A Blue View

GOP Fiscal Hypocrisy On Taxes

In today's NY Times, Bruce Bartlett, an economist who has held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul, defended  Republicans opposed to extending the payroll tax cut that helps working people.

Here's Bartlett's second argument against extending the payroll tax cut:

The payroll tax cut helps many workers who have no need for it and will only pocket the tax savings.

How many people who agree with this line of reasoning will still agree when it is applied to extending the Bush tax cuts do you think?

The Bush tax cuts help many wealthy people who have no need for it and will only pocket the tax savings.

Close to zero I bet.

How The Recession Affected Rich And Poor

Jonathan Chait:

Michael Linden and Heather Boushey break down how the recession has hit different income groups:

The remedy, of course, is to cut tax rates for the highest-earning 2%.

Compare The Financial Overhaul Bills & See Who Won Or Lost

The Senate on Thursday approved a far-reaching financial regulatory bill, 59 to 39. Democratic Congressional leaders and the Obama administration must now reconcile it with the House bill that was passed in December. Read the news article.

View a graphic that compares the bills. 

See which companies/industries are the winners and which the losers.

Reduced Income, Not Increased Spending, Is Driving Up Government Debt

Ezra Klein:

The financial crisis and the resulting recession have coincided with a rapid run-up in American -- and global -- government debt. A lot of people, understandably enough, assume that this is the product of government spending. The stimulus was expensive, and the bank rescues seemed expensive, and we just passed a health-care reform plan, and that must be why the deficit blew up.

The IMF, in a new report (pdf), explains that that's not the case. "Of the almost 39 percentage points of GDP increase in the debt ratio, about two-thirds is explained by revenue weakness and the fall in GDP during 2008-09," they write. Check out the graph atop this post: New spending isn't nearly as large a contributor to the increase in debt as reduced revenue is.

The mechanism here is simple enough. As Paul Krugman explains it, "the financial crisis has made us permanently poorer, which among other things reduces revenue." Recessions reduce income, reducing income reduces taxable income, and that in turn reduces the revenue that normally keeps governments out of debt.

This isn't just an interesting explanatory point, though. It's a reminder that the most important thing we can do to reduce the deficit in the long run is to do whatever it takes to get economic growth back up to speed. The more willing we are to accept permanently higher unemployment and permanently lower growth, the harder it's going to be to get our debt under control.

Obama Previews His & His Party's MidTerm Election Message: I Made Hard, Successful Decisions While The GOP Sulked

Jonathan Chait:

President Obama has been very careful to avoid anything that might smack of a "Mission Accomplished" moment on the economy. In Buffalo yesterday he really let loose:

“We can say beyond a shadow of the doubt today we are headed in the right direction,’’ Mr. Obama told a crowd of about 250 people during a swing through this economically depressed city. “All those tough steps we took –- they’re working, despite all the naysayers who were predicting failure a year ago’’

And here he is at a fundraiser that night, putting a finer point on things:

[W]e got our mops and our brooms out, we’re cleaning stuff out, and [Republicans are] sitting there saying, ‘Hold the broom better.’ (Laughter.)  ‘That's not how you mop.’ (Laughter.) Don’t tell me how to mop. Pick up a mop! … But that wasn’t their strategy; it was not their strategy from day one. And I’m not making this up. This is public record. They’ve said in interviews: We made a political decision. We stood nothing to gain from cooperating. We knew things were going to be bad. And we figured, if we didn't do anything and if it didn’t work out so well, maybe the other side would take the blame. They’ve done their best to gum up the works; to make things look broken; to say no to every single thing. … So after they drove the car into the ditch, made it as difficult as possible for us to pull it back, now they want the keys back.  (Laughter.) No! (Laughter and applause.)  You can’t drive!

I think we can see his main political theme for 2010 and 2012 taking shape here: Republicans screwed the country up, Obama got to work fixing it, Republicans took an ultra-partisan stance on every issue, and if you give them power they'll screw things up again. It's quite simple, and has the added virtue of being true.

If the economy recovers to the point where Americans start to enjoy higher living standards, he's going to have a powerful argument against Republicans, who predicted doom and disaster. Of course, if the economy double-dips, he's screwed no matter what. Might as well position himself to get as much of the potential upside as possible. At some point there's little to gain in hedging your bets.

Saving The Economy & Wall St. Is Turning Out To Be FAR Less Expensive Than Feared

Wall St Journal:

The U.S. government's rescue of wobbly companies and financial markets is starting to look far less expensive or long-lasting than once feared.

As momentum grows at companies that looked like zombies just a few months ago to repay taxpayers for lifelines they got during the financial crisis, the projected cost of the bailout is shrinking to just a fraction of previous estimates. Treasury Department officials say the tab is likely to reach $89 billion, which includes the Troubled Asset Relief Program, capital injections into Fannie Mae and Freddie Mac, loan guarantees by the Federal Housing Administration and Federal Reserve moves such as buying mortgage-backed securities and propping up the commercial-paper market.

Treasury officials are increasingly optimistic that even American International Group Inc. could be on its own within a year, with officials discussing ways to extricate the government from its 80% stake in the insurer, according to people familiar with the situation. AIG is on track to repay its loan to the Fed through asset sales that will raise $51 billion.

The discussions come as the Treasury is planning to sell its $32 billion stake in Citigroup Inc. and General Motors Corp. moves toward repaying its $6.7 billion government investment and embarking on an initial public offering this summer. Both companies could be free of government strings sometime this year.

Just a year ago, the Congressional Budget Office and Office of Management and Budget estimated that the overall bailout would cost more than $250 billion. Last month, though, Treasury Secretary Timothy Geithner said the rescues will amount to "less than 1%" of gross domestic product. The $89 billion projection is less than the cost of the savings-and-loan crisis in the 1980s and early 1990s, which totaled as much as 3.2% of GDP.

The Treasury's estimate is dependent on many factors, including the health of the economy and the housing market. Still, the smaller-than-expected price tag reflects the quick stabilization of financial markets, which helped companies to return their taxpayer-funded money—often at a profit—and allowed the government to spend less on some aid programs than originally projected. The government also is earning dividends, interest payments and other rescue-related income, ranging from about 5% annually on $1.5 trillion in Fannie Mae and Freddie Mac debt to $4 billion from the sale of warrants it got to buy shares in TARP recipients.

But the direct costs of the bailout are dwarfed by the broader political and economic impact, many experts say. It likely will take many years for the U.S. to recover from the economic misery, ballooning U.S. debt, lost tax revenue and political tumult fueled by the financial crisis.

"If you look at the cost of a financial crisis ... the bailout costs are often a small part of it," said Kenneth Rogoff, an economics professor at Harvard University and co-author of a 2009 book about financial crises.

The Chart That May Make All The Difference In The World Come November

This chart from Steve Benen shows the monthly job losses since the start of the Great Recession with an interesting twist: red columns point to monthly job totals under the Bush administration, while blue columns reflect job totals under the Obama administration.

Weekly Radio Address: Holiday Greetings

WhiteHouse.gov:

In this week of Easter, Passover, and faithful celebration, the President offers a holiday greeting and calls on people of all faiths and nonbelievers to remember our shared spirit of humanity. 

New Dem Theme For November: "On health-care reform, on student loans and (soon) on financial regulations, Democrats fought off the moneyed interests in defense of the little guy"

Dana Millbank:

... it was a chance for the president, just back from the political dead, to test some themes for this fall's midterm campaigns.

"This day affirms our ability to overcome the challenges of our politics and meet the challenges of our time," Obama, in triumphant mode, told the NoVa audience. "When I took office, one of the questions we needed to answer was whether it was still possible to make government responsive to the needs of everyday people . . . or whether the special interests and their lobbyists would continue to hold sway." Obama, on the basis of "two major victories in one week," felt confident enough to claim success.

The president's celebration may be premature. A USA Today/Gallup poll out Tuesday found that nearly two-thirds of Americans think the health-care law costs too much and expands the government's role too much. Although other polls have shown a jump in Obama's popularity, Gallup found that Obama's disapproval rating climbed to 50 percent for the first time.

But there is no doubt that the conventional wisdom in the capital has done a 180 in recent days. Had Obama failed on health-care reform, the end of his presidency would have been proclaimed. Instead, he has been restored as ruler of all he surveys, and he's acting as such.

Over the weekend, he dashed off to Afghanistan for an unscheduled visit; on his return, he lectured Hamid Karzai, suggesting on the "Today" show that the Afghan president heed "the fierce urgency of now" -- a Martin Luther King Jr. phrase adopted by Obama's presidential campaign. At home, Obama has taken on an increasingly confident tone, telling those who would repeal the health-care law to "go for it," the way George W. Bush said of Iraqi insurgents: "Bring 'em on."

Obama's approval rating at NoVa on Tuesday was undoubtedly higher than it was in the Gallup poll. In the front row was his new ally Dennis Kucinich (Ohio), a far-left congressman who was posing for pictures with admirers. About two dozen lawmakers, including Sen. Al Franken (D-Minn.) and Rep. Charlie Rangel (D-N.Y.), filled the first two rows. The students, nearly equaled in number by congressional staffers and interest group activists, gave House Speaker Nancy Pelosi (D-Calif.) a thunderous ovation when she took the stage. The crowd even applauded the man who came out to make sure the teleprompter was working ...

The president spared few words for the health-care component of the bill, devoting more than 10 times as much to an add-on provision: the student loan change that is supposed to save billions by cutting out banks as the middlemen.

Obama portrayed the change as the culmination of an epic struggle, "for almost two decades" and against an "army" of lobbyists. "I didn't stand with the banks and the financial industries in this fight," he said, auditioning the populist message that he and Democrats hope to take to voters in November. "Neither did any of the members of Congress who are here today. We stood with you."

What emerged on Tuesday was a single, coherent theme: on health-care reform, on student loans and (soon) on financial regulations, Democrats fought off the moneyed interests in defense of the little guy.

"From the moment I was sworn into office, I've spoken about the urgent need for us to lay a new foundation for our economy and for our future," Obama said. Now, "we can rightly say the foundation on which America's future will be built is stronger than it was one year ago."

The Next Big Democractic Push: Financial Reform

Noam Scheiber on the big next Democratic push Obama has planned and how it could play to their electoral advantage in November:

Pretty much no one who follows the regulatory reform issue can quite believe the sudden change. In the span of a few days, reform has evolved from one of those debates newspaper editorialists have among themselves to Washington’s NEXT BIG PUSH. Clearly much of this derives from the parties’ changing fortunes, as Democrats bask in the glory of their health care victory and Republicans suddenly lack self-esteem. Indeed, try to recall the last time a GOP senator lacerated his party for blowing a chance at bipartisanship, as Tennessee Senator Bob Corker did on reg reform this week, and you begin to understand how far we’ve come.

The key shift is arguably the one that’s taken place at the White House. Prior to late last week, it wasn’t entirely clear whether the White House actually wanted a bill this year, or whether it simply wanted to bloody Republicans over their opposition to reform. But, as health care began to look like a fait accompli, the White House seemed to subtly change its posture. One administration official says it wasn’t so much that the White House was ambivalent, as that it was massively preoccupied with health care--and that it wasn’t sure until recently that a solid bill was achievable. “We didn’t want to do the thing … where you cut a deal here and there with every special interest available,” says the official. Whatever the case, the shift was as palpable as it was significant: Another official was impressed that the president delivered a radio address about reforming Wall Street last Saturday, the day before the most historic health care vote in 45 years.

... on Wednesday, Obama told Dodd and his House counterpart, Barney Frank, that he could more or less live with either version, according to an official knowledgeable about the meeting. (Though he stressed that he’d like to combine the toughest elements of both, as with an exemption from derivatives regulation for non-financial companies, which is stricter in Dodd’s bill.) Mostly, he just encouraged them to press ahead, emphasizing the win-win dynamic at work. If Republicans dig in, the president argued, that’s a fight he’d welcome. (Administration officials have seen polling suggesting the public will assume Republicans are carrying Wall Street’s water, regardless of their arguments.) And if Republicans want to join in the effort to rein in Wall Street—well, no one at the White House would turn down a big, bipartisan victory. 

Saving The Big Banks Was The Right Thing To Do For The Economy. Turns Out, It Was Also Very Profitable.

It seems like the Wall St bailout is going to be very profitable for the US Government. Wash Post:

Among the banks that rule Wall Street, Citigroup got a bailout that was bigger than the rest. Now the company is about to pay a king's ransom for its federal rescue.

The Obama administration is making final preparations to sell its stake in the New York bank, according to industry and federal sources. At today's prices, the sale would net more than $8 billion, by far the largest profit returned from any firm that accepted bailout funds, and the transaction would be the second-largest stock sale in history.

On paper, the government's 27 percent stake has grown in value to $33 billion. The size of the deal in the works has Wall Street buzzing. Only the stock offering by Japan's Nippon Telegraph and Telephone, which raised $36.8 billion in 1987, was larger, according to Thomson Reuters.

Leading financial firms, including J.P. Morgan Chase, Morgan Stanley and Goldman Sachs, are vying to be chosen as the deal's underwriters to gain the prestige of managing a historic stock sale as well as the fees from investors who buy the shares. To improve their chances, some banks, such as Goldman Sachs, are offering their services to the Treasury Department at almost no cost, industry officials familiar with the matter said.

The windfall expected from the stock sale would amount to a validation of the rescue plan adopted by government officials during the height of the financial panic, when the banking system neared the brink of collapse. A year ago, Citigroup's stock hovered around a dollar a share, and the bank's future seemed in doubt. On Friday, the stock closed at $4.31.

If the sale proceeds as planned, Citigroup would be able to cut nearly all of its ties to the $700 billion Troubled Assets Relief Program. Meanwhile, the administration could highlight the profit generated from the rescue of big banks.

"It's unprecedented to do [a stock sale] of this size right after the financial industry has been so battered," said an industry official who spoke on the condition of anonymity because he was not authorized to comment publicly. "It's just a very bullish sign."

In Rare Bipartisan Vote, Senate Approves Jobs Bill

Dow Jones:

The U.S. Senate voted Wednesday to give final approval to $17.5 billion legislation creating a payroll tax credit for employers who hire unemployed Americans in what Democrats say will be several election-year job-creation bills.

The Senate vote was 68-29, with a handful of Republicans joining the Democratic majority to support the measure.

The legislation has bounced back and forth between the House and Senate, but with the Senate vote will now be sent to the White House for President Barack Obama's signature.

The centerpiece of the bill would excuse business owners from having to pay their 6.2% of federal payroll taxes for the rest of 2010 on new employees they hire that have been out of work for at least two months.

If the worker is still on an employer's books in a year, the business owner would receive a further $1,000 tax credit.

Democrats hope the measure will convince private-sector employers to begin hiring again. Despite firm indications that an economic recovery is gradually gaining steam in the U.S., the jobs market has continued to lag behind.

The unemployment rate stands at 9.7%, more than two percentage points higher than January 2009 when President Barack Obama was sworn into office.

Heading toward what most expect to be a tough mid-term election season for the incumbent Democrats, the party's leaders are aware of the need to be seen tackling the jobs crisis.

Senate Democrats said the bill is the first of at least four pieces of legislation aimed at stimulating growth in the moribund jobs market they will pass in the coming months.

The new employee tax credit has already come under criticism from some economists who doubt whether it will make much difference in employers' hiring plans. They argue a 6% tax break won't make much difference to business owners uncertain about the direction of the economy.

The legislation also contains an extension of federal subsidies towards state government costs incurred through road and bridge construction and repairs.

It extends an expense write-off provision for small businesses, and modestly expands so-called "Build America Bonds" used by local governments to fund public works projects.

Democrats said the full $17.5 billion cost of the bill is fully offset by savings elsewhere in the federal budget, primarily by delaying the implementation of a measure that would allow U.S. multinational companies to deduct more of their worldwide interest income from their U.S. income.

New Short Sale Program To Pay Underwater Homeowners

NY Times:

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Living & Dead Presidents Advice Barack On The Consumer Financial Protection Agency

Funny or Die's Presidential Reunion from Will Ferrell

Maddow Exposes More GOP Hypocrisy On Stimulus & Climate Change

Brown Helps Tip The Scales: Senate Jobs Bill Passes With Bipartisan Support

Wash Post:

Aided by a handful of Republicans, Senate Democratic leaders on Monday kept alive a $15 billion job-creation measure and are poised to pass the measure later this week.

Five Republicans, including new Sen. Scott P. Brown (Mass.), joined 57 Democrats in voting to break a filibuster of the jobs bill, after a suspenseful buildup in which members of both parties wondered whether Senate Majority Leader Harry M. Reid (D-Nev.) could cobble together enough support to clear the legislative hurdle.

The bipartisan result marked a breakthrough for Democrats, who have been frustrated since President Obama came to office by their inability to attract much Republican support for their agenda. The vote was also a vindication for Reid, who is grappling with a tough reelection race in Nevada and faced questions in Washington over whether he mishandled the jobs issue.

"I hope this is the beginning of a new day in the Senate," Reid said after the vote.

Reid lost the public support of several Republicans after discarding an $85 billion jobs package negotiated by Sens. Max Baucus (D-Mont.) and Charles E. Grassley (R-Iowa) in favor of a narrower bill favored by liberals. GOP leaders complained that Reid had spurned a bipartisan deal that had been negotiated in good faith.

Republicans Christopher Bond (Mo.), Susan Collins (Maine), Olympia J. Snowe (Maine) and George V. Voinovich (Ohio) joined Brown in breaking ranks to back the bill. Sen. Ben Nelson (Neb.) was the only Democrat to vote against the measure, which advanced, 62 to 30.

The bill's centerpiece is a $13 billion program allowing companies to avoid paying Social Security taxes for the remainder of 2010 on new hires who have been unemployed for at least 60 days. Employers would also receive a $1,000 tax credit for each new worker who stays on the job for at least a year. Democrats tout the plan as a simple way to create tens of thousands of new jobs, though some experts dismiss it as too narrow to make a significant dent in the nation's unemployment rate.

The jobs bill also includes a one-year reauthorization of the Highway Trust Fund, a provision allowing companies to write off equipment purchases as business expenses, and an expansion of the Build America Bonds program, which helps state and local governments finance infrastructure projects.

Brown, who pulled off a stunning political feat last month by capturing the seat of the late Sen. Edward M. Kennedy (D) and gave Republicans the 41 votes to block most Democratic initiatives, announced his intention to support the measure minutes before Monday's vote. He said he "came to Washington to be an independent voice, to put politics aside. . . . This Senate jobs bill is not perfect. I wish the tax cuts were deeper and broader, but I will vote for it because it contains measures that will help put people back to work."

Senate Votes Today On Scaled-Down Jobs Bill

Wash Post:

Democrats' renewed focus on bolstering the economy faces a key test Monday, with the Senate expected to hold a procedural vote on what Majority Leader Harry M. Reid (D-Nev.) hopes will be the first of several job-creation bills.

The chamber will vote on whether to proceed with a $15 billion measure that includes a one-year Social Security tax break for companies hiring new employees who have been out of work for at least 60 days. The package also would reauthorize the Highway Trust Fund, allow companies to write off equipment purchases, and expand Build America Bonds, which help state and local governments fund infrastructure projects.

But the measure does not include a host of other provisions from an $85 billion bipartisan package negotiated by Sens. Max Baucus (D-Mont.) and Charles E. Grassley (R-Iowa). Reid's decision to discard that bill in favor of a smaller version has cost him the public support of several Republicans, casting doubt on whether Democrats will garner the 60 votes necessary to proceed Monday.

"We're pretty close," Reid said Friday during a television appearance in Nevada, adding that he thought "fat cats" would have benefited too much from the larger Baucus-Grassley bill.

As of Sunday, no Republicans had declared intentions to vote to proceed on the slimmer bill. Under normal circumstances, Democrats would need at least one GOP vote to reach a filibuster-proof majority. With Sen. Frank Lautenberg (D-N.J.) absent after receiving a diagnosis of cancer last week, his party will need to lure at least two Republicans on Monday in order to set up a vote on final passage later this week.

Minority Leader Mitch McConnell (R-Ky.) said on "Fox News Sunday" that Republicans "may well" support the jobs bill, though that doesn't necessarily mean the GOP will help Democrats on Monday's procedural vote.

The Right In Cartoons

The Wall St Journal Acknowledges The Stimulus Worked & Is One Of The Reasons We're Doing Better Than Europe

I wonder how many Republicans read the Wall St Journal ;) and whether this will have any effect on their rhetoric between now and November. INHMB (I'm not holding my breathe)

Amid the cacophonous economic debate echoing in Washington, what's most striking are two numbers: 5.7% and 0.4%.

Those are the economic-growth rates in the latest quarter for the U.S. and Europe, respectively. The difference is so strikingly in America's favor that it warrants a little more attention, both because of what it says about the current state of affairs and for the lessons it might offer policy makers.

The gap between American and European growth can be attributed partly to economic cycles and partly to some artificial expansion in that big U.S. growth figure for the last quarter of 2009. But the disparity also suggests that, amid all the scrambling and stumbling, at least a few things were done right in the American response to the economic crisis of the past two years, and a few things less right in Europe.

Marking the first anniversary of President Obama's controversial stimulus, WSJ's Gerald Seib discusses how the package, along with interest-rate moves and a shoring-up of bank balance sheets has allowed the U.S. to outstrip European economic growth.

Such questions haven't been explored much in this weeks' economic debate in Washington, which has been a fairly sterile shouting match over whether the stimulus package signed into law by President Barack Obama precisely a year ago has accomplished much.

That question won't be settled this week, or by November's elections. But it's safe to assume that the stimulus package hasn't been as useful as the White House claims, or as useless as Republicans assert.

More intriguing is the question of how the whole combination of forces the U.S. brought to bear is working out, and why the picture looks so different right now on the other side of the Atlantic.

Last April, Mr. Obama went to Britain for a summit of leading economic nations, amid much skepticism among European leaders about the value of economic-stimulus measures, doubts about the wisdom of the bank "stress test" the U.S. was planning, and a degree of confidence that Europe's regulatory system was better at preventing and controlling problems.

Now, the picture looks scarier in Europe than in the U.S., as banking problems merge with national debt troubles.

More Aid To Homeowners In 5 Hardest Hit States Coming

Wash Post:

President Obama will announce a plan Friday to direct $1.5 billion in taxpayer money to five state housing finance agencies to help them develop new programs for addressing the housing crisis in their communities, according to a senior administration official.

The five states -- California, Nevada, Arizona, Michigan and Florida -- have been among the hardest hit by the housing crisis and have seen home values decline more than 20 percent. The initiative will be financed through the government's Troubled Assets Relief Program (TARP).

Obama is scheduled to make the announcement in Nevada on Friday morning alongside Senate Majority Leader Harry M. Reid (D-Nev.), who faces a tough reelection battle this year.

Confronting the foreclosure issue is a key part of the White House effort to convince Americans that the president is fighting for them during one of the worst economic downturns in generations.

White House officials stressed Thursday night that the new initiative is just one of many efforts that the administration has launched to help homeowners stay in their homes. They said the money should spark innovative and effective programs in the affected states to speed relief to homeowners. The officials spoke on condition of anonymity because the plan had not yet been announced.

In discussing the plan, officials acknowledged the growing challenge that unemployment and falling home prices have posed to mortgage relief efforts. The administration's marquee foreclosure-prevention program, known as Making Home Affordable, which was unveiled a year ago but has struggled to gain traction. Through January, nearly 1 million borrowers had their mortgage payments lowered under the program, but most still must prove they qualify for the mortgage aid and were at risk of losing the help.

GOP Stimulus Hypocrisy: The Chart The GOP Doesn't Want You To See

The GOP's argument that the Stimulus bill hasn't worked because unemployment is still high is like saying seat belts don't work when a car with 4 people going 90 miles an hour hits a tree and one of them dies. Sure, it would have been better if everyone survived but to say the belts didn't work is only plausible and makes sense in the bizarro world of Washington where lies, if repeated often enough and are unchecked by a lazy media, become truth. 

How then, do you think the GOP will spin this chart?

 

For more, see Based On The Data, The Stimulus Is Working

Based On The Data, The Stimulus Is Working

David Leonhardt (also see this chart):

Imagine if, one year ago, Congress had passed a stimulus bill that really worked.

Let’s say this bill had started spending money within a matter of weeks and had rapidly helped the economy. Let’s also imagine it was large enough to have had a huge impact on jobs — employing something like two million people who would otherwise be unemployed right now.

If that had happened, what would the economy look like today?

Well, it would look almost exactly as it does now. Because those nice descriptions of the stimulus that I just gave aren’t hypothetical. They are descriptions of the actual bill.

Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.

Yet I’m guessing you don’t think of the stimulus bill as a big success. You’ve read columns (by me, for example) complaining that it should have spent money more quickly. Or you’ve heard about the phantom ZIP code scandal: the fact that a government Web site mistakenly reported money being spent in nonexistent ZIP codes.

And many of the criticisms are valid. The program has had its flaws. But the attention they have received is wildly disproportionate to their importance. To hark back to another big government program, it’s almost as if the lasting image of the lunar space program was Apollo 6, an unmanned 1968 mission that had engine problems, and not Apollo 11, the moon landing.

The reasons for the stimulus’s middling popularity aren’t a mystery. The unemployment rate remains near 10 percent, and many families are struggling. Saying that things could have been even worse doesn’t exactly inspire. Liberals don’t like the stimulus because they wish it were bigger. Republicans don’t like it because it’s a Democratic program. The Obama administration hurt the bill’s popularity by making too rosy an economic forecast upon taking office.

Moreover, the introduction of the most visible parts of the program — spending on roads, buildings and the like — has been a bit sluggish. Aid to states, unemployment benefits and some tax provisions have been more successful and account for far more of the bill. But their successes are not obvious.

Even if the conventional wisdom is understandable, however, it has consequences. Because the economy is still a long way from being healthy, members of Congress are now debating another, smaller stimulus bill. (They’re calling it a “jobs bill,” seeing stimulus as a dirty word.) The logical thing to do would be to examine what worked and what didn’t in last year’s bill.

But that’s not what is happening. Instead, the debate is largely disconnected from the huge stimulus experiment we just ran. Why? As Senator Scott Brown of Massachusetts, the newest member of Congress, said, in a nice summary of the misperceptions, the stimulus might have saved some jobs, but it “didn’t create one new job.”

The case against the stimulus revolves around the idea that the economy would be no worse off without it. As a Wall Street Journal opinion piece put it last year, “The resilience of the private sector following the fall 2008 panic — not the fiscal stimulus program — deserves the lion’s share of the credit for the impressive growth improvement.” In a touch of unintended irony, two of article’s three authors were listed as working at a research institution named for Herbert Hoover.

Of course, no one can be certain about what would have happened in an alternate universe without a $787 billion stimulus. But there are two main reasons to think the hard-core skeptics are misguided — above and beyond those complicated, independent economic analyses.

The first is the basic narrative that the data offer. Pick just about any area of the economy and you come across the stimulus bill’s footprints.<Continue reading.>

GOP Stimulus Hypocrisy: The Videos

A new one from the DNCC:

And if you haven't seen it, check out:

GOP Obstructionism On Tape: Maddow Shows Again & Again How GOP Rejects Their Own Ideas When Obama Agrees To Them

Partisanship In Washington Blocks Solutions To Long Term, "Hard" Problems. Exhibit A: The Debt.

NY Times:

After decades of warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning, economists and the nation’s foreign creditors say that moment is approaching faster than expected, hastened by a deep recession that cost trillions of dollars in lost tax revenues and higher spending for safety-net programs.

Yet rarely has the political system seemed more polarized and less able to solve big problems that involve trust, tough choices and little short-term gain. The main urgency for both parties seems to be about pinning blame on the other, before November’s elections, for deficits now averaging $1 trillion a year, the largest since World War II relative to the size of the economy ...

“I used to think it would take a global financial crisis to get both parties to the table, but we just had one,” said G. William Hoagland, who was a fiscal policy adviser to Senate Republican leaders and a witness to past bipartisan budget summits. “These days I wonder if this country is even governable.”

Sensing political advantage, Republicans are resisting President Obama’s call for a bipartisan commission to cut the debt, although recent studies have implicated the tax cuts and spending policies of the years after 2000 when they controlled Congress and the White House. Even seven Republican senators who had co-sponsored a bill to create a commission nonetheless voted against it recently.

The president is not giving up. On Thursday, administration officials say, he will sign an executive order establishing the 18-member National Commission on Fiscal Responsibility and Reform. He also will name as co-chairmen Alan K. Simpson, a former Republican Senate leader from Wyoming, and Erskine Bowles, a moderate Democrat from North Carolina who, as President Bill Clinton’s White House chief of staff, brokered a 1997 balanced budget agreement with Congressional Republicans.

“There isn’t a single sitting member of Congress — not one — that doesn’t know exactly where we’re headed,” Mr. Simpson said in a telephone interview Tuesday just before word of his role got out. “And to use the politics of fear and division and hate on each other — we are at a point right now where it doesn’t make a damn whether you’re a Democrat or a Republican if you’ve forgotten you’re an American.”

While he criticized some liberal Democrats’ refusal to reduce entitlement benefits, Mr. Simpson also dismissed Republicans’ antitax arguments that deficits could be controlled with spending cuts alone. “But they don’t cut spending,” he said, referring to the years Republicans governed with President George W. Bush.

Elected Republicans, however, are under intense pressure from their party’s conservative base to oppose any tax increases — a line in the sand that dims any prospects for bipartisan cooperation. Yet economists, including veterans of past Republican administrations, are vocal in insisting that the debt problem is too great to be solved without increasing revenues somehow and perhaps moving to a new consumption tax system like Europe’s.

The same economists also say a significant deficit-reduction plan is not possible unless Mr. Obama breaks his campaign promise not to raise taxes for households making less than $250,000. Last week, Mr. Obama said he would not impose that condition or any other on a fiscal commission.

The situation is complicated by a debate over how quickly Washington should act even if it could. The Obama administration, Congressional Democratic leaders and many economists are pushing for additional government stimulus measures while the private sector remains weak. But anger about big deficits has stoked the populism roiling politics, and Republicans as well as some conservative Democrats want to cut spending right now as a way of addressing perceptions among voters that government has gotten too big, too intrusive and too profligate. Mr. Obama himself proposed a budget that would freeze spending on some categories of domestic spending for three years.

Many analysts say the president and Congress could send a strong signal to global markets by agreeing this year to a package of both long-term tax increases and spending reductions, especially in the popular entitlement programs, that would not take effect until 2012. That is the recommendation of two new studies, one from a diverse group sponsored by the National Academy of Sciences and a separate joint project of the Peter G. Peterson Foundation, the Pew Charitable Trusts and the Committee for a Responsible Federal Budget.

As debt rises, so do interest costs; by 2014, at a projected $516 billion, they will exceed the budget for annual appropriations for domestic programs. The government will be competing with the private sector for credit, forcing interest rates higher and imperiling future prosperity.

Foreign investors now own more than half of the publicly held debt, and officials for the largest creditor, China, have fretted publicly about the fiscal course of the United States. While few expect foreigners to dump their assets, since the resulting plunge in values would hurt them as well as everyone else, the fear is that investors will demand higher interest payments and reduce or stop future debt purchases, threatening the government’s ability to finance its borrowing.

Lesser financial and fiscal crises have brought the two parties together to compromise on tough choices about taxes and spending.

Obama Shifting To Other Levers Of Power To Push Agenda

NY Times:

With much of his legislative agenda stalled in Congress, President Obama and his team are preparing an array of actions using his executive power to advance energy, environmental, fiscal and other domestic policy priorities.

Mr. Obama has not given up hope of progress on Capitol Hill, aides said, and has scheduled a session with Republican leaders on health care later this month. But in the aftermath of a special election in Massachusetts that cost Democrats unilateral control of the Senate, the White House is getting ready to act on its own in the face of partisan gridlock heading into the midterm campaign.

“We are reviewing a list of presidential executive orders and directives to get the job done across a front of issues,” said Rahm Emanuel, the White House chief of staff.

Any president has vast authority to influence policy even without legislation, through executive orders, agency rule-making and administrative fiat. And Mr. Obama’s success this week in pressuring the Senate to confirm 27 nominations by threatening to use his recess appointment power demonstrated that executive authority can also be leveraged to force action by Congress.

Mr. Obama has already decided to create a bipartisan budget commission under his own authority after Congress refused to do so. His administration has signaled that it plans to use its discretion to soften enforcement of the ban on openly gay men and lesbians serving in the military, even as Congress considers repealing the law. And the Environmental Protection Agency is moving forward with possible regulations on heat-trapping gases blamed for climate change, while a bill to cap such emissions languishes in the Senate.

In an effort to demonstrate forward momentum, the White House is also drawing more attention to the sorts of actions taken regularly by cabinet departments without much fanfare. The White House heavily promoted an export initiative announced by Commerce Secretary Gary Locke last week and nearly $1 billion in health care technology grants announced on Friday by Kathleen Sebelius, the health and human services secretary, and Hilda L. Solis, the labor secretary.

White House officials said the increased focus on executive authority reflected a natural evolution from the first year to the second year of any presidency.

“The challenges we had to address in 2009 ensured that the center of action would be in Congress,” said Dan Pfeiffer, the White House communications director. “In 2010, executive actions will also play a key role in advancing the agenda.”

The use of executive authority during times of legislative inertia is hardly new; former Presidents Bill Clinton and George W. Bush turned to such powers at various moments in their presidencies, and Mr. Emanuel was in the thick of carrying out the strategy during his days as a top official in the Clinton White House.

But Mr. Obama has to be careful how he proceeds because he has been critical of both Mr. Clinton’s penchant for expending presidential capital on small-bore initiatives, like school uniforms, and Mr. Bush’s expansive assertions of executive authority, like the secret program of wiretapping without warrants ...

Another drawback of the executive power strategy is that actions taken unilaterally by the executive branch may not be as enduring as decisions made through acts of Congress signed into law by a president. For instance, while the E.P.A. has been determined to have the authority to regulate carbon emissions, the administration would rather have a market-based system of pollution permits, called cap and trade, that requires legislation ...

The use of executive power came to a head this week when Mr. Obama confronted Senator Mitch McConnell of Kentucky, the Republican leader, about nominations held up in the Senate. In a meeting with Congressional leaders at the White House on Tuesday, Mr. Obama turned to Mr. McConnell and vowed to use his power to appoint officials during Senate recesses if his nominations were not cleared.

By Thursday, the Senate had voted to confirm 27 of 63 nominations that had been held up, and the White House declared victory.

"Deal on Jobs Shows Limits of Push for Bipartisanship"

NY Times:

Key Democrats and Republicans in the Senate reached a rare bipartisan agreement on Thursday on steps to spur job creation. But Democratic leaders said they would move ahead on only some elements as the two parties maneuvered to address both the struggling economy and voter unrest over gridlock in Washington.

Senator Harry Reid, the Nevada Democrat and majority leader, said he would take four core job-creating initiatives from the bipartisan proposal — including tax breaks for businesses that hire unemployed workers and increased public works spending — and seek to move those rapidly through the Senate.

“We feel that the American people need a message,” Mr. Reid said. “The message that they need is that we’re doing something about jobs.”

Yet his decision to embrace only portions of the bipartisan plan developed by Senators Max Baucus, Democrat of Montana, and Charles E. Grassley, Republican of Iowa, caught some lawmakers by surprise and threatened to undermine Republican support for the proposal even as members of Congress and the White House sought ways of working together across party lines after months of deep partisan division.

The White House projected Thursday that unemployment would fall this year by only a little, if at all, and would remain well over 6 percent until 2015.

While Mr. Reid stripped out of the bipartisan bill some tax breaks and other provisions intended to win Republican support, as well as special-interest provisions to win the backing of specific senators, the scaled-back package retained a combination of tax cuts and spending with the potential to win support from both parties.

The centerpiece is a payroll tax holiday that would waive the 6.2 percent Social Security tax for any employer who hires a worker who has been out of a job for at least 60 days. In addition, the bill would provide a $1,000 income tax credit for every new employee retained for at least 52 weeks.

It would also extend a tax break that would allow businesses to write off up to $250,000 in capital investments in 2010 rather than depreciating the costs over time, and reauthorize spending on road and transit programs through the end of the year. And it would allow state and local governments to receive a federal subsidy for a portion of the interest paid on bonds that finance public works projects.

The cost of the package laid out by Mr. Reid would be at least $15 billion over the next decade.

Hours before Mr. Reid’s announcement, Mr. Baucus, chairman of the Finance Committee, and Mr. Grassley, the senior Republican on the panel, had unveiled a broader, $85 billion agreement that also included an array of other provisions intended to generate support. They included extended unemployment benefits and health care for the unemployed as well as the renewal of an array of tax breaks that are due to expire.

GOP Obstructionism On Tape: Maddow Shows Again & Again How GOP Rejects Their Own Ideas When Obama Agrees To Them

Obama Again Attempts To Bridge The Divide With The GOP

Wash Post:

President Obama brought Republicans to the negotiating table on Tuesday, hoping to stem a steady deterioration in relations between the two parties that has brought business in Washington to a standstill, left the Democratic agenda in tatters and angered voters who are eager to have lawmakers address their concerns.

The two-hour session was part of a renewed drive by the White House to create legislation by consensus, regardless of party label. Obama tried the approach after he took office, but it did not take hold. After the meeting, the president paid a surprise visit to the White House press room to brief reporters.

He accused Republicans of indiscriminate obstruction that he said has created legislative gridlock, especially in the Senate, but he also called on Democratic leaders to "put aside matters of party for the good of the country."

Obama outlined issues that could bridge the divide, including job creation, health-care reform, energy and trade. But he extracted few concrete commitments from his GOP visitors.

A new Washington Post-ABC News poll suggests that the public is frustrated by the bickering and recriminations. According to the survey, 57 percent of Americans consider the loss of the Senate Democrats' filibuster-proof supermajority a "good thing," but few think Republicans should wield their new power to block bills frequently. Nearly six in 10 say that Republicans are not doing enough to forge compromise with Obama on important issues, while nearly half view the president as doing too little to overcome differences with the GOP.

On the issue of health-care reform, public attitudes about the stalled Democratic legislation remain virtually deadlocked. But nearly two-thirds of voters, or 63 percent, want Congress to keep trying to tackle the issue.

A major test of whether Obama's new strategy will yield legislative results could come when the Senate takes up a job-creation bill, which Senate Majority Leader Harry M. Reid (D-Nev.) had hoped to introduce last week but which was sidetracked by a snowstorm.

Sens. Orrin G. Hatch (Utah) and Charles E. Grassley (Iowa) -- senior Republicans who walked away from health-care talks last year -- have been heavily involved in drafting the legislation but are reluctant to sign on to the bill unless it attracts broad GOP support. After the White House meeting, Senate Minority Leader Mitch McConnell (R-Ky.) said there is "a chance" that Republicans would back the jobs measure, although he said his conference is "not entirely comfortable with it yet."

Later, McConnell convened GOP members of the Senate Finance Committee for an impromptu gathering, and the senators emerged expressing some support for the overall framework. But Republicans were reluctant to agree to Reid's timeline for speeding the legislation to completion by the weekend. On Tuesday evening, Reid announced that snowstorms made continued legislative action all but impossible, and put off its formal introduction and a final vote until later this month ...

Obama has reached out to Republicans on health-care reform by inviting them to participate in a bipartisan summit on Feb. 25. GOP leaders have expressed wariness that the event will amount to little more than political theater and so far have not committed to attending.

With Stimulus Money Gone, Many Schools Face A Budget Cliff

NY Times:

Federal stimulus money has helped avoid drastic cuts at public schools in most parts of the nation, at least so far. But with the federal money running out, many of the nation’s schools are approaching what officials are calling a “funding cliff.”

Congress included about $100 billion for education in the stimulus law last year to cushion the recession’s impact on schools and to help fuel an economic recovery. New studies show that many states will spend all or nearly all that is left between now and the end of this school term.

With state and local tax revenues still in decline, the end of the federal money will leave big holes in education budgets from Massachusetts and Florida to California and Washington, experts said.

“States are going to face a huge problem because they’ll have to find some way to replace these billions, either with cuts to their K-12 systems or by finding alternative revenues,” said Bruce Baker, an education professor at Rutgers University.

The stimulus program was the largest one-time infusion of federal education dollars to states and districts in the nation’s history. As the program took shape last year, Education Secretary Arne Duncan and other officials repeatedly warned states and districts to avoid spending the money in ways that could lead to dislocations when the gush of federal money came to an end.

But from the start, those warnings seemed at odds with the stimulus law’s goal of jump-starting the economy, and the administration trumpeted last fall that school districts had used stimulus money to save, or create, some 250,000 education jobs.

Now the new studies point to the problems likely to beset thousands of school districts when the federal money runs out.

Obama's Dilemma (cartoons)

He's got to execute a very tough maneuver

While relying on a very inept team

"I am not a hypocrite" Says The Politician As He Decries The Deficit While Resisting Cuts In His District

NY Times:

While Senator Saxby Chambliss, Republican of Georgia, said he was all for slowing federal spending, he has no appetite for the substantial cuts in farm programs proposed in President Obama’s new budget.

Representative Todd Akin, Republican of Missouri, issued a press release simultaneously lamenting the deficit spending outlined in the new budget and protesting cuts in Pentagon projects important to his state.

And Senator Jeff Sessions of Alabama, a fiscal conservative and a senior Republican on the Budget Committee, vowed to resist reductions in space program spending that would flow back home.

The positions of these Republicans — and similar stances by dozens of other lawmakers of both parties — are a telling illustration of why it is so hard to control federal spending. Every federal program has a constituency, and even lawmakers who profess to be alarmed by rising deficits will go to the mat to preserve money that provides jobs and benefits to their constituents.

“I am not a hypocrite,” Mr. Sessions said in reconciling his fiscally conservative credentials with his outrage over the administration’s proposal to essentially end the human space flight program and allow private enterprise to take on some of the load — an approach that Republicans typically favor.

Mr. Sessions said money taken from NASA would not be saved but would instead be directed to other Obama administration priorities that he did not support. He said his preference would be to set an overall spending limit and allow Congress to determine what programs should get the money. “Then we can debate it,” Mr. Sessions said.

Others said that the annual tableau in which members of Congress criticize the spread of red ink even as they reassure voters back home of protection for popular subsidies and Pentagon projects exposed the high degree of cynicism and lack of conviction that colors the fight over Congressional spending.

“It shows that in Washington, you can be firm on your opinions; it is your principles you can be flexible on,” said Rahm Emanuel, the White House chief of staff.

The Republican juggling act on spending comes after a legislative proposal for an independent commission to study ways to cut the deficit stalled in the Senate, partly because some Republicans who had originally backed the idea balked.

A Peek Behind The Curtain At How Washington Really Works

Though the Wash Post thinks the big news in this Propublica report is the suggestion that GE lied to investors about the condition of its short term debt, I found the most interesting thing to be how freely and how often Immault, GE's CEO, picked up the phone and spoke directly to Paulson, Bush's Sec of the Treasury. It is this unfair access (how many businesses do you know that have a direct line to the Treasury?), and the resultant ability to influence decisions as this story implies, that is the root of corporate & special interest control of our government.

As the financial crisis worsened toward the end of 2008, chief executive Jeffrey Immelt and other leaders at General Electric repeatedly assured the public there was no need to worry about the company's ability to access credit markets and refinance its massive debts as they came due.

But in private conversations that alarmed then-Treasury Secretary Henry M. Paulson Jr., Immelt laid out a different picture of GE's credit situation, according to Paulson's new book about the crisis.

Instead, Paulson writes, Immelt on at least four occasions expressed worries about GE's short-term debt, known as commercial paper, and eventually lobbied for access to special government guarantees for such debt.

To take one example: On Sept. 15, 2008, the day Lehman Brothers declared bankruptcy, Paulson says he was "startled" when Immelt came to his office and told him GE was finding it "very difficult" to sell short-term debt "for any term longer than overnight." A day earlier, GE sent investors a letter saying its ability to sell commercial paper was "robust."...

Today's Digest

Sorry, I don't have time today to separately post each of the stories I today found interesting.  Instead, here they are in a "quickie" digest form:

Obama Maps a Way Forward for a Health Overhaul

President Obama on Thursday evening presented his clearest plan yet to move forward with comprehensive health care legislation, saying that he wanted to meet with Democrats, Republicans and independent experts, lay out the facts for the American people and then, he said, “I think that we have got to move forward on a vote.”

Mr. Obama said he would first work with Congress to enact a jobs package ... But he also said that he would take the time to refute false statements and misunderstandings about the health care legislation and to hear alternate ideas from Republicans. After “several weeks” of work, he said, he would be prepared to live with whatever decision is made by Congress, but he also warned that voters, too, would be watching and would decide at the polls in November whether lawmakers had made the right choice.

The myth of Washington bipartisanship and the art of true compromise

Give this to Scott Brown: He's just been sworn in, and he's already having a positive impact on the governing dynamic in the capital. The president, key lawmakers and even the press have begun to focus on the dysfunctionality of the political process that now threatens all incumbents, irrespective of party and ideology. People have begun to talk to one another -- Obama with House Republicans, Jon Stewart with Bill O'Reilly -- and the tone has gotten noticeably more civil. In the 12-step program for overcoming our partisan addiction, we're now somewhere between Step 1 (acknowledging the problem) and Step 2 (accepting personal responsibility for doing something about it).

GOP senator blocking all Obama nominees

Sen. Richard Shelby (R-Ala.) has placed a blanket hold on more than 70 Obama administration nominees because he wants funding for projects in his state.

Republican lawmaker's budget plan gets Obama's attention

Released two days before the unusual back-and-forth session between Obama and the GOP, the bill sponsored by Ryan and five other House members would seek to reduce the deficit and spur economic growth by cutting the tax rate on corporations, shifting future Medicare and Medicaid beneficiaries to private insurance plans, and both raising the retirement age gradually to 70 and reducing the growth of benefits to make Social Security solvent ...

By Sunday, less than 72 hours after Obama praised Ryan, Office of Management and Budget Director Peter Orszag was highlighting potentially controversial elements of the plan. Ryan, meanwhile, was leading the GOP opposition to what he called the president's "far-left budget" and attacked the administration's support for a fiscal commission to examine how to reduce the national debt as "not leadership," but "punting."

Obama to get deficit commission with or without Republican help

President Obama will appoint a commission to tackle the nation's budget problems with or without the cooperation of Republican congressional leaders, House Majority Leader Steny Hoyer (D-Md.) said Thursday.

Lobbying Imperils Overhaul of Student Loans

An aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business. House and Senate aides say that the administration’s plan faces a far tougher fight than it did last fall, when the House passed its version.

Scott Brown Raised A Tsunami Of Money From Financial Industry: 80% From Outside Mass.

Scott Brown 's a real man-of-the-people, beholden to no one. That's why he raised as much as the Boston Globe reports he did from the financial industry and why I couldn't resist reposting this cartoon:

In a six-day span just before the US Senate election, Republican Scott Brown collected nearly $450,000 from donors who work at financial companies, a sign the industry is prepared to spend heavily in the upcoming midterm elections to beat back new controls and taxes President Obama wants to impose.

The donations, from hundreds of financial executives, far exceeded what Brown received from doctors and others in the health care industry in the final days of the campaign. While Brown saw donations from all quarters explode in mid-January, as polls showed him closing fast on opponent Martha Coakley, the donations from financial workers coincided with several key developments that would affect their companies.

On Jan. 14, five days before the Senate election, President Obama proposed a fee on large financial firms to recoup the cost of the government’s bailout of the industry, and he angrily demanded that those firms cut executive bonuses.

The president was also pushing the Senate to follow the House of Representatives and adopt sweeping changes that would impose controls on the trading of exotic securities, limit risk-taking by the largest institutions, and create an agency to protect consumers from abusive lending practices.

Martin Gruss, owner of a West Palm Beach, Fla., investment firm, said he gave $2,400 to Brown because he vehemently disagrees with the policies being pursued by Obama and his economic aides.

“They have no real understanding of the business implications of their actions,’’ he said, adding that limits on trading securities would undermine the position of the United States as the world’s financial capital. “I contributed to Scott Brown because his election will help redress the balance of power in the Senate.’’

The industry’s giving could also spell trouble for Democrats in next fall’s midterm elections, especially following the US Supreme Court decision last month that allows corporations to spend unlimited amounts to influence political contests.

Already, the financial services sector is the single largest base of donors to federal campaigns, giving an industry record $476 million in the 2007-2008 election cycle, much more than the second-largest giver, lawyers and lobbyists, who contributed $270 million, according to the Center for Responsive politics.

“People like me are scouring the country for conservative candidates,’’ said John Mumford, a California venture capitalist who gave the maximum $2,400 contribution to Brown four days before the election. “What’s going on in Washington is against everything I believe in, which is small government, balanced budgets, and support for free enterprise.’’

It's The Economy Stupid: 4Q09 GDP Grew 5.7%; Most In Six Years

What's the GOP going to do if the economy is noticeably healthier by November? Bloomberg:

The economy in the U.S. expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines and companies increased investment in equipment and software.

The 5.7 percent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed today in Washington. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades.

Manufacturers such as Intel Corp. may keep leading the recovery as increasing sales prompt companies to restock. A slowdown in consumer spending last quarter is a reminder that 10 percent unemployment is causing Americans to hold back, one reason why the Federal Reserve is keeping interest rates low and the Obama administration is proposing new plans to create jobs.

“The economy is still healing and improving,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected a 5.6 percent gain in GDP. “I think this is a sustainable recovery.”///

Confidence Rising

Private reports released today showed confidence among U.S. consumers improved in January for a second month, and companies expanded this month at the fastest pace in more than four years as orders and employment increased.

The economy was forecast to grow at a 4.7 percent annual pace, according to the median estimate of 84 economists in a Bloomberg News survey. Estimates ranged from gains of 3 percent to 7.5 percent.

For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946.

Consumer spending, which comprises about 70 percent of the economy, rose at a 2 percent pace, more than anticipated following a 2.8 percent increase in the previous three months. Economists projected a 1.8 percent gain, according to the survey median.

Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.

Media Comparison: The "strategy for breaking the partisan logjam holding up President Obama’s agenda" Begins To Come Into Focus

Or at least the NY Times thinks so. The Wash Post isn't so sure, however.  As regular followers of our Media Comparisons know, there is no "truth" ... just different news sources interpretations of "truth."

The White House on Thursday signaled the outlines of its strategy for breaking the partisan logjam holding up President Obama’s agenda, saying Democrats would move quickly to underline their commitment to fixing the broken economy and to build an election-year case against Republicans if they do not cooperate.

With Mr. Obama’s health care overhaul stalled on Capitol Hill, Rahm Emanuel, the White House chief of staff, said in an interview that Democrats would try to act first on job creation, reducing the deficit and imposing tighter regulation on banks before returning to the health measure, the president’s top priority from last year.

But Mr. Obama quickly got a taste of how difficult it would be to bring the opposition party on board.

One day after the president upbraided Congress in his State of the Union address for excessive partisanship, Senate Republicans voted en masse against a plan to require that new spending not add to the deficit (it passed anyway as all 60 members of the Democratic caucus hung together). And some Republicans peremptorily dismissed Mr. Obama’s main job-creating proposal, expressing no interest in using $30 billion in bank bailout money for business tax credits.

“I think there is a right way and a wrong way to do it, and that is not the right way,” said Senator John Cornyn, the Texas Republican heading the effort to elect more Republicans to the Senate.

On Friday, Mr. Obama will travel to Baltimore to announce specifics of his jobs plan, including a proposed $5,000 tax credit for small businesses for each new employee they hire in 2010. While there, he will address House Republicans at a retreat they are holding.

The instant Republican resistance to the jobs plan — coupled with a vote this week to kill a deficit-reduction panel that had been initiated with high bipartisan hopes — illustrated the chasm between the two parties and the difficulties Mr. Obama faces if he is serious about trying to work with an energized opposition.

Increasingly confident of their prospects after the Massachusetts Senate victory, Republicans are disinclined to give ground in policy debates and appear willing to stick with their near-unanimous opposition to major initiatives unless Democrats offer significant concessions.

“House Republicans will seize the opportunity in respectful terms, but candid and frank terms, and make it clear to the president that we have better solutions,” said Representative Mike Pence of Indiana, the chairman of the House Republican Conference.

The administration showed no signs of capitulating either, with officials saying the White House will pursue a strategy of trying to shame Republicans whenever they stand in lock-step against Mr. Obama. In an interview Thursday, Mr. Emanuel warned that Republicans would suffer politically for their opposition to the pay-as-you-go plan.

Media Comparison: "Democrats confused about path ahead"

Or at least the Wash Post thinks so. The NY Times isn't so sure, however.  As regular followers of our Media Comparisons know, there is no "truth," just different news sources interpretations of "truth."

A day after President Obama called on them to renew efforts to pass his ambitious agenda, congressional Democrats remained in disarray Thursday about how to move forward, with at least some pointing at the White House as the cause of the legislative standstill gripping Capitol Hill.

Democrats left town early Thursday weighing their next steps on everything from the stalled health-care bill to competing job-creation packages. Before they departed, some criticized Obama for casting blame on the Senate, where moderates felt singled out for ridicule. Others sought to shift the burden to the GOP, latching on to Obama's call for Republicans to share responsibility for governing after a devastating special-election loss left Democrats a vote shy of a filibuster-proof majority in the Senate. Still others said the president's calls for bipartisanship were wishful thinking and suggested that daring Republicans to block their ambitious agenda would set up a "liberating" contrast for November's midterm elections.

"We also have the responsibility, if we can't find that common ground, to stand our ground on principles," said House Speaker Nancy Pelosi (D-Calif.), rejecting bipartisanship as a goal unto itself. "If we can't find a bipartisan way to do it, we are not going to say, 'Well, if it is not bipartisan, we are not going to do it.' We are going to do what we believe."

The first order of business continues to be the far-reaching health-care bill that Obama once considered the cornerstone of his domestic agenda but that took a back seat to the economy in his State of the Union address Wednesday. Senate Majority Leader Harry M. Reid (D-Nev.) said he felt "a little bit" more confident about the health-care bill's prospects after Obama sought to rally the 48 million Americans who watched the speech.

"I think he did a good job of laying out the problem," Reid said.

Reid and Pelosi said they remain stalled on the most likely option for moving ahead on health-care reform. That would require the Senate to pass a bill, through a parliamentary move requiring a simple majority, resolving issues in its version of the legislation that have prompted objections from House Democrats. That would allow the House to then approve the Senate's measure, thus avoiding another vote on the entire bill in the Senate, where it would almost certainly face a successful 41-vote filibuster by Republicans.

Pelosi, reiterating her opposition to simply passing the Senate legislation, said it is only "75 percent the same" as the House bill and mocked Obama for suggesting that the two measures are 90 percent similar.

Obama Announces $8 Billion For Rail Improvements

NY Times:

A day after delivering his State of the Union address, Mr. Obama came to Florida to announce the investment of $8 billion in high-speed rail projects in 13 major corridors, which he said would provide a down payment for the most significant advance in transportation since the Interstate highway system was built more than a half-century ago ...

The administration announced the $8 billion awards to coincide with the president and vice president’s trip here on Thursday. For months, states have been competing for the financing.

Most of the money, officials decided, will go toward improving existing rail service. More than a billion dollars, for instance, will go to speed train travel between Chicago and St. Louis to up to 110 miles per hour — faster than it is now, but a far cry from the kind of bullet trains that zip along at speeds of more than 150 m.p.h. in Japan and Europe. Two of the largest shares of money are being distributed for investments in bullet-train projects.

The administration said that a $2.25 billion award would help California make a small down payment on its ambitious $45 billion plan to build trains that can go 220 miles an hour. The stimulus money will go to buy right-of-way, build track, and do engineering and environmental work.

Another $1.25 billion will go to build 84 miles of track from Tampa to Orlando, which would allow trains to travel at up to 168 m.p.h., the first leg of a corridor that is eventually expected to go to Miami. If the state and federal financing hold, the first phase of the railway is scheduled to be completed by 2015.

“It’s the biggest thing since Walt Disney World for the I-4 Corridor,” said Representative Kendrick B. Meek, Democrat of Florida, who is running for Senate this year.

The president’s trip to Tampa on Thursday marked his third visit to the state since taking office. The high-speed rail project represented a considerable investment into the state, which the Obama-Biden ticket carried in 2008.

Before any suggestions could be made about any potential political benefits of the awards, Mr. Biden told the audience here that both Florida and California have something in common: Republican governors.

“We didn’t pick this based on politics. I mean this sincerely,” Mr. Biden said. “We’re picking the places that make the most sense, have the highest density, are ready to go.”

$8 Billion In Grants Awarded For "High-Speed" Rail

AP:

High-speed rail projects in California, Florida and Illinois are among the big winners of $8 billion in grants to be announced Thursday by the White House -- the start of what some Democrats tout as a national rail-building program that could rival the interstate highways begun in the Eisenhower era.

Thirteen rail corridors in 31 states received funds. The White House, which supplied a list of the grants to reporters late Wednesday, billed the program as ''high-speed rail,'' but only the California project calls for trains with maximum speeds exceeding the 200 mph achieved by some trains in Europe and Asia.

Some of the money will go toward trains with top speeds of 110 mph, while others -- such as the $400 million allotted to Ohio to connect Cleveland, Columbus, Dayton and Cincinnati by rail -- will go toward trains traveling no faster than 79 mph.

President Barack Obama and Vice President Joe Biden are expected to pitch the program as a boost to the economy at a town hall meeting Thursday in Tampa, Fla. A half-dozen Cabinet members and other senior administration officials were scheduled to fan out across the country for rail events Thursday and Friday. The White House said rail projects will create or save thousands of jobs in areas like track laying, manufacturing, planning, engineering and rail maintenance and operations.

Except for Amtrak's Acela line between Boston and Washington, there are no high-speed trains in the U.S. and no domestic high-speed rail industry. Transportation Secretary Ray LaHood and members of Congress have acknowledged they expect much of the expertise and equipment to be supplied by foreign companies.

Congress set aside the $8 billion as part of the economic recovery plan enacted last year. The money is just a start. Last year, Obama asked Congress in his budget request for an additional $1 billion a year for five years. Congress for this year approved another $2.5 billion that remains to be awarded. And Obama is expected to ask for yet more rail funds when his budget is unveiled next week.

Also, LaHood has hinted that some of the $1.5 billion allotted in the stimulus plan for discretionary transportation projects may go toward high-speed rail.

Japan launched the first high-speed trains in 1964, and France and other European countries followed in the 1980s and 1990s. China has announced plans to expand its high-speed rail system to a network of more than 16,000 miles by the year 2020 and has spent more than $50 billion.

... < See list of  states awarded money> ...

By spreading the $8 billion among so many states, Obama is ignoring the advice of transportation experts and high-speed rail advocates who said the best way to build continuing political support for the program would be to concentrate on two or three grants large enough to get a high-speed line up and running. Once that happens, they reasoned, other parts of the country would lobby for more money to build their own lines.

''We can't try to touch as many political bases as we can with that money. We have got to do major projects,'' Pennsylvania Gov. Ed Rendell said in a recent interview.

Sen. Dick Durbin, D-Ill., disagreed. ''You really have to look at local and regional approaches to create the political will to expand the program,'' he said.

Poll: Americans "Fed Up" With Congress, Both Parties & The Feds; Obama Approval Inches Up

NBC News (complete poll):

Visit msnbc.com for breaking news, world news, and news about the economy

As President Barack Obama prepares to deliver his first State of the Union address Wednesday night, he will be speaking to an American public that’s fed up with Congress, the country’s two main political parties, and the federal government, according to a new NBC News/Wall Street Journal poll.

Only 28 percent believe the federal government is “working well” or even works “okay,” versus seven in 10 who think it’s “unhealthy,” “stagnant” or needs large reforms.

By comparison, in December of 2000 — during the height of the disputed Bush-Gore presidential election — 55 percent said the government was working well or okay.

What’s more, a whopping 93 percent believe there’s too much partisan infighting; 84 percent think the special interests have too much influence over legislation; nearly three-quarters say that not enough has been done to regulate Wall Street and the banking industry; and an equal 61 percent complain that both Democrats and Republicans in Congress aren’t willing to compromise.

And the percentage who believe the country is headed in the wrong direction now stands at 58 percent, the highest level of Obama’s presidency.

“The message is a big one,” said Democratic pollster Peter D. Hart, who conducted this survey with Republican pollster Bill McInturff. “The message is, ‘We hate what’s going in Washington.’”

Public’s anger isn’t directed at Obama
Indeed, the NBC/Journal survey finds that nearly half of the country (48 percent) said last week’s stunning election in Massachusetts, in which Republican candidate Scott Brown won a Senate contest in one of the nation’s most Democratic-leaning states, was aimed at sending a message to Washington. Only 15 percent disagreed.

But if the public is fed up with Washington, its anger isn’t necessarily directed at President Obama.

Only 27 percent say they blame him for not being able to find solutions to the country’s problems. By contrast, 48 percent blame Republicans in Congress and 41 percent blame congressional Democrats.

“The president has problems,” Hart adds, “but the Congress has much bigger problems.”

Obama’s numbers, in fact, are virtually unchanged from last week’s poll, which was released on the day of the Massachusetts election.

The president’s approval rating inched up two points to 50 percent, while the number believing his health care plan is a good idea declined two points to 31 percent.

“This data set reminds us that the Scott Brown election has been a huge event in Washington, D.C.,” said McInturff, the Republican pollster. “But around the country, I think this polling would suggest that it had a modest effect.”

Focus more on the economy, less on health care

Defiant Obama Vows to Push Agenda

NY Times (watch the Town Hall):

President Obama, striking a no-retreat, no-surrender posture in the wake of his party’s humiliating defeat in the Massachusetts Senate race this week, vowed Friday to press on with his expansive domestic agenda — including a health care overhaul and tough new restrictions on banks — even if it meant he had to “take my lumps” from political critics.

Mr. Obama came to this Cleveland suburb for the second stop on his White House to Main Street Tour to spread the word that his administration is about jobs, jobs, jobs. With his approval rating down to about 50 percent, a bruising season of midterm elections ahead and Democrats reeling from the resounding note of disapproval in Massachusetts, the ordinarily cool and cerebral Mr. Obama sounded unusually defiant, even fiery, at a town hall-style question and answer session at Lorain County Community College here.

The president used the word “fight,” or some version of it, more than 20 times.

Mr. Obama vowed to “never stop fighting for policies that will help restore home values.” He promised that he was “not going to stop fighting to give our kids the best education possible.” He pledged he would not “stop fighting to give every American a fair shake,” to continue fighting for a new Consumer Protection Agency and for openness in government. And of course, Mr. Obama pledged to fight for jobs.

“So long as I have some breath in me, so long as I have the privilege of serving as your president, I will not stop fighting for you,” Mr. Obama said. “I will take my lumps. But I won’t stop fighting to bring back jobs here.”

The president’s appearance here comes one day after he picked an especially big fight, with Wall Street, by calling for new limits on banks that would prevent them from becoming too big to fail. He sounded as if he would relish it.

“It’s going to be a fight,” the president said, warming up to the crowd. “You watch. I guarantee you, when we start on financial regulatory reform, trying to change the rules to prevent what has caused so much heartache all across the country, there are people who are going to say, ‘Why is he meddling in government’ or ‘Why is he meddling in the financial industry? It’s another example of Obama being big government.’ No, I just want to have some rules in place so that when these guys make dumb decisions, you don’t end up having to foot the bill. That’s pretty straightforward. I don’t mind having a fight.”

Mr. Obama’s bellicose rhetoric carried echoes of his tone in the 2008 campaign. He is now trying to strike a more populist tone to tap into anger many Americans feel about bailouts on Wall Street while Main Street is suffering. At the same time, the White House is trying to frame the midterm elections on terms favorable to Mr. Obama, by casting him as someone who will stand with the little guy, even if those fighting words contrast with his image as a politician who cares about bringing people together.

“There will be a fulsome debate about who is fighting for Main Street and who is siding with the special interests,” said Dan Pfeiffer, Mr. Obama’s communications director, adding, “There is nothing inconsistent between trying to bring people together to solve problems and standing up to the insurers and the lobbyists.”

Mr. Obama’s shift in tone actually began last week, before Tuesday’s bruising loss in Massachusetts, when the president appeared before the House Democrats and warned that if Republicans want to “stand up for the status quo” and block his health care bill, “that is a fight I want to have.” He used a version of that language at the White House on Thursday in announcing his plan for restrictions on banks.

While here, Mr. Obama made a plea for the health care bill ... Conceding that the plan had “hit a little bit of a buzz saw this week,” Mr. Obama acknowledged that the process “has been less than pretty” and that the measure was so big and unwieldy it looked like “a monstrosity,” creating fear and anxiety among ordinary Americans. But he made the case that passing the measure was an imperative ...

Mr. Obama rode to office on the strength of his cool temperament, but in recent weeks, even some Democrats have questioned whether he appears too distant from voters. Earlier this week, in an interview with ABC, the president acknowledged that many Americans have a sense of “remoteness and detachment” from policy makers in Washington.

On Friday, Mr. Obama alluded to it again, saying it was “pretty easy to get a warped view of things” in Washington. With all the problems he faces in the capital, he sounded especially happy to be let loose for a few hours.

Obama's Town Hall In Elyria Ohio (video)

Watch (read NY Times analysis):

"Obama bank plan wins tentative support in Europe"

Reuters:

France, Britain and Germany offered support on Friday for U.S. President Barack Obama's plan to limit banks' size and trading activities but fell short of pledging to follow suit on the proposal that has stunned world markets.

Obama's dramatic proposals could rewrite the world financial order but experts said they were light on detail and could cloud the global approach fostered by the Group of 20 nations.

Obama made his proposals on Thursday, saying he was ready to fight resistance from Wall Street banks he blamed for helping cause the global financial crisis.

The plan would prevent banks from investing in, owning or sponsoring a hedge fund or private equity fund.

It would set a new limit on banks' size in relation to the overall financial sector and, perhaps most dramatically, could also bar institutions from proprietary trading operations, which are unrelated to serving customers, for their own profit.

Proprietary trading involves firms making bets on markets with their own money and has been the source of much of banks' bumper profits before and after the financial crisis.

French Economy Minister Christine Lagarde welcomed the proposal, saying it was a "very, very good step forward."

"They see that regulation, which was a taboo word that was difficult to use in financial circles in the United States, is vital to contain ... banking excesses," she said.

UK Treasury Minister Paul Myners said Britain had already acted to address problems in its banking industry.

"He's developing a solution to what he sees as the American issues, we've already taken the necessary action in the UK," Myners said in an interview with Reuters Insider TV.

But Britain's opposition Conservatives, tipped by polls to win an election to be held by June, offered more solid support.

"President Obama has created a lot of space for the rest of the world to come up with what I think would be a sensible system of international rules," Conservative finance spokesman George Osborne told BBC Radio.

"I have said consistently that we should look at separating retail banking from activities like large-scale propriety trading and that this was best done internationally."

Doubts remain as to whether Obama's scheme can be enacted unchanged, not least since his party lost a key Senate seat this week, depriving it of a "super majority" in that house.

But it will strike a popular chord.

Banks' return to paying massive bonuses has prompted public and media outrage in the United States and Europe after taxpayer money was used to bail many of them out.

Wall Street sold off on Thursday and the threat that other countries will follow Obama's lead rattled European lenders.

Banker Cluelessness (cartoon)

 

Weekly Radio Address: Getting Our Money Back from Wall Street

WhiteHouse.gov:

As the President continues to work on immediate job creation, he discusses his proposal for a new fee on the largest financial institutions to ensure that every cent of taxpayer assistance gets paid back. Saying that, "we're not going to let Wall Street take the money and run," he then to discusses the ongoing push to make sure banks can never put our economy at risk again.

Obama Proposes Financial Crisis Responsibility Tax

President Obama explains the proposed Financial Crisis Responsibility Fee that will ensure that the largest financial firms meet their obligations to repay American taxpayers for the assistance provided to Wall Street. January 14, 2010.

The NY Times Argues Bankers Should Pay A One-Off Windfall Tax On Bonuses

This NY Times editorial agrees with Let's Put To Bed The Tarp Repayer's Number One Rationale Against A Tax, and proposing addsinga new, one time tax to the mix:

... House Democrats on Thursday proposed imposing a 50 percent windfall tax on bankers’ bonuses. And it is unlikely to satisfy taxpayers. It shouldn’t.

For the sake of fairness, Congress should pass a one-off windfall tax on bonuses. After all, what profits the banks had in 2009 were largely underwritten by taxpayers, who pumped in billions of dollars of capital, covered losses from the collapse of the American International Group and guaranteed the debts of Fannie Mae and Freddie Mac. The Federal Reserve lent hundreds of billions against shoddy collateral that no one else would touch and the Federal Deposit Insurance Corporation guaranteed loans worth hundreds of billions more.

And for the sake of long-term financial stability, Congress should also pass President Obama’s proposed big bank fee — intended to recover, over 12 years, the $117 billion that the administration estimates it will spend on financial bailouts. That should discourage banks that are already too big from getting even bigger and posing a larger threat to the overall economy.

Let's Put To Bed The Tarp Repayer's Number One Rationale Against A Tax

Over the last few days, I've heard again and again how taxing the firms who received TARP funds, and have already paid it back with interest, is unfair. After all these folks say, the interest was the "fee" the government assessed Wall Street for the "service" it provided so assessing some new, additional fee is unfair. Plus, the government has made a record return on their repaid TARP "investments".

Unfortunately for these apologists, they're forgetting two very important facts:

1. The largest slug of TARP money by far has gone to AIG to cover the stupid "insurance" policies it wrote with Wall Street. These policies were covered when there was NO loss and at full face value (when any reasonable business assessment would have dramatically reduced their value) directly benefiting AIG's Wall Street counterparties. This massive subsidy is in large part responsible for the rapid and dramatic rise in these company's stock prices because, while it's hard for most folks on Main Street to understand what occurred, Wall Street understands what's really going on.
2. TARP is not the Feds' biggest source of largesse to financial firms, the FDIC's bond-guarantee program is. And that program is still running, and benefiting, Wall Street.

So it is not the case that Wall Street has paid back the government for its help; in fact they're still receiving massive amounts of help. So paying for that ongoing help is totally fair and not just populist anger.

"White House's Tax Proposal Targets Big Banks' Risks"

Wall St Journal:

President Barack Obama plans Thursday to propose taxing large banks based on their exposure to risk as a way to recover taxpayer losses from the 2008 bailout of the financial sector, people familiar with the matter said.

The plan marks the latest in a slew of proposed fees, penalties and constraints the White House envisions slapping on Wall Street during the clean-up of the financial crisis.

If approved by Congress, the new tax—which the White House calls a "financial crisis responsibility fee "—would force more than 25 banks to collectively pay the federal government roughly $100 billion over 10 years.

The numbers could change as the final tally of losses from the $700 billion Troubled Asset Relief Program is calculated. The top five Wall Street banks earned profits of about $30 billion through the third quarter last year. The proposal will also help the administration tackle the U.S.'s giant budget deficit.

Companies that benefited from the government's debt-guarantee program would also be taxed, a decision that would affect GE Capital, the finance arm of General Electric Co.

The banking industry has already objected to initial reports of the proposal, which Mr. Obama is expected to detail at the White House on Thursday ...

The proposal would not require small banks to pay the fees, the people familiar with the matter said, the latest sign that Washington's post-crisis clean-up is hitting large financial institutions most heavily.

The administration hasn't disclosed the exact equation it will use to determine what each bank owes, but the rough contours suggest that J.P. Morgan, Citigroup Inc. and Bank of America Corp. will top the list of banks with the largest exposure.

Banks that lean heavily on funding sources other than customer deposits, meanwhile, could pay proportionally higher taxes. That means that Goldman Sachs Group Inc. and Morgan Stanley could get penalized. Another big loser could be Citigroup, whose main U.S. banking unit's insured deposits represent a relatively small slice of the company's liabilities.

The 2008 law creating TARP required the White House to come up with a proposal to recoup any losses. The latest government report estimates losses to be about $120 billion. A large portion of those losses are expected to be from government investments in the automotive industry, a burden Mr. Dimon said Wednesday that banks shouldn't be required to shoulder.

Bank CEO's Grilled By Congress: “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars”

NY Times:

The 10 members of the panel, brows furrowed and some furiously taking notes, squared off against the Wall Street chiefs in Washington over the billions in bonuses, and who was really to blame for bringing the financial system to its knees.

But the hearing shifted to new ground when Phil Angelides, chairman of the group, the Financial Crisis Inquiry Commission, bore in on Lloyd C. Blankfein, Goldman Sachs’s chairman.

He asked Mr. Blankfein to explain how his firm could have sold bundles of troubled mortgages at the same time it placed bets with Goldman’s own money that their value would fall.

Mr. Blankfein tried a variation of the tagline used by the Syms clothing chain: “An educated consumer is our best customer.” He said that Goldman’s clients knew what they were buying and that his firm was simply providing a customer service.

“These are professional investors who want this exposure,” Mr. Blankfein said.

But Mr. Angelides had his comeback: “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.”

The exchange was particularly revealing because it laid bare an essential truth about the Wall Street ethos: if there’s a buyer — no matter how sophisticated — there’s always a seller.

Maybe that’s fine within the confines of Wall Street. But it didn’t work so well when people wanted to buy homes they clearly could not afford and banks were quick to provide them with mortgages.

And it didn’t work so well when companies sought to finance enormous takeovers by leveraging their balance sheets to dizzying heights and banks were happy to provide them with the debt.

Mr. Angelides also dismissed Mr. Blankfein’s line about “professional investors” by saying that those same investors represented the savings of teachers and police officers.

After the hearing, Mr. Angelides said he was frustrated with Mr. Blankfein’s answer. “Mr. Blankfein himself never admitted that there was any responsibility of Goldman Sachs to make sure the products themselves were good products,” he said. “That’s very troublesome.”

Mr. Blankfein took the brunt of other lines of questioning, and when the hearing shifted to more predictable exchanges, he was clearly more comfortable. The executives, for the most part, had figured out how to avoid directly apologizing, despite the commission’s best efforts to pry some admission of guilt out of them.

“Whatever we did, it didn’t work out well,” Mr. Blankfein said. “We regret the consequence that people have lost money.” (John J. Mack, Morgan Stanley’s chairman, who has been the most outspoken about the need for regulation, had apologized at a Congressional hearing last year.)

All of them suggested that reform was necessary, including detailed explanations of how they might put into effect changes to compensation plans and making the sale of derivatives more transparent.

But it was unclear whether it was just lip service. “If the leaders of Wall Street believe regulation is needed, as they stated today before the Financial Crisis Inquiry Commission, then they should tell their lobbyists because they are fighting every serious regulatory change and improvement being considered by Congress,” John Taylor, president of the National Community Reinvestment Coalition, said in a statement after the hearing.

Mr. Taylor also said the banks should be held more accountable for what they sell.

“If the leaders of Wall Street did not consider the possibility of housing prices dropping in their own stress tests and due diligence,” he added, “if they did not know that the F.B.I. had been raising red flags about mortgage fraud since 2004, and if they did not know that high-cost, no-doc, interest-only loans were being made right and left to anyone, then their spirited defense of their employees falls flat.”

“Based on what we heard today,” he added, “they should be firing people, not giving them bonuses.”