Wonkbook: House passes FinReg; unemployment insurance fails; CBO makes the case for stimulus

Ezra Klein
Thursday, July 1, 2010; 7:25 AM

The House passed the revised conference report for FinReg, but with the Senate delaying its vote until after the Fourth of July, final passage remains uncertain. The Senate, meanwhile, did not pass the standalone unemployment insurance extension, meaning checks will cease for millions of Americans.

Testimony from CBO director Doug Elmendorf suggests that short-term stimulus may make budgetary sense, and can play nice with long-term deficit reduction. A Senate proposal to eliminate the cap on oil company liability for spills moved closer to passage, and the Department of Health and Human Services launched www.HealthCare.gov, their major health-coverage options portal.

Is it only Thursday? Sigh. Welcome to Wonkbook.

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The House passed the conference report for FinReg as the Senate delayed passage until after the Fourth of July, report Brady Dennis and Jia Lynn Yang: "After two final hours of debate, 234 Democrats and three Republicans voted for the overhaul. The margin of victory was greater than when the House initially voted on its version of the bill in December, when no Republicans voted yes....The uncertainty over key Republican votes, coupled with the loss this week of Sen. Robert Byrd (D-W.Va.), prompted Senate Majority Leader Harry Reid (D-Nev.) to delay the Senate vote until after the July 4 recess. Reid will likely push for a final vote the week of July 12."

Jonathan Cohn -- whose has a new blog -- argues that CBO director Doug Elmendorf's recent testimony makes the case for short-term stimulus: "The ideal solution, if you follow Elmendorf's logic, would be to pass tax and spending bills that raised deficits now but reduced them later. If even a few conservatives were willing to talk about such a package, it might have a chance of passing. Instead, conservatives--including the whole of the Republican Party and a depressingly significant fraction of the Democrats--insist we must tighten belts now."

The Senate voted down Harry Reid's latest jobs package last night, but voted unanimously to extend the housing tax credit: http://bit.ly/aUGEWZ

The political history of unemployment insurance extensions has been much more fraught than one might assume: http://bit.ly/b3RNst

A Senate committee voted to remove oil spill liability limits, but the measure could run into trouble yet, report Tennille Tracy and Siobhan Hughes: "Democratic leaders are considering rolling some or all of the measures directly related to the Gulf oil spill into broader energy and climate legislation that may not have the votes to pass the Senate....Republicans--and at least one Democrat--expressed concern that removing the cap on damage claims would shut all but the largest oil companies out of offshore drilling by making it impossible to obtain insurance."

The Department of Health and Human Services has launched is health-coverage portal: http://www.healthcare.gov/

8-bit interlude: Twilight as an NES game.

Still to come: A program aiding homeowners with energy improvements is running into trouble with Fannie Mae and Freddie Mac; the CBO also warned that extending the Bush tax cuts could steer the budget off course; Elena Kagan dodged yet more political questions in her last day of testimony; and scientists have discovered an ancient, giant, carnivorous, and generally terrifying whale.


The PACE program, which enables local loans to homeowners to increase energy efficiency, is facing opposition from Fannie and Freddie, report Todd Woody: "Fannie Mae and Freddie Mac, the government entities that guarantee more than half of the residential mortgages in the United States, have different priorities. They are worried that taxpayers will end up as losers if a homeowner defaults on a mortgage on a home that uses such creative financing. Typically, property taxes must be paid first from any proceeds on a foreclosed home. In letters sent to mortgage lenders on May 5, Fannie Mae and Freddie Mac stated that energy-efficiency liens could not take priority over a mortgage."

La. Gov. Bobby Jindal is trying to keep documents involving the oil spill hidden: http://bit.ly/bweTFA

The Interior Department has delayed hearings on expanding offshore drilling, reports John Broder: "The department said on Wednesday that more extensive environmental and safety reviews were needed before moving ahead with any new leasing decisions.The process was to have begun with public hearings in Alaska, along the Gulf Coast and the southern Atlantic Coast in June and early July. Those hearings have now been put off until later in the year, the department said in a statement. No new dates were given."

The EPA has judged that the oil dispersant used does more good than harm: http://bit.ly/cR98Rn Electric car company Tesla had an impressive IPO, reports Peter Whoriskey: "In a burst of enthusiasm for electric cars, investors are saluting the company's prospects, raising more than $200 million at its initial public offering Monday and, on its first day of trading Tuesday, sending share prices up again from $17 to $23.89. Co-founder and chief executive Elon Musk said the enthusiasts were making a smart bet. 'We had an incredibly positive outcome from the smartest investors in the world,' he told CNBC on Tuesday. 'When people look at the list of the investors...they will be amazed at the quality and strength of the investor group in Tesla.'"

Paleontology interlude: Scientists discover a huge, 12 million year old, hypercarnivorous whale.

Economy/ FinReg

CBO director Doug Elmendorf stressed the deficit exploding impact of extending the Bush tax cuts, reports Lori Montgomery: "[With] a permanent reduction in the alternative minimum tax and a plan to extend tax cuts enacted in the Bush administration for families making less than $250,000 a year...the CBO said the national debt would soar to 87 percent of gross domestic product by 2020, exceed its historical peak of 109 percent by 2025 and hit 185 percent by 2035 -- 'uncharted territory,' Elmendorf said, that could include higher interest rates, more foreign borrowing, less private investment and lower income growth, if not a full-blown fiscal crisis."

The EU has adopted binding budget restraint rules: http://bit.ly/d3corR

The debt panel is focusing on spending cuts, reports John McKinnon: "Erskine Bowles, the Democratic co-chairman of the bipartisan White House Commission on Fiscal Responsibility and Reform, floated a long-term goal of reducing federal spending to about 21% of U.S. gross domestic product, slightly above the recent norm but significantly lower than current spending projections....The outlook for agreement among the 18-member panel, however, remains uncertain. Mr. Bowles, while suggesting that the weight of deficit reduction should rest on spending cuts, also said long-term federal tax revenue should rise to about 21% of GDP, above the current 18% or so."

David Wessel argues Obama's aggressive posture is building support for free trade: "In international forums, as he did at the Copenhagen climate-change talks, he is arguing that China is posing as a developing country even though it has grown up and needs to be treated like the economic powerhouse it is. At home, he knows--no matter what his economists tell him--that neither voters nor Democrats in Congress will be convinced that free trade is good for them. So he is styling himself as a tough bargainer, who can beat other countries at their own game."

John Taylor argues the Dodd-Frank bill gives government powers it didn't need in the crisis: "The biggest misdiagnosis is the presumption that the government did not have enough power to avoid the crisis. But the Federal Reserve had the power to avoid the monetary excesses that accelerated the housing boom that went bust in 2007. The New York Fed had the power to stop Citigroup's questionable lending and trading decisions and, with hundreds of regulators on the premises of such large banks, should have had the information to do so."

"The world's thirstiest gerbil" interlude: The worst first sentences of novels from the past yea.

Domestic Policy

Elena Kagan kept declining to answer political questions in her last Senate hearing yesterday, report Robert Barnes and Amy Goldstein: "Sen. Jon Kyl (R-Ariz.) pressed Kagan on whether her statement at her solicitor general confirmation hearings that there is not a constitutional right to same-sex marriage is her personal opinion or merely a reflection of current law. 'I don't think that that would be appropriate' to answer, she said. She said pending cases might call on the court to make just such a decision."

The NRA may count the Kagan nomination as a "key vote" http://bit.ly/cOpxGt

Children born into poverty are likely to spend many years there, reports Justin Lahart: "Using data from a University of Michigan program that has been tracking the same families for over 40 years, economists at the Urban Institute found that 49% of children who are born into households below the poverty line spend at least half of their first 18 years in poverty. Among children not poor at birth, just over a quarter spend any of their childhood years poor, and only 4% are poor for at least half of their childhood."

The administration has unveiled a new health care website: http://bit.ly/bh4DWc

Almost a million jobs could be lost if states do not receive more aid, reports Michael Fletcher: "States face a combined deficit of $89 billion in the fiscal year that begins Thursday, according to the National Conference of State Legislatures. And because every state but Vermont is required to balance its budget, the only recourse is cutting employees or vital programs, including education spending, medical services, programs for the disabled and elderly, and police and fire protection. All that cutting could mean the loss of 900,000 jobs -- in the public sector and in private companies that rely on state business, according to the Center on Budget and Policy Priorities, a liberal research group."

Closing credits: Wonkbook compiled with the help of Dylan Matthews and Mike Shepard.

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