Something amazing happened yesterday: The Senate passed a piece of legislation. An important piece of legislation. And it did so by 51 votes. There was no filibuster.
Sadly, the more I reveal about this shocking turn of events, the less amazing it will become. The legislation was the Democrats’ proposal to extend the Bush tax cut for income up to $250,000. And tax laws have to originate in the House. “The only reason we won’t block [the bill] today is that we know it doesn’t pass constitutional muster and won’t become law,” Senate Minority Leader Mitch McConnell said. “What today’s votes are all about,” he continued, is “showing the people who sent us here where we stand.”
Charming. Meanwhile, there’s very little chance that the House will pass the Democrats’ bill, so that’s that for our exciting tale of Congress seeming, for a brief moment, to actually get its act together and do something constructive to avert the fiscal cliff.
Just one more data point behind the case that the 112th Congress is one of the worst congresses of all time.
But insofar as McConnell wanted to show Americans where the two sides stood, it’s worth making a point that often gets overlooked: Compared to the law as it’s currently written, both Republicans and Democrats want to cut taxes on the rich. Remember: The Democrats’ extension cuts taxes on all income between $1 and $250,000. If you make a million dollars, you still get a a tax cut on that first quarter-million. For that reason, the Tax Policy Center estimates that the Senate Democrats’ bill, if you assume it’s later followed by an AMT patch and an extension of the 2009 estate tax rates (which everyone does assume), would cut taxes on the top one percent by more than $17,000. And even if you don’t assume the AMT and estate fixes, it’s a tax cut of $15,000. The Republican bill, by contrast, would cut taxes on the top one percent by more than $75,000.
So compared to letting the Bush tax cuts expire, both sides are offering a broad-based tax cut. Republicans are just offering a larger one for folks making more than $250,000.
Want Wonkbook delivered to your inbox or mobile device? Subscribe!
RCP Obama vs. Romney: Obama +1.3%; 7-day change: Obama -0.1%.
RCP Obama approval: 47.1%; 7-day change: +0.7%.
Top story: Still droughting
The drought will drive up food prices next year. “Scorching heat and the worst drought in nearly a half-century are threatening to send food prices up, spooking consumers and leading to worries about global food costs. On Wednesday, the government said it expected the record-breaking weather to drive up the price for groceries next year, including milk, beef, chicken and pork. The drought is now affecting 88 percent of the corn crop, a staple of processed foods and animal feed as well as the nation’s leading farm export. The government’s forecast, based on a consumer price index for food, estimated that prices would rise 4 to 5 percent for beef next year with slightly lower increases for pork, eggs and dairy products.” Annie Lowrey and Ron Nixon in The New York Times.
@DLeonhardt: Scorching heat. Severe drought. Corn, beef, dairy prices rising. Highways buckling. The summer of ’12
Drought and other weather extremes are taxing parts of the electrical grid. “From highways in Texas to nuclear power plants in Illinois, the concrete, steel and sophisticated engineering that undergird the nation’s infrastructure are being taxed to worrisome degrees by heat, drought and vicious storms. On a single day this month here, a US Airways regional jet became stuck in asphalt that had softened in 100-degree temperatures, and a subway train derailed after the heat stretched the track so far that it kinked — inserting a sharp angle into a stretch that was supposed to be straight…The frequency of extreme weather is up over the past few years, and people who deal with infrastructure expect that to continue. Leading climate models suggest that weather-sensitive parts of the infrastructure will be seeing many more extreme episodes, along with shifts in weather patterns and rising maximum (and minimum) temperatures.” Matthew Wald and John Schwartz in The New York Times.
What we know about climate change and drought: http://wapo.st/MJMxoJ.
Forecasts don’t see the drought getting any better for the next couple of weeks. “Midday weather updates indicated worsening stress on the U.S. corn and soybean crops for the next two weeks as the worst drought in over 50 years retains a firm hold on America’s heartland, an agricultural meteorologist said on Wednesday. ‘There are no soaking rains seen through August 8,’ said Andy Karst, meteorologist for World Weather Inc…High temperatures in the 90s Fahrenheit would remain the norm for 10 days in much of the Midwest, with triple-digit readings in the southwest, said Don Keeney, meteorologist for MDA EarthSat Weather.” Sam Nelson in Reuters.
76 more counties were declared disaster areas due to drought. “The nation’s worst drought in a half-century has spread, and 76 counties in six Midwestern states were declared disaster areas Wednesday as the Obama administration added them to the more than 1,300 counties already on the list. At least two-thirds of the area of the contiguous United States is experiencing moderate to exceptional drought, according to the U.S. Department of Agriculture’s Drought Monitor. Hot, dry conditions have caused significant damage to corn, soybeans, pastures and rangeland from California to Upstate New York, a USDA statement said…The USDA has designated 1,369 counties in 31 states as disaster areas — 1,234 because of drought. Sixty-seven percent of the nation’s livestock pastures are in areas affected by drought.” Darryl Fears in The Washington Post.
Republicans are considering a one-year extension of the farm bill, paired with disaster aid. “Boxed into a corner on the farm bill, House Republicans scrambled Wednesday to find a path forward before sending lawmakers home in August to face drought-stricken producers — just months before the November elections. House Agriculture Committee staff met with their GOP leadership counterparts Wednesday morning, and there were animated conversations on the House floor later between Chairman Frank Lucas (R-Okla.) and Majority Leader Eric Cantor (R-Va.), who has been a obstacle to farm legislation. The focus now is on a one-year extension of the current subsidies together with immediate disaster aid for livestock and specialty crop producers impacted by the severe weather. But the cost and practicality of this approach are in serious question, and Lucas can’t count on the support of his ranking Democrat and strong partner on the farm bill, Rep. Collin Peterson of Minnesota.” David Rogers in Politico.
Stephen Colbert is worried about how drought will affect his cheese: http://bit.ly/MKgU0b.
The drought is almost certain to cost the most since 1988. “The massive drought now scorching the central USA will almost certainly cost at least $12 billion, making it the costliest since 1988, experts reported Wednesday. ‘There does seem to be near unanimous agreement from industry experts that this year’s drought losses will surpass the $12 billion recorded in 2011,’ says meteorologist Steve Bowen of Aon Benfield, a global reinsurance firm…’Right now it is difficult to say whether we end up reaching the loss levels of 1988 ($40 billion) and 1980 ($20 billion), given that it will be several months for agricultural industries to fully assess the total extent of their losses,’ Bowen says.” Doyle Rice and Chuck Raasch in USA Today.
But farmers are better prepared this time. “U.S. crops are taking a beating in the worst drought since 1988 but most farmers are not sweating like they did 24 years ago when a drought hit as they were just starting to recover from a farm depression that brought down a big slice of the Midwestern economy. While financial losses from the 2012 drought in the world’s largest food exporting nation will no doubt top the $40 billion of losses in 1988 — an inflation-adjusted $78 billion today — U.S. farmers face this drought in their strongest financial position in history, buoyed by less debt, record-high grain and land prices, plus greater production and exports, according to agriculture bankers, farm managers and economists. In addition, much stronger crop and livestock insurance programs than in 1988 will make a huge difference – and some lucky farmers, by collecting insurance but selling remaining harvests at record prices, may even come out ahead of last year, economists say.” Christine Stebbins in Reuters.
The drought could cause global unrest. ”Twice in the last five years, rising food prices triggered global waves of social unrest. With drought baking U.S. crops, another round of soaring, society-straining price spikes may happen in coming months. According to researchers from the New England Complex Systems Institute, commodity speculation — investors betting on food prices — will amplify the drought’s market signals, creating a new food bubble and the crises that follow…What happens after another bubble is a pressing question, said Bar-Yam. In both 2007 and 2010, massive unrest almost immediately followed food price surges, tracking market behavior with uncanny synchronization.” Brandon Keim in Wired.
1) KLEIN: Money corrupts politics more than you thought. “According to Harvard law professor Lawrence Lessig, only 0.26 percent of Americans give more than $200 to congressional campaigns. Only 0.05 percent give the maximum amount to any congressional candidate. Only 0.01 percent — 1 percent of 1 percent — give more than $10,000 in an election cycle. And in the current presidential election, 0.000063 percent of Americans — fewer than 200 of the country’s 310 million residents — have contributed 80 percent of all super-PAC donations…The other side of the coin…is a constitutional amendment making it possible to limit the role of private money in politics. This is not a solution I like endorsing, because it seems impossible to imagine it actually happening. But it was, presumably, difficult for a previous generation to imagine that the Constitution would be amended to permit the direct election of senators, thus necessitating expensive campaigns that only a small fraction of Americans would fund. Yet here we are.” Ezra Klein in Bloomberg.
2) WESSEL: We may be headed back into recession. “Is the U.S. economy headed for a recession before it fully recovers from the last one? Unfortunately, it’s a timely question…In a recent Wall Street Journal survey, forecasters put the chances of a recession in the next 12 months at a reassuringly low 21%. But economists rarely foresee recessions. In August 2007, they put recession odds at 28%. Within four months, the economy had fallen into what became the worst recession in more than half a century. In the recent survey, 39 forecasters said risks to their slow-growth forecasts were on the downside; only four said risks were on the upside. To use another metaphor heard in the corridors of the Fed, the U.S. economy is barely flying at stall speed. It wouldn’t take much to push it down.” David Wessel in The Wall Street Journal.
3) GLAESER: We should think about what each candidate would actually do. “The U.S. election of 2012, we assume, is a nation-defining moment…To make this decision wisely, we need to anticipate not the rosiest scenarios of each vision, executed perfectly, but rather the more likely outcomes that will involve far more mediocrity and near-sighted, short-term political opportunism…Since cutting taxes is a lot more fun than cutting spending, I fear that a return to Republican rule will mean bigger deficits, not smaller government…President Obama may stand for a more European approach to government. In that case, we had better be sure that we are going to become Germany and not Greece. The examples of Germany, the Netherlands and the Nordic countries show that robust economic performance can be combined with a sizable welfare state, but the current disasters in southern Europe remind us how easily big government can go awry.” Edward Glaeser in Bloomberg.
4) YGLESIAS: There is no sovereign debt crisis. “What sovereign debt crisis? There certainly isn’t one in the United States, where for weeks the inflation-adjusted yield on 20-year bonds has been negative. Investors, in other words, are so pessimistic about growth prospects and so frightened of losing their principal that they’re willing to pay the American government a small fee for the privilege of safeguarding their money. And a quick glance around the world reveals that the American experience is much more typical than the Greek or Italian one…All across the world, governments have never been able to borrow so cheaply” Matthew Yglesias in Slate.
5) GAPPER: Financial regulators need to alter their relationship with banks. “One doesn’t have to believe Mr Barofsky’s view that the relationship between the Fed, the Treasury – and central banks and regulators elsewhere – and the financial industry is inherently corrupt to identify a problem. Any oversight that is biased towards preserving stability will often shy from making life too difficult for banks…The only way to curb the conflict in the long term would be for bank supervisors to prevent banks from taking excessive risks and adopting inadequate business models, such as Northern Rock’s heavy over-reliance on impermanent wholesale funding. They could then crack down on banks’ practices before the next crisis made it awkward.” John Gapper in The Financial Times.
Los Angeles alt-rock interlude: Weezer plays “Keep Fishin’” live on the Late Show with David Letterman.
Got tips, additions, or comments? E-mail me.
Still to come:The Senate wants to keep tax cuts for first $250,000; the death rate dropped where Medicaid grew; cybersecurity is set for a test vote; momentum for stopping clean energy loans; and a gopher is pretty curious about the camera.
The Senate passed a bill to keep tax cuts for first $250,000 of income. “The Senate on Wednesday narrowly approved a plan to preserve tax cuts for the middle class while letting them expire for the wealthy, a powerful if largely symbolic victory for Democrats who have been pushing to raise taxes on the rich for more than a decade. The measure is dead on arrival in the Republican-controlled House, where leaders are preparing to vote next week on their own plan to extend the George W. Bush-era tax cuts for households at every income level through 2013. But Democratic lawmakers said the Senate’s 51-48 vote is a political breakthrough that strengthens their election-year argument that Republicans are holding tax cuts for the middle class hostage in order to maintain breaks worth $160,000 a year to the average millionaire.” Lori Montgomery in The Washington Post.
@sahilkapur: Words missing from the GOP lexicon today: deficit, debt.
@daveweigel: The Senate should end days of stunt votes with everybody laughing as the camera freeze-frames and theme song rolls.
@HoyerPress: I just met you. And this is crazy. But if all sides agree on need for middle class tax cuts, House should pass it, maybe?
The pioneer of big banks now wants to break them up. ”In a few seconds, Sanford Weill disavowed the work of a lifetime. Mr. Weill, who built Citigroup Inc. through repeated acquisitions–including the 1998 megadeal that prompted Congress to strike down a six-decade-old ban on commercial banks doing investment banking, and vice versa–on Wednesday called for the breakup of huge U.S. financial conglomerates. ‘I am suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk,’ Mr. Weill said in a TV interview on CNBC. ‘Mistakes were made,’ he added a few seconds later…It was as if Napoleon had called for an end to military conquest.” E.S. Browning and David Benoit in The Wall Street Journal.
New home sales fell in June. “Sales of newly built homes in the U.S. fell in June to the lowest level in five months, showing that the recovery of the housing market remains uneven. New single-family home sales decreased by 8.4% from May to a seasonally adjusted annual rate of 350,000, the Commerce Department said Wednesday. June’s sales were the lowest since January but were up 15.1% compared to the same month a year ago. Results were lower than expected. Economists surveyed by Dow Jones Newswires had forecast an annual rate of 375,000, which would have been a 1.6% gain over the figure previously reported for May.” Sarah Portlock and Eric Morath in The Wall Street Journal.
@NickTimiraos: Context on new home sales: June reading is lower than any in the last 4 months and better than each of the 21 months before than.
Europe is considering making rate-rigging a crime. “Calls for the criminal prosecution of bankers involved in rigging the global interest rate known as Libor are growing louder as government officials learn more about the scheme. The European Commission on Wednesday proposed making the manipulation of key financial benchmarks a criminal offense, in response to e-mails that show bankers on both sides of the Atlantic colluded in fiddling with Libor. Short of instituting new legislation, U.S. authorities are pursuing criminal charges against those involved in the scheme, although the scope of the charges is unclear. Analysts say prosecutors are likely to hinge cases on securities fraud and conspiracy charges. But whether they stick is another matter.” Danielle Douglas in The Washington Post.
The Fed sees benefits and risks in further action. “The argument for the Federal Reserve to introduce another round of stimulus, and its reasons for hesitation, can both be summarized by a single number: 3.53 percent, the average interest rate last week on a 30-year mortgage. The cost of mortgages and other kinds of loans remain well above zero, a chief reason that many Fed officials are confident the central bank still has some power to increase the pace of economic growth by continuing to reduce interest rates. But those rates also are lower than they ever have been before, raising questions about how low they can go, and about the eventual consequences of such huge and enduring distortions to the normal workings of the financial marketplace.” Binyamin Appelbaum in The New York Times.
Some Republicans want to push the fight over spending into 2013. “House conservatives urged Majority Leader Eric Cantor (R-Va.) to back a stopgap spending bill that would extend into 2013 and take the issue of government funding off the table during the election and the jammed lame-duck session this fall. Cantor attended a meeting Wednesday of the conservative Republican Study Committee, where lawmakers voiced support for passing a long-term continuing resolution when federal funding runs out at the end of the fiscal year on Sept. 30…Two leading members of the Republican Study Committee, Chairman Jim Jordan (Ohio), and Rep. Scott Garrett (N.J.), are supportive of the idea. The conservatives are willing to consider higher spending levels than they have voted for in the past to get a long-term continuing resolution, the aide said.” Russell Berman in The Hill.
The House overwhelmingly voted for an audit of the Fed. “The House voted for an audit of the Federal Reserve Wednesday, handing Rep. Ron Paul a symbolic victory in his long crusade against the central bank. The bill passed 327 to 98. One Republican, Rep. Robert Turner of New York, voted against the bill. Eighty-nine Democrats voted for it…Senate Majority Leader Harry Reid (D-Nev.) has said the Senate will not consider the bill, effectively killing its chances of becoming law.” Patrick Reis in Politico.
@BCAppelbaum: House passes Audit The Fed bill. Per House rules, they must now pass it 31 more times.
Fine art interlude: Superheros as manatees.
Obama and insurers will team up to cut healthcare fraud. “President Obama and health insurance executives plan to announce a new joint effort on Thursday to crack down on health care fraud by sharing and comparing claims data, administration officials say…The charter for the venture says that federal investigators and insurers will pool claims data and look for suspicious billing patterns and aberrations. If agents detect possible fraud and begin an investigation, they can provide insurers with the names of doctors, hospitals and suppliers suspected of misconduct. The claims data will come from Medicare, Medicaid and private insurance.” Robert Pear in The New York Times.
@JeffreyYoung_HC: Health care fraud: Not just the government’s problem!
The death rate dropped where Medicaid grew. “Into the maelstrom of debate over whether Medicaid should cover more people comes a new study by Harvard researchers who found that when states expanded their Medicaid programs and gave more poor people health insurance, fewer people died. The study, published online Wednesday in The New England Journal of Medicine, comes as states are deciding whether to expand Medicaid by 2014 under the Affordable Care Act, the Obama administration’s health care law…When researchers adjusted the data for economic factors like income and unemployment rates and population characteristics like age, sex and race, and then compared those numbers with neighboring states, they estimated that the Medicaid expansions were associated with a decline of 6.1 percent in deaths, or about 2,840 per year for every 500,000 adults added.” Pam Belluck in The New York Times.
@sarahkliff: Forty-seven years ago Congress created Medicare. Just 18 years til it becomes Medicare-eligible itself! #horriblehealthpolicyjokes
The cybersecurity bill is set for a test vote. “Senate Majority Leader Harry Reid (D-Nev.) has scheduled a crucial procedural vote that could determine the fate of cybersecurity legislation in the upper chamber. The test vote is set up for Friday on Sen. Joe Lieberman’s (I-Conn.) cybersecurity bill, but an aide for Reid said Republicans will likely yield back time for the vote to take place on Thursday. In the meantime, the co-sponsors of Lieberman’s bill and a group of Senate Republicans are working to come up with a consensus that will bridge their differences on provisions that would incentivize critical infrastructure operators to meet security standards.” Jennifer Martinez in The Hill.
Animals inspecting things interlude: A gopher sort of wants to learn more about this camera thing.
Amtrak is pushing expansion plans for the Northeast Corridor. “Amtrak is promoting a $151 billion expansion plan that includes a major revamping of Union Station in Washington, which was unveiled here Wednesday, as well as the upgrading of its hubs in New York and Boston. The plan represents a bid for federal support to transform the service into a high-speed rail operation. Amtrak released its updated ‘Next-Generation High-Speed Rail Plan for the Northeast Corridor’ report earlier this month, but financing remains a matter of concern…Under the plan, the rail company envisions trains traveling at up to 220 miles per hour, going from Washington to New York in just over an hour and a half and from Washington to Boston in a little more than three hours. Both goals would amount to about half the travel time Amtrak offers now on its fastest trains.” Ron Nixon in The New York Times.
A bill shutting down clean energy loans moved forward. “The plan, approved in a party-line vote, would curtain the Energy Department’s embattled loan-guarantee program. A House Energy and Commerce Committee panel, in a largely party-line vote, approved a GOP plan Wednesday that would curtail the Energy Department’s embattled loan-guarantee program…The bill would prevent the Energy Department from issuing loan guarantees on applications received after the end of 2011, and also sets new restrictions on existing applications and loans. The Energy and Power Subcommittee members voted 14-6 to approve the GOP bill, with only Rep. Brian Bilbray (R-Calif.) breaking ranks with Republicans by voting against it.” Ben Geman in The Hill.
@Ben_Geman: A Martian landing here (if she/he/it spoke English) would learn that “picking winners & losers” in energy brings great shame in our culture
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.