Do Republicans Care About the Deficit or Not?


Republicans who seek our support during an election cycle declare emphatically that they will deal with the deficit upon being elected.  Once elected, however, they far too often evince nothing but apathy towards efforts to solve our budget crisis.  Worse yet, they even work assiduously to create new deficits.

Ever since Republicans won control of the House in 2010, instead of looking for spending cuts to offset existing deficits, they are constantly looking for ways to create new deficits, albeit with the fervent pledge to offset those new deficits.  Yesterday, several lawmakers showed us just how indifferent they are to deficit spending.

Commenting on concerns of deficit spending, John Mica, the author of the House highway bill, offered this caviler response: “Honestly I don’t pay that much attention to the financing portion because it’s not mine. But they’ve promised to find ways to fund this and so far they’ve kept their word.  It will be done. It will pass. Then I will say Amen.”

Yes, we understand that Mica is Chairman of the Transportation Committee, not Ways and Means or Appropriations.  But does he really regard the cost as such an ancillary footnote to the bill that he need not consider it when drafting the underlying bill?

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Do Republicans Care About the Deficit or Not?


Republicans who seek our support during an election cycle declare emphatically that they will deal with the deficit upon being elected.  Once elected, however, they far too often evince nothing but apathy towards efforts to solve our budget crisis.  Worse yet, they even work assiduously to create new deficits.

Ever since Republicans won control of the House in 2010, instead of looking for spending cuts to offset existing deficits, they are constantly looking for ways to create new deficits, albeit with the fervent pledge to offset those new deficits.  Yesterday, several lawmakers showed us just how indifferent they are to deficit spending.

Commenting on concerns of deficit spending, John Mica, the author of the House highway bill, offered this caviler response: “Honestly I don’t pay that much attention to the financing portion because it’s not mine. But they’ve promised to find ways to fund this and so far they’ve kept their word.  It will be done. It will pass. Then I will say Amen.”

Yes, we understand that Mica is Chairman of the Transportation Committee, not Ways and Means or Appropriations.  But does he really regard the cost as such an ancillary footnote to the bill that he need not consider it when drafting the underlying bill?

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Good News on Highway Bill Front; More Issues Elsewhere


Our voices are finally being heard – sort of.  When we started voicing opposition to the highway bill there were few conservatives speaking out against it, and even fewer members of the House who were willing to oppose it.  Now, there is so much opposition to the bill that John Boehner was forced to delay the vote on the highway bill, which was previously scheduled for today:

Boehner (R-Ohio) told his conference Wednesday morning that it was “more important that we do it right than that we do it fast” in explaining his decision, a clear signal GOP leaders lack the votes to win approval of the package.

“Given the volume of amendments and the need for a full, fair, open and transparent process, we may not finish energy/infrastructure this week,” Boehner told his conference, according to a source in the room. “If we need more time to debate and consider amendments, that’s perfectly fine with me. It’s more important that we do it right than that we do it fast.”

The bottom line is that Boehner and McCarthy are lacking the votes.  They plan to suspend consideration of the bill until after next week’s President’s Day recess.

But there is another issue regarding the offsets of the bill.  CQ is reporting that “lawmakers needed time to examine their options for offsetting the bill’s cost, because a proposal involving federal employee pensions is also being used in a package (HR 3630) that would extend a Social Security payroll tax cut and other expiring provisions.”  According to media reports of the tentative ‘extenders’ deal, $15 billion in savings from pension reform will go towards the $50 billion deficit created by a 10-month extension of unemployment benefits and Medicare doc fix.  It’s sad that there is such a dearth of items they are willing to cut that they need to recycle the same offsets for multiple bills.

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Good News on Highway Bill Front; More Issues Elsewhere


Our voices are finally being heard – sort of.  When we started voicing opposition to the highway bill there were few conservatives speaking out against it, and even fewer members of the House who were willing to oppose it.  Now, there is so much opposition to the bill that John Boehner was forced to delay the vote on the highway bill, which was previously scheduled for today:

Boehner (R-Ohio) told his conference Wednesday morning that it was “more important that we do it right than that we do it fast” in explaining his decision, a clear signal GOP leaders lack the votes to win approval of the package.

“Given the volume of amendments and the need for a full, fair, open and transparent process, we may not finish energy/infrastructure this week,” Boehner told his conference, according to a source in the room. “If we need more time to debate and consider amendments, that’s perfectly fine with me. It’s more important that we do it right than that we do it fast.”

The bottom line is that Boehner and McCarthy are lacking the votes.  They plan to suspend consideration of the bill until after next week’s President’s Day recess.

But there is another issue regarding the offsets of the bill.  CQ is reporting that “lawmakers needed time to examine their options for offsetting the bill’s cost, because a proposal involving federal employee pensions is also being used in a package (HR 3630) that would extend a Social Security payroll tax cut and other expiring provisions.”  According to media reports of the tentative ‘extenders’ deal, $15 billion in savings from pension reform will go towards the $50 billion deficit created by a 10-month extension of unemployment benefits and Medicare doc fix.  It’s sad that there is such a dearth of items they are willing to cut that they need to recycle the same offsets for multiple bills.

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“Let me go on. I’m not yielding my time.”


Renee Ellmers (R-NC), took on Henry Waxman (D-CA) in spectacular fashion today in a joint House-Senate hearing on the payroll tax cut extension.

“What you say is completely and totally incorrect.”

Unfortunately a transcript is not yet available, but Rep. Ellmers takes the whole committee to task on ineffectiveness, useless rhetoric, and grandstanding, in a classic rant. It is especially satisfying to hear someone in Congress call out Democrats on their use of “emergency” rhetoric after failing to take care of any of our economic problems, or even pass a budget, last year. More of this, please.


“Let me go on. I’m not yielding my time.”


Renee Ellmers (R-NC), took on Henry Waxman (D-CA) in spectacular fashion today in a joint House-Senate hearing on the payroll tax cut extension.

“What you say is completely and totally incorrect.”

Unfortunately a transcript is not yet available, but Rep. Ellmers takes the whole committee to task on ineffectiveness, useless rhetoric, and grandstanding, in a classic rant. It is especially satisfying to hear someone in Congress call out Democrats on their use of “emergency” rhetoric after failing to take care of any of our economic problems, or even pass a budget, last year. More of this, please.


Democrats and Complicit Republicans Trying to Take Over Fannie & Freddie Through the Payroll-Tax Extension


 

Guess who’s going to be paying for the Payroll-Tax Cut… That’s right, you are!!! Well, that is if you own a home in the United States.

You see, for the Democrat-led Senate and the Obama administration to pay for this ridiculous 2 month band-aid payroll-tax extension they’ve decided to tax Fannie Mae & Freddie Mac. Seems like a perfect fix right? Get the GSE’s to pay for our payroll-tax holiday… but as is life, it’s not that cut and dry. Since Fannie & Freddie don’t issue mortgage instruments it will be the home mortgage lenders who are responsible for paying this tax. Every business owner, and most Americans (not residing at 1600 Pennsylvania Ave.) realize that nothing in this world is free, someone always pays, and that someone is usually you and me — this case is no different.

Congress and the Obama administration are turning to an unlikely source to pay for the proposed extension of the payroll-tax cut: mortgage-finance giants Fannie Mae and Freddie Mac.

The revenue source proposed by both Senate Democrats and House Republicans would boost fees that Fannie and Freddie collect from lenders. But that is raising hackles in the real-estate industry. Builders, Realtors and lenders say it would amount to a tax that would be passed on to mortgage borrowers.

Fannie and Freddie don’t issue mortgages, but instead buy them from lenders. They bundle those loans into securities that are sold to investors, and promise to make investors whole if the loans default. To cover any defaults, Fannie and Freddie charge “guarantee” fees to lenders when they buy the loans.

Anyone that thinks these mortgage lenders are going to pay said taxes out of their profit, and not pass them down to their customers, is simply living in fantasy-land.

But make no mistake, the banks will pass this increased fee on to borrowers in the form of higher interest rates on mortgages. In essence, it’s a conduit for the home buyer to pay the bank to pay Fannie and Freddie to pay the Treasury to pay for the tax credit. Only in Washington…

As if that in and of itself wasn’t bad enough it looks to most experts that in-so-doing this tax will also, inadvertently or on purpose, back-door a government takeover of Fannie and Freddie through “pay for”

Concern:  GSE “pay-for” in payroll tax cut extension bill – raises $30-40bn by making Fannie and Freddie Mac charge higher G-fees and send the extra revenue directly to the Treasury (i.e. a direct tax, even if the bill doesn’t call it that)

Problem:  This ties Fannie Mae and Freddie Mac to the US government budget for up to 40 years (10 years of higher fees charged on mortgages that run up to 30 years beyond that) to cover just two months of payroll tax cut extension.  (Senate: covers whole 2 months planned; House: covers part of 1 year planned)

Big picture implications not appreciated:

1. Republicans say they want to fix mortgage finance and end the “GSE model” where gains are privatized and losses are dumped on taxpayers.  This prevents that from happening, as Congress will not restructure the entities if it has to “undo” a direct source of revenue.

2. In fact, this goes in the other direction – Fannie Mae and Freddie Mac become part of the government – they are nationalized – as the taxpayer will be on the hook for future losses as the companies can’t generate reserves to cover losses when mortgage borrowers default.

3. This guts the conservatorship now in place, taking value away from the enterprises that belongs to the various stakeholders.  The largest stakeholder is the US government as holder of the senior preferred stock.

4. Sets bad precedent – this is like Congress taking money out of the FDIC deposit insurance fund to cover other expenses and not losses to bank depositors.

5. If Fannie Mae and Freddie Mac become arms of the government as a result of this tax, there is a risk they could be consolidated on the government’s balance sheet and their debt could blow the debt ceiling.

Conclusion:  To us it makes sense to reform and re-privatize Fannie Mae and Freddie Mac so they lose their government sponsorship and the taxpayer gets paid back.  You don’t have to agree with this conclusion now, but if this provision goes into effect it prevents that from happening for a very long time.

Raising the “G-fee” by itself is not a bad thing, as it lets the market work, lets credit reserves build up to insulate taxpayers from harm, and brings private capital back into the mortgage market, but this is not the right way to do so.

Ties Fannie Mae and Freddie Mac into the appropriations process for the full 10-year period of the required offset, limiting Congress’ future ability to restructure and resolve the entities:
  1. Congress will not restructure the entities if it has to “undo” a direct source of revenue; in past experience, tax increases become permanent fixtures of the fiscal landscape
  2. Effectively perpetuates the conservatorship, draining financial resources from the entities and making it less likely the government will get paid back its invested capital
  3. Increases “left pocket to right pocket” accounting game where the government is forced to buy new senior preferred stock to pay dividends on previously invested capital
  4. Keeps the housing market in limbo as important sources of mortgage finance would be left un-restructured and in government hands

 

-Steve Foley
Cross Posted from The Minority Report

The Strategic Incompetence of Mitch McConnell


Mitch McConnell‘s minion are in full on spin mode trying to blame Speaker of the House John Boehner for botching the payroll tax cut extension. The only person who deserves any blame is Mitch McConnell. In this, the first deal he pretty much single handedly negotiated with the Democrats, he not only screwed up, but proved he has no freaking clue how to get the economy growing again.

The House has postponed a vote on the matter but members of the House are in open rebellion about it. In exchange for the Keystone Pipeline, which would probably make the President veto the whole thing anyway, the GOP would go for a two month extension of the payroll tax cut and raise fees on mortgages permanently.

Note the last bit. McConnell was okay raising fees on the American people permanently to offset a two month payroll tax cut. And it would not just raise fees on mortgages, it would, in effect, perpetuate the sad, sick cycle of Fannie Mae and Freddie Mac controlling the mortgage industry with no reforms to either.

McConnell now wants us to know this is all John Boehner’s fault and John Boehner had intended to go along with it. Except that comes as news to plenty of people in the House. There is a larger point, though, that is being ignored.

Mitch McConnell negotiated a two month extension of the payroll tax cut and businesses in America, particularly small businesses, need to plan for a full year. The GOP has blamed Obama and the Democrats for “uncertainty” in the economy and Mitch McConnell sought to exacerbate that uncertainty playing political games with a payroll tax cut.

To compound the stupidity of it all the deal cannot even be implemented by most businesses in America. Mitch McConnell, who supposedly is on the side of job creators, seemingly has no clue how this payroll tax cut would affect businesses and clearly did not understand its implications enough to know just how wholly unworkable it is.

In other words, the leader of the Republicans in the Senate has become such a creature of Washington, he like the Democrats we fight, knows not a darn thing about how to get Washington out of the way of the job creators or, worse, he does not care.


The Strategic Incompetence of Mitch McConnell


Mitch McConnell‘s minion are in full on spin mode trying to blame Speaker of the House John Boehner for botching the payroll tax cut extension. The only person who deserves any blame is Mitch McConnell. In this, the first deal he pretty much single handedly negotiated with the Democrats, he not only screwed up, but proved he has no freaking clue how to get the economy growing again.

The House has postponed a vote on the matter but members of the House are in open rebellion about it. In exchange for the Keystone Pipeline, which would probably make the President veto the whole thing anyway, the GOP would go for a two month extension of the payroll tax cut and raise fees on mortgages permanently.

Note the last bit. McConnell was okay raising fees on the American people permanently to offset a two month payroll tax cut. And it would not just raise fees on mortgages, it would, in effect, perpetuate the sad, sick cycle of Fannie Mae and Freddie Mac controlling the mortgage industry with no reforms to either.

McConnell now wants us to know this is all John Boehner’s fault and John Boehner had intended to go along with it. Except that comes as news to plenty of people in the House. There is a larger point, though, that is being ignored.

Mitch McConnell negotiated a two month extension of the payroll tax cut and businesses in America, particularly small businesses, need to plan for a full year. The GOP has blamed Obama and the Democrats for “uncertainty” in the economy and Mitch McConnell sought to exacerbate that uncertainty playing political games with a payroll tax cut.

To compound the stupidity of it all the deal cannot even be implemented by most businesses in America. Mitch McConnell, who supposedly is on the side of job creators, seemingly has no clue how this payroll tax cut would affect businesses and clearly did not understand its implications enough to know just how wholly unworkable it is.

In other words, the leader of the Republicans in the Senate has become such a creature of Washington, he like the Democrats we fight, knows not a darn thing about how to get Washington out of the way of the job creators or, worse, he does not care.


Keystone showdown looms: is Harry Reid a Senator, or Barack Obama’s Lap Dog?


Here’s the background: the current hot topic of conversation in domestic politics right now is whether or not to extend a temporary payroll tax cut. It’s currently an object of some controversy on the GOP side, largely because it would involve effectively another 180 billion in spending; Democrats were in fact kind of gleeful about that, given that it promised to give Republicans a bit of a problem between specifically choosing between less spending and lower taxes (two things that have been long-term fiscal conservative goals). Unfortunately for the Democrats, they aren’t the only ones that can give their opponents uncomfortable choices: Speaker John Boehner made a deal where the tax cuts would be bundled up with provisions towards hastening the development of the ethical oil Keystone Pipeline. This reportedly will ensure that the tax cuts will pass the House.

The problem here is that the White House has decided that it would rather pander to homophobic, racist, misogynistic, anti-Semitic, and anti-democratic conflict oil regimes abroad – and those regimes’ radical progressive allies at home – than to produce jobs for working class Americans (even the ones that work for private sector unions). The White House has thus announced that it will veto the bill (via @davidhauptmann) if it passes the Keystone jobs program language. Speaker Boehner has already made it clear that he’s aware of the threat, and is not allowing it to affect House business.

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