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Health

GOP Senators: We’ll Hold Up Treasury Nominee Unless Obama Makes Medicare Cuts That He’s Already Made

By Sy Mukherjee on Feb 27, 2013 at 4:25 pm

In a letter sent to the White House on Tuesday, 22 Republican senators are demanding that President Obama propose Medicare cuts before the chamber considers Treasury Secretary nominee Jack Lew.

The letter is part of an ongoing GOP smear campaign against Lew alleging that, during his tenure as director of the Office of Management and Budget (OMB), Lew and the Obama Administration failed to comply with a law requiring the White House to submit Medicare cost-cutting proposals “whenever the program’s trustees express concerns about its solvency in their annual report.” The senators suggest that Lew should have known about that legal requirement and spurred the Administration to take action by formally proposing Medicare cuts:

“We find it stunning and noteworthy that so far Mr. Lew has not provided adequate responses to congressional inquiries on the matter,” the senators wrote to Obama Tuesday.

“Congress needs a clearer understanding about his role in the violation of this law, including exactly when Mr. Lew first became aware of this legal requirement and what counsel, if any, he provided the administration on whether it should comply with this law.”

But there are some glaring falsehoods in the senators’ claims and their subsequent demand for an Administration plan to curb Medicare cost growth.

First, calling for Medicare cuts to ensure the program’s long-term solvency is based on the assumption that inflation in medical services — and, consequently, spending on health care entitlements like Medicare — will continue to balloon at staggering rates indefinitely. But the key to reducing national health expenditures is to reduce the actual price of consuming care — so if forces in the health care market facilitate cost reductions in medical technology and services, then entitlement spending will drop accordingly. Recent evidence shows that that is exactly what is happening, as the recent slowdown in health care cost growth has reduced Medicare’s future projected spending by over half a trillion dollars, all without a single policy change. Furthermore, a just-released GAO report found that if Obamacare and its cost-containment mechanisms are fully implemented, then future spending on Medicare would decrease “from 6.2 percent of GDP in 2035 in the simulations run before [Obamacare] was enacted to 4.7 percent in the simulations run immediately after enactment.”

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Economy

Why Treasury’s Opposition To Europe’s Transactions Tax Is Misguided

By Pat Garofalo on Feb 14, 2013 at 10:40 am

The European Union is working on rolling out a financial transactions tax, a tiny tax on stock trades. The benefits of such a tax are substantial: it can raise significant amounts of revenue without bothering most investors and it can slow down the high-frequency trading that has brought huge amounts of volatility into markets.

Some Democratic lawmakers have been making a push to implement a transactions tax here. But in an email to the Wall Street Journal, the Treasury Department had nothing but harsh words for Europe’s effort:

The U.S. Treasury said it opposes plans by 11 European Union countries to impose a small tax on trades in shares, bonds and derivatives. [...]

The potentially broad impact has triggered opposition in the U.S. “We do not support the proposed European financial transaction tax, because it would harm U.S. investors in the U.S. and elsewhere who have purchased affected securities,” a Treasury spokeswoman said in an email. “Treasury has raised these concerns with European counterparts.”

Treasury has never had much love for a transactions tax, but this outright denunciation is a missed opportunity. Instead of dumping on the tax, Treasury could have seized the chance to say that, if the developed world gets together on a transactions tax, many of the concerns about it undermining an individual nation’s competitiveness will disappear.

As Reuters’ Felix Salmon noted, “financial transactions taxes work pretty well: even the UK, which is implacably opposed to the European tax and which won’t ever join such a scheme, levies a surprisingly large 0.5% tax whenever anybody — anywhere in the world — trades a UK stock. And yet, somehow, London remains the first choice for international companies looking for a place to list their shares.”

There is little reason to expect that the U.S. experience would be substantially different, as New York would still have all the attraction for the financial industry that it does today, even with a transactions tax. And most investors would barely notice the miniscule tax, as they don’t engage in enough trading to rack up a substantial bill. In the meantime, the U.S. would raise revenue from a sector that can afford it, with little economic effect.

Economy

What You Need To Know About Jack Lew, Obama’s Treasury Nominee

By Travis Waldron on Jan 9, 2013 at 2:00 pm

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.

NEWS FLASH

Probe Finds U.S. Treasury Department Employees Soliciting Prostitutes, Accepting Corporate Executive Gifts | An official government probe filed under the Freedom of Information Act found that United States Treasury Department employees have been engaging in unethical and possible criminal behavior. Specifically, the Hill reports that the investigation found that Treasury employees had been “soliciting prostitutes, breaking conflict-of-interest rules and accepting gifts from corporate executives.” The probe findings come just weeks after the scandals at the General Services Administration and the Secret Service.

– Nina Liss-Schultz

By Guest Blogger on Jul 16, 2012 at 1:30 pm

Climate Progress

Major Analysis: Federal Loans And Loan Guarantees Have A Huge Benefit But A Low And Predicatable Cost

By Climate Guest Blogger on May 3, 2012 at 10:26 am

the low and predictable cost of federal loans

by John Griffith and Richard Caperton

The U.S. government is arguably the largest and most influential financial institution in the world, with about $2.7 trillion outstanding in loans and loan guarantees. Among other things, these federal credit programs help college students afford tuition, first-time homebuyers access affordable mortgages, and budding small businesses get the capital they need to expand.

In these and many other cases, the private sector will simply not lend to certain borrowers or will lend only under unaffordable or unmanageable conditions. That’s why we rely on federal credit programs: The U.S. government can bear certain risks that the private sector cannot to achieve certain public goals such as increasing the global competitiveness of our workforce, returning stability to the U.S. housing market, and adding jobs through business expansion.

These programs typically run at very low cost to taxpayers. On average, every $1 allocated to loan and guarantee programs generates more than $99 of economic activity from individuals, businesses, nonprofits, and state and local governments, according to our analysis.

But in the wake of certain widely publicized credit blunders, most notably this past summer’s bankruptcy announcement from solar company Solyndra LLC, some have called into question Washington’s ability to manage financial risk. Conservative critics contend that the government is incapable of accurately pricing risk, and that political pressure encourages government agencies to routinely underestimate the risk to taxpayers when extending credit.

Government underpricing of risk is a convenient theory for free-market ideologues but it runs contrary to the overwhelming evidence.

Our review of federal government credit programs back to 1992 shows that on average the government is quite accurate in its risk pricing. In fact, the majority of government credit programs cost less than originally estimated, not more. Specifically, we found that:

  • Based on initial estimates over the past 20 years, the government expected its credit programs to cost taxpayers 79 cents for every $100 loaned or guaranteed. Based on recently updated data, those cost predictions were reasonably accurate but slightly underestimated. The current budgetary impact of these programs is about 94 cents per $100 loaned or guaranteed.
  • There’s little evidence that credit programs are biased toward underpricing risk. In fact, a little more than half of all nonemergency federal credit programs will cost the government less than what they are expected to over the life of the program.
  • The remainder is accounted for by the losses suffered by the Federal Housing Administration on loans made in 2008 during the peak of the housing crisis. Excluding that book of loans, all nonemergency federal credit programs cost slightly less than expected.

Conservative critics often portray a world in which government bureaucrats haphazardly issue loans and loan guarantees without considering taxpayer exposure to risk. That’s simply not the case. This issue brief explains how the government prices credit risk in the federal budget, how well those cost estimates have reflected reality over the years, and why the government is in a particularly good position to assume certain types of risk.

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Security

Obama Announces Measures To Counter Iranian ‘Electronic Curtain’ Against Free Flow Of Information

By Ali Gharib on Mar 20, 2012 at 11:06 am

Following on Secretary of State Hillary Clinton’s message for the Iranian New Year, or Noruz, President Obama released his own video to the Iranian people today. At the end of the message, Obama told Iranians in Farsi, “Eideh shoma mobarak,” the equivalent of “happy holidays.” But the message was not all pleasantries: Obama also focused on the suppression of the free flow of information in Iran, and announced steps to counter it.

Obama initially listed some heartening interactions between Iranians and Americans — such as the best foreign language film Oscar for the Iranian movie A Separation. He continued that Iranians and Americans both use the same tools on the internet to communicate, but that Iran’s increasingly repressive government hinders the free flow of information:

OBAMA: Because of the actions of the Iranian regime, an ‘Electronic Curtain’ has fallen around Iran, a barrier that stops the free flow of information and ideas into the country, and denies the rest of the world the benefit of interacting with the iranian people who have so much to offer…

Even as we’ve imposed sanctions on the Iranian government, today my administration is issuing new guidelines to make it easier for American businesses to provide software and services into Iran that will make it easier for Iranian people to use the internet.

Watch the video:

Indeed, the Iranian government cracks down on satellite dishes (somewhat futilely) and jams signals by international broadcasters over U.N. objections.

Amid the increasingly severe internet restrictions of the Electronic Curtain, the Obama administration today released new Treasury Department guidelines removing some of the ambiguities that hindered American software producers from allowing their products to be used in Iran. In a blog post, Deputy National Security Adviser Ben Rhodes expanded on the new guidelines and wrote:

Today we are taking another step, by making it easier for Iranian citizens to get the software and services they need to connect with the rest of the world through modern communications methods. The U.S. Office of Foreign Asset Control (OFAC) today issued guidance that will facilitate the availability of software and services that Iranians have told us are essential in order to effectively use the Internet.

A Treasury release outlined some of the specific areas where allowances are now made to export software to Iran, including software for chatting and voice-over-internet-phonecalls and related mobile apps, data storage like Dropbox, web browsers, RSS readers, and more.

The benefits of the free flow of internet information to and from Iran was on full display last week when a Facebook page drew Iranians and Israelis — two peoples whose countries are seemingly approaching the brink of war — to share messages of mutual admiration, solidarity, and speak out against confrontation.

NEWS FLASH

U.S. Receives Record Demand For Its Bonds Under Obama, Helping The Deficit | Bloomberg News reports that the U.S. government received record demand for its bonds in 2011, “pushing longer-maturity treasuries to their best performance since 1995 in a sign that President Obama may have little difficulty” financing the budget deficit. The European debt crisis is driving investors to buy U.S. assets, allowing the government to get an “all-time high bid-to-cover ratio of 9.07 for $30 billion of four-week bills it auctioned on Dec. 20 even though they pay zero interest.” Despite the GOP’s factually-challenged fear-mongering about the deficit, the high demand for U.S. bonds are “helping to contain borrowing costs and making it cheaper as a percentage of gross domestic product to finance deficits than when the nation last had budget surpluses.”

By Tanya Somanader on Dec 27, 2011 at 10:31 am

Security

Treasury Official: Senate’s Iran Central Bank Sanctions ‘Risk Fracturing The International Coalition’ Against Iran

By Ali Gharib on Dec 1, 2011 at 6:26 pm

The Obama administration, while wanting to apply additional pressure on Iran, came out today in a letter to a key Member of Congress and in a Congressional hearing with “strong opposition” to a Senate amendment to the Defense Department budget that would level hard-hitting sanctions against Iran’s Central Bank (CBI). The Kirk-Menendez amendment, named for the sponsoring Senators Mark Kirk (R-IL) and Bob Menendez (D-NJ), would bar any companies or central banks abroad that do business through Iran’s central bank from doing any business in the U.S. Kirk has said the legislation was designed to collapse Iran’s currency and expressed indifference to the suffering of ordinary Iranians as a result of doing so.

At a Senate Foreign Relations Committee hearing today, two administration officials pushed back against the Kirk-Menendez amendment, offering a critique that while they shared the goals that underly the bill — pressuring Iran — they feared consequences of the legislation might be counterproductive.

Under Secretary of the Treasury for Terrorism and Financial Intelligence David Cohen, who recently returned from a trip to Israel and the United Arab Emirates to work with U.S. allies in pressuring Iran, told the committee that the Kirk-Menendez amendment could shatter the international coalition that has been successful in slowing Iran’s nuclear progress:

COHEN: [It] risks fracturing the international coalition that has been built up over the last several years to bring pressure to bear on Iran, especially today in the aftermath of what has occurred in Tehran over the last several days, in the aftermath of the IAEA report, and in the growing sense of urgency internationally with respect to Iran’s nuclear program.

I think we have an opportunity to work cooperatively and collaboratively with our international partners to bring additional pressure to bear on Iran. The amendment, however, would focus the most powerful sanction that we have, the termination of access to the United States on the largest financial institutions and the central banks and some of our closest partners.

Watch the video:

Cohen said the “threat of coercion that is contained in the amendment” could alienate even close and cooperative allies like Japan and European countries. The administration believes, Cohen added, that cooperation and coordination can be better achieved “if we approach this issue through an effort to coordinate action voluntarily.”

Under Secretary of State for Political Affairs Wendy Sherman, who also appeared at the hearing, said the administration’s analysis concludes that “there is absolutely a risk that in fact the price of oil would go up, which would mean that Iran would in fact have more money to fuel its nuclear ambitions, not less.”

Also today, as committee chair Sen. John Kerry (D-MA) acknowledged, Treasury Secretary Timothy Geithner wrote a letter to Armed Services chair Sen. Carl Levin (D-MI) stating the administration’s “strong opposition to this amendment because, it its current form, it threatens to undermine the effective, carefully phased, and sustainable approach we have undertaken to build strong international pressure against Iran.”

Climate Progress

Solar Industry: Extending the Treasury Grant Program Could Add 37,000 New Jobs by 2013

By Stephen Lacey on Oct 12, 2011 at 12:44 pm

The Treasury Grant Program has been a huge success for the solar industry. By allowing developers and financial institutions to take a cash grant instead of a tax credit — an instrument still hard to monetize due to the economic malaise — solar has become one of the fastest growing industries in America, expanding 102% in 2010 during one of the worst economic times in our nation’s history.

But the Grant Program is set to expire at the end of this year. Although the grants have been a resounding success for the renewable energy sector, the program is politically tarnished because it was created under Obama’s stimulus program.

Allowing this program to get killed by election-year politics would be a major mistake, as it would severely limit the growth of a valuable industry that has boomed in spite of the lagging economy.

A new report out from the business-to-business market research firm EuPD Research shows the immense economic value that could be created with an extension of the program. According to the report, which was commissioned by the Solar Energy Industries Association, a simple one-year extension of the Treasury Grant Program could leverage an additional 37,000 jobs — a 12% increase over the baseline. That could also help bring an additional 2 GW of solar projects online from 2012 to 2016.

A five-year extension through 2016 could result in an additional 114,000 jobs — a 32% increase in employment.   That could result in an additional 7.3 GW of installations over the baseline scenario, as this figure shows:

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Security

Treasury Department Offers Few Details About Alleged ‘Secret Deal’ Between Iran And Al Qaeda

By Ali Gharib on Jul 29, 2011 at 11:35 am

Yesterday, the Treasury Department, announcing sanctions on six suspected al Qaeda facilitators, alleged a pact between Iran and al Qaeda. According to a statement, Iran agreed to a “secret deal with al Qaeda allowing it to funnel funds and operatives through its territory.” Treasury offered few details about the deal, leaving its contours mostly a mystery.

“Our sense is this network is operating through Iranian territory with the knowledge and at least the acquiescence of Iranian authorities,” a Treasury official, named in some reports as Undersecretary for Terrorism and Financial Intelligence David Cohen, said in a phone briefing. The Departments of Treasury and State did not respond to requests for interviews.

None of the six people named for sanctions were Iranian, and only one is allegedly based on Iranian soil: Syrian national Ezedin Abdel Aziz Khalil. Of the other named operatives and facilitators, one is based in Iraq, one in Pakistan, one in Qatar and two in Kuwait. The Gulf monarchies of Kuwait and Qatar are close U.S. allies, leading Columbia professor and former Iran-based foreign service officer Gary Sick to comment that articles about the announcement could just as easily have been headlined: “Two U.S. Allies in the Gulf promote and support anti-U.S. terrorism.”

The announcement yesterday piqued the interests of some prominent Iran hawks, including the neoconservative editorial board of the Wall Street Journal, which has already more or less called for war with Iran. The Journal editorial concluded that news of the agreement served as “a reminder of why a regime that has no qualms serving as al Qaeda’s facilitator can on no account be permitted to build a nuclear bomb.”

Al Qaeda has long been known to have some affiliated personnel inside Iran. Several operatives fled there after the U.S.-led invasion of Afghanistan in late 2001. But tensions between the Sunni terror group and Iran’s Shia government have long been thought to temper co-operation. Iran detained many of the operatives on its soil, usually at least restricting their travel. Those conditions were reportedly eased when al Qaeda reportedly helped Iran get an agent released by Pakistani militants, according to “Western officials.” Last year, then head of U.S. forces of Afghanistan Gen. David Petraeus said Iran’s attitude toward the group was “unpredictable,” and the Financial Times noted today that “there have been persistent reports of co-operation between the two given that they share a mutual enemy: the U.S.”

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