James Pethokoukis

Politics and policy from inside Washington

Net neutrality compromise won’t calm new Congress

Dec 21, 2010 17:40 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

WASHINGTON – Under the so-called net neutrality proposal from the U.S. Federal Communications Commission, broadband access providers like Comcast and Verizon would be prevented from blocking or discriminating against lawful Internet traffic. But they would be allowed to sell faster service for those who want to deliver video, games and the like. And they could increase rates for subscribers who use the Internet for those tasks that hog bandwidth.

To a great extent, the rules codify a compromise plan cooked up last August by Verizon and Google. That blueprint acknowledged both the inevitability of some government rule-making and the need to better divvy up future costs and revenue between the layers of pipes and those who deliver material through them.

Both views will do battle on Capitol Hill. Democrat Senator Al Franken says the FCC’s plan is “worse than nothing.” Republicans, meanwhile, see the ruling as an initial effort by the Obama administration to lean on regulatory agencies now that Democrats no longer completely run Congress. Expect the GOP-controlled House to quickly pass a disapproval resolution under the Congressional Review Act to overturn the ruling. If the measure gets 51 votes in the Senate, it would be up to the president to sign or veto.

By trying to play Internet traffic cop, the FCC may wind up getting run down. In the meantime, it’s just creating logjams elsewhere.

Why Chris Christie’s war may determine America’s future

Dec 20, 2010 20:27 UTC

Why the combative governor of New Jersey must succeed in dismantling the NJ teachers unions:

There are many teachers who inspire students. And then there’s Curtis Robinson, the sort of teacher who inspires tenure reformers. During his 18 years teaching disabled students in Paterson, Robinson hurled classroom chairs, punched a boy in the chest for failing to do his homework and shoved another kid against a blackboard until he cried, staff and students said.

Robinson still insists he had a gift with children. But he admits that using cocaine after school early in his career sometimes made him “preoccupied.” “Immediately after work, I’d have a line or two,” he told The Record in August. “I been teaching so long, you can function with your eyes closed.”

That’s probably true, thanks to the extensive job protections for teachers in New Jersey. Because Robinson was tenured, it took more than four years of legal proceedings to fire him, costing the state more than $100,000 in legal costs.

Please, read the whole thing.

What to do about China?

Dec 20, 2010 19:21 UTC

More and more, I think, China will be the defining issue of the 2012 presidential campaign. This Weekly Standard piece by Irwin Stelzer is a must-read on the topic:

The Communist regime sees trade policy as merely one weapon in a war aimed at overtaking the United States as the world’s preeminent economic and, by extension, military power. The undervaluation of the renminbi is a necessary means of keeping China’s export machine running at full tilt so as to create jobs for the millions who are moving from the country to the nation’s cities. Lacking democratic legitimacy, the regime’s principal claim to the loyalty, or at least the submission of its people, is its ability to provide jobs and a rising standard of living, doubly important in this period of transition to a new generation of leaders in 2012. Americans chortle: that mercantilist program of subsidizing exports cannot be sustained forever, as the inflow of dollars will sooner or later trigger inflation. Right: indeed, that is already happening, and forcing the regime to adopt a variety of measures to curb credit and inflation.

But largely irrelevant in the longer term on which the Chinese are focused. By the time the Chinese decide they will have to allow the renminbi to appreciate, they will have accomplished two long-standing objectives. First, their vaults will be stuffed with an even larger hoard of American IOUs, enough to give them an important influence over U.S. foreign policy. “How do you deal toughly with your banker?” asked Hillary Clinton of the then-prime minister of Australia, Kevin Rudd, at a luncheon last year. His answer is not recorded.

It is true that if the Chinese start to dump U.S. Treasuries and dollars, the value of their own piles of dollar-denominated assets would decline. But if the broader geopolitical objective were served, that would merely be a cost to consider as part of the military budget.

Second, by then the Chinese will have copied enough American and Western technology to be in less need of an undervalued renminbi—they will have made-in-China products that can dominate world markets even if their currency approximates its market value. The camels that trod the old Silk Road laden with spices and porcelain will have been replaced with air and sea freighters hauling solar panels and all sorts of goods based on copied technologies and purloined intellectual property. To cite just one example, the high-speed trains that China is now selling worldwide are based on technology brought to China by French, German and Japanese companies.

Obamanomics replaced by Reaganomics?

Dec 20, 2010 19:02 UTC

This Larry Kudlow commentary is a nice companion piece to my previous post:

In one fell swoop, Obamanomics is out the window. Reaganomics 2.0 is now in the driver’s seat. …  In the new session of Congress — which will feature a true Tea Party GOP conservative majority — new spending-limit policies can fill in the blanks left by the tax deal. But if President Obama has the acumen to see that a pro-growth economic policy is tied to low tax rates, the GOP should take great care not to cede that message and lose the economic-growth high ground. … A great battle will be joined over the spending, taxing, and regulatory mandates of Obamacare, which is probably the biggest job-killer of all. Conservative reformers in the new Congress will force this fight, along with tax, spending, entitlement, and monetary reform. Behind all this, however, the new Tea Party GOP must maintain a message of economic growth and prosperity.

COMMENT

The next big battle must be over regulations. The public prefers lower taxes thanks to several years of debate. But regulations are less visible to the public, politicians use corporations as agents to impose them, and the public thinks corporations are responsible for them. This is Reaganomics 2.0.

Posted by wfl | Report as abusive

Obama pivots as liberal dream collapses

Dec 20, 2010 18:58 UTC

Well, that was quick. America’s supposed generational shift toward an embrace of high-tax, high-service Big Government didn’t even make it a full two years. The new public policy consensus — built around favorite liberal issues of the environment and income inequality — promoted by Washington elites has been a flop with the public.

The nation’s ruling class thought for sure the financial crisis and subsequent Great Recession would create so much economic insecurity that it would be easy to pass a broad expansion of the welfare state — all financed by a combination of higher income taxes on the rich and new energy taxes on the middle class.

Instead, concerns about the federal budget deficit and competition with China became paramount. And the liberal agenda of healthcare reform and cap-and-trade suddenly seemed terribly off-point. So within a span of seven weeks, Democrats lost control of the House and then their legislative agenda.

First, the $858 billion tax deal. The near-term economic impact may modest. Some $500 billion of that total is merely the “cost” — as government bean counters look at things — of extending current income tax policy. Consumers will save most of the payroll tax cut, while extending the funding of unemployment insurance will make unemployment a bit higher than it would otherwise be.

But longer-term, the package is extremely bullish. It shows clearly that the “battlespace” of the coming Republican-Democrat fiscal clash will almost entirely be on the spending side of the ledger. There is little appetite among the public for sending more tax dollars to a wasteful and inefficient Washington. And the debate over restructuring the U.S. healthcare system will be between trusting government rationing or trusting market efficiency and choice.

The failure to pass a 2011 budget is also tremendously positive. It shows the impact of the Tea Party movement has not waned since the November midterms. This creates a situation next year where the flood of new Tea Party Republicans can combine a threat of government shutdown with a refusal to raise the national debt ceiling so as to squeeze spending cuts out of Obama and congressional Democrats.

Indeed, some GOP insiders believe the president — with a bit of nudging — may be ready to strike a deal to reform the tax system and cut future Social Security benefits along lines suggested by his own debt commission earlier this month. And as the tax compromise shows, Obama now seems willing to anger some within his own party in order to get legislation passed and win the reelection.

But if Obama does manage to somehow eke out a second term, it will be as president of a country that he may understand a bit better than he did two years ago. His true value and concerns in 2008, it turns out, were not those of most of his countrymen. Most Americans were not itching for government-run healthcare, a vast energy bureaucracy, an expansion of union power or new penalties on success and wealth creation. To a great extent, the term Tea Party America is redundant. The U.S. remains a center-right nation, and prosperity usually ensues when its leaders understand this.

COMMENT

Obama did not pivot-he lost, and Harry Reid caved. They’re not happy. This is not going to help any Dem in 2012.

Posted by pduggan | Report as abusive

US tax deal, budget feud set stage for 2011 cuts

Dec 17, 2010 23:23 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

To nations suffering austerity, it must seem as if Washington has gone mad. First, the U.S. Congress fails to agree on a 2011 budget. Then lawmakers overwhelmingly pass another giant stimulus. But both events actually hint at some chance of more disciplined fiscal action next year.

President Barack Obama will quickly sign the $858 billion stimulus/tax cut bill that funds unemployment benefits for 13 months and extends Bush-era tax cuts for two years. Of course, the bulk of the headline cost — $500 billion — comes simply from keeping tax rates as they have been, so it’s not traditional stimulus. It’s just keeping bad stuff from happening. And government bean counters would not score the renewal of a temporary welfare program as a spending increase. Still, the bill does delay any effort at deficit reduction since it does not pay for funding jobless benefits.

All this makes budget hawks wince, both at home and abroad. But even the International Monetary Fund concedes that America has the capacity to boost its sluggish economy through short-term tax cuts or spending increases — as long as it has in place a credible plan to reduce the longer-term fiscal gap. (And the best deficit strategy is cutting spending while also boosting growth through smart ( meaning low) tax policy.

That plan isn’t drawn up yet, but it could be getting closer. Democrats and Republicans in Congress are gridlocked over the $1.1 trillion budget for 2011. So they will probably pass a temporary spending measure to keep the government running for another month or two. This creates a situation next year where the flood of new Tea Party Republicans can combine a threat of government shutdown with a refusal to raise the national debt ceiling so as to squeeze spending cuts out of Obama and congressional Democrats.

Indeed, some GOP insiders believe the president –  with a bit of nudging — may be ready to strike a deal to reform the tax system and cut future Social Security benefits along lines suggested by his own debt commission earlier this month. And as the tax compromise shows, Obama now seems willing to anger some within his own party in order to get legislation passed.

The key to any longer-term deal on the deficit is to make it happen before presidential politics starts to intrude by the middle of 2011. That’s not going to be easy — but the flurry of activity at the end of 2010 provides a glimmer of hope.

The seeds of change

Dec 17, 2010 17:21 UTC

Yuval Levin sums things up correctly and thusly:

This opening of the eyes of the Republican appropriators (brought about by a groundswell of outrage from conservatives) is the most important part of the omnibus story, and maybe of the lame-duck Congress in general. Combined with the minor revolution John Boehner is attempting to enable in the House Appropriations Committee (by appointing some new members who might be best thought of as a kind of crop of anti-appropriators) it has the potential to change the culture of Congress (which has long consisted of three parties: Republicans, Democrats, and appropriators) in a very important and constructive way—if it lasts.

Congress throws a tea party

Dec 17, 2010 17:07 UTC

Overall, a pretty good day for those who believe in low taxes and less spending. Here is the money graph from my upcoming Reuters Breakingviews column:

Democrats and Republicans in Congress are gridlocked over the $1.1 trillion 2011 budget. So they will likely pass a temporary spending measure to keep the government running for another month or two. This creates a situation next year where incoming Tea Party Republicans can a) combine a threat of government shutdown with b) a refusal to raise the national debt ceiling to c) squeeze deep spending cuts from Obama and congressional Democrats. Indeed, some GOP insiders believe the president —  with a bit of nudging — may be ready to strike a deal on tax reform and cutting future Social Security benefits along lines suggested by his own debt commission earlier this month. And as the tax compromise shows, Obama is now seems more than willing to anger liberals within his own party and scuttle past campaign promises to get legislation passed.

Of course, the biggie is healthcare and that is going to have to be settle by voters in 2012.  But what a change from January 2009 when Obama’s election was supposed to signify a generational political swing toward more activist government.

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