James Pethokoukis

Politics and policy from inside Washington

Is ObamaCare in trouble in the Senate?

Nov 12, 2009 21:47 UTC

A few thoughts on healthcare reform:

1) Just talked to a very insightful Capitol Hill Watcher who doesn’t think Harry Reid has the votes in the Senate to pass anything resembling comprehensive healthcare reform. You can count out Lieberman, Landrieu, Nelson and maybe even Bayh.

2) First, of course, comes the CBO’s analysis of various proposals. Any of them that boosts the deficit or healthcare premiums are DOA. Remember, healthcare reform was supposed to expand coverage, lower premiums and bend the curve on the long-term deficit.

3) Assuming Reid can get 60 votes to proceed to the floor sometime next week, we are talking December being taken up with debate on amendments concerning the public option, abortion, taxes. As it is, Reid is reworking the Senate bill on the fly. One day it is a new version of a PO trigger, the next a hike in payroll taxes. Reconciliation? “That ship has sailed.”

5) Time does not help.  Once the Congress goes homes, members could be inundated with complains and protests, just like in August. Also, the rising unemployment rate continues to sap public confidence in the Obama agenda and Washington, in general.

COMMENT

My grown kids think that socialism/communism would be okay. What did I do wrong in raising them? I wonder when they start paying more taxes if it will make any difference to them?They do not seem concerned about the U.S. deficit, they are too wrapped up in their own little worlds and watch the propoganda(?) machines every night.

Using TARP to pay down deficit? The math doesn’t add up

Nov 12, 2009 14:03 UTC

First, the nub of the WH idea:

The White House is looking to cut its budget deficit by using some unspent funds from the U.S. government’s Troubled Asset Relief Program (TARP), the Wall Street Journal said, citing people familiar with the matter.

Members of the Obama administration are still debating the idea, the paper said, adding that the administration would still like to keep some of the unspent money in case of emergencies.

A U.S. Treasury source told Reuters that it was shifting the focus of the TARP program toward helping small business and the housing sector rather than large banks.

“As that focus shifts, we expect to use significantly less TARP funding than authorized,” the source said. “We will maintain the flexibility to deal with a future crisis, and uninvested TARP money is dedicated to reducing the debt.”

But as my pal Dan Clifton of the  Strategas Group points out, this idea neglects certain budget realities:

Is this really news? The US government has already issued the debt for the funds and any unused money would logically be used to retire that debt. There is about $300bn in unspent TARP funds now. But none of that can be used as deficit reduction. Why? Because the money has not been spent yet. And is it really $300bn? Absolutely not, the administration decided to change the accounting to a net present value basis. So any savings would be negligible. The punchline: This story makes a great headline against the concerns over deficits, but will have zero impact on debt issuance and the deficit.

COMMENT

There are two actions which could substantially reduce (and eventually end) the US debt.

Within the last year companies which received TARP shared the wealth via bonuses when it was not theirs to share. In fact, their response to TARP has been to hog far more in bonuses (at taxpayer expense) than their companies even earned. A substantial tax penalty (a claw back of 70% or better?) on these bonuses would net $Billions which could be used to pay down outstanding debt and discourage future feeding frenzies.

In the late 80′s a pie chart in the 1040 instruction book caught my attention. Still there, it describes the sources and expenditures of US Treasury funds including taxes. Not surprising was that Defense was the greatest spending portion. What I found alarming at that time was that almost as large a piece of the pie went to service the public debt. My reasoning held that this burden would eventually be lifted if the US Treasury would simply STOP selling bonds.

The meltdown on Wall Street last fall has by now been embraced by both Bush and Obama as an excuse to raid the treasury on behalf of the companies which caused the problem. Expect the DEBT piece of the US Expenditures pie to eclipse defense in your next 1040 book.

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