James Pethokoukis

Politics and policy from inside Washington

This is what Pelosi should have said about cap-and-trade …

Jun 30, 2009 16:36 UTC

This is much punchier than “jobs, jobs, jobs, jobs.” James Lovelock (via the Climate Progress blog):

If we can keep civilization alive through this century perhaps there is a chance that our descendants will one day serve Gaia and assist her in the fine-tuned self-regulation of the climate and composition of our planet. We have enjoyed 12,000 years of climate peace since the last shift from a glacial age to an interglacial one. Before long, we may face planet-wide devastation worse even than unrestricted nuclear war between superpowers. The climate war could kill nearly all of us and leave the few survivors living a Stone Age existence.

COMMENT

Reference contact is bjcoppa3 at gmail dot com

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Why Europe wants America to raise taxes

Jun 30, 2009 16:24 UTC

When the G20 went after tax havens last April, I said it was just a first step toward a push for “tax harmonization,”  a fancy phrase that really means getting low-tax nations to raise their tax rates. Then I see what the prime minister of Finland is advocating:

We have to initiate discussions at the European Union level about how to prepare for the post-crisis period. Getting public finances in order is a must if we are to grow, create employment and provide the welfare services that we in Europe value so much. …  This will require tight control and, in many countries, painful cuts. However, it would be unrealistic to assume that all the balancing could be done on the spending side alone. … The overall tax rate will have to rise as well over the longer term. In some areas that can be done without much consultation between the countries. … However, raising such taxes can have detrimental effects on economic activity. This is especially so when a country acts on its own: capital and people can respond by migrating to jurisdictions with lower rates. … Parallel measures would help all of Europe: tax competition risk would be reduced and the public finances of individual countries would improve. Such co-ordinated tax changes could set also an important global example. In particular, it might encourage the US – with lower tax levels in most areas – to do what has to be done to address its spiralling budget deficit.

My spin:  Don’t raise the bridge, lower the river! Why countries don’t try to instead supercharge their economies is beyond me.

COMMENT

Europe is just jealous. They have been plowing so much money into their beloved welfare programs, that it just doesnt seem fair that the US should enjoy such low tax rates. Even though we obviously dont embrace a European style welfare state.

Comparatively, the US does have lower overall rates, and could it possibly be that these have spurred some growth whileas the European Union’s main growth driver is Eastern Europe. Now that source of growth is being reined in. So could this initiative really be a way to constrain US growth, so that future European growth doesn’t look so bad?

While US tax rates will likely go up in the not to distant future, US legislators and the IRS should avoid the European and Canadian VAT model. US tax revenues can be increased through creativity and fairness. We should not levy a high VAT on sales, which are already being taxed at the state level. Since the US economy is dominated by consumer spending, clearly it is unwise to reduce the volume of this spending through burdensome taxes. A more efficient tax model, when combined with more efficient government, should yield a significant improvement in tax revenues. A VAT, while deceptively simple, should be a last resort, since it will stifle any existing economic advantages the US currently enjoys over its European rivals.

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Doing the PPIP shuffle

Jun 30, 2009 16:10 UTC

A Treasury insider talk about the ever-shrinking PPIP (via Noam Scheiber):

If you had asked–I don’t want to speak for the secretary–what’s problem number one? I think he’d say capital. Problem two? Capital. Problem three? Capital. Everything was in the service of that view. The legacy loans program was meant to help clean balance sheets. It was not an independent good in itself. It was seen as friendly to equity raising. Now people say the legacy loans thing is not gaining as much traction, so is that a failure? But because we had a good outcome in terms of raising equity, they [the banks] were able to raise equity without shedding assets … you should be okay with that.

My spin:  This reminds me of an old Letterman sketch with Chris Elliott about a TV show where all you ever saw was the promos:

The Regulator Guy: A series of expensive-looking promos for a Terminator-like action character aired on “Late Night” over a period of several months, with Elliott incongruously playing the super-cool half-human, half-mechanical “Regulator Guy”, even speaking with a bad Schwarzenegger-esque accent. Repeatedly promoted during “Late Night” as “Coming soon to NBC!” the “Regulator Guy” appeared once and only once in an actual sketch on the show, but this appearance was a (deliberately) cheap and poorly-done affair, which ended with Letterman interviewing the new sidekick character, Ajax, while completely ignoring Elliott (much to his faux-chagrin).

Is Obama blowing it?

Jun 30, 2009 16:01 UTC

Some liberals think so, says Ezra Klein:

Late last week, I was summoned to a windowed meeting room overlooking the White House to sit with members of one of Washington’s nimbler, smarter think tanks. The assembled thinkers tried to convince me that Barack Obama was missing a historic opportunity: The legislation that was traveling under his name was increasingly unlikely to bind the middle class to his presidency or party. Cap-and-trade was a mess. Health reform was going to fail on cost control. And what of jobs? Obama, they said, had to take a firmer hand with the Congress. His hands-off approach was a fiasco. Leadership matters. It’s important. It’s needed.

My spin: Where did it all start going wrong. A too small stimulus? Not nationalizing the banks? Picking Biden? And overshadowing all of this is an economy that will have poisonously high levels of jobless as far as the eye can see.

COMMENT

That is quite an amazingly confounding assessment. Your words : “My spin: Where did it all start going wrong. A too small stimulus? Not nationalizing the banks?”
Yoou write as if these are Obama’s mistakes. Everything you mention were compromises pushed by the Republicans. I am sure you meant that the compromises were the mistakes and a larger stimulus and nationalizing the banks would have been the correct course.

Wow, Mr. Pethokoukis, you are suddenly a liberal!

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Pelosi, a vision in white — but not green

Jun 30, 2009 09:39 UTC

It was Nancy Pelosi’s star turn. (The blindingly white pant suit — Armani? Lovely.) The House speaker giving the closing argument at the end of the cap-and-trade debate that she personally pushed to the floor. The final pitch. “Just remember these four words for what this legislation means: jobs, jobs, jobs, jobs. Let’s vote for jobs.” Then the victorious vote. The greatest achievement of her legislative career. “An extraordinary piece of legislation,” said President Obama.

But what did Pelosi really accomplish, other than momentarily satisfying the powerful Green Lobby?

1) Getting major energy and environmental legislation passed in the House of Representatives isn’t by itself a landmark accomplishment. Been there, done that. In 1993, Democrats passed an energy tax by a vote of 219-213. And doing it again by a similarly razor-thin 219-212 vote — after more than a decade-and-a-half of intense political lobbying, numerous scientific studies, global media attention, Hollywood hectoring and, of course, Al Gore — doesn’t show a whole lot of tangible political progress for green Democrats.
[Why Obama's big economic gamble is failing.]

2) One of Pelosi’s goals also was to get the bill passed without the votes of Democrats who might suffer at the polls in the 2010 midterm elections if they voted for the bill. (Many Democrats suffered for their BTU votes in the 1994 congressional elections when the Republicans won back the House.) Mission accomplished, then. But it speaks poorly for Democratic messaging that cap-and-trade was such a risky vote for so many of the party’s members. It surely would have been better for the current momentum and eventual legislative success of the cap-and-trade bill for it to have passed the House by a wide margin.

3) The same delicate, precise formula that allowed the bill to succeed in that chamber won’t work in the Senate. For instance, more than a quarter of the bill’s House support came from the California and New York delegations whose members account for a fifth of the House. But those two states, notes Jay Cost of RealClearPolitics, make up just four percent of the Senate. A cap-and-trade bill that can’t pass the House by a big margin probably can’t pass the Senate by even a narrow one.
[Why Obamacare might be flatlining.]

4) And of course, the Senate, where you need 60 votes to end a filibuster, is a different manner of beast. Yes, Senate Democrats currently have 59 votes and seem likely to get a 60th from Minnesota. But there may already be as many as eight Democrats ready to vote against Pelosi’s creation. And as unemployment continues to rise, climate change may sink further down the list of American voters’ priorities and that of centrist senators.

5) Then there was that final pitch. Jobs, jobs, jobs, jobs. A sign of desperation, really, since the traditional economic argument for dealing with climate change has never been that it was inherently pro-economic growth or a job creator. Rather, the intellectually honest argument is that the economic costs of climate legislation would be less than the impact of doing nothing and letting carbon emissions skyrocket. But cap-and-trade is not a free lunch, and the Pelosi Democrats and eight Pelosi Republicans shouldn’t suggest it is.

Bottom line: President Obama surely would love to have a signed bill in his pocket by the time he wings his way to the global climate conference in Copenhagen next December. But rather than passing cap-and-trade, it is more likely that the Senate will have either voted it down by then, or not voted on it at all. (Recall that the 1993 B.T.U. bill never made it to a vote.) By then, that simple carbon tax-payroll tax swap some conservatives (and Gore) keep touting might start looking awfully inviting to Pelosi.  But hey, she sure did look great in that pant suit.

COMMENT

“Nancy Pelosi makes me nauseous, can we have term limits please or can she step down?”

Yes we can have term limits! Support law professor Randy Barnett’s initiative to amend the constitution for federalism. Google “federalism amendment” and you’ll find the website for the bill. Good luck!

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