Progressive Breakfast: Crunch Week

ACTIVISM UPDATE: Senate expected to pass econ recovery Tuesday. House-Senate conference to iron out differences immediately follows. Phone calls to Congress [1] for a "big and bold" bill will be critically important all week [1].

Presidential Campaign for Economic Recovery In High Gear

LA Times: [2] "President Obama plans to hit the road to sell the package directly to the American public. He'll spend today in Indiana [at noon ET] and Tuesday in Florida, talking with communities [2] that have been hard hit by the recession. And tonight [8 PM ET], in Washington, he'll hold his first prime-time news conference [2], with the economy likely to be Topic A."

USA Today reports today's town-hall won't be Bush-style, stacked with supporters: [3] "Free tickets to the Concord High School town-hall-style meeting were handed out first-come-first-served starting at noon Saturday."

NYT: [4] "Mr. Obama is set to meet with the mayor [of Elkhart, IN], Dick Moore, who has assembled a list of 18 construction projects, from rebuilding runways at the local airport to upgrading sewer systems, that he said could help create 2,300 jobs. In Washington, those are the types of projects deemed recipients of pork-barrel spending,but the administration hopes they will be seen differently at closer range."

[5]W. Post on the urgent need: [6] "While economists remain divided on the role of government generally, an overwhelming number from both parties are saying that a government stimulus package -- even a flawed one -- is urgently needed to help prevent a steeper slide in the economy. Many economists say the precise size and shape of the package developing in Congress matter less than the timing, and that any delay is damaging."

Pollster.com's Mark Blumenthal pushes back on claims that support for economic recovery is collapsing: [7] "Is support for the economic stimulus legislation falling? Three polls provide data on point this week: Gallup says support is flat, while CBS News and Rasmussen Reports say support is declining ... both CBS and Gallup changed the dollar amounts ... Rasmussen also changed the wording of their stimulus question ... more reason for skepticism about the apparent decline in support for the stimulus package."

UPDATE: The Plum Line [8] reports new positive poll numbers, "Some striking numbers in today’s new Gallup Poll [9] seem to directly counter the conventional wisdom that President Obama has botched the politics around the stim package and that the GOP has taken control of the debate ... The poll finds that a big majority (67%) approve of Obama’s handling of the efforts to pass a stim bill ... Meanwhile, a sizable majority (58%) disapprove of the GOP’s handling of it,"

600,000 Fewer Jobs in Senate Compromise Than House Bill

Sunday NYT lays out the major differences in the similarly sized House and Senate economic recovery bills: [10]

The House puts greater emphasis on helping states and localities avoid wide-scale cuts in services and layoffs of public employees. The Senate cut $40 billion of that aid from its bill, which is expected to be approved Tuesday.

The Senate plan, reached in an agreement late Friday between Democrats and three moderate Republicans, focuses somewhat more heavily on tax cuts, provides far less generous health care subsidies for the unemployed and lowers a proposed increase in food stamps...

...The $40 billion was the largest cut in a paring back of the Senate proposal that helped seal a deal between Democrats and the moderate Republicans, thanks to the efforts of a bipartisan group led by Senators Susan Collins, Republican of Maine, and Ben Nelson, Democrat of Nebraska.

Another big difference is the Senate’s inclusion of nearly $70 billion to protect thousands of middle-class Americans from paying the alternative minimum tax in 2009, sparing them from a system originally intended to prevent the wealthy from claiming too many tax deductions.

House Democratic leaders have indicated a willingness to retain that provision even though it could require them to give up tens of billions of dollars in favored spending programs and force them to make wrenching choices.

Adjusting the alternative minimum tax is also unlikely to give much extra lift to the economy, because Congress has adopted similar fixes for years and would probably have done so again regardless of the stimulus.

Other trims the Senate settled on eliminated $19.5 billion in construction aid for schools and colleges and sliced proposed new aid for the Head Start early childhood program by $1 billion.

Obama econ aide Larry Summers implicitly criticizes Senate cuts on ABC's This Week: [11] "...what we've got to do is go after support for education. And there are huge problems facing state and local governments, and that could lead to a vicious cycle of layoffs, falling home values, lower property taxes, more layoffs. And we've got to prevent that. So we're going to have to try to come together in the conference. And the president is certainly going to be active in sharing his views as that process..."

Paul Krugman estimates the job loss from the Senate version: [12] "...aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out. My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years."

Matt Yglesias calls out misleading rhetoric from Senate center-right cutters: [13]

In their rhetoric, Collins and Nelson preserved vital education funding and state assistance while eliminating various metaphorical animal products. Meanwhile, actual changes Collins and Nelson made include:

* Elimination of $25 billion in flexible funding for state governments.
* Cut $7.5 billion in funding for “state incentive grants” to help states make progress toward NCLB goals.
* Eliminated $19.5 billion in construction aid for schools and colleges.
* Reduced new aid for the Head Start early childhood program by $1 billion.

Nowhere in their statement do Nelson and Collins make any effort to justify these decisions. Indeed, they don’t even seem prepared to admit that they made these decisions.

Ezra Klein concurs: [14] "Nor have they argued that the $40 billion in state aid and $20 billion in school construction will be less stimulative than the $70 billion Alternative Minimum Tax patch, of which exactly 0.5% goes towards the bottom 60 percent of the income distribution (which are, of course, the folks most in need of relief, and most likely to spend it quickly). In fact, they haven't really argued anything at all. Rather, it's been a dazzling display of the most analytically bankrupt strain of centrism: The belief that the right answer lies, by definition, somewhere between the answers that are already on the table"

HuffPost's Robert Kuttner hopes Maine voters rise up: [15]

You can say one thing for Sen. Susan Collins of Maine. She is performing the service of giving bipartisanship a bad name.

Maine's current $6.1 billion budget has a revenue shortfall of $830 million, and Maine is facing the same kinds of layoffs and program cuts as other states. But Collins thinks it's clever to cut from the recovery package by some $40 billion in desperately needed to aid the states, in order to....what? In order to show that "moderates" can force the Obama administration to bend? I hope the lady's phone is ringing off the hook from bewildered constituents.

LA Times [16] (via Hullabaloo [17]) reports on the coming pain from state budget cuts: [16]

...state governments -- reeling from a historic free fall in tax revenue -- have run out of tricks. And Americans are about to feel it. In some cases, they already have.

Nevada resident Margaret Frye-Jackman, 71, was diagnosed in August with ovarian cancer. She had two rounds of chemotherapy at University Medical Center, the only public hospital in the Las Vegas area.

Soon after, she and her daughter heard the news on TV: The hospital's outpatient oncology services were closing because of state Medicaid cuts. Treatment for Frye-Jackman and hundreds of other cancer patients was eliminated.

EPI's Ethan Pollack details the dire straits states are in: [18]

In a severe recession, state spending cuts can be so drastic that they significantly threaten the federal government’s ability to staunch the economic bleeding at all.

This recession is much more than just severe. In the current fiscal year (FY09), states faced a $48 billion shortfall and responded in part by cutting jobs and services. A majority of states have made cuts to K-12 education, higher education, and health care, while many are also making cuts to law enforcement and other government functions. Last week California became the first state to institute a significant work furlough, ordering over 200,000 state workers to stay at home on Friday without pay.

Unfortunately, it’s only going to get worse. The Center for Budget and Policy Priorities estimates that overall state shortfalls will total a whopping $350 billion over the next two and a half years. As states exhaust their dwindling reserves, they will be forced to rely more heavily on pay cuts and layoffs. These newly underpaid or even unemployed teachers, health care workers, social workers, and state or local government employees will now spend less in the economy, resulting in less sales revenue for businesses, which in turn are forced to lay off their own employees. As business profits shrink, so will tax revenues, forcing states to make even more drastic cuts, leading to less consumer spending, and so on.

EPI's Ross Eisenberry criticizes the school construction cuts: [19]

By every definition, the school construction money is perfect stimulus. It’s targeted: there is an enormous backlog of ready-to-go repair projects in every state, a backlog so big it would take 8 to 10 years to address at $16 billion a year, according to various studies by the Government Accountability Office, the National Education Association and the National Center for Education Statistics. It’s timely: the spending can happen in a matter of months, most obviously when the kids leave schools empty in June for summer vacation. New York City alone has more than one billion dollars of deferred maintenance it’s ready to tackle if funds are provided. States and school districts from Oregon to New Jersey have been preparing project lists for months. And it’s temporary: however much a permanent program is called for, this is a one-time grant of funds for a burst of badly needed repairs.

The Rural Blog looks at the rural impact: [20] "less money to expand broadband Internet service than the original version of the Senate bill, but still more than the House passed. And it has more for rural health centers, but less for electronic health data systems that could have particular benefits for rural residents."

On the Positive Tip

Michael Tomasky praises what Obama has accomplished: [21]

The stimulus bill, imperfect as it is, does indeed represent an enormous political victory for Obama. For reasons tactical as well as substantive, liberals ought to declare victory and dance on the vast empty tundra that is the Republican present...

...the big concern of liberals who are unhappy with this bill - they wanted it to be larger, and less focused on tax cuts - is the central question of whether it will work. They say, this is our best shot in 30 years at showing that government can be part of the solution, and it damn well better show that. They're doubtful that this bill can ... [but] this bill is not the Obama administration's only chance to do something about the economy...

...Liberals should press the administration for the most progressive outcome possible. That's fine and laudable. But at the same time, let's understand that they got about 80% of what they wanted here, and getting 80% of what you want is awfully rare, in politics or marriage or at the office or anywhere.

Stan Collender [22] (via Paul Krugman [23]) believes there will be more opportunities to build on this bill:

even if the president doesn't make a request for additional fiscal stimulus, there will a number of already scheduled opportunities for more stimulus to be enacted. I'm even willing to predict that more will be adopted in the not too distant future if it is needed.

The congressional budget process will provide the means for this to happen.

The continuing resolution put in place last Fall to cover the nine 2009 appropriations that were not enacted by the start of the fiscal year will expire on March and additional spending almost certainly will be added to the levels currently in place just a week or so after the stimulus is signed.

The Obama 2010 budget will start that year's budget process and the appropriations for that year will provide another opportunity for an additional economic jolt this Fall.

But even more important, the 2010 budget process could include a reconciliation bill that increases spending or reduces revenues or both that, because of the rules, won't be subject to a filibuster in the Senate. In addition, the budget resolution that has to be adopted before a reconciliation bill can happen also can't be filibustered.

Not only will that make another stimulus bill much easier to enact, it's also something that could happen any time after the budget resolution is adopted so the process could be completed relatively early this year and the stimulus provided quickly.

Are Senate Center-Right Cutters Digging In?

WSJ: [24] "Even before negotiations have started, one influential Republican supporter of the bill, Sen. Susan Collins of Maine, is stressing her desire for the cost of the final package to be held to $800 billion. She is suggesting that her support for a final compromise package can't be taken for granted. 'I made no commitments,' she said."

On CBS' Face The Nation, Sen. Kent Conrad signals desire for more cuts: [25] "I was part of the group that performed some of this surgery. We reduced this package by $107 billion. I had amendments to reallocate money, to take it out of lower-priority areas, put it in higher-priority areas, like the housing crisis. I’m very much hopeful that, in this conference committee to work out the differences between the House and the Senate, that we can improve it. You know, 80 percent of this package will be effective in the first two years. That means 20 percent will not. I think we’ve got to focus like that ... Unfortunately, there are items still here that have long-range effect well beyond the time that we expect this downturn to -- to continue. So I think we could improve this package."

Conrad doesn't mention that his group's biggest cut was $40B to cash-strapped state governments, which would use the funds immediately.

GOP Sen. Specter defends compromise in W. Post oped [26], but doesn't really address criticisms:

If a stimulus bill doesn't pass, there won't be any money for Title I education programs. The moderates' bill provides marginally less money for Title I than the House and Senate bills. But while it's less than supporters want, this proverbial half a loaf beats no loaf by a mile.

In health funding, both the House and Senate bills contain billions of dollars for wellness and prevention programs, including for smoking cessation, prenatal screening and counseling, education, and immunization. The moderates' bill, regrettably but necessarily, cancels this funding on the grounds that such programs are better left to the regular appropriations process.

TNR's Jonathan Chait sees only centrist posing: [27] "I do think they can reverse the state budget aid cuts, which is the most damaging cut the centrists imposed, and swap it for something else. In fact I think a conference committee could undo a lot of the damage, and probably bring the price tag up a bit. The question is, will the centrists really hold out and kill the bill at that point? They certainly weren't willing to do that to the Bush tax cuts in 2001 after the Republicans neutered their input. I don't think they would this time, either. The point was to establish that they're centrists -- important dealmakers who can take whatever bill emerges and make it somewhat less so. The point has been made clearly. I don't think they particularly care about the specifics. If their changes are reversed in committee, and they can quietly vote for the final product, they probably will."

More Right-Wing Distortions on Pork, Immigrants

Town Hall's Amanda Carpenter launches fresh right-wing attack: [28] "$300 Million for GOLF CARTS."

That's her distortion of "neighborhood electric vehicles" in the Senate allocation for transitioning to energy-efficient vehicles in the federal government fleet. Bill text: "ENERGY-EFFICIENT FEDERAL MOTOR VEHICLE FLEET PROCUREMENT: For capital expenditures and necessary expenses of acquiring motor vehicles with higher fuel economy, including: hybrid vehicles; neighborhood electric vehicles; electric vehicles; and commercially-available, plug-in hybrid vehicles, $300,000,000, to remain available until September 30, 2011."

Michelle Malkin accuses Sen. Maj. Leader Reid of "looking out" for illegal immigrants: [29] "GOP Sen. Jeff Sessions and Democrat Sen. Ben Nelson attempted several times to bring their bipartisan amendment to the floor last week ... [requiring] local governments and businesses that receive porkulus money to use the federal E-Verify citizenship check system ... But Democrat Sen. Majority Leader Harry Reid refused to allow it to come to the floor ... The provision is not included in the Sellout Substitute Amendment forged by the Turncoat Caucus and the Democrats. Who’s Dingy Harry looking out for?"

EARLIER, DMIBlog: "The E-Verify program is deeply flawed. [30] The United States Government Accountability Office and other independent organizations have found that this program is unable to accurately identify U.S citizen and documented immigrant workers. In addition, the program fails to include a way to monitor and prevent unscrupulous employers from misusing the system."

Seeing The Forest lists the Senate Dems who voted to ban stimulus funding to public parks, arts [31] and other inexpensive projects which often get unfairly tarred as "pork."

Financial Bailout Announcement Tuesday

NYT has the latest trial balloon: [32] "Administration officials said the plan, to be announced Tuesday, was likely to depend in part on the willingness of private investors other than banks -- like hedge funds, private equity funds and perhaps even insurance companies -- to buy the contaminating assets that wiped out the capital of many banks. The officials say they are counting on the profit motive to create a market for those assets. The government would guarantee a floor value, officials say, as a way to overcome investors’ reluctance to buy them."

Naked Capitalism is incredulous: [33]

This is so far from being a plan I cannot believe the Obama administration is putting it forward. This is well short of the sort of term sheet or agreement in principle that then gets hashed out in deal land to close a transaction. The basic structure of the New Entity is up in the air, subject to negotiation with a variety of investors who likely have differing perceptions of risk and investment time horizons (how does this work for a hedge fund that has to report its net asset value to investors monthly, for instance? That is one of a host of considerations on the investor side). Expect a rerun of the Paulson ... saga, weeks of floundering as the Treasury tries to herd cats...

...this deal works only if the government is the bagholder, big time. This elaborate structure is merely designed to put lipstick on a pig by dignifying the fiction that there might be some upside to the taxpayer and using guarantees to disguise what the ultimate cost might be.

TPM previews its interview with Joe Stiglitz, and his concerns about the next phase of bailout: [34] "It now seems like we're going to go the 'bad bank' route. Only instead of buying the crappy assets at inflated values (to absorb the bank's loses for them), we're going insure the assets so we can absorb the losses dribbled out over time. Many, perhaps most, of these big banks are insolvent. But they refuse to recognize it. They insist that these 'toxic assets' are worth much more than anyone is willing to pay for them. Stiglitz's argument is that this is really a zero sum game over who picks up this tab -- the banks, their shareholders and bondholders or the taxpayers. A far better approach is take these banks through some sort of structured reorganization, something like bankruptcy, though probably it would need to be customized in some ways given the scale of the institutions and the larger issues involved. Feds take over the bank (just like they routinely do when little banks fail), run it until things stabilize, then sell it to new investors."

FireDogLake's Ian Welsh lays out principles for performing triage on the banks: [35]

1. Find out How Deep the Hole Is
2. Perform Triage: Bury the dead, help the injured, let those only mildly wounded fend for themselves
3. Make sure the damage to the financial sector doesn't spread any further beyond the financial sector

Europe working on a plan. [36] Joaquin Almunia, European commissioner for economic and monetary affairs, in WSJ Europe: [36] "...a broad consensus is forming that we need to solve the problem of toxic assets that are plaguing banks' balance sheets and undermining a return of confidence. EU finance ministers will be considering this question at a meeting tomorrow."

Union-Bashing Fail

Crooks and Liars' David Neiwert: [37] Stuart Acuff of the AFL-CIO was on Neil Cavuto's Fox News show earlier this week, and it seemed like Cavuto tossed every right-wing talking point imaginable about the Employee Free Choice Act** at him, and each time Acuff shot them down with great ease. By the end of the segment, Cavuto was clearly frustrated.

This seems to happen a lot whenever right-wingers actually try to engage anyone knowledgeable about the Free Choice Act. The facts aren't on their side. Which is why when Glenn Beck and Bill O'Reilly discussed it this week, they only had on fellow right-wingers."

Defending Chinese Protectionism

Brad Setser takes on [38] former Bush econ adviser Greg Mankiw's NYT oped: [39] "Dr. Mankiw labels complaints about China’s practice of intervening in the market to hold its currency down protectionist. But Mankiw isn’t defending a world where governments do not intervene to shape trade flows."

HHS Update

The Treatment's Jonathan Cohn: [40] "...here is one hint that its commitment to pursuing major health care legislation in 2009 remains in place. On Sunday, a senior administration official told me that health care would be a 'central focus' of Obama’s first budget proposal."

USA Today: Kansas Gov. Kathleen Sebelius is rumored to be on the short list for HHS [41]

Group News Blog rounds up endorsements for Howard Dean as HHS Secretary [42] and points to DeanForHHS.com [43]

House-Senate Differences on Renewable Energy

Grist reports on a new Senate proposal [44] to increase the amount electricity generated by renewable energy in America to 20% by 2039, "less aggressive" than a House bill calling for 25% by 2025. Tom Casten argues the House bill will lead to cheaper electricity. [45]