House Republicans plan to vote Jan. 23 on a three-month extension of U.S. borrowing authority in an effort to force the Democratic-led Senate to adopt a budget plan.Ryan's Cop-Out
“We are going to pursue strategies that will obligate the Senate to finally join the House in confronting the government’s spending problem,” Speaker John Boehner of Ohio said in a statement today at the end of the party’s private policy retreat at a resort near Williamsburg, Virginia.
A leadership aide said Republicans are dropping their insistence that a short-term extension be accompanied by a dollar-for-dollar spending cut.
A leadership aide said Republicans are dropping their insistence that a short-term extension be accompanied by a dollar-for-dollar spending cut.
Senate Republican leader Mitch McConnell of Kentucky said in a statement that the lack of a Senate-passed budget in the last several years was a “shameful record that needs to end this year.”
Political divisions in Congress pose limits to the ability of Republicans to achieve their long-term goals of deep cuts in spending, Budget Committee Chairman Paul Ryan of Wisconsin told reporters at the retreat yesterday.
“No one is talking about default, no one wants to default,” South Carolina Republican Mick Mulvaney, who voted against the 2011 debt-ceiling deal, said in an interview today with Bloomberg Television. There is a “lot of support growing” among the rank and file for a short-term debt limit, he said.
The comments by Mulvaney and Ryan reflected the new political realities following President Barack Obama’s re-election that are spurring House Republicans to reassess their goals.
Because of vehicles with higher fuel efficiency, slightly less driving, and the gas tax not being changed since 1993, the motor vehicle fuel tax, or “gas tax”, has failed to pay for everything that Congress has legislated that it should pay for. The Highway Trust Fund, which includes the Mass Transit Account, has received several infusions of money from the “general revenue fund” – to the tune of over $60 billion.Mindless Possibilities
But a new report from the Government Accountability Office, the congressional think tank focused on financing, past, present, and future, has made the country take a giant step forward in considering a switch to a fee that more accurately charges usage. The report, like all GAO studies, was commissioned by the House Transportation Appropriations Subcommittee.
The gas tax charges drivers based on their use of petroleum, different vehicles can go different distances on the same amount of petroleum: essentially, some pay less than others for the same use of the road. Additionally, the counts of how much people drive has decreased (called vehicle miles traveled, or VMT), yet our demand for funds to maintain and build new infrastructure outpaces the incoming revenues from the gas tax. Lastly, the federal gas tax hasn’t changed at all, sticking to a cool 18.4 cents per gallon (for non-diesel drivers) since 1993. ”While the gas tax was equal to 17 percent of the cost of a gallon of gas when it was set at its current level in 1993, it is now only 5 percent” (Streetsblog).
The Simpson-Bowles Commission, convened by President Obama to find strategies to improve the country’s fiscal situation in 2010, “called for an immediate 15 cent-per-gallon increase in the gas tax”.
An alternative to the gas tax is to charge people based on how much they drive, a mileage fee. This can be calculated in more than one way, and doesn’t require the use of a GPS system to track where people are going: pay-at-the-pump (or electric vehicle charging station), and prepaid, self-reporting system based on odometer readings.
An on-again, off-again move by the Obama administration to scrap the federal gas tax in favor of a pay-per-mile fee would boost the tab to Americans as high as 250 percent, raising their current tax of 18.4 cents a gallon to as high as 46 cents, according to a new government study.Obama Mulls Replacing Gas Tax With Hefty Mileage Tax
But without a tax increase, said the Government Accountability Office study, the government's highway fund is going to go dry. One reason the fund is going broke: President Obama's push for fuel efficient cars has resulted in better mileage, and fewer stops at the pump.
The GAO study is just the latest review of federal spending that paints a grim picture of the nation's infrastructure. Just keeping spending at current levels, the GAO said, would require a near doubling of the gas tax to 32 cents a gallon, and that would jump to as high as 46 cents should the federal government add spending to fix crumbling infrastructure and build new roads.
One reason gas prices are so high is that the Feds impose a tax of 18.4 cents per gallon on gas. It’s 24.4 cents per gallon of diesel. We’ve had federal gas taxes since the 50’s to pay for highways and bridges, but since 1983, they started diverting about 20% of gas taxes to go to a Mass Transit Account that is supposed to pay for public transportation like buses and railways. So, those of us who don’t use mass transit are paying for those that do in the form of gas taxes. That’s socialism for you.
We’ve had the 18.4-cent per gallon tax since 1993 under the Clinton administration. Nowadays, with the further destruction of the dollar, that 18.4 cents just doesn’t buy what it used to. Now, the Highway Trust Fund (which includes the Mass Transit Account) is facing insolvency.
Some credit the loss of revenue to the fact that many are using more fuel-efficient cars and therefore not spending as much on gas. Isn’t that what Obama wanted? For people to use more “green” energy? And now, the Highway Trust Fund is running out of money.
That could be part of it, but billions of the gas tax revenues are used to fund pet mass transit projects, which those who drive cars generally don’t even use.
If states want to have public transportation, they should raise their own revenue and pay for it themselves instead of taking federal highway funds to build it. As for paying for highways and roads, we could cut hundreds of billions of dollars from Obama’s foreign policy expenditures and put those funds toward domestic infrastructure and not have to impose one penny of gas taxes to fund it.
Health-insurance premiums have been rising—and consumers will experience another series of price shocks later this year when some see their premiums skyrocket thanks to the Affordable Care Act, aka ObamaCare.Aetna CEO Sees Obama Health Law Doubling Some Premiums
The reason: The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard—indeed, premiums are already reflecting it.
Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions.
Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well). While ObamaCare imposes a financial penalty—or is it a tax?—to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive.
Eight states—New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts—enacted guaranteed issue and community rating in the mid-1990s and wrecked their individual (i.e., non-group) health-insurance markets. Premiums increased so much that Kentucky largely repealed its law in 2000 and some of the other states eventually modified their community-rating provisions.
While ObamaCare won't take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year.
Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher—a spread of about $5,500 per family.
Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.Fantasyland CBO Projection
While subsidies in the law will shield some people, other consumers who make too much for assistance are in for “premium rate shock,” Mark Bertolini, who runs the third-biggest U.S. health-insurance company, told analysts yesterday at a conference in New York. The prospect has spurred discussion of having Congress delay or phase in parts of the law, he said.
“We’ve shared it all with the people in Washington and I think it’s a big concern,” the CEO said. “We’re going to see some markets go up as much as 100 percent.”
The Obama administration said last year that “middle-class families” buying insurance through the law’s new online exchanges may save as much as $2,300 a year starting in 2014. Nick Papas, a White House spokesman, declined to comment on Bertolini’s predictions.
The CBO estimated in 2009 that the law will increase premiums 10 percent to 13 percent for individuals and have little effect on small and large-employer plans. After the subsidies are factored in, individual bills will go down by about 60 percent, the agency predicted.
“The issue here is whether or not America pays its bills,” Obama said. “We are not a deadbeat nation.”Increase the Debt Ceiling or Else
He also issued a warning about the potential tactics that House Republicans in particular are discussing, including demanding a new round of spending cuts attached to each incremental increase in the debt ceiling.
“They will not collect a ransom for not crashing the American economy,” Obama said.
President Barack Obama warned Congress on Monday that it must raise the debt ceiling or risk a "self-inflicted wound on the economy." Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner also delivered ominous calls for action.Congress Pretends to Hold the President Hostage
"We've got to stop lurching from crisis to crisis to crisis," Obama told reporters at the White House in the last news conference of his first term.
Hours later, Geithner said in a letter to Congress that even a brief default would be "terribly damaging." And Bernanke said "we're not out of the woods yet," despite the deal to avoid the "fiscal cliff."
House Republicans are seriously entertaining dramatic steps, including default or shutting down the government, to force President Barack Obama to finally cut spending by the end of March.Secretary of Treasury Gets Into the Act
The idea of allowing the country to default by refusing to increase the debt limit is getting more widespread and serious traction among House Republicans than people realize, though GOP leaders think shutting down the government is the much more likely outcome of the spending fights this winter.
“I think it is possible that we would shut down the government to make sure President Obama understands that we’re serious,” House Republican Conference Chairwoman Cathy McMorris Rodgers of Washington state told us. “We always talk about whether or not we’re going to kick the can down the road. I think the mood is that we’ve come to the end of the road.”
GOP officials said more than half of their members are prepared to allow default unless Obama agrees to dramatic cuts he has repeatedly said he opposes. Many more members, including some party leaders, are prepared to shut down the government to make their point. House Speaker John Boehner “may need a shutdown just to get it out of their system,” said a top GOP leadership adviser. “We might need to do that for member-management purposes — so they have an endgame and can show their constituents they’re fighting.”
U.S. Treasury Secretary Timothy F. Geithner said so-called extraordinary measures the Obama administration is taking to avoid breaching the federal debt ceiling would work only until mid-February to early March and warned that a failure by Congress to raise the limit could “impose severe economic hardship” on the country.Fed Gets Into the Act
“Congress should act as early as possible to extend normal borrowing authority in order to avoid the risk of default and any interruption in payments,” Geithner said in a letter today to House Speaker John Boehner and other congressional leaders. The letter was released by the Treasury Department.
Although the "fiscal cliff" deal made "some progress" in resolving the nation's debt problem, "we're not out of the woods yet," Federal Reserve Chairman Ben Bernanke said Monday.Progress or Lies?
"We are approaching a number of other fiscal critical watersheds," Bernanke told the University of Michigan's Gerald R. Ford School of Public Policy. "We have the funding of the government, we have the so called sequester…and we have the infamous debt ceiling which will come into play."
Echoing comments made earlier in the day by President Barack Obama, Bernanke said raising the debt ceiling merely gives the government the ability to pay its existing bills.
"It doesn't create new deficits, it doesn't create new spending," he said. He said it was like a family deciding that to save money, it won't pay its credit card bill.
Top business executives have warned U.K. Prime Minister David Cameron that he could damage Britain’s economy if he seeks to renegotiate the terms of its membership in the 27-country European Union.We Want Our Cake And Eat It Too
In a letter published in the Financial Times on Wednesday, Virgin Group’s Richard Branson, London Stock Exchange head Chris Gibson-Smith and eight other business leaders challenged Cameron’s plan to renegotiate the U.K.’s EU membership terms and put the matter to a referendum.
However, popular distrust of the EU has grown in Britain — one of the 10 countries in the region that doesn’t use the euro. The British public shows no interest in the EU’s plans to move closer together. Most can’t even seem to stomach the current level of power of the EU, which many Britons see as meddlesome and inefficient.
Though the business leaders urged EU reform in their letter, they argued “we must be very careful not to call for a wholesale renegotiation of our EU membership, which would almost certainly be rejected.”
“To call for such a move in these circumstances would be to put our membership of the EU at risk and create damaging uncertainty for British business, which are the last things the prime minister would want to do,” they said.
But while Cameron wants Britain to remain in the EU and to retain influence in the body, he is also resisting a push by many member states, like France and Germany, to grant central authorities in Brussels greater powers over financial and legal affairs for the whole of the EU.
In the long run, many EU countries want to turn the bloc into a United States of Europe, an idea British politicians, particularly among Cameron’s Conservatives, abhor.
Philip Gordon, the US assistant secretary responsible for European affairs, said that Britain's membership of the EU was "in the American interest".One Last Chance to Get this Right
His remarks came as David Cameron prepares to deliver a speech on Europe later this month. The Prime Minister is expected to promise to renegotiate Britain’s membership and then put the new terms to a referendum. Many Conservatives, including some Cabinet ministers, believe that a ‘No’ vote would mean Britain leaving the EU, although Mr Cameron says he opposes an exit.
President Barack Obama and congressional Republicans looked ahead on Wednesday toward the next round of even bigger budget fights after reaching a hard-fought "fiscal cliff" deal that narrowly averted potentially devastating tax hikes and spending cuts.Retreat, Retreat, Then Surrender
[The fiscal cliff agreement] set up political showdowns over the next two months on spending cuts and on raising the nation's limit on borrowing. Republicans, angry the deal did little to curb the federal deficit, promised to use the debt ceiling debate to win deep spending cuts next time.Opportunity to Surrender Again
"Our opportunity here is on the debt ceiling," Republican Senator Pat Toomey of Pennsylvania said on MSNBC, adding Republicans would have the political leverage against Obama in that debate. "We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean."
In a rare late-night show of unity, the Senate voted 89 to 8 to raise some taxes on the wealthy while keeping income taxes low on more moderate earners.Only 5 Republicans Voted Against
Republicans, unhappy that the bill contained over $600 billion in tax increases but only around $12 billion in spending cuts, said they may change it more to their liking and send it back to the Senate. Party leaders planned to take the temperature of rank-and-file lawmakers over the afternoon before deciding on a course of action.
"My recommendation would be not to take a package put together by a bunch of sleep-deprived octogenarians on New Year's Eve," said Representative Steve LaTourette, a moderate Republican from Ohio who is a close ally of House Speaker John Boehner.
"My district cannot afford to wait a few days and have the stock market go down 300 points tomorrow if we don't get together and do something," Representative Steve Cohen, a Democrat from Tennessee, said on the House floor.
The White House has floated $600 billion worth of spending cuts in earlier negotiations, and Obama said he would be willing to tackle deficit reduction over the coming months.
"There's more work to do to reduce our deficits, and I'm willing to do it," he said in a statement urging the House to pass the current bill.
Republican Representative Tom Cole said his House colleagues should pass the Senate bill rather than try to change it.
"We ought to take this deal right now, and we'll live to fight another day," Cole said on MSNBC.
At 2AM this morning, the Senate passed H.R. 8, the American Taxpayer Relief Act of 2012, by a vote of 89-8. Voting no were Bennet (D-CO), Carper (D-DE), Grassley (R-IA), Harkin (D-IA), Lee (R-UT), Paul (R-KY), Rubio (R-FL), Shelby (R-AL). Not voting were DeMint (R-SC), Kirk (R-IL), and Lautenberg (D-NJ). TaxProfBlog has the text of Senate-passed bill (157 pages). The Joint Committee on Taxation (JCT) has also produced a revenue estimate, as has the Congressional Budget Office (CBO).White-Flag Surrender
The House of Representatives will reconvene on Sunday evening, just less than 30 hours before the United States reaches the fiscal cliff.Flagpole Rally S&P 500 Futures
House Speaker John Boehner, R-Ohio, notified lawmakers that the House would come to order at 6:30 p.m. ET on Sunday in hopes of averting the end-of-year combination of tax hikes and spending cuts that constitute the fiscal cliff.
The lawmaker on Thursday's call told NBC News that any Senate plan Boehner puts on the House floor (of which there is no guarantee) would only receive as few as 40 Republican votes, making Democratic help necessary.
"If the Senate will not approve these bills and send them to the president to be signed into law in their current form, they must be amended and returned to the House," Boehner told Republicans Thursday, according to a source on the call. "Once this has occurred, the House will then consider whether to accept the bills as amended, or to send them back to the Senate with additional amendments. The House will take this action on whatever the Senate can pass -- but the Senate must act."
Senate Republican Leader Mitch McConnell said late Thursday that Senate Republicans are open to any White House proposal to avert the fiscal cliff.Easy Escape for Senate Republicans
Reid urged the House to pass a Senate bill extending Bush-era tax cuts for those earning $250,000 a year or less. The Nevada Democrat said the House is being operated under “a dictatorship of the speaker.”
A spokesman for House Speaker John Boehner said in response: “Senator Reid should talk less and legislate more.”
Even in the Democratic-controlled Senate, Obama’s preferred bill faces an obstacle: Sixty senators are required to break a filibuster, and Democrats control 53 seats.
The United States doesn’t have a fiscal problem. Or an economic problem. It has a political problem. The workings of the government are so gummed up that we’re in danger of falling into a recession that’s completely avoidable.Economic Folly of Recession Avoidance
I think it’s high time we locked the members of Congress in a room and told them that we’ll let them out when they reach a deal.
Talks to avoid a fiscal crisis appeared to stall on Wednesday as President Barack Obama accused Republicans of digging in their heels due to a personal grudge against him, while a top Republican called the president "irrational."Concession Nonsense
Boehner and Obama have each offered substantial concessions that have made a deal look within reach. Obama has agreed to cuts in benefits for seniors, while Boehner has conceded to Obama's demand that taxes rise for the richest Americans.
However, the climate of goodwill has evaporated since Republicans announced plans on Tuesday to put an alternative tax plan to a vote in the House this week that would largely disregard the progress made so far in negotiations.
Obama threatened to veto the Republican measure, known as "Plan B," if Congress approved it.
Boehner's office slammed Obama for opposing their plan, which would raise taxes on households making more than $1 million a year and is a concession from longstanding Republican opposition to increasing any tax rates.
"The White House's opposition to a backup plan ... is growing more bizarre and irrational by the day," Boehner said through his spokesman, Brendan Buck.
Significant DifferencesTo be sure, "token" concessions were made, but "substantial" is another matter.
- There is a huge gap between $400,000 and $1,000,000 on tax hikes.
- There is a huge gap between $400 billion and a $trillion on entitlement cuts.
- Boehner wants a debt-ceiling deal to include spending cuts for every dollar upped.
The gaps that still remain are huge. Nonetheless, the stock market acts as if a deal is at hand.
Obama administration officials told leaders of business and financial services groups that negotiations with House Speaker John Boehner have deteriorated in the past 24 hours, a person familiar with the meeting said.Who's Posturing?
Obama said at the White House that he offered congressional Republicans a “fair deal” and accused them of “posturing” in the talks. Republicans need to “take the deal” he offered, the president said.
Boehner, who is pressing Obama to accept deeper spending cuts and a higher income threshold for tax-rate increases, said if the president doesn’t accept the Republican plan he’ll be responsible for “the largest tax increase in American history.”
The $4.6 trillion tax increase over the next decade, scheduled to start taking effect in January, would be about 2.3 percent of the U.S. gross domestic product. In those terms, it would be smaller than a 1942 tax increase during World War II, which was 5 percent of GDP according to the Treasury Department.
House Speaker John Boehner pressed his backup tax plan Wednesday despite a White House veto threat, saying it will be approved Thursday by the GOP-controlled House.Obama's Fantasyland Statements
"Then the president will have a decision to make," Boehner said. "He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history."
Earlier in the day, President Barack Obama threatened to veto Boehner's "Plan B," pressing instead for a deal to avert the "fiscal cliff." He said the two sides were only a few hundred billion dollars apart, and he hoped to get the job done before Christmas.
"Plan B" calls for extending tax cuts for people making up to $1 million. The White House immediately rejected it Tuesday, saying it was unbalanced and didn't go far enough on seeking more revenue from the wealthy.
Obama said he would continue to work with Boehner and was prepared to do "tough things." But he said he would not compromise on his demand that he be given authority to raise the debt ceiling without Congress' approval.
"What separates us is probably a few hundred billion dollars," Obama said. "The idea that we would put our economy at risk because you can't bridge that gap doesn't make a lot of sense."
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