The Real West Wing Tour Guide

The Real West Wing Tour Guide

Here is a small Christmas gift for you: The Real West Wing Tour Guide (circa 2007).

While the general public can often get a White House East Wing tour through the office of their Member of Congress, West Wing tours can only be given by White House staff.

Through most of President Bush’s time in office, staff were allowed to give tours Tuesday through Friday evenings, and also on weekends.

One summer (I think it was 2003) my West Wing colleague Krista Ritacco and I thought it would be helpful and fun to create a written tour guide for staff. We could improve the quality and accuracy of information and generally help make tours better for both the visitors and the tour guides.

We recruited Krista’s intern, then-Duke University student Sarah Hawkins, to research and write the first version. We then produced simple decks of index cards which we distributed to friends and colleagues on the White House staff. They quickly became an underground hit and were frequently used on tours.

The project went through several iterations, the last quasi-public version of which was developed by Ashley Hickey.

Karen Evans came up with the idea of upgrading it from index cards to a more professional appearance. This is the version you see below, produced by Karen Evans, Tony Summerlin, and the Touchstone Consulting Group on a volunteer basis without using taxpayer dollars. We never distributed this version broadly, even to other White House staff. The contents are identical to the last “public” version, but this version looks even better.

I am distributing this under a Creative Commons License – you can distribute, share, and display this, but you must attribute it, you may not edit it, and you may not use it for commercial purposes.

I invite others to mirror the 10 MB PDF so my host isn’t overloaded. Please provide a link to this page if you do.

I expect that today’s West Wing is somewhat different, especially in the displayed artwork and decor. Nevertheless, I hope you find this interesting and enjoyable.

Merry Christmas. Please click on the cover below to see the Guide. If you get an error message, please update your version of Adobe Acrobat Reader. And thanks to those submitting errata in the comments.

My foggy legislative crystal ball

My foggy legislative crystal ball

I tried to update my projections for health care legislation but found I was making wild guesses. This is too much of an inside game for me to predict what will happen over the next ten days. My crystal ball is foggy.

I can, however, offer some questions and observations for you to consider. I hope you find them useful.


Q: Is there a deal?

A: We don’t know. We know that, at the behest of the President, Leader Reid is dropping both the public option and Medicare buy-in from his amendment. Last week he said the buy-in was a core element of what he asserted was a consensus Senate Democratic deal. I think there is an Obama-Reid-Lieberman deal on two key issues, the announcement of which generated tremendous legislative momentum. As best I can tell, there is not yet a comprehensive Reid amendment supported by 60 Senators.

Watch closely for reports of a CBO score. Every time I read “Leader Reid’s staff continues to work with CBO,” I think “They still don’t have an amendment.” They need a good answer from CBO, and they need to sell it to 60 Senators. Despite the apparent enormous shift in public momentum favoring Senate passage, it appears they don’t have either one at the moment.

A friend astutely observed, “The proponents of this thing are simultaneously closer to final success – and to a complete collapse – than they have been for months.”


Q: Why might this take until Christmas Eve?

A: Assume Senate Republicans (or at least one) are willing to use all available procedural tools to slow this down. Leader Reid needs three votes: his new amendment to the Reid substitute, the Reid substitute, and final passage. On each of those votes he will need to invoke cloture. That process takes 3+ days.

Example:

  • Leader Reid offers his new amendment today and files cloture on it.
  • The Senate votes on cloture the day after tomorrow (Saturday).
  • Assuming cloture is invoked, there are then 30 hours of debate post-cloture.
  • So the new amendment would then be adopted Sunday.

These cloture votes can be “stacked,” but the three 30-hour periods must run sequentially, burning up the entire next week. Then again, Leader Reid may decide he only needs to win one or two of the three before sending everyone home.

In addition, I assume Senate Democrats have figured out that Senate Republicans can offer and force votes on certain amendments during those three 30-hour periods. There could be some politically very difficult votes for Democrats next week.

Update: Two friends point out that Leader Reid can use a tactic called “filling the [amendment] tree” to block consideration of troublesome amendments, so Senate Republicans may lack this opportunity.


Q: Is there really only one legislative option?

A: No, there are two. Option one is that 60 Senate Democrats/Independents can rally around, invoke cloture on, and pass a Reid amendment. House Democrats would then either have to swallow it whole by passing it without a conference, or, more likely, have a conference in which they make some optical tweaks, then swallow it whole. When one legislative body credibly says “We cannot pass anything but X,” and the other says “We don’t want to pass anything but Y,” X wins.

Option two is for the House to initiate a new bill through the reconciliation process. This path could produce a bill that is farther left than the current bill. Both the public option and a Medicare buy-in would survive the Senate’s Byrd rule, although other parts of the bill might be in some jeopardy. Leader Reid could pass such a bill with 50 Senate Democrats plus the Vice President, allowing/forcing up to 10 moderate or nervous Senate Democrats to vote no. I assume House Blue Dogs would similarly vote no. Social issues within the bill would likely move left as well.

If the President, Speaker, and Senate Majority Leader had agreed to pursue this path months ago, it would have had a high probability of legislative success, in a take-no-prisoners fashion. Successfully executing this process now would be less certain because of the calendar and deterioration of broad-based public support for the policies. Outside advocates on the Left would be initially ecstatic, but Leaders correctly fear that further delay and starting over risk implosion. In addition, they appear to want get health care done so they can shift their focus to the weak employment picture and deficit problem. I would be stunned if the leaders chose to go the reconciliation path, despite the pounding they are beginning to take from their Left. Then again, there’s an outside chance they may be forced down this path.


Q: Who are the key decision-makers?

A: Surprisingly, it’s the leftmost Senators and House members. Any single Democratic Senator has the unilateral ability to force the reconciliation path, simply by saying no to Reid’s deal, if and when it comes together. Formally, Leader Reid gets to decide what will be voted on, and he therefore can “box in” either the left or right side of his party. He appears to be following the President’s lead, leaning toward Lieberman on his amendment, and putting liberals in the position of “Are you going to kill health care reform because it doesn’t have everything you want?”

The question then becomes, will one or more Senate liberals reply, “I’m going to vote against cloture on your amendment because I want to force you to either move your amendment back toward me, or to pursue the reconciliation path, which would be long and painful and risks complete failure but, if successful, is more likely to produce a bill that I prefer.”

Similarly, will the President and Speaker be able to hold a large bloc of House liberals on a bill in which Senator Lieberman’s preferences trump theirs? Or will they instead force their leaders to start over?

There’s no question which path the Leaders should prefer. This is instead a test of how these liberal members weigh their policy goals and pleasing their most active supporters, versus team play and supporting their President and party. Outside Lefties would be more effective if they pounded on their liberal friends in Congress who are more likely to be responsive to their pleas. While liberals beat up Senators Nelson and Lieberman, I wonder why they are not challenging Senators Boxer, Rockefeller, and Sanders for not standing up to their party leaders? Each of them has the ability to force the path the Left desires.

It’s not uncommon for legislative leaders to disappoint the average member of their party to satisfy the marginal member whose vote is needed for passage. In this case, however, the left margin has precisely as much leverage as the right. Senator Lieberman demonstrated his willingness to deny the President and risk Democratic party opprobrium to kill a bill he thought was bad. It worked for him. Will any liberal Members of Congress be willing to do the same? Or do they think that a law without a public option and Medicare buy-in is better than forcing another round of internal Senate negotiation, and better than risking a reconciliation path that might lead to complete legislative failure?


I usually think of policy and political spectrums as lines from Left to Right. We talk about “centrists” and people on the “wings.”

Occasionally the line becomes a circle, in which the Left and Right ends start to sound alike, or to have common interests. I can see two cases of that now.

  1. Outsiders on the far Left and, it appears, all Congressional Republicans now want to kill Leader Reid’s deal (again, if such a deal exists). Outsiders like former Governor Howard Dean and commentator Keith Olbermann argue the Reid plan is too weak, and should either be moved further left or pursued through reconciliation. Either way, they oppose the Reid-Lieberman agreement.
    Senate Republicans are similarly firing away. Dean/Olbermann want the Reid-Lieberman plan to fail so they can get something better. Senate Republicans want it to fail because they think the whole bill may crater if it does. These two factions share a goal of killing the Reid-Lieberman deal primarily because they have different expectations about what would happen afterward if they succeed. And Senate Republicans who are slowing the legislative process down may buy time for outside advocates on the Left to encourage/persuade/force Liberal Members of Congress to block the new Reid-Lieberman deal.
  2. Some on the Left now oppose the individual mandate. (See both partsof Keith Olbermann’s commentary.) This surprised me before I understood the logic. Mandating coverage in which the government can “keep prices down” through fiat is a good thing, they argue, while mandates without “cost controls” is bad. This appears to hinge on an intense hatred for a private insurance industry. So now both ends of the policy spectrum oppose the individual mandate within the Reid bill, albeit for different reasons. It would be interesting to see how a vote to strike the mandate turned out in one of the post-cloture voting periods.Advocates on the Left are correct that health insurers would be big financial winners in this bill. The government would be forcing everyone to buy their product, under penalty of punitive taxation for those who did not. Continued support (or at least non-opposition) from the insurers tells me they believe these guaranteed customers are worth the downsides of community rating and premium taxes.

What to watch

  • When does Leader Reid have a CBO score? Each day of delay hurts his chances of success.
  • After the next Senate Democratic caucus meeting, what do rank-and-file Democrats on the two edges of the party say? (Nelson, Lincoln, Lieberman, Rockefeller, Boxer, Sanders)
  • When does Leader Reid lay down (offer) his amendment and file cloture on it? Once he does, he’s committed. Does he do this before knowing he has 60 votes?
  • What does Speaker Pelosi say after the Reid amendment has been filed? She has to worry about dynamics within her own caucus.
  • Can the White House tamp down outside opposition from the Left before Reid offers his amendment? Does that opposition grow or subside over the next several days?

(photo credit: Crystal Ball #1 by just.Luc)

Updated health care reform projections

Updated projections

I am lowering from 50% to 35% my prediction for the success of comprehensive health care reform.  I now think the most likely outcome is a much more limited bill becomes law.

  1. Pass a partisan comprehensive bill through the House and through the regular Senate process with 60, leading to a law; (was 30% -> 30%)
  2. Pass a partisan comprehensive bill through the House and through the reconciliation process with 51 Senate Democrats, leading to a law; (was 20% -> 5%)
  3. Fall back to a much more limited bill that becomes law; (was 15% -> 45%)
  4. No bill becomes law this Congress.  (was 35% -> 20%)

My last update was 3 1/2 weeks ago, right before the motion to proceed was adopted.  My prediction then that “there is zero chance a bill makes it to the President’s desk before 2010″ has been proven correct.  At the time that was not an uncommon prediction, but it was inconsistent with what the White House, Speaker Pelosi, and Leader Reid were all saying.

I still believe that if a comprehensive bill becomes law, I anticipate completion in late January or February, with the latter more likely.

In mid-November I wrote,

I would expect that as the third week approaches, Reid would begin to signal that the Senate has worked hard on the bill and needs to bring debate to a close.  Around the middle of week three, he would file a cloture motion on his substitute amendment, with the cloture vote happening on or near Friday, December 18th.

Public and private sources suggest this is likely to play out as predicted.

New prediction:  I think Leader Reid will not invoke cloture before Christmas.  What’s harder to figure out is whether he’ll even try.

Analysis

I’m still stuck on my “two equally strong stories” model:

  1. It appears the President’s private meeting last Sunday with Senate Democrats had a similar effect to his September Address to Congress.  He unified them, rallied them, and generated tremendous team spirit and legislative flexibility.  It appears that 60 Senators agree that they need to agree on something, and are willing to bend a lot to reach their common legislative goal.  No one of those 60 Senators wants to be vote #41 against cloture, and they’ll give up a lot to avoid that situation.  The internal caucus politics and vote counting leads me to believe there’s a 90% chance that cloture will be invoked.
  2. But the substance of the Reid amendment, and especially his public option “deal,” are in big trouble.  The bill is weakening substantively and politically every 2-3 days.  On the substance and politics of this particular amendment and deal, I think there’s a 90% chance that cloture will fail.

The question then becomes which force dominates.  At the moment, I think it’s the substance, and therefore I think cloture will fail pre-Christmas.  Senate Democrats want to agree on something, but no reasonable something yet exists for them to agree upon.

To invoke cloture next week, Leader Reid needs all of the following to go his way:

  • He needs CBO to come back with a Medicare buy-in premium that isn’t so high that it scares away members.
  • He needs 60 members to support the buy-in, despite the Washington Post editorial page and other center-left elites are trashing it.
  • He needs the CBO score to not have other problems that scare away his members.
  • He needs none of his members to fold to provider pressure, especially from hospitals.  I remember that pressure well from my time in the Senate, and it can be intense, especially from home-state hospitals.
  • He needs abortion to be resolved such that none of his 60 votes will bolt on cloture.  Is it?
  • He needs those Democratic senators favoring reimportation who look like they may not get a vote to be willing to support cloture anyway (e.g., Sen. Dorgan).
  • He needs nothing else to go wrong.

If any one of the above goes wrong and he loses a single vote, then he cannot invoke cloture.

I think the Achilles heel at the moment is the new Medicare buy-in component of the so-called public option deal.  Press reports are that Reid picked five liberals and five moderates to negotiate a compromise.  Early last week he proudly announced a deal that was supported by all 60 Senators.  It appears, however, that all he had was an agreement among the 60 to not blow up the proposal until seeing what CBO said about it.  Even so, there is fraying around the edges of even that tenuous agreement as his staff work behind the scenes with CBO.

I’m going to guess that by mid-week that proposal has imploded, probably due to a combination of:

  1. CBO saying the buy-in premium is astronomically high and/or there’s a big cost to taxpayers,
  2. medical care providers (especially hospitals and doctors) pounding on Democratic Senators,
  3. more attacks from the press elite,
  4. exacerbated by continued pressure from Senate Republicans, who are attacking the bill’s quantitative effects:  higher spending, higher premiums.

Leader Reid raised expectations by asserting there was a deal when there really wasn’t.  If the deal collapses, it’s not just a loss of momentum, it’s moving in reverse.  Cloture would not be invoked, and the week could end with a partial implosion.

Legislative hostage taking

Legislative hostage taking

Former Senator Phil Gramm (R-TX) famously said, in his trademark Texas drawl,

Never take a hostage you’re not willing to shoot.

I heard him say this to a Republican colleague who had blocked a Clinton Administration nominee as leverage on an unrelated policy issue. The White House publicly confronted the hostage-taking Senator, who promptly folded. Gramm knew that, if you were going to make a legislative threat to block a bill or nominee, you needed to be willing to actually carry through with your threat (“shoot the hostage”). The other guy might call your bluff, and you needed to be willing to accept both responsibility for the policy damage caused by your action, as well as the associated political pain. And once you’re seen as an empty bluffer, your future threats have no power.

It appears that Senate Budget Committee Chairman may be making this mistake. The Washington Post reports,

Conrad is the leader of a group of Senate moderates threatening to block an increase in the debt limit unless Congress also votes to create a bipartisan task force on deficit reduction with broad powers to force tax increases or spending cuts through Congress.

If this report is accurate, then Senator Conrad is bluffing. If Leader Reid calls his bluff, neither Senator Conrad nor his colleagues will block an increase in the debt limit. Nor should they.

Having worked on too many debt limit increases to count, from both ends of Pennsylvania Avenue, I will claim the following are six rules of debt limit increase legislation:

  1. Treasury always says the debt limit must be increased by a certain date, and usually claims that date is a hard backstop, implying that the USG will default if the limit is not increased by that date.
  2. Treasury always has more cash management tricks it can use to push that hard date just a smidge farther.
  3. Some Senator almost always foolishly threatens to hold the debt limit increase bill, usually in an atttempt to gain leverage on some unrelated issue.
  4. At the end of the day, that hostage-taker always folds, and a clean debt limit increase passes. It is sometimes part of a larger bill, but the threat to block it always goes away if the demand is too great.
  5. The majority party has the responsibility for delivering the needed 51 votes to pass the bill. The minority gets a free ride, although sometimes the leaders will work together.
  6. Therefore, the debt limit increase always passes, although sometimes a few days late, forcing Treasury to dip into its bag of tricks. And the U.S. Government never defaults on Treasuries.

These are not the rules you’d like to govern the process. They’re ugly and messy. In an ideal world, Treasury wouldn’t have to dip into its bag of cash management tricks, each of which has increasingly harmful policy consequences, to buy a little more time for Congress to act.

But the end result has always been success, and I see little prospect for changing the process, so I’ll just try to explain it.

There is a fairly predictable dance that occurs each time the government approaches the statutory limit on debt held by the public:

  • Treasury starts warning Congress, “We need you to increase the debt limit soon, like, by date X.”
  • Congress replies, “Uh huh. We’ll get around to it, don’t worry.”
  • (a little later) Treasury: “We really need you to increase it soon. We’re running out of room.”
  • Congress, “Yup. We’ll get right on that.”
  • (as date X nears) Treasury: “We need it NOW.”
  • Congressional leaders: “OK, OK. Hold your horses, it’s coming.”
  • [Leaders start to move a "clean bill" that contains only a debt limit increase.]
  • Some foolish Senator threatens to block the clean bill, and insists on a vote on his unrelated amendment, or that a separate bill addressing his issue be passed.
  • If the demand cannot be easily met, the Senate Majority Leader goes to the floor right before date X. The floor discussion goes like this:
    • [Majority Leader] “Mr. President, I ask unanimous consent that the Senate proceed to and have a roll call vote on the House-passed debt limit bill.”
    • [Hostage-Taking Senator] “Mr. President, reserving the right to object, I ask the Leader’s request be modified to allow a vote on my [unrelated] amendment to the debt limit increase bill, or to allow a vote on my [unrelated] issue as a separate freestanding bill.”
    • [Majority Leader] “I object to your modification. There will be no amendments to this bill, and I cannot commit to a vote on your issue as a freestanding bill.”
    • Now the hostage-taker has to decide if he wants to be the one to kill a clean debt limit increase bill by objecting to the Leader’s unanimous consent request. Sure, he can try to blame it on the Majority Leader, but he’ll lose that battle in the press.
    • The hostage-taking Senator then backs down, and the Majority Leader’s UC is agreed to.
    • The Senate votes and passes the bill. Members of the majority party know they have the responsibility to pass the bill. Those up for reelection may ask the Leader if they can vote no, but no member of the majority will outright refuse to vote aye on this vote if the Leader insists. Sometimes the Majority Leader will ask the Minority Leader for help delivering votes, and depending on the state of their relationship at that moment, he may get help.
    • But it always passes. Always.

There’s a simple legislative logic that gives the Majority Leader leverage against Hostage-Taking Senator when they offer competing UCs. It is politically difficult to defend killing or blocking a bill because of something that is not in the bill. After all, you’ll have other opportunities to pursue your goal, so you don’t need to get your vote to add your provision right now, on this bill. In contrast, this is a must-pass bill, and if you block it, you are responsible for the U.S. government defaulting on its debt. No Member of Congress, no matter how extreme, is willing to take the blame for that. The rhetorical, political, and therefore actual leverage goes to he who is arguing for this must-pass bill to be “clean.”

It is, however, possible to block a debt limit increase in favor of a smaller debt limit increase (within reason on the amounts). Then neither Senator has rhetorical leverage in the battling UC’s, because both want a clean increase in the debt limit. In fact, often the power shifts to whoever wants a smaller increase, because it’s hard to argue against “You can come back and extend it again later.”

Chairman Conrad may get his commission, although I doubt it he will get it now. He may get his vote, although I doubt as an amendment to a clean debt limit bill. If he confronts Leader Reid over the debt limit, either in private or on the Senate floor, Reid has all the leverage. He can force Conrad to back down.

While I wish the process were cleaner and more straightforward, I am quite comfortable with this relative imbalance of power. Nobody should mess with the full faith and credit of the U.S. government for any reason. When there is an increasing focus on the U.S. deficit and the credit rating of the U.S. government, this only reinforces the importance of reassuring the world that the U.S. government honors its debts no matter what. There are plenty of other legislative tools available to generate procedural leverage on other important policy issues. I am glad that most Senators are smart enough and savvy enough to leave the debt limit alone.

(photo credit: Dodging Bullets by hao$)

How would the Reid bill affect the middle class?

How would the Reid bill affect the middle class?

There has been confused public discussion about the effects of the Reid bill on low- and middle-income taxpayers. Senator Grassley and his Finance Committee staff have worked with the Joint Tax Committee staff to disentangle the strands a present and clearer picture of the actual financial effects of the Reid bill on different middle class populations.

Grassley’s staff summarize the results this way:

First, there is a group of low- and middle-income taxpayers who clearly benefit under the bill. This group, however, is relatively small. There is another much larger group of middle-income taxpayers who are seeing their taxes go up due to one or a combination of the following tax increases: (1) the high cost plan tax, (2) the medical expense deduction limitation, and (3) the medicare payroll tax. In general, this group is not benefiting from the tax credit (because they are not eligible for the tax credit), but they are subject to the tax increase(s). Also, there is an additional group of taxpayers who would be affected by other tax increase provisions that JCT could not distribute. Finance Committee staff is working with JCT to determine how to identify this “un-distributed” group of people. … This analysis reveals that while a relatively small group of middle-class individuals, families, and single parents are benefiting under the Reid bill, a much larger group of middle-class individuals, families, and single parents are disadvantaged.

Senate Democrats have used a different JCT analysis that show the combined effects on these two populations when blended together. You have a relatively small group of people getting big net benefits, and a much larger group paying net costs. The aggregate impact for the two populations combined is a net benefit for the group as a whole, and advocates for the bill have therefore argued the bill is a “middle class tax cut.” Senator Grassley and his staff deserve credit for separating the effects on distinct (and large) subpopulations.

Here’s the quantitative summary for the Reid bill. All figures are for the year 2019, and in each case these are net results of premium changes, tax subsidies, and tax increases.

  • 17.8 million individuals, families, and single parents with incomes under $200K will be net financial winners (11% of all tax returns under $200K):
    • Of that 17.8 million total, 13.2 million of them will benefit from the government subsidy for health insurance, net of any premium increases.
    • The other 4.6 million of them will also benefit, netting out their premium reduction with the higher taxes they will pay. These people in general will not get a health insurance subsidy.
  • 68.4 million individuals, families, and single parents with incomes under $200K will be net financial losers (41% of all tax returns under $200K):
    • In general these people are not eligible for premium subsidies, so the effects of he Reid bill on them are direct premium effects and/or tax increases.
    • Within this group, here are some representative averages, taking into account premium changes, tax subsidies for premium purchase, and tax increases:
      • Within this population of 68.4 million net losers, an average individual working for a small business who gets health insurance through the small group market will be worse off, even if his income is below $10K per year:
        • Income of 0 – $10K: He pays $31 more (per year).
        • Income of $10K – $20K: He pays $99 more.
        • Income of $20K – $30K: He pays $202 more.
        • Income of $30K – $40K: He pays $325 more.
        • Income of $40K – $50K: He pays $377 more.
        • Income of $50K – $75K: He pays $576 more.
        • Income of $75K – $100K: He pays $681 more.
        • Income of $100K – $200K: He pays $726 more.
      • If this individual works for a large employer buying insurance in the large group market, the bill helps him if his income is <$20K, and hurts him if his income is >$20K:
        • Income of 0 – $10K: He pays $135 less.
        • Income of $10K – $20K: He pays $67 less.
        • Income of $20K – $30K: He pays $36 more.
        • Income of $30K – $40K: He pays $159 more.
        • Income of $40K – $50K: He pays $211 more.
        • Income of $50K – $75K: He pays $410 more.
        • Income of $75K – $100K: He pays $515 more.
        • Income of $100K – $200K: He pays $561 more.
      • For an average family among the 68.4 million losers getting insurance through the small group market (including most small business employees), they are on average better off if their family income is <$20K, and worse off if their income is >$20K. If they get insurance through a large employer, the breakpoint is $30K.
      • For an average single parent among the 68.4 million losers, he or she will be better off if income is <$20K, and worse off if income is >$20K, whether he or she gets insurance in the small group or large group markets.

While the press obsesses over the public option and abortion, will they pay sufficient attention to the harder-to-explain components of the bill that would make 68.4 million middle-class individuals, families, and single parents worse off?

Lots more detail is below and linked, courtesy of Senator Grassley and his fine staff.


From Senate Finance Committee Republican staff

Here is an analysis of the premium changes, tax subsidies, and tax increases under the Reid bill. Here are the JCT tables that were the basis for these findings: 4 tax provisions in 2019, tax credits in 2019, and universe of returns in 2019. The other data source is the November 30th CBO letter to Senator Bayh.

Based on this analysis, Finance Committee staff believes we can summarize the benefits and disadvantages to individuals, families, and single parents under the Reid bill this way: First, there is a group of low- and middle-income taxpayers who clearly benefit under the bill. This group, however, is relatively small. There is another much larger group of middle-income taxpayers who are seeing their taxes go up due to one or a combination of the following tax increases: (1) the high cost plan tax, (2) the medical expense deduction limitation, and (3) the medicare payroll tax. In general, this group is not benefiting from the tax credit (because they are not eligible for the tax credit), but they are subject to the tax increase(s). Also, there is an additional group of taxpayers who would be affected by other tax increase provisions that JCT could not distribute. Finance Committee staff is working with JCT to determine how to identify this “un-distributed” group of people.

Further Analysis Reveals Benefits and Disadvantages to

Individuals, Families, and Single Parents

Analysis of Premium Changes, Tax Subsidies, and Tax Increases

On November 30, 2009, the Congressional Budget Office (CBO) estimated the average premiums for single and family health insurance policies purchased in the non-group market and offered by small businesses and large employers under both the Reid bill and current law. The Joint Committee on Taxation (JCT) has provided Finance Committee Republican staff with a distributional analysis of four of the major tax provisions in the Reid bill, along with a distributional analysis of the number of tax returns that will receive the premium tax credit for health insurance for 2019. Based on this data, Finance Committee Republican staff compared the average premium change, according to CBO, with the average subsidy or tax increase individuals, families, and single parents would see, based on JCT data in 2019, and concluded following:

  • According to JCT, 13.2 million individuals, families, and single parents or 8% of all tax returns under $200,000 in 2019 will benefit from receiving the government subsidy for health insurance, net of any health insurance premium increases under the Reid bill.
  • According to JCT, a group of 4.6 million individuals, families, and single parents or 3% of all returns under $200,000 in 2019 will also benefit from a premium reduction, net of a tax increase, under the Reid bill. In general, this group of 4.6 million individuals, families, and single parents are NOT eligible to receive the subsidy for health insurance.
  • According to JCT, a group of 68.4 million individuals, families, and single parents or 41% of all returns under $200,000 in 2019, however, will be worse off as a result of a tax increase, net of any premium reduction, under the Reid bill. In general, this group of 68.4 million individuals and families are NOT eligible to receive the subsidy for health insurance.
    • An average individual who receives health insurance through a small employer and earning between $0 and $200,000 would be paying, on average, a range of $31 to $726 more. In the large group market, an average individual making between $20,000 and $200,000 would be paying, on average, a range of $36 to $561 more.
    • An average family who receives health insurance through a small employer and earning between $20,000 and $200,000 would be paying, on average, a range of $82 to $892 more. In the large group market, an average family making between $30,000 and $200,000 would be paying, on average, a range of $116 to $724 more.
    • An average head of household who receives health insurance through a small employer and earning between $20,000 and $200,000 would be paying, on average, a range of $383 to $1,587 more. In the large group market, an average head of household also making between $20,000 and $200,000 would be paying, on average, a range of $185 to $1,419 more.

This analysis reveals that while a relatively small group of middle-class individuals, families, and single parents are benefiting under the Reid bill, a much larger group of middle-class individuals, families, and single parents are disadvantaged.

 

Background

 

Premium Analysis – CBO has estimated the average premiums in 2016 for a single and family health insurance policy in (1) the non-group, (2) the small group, and (3) the large group health insurance markets under both the Reid bill and current law. Based on CBO data, we can identify the average annual increase in premiums in each of these markets under the Reid bill and current law. Based on these CBO’s estimates and data, we can project the cost of a single and family health insurance policy in (1) the non-group, (2) the small group, and (3) the large group markets under the Reid bill and current law in 2019.

Tax Increase and Subsidy Analysis – JCT has provided Finance Committee staff with a distributional analysis of four of the major tax provisions in the Reid bill – (1) the advance-refundable tax credit for health insurance, (2) the high cost plan tax, (3) the medical expense deduction limitation, and (4) additional Medicare payroll tax. Separately, JCT has provided a distributional analysis of the number of tax returns that will receive the premium tax credit for health insurance. Based on this data, we can determine how many individuals, families, and single parents receive the premium tax credit for health insurance. We can also identify (1) those individuals, families, and single parents who are NOT eligible to receive the tax credit and (2) those individuals, families, and single parents whose taxes may go up before they see some type of tax reduction from the tax credit.

Eligibility for the Subsidy for Health Insurance – Under the Reid bill, individuals, families, and single parents between 133% and 400% of the Federal Poverty Level (FPL) who purchase health insurance through the “exchange” would be eligible for a subsidy for health insurance. In general, individuals, families, and single parents who get health insurance through their employer are NOT eligible for the subsidy, even if they are below 400% of FPL.

Analysis

Comparison of Subsidy for Health Insurance and Premium Increase

Based on the projected cost of an average single and family health insurance policy in the non-group market in 2016, and based on CBO data on the average premium inflation rates under the Reid bill and current law, Finance Committee Republican staff projected the average cost for these plans in the non-group market in 2019. Staff then compared the premium changes with the average subsidy for health insurance an individual, family, or single parent would receive based on JCT data. The below tables illustrate this comparison.

As we can see from the below tables, every individual, family, or single parent is benefiting irrespective of a premium increase.

Non-Group – Single

Income Premiums Under Reid Bill Premiums Under Current Law Premiums Increase Subsidy Net Premium Increase/Premium Subsidy
$0 to $10,000 $6,953 $6,444 $509 ($6,500) ($6,218)
$10,000 to $20,000 $6,953 $6,444 $509 ($5,694) ($5,412)
$20,000 to $30,000 $6,953 $6,444 $509 ($4,723) ($4,441)
$30,000 to $40,000 $6,953 $6,444 $509 ($3,742) ($3,459)
$40,000 to $50,000 $6,953 $6,444 $509 ($4,075) ($3,793)
$50,000 to $75,000 $6,953 $6,444 $509 ($3,304) ($3,022)
$75,000 to $100,000 $6,953 $6,444 $509 ($667) ($384)
$100,000 to $200,000 $6,953 $6,444 $509 ($1,500) ($1,218)

 

Non-Group – Family

Income Premiums Under Reid Bill Premiums Under Current Law Premiums Increase Subsidy Net Premium Increase/Premium Subsidy
$10,000 to $20,000 $19,026 $15,387 $3,639 ($9,183) ($5,544)
$20,000 to $30,000 $19,026 $15,387 $3,639 ($14,127) ($10,489)
$30,000 to $40,000 $19,026 $15,387 $3,639 ($14,647) ($11,008)
$40,000 to $50,000 $19,026 $15,387 $3,639 ($14,129) ($10,490)
$50,000 to $75,000 $19,026 $15,387 $3,639 ($13,542) ($9,904)
$75,000 to $100,000 $19,026 $15,387 $3,639 ($11,117) ($7,478)
$100,000 to $200,000 $19,026 $15,387 $3,639 ($6,743) ($3,110))

Non-Group – Head of Household

Income Premiums Under Reid Bill Premiums Under Current Law Premiums Increase Subsidy Net Premium Increase/Premium Subsidy
$0 to $10,000 $19,026 $15,387 $3,639 ($7,555) ($3,916)
$10,000 to $20,000 $19,026 $15,387 $3,639 ($7,958) ($4,139)
$20,000 to $30,000 $19,026 $15,387 $3,639 ($7,464) ($3,825)
$30,000 to $40,000 $19,026 $15,387 $3,639 ($7,764) ($4,125)
$40,000 to $50,000 $19,026 $15,387 $3,639 ($9,201) ($5,562)
$50,000 to $75,000 $19,026 $15,387 $3,639 ($9,497) ($5,858)
$75,000 to $100,000 $19,026 $15,387 $3,639 ($8,039) ($4,400)
$100,000 to $200,000 $19,026 $15,387 $3,639 ($8,500) ($4,861)

Comparison of Premium Reduction and Tax Increase

Based on the projected cost of an average single and family health insurance policy in the small group and large group market in 2016, and based on CBO data on the average premium inflation rates under the Reid bill and current law, Finance Committee Republican staff projected the average cost for these plans in the small and large group markets in 2019. Staff then compared the premium changes with the average tax increase an individual or family would see based on JCT data. The below tables illustrate this comparison.

As we can see from the below tables, low-income individuals, families, and single parents between $0 and $20,000 (and in the case of a family policy in the large group market, between $0 and $30,000) are benefiting from the premium reduction, net of a tax increase. Individuals, families, and single parents with income between $20,000 and $200,000, however, are actually paying more, net of the premium reduction and tax increase.

Small Group – Single

Income Premiums Under Reid Bill Premiums Under Current Law Premiums Reduction Subsidy Tax Increase Net Tax Increase/Premium Reduction
$0 to $10,000 $9,130 $9,130 $0 $0 $31 $31
$10,000 to $20,000 $9,130 $9,130 $0 $0 $99 $99
$20,000 to $30,000 $9,130 $9,130 $0 $0 $202 $202
$30,000 to $40,000 $9,130 $9,130 $0 $0 $325 $325
$40,000 to $50,000 $9,130 $9,130 $0 $0 $377 $377
$50,000 to $75,000 $9,130 $9,130 $0 $0 $576 $576
$75,000 to $100,000 $9,130 $9,130 $0 $0 $681 $681
$100,000 to $200,000 $9,130 $9,130 $0 $0 $726 $726

Small Group – Family

Income Premiums Under Reid Bill Premiums Under Current Law Premiums Reduction Subsidy Tax Increase Net Tax Increase/Premium Reduction
$0 to $10,000 $22,469 $22,637 ($168) $0 $88 ($80)
$10,000 to $20,000 $22,469 $22,637 ($168) $0 $99 ($69)
$20,000 to $30,000 $22,469 $22,637 ($168) $0 $250 $82
$30,000 to $40,000 $22,469 $22,637 ($168) $0 $452 $284
$40,000 to $50,000 $22,469 $22,637 ($168) $0 $620 $452
$50,000 to $75,000 $22,469 $22,637 ($168) $0 $743 $575
$75,000 to $100,000 $22,469 $22,637 ($168) $0 $826 $658
$100,000 to $200,000 $22,469 $22,637 ($168) $0 $1,060 $892

Small Group – Head of Household

Income Premiums Under Reid Bill Premiums Under Current Law Premiums Reduction Subsidy Tax Increase Net Tax Increase/Premium Reduction
$0 to $10,000 $22,469 $22,637 ($168) $0 $0 ($168)
$10,000 to $20,000 $22,469 $22,637 ($168) $0 $55 ($113)
$20,000 to $30,000 $22,469 $22,637 ($168) $0 $521 $353
$30,000 to $40,000 $22,469 $22,637 ($168) $0 $1,294 $1,126
$40,000 to $50,000 $22,469 $22,637 ($168) $0 $1,755 $1,587
$50,000 to $75,000 $22,469 $22,637 ($168) $0 $1,482 $1,314
$75,000 to $100,000 $22,469 $22,637 ($168) $0 $1,114 $946
$100,000 to $200,000 $22,469 $22,637 ($168) $0 $999 $831

Large Group – Single

Income Premiums Under Reid Bill Premiums Under Current Law Premiums Reduction Subsidy Tax Increase Net Tax Increase/Premium Reduction
$0 to $10,000 $8,514 $8,680 ($166) $0 $31 ($135)
$10,000 to $20,000 $8,514 $8,680 ($166) $0 $99 ($67)
$20,000 to $30,000 $8,514 $8,680 ($166) $0 $202 $36
$30,000 to $40,000 $8,514 $8,680 ($166) $0 $325 $159
$40,000 to $50,000 $8,514 $8,680 ($166) $0 $377 $211
$50,000 to $75,000 $8,514 $8,680 ($166) $0 $576 $410
$75,000 to $100,000 $8,514 $8,680 ($166) $0 $681 $515
$100,000 to $200,000 $8,514 $8,680 ($166) $0 $726 $561

Large Group – Family

Income Average Premiums Under Reid Bill Average Premiums Under Current Law Premiums Reduction Subsidy Tax Increase Net Tax Increase/Premium Reduction
$0 to $10,000 $23,542 $23,878 ($336) $0 $88 ($248)
$10,000 to $20,000 $23,542 $23,878 ($336) $0 $99 ($237)
$20,000 to $30,000 $23,542 $23,878 ($336) $0 $250 ($86)
$30,000 to $40,000 $23,542 $23,878 ($336) $0 $452 $116
$40,000 to $50,000 $23,542 $23,878 ($336) $0 $620 $284
$50,000 to $75,000 $23,542 $23,878 ($336) $0 $743 $407
$75,000 to $100,000 $23,542 $23,878 ($336) $0 $826 $490
$100,000 to $200,000 $23,542 $23,878 ($336) $0 $1,060 $724

Large Group – Head of Household

Income Average Premiums Under Reid Bill Average Premiums Under Current Law Premiums Reduction Subsidy Tax Increase Net Tax Increase/Premium Reduction
$0 to $10,000 $23,542 $23,878 ($336) $0 $0 ($336)
$10,000 to $20,000 $23,542 $23,878 ($336) $0 $55 ($281)
$20,000 to $30,000 $23,542 $23,878 ($336) $0 $521 $185
$30,000 to $40,000 $23,542 $23,878 ($336) $0 $1,294 $958
$40,000 to $50,000 $23,542 $23,878 ($336) $0 $1,755 $1,419
$50,000 to $75,000 $23,542 $23,878 ($336) $0 $1,482 $1,146
$75,000 to $100,000 $23,542 $23,878 ($336) $0 $1,114 $778
$100,000 to $200,000 $23,542 $23,878 ($336) $0 $999 $663

(photo credit: White House official photo by Sharon Farmer)

The President's new economic proposal

The President's new economic proposal

Here is the President’s new economic proposal, which he is not calling a stimulus:

I. Accelerating near-term job growth

  1. Small business
    • “a tax incentive to encourage small businesses to add and keep employees” [details TBD with Congress]
    • one year zero capital gains tax rate for small businesses.
    • one year extension of increased small business expensing limits to $250K.
    • one year(?) extension of accelerated “bonus” depreciation for all businesses.
  2. Infrastructure
    • “More money for infrastructure: highways, transit, rail, aviation, and water.” The explicit listing in significant in the legislative process. In the fact sheet they also emphasize broadband networks.
    • “Support for merit-based infrastructure investment that leverages federal dollars.” I don’t know what this means in practice.
  3. Energy efficiency & clean energy
    • “Rebates for consumers who make energy efficiency retrofits” [to their homes].
    • Expanding those energy efficiency and clean energy manufacturing programs “for which additional federal dollars will leverage private investment and create jobs quickly, such as industrial energy efficiency investments and tax incentives for investing in renewable manufacturing facilities in the U.S.”

II. TARP & Fiscal discipline

  1. [Claiming to] redirect TARP savings “to work on Main Street” – This is a gimmick. “The … steps the President took to stabilize the financial system have reduced the cost of TARP by more than $200 billion, providing additional resources for job creation and for deficit reduction.”
  2. “Exploring a range of steps to take as part of the FY2011 budget process.”

III. Long-term job creation

  • Extending unemployment insurance.
  • Extending the COBRA health insurance subsidy.
  • Providing another $250 payment to seniors and veterans.
  • More funds transferred to state and local governments.

Analysis

This package seems driven largely by Members of Congress trying to satisfy their political need to be seen as doing something while the economy and job growth are weak. It is trying to work on two levels:

  • It’s trying to stimulate macro demand through traditional deficit-increasing fiscal stimulus measures: infrastructure and clean energy spending, plus all the transfer payments. In this respect it roughly parallels February’s stimulus law.
  • It’s trying to increase the supply of capital and labor, but to small businesses only, through the hiring tax credit, zero cap gains, and depreciation incentives.

I think policymakers will struggle most with the hiring tax credit. We looked at it a couple times during the Bush Administration and could not find a version with more benefits than costs. How much is a temporary reduction in compensation costs going to encourage a small business owner to hire an employee? In my simplistic view, expected future demand for a firm’s products is far more important. On a macro level, job growth follows GDP growth, and it anticipates future GDP growth. Thus, if you want near-term job growth, figure out how to increase GDP growth. It’s difficult for government to quickly increase the number of people hired, holding the future path of GDP growth roughly constant. The most effective and efficient policy lever for GDP growth and therefore job growth is the Fed Funds rate, but that’s tapped out, so policymakers are struggling to find other levers.

They will also have a problem with churning – you fire me, then immediately rehire me to get the tax credit. To address this, the President proposed a new tax credit to hire and keep employees. This means subsidizing jobs “saved” in addition to those “created.” This tries to address the churning problem but exacerbates the inefficiency problem. I think they will find that most of the tax benefit is inframarginal – they will be subsidizing hires (or keepers) that would have occurred anyway, so the marginal number of new hires resulting from this policy will be small relative to the dollars spent. They will probably get very little bang for the buck. Finally, they will create all sorts of ugly distortions if they limit the incentive to small businesses. This targeting is a politically popular way to keep the budgetary cost down, but I am just as happy if people now unemployed get hired by big firms as by small firms.

This package looks like the President is giving a green light to House allies who are developing their own bill, as long as the bill includes a few of the President’s priorities. I expect the bulk of the money in a final law would be in bucket #3 – the extensions of UI benefits, health insurance subsidies, the senior-pandering checks, and the transfers to state and local governments.

Bucket #1 includes the President’s priorities, and I expect reflects his primary message points over the next month or two: small business, infrastructure, and clean energy. These are easy demands for Congress to fulfill.

Bucket #2 is empty – the President is telling Congress they don’t have to offset the new spending and tax relief with other spending cuts or tax increases. They can claim that TARP repayments reduce the deficit to offset the new proposed deficit increases. That’s a gimmick, but it may work to cloud the deficit question. I expect a $150ish B deficit increase.

Inferring from the speech, prior signals from the White House, and other sources, this announcement looks like the result of the following White House logic:

  • Whether we want them to or not, the House is going to pass something that they can argue will help job growth.
  • We can either get on board and try to shape it, or get run over by it.
  • Let’s try to shape it and take some credit for it.

This logic is not partisan – we (Bush team) were often faced with a similar dilemma.

The primary difficulty for Team Obama will be how they integrate this with their overall economic message. This law will probably make their policy and communications jobs harder, not easier.

Here are some challenges this bill creates for the Obama White House:

  • The structure of this package is quite similar to the $787 B stimulus. This makes it hard for Team Obama to argue this is not a second/third/fourth stimulus.
  • It therefore undermines their argument that their prior policies are working (or at least sufficient.)
  • The bill would increase the deficit a lot (most are guessing around $150 B, a big number) when the policy and political pressure is strong and growing for deficit reduction. (See this article for an example of the policy challenge.)
  • The infrastructure spending and grants to states will in all likelihood face the same challenges we have seen all year: they are in general slow, inefficient, and prone to fraud and embarrassing revelations.

Prior to the President’s speech, action on a “jobs bill” was most evident in the House. The Senate is busy with health care, and Leader Reid does not have floor time to devote to this in December. We now have a rough Obama-House Democrat alliance. I expect Senate Democratic leaders will soon come on board, leaving Congressional Republicans with their own challenges:

  • They will be politically inclined to oppose it, and have remained remarkably unified in their opposition to the President and Democratic majority’s stimulus proposals so far. But some will like the small business incentives, many will (semi-secretly) like the infrastructure spending and try to get a piece of it, and nearly all will support the transfer payments.
  • Some Republicans will want to sign on board and “improve” the package, either for policy or political reasons. Republican leaders will need to decide whether to oppose the package straight up, oppose the package and develop a Republican alternative, or negotiate a compromise with Democratic leaders. I’ll bet they do the second.
  • I think they will also focus on the deficit impact and argue that the economic benefits of the President/House Democrats proposal are small, while the deficit impact is large.

My views

This looks like a smaller version of the original stimulus law. Its origins are more political and fulfilling a legislative need, than policy-driven.

  • I’m OK with the UI extension and extending the health insurance subsidy, although I wish both were better designed.
  • I generally support tax relief, but I am concerned the targeted capital gains reduction will give some cover to let the broader capital tax rates jump at the end of 2010. That would be very bad.
  • The spending programs will have little near-term GDP effect, and so should be evaluated in how they meet other policy goals. They’re largely ineffective as immediate stimulus, because government spending is slow.
  • The $250 check to seniors was pandering the first time Congress passed it (on a broadly bipartisan vote). It’s still pandering. Why are seniors more deserving of aid than, say, a low-income working family?
  • The “using TARP dollars to help Main Street” is a transparent gimmick. If you’re going to increase the deficit, it’s better just to stand up and say the deficit increase is worth the short-term economic benefit you think will result from the other policies.

I suggest they do a targeted bill that contains only the UI and COBRA provisions, because I think the large deficit impact of the other provisions, relative to their small macroeconomic benefit, isn’t worth it.

(photo credit: White House, Pete Souza)

A good jobs day

A good jobs day

Today’s employment report is good news:

  • Only 11,000 net jobs were lost in November. Given the margin of error on this data, that’s basically equivalent to zero.
  • The unemployment rate declined from 10.2% in October to 10.0% in November.
  • Data for September and October were revised upward. The U.S. economy still lost jobs in those months, but fewer than previously estimated.

The graph below shows the employment level – the number of people working in the U.S. according to the payroll survey. You can see that the line has flattened out in the past month. That’s a good thing.

At the same time, you can see how much slack there is in the economy. We’re down 7.156 million jobs from the peak in December 2007 (the blue dot), and down 3.337 million jobs since President Obama took office in January 2009 (the red dot).

Here is the graph for the unemployment rate. You can see the rate has turned down over the past month. That, too, is good news.

Regular readers will remember that there are several useful job growth markers. The first is for job growth to begin. We can further subdivide that into two components: first the job decline needs to stop, then job growth needs to begin. It appears the job decline has essentially stopped, although most economists whom I trust will wait for a second month of data to confirm it. Now we need job growth to begin.

After job growth begins, the next marker is when job growth exceeds about 150K jobs per month. That’s a good rule-of-thumb number for when we should expect to begin to see steady declines in the unemployment rate.

The final marker is full employment. We obviously have a long, long way to go before reaching that point. I use 5.0% as my rule-of-thumb for full employment. With today’s workforce of about 154 million people (in the household survey), we’d need to create about 7.7 million jobs starting now to return to full employment. And since the labor force generally grows over time, by the time we get there it’ll probably be around 8 million above today’s levels. That’s a lot of new jobs we need the economy to create.

I’d like to suggest five takeaway points for you:

  1. Today’s report is good news.
  2. We should wait for one more month of data to confirm today’s report before concluding that job declines have ended.
  3. The picture has flattened out, but has not yet turned upward. In political rhetoric, if next month’s data confirms today’s data, we will no longer be “headed in the wrong direction.” We won’t be “headed in the right direction” until the top graph turns up.
  4. Once job growth has broken zero, the next threshold is +150K jobs per month. That should roughly coincide with a declining unemployment rate.
  5. We have a longway to go:
    • We need the economy to create 3.3 million jobs to get back to the employment level when President Obama took office.
    • We need it to create 7.2 million jobs to get back to our previous high in December 2007.
    • We need it to create about 8 million jobs to get back to full employment.

The President's 2010 challenges: jobs, deficits, and taxes

The President's 2010 challenges: jobs, deficits, and taxes

I think health care will dominate the first month or two of the 2010 American domestic policy debate. But by the end of February we will either have a law or the bill will have died.

Jobs, deficits, and taxes will dominate the rest of the 2010 American domestic policy debate:

  • The unemployment rate is 10.2%. The Administration projects it will remain in the high 9s throughout 2010, even as it projects real GDP to grow 2 – 3%. (2.0% year-over-year growth, and 2.9% comparing Q4 2009 to Q4 2010).
  • The Administration projects a 2010 deficit of 10.4% of GDP, compared to 11.2% this year. They project an average budget deficit for the next ten years of 5.1%, and a 4% deficit at the end of the decade. Those are unsustainably high deficits.
  • The Administration projects steadily rising debt held by the public, from 41% of GDP in 2008, to 56% this year, to 66% next year, to 77% by the end of the decade.
  • CBO’s projections for deficits and debt are even more pessimistic than the Administration’s.
  • Under current law, the Bush tax cuts are scheduled to expire on at the end of 2010. If no new law is enacted, on January 1, 2011 (oversimplifying a bit):
    • The individual income tax rates will increase from 10/15/25/28/33/35 to 10/15/28/31/35/39.6%.
    • Capital gains rates will increase from 15% to 20%.
    • Dividend tax rates will increase from 15% to being taxed as ordinary income.
    • The estate tax will return to its pre-2001 state: a $1M exemption and a top rate of 55%.
    • The AMT “patch” will again expire, as it does each year after Congress fixes it only one year at a time.

The problem for the President is that there are tensions among these problems.

  • Accelerating GDP and job growth requires big fiscal or monetary stimulus. The Fed has the dial set to 11, so fiscal stimulus is all that’s left. As a policy matter, a big new stimulus program would substantially further increase at least the short-term deficit and take at least a few months to even begin to have an impact. As a political matter, the Administration has poorly managed stimulus implementation and communications to the point that even they are afraid of the word “stimulus.” The President’s communications and political advisors are, I imagine, groaning at the thought of the President’s policy answer to slow job growth being another stimulus. Then again, they’re probably also panicked about another year of 9+% unemployment.
  • Getting serious about budget deficits requires some combination of big spending cuts and/or big tax increases.
    • While Congressional Republicans are almost never able to muster the votes for big spending cuts, at least they’re generally willing to talk about them as the preferred solution. (How’s that for faint praise?) I have seen no indication that the President or any of his allies (except House Majority Leader Steny Hoyer) are willing to significantly slow the growth of spending. To have a measurable effect on the long run spending problem, one has to address demographics and health care cost growth in Medicare and Medicaid. But Director Orszag routinely ignores demographics in his presentations, arguing the long-run problem is only about health care costs. The President and his allies have lowered their long-term fiscal goal for health care reform to only slight improvements in our deficit picture. Even those small improvements are contingent on wildly optimistic assumptions about future Congressional behavior.
    • That leaves tax increases. The Administration already has baked into their projections revenue gains from allowing the top rates and capital tax rates to rise. Getting a lot more revenue (measured in percentage points of GDP) requires either returning to pre-Reagan tax rates or a new source of revenue. Q1: Will the President propose a new value-added tax (VAT), which would raise taxes on all consumers and break the President’s pledge? Q2: Will he instead propose a new business activity tax (BAT) which would have similar effects but which he could claim taxes businesses rather than individuals?
    • As worried as the President’s Congressional allies might be about the policy and political impacts of dangerous deficits, it’s hard to imagine them preferring to spend election year 2010 pushing for big spending cuts or big tax increases. I imagine they’ll be looking for ways to punt.
  • The scheduled automatic tax increases pose another conundrum. On the one hand, they need the revenues to prevent future deficits from being even worse than projected. On the other, if the economy is still soft at the end of 2010, tax increases are counterproductive. And while some on the left may think it’s easy to raise the top two individual tax rates, they forget that there was a broad bipartisan consensus in 2001 and 2003 to lower those top rates. The partisan dispute in 2003 was over cap gains and dividends, not the individual rates. This is largely because the top rates have been politically redefined as small business tax rates. When Congressional Republicans insist on votes throughout 2010 to prevent tax increases on successful small business owners during a time of economic weakness, will moderate and nervous Congressional Democrats want to vote against small business?

Within the White House the budget process is almost certainly driving these decisions. In my experience, most big Presidential budget decisions take place in November and December, to be rolled out in the State of the Union address and the release of the President’s Budget in the first week of February.

Here’s a policy checklist of questions they need to answer:

  1. Do we propose a new fiscal stimulus? If so, do we offset it in the outyears with spending cuts or tax increases? Or do we (misleadingly) claim we’re using returned TARP dollars to finance it?
  2. What do we do if we’re not going to propose a new fiscal stimulus, but our Congressional allies charge forward anyway?
  3. Do we propose a major deficit reduction package in next year’s State of the Union address and President’s Budget? If so, does it include entitlement spending cuts (unlikely), even bigger tax rate increases, or a new revenue source?
  4. How hard do we push back if moderate and nervous Congressional Democrats want to postpone the tax increases scheduled to take effect at the end of 2010?

Senate floor #011: The “hidden tax” of the uninsured

I have heard the following argument frequently and expect to hear it much more over the next few weeks. Here is Senator Baucus speaking on the Senate floor Monday:

Third, health care reform will work to repeal the hidden tax of more than $1,000 in increased premiums that American families pay each year in order to cover the cost of caring for the uninsured.

I am skeptical about the $1,000 figure, which is from an outside group, but let’s assume it’s accurate.

CBO estimates that the Reid bill would reduce the number of uninsured in 2016 (when the plan is in full effect) from 52 million to 23 million. That’s a 55% reduction in the number of uninsured.

If we’re generous and presume that the so-called “hidden tax” is reduced proportionately, then this indirect premium subsidy would be cut in half, not repealed.

Senator Baucus covered himself by saying “work to repeal” rather than “repeal,” but the impression left with the reader is that the Reid bill would eliminate this cost-shift. Others are not as careful with their language as Senator Baucus is here.

I have written before that I have always been skeptical of the cost shifting argument. Here’s the best response I’ve seen to my skepticism.

Whether or not cost-shifting is real, and whether or not the $1,000 figure is good, the Reid bill would at best cut that figure in half. More importantly, total health spending and costs to the insured will increase if we cover more of the uninsured with taxpayer-subsidized insurance. This sounds almost tautological, but it needs to be said: covering more people costs more money. Yes, there are some indirect savings through less use of emergency and charity care, but those savings are small compared to the gross outlays of subsidizing the purchase of health insurance for many others.

If you’re advocating a policy to subsidize coverage for people who are now uninsured, I hope you’ll argue that the benefits to those uninsured are worth the higher costs to others. Don’t argue that we’ll save money overall, or that it will financially benefit those who are now insured. This one isn’t a free lunch.

Senate floor #010: Minority party rights and tactics

Yesterday Senate Budget Committee Ranking Republican Judd Gregg sent Senate Republicans a reminder of all the procedural tools available to Senators “to insist on a full, complete, and fully informed debate on all measures and issues coming before the Senate.” When you’re in the majority, you often refer to these as stalling tactics and obstructionism. When you’re in the minority trying to prevent a bad bill from becoming law, you often refer to these as rights that can be protected.

I’ll cut and paste the description of the rights. I won’t describe them here – please consider this a reference document.

Since the Senate is now considering the bill and the Reid substitute amendment, we’re past section I. Tools still available and useful to the minority begin with “Senate Points of Order,” the third bullet in section II.


FOUNDATION FOR THE MINORITY PARTY’S RIGHTS IN THE SENATE (Fall 2009)

The Senate rules are designed to give a minority of Senators the right to insist on a full, complete, and fully informed debate on all measures and issues coming before the Senate. This cornerstone of protection can only be abrogated if 60 or more Senators vote to take these rights away from the minority.

I. RIGHTS AVAILABLE TO MINORITY BEFORE MEASURES ARE CONSIDERED ON FLOOR

(These rights are normally waived by Unanimous Consent (UC) when time is short, but any Senator can object to the waiver.)

  • New Legislative Day – An adjournment of the Senate, as opposed to a recess, is required to trigger a new legislative day. A new legislative day starts with the morning hour, a 2-hour period with a number of required procedures. During part of the ?morning hour? any Senator may make non-debatable motions to proceed to items on the Senate calendar.
  • One Day and Two Day Rules – The 1-day rule requires that measures must lie over one ?legislative day? before they can be considered. All bills have to lie over one day, whether they were introduced by an individual Senator (Rule XIV) or reported by a committee (Rule XVII). The 2-day rule requires that IF a committee chooses to file a written report, that committee report MUST contain a CBO cost estimate, a regulatory impact statement, and detail what changes the measure makes to current law (or provide a statement why any of these cannot be done), and that report must be available at least 2 calendar days before a bill can be considered on the Senate floor. Senators may block a measure’s consideration by raising a point of order if it does not meet one of these requirements.
  • “Hard” Quorum Calls – Senate operates on a presumptive quorum of 51 senators and quorum calls are routinely dispensed with by unanimous consent. If UC is not granted to dispose of a routine quorum call, then the roll must continue to be called. If a quorum is not present, the only motions the leadership may make are to adjourn, to recess under a previous order, or time-consuming motions to establish a quorum that include requesting, requiring, and then arresting Senators to compel their presence in the Senate chamber.

II. RIGHTS AVAILABLE TO MINORITY DURING CONSIDERATION OF MEASURES IN SENATE

(Many of these rights are regularly waived by Unanimous Consent.)

  • Motions to Proceed to Measures – with the exception of Conference Reports and Budget Resolutions, most such motions are fully debatable and 60 votes for cloture is needed to cut off extended debate.
  • Reading of Amendments and Conference Reports in Entirety – In most circumstances, the reading of the full text of amendments may only be dispensed with by unanimous consent. Any Senator may object to dispensing with the reading. If, as is often the case when the Senate begins consideration of a House-passed vehicle, the Majority Leader offers a full-text substitute amendment, the reading of that full-text substitute amendment can only be waived by unanimous consent. A member may only request the reading of a conference report if it is not available in printed form (100 copies available in the Senate chamber).
  • Senate Points of Order – A Senator may make a point of order at any point he or she believes that a Senate procedure is being violated, with or without cause. After the presiding officer rules, any Senator who disagrees with such ruling may appeal the ruling of the chair – that appeal is fully debatable. Some points of order, such as those raised on Constitutional grounds, are not ruled on by the presiding officer and the question is put to the Senate, then the point of order itself is fully debatable. The Senate may dispose of a point of order or an appeal by tabling it; however, delay is created by the two roll call votes in connection with each tabling motion (motion to table and motion to reconsider that vote).
  • Budget Points of Order – Many legislative proposals (bills, amendments, and conference reports) are subject to a point of order under the Budget Act or budget resolution, most of which can only be waived by 60 votes. If budget points of order lie against a measure, any Senator may raise them, and a measure cannot be passed or disposed of unless the points of order that are raised are waived. (See http://budget.senate.gov/republican/pressarchive/PointsofOrder.pdf )
  • Amendment Process
    • Amendment Tree Process and/or Filibuster by Amendment – until cloture is invoked, Senators may offer an unlimited number of amendments — germane or non-germane — on any subject. This is the fullest expression of a ?full, complete, and informed? debate on a measure. It has been necessary under past Democrat majorities to use the rules governing the amendment process aggressively to ensure that minority Senators get votes on their amendment as originally written (unchanged by the Majority Democrats.)
    • Substitute Amendments – UC is routinely requested to treat substitute amendments as original text for purposes of further amendment, which makes it easier for the majority to offer 2nd degree amendments to gut 1st degree amendments by the minority. The minority could protect their amendments by objecting to such UCs.
    • Divisible Amendments – amendments are divisible upon demand by any Senator if they contain two or more parts that can stand independently of one another. This can be used to fight efforts to block the minority from offering all of their amendments, because a single amendment could be drafted, offered at a point when such an amendment is in order, and then divided into multiple component parts for separate consideration and votes. Demanding division of amendments can also be used to extend consideration of a measure. Amendments to strike and insert text cannot be divided.
  • Motions to Recommit Bills to Committee With or Without Instructions – A Senator may make a motion to recommit a bill to the committee with or without instructions to the Committee to report it back to the Senate with certain changes or additions. Such instructions are amendable.
  • AFTER PASSAGE Going to Conference, Motions to Instruct Conferees, Matters Out of Scope of Conference
    • Going to Conference – The Senate must pass 3 separate motions to go to conference: (1) a motion to insist on its amendments or disagree with the House amendments; (2) a motion to request/agree to a conference; and (3) a motion to authorize the Chair to appoint conferees. The Senate routinely does this by UC, but if a Senator objects the Senate must debate each step and all 3 motions may be filibustered (requiring a cloture vote to end debate).
    • Motion to Instruct Conferees – Once the Senate adopts the first two motions, Senators may offer an unlimited number of motions to instruct the Senate’s conferees. The motions to instruct are amendable – and divisible upon demand — by Senators if they contain more than one separate and distinct instruction.
    • Conference Reports, Out of Scope Motions – In addition to demanding a copy of the conference report to be on every Senator’s desk and raising Budget points of order against it, Senators may also raise a point of order that it contains matter not related to the matters originally submitted to the conference by either chamber. If the Chair sustains the point or order, the provision(s) is stricken from the conference agreement, and the House would then have to approve the measure absent the stricken provision (even if the House had already acted on the conference report). The scope point of order can be waived by 60 Senators.
    • Availability of Conference Report Language. The conference report must be publicly available on a website 48 hours in advance prior to the vote on passage.
Follow

Get every new post delivered to your Inbox.

Join 6,422 other followers