Holiday Cliff Diving

Posted on December 26, 2012 by billmanzi

I hope everyone had a wonderful Christmas and holiday season. As we prepare for the New Year let us return once more to the dreaded “fiscal cliff”, which is being dealt with in Washington at quite a leisurely pace.

As we left our hard working public servants before they jetted off for holiday Speaker John Boehner had been flummoxed by his own caucus rejecting “Plan B”, which would have raised marginal tax rates on those earning $1 million and above. The Speaker then punted over to Harry Reid and the Senate, saying it is up to them to produce a workable, passable plan. The President has offered a scaled down deal, with unemployment benefits extended, tax breaks extended for those under $250,000, and some other unspecified items. Those other, non-specified would likely include the AMT Patch, some recommendation on the estate tax, and a modification of the sequester, which would essentially boil down to creating Sequester 2 in 2013. Left unattended would be the debt ceiling, which will rear its ugly head again in 2013. Majority Leader Reid has said he might be willing to put forward a package, but only if Minority Leader Mitch McConnell promises not to filibuster it. And while both Senate and House have actually passed partisan bills to deal with taxes Speaker Boehner referred to the “blue slip” problem that the Senate bill(s) have. (Under the Constitution all revenue raising bills must originate in the House). Minority Leader McConnell, at least publicly, has refused to say whether he will in fact filibuster any Democratic bill. McConnell is a candidate for re-election next year, and is looking over his shoulder at a possible right wing primary challenge, so he is reluctant to be seen as “cooperating” with Democrats on anything. Speaker Boehner, even if he gets a Senate bill passed by majority vote without a “blue slip” problem, has not said if he would allow that bill to get to the House floor if it does not have a “majority of the majority”. If he does allow it forward conservatives are threatening his hold on the Speakership for allowing a bill that would raise taxes to go forward. Those very same taxes that rise for everyone a couple of days later. Are you following me so far? The only thing I have not included is the bill that Leader Reid may file to place both Speaker Boehner and Leader McConnell on double secret probation until this issue is resolved.

The media has focused almost exclusively on the tax issue, and the prospects for drawing sufficient House Republican votes for a (tax) bill to secure passage if the Speaker allows it forward. But it is a bit more complicated than that. You might be able to pick off enough Republicans on a straight tax vote to ensure House passage, but the inclusion of extended unemployment benefits in such a bill could peel those GOP votes off. Would the Democrats support a bill that did not include unemployment benefits? Since the Democrats would be supplying the vast majority of the votes you might think that item would be non-negotiable, and in a traditional compromise that would be true. But this is not traditional in any sense of the word. I anticipate that some vote will be allowed in both chambers, and that McConnell will ultimately vote no, but not filibuster. A bill would get through the Senate. I have real doubts that any bill can pass the House, but there is always hope and optimism to sustain us.

I have been saying that “off the cliff” is the betting favorite, and it still is. I believe that the “line” makes going over a 3 to 1 favorite. The knot that has been tied needs to be untied pretty quickly. I just don’t see these folks getting it done in time.

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Why Can't a Deal be Made? Watch This Video.

Posted on December 21, 2012 by billmanzi

As you wonder what happened to John Boehner in his caucus just watch this video. Rep. Tim Huelskamp went on Morning Joe this morning and essentially said that there is no compromise to be had. How do you deal with folks like this? And for those hoping to see some new common sense gun regulations please take note of the exchange on that issue. Very little chance of getting anything through the House of Representatives with guys like Tim Huelskamp serving in that body. And very little chance of reaching a deal without the Speaker relying on Democratic votes to get one through the House. This is exactly what is wrong with government today.

http://www.msnbc.msn.com/id/32545640

Visit NBCNews.com for breaking news, world news, and news about the economy

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These Guys Ain't LBJ

Posted on December 21, 2012 by billmanzi

As predicted here at the blog Speaker Boehner could not corral the votes in the Republican caucus to pass his own so called “Plan B”.I posted on this blog and through my twitter feed the prediction that the Speaker would not secure the votes from Republicans on this bill, and I was (for once) right. My confusion, even in light of my prediction, is how the Speaker’s whip operation came up with a bad vote count??? When Majority Leader Cantor announced yesterday afternoon that the votes were there for the Speaker’s plan I was not totally convinced, but I thought it unlikely that such an announcement would be made without a hard vote count. I can say with certainty that these guys ain’t LBJ, but to blow a count of this importance is either gross incompetence or an attempt to make the Speaker look bad. If I were the Speaker and the Whip put me out there like that he would have to be fired. Unfortunately for Boehner he is in a position to fire no one, and in fact has so lost control of the caucus that his own relevance is in question.

Leaders must lead, and for those saying (like John Boehner) that this deal should not be cut with just two people in the room that is just so much hooey. That is the only way a deal can get done that will help to solve some of the very real problems that will occur on December 31 without a deal. The deal was close, and Boehner blinked.

The Speaker has some very hard choices ahead. He was moving towards a deal, and was in essence derailed by his own caucus. Will he be willing to bring a deal forward that does not have a “majority of the majority”? Does he dare bring forward a compromise that must win with Democratic support? If he does will it cost him his Speaker’s gavel? The situation is a mess, but it could be extricated by some folks exercising real leadership. That is why I continue to handicap this as “go over the cliff” a strong favorite.

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Production Tax Credit for Wind Power on Chopping Block

Posted on December 20, 2012 by billmanzi

The Fiscal Cliff is not the only thing facing Congress as the year winds down. The Production Tax Credit for wind power is set to expire on December 31, and although there is bipartisan support for its extension it appears that it will be allowed to expire. There is a concerted effort, especially by the oil industry, to derail this tax credit. From the New York Times:

Opponents argue that the industry has had long enough to wean itself from the subsidy and, with wind representing a small percentage of total electricity generation, the taxpayers’ investment has yielded an insufficient return.

“Big Wind has had extension after extension after extension,” said Benjamin Cole, a spokesman for the American Energy Alliance, a group partly financed by oil interests that has been lobbying against the credit in Washington. “The government shouldn’t be continuing to prop up industries that never seem to be able to get off their training wheels.”

Obviously proponents of wind power disagree with that assessment. I have attached a video from the Wind Trade Association that talks about the jobs that will be lost if the PTC is allowed to lapse. From that same New York Times article:

Industry executives and analysts say that the looming end of the production tax credit, which subsidizes wind power by 2.2 cents a kilowatt-hour, has made project developers skittish about investing or going forward. That reluctance has rippled through the supply chain.

On Tuesday, Siemens, the German-based turbine-maker, announced it would lay off 945 workers in Kansas, Iowa and Florida, including part-timers. Last week Katana Summit, a tower manufacturer, said it would shut down operations in Nebraska and Washington if it could not find a buyer. Vestas, the world’s largest turbine manufacturer, with operations in Colorado and Texas, recently laid off 1,400 workers globally on top of 2,300 layoffs announced earlier this year. Clipper Windpower, with manufacturing in Iowa, is reducing its staff by a third, to 376 from 550. DMI Industries, another tower producer, is planning to lay off 167 workers in Tulsa by November.

Wind industry jobs range in pay from about $30,000 a year for assemblers to almost $100,000 a year for engineers, according to the Bureau of Labor Statistics.

The industry’s contraction follows several years of sustained growth — with a few hiccups during the downturn — that has helped wind power edge closer to the cost of electricity from conventional fuels. The number of turbine manufacturers grew to nine in 2010 from just one in 2005, according to the United States International Trade Commission, while the number of component makers increased tenfold in roughly the same period to almost 400, according to the Congressional Research Service.

I have always been a wind proponent, and remain one today. As usual in Congress business is done in such a haphazard way that getting to a managed policy that sets time-frames, parameters, and measurable impacts of tax policy just seems beyond our current membership. I come down on the side of giving a nascent industry some help for all of the obvious reasons. (Alternative energy, clean energy, less reliance on foreign sources) But a discussion needs to be had about time frames for continuation, with modeling done so that we understand wind viability within different energy pricing scenarios. The natural gas supply explosion has thrown some of the prior modeling right out the window. Congress needs to do its job, understand the ramifications of its own policies, and act in the best, long term interests of the country. As the fiscal cliff negotiations are showing that may be a bridge too far.

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Republican Gun Control

Posted on December 19, 2012 by billmanzi

Here is the apparent idea that is now driving the GOP idea machine on how to deal with gun violence. What we used to laugh at is now the public policy position of the Republican Party.

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MMA Looks to Get in the Que

Posted on December 19, 2012 by billmanzi

The Massachusetts Municipal Association yesterday called for an increase in Chapter 90 funding for localities to bridge the gap between what is spent today, and what needs to be spent to bring local roads and bridges to a “state of good repair”. The so called “state of good repair” is the standard used to quantify how much would need to be spent to keep our locally maintained roads and bridges in workable condition. It is a phrase that we have seen used by the State Transportation Finance Commission with regards to the MBTA and Massachusetts roads and bridges.

How much responsibility do localities have for Massachusetts roads? Actually localities have the primary responsibility. From the MMA report.

Cities and towns are responsible for repairing and maintaining 30,000 miles of roadways, almost 90% of the total in Massachusetts. In 1973, recognizing the vital role that communities have in ensuring an effective and safe statewide roadway system, the state created the Chapter 90 program, with the intent to share a portion of gas tax revenues with communities to ensure adequate resources for local road construction needs. But almost 40 years later, funding for the Chapter 90 program is far short of the actual need, as construction costs have escalated sharply, in great part due to significant increases in the cost of fossil fuels, which drives up the price of construction materials such as asphalt and steel.

Chapter 90 is the program that delivers state assistance to localities for this work. From the report:

Chapter 90, the state’s bond-funded program to reimburse cities and towns for the cost of maintaining local roads provides just $200 million a year, or only 36% of the actual need, resulting in a massive local funding gap of $362 million a year. While some communities are able to close a small portion of their road construction funding gap with local property tax dollars, this does not come close to meeting the actual need, which explains why local roads are crumbling across the state. The MMA and local officials throughout Massachusetts have called
for a $100 million increase in annual Chapter 90 funding, with a 5-year commitment of $300 million a year for Chapter 90, or a total $1.5 billion over 5 years, to help close the gap and get local roadways in Massachusetts much closer to the good repair standard.

The MMA is correct on the state of good repair issue, and the need to increase infrastructure aid to localities. The timing of this release, from a political perspective, is designed to ensure that if new revenues are are the table to solve the State’s transportation issues localities are included in the mix. There is a real need for transportation dollars, and localities want to make sure that (new)revenues are distributed fairly. A fair presentation, and one that will increase pressure on the Legislature to look at new revenues in the next budget cycle. The MMA Report is here.

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Boehner's Bluff

Posted on December 19, 2012 by billmanzi

Just when it looked like there might be some movement towards a fiscal cliff deal, with the President and Speaker engaging in a good negotiating give and take, the Speaker has once again blanched, threatening to go with “plan B”. This so called Plan B would have the Speaker bringing legislation to the floor that would lift tax rates for those making $1 million and above to 39.6%, and leaving all other rates constant.

The Speaker, in letting out the existence of plan B, has said it might include the patch for the Alternative Minimum Tax, and an estate tax change. But the idea is to throw the ball into the Senate with the clock running out, and then blame Democrats for going over the cliff. The Politico story focused on this dynamic, with an emphasis on Plan B being dead on arrival in the Senate. But unless Boehner has more Republican votes than I think he has unanimous Democratic opposition in the House should, when coupled with Republican opponents to any tax hikes, be sufficient to defeat the Speaker in his own House.

My analysis will be dead wrong if the Speaker has imposed Party discipline on his caucus, and can deliver the entire bloc for a tax raising bill. If he takes a mere 27 defections and the Democrats hold strong he will end up with a lot of egg on his face, even if he pulls the bill in advance of a vote. If Nancy Pelosi can hold the fort within her own Party then the Democrats should start clamoring for this bill to hit the floor. The Club for Growth has started hitting the Speaker already.

“First Speaker Boehner offered to raise tax rates after promising not to, and now he’s offering to raise the debt ceiling. Raising tax rates is anti-growth and raising the debt ceiling is pro-government growth – and this is the Republican position?” said Club for Growth President Chris Chocola.

Lets see if the Speaker can deliver 218 Republican votes for Plan B. I say put him to the test now. Maybe he can get Mitch McConnell to come over and filibuster it. (Oh darn they don’t have filibusters in the House of Representatives)

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The Automaton Factor: Zero Sum Politics

Posted on December 17, 2012 by billmanzi

One of the more interesting political stories in the past two weeks has been the “right to work” controversy in Michigan, with the Republican Legislature there passing a (right to work)bill in the closing days of their session, and Republican Governor Rick Snyder signing it into law.

The political ramifications are clear, with Wisconsin like battle lines being drawn. There are many different pieces of this story that can be talked about, but the one I am interested in is the Governor. Governor Snyder had been on record as saying that “right to work” was not on his “agenda”, and that any attempt to impose such legislation would be “divisive”. The Governor really seemed to be trying, as a Republican, not to stir up that hornets nest. But in the end he signed, and went on a public relations tour trying to sell the idea that right to work actually would be helpful to unions. Why the switch? I must attribute it to what I call the “automaton” factor.

What the hell am I talking about? Snyder was faced with certain realities relative to the powerful Republican donor class, who are truly behind this move. With Snyder you can see a moderate trying to escape from the ideological straight-jacket, but he just could not get loose. Why is that? Leaving aside the issue of the donors for just a moment let us imagine that we are in the room as Snyder and his advisers consider what his response should be.

Snyder’s political folks will be telling him that his re-elect will be strongly opposed by the same unions that have so much riding on this legislation. I can hear them saying that it would be great to de-fang them, because they will oppose you even if you veto this legislation. Since no matter what you do they will work to defeat you why help them now? The assumption that the unions are now “automatons” for the Democrats must produce “automatons” for the Republicans. And then there is the money.

Today’s New York Times talks about the money poured into Republican efforts to win control in Michigan and other states, highlighting the huge infusion of cash by the DeVos family to defeat a pro-union ballot initiative, and then to push Republicans to adopt the “right to work” legislation. Think that one billionaire cannot exert huge influence? Listen to DeVos brag about his role in the Times story.

Although Mr. Obama won Michigan handily, Republicans had kept control of the Legislature. A union-backed ballot measure to enshrine collective bargaining rights in the State Constitution was defeated, thanks to an aggressive campaign against it that was financed in part by $2 million of DeVos family money.

The time had come, Mr. DeVos told Republican lawmakers, for the bold stroke they were considering: a law banning requirements that workers pay union dues or fees, in the state where the modern American labor movement was born. If the lawmakers later found themselves facing recalls or tough re-election fights, Mr. DeVos told them, he would be there to help.

“That was when I started to say, you know what, this thing could happen,” Mr. DeVos said on Friday. “These people really are serious and committed.”

So what was Snyder looking at? Not only, from his perspective, did he see no upside to a veto, but should he have issued that veto he would likely have seen a well financed Republican opponent with plenty of DeVos money behind that candidacy in a primary. The ability of Republicans to peel off Democrats, and vice versa, is diminishing, leaving someone like the Governor in a difficult situation politically. I thought the Governor should veto the bill, because it is not the right prescription for Michigan. But the middle of the road is becoming tough political terrain for members of either party. That fact is making politics in our country much more of a zero sum game, and deviancy from party orthodoxy much harder to sustain for elected officials. The Republicans have upped the ante on fighting unions, and ultimately even folks like Rick Snyder must march in lockstep, or switch parties a la Charlie Crist. Our party system is producing “automatons”, and with that dynamic real deals are harder to come by. Getting robots to change perspective, even a little, can be very difficult.

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A Horrible Day

Posted on December 15, 2012 by billmanzi

The tragedy of yesterday’s mass killing is still weighing on the entire nation. Our prayers go to the families and the entire community, and our appreciation for the teachers and staff who acted so courageously to protect the children can never be measured. A time to mourn, and to pray for those who have had their lives so terribly changed.

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What Ails Republicans? No New Ideas.

Posted on December 14, 2012 by billmanzi

The very nerve of a partisan Democrat like myself talking about what types of problems the Republican Party has. But yes it needs to be talked about in a serious way, as those problems will have a big impact on the country in the next two years. Two new columns from opposite sides of the political spectrum lay out some issues that Republicans just cannot seem to solve. Many have recognized the problems, and I have made the prediction of a dive off the fiscal cliff based on the very issues highlighted by Paul Krugman on the left, and Peggy Noonan on the right. Let us start with Krugman.

Krugman is a man that Republicans love to hate. George Will and Mary Matalin openly loath him when he is a panelist on “This Week” on ABC. But Krugman brings that no room to move truth to discussions, and that makes members of both parties squirm. (Trust me he is not a favorite of the Obama financial folks). His latest column brings some more of that hard edged truth to the table in discussing the Republicans. Krugman uses the current fiscal cliff talks to highlight the Republican quandary.

Before I talk about that reality, a word about the current state of budget “negotiations.”

Why the scare quotes? Because these aren’t normal negotiations in which each side presents specific proposals, and horse-trading proceeds until the two sides converge. By all accounts, Republicans have, so far, offered almost no specifics. They claim that they’re willing to raise $800 billion in revenue by closing loopholes, but they refuse to specify which loopholes they would close; they are demanding large cuts in spending, but the specific cuts they have been willing to lay out wouldn’t come close to delivering the savings they demand.

It’s a very peculiar situation. In effect, Republicans are saying to President Obama, “Come up with something that will make us happy.” He is, understandably, not willing to play that game. And so the talks are stuck.

Funny thing is that by all accounts Krugman is right on this point. Republicans have offered a couple of ideas on “entitlement savings” that do not come anywhere near providing the budgetary savings they claim to want to achieve. (Such as changing the COLA index for Social Security, and increasing the Medicare eligibility age from 65 to 67.) They are indicating that they are fine with raising $800 billion in revenue, but insist that it be done through the “closing of loopholes”. Which loopholes? Don’t ask them that. I guess they want the President to decide. What specific Medicare cuts beyond raising the age are they advocating? They will get back to us on that. Beyond the simple mantra of cutting taxes what do they have to offer? While Krugman and Noonan come at that question from slightly different viewpoints I think it is fair to say that both agree that the Republican idea machine is empty. Krugman is more direct, but I think both hold out the prospect of the Republicans going the way of the Whigs.

My Republican friends out there they are likely to point to the two speeches given by Paul Ryan and Marco Rubio, which after a bit of positive Republican response have essentially sunk like lead weights. I was struck by the total dearth of anything new, except for the point made by both that re-packaging the old, and explaining to folks why they should embrace the old, is the best way forward for Republicans. I mean these guys are really stuck in a tight ideological box which must ultimately asphyxiate them. Noonan on the Paul Ryan speech at the Kemp Institute:

Rep. Ryan’s speech was OK but insufficient. He didn’t say anything terrible but he didn’t stake out new ground or take chances. Actually, the part where he said Mitt Romney made “a big election about big ideas and offering serious solutions to serious problems” was slightly terrible because it isn’t in a general way true, and it forestalls analysis that might actually be helpful in the long term. Mr. Ryan got points for loyalty but no one doubts he’s loyal, and it undercut his central message, which is that the Republican Party needs “new thinking,” “fresh ideas and serious leadership,” and must find “new ways to apply our timeless principles to the challenges of today.”

Well, yes, that’s true. But what thinking do you suggest? In what area? Which fresh ideas? Do you have one?

The thrust of Mr. Ryan’s remarks seemed to suggest the party has to show its economic stands are aligned with the views of the working and middle classes. Fine. But how, exactly? What changes should be made, not just to message but content?

Noonan of course has it right. What these folks are saying is we tried to serve dinner to the American people, but they didn’t like the meal. So our plan is to bring the same dinner out, but maybe sprinkle a little salt on it. Either that or we just serve the same dinner, but call it something else. That formula is not likely to work for the Republicans, and will make them a regional party at best in the years to come.

So where are the ideas? The Republicans, in my view, are constrained from ideological deviation by their donor class, who just cannot accept the types of changes that might result in some electoral gain. Noonan broaches two ideas in her column that would bring howls of outrage from the donor base.

If conservatives are going to appeal to the nonrich, perhaps we want to be talking about—I don’t know, let’s float an idea—breaking up the banks? Too big to fail is too big to live, didn’t we learn that in 2008? Why aren’t we debating this? How about doing away with the carried interest deduction? Would billionaire hedge-fund contributors not like that? Isn’t that just kind of . . . too bad?

Too bad for hedge fund billionaires???? That is heresy in Republican circles. But Noonan, (and Krugman) both understand the death spiral that the GOP appears to be in because of the tight fitting ideological straight jacket. The Republicans need to change to win national elections. But can they do so without rupturing the Party itself? I make them a decided underdog.

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