via a special arrangement with Informa Economics, Inc.
Additional efforts (and a lot more funding)
will be needed for financial system rescue
This column is copyrighted material, therefore reproduction
or retransmission is prohibited under U.S. copyright laws.
-- Doubts rise about effectiveness of economic
stimulus package. The Tax Policy Center, a nonprofit Washington
think tank, in a report this week graded each of the stimulus package's
10 tax provisions on how well they would boost the economy in the short
term. They rated two B-plus, with the rest falling short of that.
-- Union wages provision in House stimulus
package. The House economic stimulus bill to be voted
on today requires all employers that receive contracts under the bill
to pay their workers the prevailing union wage under Davis-Bacon laws.
-- Projected costs of House economic stimulus
proposal rising. The Congressional Budget Office (CBO)
estimated that the $816 billion cost of the House stimulus bill would
result in an additional $347 billion in interest payments on the national
debt — effectively raising the package’s cost to more than
-- Obama supports return to pay/go. Office
of Management and Budget Director Peter Orszag sent a letter Tuesday to
House Appropriations Chairman David Obey (D-Wis.) saying Obama was "committed
to paying for any of the temporary tax cuts included in the recovery plan
that he would like to make permanent," and supported a return to
"pay-as-you-go" budget rules for nonemergency spending.
Details: Orszag wrote that the stimulus bill “should
not be seen as an opportunity to abandon the fiscal discipline that
we owe each and every taxpayer in spending their money — and that
is critical to keeping the US strong in a global, interdependent economy.
Although it is not feasible to avoid any spillover whatsoever of the
recovery package on out-year spending, the administration believes that
the package should minimize such effects on out-year spending as much
as possible. Furthermore, the president is committed to paying for any
of the temporary tax cuts included in the recovery plan that he would
like to make permanent, and will detail the manner of doing so in his
budget submission.” Orszag also wrote that the Obama administration
intended to return to the “pay-as-you-go budgeting that we had
in the 1990s.” He concluded, “Putting the country back on
the path of fiscal responsibility will mean tough choices and difficult
trade-offs, but for the long-term health of our economy, the president
believes that they must be made.”
-- Focus will be on Senate stimulus package,
not the House. Republicans on Tuesday met with President
Barack Obama about their concerns over the House bill lacking enough incentives
to jumpstart the US economy. The Senate bill will likely include some
GOP-pushed changes but at this juncture it is unclear whether there will
be enough changes to warrant a significant number of Republican votes
for either the eventual Senate bill or in a resulting conference bill.
(Very few Republicans will vote for the House measure to be considered
-- Stimulus package will not be last effort.
The Obama administration is working on several additional
programs that they believe will be needed relative to financial rescue.
Huge additional losses in the banking sector are ahead, especially as
unemployment rises in most states, resulting in more loan defaults.
FDIC wants to manage “bad bank”. Reports
note that the Federal Deposit Insurance Corp. (FDIC) may manage the
so-called “bad bank” that the Obama administration may set
up. Obama’s financial team may announce the outlines of its financial-rescue
plan as early as next week. While setting up a bank to buy underwater
assets is emerging as a favored approach, it could drive up the cost
of the rescue in excess of $1 trillion. Treasury Secretary Timothy Geithner
has pledged to unveil a “comprehensive plan” for responding
to the crisis. (Some sources report the FDIC is busy renting office
space in several cities...perhaps ahead of a major role ahead relative
to the "bad bank" possibility.)
-- Ethanol blending percentage language
not likely part of final stimulus package: Efforts to
get language boosting the current 10 percent maximum blend into the Senate
stimulus package will likely fail, according to our sources. If so, that
means efforts will be renewed to get the percentage increased via an announcement
from the Environmental Protection Agency (EPA), but based on our talks
with sources on this topic, our contacts suggest the odds for an EPA announcement
are less than 50 percent.
This column is copyrighted material, therefore reproduction or
retransmission is prohibited under U.S. copyright laws.