James Pethokoukis

BAILOUT BILL: Good piece in Daily Caller by Sam Zamarippa on how financial reform extends TBTF. If financial reform fails, that will be a big reason.

BILLONS AND BILLIONS: Actually, make it $300 billion in outstanding bailout money, according to Pro Publica.

THE WAY FORWARD: Yet another insightful analysis by Nicole Gelinas on how to restructure the banking system.

VETTING A VAT: Brett Swanson tries to explain the WSJ’s editorial board position on a VAT. It is not so much that board hates a VAT (indeed a Hall-Rabushka VAT-like tax would be OK) but that it hates a VAT on top of the current tax system:

The Journal has always opposed a European style VAT on top of our current anti-growth tax code. The point is not that they hate a VAT conceptually. The point is that they don’t want the federal government’s share of the economy to grow dramatically from its already too-large and too-intrusive level. But I doubt the Journal is fundamentally opposed to a VAT-like levy under any circumstances . . . because as they surely know, it is in fact an efficient way to collect revenue.

VON RYAN’S EXPRESS: Kim Strassel outlines the Dem attack on Paul Ryan’s deficit reduction plan. She also pushes the GOP to fully embrace the plan. Well, someone should.

SICK SYSTEM: Philip Klein helpfully explains why Anthem’s health insurance rate hike makes the case for free market reform.

With healthcare on ice, financial reform is the hottest game in town. Now Dodd is trying to bypass Shelby to somehow gin up a bipartisan bill with Corker –  who takes the issue extremely seriously. A few thoughts:

1) A CFPA is still the stickler. GOP, including Corker probably, will only accept a non stand-alone regulator will narrow rule-writing and enforcement powers. But  CFPA is dominant issue for Obama WH.

2) Corker is more easily undercut by McConnell than old bull Shelby. If McConnell doesn’t want a bill, there will not  be a bill.  At this point, the smart betting is that GOP views denying Dems a victory more important than anti-populist backlash for opposing reform. They will label it a bailout bill if there is even a hint at giving Treasury TARP 2.0 powers. But if it is watered-down enough, it can pass.

3) If a Dodd-Corker bill gets to the floor, both Left and Right will push a flurry of amendments that they would’t try with Dodd-Shelby. Should be a chaotic mess.

4) Looks like the Volcker rule isn’t going anywhere.

1) Obama administration economists reckon the jobless rate will hover around 10 percent this year, and now say the U.S. economy will generate an average of just 95,000 jobs a month. That tallies with Team Obama’s forecast of anemic 3.0 percent GDP growth. Monthly job growth of 125,000 to 150,000 is needed to start bringing the unemployment rate down from its current 9.7 percent. That’s what would normally be expected more than two years after the onset of a recession. It’s not happening — at least not yet.

2) Enter the U.S. Senate. The centerpiece jobs proposal would spare businesses from paying payroll taxes on some new hires for the rest of 2010. Based on a Congressional Budget Office analysis, this measure might create a feeble 50,000 to 90,000 jobs.

3) Aside from the bill’s limited potential effects, short-term fixes are not what’s needed. America’s job machine didn’t suddenly break down in 2008. It has been sputtering since the Internet bubble burst. Some economists now think a decline in education, innovation and other former U.S. advantages means the realistic minimum unemployment rate has gone up from 4-5 percent to as much as 7 percent.

4) That suggests legislative efforts at improving the employment picture should focus on long-term measures to improve education and help innovative businesses. Options in the latter category include a reduction in the U.S. corporate tax rate, targeted infrastructure spending and long-term tax credits for research and development. It’s a shame Washington seems able to set politics aside to accommodate special interests, but not for what’s really needed.