the fox in the henhouse with the wolf,” added John Taylor, president of the National Community Reinvestment Coalition.
“We commend regulators for their ongoing efforts to hold financial institutions accountable for misdeeds during the foreclosure crisis, but the payments in this settlement represent a mere fraction of the total harm inflicted on borrowers and communities,” said Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress. The last foreclosure settlement was gamed by the banks, who counted aid they were providing anyway towards their settlement total.
Unemployment in the Eurozone hit yet another record in November, clearing 11.8 percent, according to Eurostat. 18.8 million residents of the Eurozone are out of work, the most since the single currency was created in 1999. Across all of Europe, 26 million citizens are jobless.
As the Associated Press noted, “governments across Europe have introduced tough austerity measures, such as slashing spending and raising taxes. However, measures such as cutting wages and pensions hit the labor force in the pocket and reduce demand in the economy.” Austerity measures have also driven the U.K. to the brink of a triple-dip recession. And the U.S. is scheduled to enact an austerity package larger than that passed in many European countries, if spending cuts that are on the books actually take effect, as this chart shows:
The International Monetary Fund recently admitted that it vastly underestimated the detrimental effects austerity would have on world economies. Europe is providing a prime example of the consequences of that mistake.
The U.S. came out of its economic slump faster than Europe due, in part, to its embrace of stimulus over austerity. But recent budget deals have the potential to reverse those gains.
American International Group, the mega-insurer that nearly collapsed in 2008 before being bailed out, is now considering joining a lawsuit filed by its former chairman against the federal government. The lawsuit, filed in 2011 by former AIG chairman Maurice Greenberg, contends that the federal government violated the Fifth Amendment by taking too large a share in the company and charging it excessive interest rates on the $182 billion in loans it gave the company.
Greenberg, who led AIG for nearly four decades, says the deal crushed the company’s shareholders, and he will make the same case to AIG’s board of directors to urge them to join his lawsuit, the New York Times reports:
The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”
In recent weeks, AIG has run a series of ads on network and cable television across the country thanking American taxpayers for saving it. AIG repaid the $182 billion, and the government sold its last stake in the company in August. The ads tout AIG’s role in recoveries from natural disasters, including $144 million in insurance claims it paid after the Joplin, Missouri tornadoes and $2 billion in claims it expects to pay to Hurricane Sandy victims. It also boasts that it is the “lead insurer” of the new World Trade Center and that taxpayers turned a profit on the bailout:
AIG CEO Robert H. Benmosche accompanied the ads with a letter to the New York Times, in which he wrote, “It is a result of our employees’ determination to repay America that A.I.G. not only supports our customers and employees but also contributes directly to the financial stability of the United States. Thank you, America.”
While Greenberg says the bailout hurt shareholders, government officials that spoke to the Times anonymously said the shareholders would have fared worse going through bankruptcy. And though Greenberg is correct in his reading of the Fifth Amendment, which prohibits government seizure of private property without fair compensation, AIG’s stock price at the time of the bailout was “slightly north of zero.”
Welcome to ThinkProgress Economy’s morning link roundup. This is what we’re reading. Have you seen any interesting news? Let us know in the comments section. You can also follow ThinkProgress Economy on Twitter.
Eurozone unemployment hit yet another record high of 11.8 percent in November. [Financial Times]
President Obama is reportedly close to naming a replacement for outgoing Treasury Secretary Tim Geithner. [Bloomberg]
Bank of America has agreed to pay the federal government $11 billion to settle a dispute over bad mortgages. [New York Times]
State and local governments are expected to add employees this year, after slashing 500,000 positions over the last five years. [Bloomberg]
Landlords increased apartment rents in 2012 by the largest amount since 2007. [Wall Street Journal]
Japan’s government is set to unveil a new stimulus package for the country’s moribund economy. [Financial Times]
Some Congressional Democrats want President Obama to go to court against Republicans over the debt ceiling. [The Hill]