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Obama Demands That Congress Approve His Jobs Bill

October 1, 2011

WASHINGTON (AP) — The White House and congressional Republicans just can’t agree on the best prescription for the economy, with President Barack Obama demanding passage of his $447 billion jobs bill and the GOP pushing to cut government red tape. Both efforts, the focus of competing radio and Internet addresses Saturday, face little chance of success as all-or-nothing proposals in a divided Congress. Three weeks after Obama submitted his legislation, the Democratic-controlled Senate has yet to consider it. “It is time for Congress to get its act together and pass this jobs bill so I can sign it into law,” he said in his Saturday address. The president has mounted a steady public campaign on behalf of his bill, trying to cast Congress and Republicans in particular as obstacles. With a populist flair, Obama has barnstormed across the country to prod Congress, so far to no avail. The stops have come in contested election states such as Ohio, North Carolina, Colorado and Virginia, and the president has taken his message directly to the districts of leading Republicans. On Tuesday, he will go to the Texas district represented by GOP Rep. Jeb Hensarling, co-chairman of a special deficit reduction committee in Congress. In the Republican address, Rep. Morgan Griffith of Virginia made a pitch for legislation in the House that would reduce regulatory requirements on businesses. He cited rules affecting cement plants and restrictions on institutional boilers as examples of government overreaching. “For years, excessive regulations have been a source of frustration for businesses trying to stay afloat,” he said. “President Obama, who has said he’s willing to consider stopping excessive regulations, should call on the Democrat-led Senate to follow the House in passing these jobs bills,” he said. Obama’s public approval ratings have held steady in the low 40 percent range, but the public’s assessment of his handling of the economy has been significantly lower. Obama has tried to deflect responsibility to congressional Republicans, who together with congressional Democrats fare much worse than the president. Obama’s proposal would cut payroll taxes for workers and for businesses, lengthen jobless benefits, spend on public works projects and pay local and state governments to keep teachers, police and firefighters on the job. He has proposed paying for the legislation with targeted tax increases. They include limits on deductions taken by wealthier taxpayers, closing corporate loopholes and ending oil and gas subsidies. Republicans have said some of his proposals, such as the payroll tax cuts, are worth considering. But they object to spending proposals and flatly reject raising taxes to pay for them. Even some Senate Democrats have balked at the taxes Obama would raise. There are 51 Democrats in the Senate and two independents who typically vote with them and 47 Republicans. But it usually takes 60 votes to overcome procedural roadblocks and pass legislation. Sen. Dick Durbin of Illinois, the second-ranking Democrat in the Senate and an Obama ally, told a radio interviewer this past week that there were not 60 votes in the Senate now for Obama’s bill. “We can work on it,” Durbin said. “We should.” In his address, Obama said that “some Republicans in Congress have said that they agree with certain parts of this jobs bill. If so, it’s time for them to tell me what those proposals are.” Obama said that if people who listened to or watched his remarks feel the same way, “don’t be shy about letting your congressman know. It is time for the politics to end.” ____ Online: Obama address: www.whitehouse.gov GOP address: http://www.youtube.com/HouseConference

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Martha Burk: Congress Should Puncture This Cartel

September 30, 2011

It’s the scary season at the movies, and I don’t mean the usual spate of Halloween films that bombard us every October. Now playing in theaters nationwide is Contagion , the fictitious account of a mysterious and fast-spreading virus that’s killing millions around the world. There’s no vaccine in sight — until the heroine steps in and injects herself with an experimental antidote that works. Meanwhile civil order breaks down when misguided seekers of an herbal remedy storm pharmacies as police, fire, and health care workers go on strike out of fear. It’s an entertaining and slightly scary fantasy that comes out all ok in the end. Much more frightening is Puncture , already playing in New York and opening around the country next week. Unlike Contagion , Puncture is no fantasy. It’s based on the true story of Karen Daley, a nurse who died of AIDS after suffering a needlestick while giving an injection to a patient. The movie has plenty of villains, and most of them are wearing suits and ties. You may even recognize some of the types — they bear an uncanny resemblance to members of Congress. What does Congress have to do with movies, injections, and AIDS death? Plenty, as it turns out. Puncture exposes a very real medical cartel that’s not only needlessly taking lives like Daley’s, but costing you (yes you, the taxpayer) a lot more than the price of a theater ticket. Millions of dollars in fact. All perfectly legal, courtesy of your elected representatives on Capitol Hill. It’s a real life horror story, and here’s how it works. Hospitals of course use a lot of medical devices — everything from hypodermic needles and heating pads to cardiac stents, artificial hips, and pacemakers. They buy from a variety of manufacturers. And they want to get the most effective devices possible and at a fair price, right? Not exactly. Virtually all sales of medical devices to U.S. hospitals are controlled by a cartel made up of large Group Purchasing Organizations (GPOs). The GPOs represent a select group of suppliers, and only that select group. They go to hospitals and negotiate “sole source” contracts — meaning the hospitals agree to buy the products from the GPO-sanctioned companies — and no others. It doesn’t matter whether the chosen few actually provide the best devices for the intended purpose, or whether their products cost many times what the competition would charge. All that matters is that these anointed suppliers are on the GPO “list.” How does a company get on the list? You would think by making the most medically sound or cost-effective products. But you’d be wrong. It’s easier than that. Manufacturers that can afford it just pay a big fat fee to the GPO. Even if their “approved” devices cost a lot more, hospitals don’t much care, because insurance companies — including Medicare and Medicaid (e.g. taxpayers) — ultimately pick up the tab. (Insurance premiums have almost doubled in the last decade, and this crummy arrangement has got to be a big contributor.) And here’s the deal sweetener: at the end of the year, the GPO returns a dollar percentage of the contracts back to the hospital . If this scam sounds like a bald-faced kickback scheme, that’s what it is. Pay-to-play from the device manufacturers, followed by kickbacks to hospitals, resulting in bilking insurance companies and ultimately consumers. Nobody even tries to deny it, because Congress exempted GPOs from anti-kickback statutes in the 1980s, in what critics say was a direct violation of anti-trust law. In the past three decades there has been no serious effort to correct this gross fleecing of patients and taxpayers, event though research shows that $37.5 billion a year could be saved — much of it from Medicare and Medicaid — if competition were opened up. Right now the little guys can’t get past the GPO gatekeepers, even though they may have better devices. Puncture highlights one real-life example of a manufacturer with a safer, cheaper hypodermic that would have saved Daley’s life and many others (worldwide, needlesticks result in 1,300,000 deaths annually). He was shut out, threatened and intimidated. When none of that worked, the big boys tried to buy him out to shut him up. But the larger story is not just about needles — hundreds of faulty devices continue to be used in thousands of hospitals. Congress fiddles while people die. If our elected representatives don’t care about safety they ought to at least consider the bottom line, which many worship. Thirty-seven billion a year in savings is more than chump change, and it’s something the Congressional “super committee” to cut the deficit should take seriously. And candidates of all stripes are running hard on transparency and accountability. This is one way they could boost both — if they care more about real people than the corporate fat cats that contribute the big bucks. Wouldn’t hurt to ask them at the next town hall.

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WATCH: Obama Heckled By Shouting Man

September 27, 2011

(AP/The Huffington Post) LOS ANGELES — A heckler shouting about Jesus Christ interrupted President Barack Obama at a fundraiser before security dragged him out. It happened at the House of Blues in Los Angeles Monday night. The man positioned himself up in front of the stage and started shouting loudly right after Obama started talking. The heckler proclaimed that “Jesus Christ is God” and a Christian God. According to Real Clear Politics, the outburst was met with boos from the crowd at the event. Obama stopped talking. Then after a moment the crowd started chanting “Four more years! Four more years!” and drowned out the heckler. As he was taken out by security the man called out that Obama is an antichrist. Later, another, more-friendly heckler shouted out, “Don’t forget medical marijuana!” Obama responded: “Thank you for that.”

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White House Worries About Solyndra’s Effect On Obama

September 16, 2011

WASHINGTON — The Obama administration was worried about the financial health of a troubled solar energy company – and the political fallout it could bring – even as officials publicly declared the company in good shape, newly released emails show. An email from a White House budget official to a co-worker discussed the likely effect of a default by Solyndra Inc. on President Barack Obama’s re-election campaign. “The optics of a Solyndra default will be bad,” an official from the Office of Management and Budget wrote in a Jan. 31 email to a senior OMB official. “The timing will likely coincide with the 2012 campaign season heating up.” The email was released by the House Energy and Commerce Committee as part of its investigation into a half-billion dollar federal loan to the company. The email says the budget official wanted White House budget director Jacob Lew to warn Energy Secretary Steven Chu about the risk posed by Solyndra, which was once the poster child for the Obama administration’s clean energy program. It has since laid off 1,100 people and filed for bankruptcy. At the time of the email, the Energy Department was pushing to release an additional $67 million to Solyndra to help the company through a cash-flow crisis. The budget official, whose name is blacked out in the email, questioned whether Solyndra should be given additional money on top of the nearly half-billion it had received by then. “Questions will be asked as to why the administration made a bad investment, not just once (which could hopefully be explained as part of the challenge of supporting innovative technologies), but twice (which could easily be portrayed as bad judgment, or worse),” the email says. Ultimately, the Fremont, Calif.-based solar panel maker received a total of $528 million in federal loans. The FBI raided Solyndra’s headquarters last week and interviewed company executives at their homes. A U.S. official, who spoke on condition of anonymity because the case is under seal, said the search was related to a fraud investigation into whether Solyndra filed inaccurate documents with the government. The Silicon Valley company was the first renewable-energy company to receive a loan guarantee under the stimulus law, and the Obama administration frequently touted Solyndra as a model for its clean energy program. President Barack Obama visited the company’s headquarters last year. Even as Obama declared that “the future is here” during a May 2010 visit to Solyndra, warning signs were being sent from within the government and from outside analysts who questioned the company’s viability. At least three reports by federal watchdogs over the past two years warned that the Energy Department had not fully developed the controls needed to manage the multibillion-dollar loan program. Emails obtained by The Associated Press show that a White House official dismissed reports about Solyndra’s gloomy future. An email from Greg Nelson, a White House official who had been involved in the planning of Obama’s May 2010 trip to Solyndra’s headquarters, to a Solyndra executive downplayed a July 2010 news story in a trade publication that criticized the company’s financial health. “Seems B.S.,” Nelson wrote. A 2009 report by the Energy Department’s inspector general warned that the DOE lacked the necessary quality control for the loan guarantee program, which was created in 2005 to support clean-energy projects that could not obtain conventional bank loans due to high risks. In July 2010, the Government Accountability Office said the Energy Department had bypassed required steps for funding awards to five of 10 applicants that received conditional loan guarantees. The report did not publicly identify the companies that were not properly vetted, but congressional investigators say one of them was Solyndra. The company was the first to receive a loan guarantee after the program was expanded under the 2009 stimulus law. In March, DOE Inspector General Gregory Friedman again faulted the loan program for poor record keeping. A report by Friedman said the program “could not always readily demonstrate, through systematically organized records … how it resolved or mitigated relevant risks prior to granting loan guarantees.” According to the report, the department kept limited or no electronic data on 15 of 18 loan guarantees examined. Damien LaVera, a spokesman for the Energy Department, said all reviews were completed before any taxpayer money was obligated. Even so, warnings about the company persisted. A report last year by auditor PricewaterhouseCoopers said Solyndra had suffered recurring losses from operations and negative cash flows, raising “substantial doubt about its ability to continue as a going concern.” But last May, a Solyndra email informed the White House that “things are going well” at the company and that it had “good market momentum, the factory is ramping up and our plan puts at cash positive later this year. Hopefully, we’ll have a great story to tell toward the end of the year.” Meanwhile, the Treasury Department’s inspector general said Thursday it has opened an investigation into the Solyndra loan. Spokesman Richard Delmar said the inspector general is reviewing the role and actions of the Federal Financing Bank, a government corporation supervised by the Treasury Department. The bank provided the low-interest loan to Solyndra. The loan is one at least 15 loans totaling more than $6 billion made by the financing bank as part of the stimulus program The Energy Department’s inspector general also is investigating Solyndra and the DOE’s loan guarantee program, which has provided billions in loan guarantees to renewable energy companies. The loan guarantees essentially make it easier for the companies to get financing, because the government guarantees repayment in the event of default. In Solyndra’s case, the loan came from the government itself. The Obama administration is moving to finalize as many as 15 loan guarantees for renewable-energy companies before the stimulus program ends Sept. 30. Republicans question whether that could lead to more loans to companies that fail like Solyndra. LaVera said the department won’t take any shortcuts during the approval process. ——– Associated Press writer Matt Apuzzo contributed to this report.

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House Liberals Propose New Tax Hike For Rich

September 14, 2011

WASHINGTON — Nervous that Social Security seems under siege from all sides, congressional liberals on Wednesday proposed raising the payroll tax that funds the program, but only for people earning more than $250,000 a year. The legislation is designed to keep the pension program solvent for the next 75 years, which is the standard used by government actuaries, by putting an additional $6.5 trillion into the Social Security trust fund over that period. The plan also is intended to head off other efforts to overhaul the program or trim benefits, or to use its funds to help pay for debt reduction. “No more discussion about raising the retirement age, no more discussion about cutting benefits, no more discussion about privatization,” said Rep. Peter DeFazio, D-Ore., one of the sponsors. With Republicans making opposition to tax increases their mantra, the measure seems to have little chance of enactment. Nonetheless, it gives liberals a chance to underscore their support for the widely popular program at a time when President Barack Obama has proposed cutting the payroll tax to help create jobs and GOP presidential contender Rick Perry, the Texas governor, has called its finances a “Ponzi scheme.” The bill’s sponsors noted that during his 2008 presidential campaign, Obama proposed raising the payroll tax on people earning over $250,000. He’s discussed the idea as president but has yet to offer legislation following through on it. Currently, workers and their employers each owe a payroll tax of 6.2 percent of a worker’s wages up to $106,800 a year. That tax would also be imposed on wages above $250,000 under the liberals’ plan. Other sponsors include Sens. Bernard Sanders, I-Vt., Barbara Boxer, D-Calif., and Sheldon Whitehouse, D-R.I. In an effort to boost consumer spending and create jobs, Obama last week proposed paring the 6.2 percent payroll tax on employees to 3.1 percent next year and cutting the payroll tax for employers as well. He would replace the revenue Social Security would lose with money from the government’s overall budget. That plan has split liberals. Sanders said he opposes it because it would make Social Security more vulnerable to budget cuts. Boxer said she favors it because it would create jobs while protecting Social Security. In debt reduction talks between Obama and House Speaker John Boehner, R-Ohio, this summer, they discussed a plan to slow the growth of Social Security benefits that they never embraced. In 2005, President George W. Bush proposed letting recipients turn part of their Social Security nest egg into stock market investments. The idea went nowhere.

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Thom Ruhe: The Myth of The Million-Dollar Idea

September 12, 2011

Too many people think of entrepreneurs as Web Wunderkinds who stumble upon some million-dollar idea in their college dorm room. The more common experience for entrepreneurs is the discovery of a simple idea that is not necessarily unique, yet often overlooked. Take Brian Scudamore, an unemployed high-school dropout, whose moment of inspiration struck while staring at a beat-up waste-removal truck in line at a McDonald’s drive-through. Within a week, Scudamore had his own truck, and was driving up and down streets in search of homes with rubbish out front. He would knock on doors and ask residents whether they wanted their junk carted off for a fee. Through face-to-face interactions with customers, Brian discovered what prevented some people from using trash hauling services: The appearance of waste removal trucks and the demeanor of the workers who man them. As Scudamore built his business, which he called the Rubbish Boys, he insisted that each truck was washed daily, painted with the company’s signature colors and that employees wore clean, professional uniforms. This new approach to an old business helped the Rubbish Boys stand out, and eventually evolve into a $100 million business. What may be surprising is that stories like Scudamore’s are the norm among successful new businesses, according to Amar Bhide, author of Origins and Evolution of New Businesses . In the book, Bhide notes that the majority of Inc. 500 companies are started by inexperienced entrepreneurs who do not possess any new technology. Examining hundreds of successful ventures, Bhide finds that the typical business has humble, improvised origins. Even entrepreneurs like Bill Gates and Sam Walton initially pursued small, uncertain opportunities, without much capital, market research or breakthrough technologies. In other words, the well-planned, venture-backed startups we so often hear about in the media are the exception rather the rule. Bhide further finds that coping with ambiguity and surprises, face-to-face selling, and making do with second-tier employees is more important than foresight, deal-making or recruiting top-notch teams. Now most people reading this column wouldn’t likely recognize The Rubbish Boys as a household name in the waste management business. That’s because, like all good founders, Scudamore learned over time from customer feedback and market adaptation and eventually re-branded the company by the more familiar name it goes by today: 1-800-Got-Junk? Founders like Brian Scudamore remind us that rather than breakthrough ideas accelerated by loads of venture capital, it is often simple solutions to everyday problems, combined with years of persistence and business-building, that lead to entrepreneurial success stories. Watch Brian Scudamore reveal the story behind his business, 1-800-Got-Junk?, :

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What Would America Do Without Mail?

September 10, 2011

WASHINGTON — Imagine a nation without the Postal Service. No more birthday cards and bills or magazines and catalogs filling the mailbox. It’s a worst-case scenario being painted for an organization that lost $8.5 billion in 2010 and seems headed deeper into the red this year. “A lot of people would miss it,” says Tony Conway, a 34-year post office veteran who now heads the Alliance of Nonprofit Mailers. Businesses, too. The letter carrier or clerk is the face of the mail. But hanging in the balance is a $1.1 trillion mailing industry that employs more than 8 million people in direct mail, periodicals, catalogs, financial services, charities and other businesses that depend on the post office. Who would carry mail to the Hualapai Indian Reservation in the Grand Canyon? To islands off the coast of Maine? To rural villages in Alaska? Only the post office goes to those places and thousands of others in the United States, and all for 44 cents. And it’s older than the United States itself. Ernest Burkes Sr. says his bills, magazines and diabetes medication are mailed to his home in Canton, in northeast Ohio, and he frequently visits the post office down the street to send first-class mail, mostly documents for the tax service he runs. As his business increased over the past three decades, so has the load of mail he sends, and it’s still pretty steady. “I don’t know what I’d do if they’d close down the post offices,” said Burkes, who doesn’t use rival delivery services such as UPS or FedEx. “They need to help them, just like they helped some of these other places, automobiles and others.” Postmaster General Patrick Donahoe is struggling to keep his money-losing organization afloat as more and more people are ditching mail in favor of the Internet, causing the lucrative first-class mail flow to plummet. Donahoe has a plan to turn things around, if he can get the attention of Congress and pass a series of hurdles, including union concerns. “The Postal Service is not going out of business,” postal spokesman David Partenheimer said. “We will continue to deliver the mail as we have for more than 200 years. The postmaster general has developed a plan that will return the Postal Service to financial stability. We continue to do what we can on our own to achieve this plan and we need Congress to do its part to get us there.” He acknowledged that if Congress doesn’t act, the post office could reach a point next summer where it doesn’t have the money to keep operating. That wouldn’t sit well with Mimi Raskin, a wine and antiques store owner in Grants Pass, Ore., who likes her birthday card mailed. “If you get a birthday card on the Internet, it’s like, well, I didn’t care about you enough to go to a store, buy a card that suited your personality, and mail it,” she said. Donahoe and his predecessor, John Potter, have warned for years of the problems and stressed that the post office will be unable to make a mandated $5.5 billion payment due Sept. 30 to a fund for future medical benefits for retirees. A 90-day delay on the payment has been suggested, but postal officials and others in the industry say a long-term solution is needed. Donahoe has one. It includes laying off staff beyond the 110,000 cut in the past four years, closing as many as 3,700 offices, eliminating Saturday delivery and switching from the federal retirement plan to one of its own. Cliff Guffey, president of the American Postal Workers Union, called the proposal “outrageous, illegal and despicable.” A contract signed in March protects many workers from layoffs. Guffey said the attempt to change that now “is in utter disregard for the legal requirement to bargain with the APWU in good faith.” Other unions, including the National Association of Letter Carriers, are negotiating their contracts with the post office. Yet Donahoe’s efforts are drawing praise from people such as Conway, the head of the nonprofit mailers, who says these are necessary steps that officials have shied away from in the past. Several bills proposing ways to fix the agency are circulating in Congress. One, by Rep. Darrell Issa, R-Calif., would impose a control board to make the tough decisions. When it was first introduced, the bill was perceived as “way out there,” Conway said. But as the postal financial problems have become more obvious, “you’re seeing people thinking maybe it isn’t that extreme.” Gene Del Polito, of the trade group American Association for Postal Commerce, said now that Donahoe has offered a plan, “why not give him the authority do to do what needs to be done.” If that fails, then a control board could be instituted, he said. Closing offices seems an easy way to save, but members of Congress never want cuts in their districts, and while the public may mail less, people still want their local office to stay open. The changes that Donahoe are proposing would mean a different post office, but one that still operates for people such as Jovita Camesa, who’s 75 and lives in a downtown Los Angeles retirement complex. She said she’s sending more first-class mail than ever due to her expanding circle of grandchildren. Camesa said she wouldn’t think to use the Internet for those birthday and holiday greetings, or start going online to seek out the articles she now reads in the issues of Vogue, Readers Digest, Prevention and other magazines that are delivered to her. “I’m not interested in the Internet or computers,” she said. “I’m very traditional.” Ellen Levine, editorial director of Hearst Magazines, told a Senate hearing that the Internet has not eliminated the need for mail delivery of magazines. “Nearly all publishers use the United States Postal Service to deliver their magazines to subscribers,” she said. “While most consumer titles are also available on newsstands, mail subscriptions will remain the major component of hard-copy magazine circulation in the United States for the foreseeable future.” Overall, Levine said subscriptions account for about 90 percent of magazine circulation. Olive Ayhens, an artist who lives in Brooklyn, N.Y., says she pays her bills online but still uses first-class mail. She was mailing announcements of her newest gallery opening; one was going to her son in London. “Less than a dollar, I’m sending to London,” she said during a stop at the James A. Farley Post Office in Manhattan. The internet, along with the advent of online bill paying, has contributed to a sharp decline in mail handled by the post office, from 207 billion in 2001 to 171 billion last year. Although the price of stamps has increased from 34 cents to 44 cents over the same period, it is not enough to cover the post office’s bills, in part because of higher labor costs. Yet one of the biggest problems isn’t mail flow or labor or other costs. Rather, it’s a requirement imposed by Congress five years ago that the post office set aside $55 billion in an account to cover future medical costs for retirees. The idea was to put $5.5 billion a year into the account for 10 years. That’s $5.5 billion the post office doesn’t have. No other government agency is required to make such a payment for future medical benefits, so why not drop it for the post office. Like everything in Washington, it’s not that simple. The Postal Service is not included in the federal budget, but the Treasury Department account that receives that payment is. That means that when the post office deposits that money, it counts as income in the federal budget. So, if it doesn’t make the payment, the federal budget deficit appears $5.5 billion bigger, something few members of Congress are likely to favor. In announcing his bill, Issa warned of a need to avoid a “bailout” of the post office, which does not receive taxpayer money for its operations. Others, however, have characterized the $5.5 billion payments as a post office bailout of the federal budget because it makes the deficit appear smaller. “We have made that argument,” said Del Polito. But it has been rejected with the argument that the payments are required by law and ending them requires a change in the law. That problem of appearing to increase the federal deficit creates a reluctance to deal with the matter directly, Del Polito said. So where does that leave the post office and those Americans who don’t have access to the internet? Sen. Joe Lieberman, I-Conn., suggested more people start sending passionate letters as a way to save the agency. As good an idea as love missives may be, they are unlikely to be enough. ___ Associated Press writers Jeff Barnard in Grants Pass, Ore.; Deepti Hajela in New York; Bob Johnson in Montgomery, Ala.; Kantele Franko in Columbus, Ohio; and Jacob Adelman in Los Angeles contributed to this report. ___ Online:

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Obama Said To Be Looking At $300 Billion Jobs Plan

September 7, 2011

WASHINGTON — The economy weak and the public seething, President Barack Obama is expected to propose $300 billion in tax cuts and federal spending Thursday night to get Americans working again. Republicans offered Tuesday to compromise with him on jobs – but also assailed his plans in advance of his prime-time speech. In effect, Obama will be hitting cleanup on a shortened holiday week, with Republican White House contender Mitt Romney releasing his jobs proposals on Tuesday and front-running Texas Gov. Rick Perry hoping to join his presidential rivals Wednesday evening on a nationally televised debate stage for the first time. Lawmakers began returning to the Capitol to tackle legislation on jobs and federal deficits in an unforgiving political season spiced by the 2012 presidential campaign. Adding to the mix: A bipartisan congressional committee is slated to hold its first public meeting on Thursday as it embarks on a quest for deficit cuts of $1.2 trillion or more over a decade. If there is no agreement, automatic spending cuts will take effect, a prospect that lawmakers in both parties have said they would like to avoid. According to people familiar with the White House deliberations, two of the biggest measures in the president’s proposals for 2012 are expected to be a one-year extension of a payroll tax cut for workers and an extension of expiring jobless benefits. Together those two would total about $170 billion. The people spoke on the condition of anonymity because the plan was still being finalized and some proposals could still be subject to change. The White House is also considering a tax credit for businesses that hire the unemployed. That could cost about $30 billion. Obama has also called for public works projects, such as school construction. Advocates of that plan have called for spending of $50 billion, but the White House proposal is expected to be smaller. Obama also is expected to continue for one year a tax break for businesses that allows them to deduct the full value of new equipment. The president and Congress negotiated that provision into law for 2011 last December. Though Obama has said he intends to propose long-term deficit reduction measures to cover the up-front costs of his jobs plan, White House spokesman Jay Carney said Obama would not lay out a wholesale deficit reduction plan in his speech. In a letter to Obama on Tuesday, House Speaker John Boehner and Majority Leader Eric Cantor outlined possible areas for compromise on jobs legislation. Separately, Senate Majority Leader Harry Reid said last month’s unemployment report – it showed a painfully persistent 9.1 percent jobless rate and no net gain of jobs – “should be a wakeup call to every member of Congress.” Whatever the potential for eventual compromise on the issue at the top of the public’s agenda, the finger pointing was already under way. Senate Republican leader Mitch McConnell predicted Obama’s Thursday night speech to Congress on jobs legislation would include “more of the same failed approach that’s only made things worse over the past few years.” He spoke a few moments after Reid had said that Republicans, rather than working with Democrats to create job-creating legislation, insist on “reckless cuts to hurt our economic recovery.” The Senate returned to Capitol Hill on Tuesday after an August recess. The House comes back Wednesday. Left largely ignored in the latest political remarks was a remarkable run of late-summer polls that show the country souring on Obama’s performance – and on Congress’ even more. A Washington Post-ABC survey released Monday found that 60 percent of those polled expressed disapproval of Obama’s handling of the economy. Thirty-four percent said his proposals were making the situation worse and 47 percent said they were having no effect – dismal soundings for a president headed into a re-election campaign. Only 19 percent said the country was moving in the right direction. Not that Republicans, or Congress as a whole, are in good odor with the voters. The Post-ABC News poll found only 28 percent approval for the job the Republicans are doing, and 68 percent disapproval. An AP-GfK survey last month put overall support for Congress at 12 percent – the lowest level ever in the survey’s history. The tea party has also been hurt, according to the same poll, which found that 32 percent of those surveyed have a deeply unfavorable impression of the movement that helped give Republicans control of the House in the 2010 elections. In their letter to Obama, Boehner and Cantor wrote that neither party would win all it wants from the coming debate over jobs legislation. “We should not approach this as an all-or-nothing situation,” they said, striking a conciliatory tone in the first moments of a post-summer session of Congress. But it was unclear what, if any, concessions they were prepared to make. “We are not opposed to initiatives to repair and improve infrastructure,” they wrote, saying they favor repeal of a current requirement for 10 percent of highway funds to be spent on items such as museums or bike trails. But they did not say they would support any additional funding for construction, and aides declined to provide any additional details. Boehner and Cantor also said the House was ready to pass free trade agreements negotiated with Colombia, Panama and South Korea measures, which they noted the White House estimates would create 250,000 jobs. The administration wants the trade deals approved simultaneously with legislation to provide job training and other benefits for workers who lose their job to imports, and the letter from the Republican leaders promised they would consider such measures rather than pledging to pass them. There was maneuvering on another front during the day. Democrats won approval in a Senate subcommittee for legislation adding $6 billion in spending to pay victims of Hurricane Irene and past disasters dating to Hurricane Katrina, including $4 billion for the 2012 budget year. Republicans did not object, even though the legislation did not include other cuts to offset the cost and the new spending would exceed levels permitted in a sweeping compromise passed last month to cut future deficits by nearly $1 trillion over a decade. It is unclear when the measure will come to the Senate floor, and whether Republicans will attempt to offset the increase when it does. In comments in recent weeks, Cantor has said any increase must be offset. For his part, Romney chose Nevada, where unemployment stood at a nationwide high of 12.9 percent in July, for a campaign speech in which he outlined numerous proposals to create jobs. He called for lowering the maximum corporate tax from 35 percent to 25 percent and abolishing the tax on dividends and investment earnings for anyone making less than $200,000 a year. He also said any new government regulation that raises costs for businesses should be accompanied by other steps to reduce the burden by an identical amount. “America should be a job machine, jobs being created all the time,” he said. The elements Romney outlined – lower taxes and less regulation – are the same as those advanced by Republicans in Congress. McConnell said Republicans “will spend the next weeks and months arguing in favor of a robust legislation agenda aimed at blocking or repealing some of the most pernicious rules and regulations.”

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Obama Presses Republicans To End ‘Political Posturing’

September 3, 2011

WASHINGTON — President Barack Obama is calling on Congress to pass a transportation bill to ensure funding for roads and construction jobs, arguing that failure to do so would spell economic disaster. Republicans say they support passing the bill, but Obama says time is running out and “political posturing” may stand in the way. “There’s no reason to put more jobs at risk in an industry that has been one of the hardest-hit in this recession,” Obama said Saturday in his weekly radio and Internet address. “There’s no reason to cut off funding for transportation projects at a time when so many of our roads are congested, so many of our bridges are in need of repair and so many businesses are feeling the cost of delays. “This isn’t a Democratic or a Republican issue – it’s an American issue,” the president said. Obama issued his call as he prepares to make a major jobs speech to a joint session of Congress on Thursday in which he’s expected to push for bipartisan action on tax credits and infrastructure spending to get the economy out of its doldrums. A new jobs report just found the economy stopped adding jobs in August and unemployment stood at 9.1 percent. Federal highway programs, and the fuel taxes that pay for them, will expire Sept. 30 unless Congress acts, and funds for construction projects across the country would be held up. That follows the partial shutdown this summer of the Federal Aviation Administration over a showdown between the House and Senate that led to thousands of layoffs of workers on airport construction and other projects. Transportation experts say the impact of an expiration of highway programs would be even more devastating for the economy. Transportation programs tend to have wide bipartisan support, but given the focus of the House Republican majority on cutting the budget, the legislation could run into disputes over how much to spend on it. Republicans used their weekly address to push for passage of a balanced budget amendment to the Constitution and attack Obama over his approach to job creation. Rep. Bob Goodlatte, R-Va., complained that the administration has spent too much money on stimulus initiatives that didn’t work while piling on burdensome regulations. “While our workers are being held back by Washington, there’s nothing in place to stop the federal government from bankrolling further big government spending – the kind that leads to government expansion into private-sector jobs, burdensome mandates on job creators and skyrocketing national debt,” Goodlatte said. The debt legislation passed last month requires both the House and Senate to vote on a balanced-budget amendment, and Goodlatte said Obama should use his upcoming jobs speech to join the call for the measure. But the administration and most Democrats oppose the approach as unnecessary and political, arguing Congress should be able to control the budget without amending the Constitution. Passage is unlikely anyway since it requires two-thirds approval of both houses of Congress and ratification by three-quarters of the states.

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Seniors Faces Foreclosure After Making Mortgage Payment Too Early

August 22, 2011

A senior couple in Pasco County, Florida is facing the prospect of foreclosure. But the reason doesn’t have to do with missed mortgage payments. This time, it’s reportedly because they paid too early one month, and used the wrong routing number the next . Only three months after Sharon Bullington, 70, negotiated a mortgage modification under the Obama administration’s Home Affordable Modification Program (HAMP), Bank of America informed her and her husband that they had been ejected from the trial plan for improper payments, St. Petersburg Times reports. (h/t The Daily What.) The problem was that Sharon has made her January payment in December, instead of the required “month in which it [was] due.” She then allegedly incorrectly wrote her routing number on her February payment, leading the bank to cancel the modification. The Bullington’s explanations and pleas for help have reportedly been to no avail. The episode is only the latest in a series of oddball foreclosure stories that have included a homeowner being asked to pay $0.00 in order to avoid foreclosure and JPMorgan repurchasing a soldier’s home on the same day he returned from a tour of duty in Iraq . But in many ways, the Bullington’s story goes against the typical narrative of a post-recession American homeowner’s struggle. Instead of paying too early, most of those threatened with foreclosure are struggling to make payments on time. Indeed, the number of mortgages which are overdue by a month rose to the highest level in a year in the second quarter of this year , according to Bloomberg . Consequently, the jobs crisis is largely being blamed for the percentage of home loans overdue by 30 days, according to the Mortgage Bankers Association in Washington. Also a rarity is the Bullington’s ability to successfully negotiate a mortgage modification in the first place. Despite the continued existence of the Obama administration’s anti-foreclosure initiative HAMP, the number of preliminary mortgage modifications approved in June was the lowest since April 2009, at 15,000, according to government data reported by The Huffington Post . Read the entire story here

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Krugman: ‘Economy Desperately Needs A Short-Run Fix’

August 12, 2011

For what we’re seeing now is what happens when influential people exploit a crisis rather than try to solve it.

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White House Considering Renting Out 300,000 Foreclosed Homes

August 10, 2011

WASHINGTON — The Obama administration may turn thousands of government-owned foreclosures into rental properties to help boost falling home prices. The Federal Housing Finance Agency said Wednesday it is seeking input from investors on how to rent homes owned by government-controlled mortgage companies Fannie Mae and Freddie Mac and the Federal Housing Administration. The U.S. government rescued Fannie and Freddie in September 2008 and has funded them since the financial crisis. The mortgage giants own or guarantee about half of the nation’s mortgages and nearly all new mortgages. At the end of last month, the government owned roughly 248,000 foreclosed homes, officials said. About 70,000 of those are listed for sale. But officials expect the number of foreclosures to soar in the coming months. Many foreclosures have been stalled so attorneys general and federal regulators can investigate whether lenders cut corners and improperly handled thousands of cases. Once a settlement is finalized, foreclosures are expected to pick up again and further depress home prices. Converting the homes into rentals may reduce “credit losses and help stabilize neighborhoods and home values,” said Edward DeMarco, acting director of the Federal Housing Finance Agency, which oversees Fannie and Freddie. Homes in foreclosure sell at a 20 percent discount on average, which can hurt prices of surrounding homes. It also might meet the growing demand for rentals. Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press. A federal “request for information” released Wednesday included an option for previous homeowners to rent out the homes or for current renters to lease to own. Private investors could also be allowed to manage the rental properties. Officials are also mulling whether to only implement the program in areas hit hardest by foreclosures and in those with high demand for rental housing, such as Arizona and Florida. The homes include single-family homes and condominiums. The deadline for responses is Sept. 15.

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Clarence B. Jones: Standard and Poor’s, The White House and the Economy

August 8, 2011

The White House, Treasury officials and persons in the private sector who are now so publicly critical of Standard and Poor’s for its downgrading of the creditworthiness of the US government are too late and off the mark. Anyone who takes the time to read the statement of S&P will soon learn that it is more right than wrong in the instant case about credit worthiness, on a balance-sheet basis, about the US government. That they are probably correct now on lowering the credit rating of our Treasury bills does not absolve them for their inaction in 2009 and 2010 for failing to withdraw their double and triple A rating for flawed credit default swaps and collateralized bundled mortgages sold by major commercial and investment banks to individual and institutional purchasers in reliance on S&P and other credit rating agencies. The White House and the Tea Party leadership in Congress have only themselves to blame. Don’t blame S&P. What did the White House think would be the impact on the credit worthiness if the only deal they could craft to enable the debt ceiling to be raised was limited only to cuts in the deficit and current spending without ANY companion inclusion of revenues, either by ending existing tax subsidies, expiration of the Bush tax cuts and/ or raising taxes? S&P is critical of the “ransom” paid by the White House to the Republicans and Tea Party by dropping its demand for a “balanced sacrifice.” It is similarly critical of the Republican Party for holding the government and the White House hostage. Nothing White House or Democratic Party surrogates can say in criticism of S&P is going to change the underlying financial and political data which is the basis of their downgrade. Yes, no question that S&P’s credibility now has been compromised by their failure to act earlier during the collateralized mortgage obligations and credit default swaps debacle; as well the failure to monitor Fannie Mae and Freddie Mac. No need for me to repeat my earlier comments last week about the importance of the words used by the president in addressing our urgent problems. Unless President Obama comes before the country with bold job-creating initiatives that are credible to the country, and even to the Republican Party, his re-election may be remote, if not irrelevant. Again, I know I sound like a “broken record,” or repetitive writer, when I acknowledge that President Obama cannot do it alone. Bill Maher’s suggestion about the formation of a “Donner Party” on the Democratic side, to off-set the power of the Tea Party, may not be as crazy as it sounds, but for its association with the early settlers of California who, stranded in the high Sierra Nevada mountain snow of the Donner Pass, began to eat one another to survive.

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Tea Party Influence On GOP Could Prove Make Or Break In 2012

August 7, 2011

(AP) WASHINGTON — The tea party is here to stay. The 2-year-old phenomenon’s muscular role in the debt-ceiling crisis made that clear, despite earlier predictions it would fade away when the national furor over health care cooled down. Now the GOP establishment wonders if the grass-roots movement will power Republicans to new victories in 2012, or dash them on the rocks of unbending ideology. One thing is obvious: The tea party already is reshaping the Republican Party. Once-moderate lawmakers are shifting sharply right, fearing primary challenges more than Democratic opponents. And most GOP presidential contenders have positioned themselves to the right of party leaders, and even some House tea partyers, on the debt-ceiling issue. The movement’s influence on the GOP remains double-edged. Tea partyers’ adamant opposition to tax hikes helped Republican Party regulars force President Barack Obama to surrender his push for new taxes on the rich. But House tea partyers also embarrassed Speaker John Boehner by forcing him to hastily revise his debt-ceiling bill. To secure their votes, Boehner added a balanced-budget provision that had no hope of becoming law, and which drew ridicule from some quarters. A weakened requirement that the House and Senate only vote on – not necessarily pass – a balanced budget amendment before the end of the year survived in the final product. With the tea party about to play its first role in a presidential election, mainstream Republicans hope to harness its energy in campaigns nationwide, as they did in 2010. The trick is to do it while avoiding the damage of that year, when tea partyers cost the GOP likely Senate pickups by nominating out-of-the-mainstream conservatives in Delaware, Nevada and Colorado. The lesson, party insiders say, is not for the tea party to dampen its fire. Rather, they say, Republican candidates must understand its power. Shame on those who get blindsided this time. The tea party is “driving the conversation,” said Republican consultant Danny Diaz. “The president, Congress, Democrats, Republicans are all talking about austerity, restraint, the spending crisis. That’s not going to change.” Asked if another tea party insurgent might cost Republicans a likely Senate win, as Christine O’Donnell did last year in Delaware, Diaz put the onus on the party’s candidates. “If you are seeking office in this environment,” he said, “it would behoove you to discuss the out-of-control spending that’s taking place in Washington.” Another Republican consultant, Brian Nick, agreed. “A candidate has got to figure out a way to get through a primary,” he said, and it’s unfair to make scapegoats of tea partyers. Veteran elected Republicans with mainstream conservative histories have gotten the message. Some are virtually reinventing themselves as tea partyers. In Utah, already-conservative Sen. Orrin Hatch has veered so hard to the right that it’s a constant topic of conversation, and sometimes amusement, in state political circles. Still, many wonder if he can survive if two-term Rep. Jason Chaffetz, a tea party favorite, decides to challenge him. In New Mexico, former five-term Rep. Heather Wilson built a reputation as a GOP centrist, willing to buck her party’s leaders and support raising the minimum wage and expanding children’s health insurance. In 2008, she lost a Senate primary to a more conservative Republican. Now, running for Senate again, Wilson has pledged to oppose raising the nation’s debt ceiling unless Congress passes a balanced budget amendment to the Constitution. That requires a two-thirds majority in both chambers, which lawmakers in both parties say is politically impossible. Virginia Republican George Allen, who is trying to regain the Senate seat he lost in 2006, has taken a similar stand, even though he voted four times to raise the debt ceiling while in office. Many congressional Republicans support the balanced-budget amendment. In the end, however, a solid majority of them, including most members of the House tea party caucus, voted for the bipartisan debt-limit deal that dropped a demand that the amendment first win passage and be sent to the states for ratification. The big unknown is the tea party movement’s influence on the presidential race. Some political professionals think tea partyers already are pushing GOP candidates so far right that the eventual nominee might struggle to pick up independent voters in the general election against Obama. Former Massachusetts Gov. Mitt Romney appeared unenthusiastic when announcing his opposition to the debt-ceiling compromise that Congress enacted with solid GOP support in both chambers. Jon Huntsman, the only presidential hopeful to support the measure, said Romney did not show leadership. The tea party’s influence on the GOP “will come with heavy baggage in independent-leaning states like Maine or even Indiana,” said Nate Daschle, a Democratic activist whose father was Senate majority leader. That could apply to Senate races in those states, where incumbent Republicans face tea party challengers for the nomination, and to the presidential race, he said. Obama won Indiana narrowly, and Maine handily, in 2008. Independent voters skip most primaries but play big roles in general elections. They want “progress over rigid ideology,” Daschle said. If tea party voters dominate GOP primaries, they can nominate unorthodox candidates such as Delaware’s O’Donnell. “The tea party didn’t happen by accident and it wasn’t contrived,” Daschle said. “It’s one of the purest and most organic movements in politics today, and while it may endanger its parent party, this is exactly the way the system was designed.” A recent Pew Research/Washington Post poll suggests that Republicans did themselves few favors in the debt-ceiling struggle. About four in 10 Americans said they had a less favorable view of congressional Republicans because of the negotiations, while three in 10 said their opinion of Democrats in Congress faded. People who now have a dimmer view of tea party-affiliated lawmakers, because of the debt issue, outnumber those with a more positive view. A CBS News/New York Times poll this week shows that only 20 percent of Americans and 41 percent of Republicans have a favorable view of the tea party, down from 26 percent and 59 percent, respectively, in April. Just 18 percent of Americans now view themselves as tea party supporters, compared with 31 percent who did immediately after the November 2010 elections. Texas Tech University political scientist Tim Nokken warns against overstating the tea party’s influence. “I’m not sure the GOP is going to march lock-step with the tea party,” he said in an email. The movement may have its biggest impact on Republican House members eager to avoid a primary threat from the right, he said. These lawmakers may act “not so much out of agreement with the tea party agenda, but as a means to reduce the likelihood of a primary challenge,” Nokken said. Either way, the tea party is leaving a big mark on the GOP. And the limits of its influence are not yet clear.

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Obama Pushes Proposals Geared Toward Job Growth

August 6, 2011

WASHINGTON — President Barack Obama is calling on Congress to put politics aside when lawmakers return from their recess in September and pass a series of initiatives the president says will spur job growth. In his weekly radio and Internet address Saturday, Obama said Washington’s urgent mission is to get the economy growing faster and create jobs. The latest jobs report released Friday was better than expected, with the economy adding 117,000 jobs and the unemployment rate ticking down a notch to 9.1 percent. “Our job right now has to be doing whatever we can to help folks find work, to help create the climate where a business can put up that job listing, where incomes are rising again for people,” Obama said. The steps the president wants Congress to take include extending payroll tax cuts for another year, passing three free trade agreements and enacting patent reform. All of the measures are proposals the president has called for previously. Obama’s weekly address capped a week that began with lawmakers and the White House reaching a deal to raise the nation’s debt ceiling and avert a potentially catastrophic government default. The deal also cuts federal spending by $2.1 trillion or more over the next decade. Late Friday, however, the credit rating agency Standard & Poor’s downgraded the United States’ AAA credit rating for the first time in history, a move that could push interest rates higher and further unsettle the economy. Obama, who recorded his address before S&P’s move, said that while the debt-ceiling deal makes some progress in reducing the nation’s deficit, both parties are going to have to work together on a larger plan to get the country’s finances in order. In the weekly Republican address, New York Rep. Michael Grimm said the debt deal legislation was far from perfect and the cuts did not go far enough. Grimm, who voted for the bill, called on lawmakers to follow it up with a balanced-budget constitutional amendment this fall, saying it was the best way to provide certainty to the private sector and control long-term spending. Grimm also said that the jobs report out Friday proves that Obama’s policies are not working. He said the GOP’s jobs plan calls for a simpler and fairer tax code, a reduction in regulations and an expansion of U.S. energy production. ___ Online:

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Robert Creamer: Reality is Calling… The Problem Isn’t Deficits It’s Jobs!

August 5, 2011

The only surprise is that it happened so fast. The cacophony of right-wing talk about how we need to “cut spending” to create jobs reached a fever pitch in the debate over the deficit ceiling that culminated just days ago. Now the world economy is sending a stark message that makes such talk sound stupider and stupider by the minute. The “conventional wisdom” is getting whiplash. As markets tumble and job reports show no growth, it is crystal clear to anyone with even a passing acquaintance with economics that Republican budget cutters are completely, utterly wrong. In fact they are 180 degrees off course. They are trying to do exactly the opposite of what the economy needs in order to grow and create jobs. History will remember them the same way it views their ideological progenitors that in 1937 decided Roosevelt’s New Deal had gone too far and needed “fiscal discipline.” That led to a sharp end of the economic recovery and a renewed downward plunge into joblessness. We’ve seen this movie. It’s a disaster film. Beohner, Cantor and Ryan and the whole gang are like a group of Medieval doctors who think that the way to treat disease is by “bleeding” patients. It may have made sense to the Medieval mind, but it was dead wrong. It should shock no one that when they ran out of money, state and local governments laid off hundreds of thousands of workers who would no longer be able to buy products and services. In fact the loss of half a million public sector jobs this year has almost completely offset private sector job growth. The workforce lost 37,000 more government workers in July. That is one of the reasons why the economy generated only 117,000 jobs in July, below the 150,000 needed to keep up with population growth. But instead of providing more funds to state and local governments to maintain schools and other public services, the Republican answer is that we must cut further and faster — meaning that there are fewer jobs, fewer consumers, less economic growth and a deepening cycle of economic stagnation. The problem with the economy is not “confidence” — it’s consumers. Businesses aren’t sitting on almost two trillion in cash because they are timid. They don’t invest in hiring new workers, or building new plants and buying equipment because they don’t see any new consumers to buy the products or services they would produce. The only way to break this dangerous cycle of economic stagnation is for all of us together — through our government — to band together and put people who can’t find jobs back to work producing things that we all need. That jumpstarts the economy by putting paychecks in people’s pockets so they will buy products. All of those businesses will see customers out there again and will hire new workers, build new plants and buy equipment. This should not be a hard concept to grasp, but Republicans like to cover their eyes and ears and hum as if that will make the truth about what is necessary to restart the economy go away. Virtually every economist in America agrees that the Obama stimulus package created millions of jobs. The problem wasn’t that it didn’t work to create jobs. The problem was that it wasn’t big enough to create enough jobs. And now the economic data indicates that Bush’s Great Recession was even more severe than we knew at the time, and there is little question that the proper response would have been much greater levels of economic stimulus than Congress ultimately passed — not less. America was perilously close to a new Great Depression. The Stimulus Bill stopped that — but it was far too small. Our problem was not “runaway government spending” over the last several years — it was too little government spending. As for the deficit, increasing taxes on the wealthy would have done little to slow economic demand. Rich people demand all the goods and services they need with or without tax breaks. Increasing tax rate on the rich would have taken a bunch of that cash that got hoarded by the wealthy and put it instead into pay checks that would have turned into the tonic the economy really needed: more economic demand. And it would have addressed problem of the long-term budget deficit at the same time. The Republicans incessantly argue that we can’t tax “job creators.” Job creators are not the rich that hoard their money. They are the everyday Americans who need money in their pockets to demand the products that will give businesses a reason to hire and invest. Some of the “mainstream” media has been complicit in this misdirection of the American political dialogue. The Washington Post’s editorial page is obsessed with the need for more “fiscal discipline.” Yes, we need to reduce the long-term deficit, the same way we did in the ’90s, by demanding the wealthy and big corporations pay their fair share — and by generating economic growth. But the most important part of that formula is the economic growth. Many of the talking heads go on endlessly about how there are only three factors that affect the deficit: revenue, spending and the cost of government borrowing. But that’s wrong. The fourth factor — and the most important factor — is the level of economic growth. The level of economic growth actually has more impact on the overall deficit than any other factor. And to have economic growth in the future, we need government action to put people to work now. Now the worst enemy of our economy is the notion that there is “nothing we can do.” All sorts of “serious” writers say, well, the Fed has lowered interest rates as far as they can go, and the stimulus is winding down — as if the stimulus “winding down” is an act of God. Of course there is something we can do. We can actually create jobs. Putting people to work is not an intractable problem that is mysterious. For about $220 billion you could put over two million Americans to work for two years — and massively lower the unemployment rate. I’m not talking about “incentivizing” companies, or cutting tax rates, or providing “stimulus.” I’m talking about funding specific job slots at state and local governments and the National Parks. I’m talking about hiring people directly, the way Roosevelt did it during the last great American jobs emergency. You’d fund specific jobs — the same way that Clinton did for the 100,000 cops in the COPS program in the ’90s. You’d have a teacher corps, a school improvement corps, a parks improvement corps. You’d fund slots for fire fighters and home health care workers. You would create jobs by actually creating jobs. And you could fund it by raising the tax rates on millionaires and billionaires. Time for us to snap out of our deficit fixation-induced stupor and realize that unless we act, the American economy is indeed headed over the cliff as a result of Congress’ unwillingness to act to pass a real emergency jobs bill. Call Congress. Tell them one simple message: America’s problem isn’t deficits. It’s jobs. Robert Creamer is a long-time political organizer and strategist, and author of the book: Stand Up Straight: How Progressives Can Win, available on Amazon.com . He is a partner in Democracy Partners . Follow him on Twitter @rbcreamer.

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Robert Reich: The Republicans’ Double-Dip, and What Must Be Done

August 5, 2011

John Boehner said Tuesday the Republicans got “90 percent of what we wanted” from the budget deal. So presumably he and his colleagues are willing to take responsibility for some 450 points of Thursday’s mammoth 513-point drop in the Dow Jones Industrial Average. I’m being a bit facetious — but only a bit. It’s always dangerous to read too much into one day’s move in the stock market. Yet the stock sell-off — not just today’s, but that of the last days — cannot be easily dismissed. It marks Wall Street’s largest losing streak since 2008. Republicans repeatedly assured the nation that once the debt-limit deal was done — capping spending, cutting the budget deficit, and getting “90 percent” of what they wanted — the economy would bounce back. Just the opposite seems to be happening. Call it the Republican’s double-dip recession. Wall Street investors aren’t ideologues. They don’t obsess about budget deficits ten years from now, or the size of the government. One day doesn’t make a trend, but a giant sell-off like this is motivated by hard, cold realities. Here are the two hard, cold realities investors are most worried about: First, the economy looks like it’s dead in the water. The Commerce Department reports almost no growth in the first half of the year. And job growth is just about at a standstill. Far fewer jobs were generated in May and June than necessary just to keep up with the growth in the potential labor force — meaning the employment picture is actually worsening. Investors fear Friday’s jobs report for July will show more of the same. Secondly, investors now know the federal government’s hands are tied. The original stimulus is over; the Fed’s “quantitative easing” is over. This week’s deal over the debt ceiling cinches it. The market is now on its own — without enough rocket power get out of the continuing gravitational pull of the Great Recession. Now that the deal is done, Obama and the Democrats will have a much harder time passing anything close to the stimulus necessary to breach the gap between what consumers (who are 70 percent of the economy) are willing to spend and what the economy can produce at or near full-employment. Not incidentally, the Commerce Department’s revised data for what happened to the economy in 2008 and 2009 shows the drop to have been far greater than had been supposed. The economy plunged 8.9 percent in the fourth quarter of 2008 — the steepest quarterly decline in more than half a century. And in 2009 household buying declined almost 2 percent (compared with a previous estimate of 1.2 percent). That’s the biggest contraction in almost sixty years. This means the original stimulus should have been much larger in order to offset the drop. With cash-starved state and local governments simultaneously scaling back their own spending, the federal stimulus needed to be even bigger. So much for Republican claims that the original stimulus “didn’t work.” Of course it didn’t, given the size of the slide. It was never a debt crisis. The debt crisis was manufactured. It’s been a jobs, wages, and growth crisis all along. And that reality has finally caught up with us. Now that we’re slouching toward a double-dip recession, the only hope is voters will tell their members of Congress — who are now on recess back home — to stop obsessing about future budget deficits and get to work on the real crisis of unemployment, falling wages, and no growth. We need a bold jobs bill to restart the economy. Eliminate payroll taxes on the first $20,000 of income for two years. Recreate the WPA and the Civilian Conservation Corps. The federal government should lend money to cash-strapped states and local governments. Give employers tax credits for net new jobs. Amend the bankruptcy laws to allow distressed homeowners to declare bankruptcy on their primary residence. Extend unemployment insurance. Provide partial unemployment benefits to people who have lost part-time jobs. Start an infrastructure bank. And more. The jobs bill should be number one on the nation’s agenda. It should have been all along. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Senate Votes To End FAA Shutdown

August 5, 2011

WASHINGTON — The Senate has approved legislation ending a two-week partial shutdown of the Federal Aviation Administration, clearing the way for furloughed employees and airport construction projects to resume. Two senators were present to approve a House bill extending FAA’s operating authority, using unanimous consent procedures that took less than 30 seconds. Employees can return to work as soon as Monday if President Barack Obama signs the bill before then. The shutdown has cost the government about $400 million in uncollected airline ticket taxes and idled thousands of construction workers. THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below. The Senate is poised to pass legislation ending a two-week partial shutdown of the Federal Aviation Administration that has cost the government about $400 million in uncollected airline ticket taxes and idled thousands of workers. A bipartisan compromise reached Thursday cleared the way for the Senate to approve a House bill extending the FAA’s operating authority through mid-September, including a provision that eliminates $16.5 million in air service subsidies to 13 rural communities. Senators have scattered for their August recess, but the measure can be approved Friday if leaders from both parties agree to adopt it by “unanimous consent.” FAA employees could return to work and payments for airport construction projects could resume as soon as Monday if President Barack Obama signs the bill over the weekend, transportation officials said. Republicans had insisted on the subsidy cuts as their price for restoring the FAA to full operation. But bill also includes language that gives Transportation Secretary Ray LaHood the authority to continue subsidized service to the 13 communities if he decides it’s necessary. Democrats said they expect the administration to effectively waive or negate the cuts. The shutdown began when much of Washington was transfixed by the stalemate over raising the government’s debt ceiling. During that time, the FAA furloughed 4,000 workers but kept air traffic controllers and most safety inspectors on the job. Forty airport safety inspectors worked without pay, picking up their own travel expenses. Some 70,000 workers on construction-related jobs on airport projects from Palm Springs, Calif., to New York City were idled as the FAA couldn’t pay for the work. But airline passengers in the busy travel season hardly noticed any changes. Airlines continued to work as normal, but they were no longer authorized to collect federal ticket taxes at a rate of $30 million a day. For a few lucky ticket buyers, prices dropped. But for most, nothing changed because airlines raised their base prices to match the tax. Some passengers will now be eligible for tax refunds if they bought their tickets before July 23 and their travel took place during the shutdown. As the debt ceiling crisis passed and Congress headed home for its August recess without resolving the standoff, Obama spoke out Wednesday and LaHood urged Congress to return to deal with the issues. Obama expressed dismay that Congress would allow up to $1.2 billion in tax revenue to go out the door – the amount that could have been lost by the time lawmakers return in September. Senate Majority Leader Harry Reid announced the deal Thursday afternoon, saying it would put 74,000 transportation and construction workers back to work. “This agreement does not resolve the important differences that still remain,” said Reid, D-Nev. “But I believe we should keep Americans working while Congress settles its differences, and this agreement will do exactly that.” Republican Sen. Tom Coburn of Oklahoma won’t attempt to block passage of the bill when it comes up on Friday, spokesman John Hart said. Coburn blocked several attempts by Democrats to pass an extension bill without the subsidy cuts. The partisan standoff that led to the shutdown began last month when Rep. John Mica, R-Fla., the chairman of the House Transportation and Infrastructure Committee, signaled his intention to attach the subsidy cuts to a bill to extend the FAA’s operating authority through mid-September. The agency has been operating under a series of 20 short-term extensions since 2007, when the last long-term FAA funding bill expired. Senate Democrats complained that Republicans were breaking with precedent by using an extension bill to enact policy changes that hadn’t been agreed upon. Even Republican Sen. Kay Bailey Hutchison of Texas called the measure a “procedural hand grenade.” Senators refused to pass the House bill, saying to do so would be giving into legislative blackmail and inviting Republicans to up the ante on the next extension bill. Obama, who had scolded Congress on Wednesday for not solving the standoff, expressed relief. “I’m pleased that leaders in Congress are working together to break the impasse involving the FAA so that tens of thousands of construction workers and others can go back to work,” Obama said in a statement. Both the House and Senate passed long-term funding bills for the FAA earlier this year, but negotiations on resolving differences and finalizing those bills are stalemated. The biggest holdup is a labor provision in the House long-term bill. Republicans want to overturn a National Mediation Board rule approved last year that allows airline and railroad employees to form a union by a simple majority of those voting. Under the old rule, workers who didn’t vote were treated as “no” votes. “The House has made it clear that the anti-worker piece is a priority for them and they also put us on notice that they don’t intend to give in,” said Vince Morris, a spokesman for Sen. Jay Rockefeller, D-W.Va., chairman of a committee that oversees FAA. “So we are bracing for a new fight in September.” Communities targeted for the proposed air service subsidy cuts are Morgantown, W.Va.; Athens, Ga.; Glendive, Mont.; Alamogordo, N.M.; Ely, Nev.; Jamestown, N.Y.; Bradford, Pa.; Hagerstown, Md.; Jonesboro, Ark.; Johnstown, Pa.; Franklin/Oil City, Pa.; Lancaster, Pa.; and Jackson, Tenn. ___ AP White House Correspondent Ben Feller contributed to this report.

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How John Boehner Got The Votes For The Debt Ceiling Deal

August 4, 2011

WASHINGTON — Speaker John Boehner was desperate in his search for votes from his party to prevent a first-ever government default. But despite what a GOP freshman called “hour by hour by hour” pressure from the Ohio Republican leader and his lieutenants, rank-and-file holdouts said they were neither offered carrots nor threatened with sticks to change their minds. That’s a major transformation from the not too distant past. There were no promises of new bridges or campaign help. No threats to boot members off coveted committees. And, if some of those tactics had been tried, it’s unlikely that many House Republican tea party supporters would have been swayed. They came to Washington disdainful of such wheeling and dealing and promising to fix what members of both parties had come to describe as a culture of corruption. Boehner, who has risen, fallen and risen again in the House GOP hierarchy, has long shunned earmarked “pet projects” and had no objection when more conservative deficit hawks succeeded in getting them banned. One GOP holdout on the debt bill, Rep. Connie Mack of Florida, recalled a time early in his career when he was withholding his vote from the Republican leadership and saw “The Hammer” – then-Majority Leader Tom DeLay – walking toward him in the House chamber. “He came over with a finger pointing at my chest,” the four-term lawmaker said. “He was telling me what I’m going to do and why. He said, `You won’t make it long in this town’” by defying the party leadership. Mack doesn’t remember what the issue was, but he remembers not budging. “The ways of the past are gone,” Mack said. “There hasn’t been a threat of taking something away or promising something. I can remember the hammer coming down on me. It’s completely different, much more open and honest.” That doesn’t mean there wasn’t pressure, especially when Boehner had to postpone a vote on his legislation last week for lack of Republican support, and faced questions about his hold on the speakership. “There was a constant barrage, hour by hour by hour,” said freshman Rep. Steve Southerland, R-Fla., who with Mack and others still voted against Boehner. Rep. Jason Chaffetz, R-Utah, said the issue of campaign help never was raised. “I didn’t see or hear any of that,” he said. “I thought they would break my knuckles and twist my arm. I saw the speaker in the cloakroom. He raised his eyebrows, to say `Where are you at?’ I said, `I support you, I just don’t like your bill.’ He said, `That’s what I thought. I’ll leave you alone.’ There was no `I got a deal for you.’” Rep. Jeff Flake, R-Ariz., says it was Boehner five years ago who told him that he was losing his seat on the Judiciary Committee for “bad behavior.” Flake irritated party leaders by regularly railing against earmarks – pet projects like bridges or highways that were offered to members in return for their votes. Boehner spokesman Michael Steel said Flake lost his seat because Republicans went from the majority to the minority, and had fewer positions. Southerland, the Florida freshman, said the old ways wouldn’t work with the new Republicans. “This is kind of a new breed,” Southerland said. “My no is no and my yes is yes.” Southerland was part of a chaotic scene last week when Boehner appeared to lose control of his party. He had to initially postpone a vote on his bill and rewrite it to appease tea partyers and other conservatives, who demanded inclusion of a proposed constitutional amendment for a balanced budget. Southerland was among the 15 to 20 GOP members, many of them freshmen, who were summoned to the office of party whip Kevin McCarthy to meet with Boehner, Majority Leader Eric Cantor and McCarthy. Dozens of reporters blocked the first floor hallway outside the office. Adding to the chaos, 19 boxes of pizza were brought in on a dolly, part of the regular feeding frenzy that McCarthy sponsors when the House has evening sessions. “It would take a lot more than a deep dish to persuade me to vote for the bill,” Southerland said. Still, Southerland praised Boehner’s approach, saying he focused on “what he could do to make the bill palatable to us. It wasn’t a pep talk. It was, how can we get to a solution that would get our support.” And there were moments to relieve the pressure. At a Republican meeting the morning after the postponement, one lawmaker quipped to party leaders, “Next time feed the guys you know are voting with you.” Boehner got his bill passed Friday by a narrow margin, 218-210. He did it by adding the balanced budget amendment as a trigger for a second round of budget cuts. That provision didn’t survive in the final compromise. Five-term Rep. Steve King, R-Iowa, who was around for DeLay’s hardball approach, said, “They didn’t put a lot of pressure on me. It’s kind of a different tone.” He spoke with Boehner for 10 minutes on Sunday, and said the speaker “was asking us to search our conscience. I don’t think in that conversation he was pushing for a vote. It was more of a conversation about overall strategy.” Rep. Paul Broun, R-Ga., agreed. “There was no arm twisting,” he said. “I was not offered any kind of plums and wasn’t threatened either. We’ll see if there’s a price to pay. I know that’s not the way it used to work.” Broun, like King, still voted against Boehner’s bill last week and against the final compromise this week.

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Harlan Green: Why Repeat 1938?

August 4, 2011

Why does the final debt ceiling agreement look like 1938, when Republicans took over Congress after President Roosevelt ok’ed spending cuts while raising some taxes? Because Congress may have made the same mistake — a repeat of the Great Depression by cutting spending when the U.S. economy hasn’t recovered from the Great Recession. Democrats lost 71 House seats and 8 Senate seats in the 1938 election, after Roosevelt had been persuaded by his advisors cut back on New Deal programs, which precipitated the 1937-38 second depression and gave Republicans ammunition to say the New Deal hadn’t worked. Production and profits and wages had regained their 1929 levels by the spring of 1937. Unemployment remained high, but was considerably lower than the 25 percent rate seen in 1933. So in June 1937, some of Roosevelt’s advisors urged spending cuts to balance the budget. WPA rolls were drastically cut and PWA projects were slowed to a standstill, according to Wikipedia . The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 per cent and production of durable goods fell even faster. Does this look terribly familiar? In other words, we might be doomed to repeat the historical mistake of listening to creditors to whom so much of the federal debt is owed by cutting spending without actually reducing debt, when we should be stimulating growth both to reduce the ratio of debt to GDP and help debtors repay their debts. The new agreement doesn’t allow any revenue increases in the first stage of some $2.1-2.4 trillion in mandated spending cuts over the next 10 years. This of course means the debt isn’t being paid down. All of the Bush tax cuts had added $3.7 billion to the $14 trillion in debt, with tax loopholes extended for energy and agribusiness, two wars and two recessions making up most of the rest. The spending cuts weren’t paid for then, and aren’t being paid for now, in other words. But, had we continued the stimulus spending of 2009-10 that included the $787 Billion in ARRA stimulus, spent more of the $11 billion set aside for the HAMP mortgage modification program, and extended the homebuyer tax credits that expired last June, we might have started both a real estate recovery and longer term economic growth. Instead, we are close to a ‘double-dip’ after just leaving the Great Recession. The first part of the Great Depression actually ended in 1934, which lulled everyone into believing that cutting spending in 1937 would do little harm. But it just made the Depression worse, until spending from government debt that topped 122 percent of GDP during World War II ended the Great Depression! So history is very clear on what it takes to stimulate jobs and economic growth — more spending on policies that produce growth. That is the only way to bring down the debt level. But one can’t borrow for the wrong things, such as tax cuts. As one pundit put it, business doesn’t care where the dollars come from — a public or private worker. Calculated Risk has kept tabs on the possibility of a double-dip recession and second quarter numbers show the economy has almost ground to a halt. GDP growth revisions show Q1 2011 rose just 0.4 percent and Q2 1.3 percent in the ‘advance estimate’. Personal Consumption Expenditures, which account for almost 70 percent of activity, have been falling for just the past 3 months for a number of reasons, including a spike in energy and food prices, and falling vehicle sales due to the Japanese Tsunami. It is why GDP growth has slowed so drastically. There are 4 indicators used by the National Bureau of Economic Research Business Dating Committee to determine a recession — employment, personal income less transfer payments, real GDP growth, and industrial production. Of the 4, industrial production and GDP growth have recovered the most. There is some hope with the July Institute of Supply Management non-manufacturing survey that showed overall service sector activity had risen 2.7 percent in 13 of its 18 industries, including transportation and Warehousing, Mining, and Real Estate (surprisingly), and which account for more than 70 percent of all economic activity. So we have not yet entered a double-dip. But without a viable job creation program, that may still happen. So history as well as basic economics tells us those who want to shrink government by slashing spending without programs that also grow the economy are wrong. What would it take to convince them otherwise? Another Great Depression, or a Great War?

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How Washington Took U.S. To The Brink In Debt Fight

August 4, 2011

WASHINGTON (Reuters) – The world’s largest economy was headed toward an unprecedented default, and all Washington wanted to talk about was the manner in which the president had left a room. A White House meeting in mid-July between President Barack Obama and congressional leaders had ended with sharp words as Obama clashed with the brash Republican House majority leader, Eric Cantor. Now Cantor was back on Capitol Hill, dishing details to a scrum of reporters — a shift from the terse, vague statements that usually followed such meetings. “He said to me, ‘Eric, don’t call my bluff. I’m going to the American people with this,’” Cantor said in his Southern drawl. “I was somewhat taken aback.” Republican aides filled in the gaps. Obama had “stormed out of the room,” one said. At the White House, aides pushed back. One official demonstrated to reporters exactly how Obama had ended the meeting — lightly pushing his chair back from the table, standing up deliberately, walking away calmly. “He didn’t storm out. He just got up and walked into his office,” one said. That evening — July 13, 2011 — was one of the lowest points in the struggle to avert fiscal disaster and put the nation’s budget on a sustainable path. Congress needed to extend the country’s $14.3 trillion debt ceiling before Tuesday, August 2, the date the Treasury Department would begin running out of cash to cover the country’s bills. But Republicans and Democrats were deadlocked. INSIDERS UNITE As the deadline drew closer, the two sides abandoned a series of efforts to reach agreement, searching for the right combination of policies and personalities to get a deal done. In the end, it fell to two consummate Washington insiders to prevent the talks from collapsing. A Reuters examination of the months-long showdown over the debt ceiling found that: * Vice President Joe Biden and Senate Republican Leader Mitch McConnell emerged as critical players in the final stretch of the talks, as theirs was the only cross-party relationship built on decades of trust. * Despite a belief among many rank-and-file Republicans that the government could muddle through a default, party leaders never doubted the Treasury Department’s warnings that economic catastrophe was a real possibility if they didn’t reach a deal by August 2. * Although House of Representatives Speaker John Boehner, the top U.S. Republican, was eager to strike a bold deal with Obama, it was ultimately necessary for Boehner to distance himself from the White House to convince his House Republicans to back the final deal. * The business community played an important behind-the-scenes role, with two White House foes — Wall Street and the Chamber of Commerce — rallying support for a compromise backed by Obama. This account of America’s journey to the brink of default is based on interviews conducted over the past six weeks with dozens of elected officials, business lobbyists and aides in the House, the Senate and the White House. A ZEAL FOR CUTS The U.S. congressional elections in November 2010 set the stage for confrontation over the congressionally mandated cap on the outstanding total of federal government borrowings. Republicans had harnessed voters’ anxiety over the economy and soaring deficits to capture the House of Representatives. Accusing Obama of overreaching with his stimulus package in 2009 and his drive for healthcare reform, Republicans vowed to slash spending and rein in the federal government’s size. A campaign document — the “Pledge to America” — promised to cut spending by $100 billion in the first year alone, back to the levels in place in Republican President George W. Bush’s last year in office. The newly elected Republicans, 87 in all, were not interested in compromise. Many felt a greater obligation to the grassroots Tea Party activists who had sent them to Washington than to the party elders who ran the place. In a budget fight with the Democratic-controlled Senate that took the government to the brink of a shutdown in April, Republicans managed to cut spending by $38 billion, the largest domestic cut in U.S. history. Still, 59 House Republicans voted against the bill because it did not go far enough. BOEHNER’S BATTLELINES That was a mere skirmish. The big battle lay ahead as the government was fast running up against its $14.3 trillion credit limit and would need Congress to raise it further. In early May, Boehner laid out his conditions for a debt-ceiling increase: spending cuts would need to exceed the amount of new borrowing authority. Instead of billions of dollars, the debate would be measured in the trillions. It would be a chance for Boehner to show his new troops that he could use the levers of Washington to get results. An avid golfer and a chain-smoker, the 61-year-old Boehner is from an older generation than many of the Tea Party conservatives whose election to Congress made it possible for him to become House Speaker. The seasoned legislator and former businessman grew up in Ohio from a family of modest means and worked as a janitor to help put himself through college. Obama, 49, had a comfort level with fellow Midwesterner Boehner despite their philosophical differences. The speaker reminded the president, a former state senator from Illinois, of Republican legislators he used to play poker with in Illinois and with whom he forged bipartisan deals. Both men are even-tempered and view themselves as Washington outsiders. Each has ambitions of transforming Washington and making a big mark on policy. Those aspirations drove their on-again, off-again talks aimed at a far-reaching, bipartisan “grand bargain” that would put the United States on sounder fiscal footing for years to come. On a golf outing in mid-June, the two agreed to work together on a broad deficit-reduction deal. “Let’s give it a try,” Obama told the speaker. The following week, at a secret White House meeting, they agreed to have their staff draw up options. The aim was to craft a plan that would cut deficits by roughly $4 trillion over 10 years. A ‘GRAND BARGAIN?’ The challenges were steep. Democrats would have to agree to rein in cherished social programs like the Medicare health plan for retirees and the disabled. Republicans would have to accept a tax-code overhaul that would increase revenues through the elimination of tax breaks and deductions. Boehner’s enthusiasm for the “grand bargain” was not shared by his colleague, Senate Republican leader Mitch McConnell. McConnell had confided to Vice President Joe Biden that he thought it was unrealistic to try to accomplish such a sweeping deal in the weeks before August 2 deadline. The Senate Republican leader worried it would lead to a dead end when pressure was building to resolve the debt-limit standoff. Rating agencies were warning they might downgrade the country’s top-notch credit score and, while there was no sign of panic yet in financial markets, investors were growing nervous. McConnell, 69, had served in the Senate since 1985 and witnessed firsthand the divided-government battles of the 1990s, when Republican House Speaker Newt Gingrich and an earlier generation of firebrand conservatives went toe-to-toe with Democratic President Bill Clinton. MEMORIES OF 1996 That confrontation led to a shutdown of the federal government and provoked a public backlash against Gingrich and his party. With the Republican brand tarnished, Clinton sailed to re-election in 1996. McConnell, whose party is a minority in the closely divided Senate, viewed the 2012 elections as a chance to gain dominance in the chamber. He feared the debt-limit fight would put that in jeopardy while also bolstering Obama’s re-election prospects. If Treasury Secretary Timothy Geithner’s warnings were right — and both McConnell and Boehner believed they were despite skepticism among their rank-and-file — the fallout from a debt default would be calamitous, causing stocks and the dollar to sink and interest rates to surge. Mortgage rates and business borrowing costs would spike, potentially sending the economy into another recession. That would mean Republicans — whom Democrats had accused of intransigence over the debt limit — would share in the blame for the economy’s woes and suffer voter wrath as a result. Many in the White House viewed McConnell as more of a tactician than a visionary and someone more focused on party politics than on setting policy. In the quest for a grand bargain, Boehner would make a better partner, they thought. But in the end, after Boehner twice broke off talks with the White House, administration officials relied heavily on McConnell as an emissary to the speaker, and came to view him as a crucial player. A BOND BETWEEN RIVALS The administration’s chief link to McConnell was Biden, 68, a 36-year veteran of the Senate with rock-solid Democratic credentials who nonetheless had a strong rapport with the Republican leader. The two seemed to speak the same language from their years in the Senate together. Their bond grew closer when they worked together on a tax-cutting deal just before Christmas late last year, according to people who know both men. “C’mon Mitch, you know what I’m dealing with here,” Biden would sometimes tell McConnell — Senate-speak to describe the pushback he would face from Democratic Party activists if he gave too much ground. According to a former Biden aide, McConnell seemed to appreciate that Biden understood the GOP leader faced similar constraints within the Republican Party. In April, Obama tapped Biden to lead a panel of lawmakers that would lay the groundwork for a deal. In an ornate corner room just off the Senate floor, the group pored through stacks of government and private-sector reports to identify more than $1 trillion in mutually acceptable spending cuts. As the talks stretched into June, Biden gradually built up a rapport with Cantor, the House majority leader, who was leading the Republican side. REPUBLICAN RIFT In less than 10 years in Washington, Cantor had quickly climbed to the top rungs of Republican leadership. But his sharp elbows had earned him enemies — some from within his own party. He and Boehner had a cool relationship, say people who know both lawmakers. The rift extended into the lobbying community, where Republicans identified themselves as “Boehner people” or “Cantor people.” At the end of June, Cantor abruptly walked out of the Biden talks, saying the two sides could not agree on taxes. The “principals” — Obama and Boehner — would have to take it from there. Even before the Biden talks began, members of Boehner’s office dismissed them as political theater. “This thing will ultimately get decided by Boehner and Obama,” a Boehner aide said. After weeks of back-channel negotiations with Obama, Boehner decided on July 22 that he could not work with the White House and would have to forge a deal with Democrats on Capitol Hill. The two sides had come tantalizingly close to a deal, but stumbled again over the tax question. Boehner felt the White House had shifted the goalposts at the last minute. White House officials believed Boehner’s departure stemmed from an unwillingness — or an inability — to take on the conservative rebels in his party. If Boehner had been willing to shake hands publicly with Obama on a “grand bargain,” they said, there would have been a way to woo enough mainstream Republicans and Democrats to pass the bill. They also disagreed with any suggestions that they had shifted the goalposts. ‘A BOWL OF JELL-O’ “Dealing with the White House is like dealing with a bowl of Jell-O,” Boehner said angrily at a press conference that night. Obama called him back to the White House the following day and told him he should not be left out of the process. “Mr. President, as I read the Constitution, the Congress writes the laws. You get to decide if you want to sign them,” Boehner responded, according to his aides. The action moved back to Congress. Like the deal that Boehner and the White House had abandoned, the latest plan would separate the relatively easy decisions — curbs on annual discretionary spending — from the difficult reforms to benefits and the tax code. It wasn’t the “grand bargain” Obama and Boehner had sought, but it would deliver trillions in savings and cover the nation’s borrowing needs past the November 2012 elections. There was one catch. The plan would require another debt-ceiling vote in a few months to ensure Congress would sign off on the second set of savings, and Obama had already ruled that out. Around 10 p.m., on Saturday, July 23, Obama called Boehner to tell him he would veto the bill if it reached his desk. But he suggested that they could find another way to ensure Congress would actually follow through with the tax and benefit changes envisioned by the plan. GOING SEPARATE WAYS Congressional staff continued work on the plan the next day. Boehner told Fox News he would press ahead with his own legislation if the two sides could not agree. With no progress made on the enforcement mechanism, known as a “trigger” in Washington-speak, that appeared to be the case. Boehner told Republicans he would unveil his version of the plan on Monday, July 25, while the Democratic leader of the Senate, Harry Reid, decided to advance a rival plan. Another effort had failed. The final week would put Boehner’s leadership to the test. Boehner unveiled his plan to Republicans that Monday in a meeting room in the bowels of the Capitol. It wouldn’t tie a debt-limit increase to the balanced-budget constitutional amendment, as many of them wanted, but it would deliver more than $2 trillion in savings. A vote was set for Wednesday, July 27. Boehner launched a two-front lobbying blitz, alternating between in-person meetings with wavering lawmakers and phone calls to conservative media figures like talk radio host Rush Limbaugh and columnist Charles Krauthammer. On Monday night, he touted the plan directly to a national audience, as television networks granted him air time to respond to a prime-time speech by Obama. ‘READY TO DRIVE THE CAR’ Boehner’s rally continued on Tuesday morning at the Capitol Hill Club, a social club for Republicans. Boehner’s lieutenants took the lead. Cantor bluntly acknowledged that “the debt limit sucks.” Kevin McCarthy, the House Republican whip, or lead vote counter, showed a clip from “The Town,” a 2010 movie about bank robbers. “I need your help,” said a character played by Ben Affleck. “You can never ask me about it later and we’re gonna hurt some people.” “Whose car are we going to take?” asks another character. The message: it was time to get the job done, no matter how messy. The film clip appeared to win over at least one convert. Representative Allen West, an outspoken Tea Party-aligned freshman, stood up and shouted: “I’m ready to drive the car!” OBAMA’S UNLIKELY ALLIES But momentum shifted as the day wore on. Outside conservative groups like the Club for Growth and the Heritage Foundation urged a vote against the bill. At the White House, aides were batting away suggestions that Obama had been sidelined. “He’s working tirelessly, meeting with his economic team, doing a lot of outreach, exploring all opportunities for compromise,” said senior White House adviser Valerie Jarrett. Obama worked the phones, talking strategy with Democratic leaders and developing options for the final endgame. Jarrett, one of the administration’s envoys to the business community, said her phone was ringing off the hook with calls from retailers and other business owners worried about the prospect of another debt-limit fight in December if Obama was forced to accept Boehner’s two-step plan. The White House was also actively reaching out to the business community to spell out the dire consequences of a default. The administration found an ally in the Chamber of Commerce, a group traditionally aligned with Republicans, who now urged the party to back the bill. The financial services industry was also on the same page as the administration on this issue, despite its many skirmishes with the White House during the debate over Wall Street reform in 2010. JAMMED CIRCUITS In his public address on Monday night, Obama had implored Americans to intervene directly by calling, emailing or posting messages on Twitter to their lawmakers. Telephone circuits on Capitol Hill seized up, email messages bounced back and Web sites crashed under the load. The anxiety at the White House was building. “It’s fair to say that nobody here had any doubt that this was going to go right up to the line, even as we urged Congress not to take it right up to the line,” one administration official said. “That’s just the way Congress works.” Still, the path toward a deal was far from clear. Over at Treasury, Geithner was trying to figure out what to do if Congress failed to reach a deal in time. Should the government make debt service a top priority to prevent a meltdown on Wall Street? That could delay paychecks to soldiers, benefit checks to retirees, and payments to government contracts, sending ripples through the economy. Back at the Capitol, Boehner’s troubles mounted. Representative Jim Jordan, a leader of the Republican Party’s right wing, predicted Boehner wouldn’t get the votes he needed from his own party. Democrats united against his bill. The Congressional Budget Office, the official scorekeeper, said it would only deliver $850 billion in savings, rather than the $1.2 trillion it claimed. Late that evening, Boehner decided to rewrite the bill to make sure it complied with the party’s vow to extract spending cuts greater than the size of the debt limit increase. That put off a vote until at least Thursday. ‘FIRE HIM!’ The acrimony spilled into the open Wednesday morning, July 27, in the party’s basement meeting room. Representative Greg Walden, a Boehner ally, read aloud an email from a Jordan staffer that urged outside conservative groups to convince undecided members to vote against the bill. Many lawmakers in the room viewed the message as a betrayal of the Speaker. As the Jordan staffer stood uncomfortably against a wall, lawmakers chanted, “Fire him! Fire him!” The usually jovial Boehner turned the screws. “Get your ass in line,” he said. There was laughter, but the message was unmistakable. As the meeting adjourned, lawmakers predicted the bill would pass. But a large number remained on the fence. Boehner spent the day listening to their concerns — the cuts weren’t big enough, the special committee might raise taxes, the balanced-budget amendment has been watered down. Thursday morning, July 28: another meeting, another chance to rally the troops over fruit and doughnuts and signs that read “Play like a champion.” Representative Mike Kelly, an alumnus of Notre Dame University, drew upon his school’s storied legacy as he urged members to “put on your helmet, buckle your chin straps, run out onto the field and beat the shit out of your opponent!” Doubters like Jordan stayed silent. As the meeting adjourned, they told reporters that their opposition had not changed. With the rewritten bill ready to go, Republican leaders scheduled a vote for late Thursday afternoon. As debate started on the House floor, Boehner, Majority Leader Cantor and Whip McCarthy continued to meet with doubters, making the case that the party needed to stick together if it wanted an acceptable final product. At 5:25 p.m., the Republican troika abruptly yanked the bill from the House floor with only one minute left of debate. They didn’t have the votes. ‘BLOODY AND BEATEN’ As floor action turned to naming post offices, Boehner summoned the holdouts to his office just off the Capitol rotunda. Whatever he was doing wasn’t changing any minds. “I’m a bloodied and beaten ‘no,’” said Representative Louie Gohmert of Texas, one of several conservatives who had downplayed the consequences of a technical default, as he left the office. At the beginning of the year, Republicans had enacted a ban on earmarks, the pet spending projects that had come to symbolize waste and corruption in the public imagination. That meant that Boehner had fewer carrots to offer reluctant members — no highway overpasses. “It is the most refreshing thing in the world to see what is going on here. These kinds of negotiations a couple of years ago would have cost $20 billion,” said Representative Jeff Flake of Arizona, whose anti-spending stance had made him an outcast in the party in the past decade. The five Republicans who represent South Carolina headed from Boehner’s opulent suite to the Capitol’s small, private chapel to pray. As they knelt beneath a stained glass window depicting George Washington, they weren’t praying for guidance, just strength to maintain their stand. “I think divine inspiration has already happened. I was a ‘lean-no,’ now I’m a ‘no,’” said Representative Tim Scott. 19 BOXES OF PIZZA The action moved downstairs to McCarthy’s office. The jovial 46-year-old Republican whip, from California’s dusty interior, was a novice vote counter. He had presided over a few embarrassing setbacks earlier in the year. Now he was facing a true disaster. As the night wore on, 19 boxes of pizza from Al’s Pizzeria disappeared into McCarthy’s office. The holdouts weren’t looking for pork-barrel spending or other favors — though they didn’t refuse the pizza. Instead, they wanted to strengthen the balanced-budget clause. That would certainly doom the bill in the Senate, but at that point Boehner just wanted to get it out of the House. Even with that change, Boehner still appeared to be short of the 217 votes he needed. At 10:30 on Thursday night, the House adjourned without a vote. House Republicans met in their basement clubhouse again on Friday morning, July 29. The holdouts came under more pressure — this time from other rank-and-file members who said they were undermining the party’s negotiating position. But a final count showed that the votes appeared to be there. “I love you guys,” Boehner said in a moment of levity. The bill passed Friday evening on a vote of 218 to 210 — just one vote more than needed. The Senate defeated it two hours later, and the House retaliated on Saturday by defeating a proposal put forth by Harry Reid, leader of the Democratic majority in the Senate. Another week had elapsed, and Congress was no closer to consensus. While the legislative chess game played out, Biden called McConnell on Wednesday and Friday. MCCONNELL’S BOTTOM LINE Out of loyalty to Boehner, the Senate Republican leader had refrained from talks with the White House for most of the week. On Friday morning, McConnell told Biden there was “no daylight” between the two Republicans, but told the vice president to try later in the day. “Call me back after these votes and I will tell you what it will take to get my support,” McConnell said, according to a Republican aide. Biden and McConnell spoke again Friday evening and in the early afternoon on Saturday. Negotiations began in earnest around 3 p.m., after the House defeated Reid’s bill. Tuesday, August 2, was three days away. White House chief of staff Bill Daley’s office became Grand Central Station for a rolling series of meetings among White House staff. The meetings moved on Sunday to the vice president’s office and later to the Oval Office. On Saturday, Obama asked Biden’s chief of staff, Bruce Reed, whether his wife was angry that he was spending his wedding anniversary at the office. “Previously, I was on negative watch but I’ve now been officially downgraded,” Reed deadpanned. CLIMACTIC PHONE CALLS After months of high-profile meetings, nearly all of the negotiations on the final weekend took place by phone. In the big gatherings, participants tended to emphasize “talking points” because of the expectation that the conversations would spill out into the public. Smaller meetings allowed participants to cut to the chase, according to an administration official, and details could remain private. On Saturday night, a media report surfaced that there was a tentative framework for a deal. White House reporters seeking an update chased a top communications aide toward the Oval Office, only to be told later that the two sides had not arrived at a deal yet. Indeed, the negotiations ended up going down to the wire. At 5 p.m. on Sunday night, White House officials discussed whether Treasury Secretary Geithner should make a statement to the financial markets that evening or perhaps the following morning. GEITHNER’S GAME Geithner, in his former role as head of the Federal Reserve Bank of New York, was one of the chief financial firefighters during the global markets meltdown triggered by the collapse of Lehman Brothers in September 2008. Asian markets were about to open. The crisis had already roiled U.S. debt markets and taken a toll on the dollar and Wall Street stocks. Administration officials feared worse bloodletting if investors returned to their desks at the start of the week without clarity on whether there would be a deal. Geithner and a small team of aides had been quietly working on contingency plans in case Congress missed the August 2 deadline to raise the debt ceiling. Treasury had planned to brief markets on those plans no later than Monday. Private-sector analysts believed that in a worst-case scenario, Geithner would be prepared to tell markets he would put a priority on paying the government’s debt in order to avoid default — even if that meant taking the politically explosive step of delaying payments to Social Security recipients and others. PULLING THE TRIGGER But the Treasury secretary never had to show his hand. The final sticking point in the talks centered on the terms of the deficit-cutting “trigger.” Democrats wanted automatic cuts in military spending if Congress balked at the second round of deficit reduction. Biden and McConnell spoke four times on Saturday, five times on Sunday, circling around the two stumbling blocks that remained — the nature of the “trigger” and the size of the defense cuts that Democrats wanted. McConnell kept in contact with Boehner. On Sunday, July 31, there were less than two full days before Default Day. As Obama’s budget director, Jack Lew, crunched numbers on the Republican defense cut proposals, the White House feared it might not get a deal. Biden spoke with Boehner around 4 p.m. and said, “We just can’t get there.” McConnell floated a compromise to widen the trigger to all security-related programs — the State Department, veterans’ care, nuclear security — and not just the Pentagon. At 8:15 p.m. Sunday, Obama made a final call to Boehner as White House aides listened nearby. “Do we have a deal?” Obama asked. There was a moment of suspense, then: “Congratulations to you, too, John.” (Additional reporting by Richard Cowan, Rachelle Younglai, Laura MacInnis, Dave Clarke, Alister Bull and Jeff Mason; Editing by Jackie Frank) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Legal Immigration Reform: White House Pushes Skilled Worker Visas

August 3, 2011

In a bid to spur job creation and promote startups, the Department of Homeland Security and U.S. Citizen and Immigration Services has announced new efforts to attract foreign talent to American shores. Specifically, the administration is promoting two kinds of visas — known as the H-1B and the EB-2 visa — by making the application process more transparent, and by releasing a set of guidelines to clarify the necessary requirements for skilled foreign nationals hoping to enter the U.S. In addition, the administration is “streamlining” the application process for what is known as the EB-5 ” immigrant investor ” program, which allows foreign nationals who have significantly invested in American companies to qualify for a green card. The Tuesday announcement reflects an increased push to reform legal immigration for skilled workers, though it stops short of any concrete legislative changes. Speaking to HuffPost, USCIS Director Alejandro Mayorkas explained that the effort was simply one to clarify — and not amend — current immigration policy. “We have laws currently in place … and we are making sure those policies are fully understood,” he said. “This is independent of immigration reform.” Business interests — in particular those in the high tech sector — hailed the efforts by the administration to bring and retain top tier talent. In an interview with HuffPost, Lynn Shotwell, executive director of the American Council on International Personnel , called the effort a “really welcome development. It shows the administration is trying to do what business leaders, including Mayor Bloomberg and others, have called for. Namely, to open our doors to talented foreign nationals.” Yet while Shotwell maintained that it was “a step in the right direction,” she noted that “we have to see how much it changes current adjudication.” Others lauded the administration’s efforts to untie legal immigration from the thorny and often divisive issue of illegal immigration. “We’ve been [working on] this issue for several years — making it easier for high tech workers to come to the U.S.,” said Emily Mendell, spokesperson for the National Venture Capital Association . “The problem has been the reluctance of Congress to separate illegal reform from legal reform. The key to having this move forward is the ability of Congress to separate the two.” Steve Case , a member of the president’s Council on Jobs and Competitiveness (and the former CEO of HuffPost parent company AOL), said, “Immigration is a sensitive, complex and emotional issue — there’s a lot of history to it. My view is that, notwithstanding that, you have to focus on the main event right now, which is the economy and jobs.” He continued, “The data we have says the best source of job creation is high-growth entrepreneurial companies. If you want to create jobs, you have to focus on entrepreneurship and the global war for talent.” But for some advocates, the splitting of legal from illegal immigration is cause for concern. Leading immigration reform advocate Rep. Luis Gutierrez (D-Ill.) acknowledged the difficulty of passing any sort of comprehensive reform in such a hyper-partisan political climate, and underscored the necessity to launch administrative efforts to ameliorate the system, rather than simply rely on broad legislative action. “We will not get any substantive immigration reform out of this Congress with House Republicans driving the agenda heading into an election year,” said Gutierrez. “That’s why the focus is on the White House and what the Obama administration can do under current law.” But he cautioned against focusing too much on legal immigration concerns over those of illegal workers. “The one million or so undocumented immigrants who were brought here as children don’t have corporate lobbyists, don’t host fundraisers, or give big bundled donations, but if you think about it, their contributions to the economy over time will be tremendous,” he said. “They are no less important to America’s economic future than foreign workers are, and I hope the president takes action on their behalf as well.”

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Joe Peyronnin: Obama’s Jobs Pivot

August 2, 2011

Senate Republican Leader Mitch McConnell of Kentucky has said that making President Barack Obama a one-term president is his top priority. Now that the president has signed the debt-ceiling bill that was shaped in part by Senator McConnell it appears that the senator has outmaneuvered the president and left him badly damaged. Few members of Congress are happy with the final measure. Moreover, there were no winners following weeks of acrimonious and frustrating debate. According to polls the president’s job approval has taken a beating. But Republicans have taken a bigger hit. Meanwhile, the global perception of America has been further diminished. President Obama found himself in a difficult position following the 2010 midterm election. Republicans won a majority in the House of Representatives. They also gained enough seats in the Senate to head off a cloture vote that would end a GOP filibuster. Even more problematic for the president was the election of the fiscally conservative Tea Party faction of the Republican Party, whose sole focus is to “get government spending under control.” The president decided late last year to continue the Bush tax cuts for the wealthiest Americans in exchange for extension of much needed unemployment benefits. He also decided not to take on the debt ceiling at that time because of Republican resistance, even though Democrats still controlled Congress. That decision ended up giving Republicans enormous leverage and they would come to use it to their advantage. Earlier this year President Obama said he wanted a clean debt-ceiling bill but the Republicans instead demanded linking budget cuts to its passage. The president then took the position that budget reform would have to be balanced between spending cuts and a smaller amount of increased revenues from the richest Americans and businesses by closing tax loopholes. He even said he would consider finding future savings in cherished social programs, a decision which drew ire from progressive Democrats. As the August 2 deadline neared the partisan rhetoric heated up. Many experts predicted that failure to pass a debt-ceiling bill would have disastrous consequences on the U.S. and global economies. And while Americans would blame everyone in Washington for the fallout, most of the blame would be directed at President Obama. For the good of the country and his political standing the president had to have a deal. In the end he had to forego his revenue demands and accept a “cuts only” budget bill. The good news for the president is that he got the debt ceiling extended until 2013 and he avoided cuts in entitlement programs. However, the budget bill calls for $1 trillion in cuts over 10 years, and another $1.7 trillion more to be identified by a special committee of Congress, equally staffed by Democrats and Republicans, later this year. And Senator McConnell has said none of his appointees will vote to raise taxes. If the committee fails to come to an acceptable proposal automatic cuts in domestic and defense programs are triggered. Of course they won’t come to an agreement! With the U.S. economy struggling and unemployment stuck at an unacceptable level, Republicans shifted the debate to government spending. They blamed President Obama for increasing the national debt by 47% since he has been in office. They do not mention that the nation’s debt increased by 200% during President Ronald Reagan’s two terms, and more than 100% in President George W. Bush’s term. And much of today’s deficit is due to President Bush; two wars, an unfunded prescription drug bill and his tax cuts. Republicans fiercely protect the Bush tax cuts and fight to radically cut the size of government and eliminate many corporate regulations. This is their jobs plan, even though the Bush tax cuts have not added jobs. And GOP leaders have effectively used every bit of their leverage to get their way. Speaking at the White House following the Senate vote, President Obama pivoted from debt to jobs saying he would take steps to get the U.S. economy back on track. He then called on Congress to extend middle class tax cuts and unemployment benefits, to pass pending trade deals and he again called for rebuilding the nation’s crumbling infrastructure. “There is no reason for Congress not to send me these bills right a way,” the president said. But by putting the onus to act on Congress the president may again be playing into Senator McConnell’s hands. Mr. President, why would you think that Republicans, who control the House and can prevent cloture in the Senate, ever do anything that may help get you re-elected? Job number one for you is job creation — please take the lead.

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HuffPost TV: WATCH: Arianna Discusses The Debt Ceiling Deal With Piers Morgan

August 2, 2011

Arianna appeared Monday on CNN ‘s ‘Piers Morgan Tonight’ to discuss the recent deal to increase the nation’s debt ceiling. “Here we have a major crisis in this country, we have a growth crisis, which means a jobs crisis and a debt crisis. We do not have a debt ceiling crisis, that was a completely manufactured crisis that we spent an enormous amount of time and energy trying to resolve,” explained Arianna. The larger problem, Arianna said, is that “there are an enormous amount of people in this country, Democrats and Republicans, who don’t think that this deal is making the economy better.” WATCH ( via CNN ):

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Joseph J. Thorndike: Why Liberals Should Learn to Love the Debt Debate

August 2, 2011

The debt limit crisis is the best thing to happen to liberalism in 30 years. It’s a manufactured crisis, of course. Republicans conjured it out of thin air, convinced that it will force a radical — and permanent — reduction in the size of government. But they’re wrong. Far from starving the beast, the debt limit debate is just as likely to feed it. By rescuing taxes from the political wilderness, it has given liberals a chance to rebuild the fiscal foundation of progressive government. A Fake Crisis As any number of levelheaded commentators have pointed out, the debt ceiling is all about the past, not the future. It’s a function of spending and taxing decisions made years ago. (And made by many of the same lawmakers decrying those decisions today.) By extension, raising the debt limit is really a question of collective accountability. In a democracy, you take responsibility for your government’s decisions, even if you didn’t like them when they were made and you like them even less today. That’s the deal — you don’t get to pick and choose. Of course, it’s possible to transform the debt ceiling into something more than simply a procedural hurdle. If you’re suitably rash, you can make it about the future as well as the past. Over the past few months, Republicans in the House have shown us how it’s done: Start walking the nation toward the edge of the abyss and threaten to keep on going. A Real Crisis But if the short-term crisis over a debt ceiling is fake, the long-term crisis over debt itself is very real. As William Gale and Benjamin Harris asserted in a recent paper for the Tax Policy Center , “The United States faces a large medium-term federal budget deficit and an unsustainable long-term fiscal gap. Left unattended, these shortfalls will hobble and eventually cripple the economy.” Those warnings have been around for years, but politicians have shown scant interest in making the hard decisions that would actually stave off disaster. Politics-as-usual doesn’t make room for much in the way of sacrifice. But the artificial crisis of the debt ceiling debate has recast politics, spurring change in the face of intractable inertia. And in that sense, it’s been spectacularly effective. By insisting that payment of past debts be tied to future spending, the House GOP has managed to put entitlements on the table. That’s no small feat. But the debt limit crisis has also put taxes on the table. Sure, Republicans are toeing the Tea Party line against any sort of revenue increase. That hasn’t changed, and it isn’t likely to change soon. Even their spin on the pending compromise seeks to minimize the likelihood of a tax hike. But for the first time in many years, Democrats are talking seriously — and even proudly — about the need for more tax revenue. In fact, the transformation is even more profound, challenging the antitax politics that have dominated national politics since 1980. Fake Tax Policy Now let’s be clear: The specific tax proposals coming from the White House are less than serious. Years ago, then-candidate Barack Obama staked out his position on soaking the rich, and as president, he’s been sticking to it. His speech July 25 on the debt ceiling impasse was typical: Most Americans, regardless of political party, don’t understand how we can ask a senior citizen to pay more for her Medicare before we ask corporate jet owners and oil companies to give up tax breaks that other companies don’t get. How can we ask a student to pay more for college before we ask hedge fund managers to stop paying taxes at a lower rate than their secretaries? How can we slash funding for education and clean energy before we ask people like me to give up tax breaks we don’t need and didn’t ask for? Jet owners, oil companies, Wall Street, and himself: These are the usual targets Obama offers up for tax increases. If you’re serious about solving the nation’s long-term fiscal problems, these tax reforms are a sideshow. Real Tax Policy But they’re a necessary sideshow, at least for anyone committed to serious fiscal reform. Ultimately, solving the long-term fiscal crisis will require both spending cuts and tax increases. Both elements will be broadly regressive, sparing the rich and soaking the poor. Lower spending will squeeze programs that principally benefit the non-wealthy, including Medicare and Social Security. Meanwhile, tax increases — at least the kind necessary to make a real dent in the fiscal gap — will fall on everyone, not just the rich. The regressive nature of meaningful fiscal reform — including the likely introduction of a broad-based consumption tax — militates for compensatory policy. In particular, it underscores the need for higher taxes on the rich. If political leaders are going to ask poor and middle-class Americans for sacrifice, they have an obligation to make sure that rich Americans share the pain. Taxing corporate jets, of course, won’t do that. To right the scales of tax justice, more substantive progressive reform is vital. In particular, lawmakers should eliminate the preferential treatment of capital gains (which would, of course, solve the carried interest issue, too). There aren’t many Democrats willing to make that argument — at least not yet. But the sideshow reforms currently in play still represent progress for liberals. By insisting that taxes are a necessary part of any balanced approach, they are building the foundation for a broader program of progressive tax reform. Small Steps Democrats have a long way to go. They are nowhere near breaking the bad tax news to lower- and middle-income Americans. But they finally have a president who is trying to restore the value proposition that lies at the heart of progressive governance. “We all want a government that lives within its means,” Obama said last week. “But there are still things we need to pay for as a country — things like new roads and bridges; weather satellites and food inspection; services to veterans and medical research.” And there it is: the hoary “price of civilization” argument that Oliver Wendell Holmes made famous and American voters made reality. With taxes, we do buy civilization. But Democrats have been afraid to say so for decades. Finally, they may be starting to speak up.

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Steven Van Zandt: Debt Ceiling? What Debt Ceiling?

August 2, 2011

First of all, just because the Tea Party people appear to be generally uneducated, ignorant about the political process, ignorant about economics, confused about their own platform from the beginning, and indelicate when it comes to the craft of diplomacy, doesn’t mean they’re wrong. They’re right about our Debt being a bad thing. They are right about our Deficit being a bad thing. They are right about having a balanced budget. They’re even right about taxes (although that really wasn’t part of their initial platform exactly). I’ve always considered the government taking one out of every two dollars I earn absolute tyranny. Especially since we get almost nothing back compared to every other civilized country. Now Hedge-fund guys and other billionaires paying 19 percent is another matter entirely, but that’s an issue of tax reform and closing loopholes and no one objects to that. What the Tea Partyers are not correct about is connecting these things to the Debt Ceiling. But you can’t really blame them. They didn’t know there was one. How should they know what’s what when they, like most of America, look to Cable TV News and Radio Talk Shows as their exclusive sources of information? When people are looking for a place to point the finger after this disaster or near disaster they should look no further than the Media. When did their job become spewing out contradictory information 24/7, serving no one except for their aggravatingly plentiful and endlessly annoying advertisers? All they had to do was have an objective, truly knowledgeable expert available to explain the facts to the general public to help them understand that even though the Tea Party people are saying things that make sense emotionally, the real facts are these — If the debt ceiling isn’t raised, obligations will not be met because this money we’re talking about, which we don’t have and need to borrow, has already been spent. And all the Mary Matalins and Rush Limbaughs of the world that are telling us Aug. 2 is a meaningless date, made up by a Left Wing conspiracy, are wrong. You know, wrong. As in let’s separate the educated facts from the mindless opinions. As in enough with the so-called balanced reporting already. Tell us the damn indisputable truth! This time it’s the so-called Right mouthing untruths, next week it’ll be the Left. Makes no difference to me, I’m a staunch Independent and always have been, does it matter to you who’s lying? As most of the population suffers through life, barely surviving, disappointed and confused day after day, hopeless, wondering what happened to their strong and beautiful country, it is in the Media’s power to restore, if not some of our quality of life, at least a bit of our peace of mind. Since we can’t have real democracy, or jobs, or a decent wage, or money that has any value, or affordable education, or real health care, or more importantly real health, at least let us have the emotional satisfaction of hating the right people for the right reasons! The Media has become just another meaningless bureaucratic institution that exists solely for the purpose of keeping the population distracted and diverted by the use of a constant barrage of bad news, intentionally or unintentionally designed to keep us from thinking, acting, and organizing, but mostly to remind us about those starving children in Africa, keeping us grateful that our miserable lives aren’t any worse.

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Gabrielle Giffords Returns To Congress To Vote On Debt Ceiling Deal

August 2, 2011

WASHINGTON — Seven months after she was shot in the head by a gunman in Tucson, Ariz., Rep. Gabrielle Giffords (D-Ariz.) made a surprise and emotional return to the House floor on Monday, casting a vote in favor of a bill to raise the nation’s debt ceiling. Giffords entered the chamber to sustained, standing applause, shaking hands with colleagues whom she had not seen since that January day. Her vote, a sideshow to the far more important and compelling personal drama, was in favor of the bill, which passed through the chamber by a margin of 269 to 161. “I have closely followed the debate over our debt ceiling and have been deeply disappointed at what’s going on in Washington,” Giffords said, in a statement from her office. “After weeks of failed debate in Washington, I was pleased to see a solution to this crisis emerge. I strongly believe that crossing the aisle for the good of the American people is more important than party politics. I had to be here for this vote. I could not take the chance that my absence could crash our economy.” Giffords’ office tweeted word of her return to Washington after the vote had begun. And as she showed up on the floor — smiling and with her hair cut short — the attention of lawmakers drifted from the vote tally to her presence. Her office, in a statement, noted that in December 2009 and again in February 2010, she had objected to raising the nation’s debt limit. This vote, the statement added, “was substantially different, with the strength of the U.S. economy hanging in the balance.” After the vote was cast, Giffords received multiple additional rounds of applause, as House Minority Leader Nancy Pelosi (D-Calif.) called her “the personification of courage.” “Her presence here in the chamber as well as her service throughout her career in Congress, brings honor to this chamber,” Pelosi said. “Thank you, Gabby.” Pelosi said she knew a Giffords visit “was possible” for a couple of days, but she urged the Arizona Democrat not to come unless she felt up for it. “I did not encourage her to,” Pelosi told reporters. “I told her first things first. But she was very eager to come.” Pelosi said she found out for sure that Giffords was returning from her chief of staff, John Lawrence, who is close with Giffords’ husband Mark Kelly. When she saw Giffords come in, she said no words were exchanged as they greeted each other. Just “girl hugs,” Pelosi said. “Suffice it to say, it was one of the most thrilling moments to see this heroine return home, to the House. And to do so at such a dramatic time.” Rep. Debbie Wasserman Schultz (D-Fla.), one of Giffords’ closest personal friends and one of the people who escorted Giffords into the chamber, said she was beside herself when she heard the House erupt into cheers as Giffords walked in for the first time since the January 8 shooting. “The reaction in the chamber was the most enthusiastic, exuberant, exhilarating — I mean we were all crying — thrilled — you know, we just knew she would make a triumphant return,” Wasserman Schultz said, becoming visibly upset. “It always felt like there were so many doubters and skeptics, but never doubt Gabby Giffords’ determination. This is the first of many votes she’s going to pass.” Wasserman Schultz, who is also the Democratic National Committee chairwoman, said she knew “sometime yesterday” that Giffords’ visit was happening. She said she spoke late last night to Giffords’ husband, Mark Kelly, about the plan. Giffords had been following the debt limit vote from Tucson and “was ready to come and do the pivotal vote if she needed to,” Wasserman Schultz said. “At the end of the day, it was probably the most important vote we’re going to cast this Congress. She wanted to make sure that her constituents were represented.” Vice President Joe Biden came to the Capitol to see Giffords, after being tipped off by Pelosi that she would be in attendance. “I told her she was now a member of the cracked-head club like me, with two craniotomies,” Biden told reporters. “You know what I mean? It was just so good to see her. But that’s a private conversation.” Speaker of the House John Boehner (R-Ohio) found out about her return about an hour before the vote and helped to escort her into the chamber. Assistant Democratic Leader James Clyburn (D-S.C.) said he found out that Giffords would show for the vote when he saw her, hinting that Pelosi and others in the know played it close to the vest. “I just said, ‘I love you, glad to have you back, great to see you,’” he said. “I only found out when I saw her. [It was] a little emotional.” Below, a picture of the congresswoman on Capitol Hill from HuffPost’s Jen Bendery: Below, two additional photos via C-Span: Video of Giffords’ return: This is a developing story. More details to follow.

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LIVE UPDATES: Debt Ceiling Deal Reached

August 2, 2011

WASHINGTON — President Barack Obama and Republican congressional leaders reached historic agreement Sunday night on a compromise to permit vital U.S. borrowing by the Treasury in exchange for more than $2 trillion in long-term spending cuts. Officials said Republican Speaker John Boehner telephoned Obama at mid-evening to say the agreement had been struck. Democratic Majority Leader Harry Reid said that both his party and opposition Republicans gave more ground than they wanted to. He said it’ll take members of both political parties to pass the measure. Minority Leader Mitch McConnell said that the pact “will ensure significant cuts in Washington spending” and he assured the markets that a first-ever default on U.S. obligations won’t occur. Check back here for the latest developments.

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In Wake Of ‘Three-Ring Circus,’ Obama Adviser Offer Positive Take On Debt Deal

August 1, 2011

WASHINGTON — A top adviser to President Barack Obama said Monday the new deal to avoid a government default lifts a big cloud over the economy, even if the country had to first endure a “three-ring circus” in Washington. Appearing on morning news shows, senior aide David Plouffe acknowledged that there were key elements of a compromise that eluded the White House and Obama. He said, for example, that the administration will continue to push for new tax revenues. “The only way to really reduce the deficits significantly in a smart way is to make sure there is smart entitlement reform and closing of loopholes and tax reform,” Plouffe said. The White House adviser called the process “a spectacle” for a jittery country and said, “Let’s hope it doesn’t get repeated any time soon.” That’s why, he said, the White House is pleased the agreement now placed before the House and Senate would extend the new borrowing authority through 2012, rather than for just six months, as many had argued. Plouffe said that both the Democratic and Republican sides “now have a result that produces good deficit reduction at the front end.” He conceded that the process had “been messy,” and said he believes the American people “obviously would like a little bit more compromise and a little less shouting.” On taxes, Plouffe noted that a newly constituted bipartisan congressional panel will “look at tax reform, entitlement reform,” as part of a continuing effort to reduce the deficit. And he said the White House was not worried by lawmakers’ criticisms of the pact. “We think that at the end of the day, this is an agreement that will pass the Senate and the House and President Obama will sign it,” Plouffe said. He appeared on ABC’s “Good Morning America,” CBS’s “The Early Show” and NBC’s “Today” show.

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Gary Shapiro: Enough Already!

July 31, 2011

Enough already! Americans want our political leaders to stop fighting and cut a debt limit deal. While Americans are concerned about jobs, our leaders are destroying the dollar, the economy and the nation by their failure to compromise and extend the debt limit. Leadership requires compromise. Compromise has always been a substitute for violence. We compromise with our friends and within our families. We do it in our jobs and business relationships. Our forefathers did it in drafting and approving the Constitution. Our leaders must compromise now, not only to save the dollar, but to save the country. A downgraded dollar means higher interest rates, which means everyone will pay for Washington’s failure. Equally disturbing, the dollar’s fall as the world’s reserve currency would be devastating to our economy. The consequences are not only economic; our stature in the world and its confidence in America would plummet if we don’t resolve this silly situation. The president and all members of Congress swear to uphold the Constitution and they pledge allegiance to the United States — not to preserve Medicare, lower taxes or any specific interest group. Other pledges are serious but must be subservient, especially when their interpretation is arbitrary, arguable, foolish and by one unelected individual. Whether closing tax loopholes or ending temporary tax benefits are actions that should be considered, tax increases are debatable; however, God has not spoken on these issues nor are there any legal doctrines at play. Even Republicans disagree on the best way forward. So how is it that one unelected person can make a Biblical pronouncement and inspire such fear in Republicans? If they are serious about the deficit, Republicans have to step up and offer something in exchange for large spending cuts. The most obvious is to eliminate the Bush tax cuts on the top earners. The deficit is so bad and our tax share of GDP is at such historic lows that it is difficult to justify letting these tax cuts continue. Democrats have to step up also. They talk a good game about seeking cuts in the deficit, but they have offered little other than unspecified cuts far in the future. More, President Obama’s attack on House Budget Committee Chairman Paul Ryan’s budget proposal and on distractions like corporate jets is simply foolish and divisive. This type of rhetoric is unhelpful as it is inaccurate. It builds distrust by fomenting class warfare and makes finding solutions to the big spending programs problematic. Every day, business leaders negotiate deals because they know it is in the interests of their companies. But our political leaders, whose company is the entire nation, are negotiating in the best interests of their party and the next election rather than putting needs of the nation first. While they try to game each other, America and Americans will suffer. If this unpatriotic rhetoric and partisanship continues, I suspect Americans will put a pox on both their parties and all three of their houses and look for alternatives in November 2012. This is not a Democratic or Republican country; it is our country. And as long as we are sending kids overseas to risk life and limb defending it, we can at least ask, expect and even demand our leaders act like adults. It appears that both parties’ failure to address the tough cost-cutting issues means that neither party truly cares about our children, born and unborn, who will bear the burden of our mistakes today. King Solomon wisely tried to resolve two mothers’ claim to a baby by proposing the baby be cut in half. This forced the real mother to come forward, while the bogus mother thought it a fair compromise to kill the baby. Our nation is about to be cut in half — when will someone step forward to save it? Unfortunately, I fear both parties will destroy the country rather than compromise with the other side. For shame! Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing some 2,000 consumer electronics companies, and author of the New York Times bestselling book, “The Comeback: How Innovation Will Restore the American Dream.”

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Ken Blackwell: Avoiding the Danger of a "Clean" BBA

July 31, 2011

Liberals are trying to kill the prospect of a Balanced Budget Amendment (BBA) in the ongoing battle over the debt ceiling. Some on the Right respond that they might settle for a “clean” BBA. But there are two types of a clean BBA, one of which would be even worse than the terrible mess we have today. Some advocate that the BBA should require only that federal outlays cannot exceed federal tax revenues. They see it as two numbers, where the former must be less than the latter. But this misses one critical point. If BBA only requires government to spend less than it collects, there are two ways to fix it. The first is cutting spending, and the second is raising taxes. Many supporters of a clean BBA are not too worried. Although acknowledging the risk, they’re willing to take it on the grounds that they can use the prospect of electoral defeat to exert political pressure on members of Congress to ensure they don’t vote for tax increases. But what about the courts? What if a judge orders a tax increase? A judge could, if the BBA only says that spending must be less than revenues. Courts currently lack the power to make changes to taxes or spending. Article I and the Sixteenth Amendment of the Constitution only authorize four types of taxes — excises, imposts, capitation taxes, and income taxes — and specify that Congress is the branch with power to levy these taxes. The Framers specifically wanted fiscal control in the hands of elected legislators. “No taxation without representation!” was the battle cry that helped precipitate the American Revolution. So three fiscal levers are exclusively in Congress’ hands: only Congress can tax, spend, or borrow. Congress’ control over the purse strings gives legislators leverage over the other branches. And the members of one congressional chamber — the House of Representatives — must stand before the people every other year, ensuring that those with taxing and spending power would be strictly accountable to the voters. But a “clean” BBA would change that. It would create a constitutional command. A private party with standing could ask a federal judge to remedy a violation of a clean BBA by ordering increases in taxes to close budgetary gaps, instead of spending cuts. Advocates of a clean BBA point out that with every provision in a BBA, it becomes harder to find the votes for a two-thirds supermajority needed to vote the BBA out of Congress and propose it to the states, where it would very likely be ratified in short order. Each of the provisions in the BBA currently proposed in Congress is there for a reason. The best version is Senate Joint Resolution 10 , the Hatch-Lee version, which has eleven sections. Section 8 of the BBA in S.J.R. 10 specifies that no federal or state court can order a revenue increase under this amendment. In other words, it leaves open the possibility that political gridlock between the elected branches might result in a court cutting federal spending, but never hiking taxes. This is critically important. Federal judges hold their offices for life to insulate them from politics so that they can faithfully uphold the Constitution and laws, even when extremely unpopular. This is especially vital when public outcry pushes Congress and the president to do something unconstitutional, leaving judges free to strike it down. But to grant judges the power to raise taxes would be antithetical to the constitutional design of political accountability for taxes. It would create a perverse incentive for members of Congress who wanted to raise taxes but were politically vulnerable to foster gridlock on spending battles, then let the courts do their dirty work for them by increasing taxes to make up the shortfall. So the bottom line is that the only type of “clean” BBA that should even be considered is a second variety. In addition to specifying that revenues must exceed spending, it must also retain the current Section 8 that no judge has power to raise taxes. America’s problem is our debt, not our debt ceiling. We desperately need a BBA to tackle our debt. But a BBA that allows judges to hike taxes would be even worse than the status quo. Given how horrible the status quo is, that’s quite a statement. Ken Blackwell and Ken Klukowski are on the faculty of Liberty University. They are the best selling authors of Resurgent: How Constitutional Conservatism Can Save America.

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Debt Ceiling Deal In The Works, Default At Stake

July 31, 2011

WASHINGTON — The U.S. Senate plunged on Sunday into what many lawmakers and the White House – and millions of Americans coast to coast – hoped would be an all-but-decisive last-minute effort to raise the nation’s debt ceiling and defuse a crisis that still could lead to an unprecedented government default. As senators began debate in a rare Sunday session – just hours after Saturday night’s concluded – Democratic leader Harry Reid said he was “cautiously optimistic” agreement could be reached. But first, in a partisan vote, the Senate rejected an effort to advance a Democratic approach to resolving the debt issue. The vote was 50-49, or 10 short of the 60 votes needed to move forward on legislation proposed by Reid that would have carried out $2.2 trillion in deficit reduction over 10 years while raising the debt ceiling by $2.4 trillion. The outcome of that vote did not directly affect the behind-the-scenes negotiations on a compromise. Immediately afterward, Reid told fellow senators that while they were “not there yet,” a vote on a possible compromise could still happen Sunday. “We are hopeful and confident it can be done.” Senate Republican leader Mitch McConnell, a key player in the negotiations, said as he headed back to his office that the sides were “really, really close.” Tuesday is the deadline for averting default, the day the Treasury says it will reach the limits of its borrowing authority to pay all the nation’s bills. McConnell, R-Ky., said earlier on the Sunday talk shows that negotiators were looking at a deal that would cut spending by some $3 trillion over the next decade while raising the debt ceiling through 2012 in a two-stage process. A Democratic official, speaking on condition of anonymity to discuss the private talks, said Vice President Joe Biden had been on the phone with McConnell multiple times over the preceding 24 hours. Biden has remained a key negotiator for the White House following the more public role he had earlier in leading several weeks of debt talks with lawmakers. Appearing on CNN and CBS, McConnell said he hoped to soon be able to present to his fellow Republicans an agreement “that they’ll consider supporting.” That agreement would include raising the debt ceiling, cutting spending by some $1 trillion initially and creating a joint committee of members of Congress that would look at a larger plate of cuts including tax and entitlement changes. Sen. Chuck Schumer, D-N.Y., a member of the Democratic leadership, told CNN that while “there is no final agreement,” there was a sense of relief that the two sides were finally working on a compromise plan. Schumer later told CBS that one of the last sticking points is the creation of a “trigger” mechanism that would hit priorities of both parties if the committee does not come up with a plan for further deficit reduction. Among the trigger ideas being discussed are automatically reducing spending on entitlement programs such as Medicare along with closing tax loopholes or reducing defense and non-defense programs by an equal amount. “It should be equally tough on Democrats and Republicans,” Schumer said. McConnell said the bipartisan committee, which would be asked to come up with a plan by Thanksgiving, would have a “broad mandate” to look at all aspects of government finance, including tax reform. McConnell said he had talked to both President Barack Obama and Biden on Saturday. “I particularly appreciate that we are back talking to the only person in American who can sign something into law, and that’s the president of the United States,” he said. McConnell said the deal being worked on, while raising the debt ceiling in two stages, would satisfy Obama’s demand that there not be another divisive debate before next year’s election. The scenario being discussed would raise the debt ceiling unless there is a two-thirds majority in both houses of Congress to reject it. McConnell said that there would be no tax increases in the deal, and White House National Economic Council Chairman Gene Sperling, on CNN and Fox, said there would be no revenue increases over the next year and a half. But while keeping higher taxes out of the deal was the top priority of many Republicans, it’s still going to be a task for McConnell to sell any agreement to his caucus. Sen. Lindsey Graham, R-S.C., said on ABC that this would be the first time that he could remember that the nation is paying for future debt increases dollar-for-dollar and that “from the Republican Party’s point of view, I think we can declare victory in a limited fashion.” But he said that even with the agreement the national debt will continue to rise and “I don’t know where I’m going to land” on a vote. “From a big picture,” Graham said, “I’m not ready to vote for this.” On the House side, where GOP conservatives have pushed their party toward greater cuts and linking future debt ceiling raises to passage of a balanced budget amendment, a leadership aide said that while the negotiators appeared to be heading in the right direction, no agreement will be final until members have a chance to weigh in. Sperling said Obama has presented three principles that the final package must meet: a significant down payment on deficit reduction, major entitlement and tax reform at a later date, and an end to the uncertainty created by the threat of the nation’s defaulting on the debt. He said the nation doesn’t want to “go through this mess again around the holidays.” Under the proposed agreement, Congress would also have to vote on a constitutional amendment requiring a balanced federal budget, a top-flight GOP goal. Unlike a bill approved Friday by the Republican-run House, none of the debt limit increase would be tied to congressional approval of that amendment. Details of a possible accord began emerging Saturday night after Reid, D-Nev., said on the Senate floor that the two sides were trying to nail down loose ends and complete an agreement. “I’m glad to see this move toward cooperation and compromise, and hope it bears fruit,” he said. A Democratic official said that while bargainers were not on the cusp of a deal, one could gel quickly. A Republican said there was consensus on general concepts but cautioned there were no guarantees of a final handshake. Both spoke on condition of anonymity to reveal details of confidential talks. Any pact would have to quickly pass both chambers of Congress after a rancorous period that has seen the two parties repeatedly belittle each other’s efforts to end the standoff. Even so, the deal under discussion offers wins for both sides. Republicans and their tea party supporters would get spending cuts at least as large as the amount the debt ceiling would grow and avoid any tax increases. For Obama and Democrats, there would be no renewed battle over extending the borrowing limit until after next year’s elections. Under the possible compromise, the debt limit would rise by an initial $1 trillion. A second, $1.4 trillion increase would be tied to a specially created congressional committee that would have to suggest deficit cuts of a slightly larger amount. If that panel did not act – or if Congress rejected their recommendations – automatic spending cuts would be triggered that could affect Medicare and defense spending, two of the most politically sacrosanct programs. The government has exhausted its $14.3 trillion borrowing limit and has paid its bills since May with money freed up by accounting maneuvers. McConnell and Schumer appeared on CNN’s “State of the Union” and CBS’ “Face the Nation” while Graham spoke on ABC’s “This Week.” Sperling appeared on “State of the Union” and “Fox News Sunday.” ___ Associated Press writer David Espo contributed to this report.

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Voters Play Role In Debt Ceiling Standoff

July 31, 2011

WASHINGTON — Dear voter: Want to know why Democrats and Republicans in Congress find it so hard to work together to solve tough problems like the debt ceiling, health care and Social Security? Look in the mirror. Americans gripe about cowardly, self-serving politicians, and Congress doubtlessly has its feckless moments and members. But voters are quick to overlook their own role in legislative impasses that keep the nation from resolving big, obvious, festering problems such as immigration, the long-term stability of Medicare, and now, the debt ceiling. Here’s the truth: The overwhelming majority of senators and House members do what their constituents want them to do. Or, more to the point, they respond to people in their districts who bother to vote. Nothing is dearer to politicians than re-election, and most have a keen sense of when they are straying into dangerous waters. For a growing number of senators and representatives, the only risk is in their party’s primary, not in the general election. Most voters, and many news outlets, ignore primaries. That gives control to a relative handful of motivated, hard-core liberals (in Democratic contests) and full-bore conservatives (in GOP primaries). In politically balanced districts, a hard-right or hard-left nominee may have trouble in the general election, when many independent and centrist voters turn out. But many House districts today aren’t balanced, thanks largely to legislative gerrymandering and Americans’ inclination to live and work near people who share their views and values. The result is districts so solidly conservative that no GOP nominee can possibly lose, or so firmly liberal that any Democratic nominee is certain to win. In these districts, the primary is the whole ball game. Republican lawmakers are under constant pressure to drift to the right, to make sure no fire-breathing conservative outflanks them in a light-turnout primary dominated by ideologues. The same goes for Democrats on the left. So who turns up on Capitol Hill for freshman orientation? Democrats and Republicans who can barely comprehend each other’s political viewpoints, let alone embrace them enough to pursue a possible compromise on big issues. But what if a Republican and Democrat do decide to meet halfway in hopes of finding, say, a path to shore up Social Security for decades to come. What can they expect? In some states and districts, they can expect to be drummed out of their party for the crime of engaging with “the enemy.” That’s what happened last year to Bob Bennett of Utah, a mainstream conservative Republican senator. A relatively small number of conservative activists, led by tea partyers, bounced him from the ticket at a GOP convention. They taunted Bennett with chants of “TARP, TARP.” He had voted for the bipartisan bank bailout legislation pushed by Republican President George W. Bush. The Senate’s GOP leaders also voted for the bill. But it was an unacceptable compromise in the eyes of Utah Republicans picking their Senate nominee. In Alaska, GOP primary voters also kicked Sen. Lisa Murkowski off their ballot. She barely saved her seat with a scrappy write-in candidacy. Murkowski supported the bank bailout and, admittedly, is more moderate than the average congressional Republican. But her improbable write-in victory proved she is popular with Alaskans in general, even if her own party rejected her in the primary. Tea party leaders spell out a warning in their periodic Washington rallies. “The message is that we’re watching, and we want you to vote based on our core values,” Mark Meckler, a co-founder of the Tea Party Patriots, said at one such event. When Democratic leaders were struggling earlier this year to strike a budget deal and avert a government shutdown, Phil Kerpen of the conservative group Americans for Prosperity said sharply, “No Republican better help them.” The crowd cheered loudly. Such threats are mainly aimed at Republicans for now, largely because of the tea party’s rapid rise. But Democratic lawmakers also know liberal discontent might undo them if they stray too far to the center. “It’s astounding how often some Democratic leaders sacrifice principles when critical issues are at stake,” said a writer for the liberal AmericaBlog. The column rebuked Sen. Dick Durbin, D-Ill., for working with the bipartisan “Gang of Six” on a debt-reduction plan. A McClatchy-Marist poll this year found that 71 percent of registered voters want political leaders in Washington to compromise to get things done. If those voters skip key primaries, however, they may have little say in the matter. Political enthusiasts, whether they wear peace signs or “Don’t Tread On Me” T-shirts, will determine who gets elected in many districts before a wide swath of Americans even notice it’s an election year. Except for a recently appointed senator from Nevada, every member of Congress got there the same way: American voters elected them. People may bristle at the notion that we get the government we deserve. But there’s no denying we get the government we elect.

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Harry Reid: GOP Leaders ‘Still Refuse To Negotiate In Good Faith’

July 30, 2011

Speaking on the Senate floor early Saturday evening, Senate Majority Leader Harry Reid dismissed a suggestion made just hours earlier by Senate Minority Leader Mitch McConnell that Democrats and Republicans were inching closer to striking a deal to raise the deficit limit. “It’s fair to say that the engagement there is not in any meaningful way,” Reid said. “Republican leaders still refuse to negotiate in good faith.” Reid said the notion both sides are making progress toward reaching an agreement is “not true.” “The Republican Leader says he’s engaged,” Reid said. “Fortunately, members of his caucus, at least as far as I’m concerned, are more engaged than he is. There are meaningful talks going on with some of his members with my senators.” Reid continued, “While the Republican leader is holding meaningless press conferences, his members are reaching out to me and other members, as I’ve just indicated. They’re coming forward with thoughtful ideas to try to move the process forward. I welcome their ideas and ask all members to continue these discussions.” He suggested that delaying tactics being exercised by his Republican colleagues are preventing a measure from advancing in the upper congressional chamber to raise the debt ceiling. The Democratic leader spelled out the word f-i-l-i-b-u-s-t-e-r to make his case. “You can put lipstick on it, a nice suit, even a skirt on it sometimes, it’s still a filibuster,” Reid said in comments directed at McConnell. The Nevada Democrat suggested that it’d be “unconscionable” for Republicans to use the maneuver to prevent a bill from passing to avert default. McConnell signaled he’s more optimistic about the prospect lawmakers in Washington will reach an agreement while speaking on the Senate floor. He said, however, that “the only way that can be done” is through talks with President Barack Obama. Below, video of Reid’s remarks on the Senate floor. Click here for more on the latest developments to unfold in the debt ceiling debate. WATCH: Visit msnbc.com for breaking news , world news , and news about the economy

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Answering The Big What-If Questions Of Debt Default

July 30, 2011

(Lauren Young) – The debt negotiations are getting down to the wire. Republican and Democratic lawmakers are scrambling to broker a deal to raise the country’s $14.3 trillion debt ceiling before Tuesday, when the Treasury will no longer be able to borrow funds to meet all of its obligations. It all means the United States could face the possibility of defaulting on its debt and losing its prized triple-A credit rating. What does that mean for consumers? Here are some answers we compiled from Reuters Money experts: 1. Should I be worried that I won’t receive my Social Security benefit in August? Perhaps not immediately. Social Security’s coffers should be full enough to make the August payments. And cash flow should be positive — the system generates more from current revenue than it spends on benefits and its own administrative costs. The main source of revenue is the payroll tax paid by employers and employees (the Federal Insurance Contributions Act, or FICA); other income sources include interest payments on bonds in the Social Security Trust Fund (SSTF) and taxes paid by higher-income beneficiaries. Last year, revenue totaled $781 billion, while outgo was $713 billion. And even if funds aren’t on hand in a given week to pay benefits for timing reasons, the SSTF can redeem bonds to make up the shortfall. But here’s the rub: the bonds are obligations of the U.S. Treasury back to the SSTF. A government debt default would put us in uncharted waters, and it’s entirely possible that the administration could refuse to redeem bonds or divert payroll tax receipts to meet other pressing obligations. Social Security advocates don’t agree on what might happen. “(Obama’s statement) was a foolish bluff,” says Eric Kingson, co-director of the Strengthen Social Security coalition. “There’s no excuse for checks not being issued, and the White House’s willingness to use the threat is symptomatic of their lack of regard for the institution. Their willingness to use it as a negotiating chip is unfortunate.” But Max Richtman, acting chief executive officer of the National Committee to Preserve Social Security and Medicare, worries that the government might decide not to fund the interest on Social Security’s bonds, which would leave the program short of funds. “We really don’t know — it’s completely uncharted territory. Social Security is cash flow-positive if you count interest on the bonds. But which obligations will the government put at top of list of priorities, and who decides that? Is it paying the interest on those bonds? Will it be paying the military? There’s so much uncertainty as to who gets paid, how much and when.” 2. What if I just filed for benefits, or plan to file next month? Could I lose my benefits in the event of a government default? No, but processing of your application could be delayed if the Social Security Administration is forced to lay off employees or shut down in the event of a government funding crisis. 3. Will interest rates on mortgages, car loans, student loans and credit cards rise? Yes. Like any average Joe or Jane who misses a credit card payment, the United States will be socked with higher borrowing costs if it defaults on its debt. If the country loses its coveted triple-A rating, which is expected to happen, the cost to service its debt will probably rise. And that will have a significant ripple effect. Greg McBride, senior financial analyst at Bankrate.com, says either a ratings downgrade or debt default would result in higher borrowing rates for consumers and businesses alike. “More of a concern is that a prolonged default could cause credit markets to freeze altogether, and we will have real problems,” he says. It’s impossible to speculate how much rates will go up, he says. “There are a lot of variables at play. The downgrade will lead to a more modest increase in rates. However, that increase would be permanent.” Folks who have variable debt such as a credit card balance or adjustable-rate mortgage can take a little comfort in this: “You are going to see higher interest rates eventually, anyway, because rates are so low,” McBride says. Alas, consumers won’t see higher rates on saving products, such as certificates of deposit or money market accounts. “Those products won’t improve until loan demand picks up; any downgrade or default will only hold back loan demand,” McBride says. 4. What’s the outlook for the U.S. dollar? Fear that the United States will lose its AAA credit rating or even default on its debt is driving foreigners away from U.S. assets, and the dollar is taking the biggest hit. Recent trading in currency markets indicates overseas investors have been voting with their feet. They have also been giving short shrift to recent Treasury auctions. Traders say Asian central banks, among the world’s biggest dollar holders, have been steady buyers of alternatives to the dollar such as the Singapore dollar and other Asian currencies as well as the Canadian, Australian and New Zealand dollars. “Foreigners are at the vanguard of the drop in the dollar,” says Dan Dorrow, head of research at Faros Trading, a currency broker/dealer in Stamford, Connecticut. “I don’t think anyone expects a catastrophic U.S. default. But a downgrade will make them more aggressive in moving away from the dollar.” If global investors lose faith in the dollar, that could weaken its dominant position in global trade and its role as the world’s reserve currency. Over time, diminished demand for dollars would make it harder for the United States to finance itself at low interest rates. The bottom line? It will be more expensive to travel overseas, drink French wine or buy Japanese cars. 5. What’s the outlook for U.S. Treasuries? The Treasury market has held up better than the dollar, but bonds haven’t been let off the hook entirely. Foreigners, who hold nearly half of outstanding Treasury debt, have been less active buyers at auctions this month. Still, the 10-year yield has held below three percent for most of July, less than a percentage point from its multi-decade low. That’s partly because domestic investors have picked up the slack in recent debt sales, suggesting they see no alternative to U.S. government bonds even in the face of a default or possible downgrade. Indeed, analysts say even with a downgrade, Treasuries would remain the benchmark for world fixed income markets, as Fitch Ratings noted this week. Terry Belton, global head of fixed income strategy at JPMorgan Chase, said a downgrade would probably add just five to 10 basis points to yields in the short run. But it could cost the U.S. government up to 70 basis points, or about $100 billion, in added borrowing costs over time as foreigners look to invest their money elsewhere. 6. Will we still pay our soldiers? While a group of Congressmen pushed forward a bill this week to ensure that the active military servicemen still get paid in the case of default, there’s no firm plan yet. The White House hasn’t made any assurances and either has the Treasury Department. Some financial organizations that service military clients, like USAA and the Andrews Federal Credit Union, have stepped up to say that they will advance pay if there is a default. “Rest assured, USAA has continued to manage its financial resources to meet our commitments to members in their moments of need,” says CEO Joe Robles in a statement. What will a default actually mean for military members and their families? “The bigger concern has got to be interest rates,” says Sarah Gilbert, the wife of an army reservist and a personal finance writer who was formerly an investment banker. She says military families have been through pay stoppages before – during the last government shut-down, they actually halted all military pay a week early – but what will really hurt is if interest rates go up even a little bit. “There’s no wiggle room,” she says. “Military families are so dependent on debt because they have to move so much, they are living on small budgets and they are mostly young families that don’t have a lot of established savings. If interest rates go up, you’re looking at foreclosures, collections and not being able to pay bills.” 7. Is there an upside to higher interest rates? Barry Glassman, president and certified financial planner at Glassman Wealth Services in McLean, Virginia, says higher interest rates are good for retirees and folks who have fixed mortgages. “I don’t know anyone with a five-year Treasury bond who doesn’t believe they won’t get their interest and principal back. If yields do jump, my clients would love 10- year Treasuries with a five percent coupon,” Glassman says. But McBride of Bankrate.com says it’s going to be a bumpy ride for most folks. “There are no winners here. Your best bet is to sit tight and pull the seat belt a little tighter,” he says. (With reporting from Mark Miller, Steven Johnson, Beth Pinsker and Linda Stern.) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Senate, House Race Against The Clock

July 30, 2011

WASHINGTON — The Republican-led House on Saturday rejected a Senate Democratic bill to raise the nation’s debt limit just three days before the deadline to avert an unprecedented U.S. financial default. President Barack Obama and lawmakers remained at loggerheads on any possible compromise. With tensions high at a rare weekend session, the legislation failed on a 246-173 vote that was largely symbolic. The Senate has yet to vote on the bill. Saturday’s result, however, could pave the way for negotiations on a compromise with Tuesday’s deadline on the government’s ability to pay its bills fast approaching. Senate Democratic Leader Harry Reid, D-Nev., and House leader Nancy Pelosi, D-Calif., were heading to the White House late Saturday. Obama, in his weekly radio and Internet address, warned that “there is very little time” and pleaded with both Republicans and Democrats to stop political gamesmanship. “The time for compromise on behalf of the American people is now,” Obama said. Pelosi, for her part, told the House it was “time to end this theater of the absurd. It’s time for us to get real.” Resolution remained elusive. Some 43 Senate Republicans said they opposed the Democratic bill by Reid. His alternative measure would raise the debt limit by $2.4 trillion while cutting spending by $2.2 trillion. In a letter to Reid, they wrote that the bill “fails to address our current fiscal imbalance and lacks any serious effort to ensure that any subsequent spending cuts are enacted.” The 43 are enough to block passage of Reid’s bill. Setting the stage for the high-stakes weekend, Senate Democrats late Friday killed a House-passed debt-limit increase and budget-cutting bill less than two hours after it squeaked through the House. Reid set up a test vote for the wee hours of Sunday morning to break a GOP filibuster on his own legislation. Saturday’s debate in the House was heated and sometimes nasty, with occasional efforts to shout down speakers. Rep. Sander Levin, D-Mich., railed against the “pernicious nonsense” from Republican Rep. David Dreier of California. Freshman Rep. Alan Nunnelee, R-Miss., said, “This Harry Reid plan offers no real solutions to the out-of-control spending problems.” Countered Rep. Jim Clyburn, D-S.C.: “The clock is ticking and Republicans are continuing to play political games.” Rep. Jerry Lewis, R-Calif., read a statement that then-Sen. Barack Obama had delivered years ago against raising the debt limit. House Democrats said they would put aside their resistance to legislation that makes deep spending cuts and back the measure in a show of strength that could improve Reid’s leverage in negotiations. “There are some misgivings, but it’s the only game in town,” said Rep. Gerald Connolly, D-Va., as he emerged from an hour-long closed door meeting. Democrats, Republicans and the White House, meanwhile, were expected to be deep in conversation in hopes of a potential compromise. Senate GOP leader Mitch McConnell of Kentucky was likely to play a pivotal role. The outcome of the weekend endgame was anything but clear as Democrats and Republicans remained at odds over how to force lawmakers to come up with additional budget savings later this year beyond the almost $1 trillion in agency budget cuts over the coming decade that they basically agree on. At the start of the Senate’s session Saturday, Reid appealed to Republicans to work with him on his proposal, particularly McConnell. “We’re willing to listen to Republican ideas to make this proposal better, but time is running short,” Reid said. McConnell said the Reid plan wasn’t “going anywhere. Senate Republicans refuse to go along with this transparently political and deeply irresponsible ploy to give the president cover to make our debt crisis even worse than it already is.” After a brutal week on Wall Street – investors lost hundreds of billions of dollars as the markets lost ground every day – pressure is intense to produce an accord before the Asian markets open on Sunday afternoon. The House measure squeaked through on a 218-210 vote, with 22 Republicans joining united Democrats in opposing the GOP measure, which pairs an immediate $900 billion increase in U.S. borrowing authority along with $917 billion in spending cuts spread over the coming decade. Friday’s roll call came after Boehner had been forced to call off a vote slated for Thursday in the face of tea party opposition to the measure. He added a provision requiring that a second, up to $1.6 trillion debt increase be conditioned on House and Senate passage of a balanced-budget amendment to the Constitution, which would require an unrealistic two-thirds vote by each chamber to send it to the states for ratification. Boehner’s move only cemented Democratic opposition to the measure and complicated prospects for a weekend compromise that could clear both houses and win Obama’s signature by next Tuesday’s deadline. And by appeasing the tea party by adding the balanced-budget amendment poison pill, Boehner seemed to hand endgame leverage to Reid and Obama. Boehner said the House bill – before the addition of the balanced-budget amendment – mirrored an agreement worked out with Reid last weekend. Still, as soon as the measure reached the Senate side of the Capitol, Senate Democrats scuttled it. The vote was 59-41, with all Democrats, two independents and six Republicans joining in opposition. Reid’s alternative measure would raise the debt limit by up to $2.4 trillion, enough to meet a demand by Obama that the increase be sufficient so that Congress doesn’t have to wrestle with it again until 2013. Administration officials say that without legislation in place by the end of Tuesday, the Treasury will no longer be able to pay all its bills. The result could inflict significant damage on the economy, they add, causing interest rates to rise and financial markets to sink. Executives from the country’s biggest banks met with U.S. Treasury officials to discuss how debt auctions will be handled if Congress fails to raise the borrowing limit before Tuesday’s deadline. ___ Associated Press writers Donna Cassata and David Espo contributed to this story.

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Obama Weekly Address: ‘There Is Very Little Time’

July 30, 2011

WASHINGTON — Claiming that the two parties aren’t that far apart, President Barack Obama is urging Democratic and Republican lawmakers to reach a deal quickly to keep the government from defaulting on payments to veterans, Social Security recipients and others. “There is very little time” he said Saturday in his weekly radio and Internet address. The Republican-controlled House on Friday passed a bill aimed at avoiding a debt default, voting 218-210 almost entirely along party lines. It pairs an immediate $900 billion increase in U.S. borrowing authority, needed for the government to keep paying all its bills, with $917 billion in federal spending cuts. But Democrats strongly oppose a provision that says Congress must approve a balanced-budget amendment to the Constitution and send it to the states for ratification before any additional increases in borrowing authority are granted. In the Republican radio address, Arizona Sen. Jon Kyl said it’s important for the country to avoid debt default, but said Democrats need to work more closely with Republicans. “Republicans have tried to work with Democrats to avoid this result and put our country on a better path, but we need them to work with us,” Kyl said. “Unfortunately, after weeks of negotiations, it became clear that Democrats in Washington did not view this crisis as an opportunity to rein in spending,” he said. “Instead, they saw it as an opportunity to impose huge tax increases on American families and small businesses.” Obama insists that borrowing authority extend through 2013, beyond next year’s presidential campaign. The Democratic-controlled Senate, with help from some Republicans, quickly rejected the House bill on Friday. Majority Leader Harry Reid, D-Nev., had an alternative measure to cut spending by $2.4 trillion and raise the debt limit by an equal amount, enough to meet Obama’s demand that there not be another vote on government borrowing next year. That defeat could set the stage for weekend negotiations on a compromise measure suitable to both houses of Congress. Obama said that compromise is needed by a Tuesday deadline – or else the government will begin running out of money. “Look, the parties are not that far apart here,” Obama said Saturday, claiming “rough agreement” between them on spending cuts and a process for overhauling the tax code and costly federal benefit programs. “There are plenty ways out of this mess. But there is very little time.” “We need to reach a compromise by Tuesday so that our country will have the ability to pay its bills on time, bills like Social Security checks, veterans’ benefits and contracts we’ve signed with thousands of American businesses,” Obama said. The president also offered praise for congressional Democrats and some Senate Republicans who “have been listening and have shown themselves willing to make compromises to solve this crisis.” He singled out House Republicans in calling on all lawmakers to show “the same kind of responsibility that the American people show every day” by paying their bills and keeping their houses in order. “The time for putting party first is over,” Obama said. “The time for compromise on behalf of the American people is now.” ___ Online: Array Array

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Despite Criticism, Tea Party Finds Moment Of Triumph In Contentious Debate

July 29, 2011

By Tom Brown MIAMI (Reuters) – They have been accused of holding Washington hostage by pushing the United States to the brink of a damaging debt default. The world is watching anxiously as the debt impasse drags on. But it is a moment of triumph for many activists of the Tea Party movement, a grass-roots group devoted to cutting the debt and shrinking government which has gained a powerful bridgehead in the U.S. House of Representatives. Many were claiming victory this week, as their refusal to compromise on spending threatened to trigger a historic default that could shake the global financial system and tip the fragile U.S. economy back into recession. Some adherents of the movement, named after the historic Boston tax rebellion against the British in 1773, are indicating it may be time to compromise to avert financial catastrophe. But most remain defiant. “We finally have an active grass-roots army and voting constituency demanding bold cuts to the budget and rewarding politicians who stand on principle, not politics,” said Dick Armey, an unofficial leader of the movement. Tea Party darling Sarah Palin, the former Alaska governor and unsuccessful U.S. vice presidential candidate in 2008, has led a chorus of calls to stand firm. “We cannot rob from our children and grandchildren’s tomorrow to pay for our unchecked spending today,” she said. Critics complain she and other activists are misleading the public by likening the complex task of running the federal government to keeping households on a budget. Congresswoman Michele Bachmann, a leader of the Tea Party caucus in the U.S. House of Representatives and contender for the 2012 Republican presidential nomination, has also flaunted her opposition to raising the debt ceiling. “I won’t raise taxes. I will reduce spending, and I won’t vote to raise the debt ceiling,” Bachmann said on Thursday. ”And I have the titanium spine to see it through.” ANTI-OBAMA RHETORIC Armey, a former leader of Republicans in the House heads FreedomWorks, a group that funds and coordinates conservative activists across the country. “If we go ahead and raise the debt ceiling without big spending cuts, spending caps or a balanced budget amendment to the Constitution, it does nothing for the long-term. I’m for the long-term solutions,” he said. The Tea Party grabbed the national political spotlight after President Barack Obama took office in early 2009 and much of its ire is directed at the Democratic president. It has managed to push Republican candidates to the right in many electoral races and its demands are carrying weight in Congress. The movement played a big role in gaining 63 extra seats for the Republicans when they took control of the House in the 2010 midterm elections. The current debt ceiling is $14.3 trillion and a failure to increase it by next Tuesday has triggered warnings from the Obama administration and others of global financial chaos. Both FreedomWorks and Americans for Prosperity, a group started by billionaire David Koch that has worked with Tea Party groups, fiercely oppose raising the debt cap without major concessions. The drive to drastically cut and cap spending levels and amend the U.S. constitution to bar federal government deficits is dominating rank-and-file meetings across the country. It dovetails with the interests of some wealthy Americans like Koch, who want low taxes, limited oversight of business and industry and minimal government services for the needy. The movement is not officially linked to the Republican Party, although its biggest impact legislatively so far has been through the influence of a block of conservative Republicans in the House. It bridles at suggestions from some critics that it is a so-called “Astro-Turf”, or fake grass-roots, organization led from the top down. Activists say the movement is broad-based, and born out of anger over corporate bailouts and a surge in government spending to counter the recent recession, although a CNN/ORC poll found only 1 percent of Americans are “active members.” “MAD HATTER” OF THE MOVEMENT Glenn Beck, the arch-conservative U.S. television host who has an almost cult-like following among many Tea Partiers, was mockingly depicted on the cover of The Economist news weekly as the “Mad Hatter” of the movement after the character in Lewis Carroll’s “Alice’s Adventures in Wonderland. At a meeting the Bayshore Tea Party in New Jersey this week, Neil O’Connor, 67, a retired small business owner from Middletown, New Jersey, spoke with Beck-like patriotic fervor as he held forth on the great debt crisis debate. “Default or be damned,” said O’Connor, speaking against the backdrop of a huge American flag and a bookshelf prominently displaying one of Beck’s best-sellers. “We are now engaged in a struggle for the survival of the Republic,” he said. “We can default and force Obama to relent and go back to the original principles of sound fiscal government.” On Thursday in Alvin, Texas, where about 35 people filled the wooden benches of a small courthouse, Tea Party members touted the movement’s ability to sway the debt debate. “We wouldn’t have had this debate if it wasn’t for the Tea Party,” said Dale Huls, a member of the Clear Lake Tea Party. In Cedar Falls, Iowa, Judd Saul, head of a Tea Party chapter, said: “If it takes going into default and losing our triple-A credit rating – our inflated triple-A credit rating – in order for the government to learn its lesson, so be it.” That contrasts sharply with warnings from the likes of Christine Lagarde, the new head of the International Monetary Fund, that a U.S. default or significant downgrade would be a ”very, very serious event” with international consequences. The state news agency in China, America’s biggest foreign creditor, took a similar view of the dysfunction in Washington on Friday. The United States has been “kidnapped” by ”dangerously irresponsible” politics, the agency said. TALK OF DEFAULT But talk of default is anathema to some Tea Party activists and even some of the movement’s staunchest allies in Congress have begun talking about the need to compromise to protect America’s top and jealously-guarded debt rating. Republican U.S. Representative Allen West, a freshman from Florida, has championed the Tea Party agenda. But he told Reuters on Wednesday he supported a compromise budget deficit plan drafted by House Speaker John Boehner but opposed by other Tea Party-backed fiscal conservatives. “We can sit around and we can try to have the 100 percent perfect plan and then we end up losing,” West said. “I have done the reasonable man thing,” he said. West did not elaborate on his willingness to make a deal. But he said the Tea Party would emerge stronger from the debt crisis talks as the movement and its backers set their sights on the state and national elections of 2012. “Everyone said that we wanted to start having a conversation that was based upon cutting spending and not increasing spending. And I think in seven months you’ve seen that occur up here in Washington D.C.,” said West. Fred O’Neal, founder and former chairman of the Florida Tea Party, said the brinkmanship may already have gone too far in Washington. “There are some people who want to burn down the house and they claim they’re the Tea Party,” said O’Neal. “That makes the rest of us look bad … Burning down the house to kill the cockroaches isn’t going to help,” he said. (Additional reporting by Barbara Liston in Orlando, Kristina Cooke and Edith Honan in New Jersey, James B. Kelleher in Chicago, Chris Baltimore in Alvin, Texas and Donna Smith in Washington; Editing by David Storey)

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Can Obama Extend The Debt Ceiling On His Own?

July 29, 2011

As the debt ceiling fiasco continues unresolved and increasingly dangerous, with no agreement among the House, the Senate and the White House yet in sight, an obscure and forgotten constitutional clause has suddenly come under scrutiny.

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Weak GDP Report Suggests Economic Recovery Will Be Painfully Slow

July 29, 2011

The American economy grew anemically during the spring, the government reported Friday, and prior growth was even slower than initially grasped, dealing a considerable setback to hopes for rapid improvement. Gross domestic product — the national output of goods and services — increased by only 1.3 percent between April and June 2011, the Commerce Department announced on Friday . Economists had expected to see growth of 1.8 percent. Worse, revisions to past numbers suggest that growth as far back as 2007 has been more sluggish than previously believed. GDP estimates for the first quarter of 2011 were revised downward to 0.4 percent growth, a sharp drop from the previous estimate of 1.9 percent. And GDP for 2007 through 2010, previously thought to have grown by an average of less than 0.1 percent each year during that period, was also revised downward, to show an average decrease of 0.3 percent per year. “It’s not a recession,” said Josh Bivens, an economist at the Economic Policy Institute, in an interview with The Huffington Post. “It doesn’t panic people the same way. But it is a disaster if you’re really concerned about joblessness.” The numbers arrive amidst an already discouraging economic climate. At the beginning of July, a report from the Labor Department showed weak job growth and rising unemployment for the third month in a row. Consumer confidence has fallen to a two-year low , according to a closely-watched survey from the University of Michigan. And in Washington, a Congressional standoff over the U.S. Treasury’s ability to borrow money has led to widespread fears of market shocks, missed government payouts, and a national credit downgrade. Given these circumstances, Friday’s listless GDP numbers are particularly unwelcome. They don’t necessarily suggest that the U.S. will backslide into another recession, says Bivens, but they don’t point to rosy days ahead either. “I think we could bounce along for a couple of years at this really miserably slow growth rate,” Bivens told HuffPost. “So we’d never technically enter a recession, but we would still have high and maybe even rising unemployment.” Last month, Federal Reserve Chairman Ben Bernanke predicted that the recovery would accelerate in the second half of 2011 , noting that high oil prices and disruptions from the natural disasters in Japan have likely played a role in suppressing growth this year. But Lakshman Achuthan, co-founder and chief operations officer at the Economic Cycle Research Institute, told The Huffington Post that the economy is likely to remain underwhelming for some time. “Today, I think if you turn on the TV, they might blame everything on the debt debates in Washington,” said Achuthan. “But the slowdown started a long time ago. It didn’t start today and it’s not going to end tomorrow… The slowing is going to continue through the end of year, at least, and that includes the slowing in jobs.” Consumer spending remained almost flat for the second quarter, according to Friday’s report, rising only 0.1 percent. “Consumers didn’t get anything. There was no growth in what they were buying,” said Achuthan. “Probably because they were just buying gas and food.” Not every indicator is trending downward, however. Friday’s report indicated that personal income increased 4.2 percent in the second quarter of 2011, after rising 8.3 percent in the first. Home prices are creeping up after a setback in February, according to data from the Census Bureau and the Standard & Poor’s/Case-Shiller index . And industrial production saw an uptick in June after two months of decline, according to the Federal Reserve . Still, two years after the official end of the recession, the economy is far from where anyone would like it to be. “If you look at the level of GDP today, it turns out with the revisions, it’s still lower than it was before the recession hit,” Bivens told The Huffington Post. “So basically we were a richer country in the fourth quarter of 2007 than we are today, with these revisions. We have not even called back all of these income losses that we saw during the Great Recession.” In April, a Gallup poll found that 55 percent of Americans believed the U.S. was in a recession or a depression — 10 percent more than in February 2008, when a recession was actually underway. Practically speaking, though, the recovery feels like a recession to many Americans. A separate Gallup survey found that about five million fewer people have access to basic necessities –including food, shelter and health care — than did in October 2008, when the recession had been going on for several months. In spite of Friday’s disappointing numbers — and all the disappointing numbers before them — a recovery is happening, said Bivens. “We really have been growing since the middle of 2009, we’ve just been growing far too slowly,” he told HuffPost. “The growth is real. It’s just clearly inadequate.”

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Eric Cantor’s District May Lose AAA Credit Rating

July 29, 2011

WASHINGTON — Moody’s Investors Service is warning 162 local governments that they risk a downgrade of their AAA credit rating because of the federal government’s inability to come to an agreement on a plan to raise the debt ceiling. The affected local governments are most heavily concentrated in Virginia and Massachusetts. One of the counties, Hanover, falls squarely in House Majority Leader Eric Cantor’s (R-Va.) district . Parts of two more counties, Chesterfield and Henrico, are in his district as well. “The ratings of these local governments, particularly those with a high economic dependence on federal activity, would be vulnerable to a downgrade of the U.S. government,” said Moody’s Senior Vice President Matt Jones. Cantor’s office said that the warning was a further indication of the need for substantial budget cuts. “Moody’s announcement further demonstrates why it is so important to take serious steps to cut spending and get our fiscal house in order,” said Cantor spokesperson Laena Fallon. “House Republicans have said all along that we want to achieve spending cuts that exceed the debt limit increase and put in place binding budget reforms to change the way Washington spends taxpayer dollars. No one wants to default on our debt, and with so many people still out of work we have to focus on getting the economy going again.” Last week, Moody’s said that five states — Maryland, New Mexico, South Carolina, Tennessee and Virginia — risked downgrades in their credit ratings if Congress and the president were unable to work out a debt ceiling deal. The states were put at risk because of their high percentages of federal employment and levels of state expenditures devoted to Medicaid. The federal government has also been put on notice by Moody’s, “given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations.” Virginia Gov. Bob McDonnell (R-Va.) recently sent a letter to President Obama and the state’s congressional delegation, imploring them reach a compromise and raise the debt limit, giving an indication of the wrath that federal lawmakers may face from the public back home if Aug. 2 comes and goes without an agreement. Another county at risk is New Castle County in Delaware, where Sen. Chris Coons (D-Del.) previously served as county executive. In a statement, he placed the blame for the stalemate on “Tea Party Republicans.” “It’s disheartening to think that years of extremely difficult work at New Castle County maintaining our AAA bond rating could be tossed aside by weeks of reckless stubbornness by Tea Party Republicans. While we have record annual deficits and a dangerous national debt that need to be urgently addressed, defaulting on America’s mortgage is not the way to do it,” he said. “The announcement from Moody’s today affects municipalities in 31 states, including those of the very Tea Party Republicans who are insisting on steering our nation’s economy off this cliff. I hope that this sobering news will instead help steer them instead to a responsible compromise.” Check here for additional debt ceiling updates.

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From The Outside Looking In: How The Debt Debate Could Affect You

July 29, 2011

As lawmakers in Washington work to advance a plan to raise the debt ceiling, local leaders and residents from across the country have something to say about the contentious debate unfolding inside the Beltway. Should the United States begin the process of defaulting on its debts, the fallout from such an economic scenario would not be confined to the nation’s capital. It would likely be felt across the country. What would it mean for you and your hometown if Democrats and Republicans fail to lift the deficit limit? Check out the slideshow below from Patch reporters highlighting local perspectives and reaction to the situation in Washington.

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The Rapture Profiteers

July 28, 2011

For nearly a year, nonagenarian preacher and radio personality Harold Camping predicted the world would end on May 21. Locusts would blanket the earth and millions would die while Camping and his flock would rise up to the sky, rendezvous with Jesus, and ascend to the Kingdom of Heaven. Instead, May 22 happened, Camping postponed the end of the world by five months, and then suffered a debilitating stroke — leaving a huge vacuum in the Rapture market. The meltdown came at a propitious moment for apocalypse followers. A proliferation of earthquakes, a plague that may or may not be sweeping Brazil, the Greeks, and Kim Kardashian, among other things, may be conspiring to create a Rapture bubble. In addition to Camping’s revised forecast — the world is definitely going to end on Oct. 21 — many Rapture-seekers now believe the Aug. 2 debt-ceiling deadline signals that the end may be very, very near.

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Fed Will Provide Banks With Guidance If Country Defaults

July 28, 2011

(Mark Felsenthal) – The Federal Reserve plans to provide guidance to banks soon on how to handle the potentially turbulent financial waters if the United States exhausts its borrowing authority. “We have been engaged in operational planning with the Treasury,” Fed spokeswoman Barbara Hagenbaugh said on Thursday. “We expect to be able to give additional guidance to financial institutions when there is greater clarity from the Congress and when Treasury outlines its specific operational plans.” The Treasury has said it will not be able to borrow more funds after Tuesday if Congress does not raise the nation’s $14.3 trillion debt ceiling by then, raising the prospect of a government default. Lawmakers on Thursday were still deadlocked over how to move forward. Officials say a debt default would damage both the U.S. and global economy for years to come and would likely provoke a severe financial crisis, but they have been hesitant to discuss contingency planning. “No one in Washington wants to do anything to relieve the pressure on lawmakers to get this done by the deadline,” said Chris Low, chief economist for FTN Financial in New York “If the Fed starts to say we’re going to do things to mitigate the financial repercussions, you’re giving them some leeway you don’t want to give.” Low said a Fed contact had been unable to provide details about what the central bank’s plans are. U.S. officials said on Wednesday that the Treasury would lay out a plan in the next few days about how the government will operate if it appears Congress may miss the August 2 deadline. This would pave the way for the Fed, which acts as the government’s bank, to make its plans clear. “We haven’t heard much from the Fed,” said Ray Stone, an economist at Stone & McCarthy in Princeton, New Jersey. “A default has such severe consequences for the financial markets and the real economy that they have to do something.” Fed officials have acknowledged preparations have been taking place behind the scenes on operational issues to be ready for any financial breakdown. Philadelphia Federal Reserve Bank President Charles Plosser told Reuters last week the Fed has been locked in discussions with Treasury about cash management and other technical issues that would arise in the event of a default. The Treasury needs to decide who would get paid if the government runs out of enough cash to meet all its obligations, and analysts expect it would seek to ensure holders of U.S. government debt are first in line. While the Fed would likely step in to provide liquidity if financial markets appeared at risk of seizing up, the guidance for banks is likely to be more mundane. The Office of the Comptroller of the Currency said it plans to advise the national banks it regulates that when assessing customer overdrafts, they should consider whether a customer failed to receive a government check due to the debt ceiling impasse. The Fed could be expected to follow suit. However, the central bank would likely face some momentous decisions if a default sparks a crisis. For one, they may need to decide whether to continue to accept Treasury debt as collateral for emergency bank loans if the United States loses its vaunted AAA credit rating. Richmond Fed President Jeffrey Lacker said on Thursday the Fed may need to reevaluate how it values government debt it accepts as collateral, possibly making banks take steeper “haircuts” on the debt. Some analysts have speculated the Fed could step in to keep government checks flowing in the event the Treasury runs out of cash. However, Fed officials have sought to quash that notion. The Fed is the fiscal agent and the depository for the Treasury. It receives bids for Treasury securities sold at auctions, issues the securities and clears government checks. Fed Chairman Ben Bernanke told a hearing on July 13 the Fed would do what it could to keep the financial system functioning. However, he said it would not be a financial backstop to help the government pay bills if it cannot borrow. “We would do what we could to preserve the operationality of the system,” Bernanke said. “But I want to eliminate any expectation that the Fed through any mechanism could offset the impact of a default on the government debt.” (Additional reporting by Emily Flitter in New York; Editing by James Dalgleish) Copyright 2011 Thomson Reuters. Click for Restrictions .

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David Nichtern: Is Karma To Blame?

July 28, 2011

What is the law of karma? In Buddhism, the law of karma describes how causes and effects interact in our world. The point of understanding how karma works is to see the nature of things as they are, beyond any kind of delusion or wishful thinking. What does the law of karma have to do with the current economic crisis? Maybe our national economic policy could use a good healthy dose of seeing “things as they are”. In our individual meditation practice, there is no magic bullet, no fantasy transformation, no gimmicks — we have to work through our karma, brick by brick — it is manual labor. With meditation practice, we can see how our mind works — what creates positive karma (compassion and wisdom), and what creates negative karma (aggression, attachment and ignorance). That is how we get clarity about how certain causes create certain conditions — how did we get where we are and what we can do about it. With the same approach, with real scrutiny, perhaps our current debt ceiling crisis can be seen to be nothing other than our national money karma coming to fruition. There are some basic principles at work here, immune from any kind of fancy talk or manipulation. Certain basic causes and conditions have created the current situation: 1. We have borrowed too much money. Just as many of us have done as individuals, as a nation we have simply borrowed too much money, and now our creditors are knocking at the door. I don’t think you need an advanced degree in economics to figure this out. Sometimes common sense is more valuable than intricate theories. It’s time to pay some of this debt down, just as we would (and as some of us have) if this were our individual problem only. 2. We have been too greedy. As a nation (and many of us as individuals) we have been willing to sacrifice long-term prosperity for short-term gain, over and over again. Many of us are addicted to a hyper-extended materialistic lifestyle (certainly by global standards) and have been willing to go deeply into debt to maintain it. Additionally, a tiny percentage of extremely wealthy people are now in a position to manipulate our entire economy to further their own self-centered, limited agenda, which they are now doing on a global level. Gordon Gekko said “greed is good,” but now we will get to see if that will be his “final answer.” 3. Our national political arena has become overrun with personalized agendas and bad manners. We seem to have a chasmic divide amongst our so-called “leadership.” Creative friction can sometimes be very effective in flushing out different points of view and perhaps reaching a higher fusion. But we seem to have gone well beyond that kind of creative friction in our national politics to the level of some kind of permanently feuding mentality. Like the Hatfields and the McCoys, we now see our two “parties” immersed in an ongoing tit for tat, with nobody being very clear about the origin or the point of it all. There seems to be a crescendo of personalized agendas in the public sector. Temporal leaders, just like good spiritual teachers, could be invited to check their ego at the door. Wouldn’t that be refreshing? The solution? We need bigger vision. Let’s think about what would be good for ourselves and others. Are these really two completely different things? Perhaps we bring out the best in each of us and are also happier individuals when we have a feeling of contributing to a common cause beyond self-aggrandizement. If we are arguing about what would be the best outcome for the larger good, that could be a healthy argument to have. If we’re going to keep playing the “me, me, me” game, we might be spinning on this particular wheel of karma forever — like a giant Ferris Wheel with all of us on it. Follow David on his website ( www.davidnichtern.com ), facebook ( facebook.com/davidnichtern ), twitter ( twitter.com/davidnichtern ), or youtube ( youtube.com/davidnichtern )

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GOP Sen. Bob Corker Disses Boehner, Praises Reid On Debt

July 28, 2011

WASHINGTON — Conservative Sen. Bob Corker (R-Tenn.) sounded Wednesday like he prefers the looks of the Democratic budget-cutting plan better than House Speaker John Boehner’s –- and sounded awfully close to embracing the Obama administration’s desire for grand bargain to hike the debt ceiling. Taking to the Senate floor, Corker argued that Senate Majority Leader Harry Reid’s (D-Nev.) $2.2 trillion cut plan was a good effort, except that it needs to be more like $4 trillion — as that’s the magnitude Corker thinks it will take to convince ratings agencies not to downgrade the United States’ prized AAA score. “I may catch some grief back home for saying this, but I think Sen. Reid has actually tried to put something forth to help solve this problem,” Corker said, while noting that House Speaker John Boehner’s (R-Ohio) short-term plan to cut $850 billion had ” issues .” In particular, Corker warned that extending the debt ceiling for only six months, as Boehner has proposed, would still risk the nation’s credit rating, and leave lawmakers facing another ugly half a year. “I know the president has been concerned, candidly, about a short-term extension,” Corker said. “In fairness, I think the business community around our country would be concerned about a long short-term extension.” Other Republicans, including Senate Minority Leader Mitch McConnell (R-Ky.), have accused Obama of seeking a longer deal because it was convenient for his reelection campaign. While Reid’s proposal is short of the $4 trillion Corker wants, at least it lasts until 2013. “To even set up a process that’s short of that doesn’t make any sense to me,” Corker said, referring to the size and duration of a deal. “It’s kind of like you’ve got to be kidding me. We’ve got to go through the aggravation of the next six months working towards an aspirational goal that we all know doesn’t solve the credit rating issue.” Boehner’s longer-term proposal — which includes a second vote after six months — is similar in overall size to Reid’s, although it also adds a balanced budget amendment. Corker was not alone in suggesting his party wasn’t pursuing the best course. Sen. John McCain (R-Ariz.) blasted some on his side for trying to insist on the constitutional amendment, which he called “bizarro.” He also slammed right-wing conservatives for “deceiving many of our constituents.” Corker’s reasoning sounds remarkably like the position of Obama, who has been seeking a deal that cuts $4 trillion or more, and lasts into 2013. Where they would part ways is over the issue of taxes, because Obama has insisted that some revenue needs to be brought in to hit the target. But in the broad outlines, the Tennessean may actually be closer to the White House than to his colleagues in Congress. Corker made clear later that his $4 trillion worth of deficit cutting was not necessarily the same as Obama’s, and that he picked the number because that’s what bankers have been telling him it will take to preserve the U.S. credit rating. “It’s just become part of the mantra. It’s not the president,” he said. “We never knew what the details of that were. All we have are sort of talking points on each side. Who knows? I don’t know what that was.” Corker spokesman Chuck Harper said that Corker’s words were not a pan of Boehner’s plan, and noted that Corker praised the speaker for moving the debate in the right direction, which Corker felt was an optimistic sign. This piece has been updated to include later comments from Sen. Corker.

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Did Republicans Really Watch This Ben Affleck Scene Behind Closed Doors?

July 27, 2011

Amid contentious negotiations taking place in Washington on the issue of raising the debt ceiling, the Washington Post offers a glimpse of what went on behind the scenes during a closed-door meeting among House Republican lawmakers on Tuesday. The gathering took place as some conservative members of the chamber remain at odds with their GOP colleagues on a plan put forth by House Speaker John Boehner to lift the nation’s deficit limit. Rep. Jim Jordan (R-Ohio) said on Tuesday morning that at the time he was confident the proposal did not have sufficient GOP votes to pass. According to the Post , House Majority Whip Kevin McCarthy (R-Calif.) sought to foster a sense of unity among House Republicans at their meeting by playing a clip from The Town , a 2010 crime thriller starring Ben Affleck and Jeremy Renner. In the segment of footage reportedly shown, Doug MacRay, a bank robber played by Affleck, says to his friend Jem Coughlin, played by Renner, “I need your help. I can’t tell you what it is. You can never ask me about it later. And we’re going to hurt some people.” Jem then responds, “Whose car are we gonna take?” Republican aides tell the Post that Rep. Allen West (R-Fla.), a Tea Party-backed lawmaker with a penchant for making eyebrow-raising remarks , told his colleagues after the clip was shown, “I’m ready to drive the car.” (The Chicago Tribune recently reported that the film appeared to inspire a real-life bank robbery.) During a recent appearance on Fox News, West was asked if he would consider supporting a short-term proposal to raise the debt ceiling. “I am a reasonable fellow and I do not want to see the U.S. default on any of its obligations,” he said. “I would be willing to listen to something that makes sure we get past the August 2nd deadline. But long term we have to continue with spending control measures and any type of tax hikes are off the table for me.” McCarthy has played a critical role in facilitating a sense of unity among a House GOP caucus that includes a significant number of staunchly conservative freshman lawmakers. Robert Draper wrote in a New York Times Magazine profile published earlier this month: McCarthy informally polled them when they first came to town in November for orientation. All but four of them said they would vote against raising the ceiling, under any circumstances. Then McCarthy (along with Ryan and the House Ways and Means chairman, Dave Camp) began conducting more listening sessions. The whip recognized that it would be counterproductive to lecture the freshmen about the economic hazards of not raising the debt ceiling. He also realized that it’s one thing to pass a budget — which in the end is a nonbinding political document — and another thing to throw America into default. And so McCarthy has urged them to consider raising the ceiling under certain conditions and thus to view this moment as a golden opportunity to force significant changes from the White House. “We all ran for a reason,” he tells them. “What’s most of concern to you? What is it that we think will change America?” As a result, the freshmen have begun to move away from a hard “no” on raising the debt ceiling to a “yes, if.” In the conference room, several freshmen have said they’ll vote to raise the ceiling only if the president agrees to repeal his health care legislation. Or if Obama signs into law a constitutional amendment to balance the budget, after all 50 states have ratified it… HuffPost’s Sam Stein reports on the proposal introduced by Boehner: The debt ceiling deal introduced by Speaker John Boehner (R-Ohio) would save, by one measure, roughly $850 billion over the course of ten years and just $1 billion in 2012 — two metrics unlikely to satisfy the most conservative members of his conference. The Congressional Budget Office, which is the official scorekeeper of legislation, released its analysis of the Budget Control Act of 2011 on Tuesday afternoon. The findings were damaging enough that an hour later, Boehner’s office told reporters it would rewrite the bill to achieve a more favorable scoring. Hours after that, GOP leadership announced it was delaying a vote on the plan until Thursday. Click here for the latest developments to unfold in ongoing negotiations to raise the debt ceiling. Below, video of the clip reportedly shown to House Republicans by McCarthy. WATCH:

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FAA Shutdown Has Lawmakers Trading Blame Over Airport Project Halts

July 26, 2011

WASHINGTON — House and Senate leaders exchanged blame Monday for the legislative stalemate that precipitated a partial shutdown of the Federal Aviation Administration while making no overture to resolve the dispute. The FAA’s operating authority expired at midnight Friday, forcing a partial shutdown of the agency. Dozens of airport construction projects across the country have been put on hold and thousands of federal employees were out of work. Air traffic controllers have continued to work, as well as FAA employees who inspect the safety of planes and test pilots. Transportation officials have said safety won’t be compromised. But it was unclear how long the FAA can continue day-to-day operations before travelers begin to feel the effects of the shutdown. Rep. John Mica, R-Fla., chairman of the House Transportation and Infrastructure Committee, said there have been no negotiations between the Republican-led House and the Democratic-led Senate to resolve the dispute. Republican leaders said they are determined to hold to their position that the Senate must accept a House-passed bill to extend the FAA’s operating through mid-September even though it contains a provision eliminating $16.5 million in air service subsidies for 13 rural airports that Democrats say is unacceptable. “This is sort of sad, you know,” Mica told reporters. “On the eve of the country’s finances near collapse, it’s sort of symbolic of the whole problem here: No one is willing to eliminate any wasteful programs.” The subsidy program was created after airlines were deregulated in 1978 to ensure continued service on less profitable routes to remote communities. Not all those communities are remote anymore. The GOP provision would end subsidies to communities less than 90 miles from a hub airport or where subsidies average greater than $1,000 per passenger. Democrats said the real issue is that Republicans are insisting Democrats accept a host of contentious provisions added to a long-term FAA spending bill approved by the House in April. Among their key differences is a GOP proposal sought by industry that would make it more difficult for airline workers to unionize. The Senate passed its own long-term funding bill in February without the labor provision, which Democrats insist much be dropped. They also accused Republicans of tying the elimination of rural air subsidies to their extension bill as a means to prod Democrats to make concessions on the labor issue. “House Republicans are nowhere to be found, refusing to come back to the negotiating table after pulling yet another cheap political stunt at the expense of rural Americans,” Senate Majority Leader Harry Reid, D-Nev., said in a statement. “Their reckless intransigence has not only shut down the FAA, but is threatening Congress’ ability to successfully complete work on the long-term FAA reauthorization that our economy and the livelihoods of thousands depend upon,” he said. The shutdown is costing the FAA about $30 million a day in lost revenue because airlines no longer have authority to collect ticket taxes. That money goes into an aviation trust fund. The fund “has a healthy balance now, but that would be depleted in fairly rapid order” without congressional action, FAA Administrator Randy Babbitt told reporters in a conference call. Nearly 4,000 FAA employees in 35 states, and the District of Columbia and Puerto Rico, who are paid from the trust fund have been furloughed. About $2.5 billion in federal airport construction grants cannot be processed because workers who handle those grants have been furloughed, officials said. That, in turn, has halted construction projects, putting hundreds of other people employed by those jobs out of work. Dozens of stop-work orders were issued over the weekend for projects to build and modernize airport control towers, as well as other improvement projects, officials said. Many of the airport projects are designed to improve the efficiency of air travel and reduce congestion. “This is simply going to slow down our ability to expand to keep up with growing traffic demands,” Babbitt said. For example, work was scheduled to begin Saturday on a $6 million project to demolish a control tower at New York’s LaGuardia Airport. But the Paul J. Scariano construction firm laid off 40 workers who were assigned to the demolition project, leaving the partly dismantled tower unattended, company vice president Luca Toscano said. “I’m worried about the planes underneath,” Toscano said. “There’s nobody up there keeping an eye on the equipment or scaffolding or anything. If we get a bad storm, a piece of wood or something might go flying.” Work also has stopped for new control towers at airports in Las Vegas, Palm Springs, Calif., Oakland, Calif., Wilkes-Barre, Pa., Kalamazoo, Mich., and Gulfport, Miss., among other projects, officials said. At Oakland International Airport, 60 people working on the facility’s new $31 million control tower were told not to report to work on Monday, said Rosemary Barnes, an airport spokeswoman. Barnes said the construction workers would not get paid until the issue was resolved. Long-term funding authority for the FAA expired in 2007. Unable to agree on new long-term funding legislation for the agency, Congress has kept the FAA operating through a series of 20 short-term extension bills. ___ Associated Press writers Christopher Hawley in New York and Jason Dearen in San Francisco contributed to this report. ___ Online: FAA work stop orders: http://www.faa.gov/news/media/workstop/

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Jim Moret: Captain America Could Strike a Budget Deal

July 25, 2011

Captain Steve Rogers, best known as Captain America, is a superhero. His ideology is simple. It is not influenced by politics nor an allegiance based on lines on a map. He is driven by the principles of right over wrong. When a young, scrawny Rogers was asked by a doctor at an Army recruiting station, during the height of WWII, if he wanted to join the service so he could “kill Nazis,” his response was direct: “I just don’t like bullies.” Even when he is given superhuman strength, the Captain’s main weapon is not a gun, but a shield, as he consistently sees his duty as one of protection. I wish we had such a champion in America right now, when we clearly need one. His charge might seem worlds away from the European battlefronts portrayed in the film, leading Allied troops against Hitler’s forces. But the task here and now is no less serious on the economic front, with potentially devastating consequences to America if no agreement is reached in time to raise the debt ceiling. A critical scene in the movie shows a series of timers, counting down to the eventual self-destruction of an enemy munitions base. The situation for us is no less dire. A 1979 GAO report, cited in a recent Congressional Research Service report, stated: It is difficult to perceive all the adverse effects that a government default for even a short time would have on the economy and the public welfare. It is generally recognized that a default would preclude the government from honoring all of its obligations to pay for such things as employees’ salaries and wages; social security benefits, civil service retirement, and other benefits from trust funds; contractual services and supplies, and maturing securities…. At a minimum, however, the government could be subject to additional claims for interest on unredeemed matured debt and to claims for damages resulting from failure to make payments. But even beyond that, the full faith and credit of the U.S. government would be threatened. Domestic money markets, in which government securities play a major role, could be affected substantially. Precious days and minutes are being wasted as Congress and the President remain at an impasse over raising the debt limit. That decision has been made time and again by various administrations. According to the Congressional Research Service, the limit has been raised 74 times since 1962 and 10 of those times have been since 2001. Raising the limit has now been tied to lines in the sand drawn by both sides of the aisle. Where has that political brinksmanship gotten us? Both S&P and Moody’s have already threatened to downgrade the credit rating of the United States. Overseas markets and Wall Street alike are becoming increasingly nervous that an agreement may not be reached after all. Economists have warned of dire financial and political consequences but even that has not been enough to avoid an 11th hour showdown. The millions of Americans who have been struggling to find work, keep their homes and support their families, and the millions more who are for the first time in a generation worried about their financial futures and those of their children, are looking for a real hero to save them. To the president and members of Congress, I ask a simple question: “What would Steve Rogers do?” He was once a “little guy” who became a larger than life hero, but who never forgot his roots. He respected his new-found strength and responsibility and used his power to fight to protect others, even if that meant sacrificing himself. Captain America may be based on a comic book, but our elected leaders could learn a lot from him about honor, service and doing the right thing.

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Lawmakers split as debt deadline looms

July 25, 2011

By Andy Sullivan and Rick Cowan WASHINGTON (Reuters) – Lawmakers were locked in a standoff on Monday over dueling debt plans that offered little prospect for compromise, increasing the threat of a ratings downgrade and default that could sow chaos in global markets. Little more than a week before the August 2 deadline to raise the $14.3 trillion U.S. debt ceiling, President Barack Obama’s Democrats and their Republican rivals pursued separate budget proposals, with no clear path to bring them together. The impasse rattled investors worldwide, sending stocks and the dollar down and pushing gold to a record high, but falling far short of the panicky sell-off that some politicians in Washington had feared after weekend talks broke down. Market players warned of the prospects for a greater alarm and a downgrade of the United States’ gold-plated AAA rating if the debt stalemate goes down to the wire. The International Monetary Fund urged swift U.S. action on its debt problems to avert negative fallout globally. “If politicians don’t find a solution right now, we are facing a disaster of major proportions,” said Fidelio Tata, head of U.S. rates strategy at SG Corporate & Investment Banking in New York. The Dow Jones industrial average, the Standard & Poor’s 500 Index and the Nasdaq Composite Index were all down less than half a percent in mid-day trading. Obama and congressional leaders have tried to reassure global markets that the country will be able to service its debt and meet other obligations after August 2, when the Treasury Department says the United States will run out of money to pay all of its bills. Ratings agencies have warned that even if Congress raises the debt ceiling and averts a default, they may still strip the United States of its AAA credit rating if lawmakers fail to agree on deeper long-term budget cuts. THREAT TO CREDIT RATING A lower credit rating could raise borrowing costs not only for the U.S. government but also for other countries, companies and consumers because U.S. Treasuries are the benchmark by which many loans are measured. Faced with such dire prospects, top lawmakers set a Monday deadline to show markets a plan. Republicans, driven by the fiscally conservative Tea Party movement that helped them win control of the House of Representatives last November, strongly oppose tax increases. Democrats who control the Senate dislike proposed cuts to popular social programs and want some tax increases in addition to spending cuts. The House and Senate appeared to be heading for a showdown as their leaders developed competing plans to resolve the crisis. Critics said both sides appeared more interested in scoring political points than forging compromise as the 2012 election campaign gathers steam. Senate Majority Leader Harry Reid, a Democrat, aims to raise the debt ceiling by $2.7 trillion, enough to cover the country’s borrowing needs through the November 2012 elections. That would be paired with an equal amount in spending cuts over 10 years — short of the $4 trillion in deficit savings that experts say would be necessary to keep debt at a sustainable level. Republican House Speaker John Boehner’s plan would raise the debt limit in stages, forcing Congress to confront the politically painful issue again before the election. His plan could potentially deliver bigger budget savings through an overhaul of the tax code and a reform of expensive health benefits that are expected to balloon over the coming decade. Boehner has promised more details on his approach when he meets House Republicans at 2 p.m. (1800 GMT). Amid sharp partisan divisions, the International Monetary Fund said on Monday the United States must raise the debt ceiling quickly and get its debts under control for the sake of the global economy. U.S. Secretary of State Hillary Clinton sought to reassure Asia, which holds close to $3 trillion in U.S. government debt, that the United States would reach a deal and avoid default. “I’m confident that Congress will do the right thing and secure a deal on the debt ceiling and work with President Obama to take the steps necessary to improve our long-term fiscal outlook,” she said in a speech in Hong Kong. Germany added its voice to those expecting U.S. lawmakers to reach a compromise, although elsewhere there were signs of frustration. Should the impasse in Congress prove unbreakable for raising the debt ceiling, Obama still has a constitutional escape hatch at his disposal, although he has expressed reluctance to resort to it. He could bypass lawmakers and invoke a little-known clause of the 14th Amendment of the U.S. Constitution, which states that the United States’ public debt “shall not be questioned.” (Additional reporting by Richard Cowan in Washington, Ryan Vlastelica in New York, Emily Kaiser in Singapore, Yoo Choonsik in Seoul; Editing by Will Dunham)

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