A lot of liberals don’t love Max Baucus. And, in fact, I don’t love Max Baucus. But I think liberals who are concerned about Baucus’ appointment to the “super committee” are barking up the wrong tree. After all, as Brian Beutler notes, Baucus served on the Simpson-Bowles Committee and ultimately voted against its recommendations on the grounds that they weren’t left-wing enough. Super committee Republicans, meanwhile, would regard Simpson-Bowles as outrageously socialistic. That means Baucus should be a reliable progressive vote for deadlock, as should Patty Murray (who’s chairing the DSCC) and John Kerry.
In general, people should remember that while an important cleavage exists between moderate and liberal Democrats about the desirability of cutting Social Security spending, there’s really very little disagreement about the core issue facing the super committee, which is whether Democrats should agree to far-reaching domestic cuts without any offsetting tax hikes. Baucus is firmly within the party mainstream in demanding balance.
This week, the U.S. Senate will debate and vote on how much to cripple the EPA’s efforts to protect civilization from global warming. The Republicans have attached the Upton-Inhofe bill to deny the existence of global warming pollution as a Sen. Mitch McConnell (R-KY) amendment (S. Amdt. 183) to Sen. Mary Landrieu’s (D-LA) unrelated small-business bill (S. 493). A Democratic amendment from Sen. Max Baucus (D-MT) would exempt the greenhouse pollution of industrial agriculture and other polluters (S. Amdt. 236). An amendment from Sen. Jay Rockefeller (D-WV) would prevent the EPA from enforcing rules for two more years (S. Amdt. 215). NRDC’s David Hawkins covers the Clean Air Act phobia well:
It’s a sad state of affairs when members on both sides of the aisle in Congress seem to think it is a good idea to attack the Clean Air Act – the landmark law that Richard Nixon signed and George H. W. Bush strengthened. Yet the hits on the Clean Air Act just keep on coming in this Congress in spite of the Act’s incredible record of cutting deaths and illness caused by air pollution – a record that has earned the strong support of the American people and the admiration of others around the world.
No amendments to force the EPA to take stronger action have been submitted. Rockefeller’s toxic amendment is cosponsored by Sens. Jim Webb (D-VA), Claire McCaskill (D-MO), Tim Johnson (D-SD), and Kent Conrad (D-ND). McConnell’s climate denial amendment is cosponsored by Sens. Joe Manchin (D-WV), Orrin Hatch (R-UT), Pat Toomey (R-PA), John Cornyn (R-TX), Mike Johanns (R-NE), Rob Portman (R-OH), and Johnny Isakson (R-GA).
The usual suspects are out en masse pounding the drums to demonize the EPA and at least implicitly deny the existence of global warming:
– The Koch brothers’ Americans For Prosperity attacks “higher energy costs and lost jobs that would result from the EPA distorting the Clean Air Act.”
– Rupert Murdoch’s Wall Street Journal: “the EPA plan will appreciably lower the U.S. standard of living.”
– The American Coalition for Clean Coal Electricity is running radio ads in Maine, Michigan, Missouri, Pennsylvania, and other states that dis the Clean Air Act as a “40-year-old law.”
– the National Association of Manufacturers is running radio and television ads in Arkansas, Maine, Michigan, Missouri, and Pennsylvania that attack “costly new regulations.”
The target senators are McCaskill, Sens. Olympia Snowe (R-ME) and Susan Collins (R-ME), Sen. Debbie Stabenow (D-MI) and Carl Levin (D-MI), Sen. Mark Pryor (D-AR), and Sen. Bob Casey (D-PA).
Call your Senators and ask them to vote against any legislation that would block the EPA from limiting greenhouse pollution: 202-224-3121
Senate Finance Committee Chairman Max Baucus (D-MT) has announced that he will introduce legislation to repeal the 1099 reporting requirement in the Affordable Care Act. The provision, which requires small businesses to report any purchases over $600, was intended to increase the tax compliance of sole proprietors, but has been condemned as overly burdensome by a bipartisan group of lawmakers — including President Obama, House Speaker Nancy Pelosi — and small business advocacy organizations like the National Federation of Independent Businesses (NFIB). The Congressional Budget Office (CBO) estimates that the requirement would generate $17 billion in revenue over 10 years.
“The proposal was originally written to keep taxes low by giving the IRS more tools to ensure all owed taxes were paid,” Baucus’ press release reads. “However, following passage of the law, some business owners expressed concern that when the provision does go into effect, the forms would place too large of a paperwork burden on businesses struggling in a still-recovering economy.” In response to those concerns, Baucus said he would “repeal the new reporting requirements and look for other ways to improve tax compliance and keep taxes low.”
Two previous efforts to repeal the measure failed in the Senate. Sen. Mike Johanns’ (R-NE) proposal would have repealed the tax reporting requirement for small businesses, but made up for the $17 billion revenue shortfall by eliminating $11 million from the Preventive Health Task Force and weakening the individual health insurance mandate. Sen. Bill Nelson’s (D-FL) alternative proposal would have required only larger businesses to report their transactions with vendors. Baucus’ office did not specify how the Senator would pay for the repeal or return requests for comment.
NFIB President Dan Danner praised Baucus’ announcement just minutes after it became public. “We are pleased Senator Baucus has announced his support for full repeal of the 1099 provision and are eager for him to formally introduce his bill when Congress returns,” Danner said in a statement. “The sooner Congress repeals this burdensome provision, the better.” Asked about the organization’s quick response, NFIB spokesperson Stephanie Cathcart told me the group has worked closely lawmakers on both sides of the aisle to build momentum to repeal the provision. She said NFIB did not help craft the Baucus’ particular repeal provision.
For repeal to succeed, Senators would have to waive the pay-go rules or find $17 billion in savings — a tall order given today’s partisan environment. Democratic have previously proposed paying for repeal with unspent stimulus funds (a bad idea), changing the inheritance tax (which is likely to get some GOP support) or levying a tax on carried interest.
Just days after HHS Secretary Kathleen Sebelius warned insurers against using the early benefits in the health care law to justify unreasonable premiums increases, Sens. Max Baucus (D-MT) and Jay Rockefeller (D-WV) have written to the CEOs of WellPoint, UnitedHealth Group, Aetna, Health Care Services Corp., and CIGNA, saying insurers are “mistaken” if they believe they can continue to blame double digit premium increases on reform.” “This level of misinformation is not acceptable,” the two write, pointing out that the early benefits should not increase costs by more than 2 percent on average:
And if an insurer thinks it can continue to impose double-digit premium increases, while providing fewer health benefits and enjoying record surpluses, it is again mistaken. There have been too many reports of insurance companies imposing insurance premiums increases at will with little oversight or public accountability. We are committed to ensuring that premium increases are fair and justified. [...]
We have and will continue to strongly encourage states and HHS to use their existing authority as well as the authority created under the Affordable Care Act to its fullest to ensure that premium increases across the country are justified and communications are honest. We will continue to work toward ensuring that the federal and state governments have the necessary resources and authority to review potentially unjustified premium increases and to hold insurance companies accountable.
Baucus and Rockefeller pledge that they “are committed to ensuring that consumers are treated fairly and will closely examine any potentially misleading communications to consumers,” but there is actually little the federal government can do — outside of publicly shaming insurers or passing a federal rate review law — to hold insurers accountable.
As Sebelius explained today, “it’s a real catch-22. The law assumes that states will regulate rates, that that’s the best marketplace. This is really a state-based bill…only if they abdicate that responsibility or say that they don’t want to participate do we have kind of the back-up responsibility.”
For ways the federal government can pressure states to hold down unreasonable rates, click here.
Glenn Greenwald notes the seediness of Liz Fowler going to the White House to help implement health care policy given that she used to be VP of WellPoint, and correctly points out that this hire is at odds with the administration’s promise to “close the revolving door.” But I wanted to pick up on another troubling aspect of this decision Greenwald mentions: the retroactive seal of approval this seems to grant to the approach taken by Fowler’s boss, Senator Max Baucus.
This is the same Max Baucus that openly admits he royally screwed up by dismissing the opinions of everyone to his left. The same Max Baucus that Rahm Emanuel had to supposedly secretly plot to undermine in order to keep the White House’s options open. It’s no surprise that when Dana Goldstein outlines the “10 Biggest Health-Care Mistakes,” fully half of them are directly or indirectly related to Baucus’ “Gang of Six” thumb-twiddling. Of course, for all the wasted time he got nothing.
The kicker, though, is that when Speaker Pelosi announced that she would include reconciliation instructions as part of the House health care effort, Baucus was condescendingly dismissive:
“The fact of the matter is that I don’t think the House is really thinking through the affect that reconciliation is going to have on the end game,” Baucus said. “And the end game is much more in jeopardy under reconciliation.”
Whoops. It turns out that because of Baucus’ inexplicable something-for-nothing delays which led to the loss of the filibuster-proof majority before the Senate could act, health care reform would not have passed without reconciliation. There aren’t a shortage of people who would like to work for Barack Obama, so when someone is offered a job to implement White House policy, one can assume that the White House thinks that he or she is the best person for the job. Ironically, Fowler is getting a job that wouldn’t exist at all had Baucus’ view of the matter won the day.
After it became clear that Baucus’ strategy was a failure, Ezra Klein wrote, “Conceding so much in return for so little isn’t just bad politics — it’s bad precedent. Why should Republicans sign onto Baucus’s proposals in the future if they can simply adjust the bill to their liking and then withhold their support at the end?” Indeed. And why should Democrats in Congress continue to fight hard for White House priorities in the future if the White House signals that the model for good health care legislating is best represented by Max Baucus and his staff?
Sens. Max Baucus (D-MT) and Chuck Grassley (R-IA), and OMB Director Peter Orszag
Last year, the House of Representatives adopted a change (included in the Obama administration’s budget) that ends an inequity in the tax code enabling hedge fund and private equity managers to pay lower taxes on their income. Right now, the percentage of a fund’s proceeds that investors pay to the manager — called the “carried interest” — gets taxed as if it’s capital gains (at a 15 percent rate, instead of 35 percent), even though the manager doesn’t have any money at risk. It’s as if we treated movie proceeds given to a film’s lead actor as investment income.
However, Congress has a bunch of very popular business tax credits that it would like to extend, but the extensions need to be paid for, so the carried interest break is looking more likely to disappear. Senate Finance Committee Chairman Max Baucus (D-MT) said this week that there’s “a growing sense of inevitability” about the tax hike occurring, despite heavy lobbying from the financial services industry.
Office of Management and Budget Director Peter Orszag agreed yesterday, predicting that “you’re going to see a change in the taxation of carried interest pass the Senate within the next few weeks.” Orszag then took on the common conservative canard that the tax increase would stifle investment:
Mr. Orszag argued that Wall Street would adjust to a higher tax rate on carried interest, saying he was “unaware of any credible evidence that there would be any significant adverse effect from the increase in taxes”…Mr. Orszag asserted that past tax increases — from those on dividends, capital gains and the marginal income tax rates — did not lead to a big dip in investment and that changes in the tax treatment of carried interest would most likely have a negligible impact on investing.
Hedge fund managers make hundreds of millions of dollars (and often billions) annually. Does anyone really think they will suddenly slam on the brakes if they have to pay the same tax rate as the janitors who clean their offices?
The preferential treatment of carried interest is a bizarre fault in the tax code that only persists because of the power of the financial services industry and Republican resistance to any tax hike at any time. But sooner or later, Congress is going to have to start raising money somewhere, and treating carried interest for what it is — normal income — is a good place to start.
Update
Citizens for Tax Justice released a report today pushing for the carried interest “loophole” to “finally be closed.”
Recently, the push in Congress to implement a bank tax on the largest financial firms seems to have lost a bit of steam, and the tax is not being included in the financial regulatory reform legislation currently being debated in the Senate. And one of the main arguments against implementing the tax is that it will undermine U.S. competitiveness, as other countries may not impose a similar fee of some kind.
Today, the Senate Finance Committee held a hearing on the bank tax, where Chairman Max Baucus (D-MT) — who has said there’s not much doubt that a bank tax will happen — said that the U.S. should “step up and lead” on this issue, and set an example for the rest of the world:
The U.S. could show more leadership by leading, by acting. You know, if we sit around waiting for all these other countries to agree my guess is not much is going to happen. A lot of countries look to the United States for leadership. If the United States does something that’s reasonable, that leads, I think there’s a good chance other countries will take note of that and try to figure out a way to do something similar, if not exactly the same. Sometimes you’ve got to step up and lead. But you’ve got to talk while you’re leading and listen while you’re leading, but you’ve got to take some action too.
Watch it:
Baucus is correct here. For one thing, the law that created the Troubled Asset Relief Program (TARP) in 2008 stipulates that any money lost through the program must be recouped by a fee on the financial system, so it’s really not a question of whether such a tax will come into being, but when and how. But in addition to the statutory requirement, there are good economic reasons for levying a fee on the biggest financial institutions. It would make the cost of being a large financial institution marginally higher, and would help address the funding advantage that large banks enjoy over their smaller counterparts.
Plus, the tax as currently envisioned by the Obama administration is incredibly small when compared to the vast amount of assets in the banking system. That’s why the Brookings Institution’s Douglas Elliot told the committee that he believes the concern about banks moving their operations offshore in reaction to the tax is overblown:
Banks and thrifts reported $13 trillion of assets to the FDIC, which does not count considerable investment banking and other non‐bank assets. Thus, the industry could cover the $9 billion fee by charging less than an additional 0.1% on each dollar of assets, on a pre‐tax basis, assuming the fee is not tax‐deductible. In practice, the industry might pass along half of this to customers, or approximately 0.05% per dollar of assets, and absorb the other half by taking a 1% hit to income plus non‐interest expense. For comparison, the Fed would never bother with an interest rate move this small, because the effect on the overall economy would be minor.
When Congress passed TARP back in the fall of 2008, they included a provision requiring the executive branch to devise a proposal for recovering the funds. The Obama administration delivered in January, with an idea for a temporary “bank tax” that would be paid by the largest financial services firms in the country and semi-offset the implicit subsidy that they get from implicit government guarantees. It was a good idea that congress ought to push further—make the tax permanent, for example. Max Baucus says no:
The Senate Finance Committee chairman tells The Hill he doesn’t think there are 60 votes for a bank tax.
Senate Finance Chairman Max Baucus (D-Mont.) on Tuesday told The Hill that he did not believe his chamber had the 60 votes needed to include a bank tax in the financial reform bill currently being debated on the floor.
“I don’t think it has 60 votes on this bill,” he said.
I find this kind of “meta” stuff very annoying and I wish reporters wouldn’t let the Baucuses of the world get away with it so easily. 60 votes aside, does Baucus think the bank tax idea is a good one? If not, what’s his critique of it? If so, does he think it would be good to try to bring it up as a separate reconciliation bill at some point? Is there some different form of tax increase that he likes better? Or will the budget deficit vanish like magic without tax increases?
Senate Finance Committee Chairman Max Baucus (D-MT) has announced that he will introduce legislation to repeal the 1099 reporting requirement in the Affordable Care Act. The provision, which requires small businesses to report any purchases over $600, was intended to increase the tax compliance of sole proprietors, but has been condemned as overly burdensome by a bipartisan group of lawmakers — 
