Under current U.S. tax law, corporations are allowed to defer paying taxes on their overseas profits, resulting in lost revenue for the federal government of up to $10 billion per year. President Obama has proposed doing away with this policy, somewhat, by restricting the use of tax credits until corporations bring those overseas profits back to the U.S. and pay taxes on them.

However, a slew of corporations have, for years, been pushing for the U.S. to adopt what’s known as a “territorial” system for corporate taxation instead. Under such a system, U.S. corporations would never have to pay taxes on profits earned overseas. House Republicans have embraced the idea, as did Mitt Romney during his unsuccessful presidential campaign.

But the Congressional Budget Office is out with a new warning about adopting such a system:

Alternatively, the United States could move toward a territorial system—for example, by exempting some income earned abroad from U.S. taxation or by taxing domestic income only but using a formula that considered the location of a company’s activities to determine the sources of its income. Such policies could result in a less efficient allocation of resources among countries by increasing incentives to shift business operations and reported income to countries with lower tax rates.

While it, too, has its problems, “eliminating deferral entirely would boost U.S. tax revenues by more than $100 billion over a 10-year period.”

As the Center for American Progress’ Seth Hanlon noted, “Deferral provides tax incentives for overseas investments. In fact, it encourages U.S. companies to make job-creating investments off shore even if similar investments in the United States (absent tax considerations) would be more profitable.” Economist Martin Sullivan wrote that “U.S. tax law provides a large tax advantage for building and moving factories to low-tax countries.” And adopting the GOP’s desired shift to a territorial system would make the problem worse.

Secretary of Labor Hilda Solis, the first Latina to lead a federal agency, is resigning. In a statement announcing her resignation, Solis touted her agency’s work overseeing the federal stimulus plan, worker training programs, and other employment initiatives during her four years in office. “Over the last four years, Secretary Solis has been a critical member of my economic team as we have worked to recover from the worst economic downturn since the Great Depression and strengthen the economy for the middle class,” President Obama said in a statement.

AFL-CIO president Richard Trumka also praised Solis. “[Solis] brought urgently needed change to the Department of Labor, putting the U.S. government firmly on the side of working families,” Trumka said in a statement. “We hope that her successor will continue to be a powerful voice both within the Obama administration and across the country for all of America’s workers.”

With Congressional Republicans once again threatening to take the nation’s debt limit hostage for spending cuts, economic circles have been abuzz with the possibility that a standoff could be averted via use of a $1 trillion platinum coin. An obscure law, read literally, gives the Treasury Secretary the ability to mint platinum coins of any denomination. Deposited with the Federal Reserve, such a coin would give the federal government the ability to make payments without needing to issue more debt, defusing the possibility of a default due to the debt ceiling.

The idea has won the endorsement of Nobel Prize winning economist Paul Krugman, a former head of the U.S. Mint, and Harvard Law School Professor Laurence Tribe. “Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely,” Krugman wrote.

Today, NBC’s Chuck Todd asked White House Press Secretary Jay Carney if the administration had ruled out using the platinum coin option. Carney refused to disavow the idea, instead reiterating that Congressional Republicans should simply raise the debt ceiling:

TODD: Do you guys have a position on this trillion dollar business?

CARNEY: Uh, I would simply go back to what I’ve said. The option here is for Congress to do its job and pay its bills, bills that have already been racked up. [...]

TODD: On the 14th amendment you flatly said you believe you do not have the power under the 14th Amendment. Do you believe you have this power to mint a trillion dollar coin?

CARNEY: There is no Plan B. There is no backup plan. There is Congress’s responsibility to pay the bills of the United States. This is not about future spending. We will have that debate and continue to have the debate about the budgets that we design and the path forward in the deficit reduction. And the president’s principles in this matter are very clear. You know, there is no alternative to Congress raising the debt ceiling. It’s its responsibility. Congress has to pay the bills of the United States. That is an obligation that they assigned to themselves.

TODD: You’re a little evasive in your answer. Are you trying to leave room or not leave room?

CARNEY: There is no substitute for Congress extending the borrowing authority of the United States.

Watch it:

There are several economic arguments made against using the coin, but as Business Insider’s Joe Wisenthal noted, none of them really hold water.

The coin doesn’t allow for new spending; it simply would ensure that America continues to pay bills that Congress has already run up. (The Federal Reserve would also sell bonds in order to prevent inflation.) And with Congressional Republicans threatening to push the country into a default in order to get their way on the budget, it seems that the White House is, for the moment at least, unwilling to take its own last resort off the table, silly as it may sound.

President Obama will nominate his chief of staff and former director of the Office of Management and Budget, Jacob “Jack” Lew, as the next Treasury Secretary, Bloomberg reported today. Lew, who served at OMB during fierce negotiations over government shutdowns and the debt ceiling during Obama’s first term, will succeed outgoing Treasury Sec. Tim Geithner. He will inherit the department at a time when debates about the budget and debt ceiling are again raging.

Lew got his start in politics as a 12-year-old working for antiwar presidential candidate Eugene McCarthy, worked under former Sen. Paul Wellstone (D) as a professor at Carleton College, was an aide for progressive Rep. Bella Abzug (D) in New York, advised former Speaker of the House Tip O’Neill (D) in the 1980s, and has held numerous positions in both the Clinton and Obama administrations. Here is a breakdown of where he stands on the issues of the day:

Budget and Spending: Lew is known as a sharp budget negotiator, and he is largely credited with crafting the deal that averted a government shutdown in the spring of 2011. That deal hoodwinked Republicans into thinking they had brokered $100 billion in spending cuts, but Lew structured it so that most of the cuts were to money that wasn’t ever going to be spent anyway. The result: real spending cuts were only about $30 billion. Lew also helped build Obama’s American Jobs Act proposal, and he was an ardent critic of Republicans during and after the debt ceiling debacle last year, saying they were “willing to provoke a crisis” to get spending cuts.

Taxes: Lew drafted the proposal to pay for the American Jobs Act in part with increased taxes on the wealthy, and he was part of Obama’s team that dealt with negotiations over allowing the high-income Bush tax cuts to expire at both the end of 2010 and 2011. Defending Obama’s 2013 budget, which featured $1.3 trillion in tax increases, he said the increases hit people who “don’t need” tax cuts and are going to “have to pay their fair share.” He angered Republicans by calling for tax increases during the 2011 debt ceiling fight, an important note, since Obama is insisting on further tax increases as part of any deficit deal this spring.

Entitlements: Lew’s record on entitlements is mixed. He’s known as a fierce defender of safety net programs, especially Medicaid, and the New York Times reported that he “morphs into a warrior” while defending them in budget negotiations. When he drew up the plan that snookered Republicans on spending cuts, many of the programs he protected were those that benefit low-income Americans. But he also worked on former Speaker Tip O’Neill’s (D) staff when Democrats agreed to raise the Social Security retirement age in the 1980s, and he has supported similar changes to Medicare (he and Geithner were known as chief proponents of raising the Medicare eligibility age as part of negotiations).

Financial Regulation: Lew, a former Citigroup banker, has often cited his inexperience and lack of expertise when asked about financial regulations. Pressed by Sen. Bernie Sanders (I-VT), he testified that he did not “believe that deregulation was the proximate cause” of the financial crisis, though he said he “would defer to others who are more expert about the industry to try and parse it better than that.” An anonymous banker has said Wall Street would be “just fine” with Lew’s appointment. And though Lew has Wall Street experience — he worked for a unit that profited from subprime mortgages — he may not be cut from the same inside-Wall Street cloth as Geithner. The New Republic’s Noam Scheiber reported that Lew “never really took” to Wall Street. “He just wasn’t especially interested in being a banker or in the work bankers did,” Scheiber wrote. Geithner, who joined the administration straight from his work inside the financial crisis, was a fierce proponent of the Dodd-Frank Wall Street Reform Act. Where Lew will stand on those issues remains to be seen.

Assuming Lew is confirmed as the new Treasury Secretary, he will also get the privilege of having his incredibly illegible signature on every piece of printed currency, unless, like Geithner, he is forced to change it to something people can actually read.

Smart Growth America released a new report yesterday — first picked up by Grist — that highlights the way federal housing policy is grossly tilted to the benefit of the well-off.

Between loans, tax expenditures, and subsidies, the federal government spent approximately $2.23 trillion on housing from 2007 to 2011. Most of that was in the form of loan programs for single-family homes and tax expenditures aimed at home ownership, even though low-income Americans are far more likely to live in small, multi-family buildings and to rent, and are far less able to take advantage of tax expenditures and a complex tax code. Adding up both direct spending and tax subsidies, Smart Growth America concluded that households making over $200,000 a year receive far more housing support from the federal government than any other income group:

This lines up with a similar study from the Center on Budget and Policy Priorities, which found that over half of all federal housing spending and tax expenditures benefited households making over $100,000 in 2010.

The study did not cover the involvement of GSEs Fannie Mae and Freddie Mack in the housing market, as these are quasi-government agencies taken into conservatorship by the federal government. But the loan support they provide is also skewed towards single-family properties.

The CBPP has also found that the number of low-income families paying over half their income in rent while receiving no rental assistance hit 7 million in 2011 — an increase of 42 percent since 2001. Low-income families are also far more likely to rent than to own a home, and 35 percent of all U.S. households are renters.

The programs most directly aimed at low-income Americans are the various rental assistance grants and credit subsidies run mainly the Department of Housing and Urban Development. These totaled a mere $187 billion over the 2007 to 2011 period covered by Smart Growth America’s study. And due to funding limitations, these programs have not kept up with the growth in families struggling to pay rent.

Virginia Gov. Bob McDonnell (R), seeking to address a looming shortfall in his state’s transportation funds, has proposed a plan to boost transportation funding by repealing the state’s gas tax and replacing it with increased sales taxes and a surcharge on alternative-fuel vehicles, the Washington Post reports:

Gov. Robert F. McDonnell proposed Tuesday an ambitious overhaul of how Virginia pays for roads, rail and transit, including eliminating the gas tax and replacing it with an increase in the sales tax.

The overall plan, which would raise an estimated $3.1 billion over five years, also would increase vehicle-registration fees and add an annual $100 charge for drivers of alternative-fuel cars. McDonnell’s proposal calls for a increase in the state’s sales tax from 5 percent to 5.8 percent and projects using $1 billion in Internet sales tax revenue from legislation pending in Congress.

While McDonnell’s plan would raise revenues, it would do so in an assortment of wrong-headed ways. It would shift more of the tax burden to low-income Virginians, since sales taxes are inherently regressive (low- and middle-income earners spend a larger portion of their incomes than do the wealthy). The sales tax would still exempt gasoline while being applied to groceries. And McDonnell can’t count internet sales tax as a definite, since it’s still unclear whether that authority will be granted by Congress.

The shift would also mean that visitors who stop to fill up their gas tanks in the state would still get the benefit of using the roads without paying taxes that support them. It also incentivizes the highway system, a perverse goal considering the bulk of the state’s transportation costs come from Northern Virginia, where there is already a public transportation system that would better serve Virginians if it was made even more robust. And it shifts costs to walkers, bikers, and public transportation users, who would be just as responsible for paying for roads as drivers.

If McDonnell is already willing to abandon his no-tax pledge to fund transportation, there are better ways to do it. He could raise the gas tax, which is currently bringing in less money per gallon of gas than at any time in its history. Or he could close corporate tax loopholes, which drain $12.5 billion a year — four times the amount of revenue his plan raises — from the state’s coffers.

Sen. Lindsey Graham (R-SC) has made it quite clear that he intends to use the debt ceiling — which needs to be raised in the next few months — to extract cuts to popular programs like Social Security and Medicare. “I’m not going to raise the debt ceiling unless we get serious about keeping the country from becoming Greece, saving Social Security and Medicare,” he said.

Graham clearly does not understand the nation’s finances, because the Greece comparison makes no sense. And it’s questionable whether he understands the debt ceiling, as yesterday he tweeted:

President Obama will NOT get a blank check to raise the debt ceiling.

— Lindsey Graham (@GrahamBlog) January 8, 2013

Raising the debt ceiling does not give the President authority to do anything except pay the bills that Congress has already accrued. And once upon a time, Graham understood the consequences of not increasing the debt limit, as he told CNN’s Wolf Blitzer last year that allowing the government to default on its obligations would mean “financial collapse and calamity“:

BLITZER: How realistic are those conditions? Because you know what’s involved if the U.S. creditworthiness is evaporated.

GRAHAM: Let me tell you what’s involved if we don’t lift the debt ceiling: financial collapse and calamity throughout the world. That’s not lost upon me.

Watch it:

Speaker of the House John Boehner (R-OH) has also admitted that failing to raise the debt ceiling would cause a “financial disaster.” (HT: Morning Money)

Insurance giant AIG is considering suing the federal government over the “onerous” terms of its $182 billion federal bailout, even as it airs a slew of “Thank You America” ads supposedly expressing gratitude towards taxpayers. Former AIG chairman Maurice Greenberg is urging the company to join a lawsuit against the government, arguing that the company’s shareholders were “crushed” by the bailout.

The reaction amongst lawmakers and economic policy officials has been swift and, for the most part, incredulous:

– Sen. Elizabeth Warren (D-MA) said “It would be outrageous for this company to turn around and sue the federal government because they think the deal wasn’t generous enough… AIG should thank American taxpayers for their help, not bite the hand that fed them for helping them out in a crisis.”

– Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner are reportedly “furious” with the company.

– Rep. Maxine Waters (D-CA), the new ranking member of the House Financial Services Committee, said, “It is simply outrageous that the board of the American International Group, Inc. (AIG) would even consider suing the federal government after America’s taxpayers stepped up and bailed them out over their bad bets on mortgage-backed securities…I would urge the board to drop its consideration of the lawsuit, thank the American public for the $182 billion rescue package that prevented the company’s collapse, and support the reforms in the Dodd–Frank Wall Street Reform and Consumer Protection Act.”

– Reps. Michael Capuano (D-MA) and Peter Welch (D-VT) wrote in a letter, “AIG became the poster company for Wall Street greed, fiscal mismanagement, and executive bonuses — the taxpayer and economy be damned. Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah.”

– Former TARP Inspector General Neil Barofsky characterized the move as “the equivalent of a giant middle finger” to U.S. taxpayers.

AIG’s argument is that shareholders were unfairly hurt by the bailout, but a complete AIG bankruptcy likely would have been far worse for them. As ThinkProgress’ Ian Millhiser noted, “at the time when the federal government took a supermajority interest in AIG, the fair market value for this interest was only slightly north of zero. Rather than receiving zero dollars for AIG’s mix of toxic sludge, however, AIG received tens of billions of dollars from the American people.”