The Washington Post asked readers to describe outgoing House Speaker Nancy Pelosi in a single word. It then made a word cloud from the responses:
When you start looking for signs of the VAT virus, you start seeing them everywhere. Here are some excerpts from Howard Gleckman over at TaxVox, the blog of the Tax Policy Center:
I’ve just spent 90 minutes listening to five Washington hands discuss “the financial and economic consequences of an exploding debt.. … Urban’s Bob Reischauer and Rudy Penner (both former CBO directors), American Enterprise Institute Congress-watcher Norm Ornstein, TPC co-founder Len Burman, and international economist Mike Mussa agreed that the depths of the medium and long-term problem can’t be overestimated. …
Mussa, who spent a decade at the International Monetary Fund and is currently a senior fellow at the Peterson Institute for International Economics, figures it could be years before overseas investors turn bearish on the U.S. In part, he says, that’s because net foreign lending has actually fallen in the past two years—their huge increases in investments in Treasury paper have been more than offset by shrinking portfolios of private debt.
But that won’t last. Once the economy begins to get back on track, private capital and government will again compete for the same foreign money—bad news for everyone seeking funds.
Is there any way out? Ornstein sees little chance that a hyper-partisan Congress will confront the budget crisis in the absence of a financial market crisis, or even in the face of one. Interestingly, Burman, Mussa, and Penner think that when the fix finally comes, it will include a Value-Added Tax. Penner calls it “almost inevitable.”
Then there is this analysis by Heritage of the costs:
Just a 1 percent VAT on all goods and services in the economy would raise $63 billion for Congress to spend each year. Some suggest the VAT rate should be set as high as 20 percent. At that rate, a VAT that covers all goods and services in the economy – including food, clothing, housing, and health care – would collect an additional $1,260 billion a year and cost every U.S. household $10,680 annually.
Even if Congress passes a VAT that has a rate of just a few percentage points, it would likely lead to higher rates in the future. Evidence from other countries that already have VATs show once it is on the books the rate tends to rise over time.
You can add House Speaker Nancy Pelosi to the group of Democrats or Obama allies (John Podesta, Paul Volcker, Roget Altman) calling for a value-added tax. (I predicted all of this days ago.) Here is Pelosi (via The Hill):
Pelosi, appearing on PBS’s “The Charlie Rose Show” asserted that “it’s fair to look at” the VAT as part of an overhaul of the nation’s tax code.
“I would say, Put everything on the table and subject it to the scrutiny that it deserves,” Pelosi told Rose when asked if the VAT has any appeal to her.
The VAT is a tax on manufacturers at each stage of production on the amount of value an additional producer adds to a product.
Pelosi argued that the VAT would level the playing field between U.S. and foreign manufacturers, the latter of which do not have pension and healthcare costs included in the price of their goods because their governments provide those services, financed by similar taxes.
“They get a tax off of that and they use that money to pay the healthcare for their own workers,” Pelosi said, using the example of auto manufacturers. “So their cars coming into our country don’t have a healthcare component cost.
“Somewhere along the way, a value-added tax plays into this. Of course, we want to take down the healthcare cost, that’s one part of it,” the Speaker added. “But in the scheme of things, I think it’s fair look at a value- added tax as well.”
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.
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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.
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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.
It is turning out to be a very, VERY close vote in the House of Representatives. Some of the moderate Rs who were going to vote for it are weakening — like Mary Bono Mack of California. Earlier, it looked like Speaker Pelosi had the votes but was trying to get a big enough margin that politically vulnerable Ds could vote fopr it …now I think the issue is finding enough votes, period. Big gamble for Pelosi might be a bridge too far …