Our guest blogger is Seth Hanlon, Director of Fiscal Reform at the Center for American Progress Action Fund.
Earlier today ThinkProgress reported that the House Ways and Means Committee is expected to approve a proposal by House Majority Leader Eric Cantor (R-VA) that is misleadingly entitled the Small Business Tax Cut Act.
The Tax Policy Center has now estimated who benefits from Cantor’s bill. Among TPC’s findings:
– The top 1 percent would receive an average tax cut that is 1000 times bigger than the average tax cut for people in the middle quintile ($23 vs. $23,000). The top 0.1 percent would receive an average tax cut of more than $130,000.
– Half of the tax benefits would go to millionaires, who comprise less than one-half of one percent of all taxpayers and only 4 percent of actual small business owners according to a recent Treasury study. Millionaires, on average, would get a tax cut of $45,000 — almost as much as median household income in 2010.
– Business owners with annual income of $200,000 or less — who comprise more than 75 percent of small business owners — would receive only 16 percent of the benefit from Cantor’s bill.
The Cantor bill would cost $46 billion and is not paid for. More debt-financed tax cuts for the rich: haven’t we tried that before?
Our guest blogger is John Griffith, a policy analyst with the economic policy team at the Center for American Progress Action Fund.
Conservativesfor years have pushed a flawed and largely-debunked narrativeabout the origins of the financial crisis. They claim that misguided government housing policies forced Fannie Mae, Freddie Mac (the GSE’s), and other financial institutions to take on unprecedented levels of risk, creating a bubble and bust in the subprime housing market that sparked financial catastrophe.
To test that theory — which New York Times columnist Joe Nocera dubbed the “Big Lie” — the Federal Reserve Bank of St. Louis recently investigated whether affordable housing policies had any influence on the price or proliferation of subprime mortgages in the mid-2000s. Spoiler alert — they didn’t:
We find no evidence that lenders increased subprime originations or altered pricing around the discrete eligibility cutoffs for the Government Sponsored Enterprises (GSEs) affordable housing goals or the Community Reinvestment Act. Our results indicate that the extensive purchases of risky private-label mortgage-backed securities by the GSEs were not due to affordable housing mandates.
The study analyzed loan- and neighborhood-level data in California and Florida. It found no statistical relationship between the two federal housing policies — which have been the central focus of conservative attacks in recent years — and the price or availability of subprime loans, even after controlling for the loan size, loan type, borrower characteristics, and other factors.
Here’s what really happened. During the housing bubble of the mid-2000s, over-leveraged shadow banks packaged risky subprime mortgage loans into securities and passed them along to consumers that were often unaware or misinformed of the underlying risks. It was the poor performance of these private-label securities — not those issued by Fannie and Freddie — that led to the financial meltdown, according to the bipartisan Financial Crisis Inquiry Commission.
More than seventy retired military officers wrote a letter to Congress urging that the body not cut the budget for non-military means of executing U.S. foreign policy. The letter, written under the auspices of the U.S. Global Leadership Coalition’s (USGLC) national security advisory group, spoke out against “disproportionate cuts” that would cut civilian programs while boosting military spending, calling on Congress to ensure that “civilian programs have the resources needed to maintain the hard-fought gains of our military.”
The letter (PDF) defending the so-called international affairs budget that covers non-military spending went on:
Development and diplomacy keep us safer by addressing threats in the most dangerous corners of the world and by preventing conflicts before they occur. The State Department, the U.S. Agency for International Development and other civilian-led programs are especially critical at a time when we are asking them to take on greater responsibilities in Iraq and Afghanistan. Addressing today’s challenges with civilian tools costs far less than it does to send in the military in dollars and, more importantly, in terms of the risks to the lives of our men and women in uniform. At just over one percent of federal spending, the International Affairs Budget is a strong return on our investment.
The letter comes just a week after Republican Representative Paul Ryan (R-WI) released a budget that called for the international affairs spending to be slashed by 11 percent, or $6 billion, while boosting military spending by at least $8 billion. Ryan’s budget document took shots at the administration, noting in one section that Obama “has chosen to subordinate national security strategy to his other spending priorities.” Speaking to U.S. News and World Report, Russell Rumbaugh, a former senior Senate Budget Committee aide now with the Stimson Center, said:
This reflects more an ideological statement than any real discussion about what the international budget levels should be.
An Iraq and Afghanistan war veteran summed up the Republican plan: “They cut every tool in the president’s toolbox that isn’t a gun,” said Michael Breen, who works with the Truman National Security Project, recounting how it was a foreign language-enabled diplomat — not their own weapons — that once helped him and fellow soliders get out a jam.
The ostensible aspirations of the Ryan plan, meanwhile, are shared by the USGLC letter signatories, who wrote that they “recognize that we must reduce our nation’s debt.” Yet, with non-military spending such a relatively small piece of the pie and capable of a “strong return” on the investment, the ex-military leaders urged Congress to “support a strong and effective International Affairs Budget and oppose disproportionate cuts to this vital account.”
During an interview with The Today Show’s Matt Lauer that aired this morning, Speaker of the House John Boehner (R-OH) admitted that the economy is improving, though he went to great lengths to argue that the economic policies of the Obama administration have held it back from recovering even more:
LAUER: You talk about the economy. Is it recovering?
BOEHNER: It is. There are certainly signs of life. But I would argue that it should be doing a lot better. It’s doing better in spite of what Washington is doing to the economy.
LAUER: But it does put some Republicans in a difficult position. You’ve got better job numbers, you’ve got better manufacturing numbers, consumer debt is down, consumer confidence is up. Isn’t it hard to run against a recovering economy?
BOEHNER: But Matt, my point is it should be doing better.
A slew of Republicans, acknowledging that continuing to bash the economy in spite of the good news that keeps coming out may not be a workable strategy, have pivoted to claiming credit for the recovery. But thus far, Republican leaders like Boehner and House Majority Leader Eric Cantor have not followed suit. As we’ve noted, the employment picture would have been significantly better were it not for the Republican insistence on cutting federal spending and laying off hundreds of thousands of public employees.
The House Ways and Means Committee today marked up a bill sponsored by House Majority Leader Eric Cantor (R-VA) that purports to give small businesses a 20 percent tax cut in order to spur hiring. We’ve already noted that the bill’s overly expansive definition of small business means super profitable hedge funds and law firms that don’t need additional employees would still receive a huge tax break.
And the bill’s problems certainly don’t end there. As Citizens for Tax Justice noted today, Cantor’s bill will also give hugely profitable operations like Oprah Winfrey’s production company and professional sports teams a big tax break:
While the legislation caps the amount of the deduction (at half of non-employee payroll), there is no limitation on the type or amount of income that business can have. So highly profitable operations like Oprah Winfrey’s production company or the Trump Tower Sales & Leasing office would both qualify for the deduction simply because they have fewer than 500 employees on payroll.
Who else would qualify? Professional sports teams (including teams owned by Mitt Romney’s friends) with their multi-million-dollar salaries to non-owner players. So would private equity firms, hedge funds, and other “small businesses” with income in the millions, or even billions, of dollars, along with most of the top law and lobbying firms inside the Beltway and elsewhere.
Adding insult to injury, many truly small businesses won’t qualify for the tax break because the cut is only available to businesses whose employees are non-owners. So a family business in which all the family members share ownership will get nothing at all, while Oprah’s production company walks away with a tax cut
This bill, like so many put forth by the GOP, fundamentally misunderstands the problems facing actual small businesses, which is that there’s no demand in the economy for their goods or services. Businesses simply have no reason to expand without the reasonable expectation of more customers, and giving an already profitable firm a big tax break won’t entice them to act any differently. As the chief economist for the conservative National Federation of Independent Business explained, “if you give a small business guy $20,000 he’ll say, ‘I could buy a new delivery truck but I have nobody to deliver to.’”
Instead, the GOP is hoping once again that its tax cut snake oil will have some effect. But as a new study released yesterday shows, “there’s no there there” when it comes to tax cuts promoting economic growth.
Idaho Rep. Mike Simpson (R) is among the growing cadre of Republicans that has denounced Americans for Tax Reform President Grover Norquist and the GOP’s staunch anti-tax zealotry, as he says any serious budget plan should balance revenues and spending cuts. The current House GOP budget proposal, authored by Budget Committee Chairman Paul Ryan (R-WI), certainly doesn’t do that; instead, it cuts revenues to a level that would force draconian across-the-board spending reductions.
According to Politico, Simpson and other Republicans are “furious” with the direction Ryan’s budget takes in ignoring revenue. Simpson is so furious, in fact, that by the time the budget passes the House tomorrow, he will have voted for it twice:
It was Simpson’s vote that allowed Budget Committee Chairman Paul Ryan (R-Wis.) to get the resolution out of his committee last week — and Simpson will stand again with the leadership on the floor. But there’s no hiding the fact that he and many Republicans on the House Appropriations Committee are furious with the course taken in this budget and more willing to lend support to those who feel revenue must also be part of the equation.
“This is going to be the most partisan debate of the year and it will set up the election for the year,” Simpson said. “But I don’t think it’s the balanced plan to get us out of the hole we are in.”
Simpson is correct that Ryan’s budget isn’t “the balanced plan to get us out of the hole we are in.” Instead of raising revenue and reducing the debt, it gives each millionaire a $187,000 tax cut, cuts taxes for corporations, slashes programs for the poor and middle class, and makes the debt worse. But instead of taking a stand against the radical proposal, Simpson toed the party line and voted “yea” during a Budget Committee hearing last week. Ryan’s plan passed the committee by one vote, meaning it was the ever-so-furious Simpson who cast the deciding vote to send a plan he doesn’t like to the full House, where he’ll fall in line and vote for it all over again.
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.
European leaders are expressing more confidence that the Eurozone fiscal crisis is coming to an end. [Bloomberg]
Federal Reserve Chairman Ben Bernanke said yesterday that while the economy is improving, “We haven’t quite yet got to the point where we can be completely confident that we’re on a track to full recovery.” [Reuters]
House Republicans yesterday scrapped a vote to reauthorize the nation’s highway funding for the second day in a row; the funding expires in three days. [The Hill]
Freddie Mac and Fannie Mae may have to pay Michigan millions of dollars after a court ruled that the mortgage giants have dodged their taxes. [NPR]
The House yesterday approved the so-called JOBS Act, sending it to President Obama over the objections of those saying it will weaken key investor protections. [Washington Post]
How the foreclosure fraud settlement gives banks credits for routine actions that don’t help people keep their homes. [New York Times]
Treasury Secretary Tim Geithner yesterday urged conservatives in Congress not to cut U.S. support to the World Bank or International Monetary Fund. [AFP]
Austerity continues to pound Great Britain, where GDP shrank by more than expected in the last three months of 2011. [Reuters]
But South Carolina may take the cake in the quest for the most ridiculous perversion of the settlement, as its GOP-controlled state House voted to use the money for corporate tax incentives. The state’s Republican attorney general, Alan Wilson, would also like to spend the money on a slew of programs, including “to help pay for the state’s lawsuit to block the expansion of the Savannah River port in Georgia”:
South Carolina Attorney General Alan Wilson wants the state’s portion of a $25 billion mortgage fraud settlement to go to shelters for battered women and homeless military veterans, and to help pay for the state’s lawsuit to block the expansion of the Savannah River port in Georgia.
Last week, House Republicans voted to give South Carolina’s portion of the settlement – about $31 million – to the state Commerce Department to create incentives for companies to locate in the Palmetto State. Democrats vainly argued the money should be used to help people who have lost their homes to foreclosure.
Wilson, a Republican, told House Democrats Tuesday that while the settlement gives him “a lot of discretion” in how the money is spent, he thinks the state Legislature should decide.
Some of these suggestions — like shelters for women or aiding homeless veterans — are surely good ideas. But the foreclosure settlement money is simply not intended for them. And it certainly is not meant for states to throw tax incentives at corporations or to pay for lawsuits entirely unrelated to anything about housing.
State Rep. Gary Simrill (R), said that using the foreclosure fraud settlement on corporate tax incentives is legitimate because it “has an exponential impact … that it is going to bring in jobs.” “[Commerce Secretary Bobby Hitt] tells us he needs help. He needs to be able to bring the fish into the boat. We want jobs. We need jobs,” Simrill added. And evidently those in the state hoping for some housing help will just have to look elsewhere.
America’s unemployment rate has fallen a full percentage point in the last year on the back of strong private sector job growth. February marked the 24th consecutive month of private sector growth, with more than 240,000 jobs added. But the loss of jobs in the public sector continues to hold back the economy, as more than 600,000 federal, state, and local government employees have lost their jobs since President Obama took office.
And while Republicans are trying to credit their small government ideology with bolstering the current economic recovery, a new study from The Roosevelt Institute’s Mike Konczal and Bryce Covert found that those public sector losses have hit hardest and most often in states where Republicans took control of state legislatures during the 2010 mid-term elections. In 2011, newly-Republican states accounted for 40 percent of the public sector layoffs while cutting government jobs at rates that far outpace the national average:
The 11 states that the Republicans took over in 2010 laid off, on average, 2.5 percent of their government workforces in a single year. This is compared to the overall average of 0.5 percent for the rest of the states. [...] [T]hese 11 states as a whole account for a total of 87,000 jobs lost, reflecting around 40.5 percent of the total.
As the chart below (click to enlarge) shows, five of the seven states with the most public sector job losses in 2011 were states that came under Republican control in 2010.
Texas, which has long been controlled by Republicans, “also dropped 4 percent of its public sector workforce in 2011,” Konczal and Covert found. “Because of its size – it had 1,645,000 state and local workers at the end of 2010 – this is a loss of 68,000 jobs, or around an additional 31 percent of the public sector workforce.” Texas and the 11 newly-Republican states accounted for a total of 71.5 percent of the year’s public sector job losses, even though they account for less than one-third of the nation’s public sector workers.
Many government job losses were due, indeed, to the recession’s impact on state budgets. But in many of the newly-Republican states, the GOP made the problems worse. In Wisconsin, New Hampshire, and Maine, Republican-controlled legislators not only cut public sector jobs, they led assaults on public sector unions, targeting government workers under the guise of balancing their budgets. In those and others, Republicans exacerbated their states’ deficits with tax breaks for corporations and the wealthy, thus leading to even more public sector layoffs that didn’t take place in states that didn’t pursue similar policies.
Members of Congress who submitted comments advocating the weakening of the already watered-down Volcker Rule — which is meant to rein in banks’ risky trading — have received more than four times as much in campaign contributions from the financial sector as members who demanded stricter regulations, a report released today by Public Citizen reveals:
Those seeking to weaken the rule have received $66.7 million from the financial services industry since the 2010 election cycle compared to only $1.9 million in contributions received by those asking for a more robust rule. Those seeking to weaken the rule have received an average of $388,010 from the industry, more than four times as much as the average of $96,897 received by those asking for a stronger rule.
“Members of Congress should not serve as megaphones for industry’s claims,” said the report’s co-author, Negah Mouzoon, a researcher for Public Citizen’s Congress Watch division. “They should amplify the public’s call to prohibit banks from engaging in the same risky financial activities that contributed to the financial meltdown of 2008.”
The Securities and Exchange Commission received more than 18,000 comments before the public comment window for the Volcker rule closed on Feb. 13. Of the 20 separate letters submitted by U.S. legislators, 17 were signed by 172 members demanding changes that would weaken the rule, while just three letters signed by 20 members recommended steps to strengthen it.
The report’s findings come after a coordinated four-month lobbying blitz headed up by finance behemoths like Goldman Sachs, JPMorgan Chase, and Credit Suisse Group. And those lawmakers in favor of weakening the rule seem to have swallowed the financial industry’s doomsday predictions about its effect hook, line, and sinker. The banks’ general aim was to pressure federal agencies into delaying and weakening the Dodd-Frank Wall Street reform law, and on that score, their campaign was relatively successful, as lawmakers have signaled they are prepared to revise the rule.
Gov. Chris Christie (R-NJ), despite the budget woes faced by the Garden State, has seen fit to twice veto a millionaires tax passed by his state’s Democratic legislature. Christie, backed up by his chief economist, Charles Steindel, claims that enacting a millionaires tax would drive wealthy New Jerseyans out of the state. “Ladies and gentlemen, if you tax [millionaires], they will leave,” Christie says.
However, just a few months before joining the Christie administration, Steindel had a very different view, as Bloomberg News noted. In a report for the New York Federal Reserve, Steindel and his co-authors wrote that increasing taxes on high-income households was a good tool for balancing the state’s budget, as it has the advantage of placing the burden of deficit reduction on those who can afford it:
Another approach to closing sizable budget gaps like New York’s and New Jersey’s is to follow a policy rule of temporarily raising income taxes on high-income households during a downturn. The advantage of this approach is that it places a larger burden on households that are less liquidity-constrained than the average household during an economic decline (and less liquidity constrained than the state itself). Such a tax would be removed once the economy begins to improve. Edgerton, Haughwout, and Rosen (2004) point out that New York City has adopted this balancing strategy in the past, adding temporary surcharges to the top income tax bracket during downturns.
The report is careful to caveat that all the proposed approaches have drawbacks, but there is nothing resembling Steindel’s denunciationof a millionaire’s tax that he officially released one year later for the Christie administration. “I would assume [Steindel] had to take a special course at the University of Christie to reorient his economic thinking,” said state Senator Loretta Weinberg (D).
A study released last week by the Political Economy Research Institute at the University of Massachusetts found that contrary to conservative beliefs, millionaires don’t move to avoid higher taxes. “The evidence available in the research literature suggests that the worst fears of the policy debates over raising additional revenue from high-income households to sustain spending on public services are unlikely to materialize,” the study says. “They will not cease working, stop investing, or even move.” And once upon a time, Christie’s own economist seemed to believe that was the case, as well.
After contentious battles over emergency disaster relief funding in 2011, congressional Democrats and Republicans reached a bipartisan agreement during the August debt talks that would make it easier to fund disaster relief in the future. But that deal, like others reached under the Budget Control Act, would be voided by the House Republican budget, authored by House Budget Committee Chairman Paul Ryan (R-WI).
According to a legislative report on the House GOP’s budget, the disaster relief deal will not be recognized in the future should the budget take effect. Instead, emergency funds would have to be offset with other spending cuts, Politico reports:
“The budget assumes that any future disaster-relief-designated spending relief will be fully offset within the discretionary levels provided in this resolution,” the report reads. “Accordingly, the budget does not assume the extension of the disaster funding enacted last year and the upward adjustment of the BCA’s spending caps for subsequent years and it reflects the removal of this spending.”
Last year wasn’t the first time that House Republicans attempted to hold disaster relief hostage to extract spending cuts from programs they opposed. By rolling back the 2011 deal, they’re ensuring that if their budget passes, it won’t be the last time either.
With the economy continuing to improve and unemployment figures in decline, some Republicans are beginning to worry that hitting President Obama on bad fiscal policy is not a winning strategy. Instead, they argue, Republicans should take all the credit for any economic improvement that is underway.
“I believe that if anybody’s going to get a pat on the back for [lower] unemployment and the better economy, it’s House Republicans, and not the president and not the Senate,” said freshman Representative Jeff Landry (R-LA) during a panel of House conservatives at the Heritage Foundation last week.
Landry is not alone either. The Hill spoke with several Republicans who agree that they are the reason the economy has improved:
– “Under Republican control of the House, [the unemployment rate] has begun a gradual but steady decline, and now it’s still disappointing, but it’s at 8.3 percent, which is much better than under the Democrats,” [Idaho Republican Rep. Raul] Labrador said.
– “In many ways our greatest success is the things we’ve stopped,” said freshman Rep. David Schweikert (R-Ariz.).
– “If you make the assumption the economy is improving, I would say yes, we have had an effect,” [South Carolina Republican Rep. Jeff] Duncan said.
Rep. Landry may want to look at the facts before he rushes to take credit for the positive economic forecasts. Thanks to Republicans in the house, who have demanded deep cuts to federal programs in the name of deficit reduction, strong job growth in the private sector have been partially offset by steady job losses in the public sector.
According to a recent report, after Republicans brought the federal government to the brink of a complete shutdown last year by demanding draconian cuts to federal programs, a last-minute continuing resolution that introduced some of the Republicans’ cuts led to the loss of an estimated 370,000 jobs.
Republicans also sought to block the American Recovery and Reinvestment Act in 2009, which helped save or create millions of jobs. Not a single Republican in the House voted for the bill. Economists have noted that if Republicans in Congress had succeeded in blocking the stimulus, the unemployment rate would have hit 10.8 percent and a further 1.2 million jobs would have been lost.
Despite Landry’s embrace of revisionist history, party leadership has been reluctant to back down from their attacks on President Obama. Speaker John Boehner (R-OH) and Majority Whip Eric Cantor (R-VA) have continued to criticize the president for failing to do more to help improve the economy, noting at every opportunity that despite the declining unemployment rate it is still above eight percent, an important, if largely symbolic, benchmark.
The Congressional Progressive Caucus yesterday released its own budget — called The Budget for All — which lays out a very different path. Here are the highlights:
– Achieves lower deficits and debt than the House Republican budget, President Obama’s budget or current policy, reducing the debt-to-GDP ratio to 62 percent by 2022.
– Includes $2.9 trillion in job creation measures, including a public works program to hire two million Americans.
– Allows the Bush tax cuts to expire for the wealthiest two percent, phasing in increases in the 28 percent and 25 percent tax brackets over the next decade as well. The budget also introduces new tax brackets for the ultra-wealthy and taxes capital gains income at the same rates as wage income.
– Institutes a financial transactions tax and a big bank tax, raising nearly $1 trillion over the next decade.
– Ends emergency war funding in 2014, and eliminates several outdated and unnecessary weapons programs.
– Institutes a public health insurance option.
– Eliminates the payroll tax cap.
– Imposes a price on carbon, rebating some of the money to middle- and lower-income families.
“Republicans say we’re headed off a cliff because of spending. Well, our budget increases funding for job training, for education, for infrastructure, for low-income and veterans housing, and we chart a much more fiscally responsible path than the Republican scheme. It’s about more than numbers on a page to us – it’s about people,” said Progressive Caucus co-chair, Rep. Raul Grijalva (D-AZ).
Unlike the House Republican budget, the progressive caucus’ budget does not gut important safety net programs like food stamps or Pell Grants. It also shows that a fiscally responsible budget can be crafted that still maintains a focus on job creation and economic stimulus in the short-term. This is a serious effort to grapple with the economic troubles that the country is facing, and should receive treatment as serious as that given to Ryan’s budget, over which much ink has been spilled in the last week.
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.
House Republicans dropped plans to approve a short-term reauthorization of transportation funding; the current round of funding expires on March 31. [Washington Post]
For the first time, total U.S. exports to China have topped $100 billion. [Politico]
Stockton, California, may be headed for the biggest municipal bankruptcy in U.S. history. [Time]
Deutsche Bank has agreed to pay $32.5 million to settle claims that it lied about mortgage securities it sold. [Bloomberg]
Executives want the Federal Reserve to release all of its methodology for the stress tests that it performed on the nation’s biggest banks. [Wall Street Journal]
How debt collectors are profiting from the explosion in student loans. [Bloomberg]
A survey shows that eight in ten school districts say they are inadequately funded. [CNN Money]
The ultra-conservative Republican Study Committee will release its budget today. [The Hill]
Last week, telecom giant T-Mobile announced that it plans to close seven of its 24 U.S. call centers. About 3,300 employees work at those centers, and the company is planning to lay off at least 1,900 of them, while offering transfers to some (though it doesn’t yet know how many). Adding insult to injury, four of the centers that T-Mobile is closing received taxpayer subsidies worth millions of dollars, according to Good Jobs First:
– Frisco, TX: $3.7 million
– Brownsville, TX: $5.3 million
– Lenexa, KS: $3.9 million
– Redmond, OR: $1.3 million
These subsidies took several forms, including sales tax exemptions, salary supplements for workers, and job training money. “T-Mobile USA’s decision to close seven call centers, employing 3,300 workers, is a bad one. It harms workers and communities, and in several locations, abuses taxpayers who provided funds to the company in exchange for employment and economic development,” said the Communication Workers of America.
T-Mobile is certainly not the first corporation to receive subsidies and then cut a community loose. Mega-manufacturer Boeing took a heap of taxpayer money and received significant local help in winning a $35 billion contract before bailing on Wichita, Kansas. Sears will lay off 100 workers after receiving millions from Illinois (and can lay off another 1,750, thanks to the terrible terms to which Illinois agreed).
Fortunately, several of the subsidies received by T-Mobile came with clawback provisions, so officials in the states affected at least stand a chance of recouping some of the money they’ve lost. “The officials in those states should investigate the possibility of recapturing as much of those millions of dollars that were paid out as possible,” said Phillip Mattera, Research Director of Good Jobs First. “The taxpayers didn’t get all that they paid for. They lost those millions of dollars in revenues in the expectation that permanent jobs would be created.”
If the Mitt Romney of today debated himself from a few years ago, he would likely call himself a government-loving socialist.
In 2007, as he prepared his national presidential campaign, Romney explicitly supported 50-mile-per-gallon fuel efficiency standards, electric cars, government programs for new automotive technologies, and renewable energy to reduce the global warming “burden” of greenhouse gases:
We have to make our automobiles far more fuel efficient. I’d love to see we’re gonna get up to 50 miles per gallon. The time will come, people will look back and say, “You’re kidding me, cars back then only got 25 miles to the gallon? You’re kidding!” We can do much, much better than that and I believe that one of the ways we do that is having a joint public-private partnership to invest in new technology related to fuel efficiency as well as new sources of energy.
Today, after a few good shakes of his Etch A Sketch, Romney now calls fuel standards “disadvantageous for domestic manufacturers.” He must have forgotten that 90% of auto manufacturers operating in the U.S. — including Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo — all support aggressive fuel economy standards that will bring the nation’s auto fleet to 54.5 mpg by 2025.
A Romney speech released last week illustrates how dramatically the candidate’s stances on energy issues have changed in one election cycle. The audio, purportedly captured at a 2007 town hall event and released by BuzzFeed’s Andrew Kaczynski, offers a completely different picture of Romney’s energy policies.
(The opening question is a bit garbled, but Romney’s answer is much more clear.)
Rohrer also thinks the government should no longer provide federal services to the American people, a position he took a step farther Saturday at the Pennsylvania Leadership Conference. During a debate featuring the state’s Republican Senate candidates, Rohrer, the party’s front-runner, outlined a proposal to privatize Social Security and end the Supplemental Security Income (SSI) program, which provides aid to disabled Americans:
ROHRER: The structural aspect of the program that is in place, financially, if we don’t make changes, it will not be there for those who are coming up. So we’ve got to stop the cost increase, meaning we do it this way. We’ve got to take out the younger workers, maybe it’s an age of 50, maybe it’s as you say, 45, determine that age where those up to that point are not compelled to join Social Security. They’re allowed to go into a program like 401(k), have their own plan, and you obviously cut the cost on the outside.
But secondarily, we have to reduce the cost of Social Security now, otherwise we will not find us able to make payouts either. And that, I recommend, we do by bringing it back into line with what Social Security was acceptably set into place to be originally, and that’s as a retirement assistance program. Meaning we have to back off such things as disability — SSI payments — where we have many new people brought into the program. Many illegal aliens are receiving SSI payments. That is a part of the program that Social Security was never intended to fund, and that’s a part that we can logically back off, bring it back to its major core. I think we can preserve and extend the life of Social Security.
Privatizing Social Security, as Rohrer would like to do, would have had disastrous consequences for Americans during the Great Recession. According to a 2008 Center for American Progress analysis found that an October 2008 retiree would have lost $26,000 in a private Social Security account even before the market bottomed out in 2009. Given that two-thirds of senior citizens count on Social Security for more than half their monthly income, those kind of losses would dump millions into poverty.
Ending SSI and disability payments goes even farther. According to the Social Security Administration, more than 8.1 million Americans received SSI in January 2012, and nearly 1.3 million of the recipients were children. SSI’s support is modest — the average monthly payment in January was $517 — but important. A 2005 study by the Center on Budget and Policy Priorities found that SSI lifted 2.4 million Americans above the poverty line in 2003. And despite Rohrer’s claims that “illegal aliens” are benefiting from the program, SSI has far stricter requirements even for legal immigrants than most federal assistance programs.
Rohrer, meanwhile, ignored the easiest solution to Social Security’s long-term health. Lifting the payroll tax cap, which currently taxes all income below $106,800 for Social Security purposes, would ensure the program’s solvency for the next 75 years.
The other GOP candidates — Tom Smith, Steve Welch, and Marc Scaringi — all “said voters under either the age of 40 or 45 should have at least the option of replacing Social Security benefits with private investment accounts. They noted the severe fiscal problems facing the Social Security fund, and several called it insolvent.”
Federal Housing Finance Agency director Edward DeMarco has been facing significant pressure from progressives to allow Fannie Mae and Freddie Mac — the mortgage giants that the FHFA regulates — to reduce outstanding mortgage principal for troubled homeowners. This pressure only intensified following last week’s ProPublica story showing that principal reductions would save taxpayers money in the long run, undercutting a key argument DeMarco was using to block action.
In an interview with the Financial Times, Edward DeMarco, acting Federal Housing Finance Agency director, said policy makers who are pushing his agency to allow Fannie Mae and Freddie Mac to reduce borrowers’ mortgage balances, are deliberately shielding big banks from taking losses on distressed housing debt. [...]
Now, as the Obama administration, Congress and at the Federal Reserve call on Fannie Mae and Freddie Mac to write down the mortgages they own or guarantee, Mr DeMarco argues that such a move amounts to a transfer of US taxpayer wealth to the biggest US lenders, whose “second mortgages” are subordinate to the debt owned or guaranteed by Fannie Mae and Freddie Mac.
“If you do principal forgiveness, who is it benefiting?” Mr DeMarco asked. “Doing principal forgiveness is what would protect the big banks.”
DeMarco and Morgensen both point to people with “second liens” — second mortgages — on their homes as the hurdle to reducing principal. And yes, if principal were reduced on a loan with a second mortgage and the second mortgage were left entirely intact, a big bank could certainly profit.
But as Center for Economic and Policy Research Director Dean Baker noted, most loans held by Fannie and Freddie don’t have a second liens. So for those homeowners, this problem simply doesn’t exist and the rationale DeMarco is using for not helping them vanishes. And bank regulators have it in their power to fix the second lien problem too, if they so chose, rendering the entire argument moot.
As Reuters’ Felix Salmon added, if principal reductions would actually bail out banks, “then the largest banks would surely be pushing loudly for their implementation. But they’re not. Because the principle beneficiaries of principal reductions are not banks, but rather homeowners.” DeMarco is quickly running outof excuses for failing to provide aid to homeowners and it’s a shame that Morgensen aided him in his snow job.