On Government Spending, Cost Inefficiencies, and Jobs

I was reading through a bunch of articles on the economy and what might happen if the automatic deficit cuts are applied (that was agreed upon by Congress if they couldn't reach a deal on how to make specified cuts). The focus was on defense spending where a 10% automatic across-the-board cut would be applied. So, for a submarine construction program, they'd have to cut 10% funding. That has the GOP trying to pin the lost construction jobs on the President.

I find the hypocrisy of that unsurprising, but revealing. It is an admission that the government can and does create jobs - the GOP is questioning where those jobs are coming from. It's apparently okay that defense contractors get government contracts to build stuff (using union labor in many instances), but if the President proposes infrastructure programs to spur jobs, he's derided as a socialist or worse.

I don't have a problem with the military spending on building new submarines and other technologies that can allow the military to do more with fewer personnel (the newest aircraft carrier will have a significant reduction in personnel aboard because of automation of numerous functions). Lower personnel costs have a cumulative effect. It reduces exposing our soldiers, sailors and marines to harms' way.

But at the same time, we need to address serious and widespread deficiencies in infrastructure. That would be a tremendous jobs opportunity but the GOP points at the stimulus package as a failure. What they want people to ignore is that the stimulus was as much a bailout of states that were in major deficit situations that couldn't raise taxes into the teeth of a major recession (at least half the stimulus was transfer payments to cover existing obligations, not to spend on new infrastructure that would encourage jobs development and a lasting improvement to infrastructure).

Still, there's plenty of fat on infrastructure projects. Amtrak went ahead and announced a $151 billion program that would upgrade the Northeast Corridor to true high speed rail. It's a staggering figure considering that it would run about $330+ million per mile or more than 10 times what it would cost for a mile of high speed rail in the rest of the world. There's no reason it should cost that much, and it would sap spending elsewhere on infrastructure. Construction costs are significantly higher on such projects in the US than they are elsewhere. That cost inefficiency has to be addressed at the same time that such projects are done.

Yet Another Mixed Unemployment Data Report

The unemployment figures are out for June, and it's a mixed bag. ADP says private payrolls grew 176,000, well above the consensus estimate of 100,000. That was bolstered by an upwards revision of May to 133,000. However, the Labor Department's job figures were worse than expected. Only 80,000 nonfarm jobs were created.

The unemployment rate has remained at 8.2%. The U-6 rate is up to 15.1%, after falling to 14.3% for May (unadjusted). Adjusted for seasonal fluctuations, the rate is still higher - at 14.9%.

Expect Republicans to hammer the Obama Administration for the ongoing troubles with job creation, while Democrats will attack Republicans for blocking more expansive programs. The economy will continue to be the top issue going into November's election.

While the President has little effect on the economy, the President will take the credit or blame for the ongoing conditions, even if the situation is beyond their control - such as the ongoing credit/debt problems all over Europe and fears that Japan is about to run out of money, it's on the verge of having its own debt ceiling troubles and it has a greater exposure to European debt than the US.

The ongoing Eurozone troubles are causing manufacturers to scale back efforts, which means that job creation is also slowing.

Debt woes have bogged down much of Europe, sending some countries into recession. The eurozone crisis in turn has dulled economic growth around the world from China to Brazil. A survey on Monday found U.S. manufacturing contracted for the first time in nearly three years in June.
Europe is not the only worry weighing on the U.S. outlook. Washington plans enough belt-tightening at the start of 2013 to easily send the economy into recession. Cautious observers wonder if lawmakers can avoid this "fiscal cliff."

"Firms are saying, 'Is there really a reason to ramp up hiring right now?'," said Bullard.

Job creation averaged 75,000 per month during the second quarter, compared with an average increase of 226,000 in the first quarter. Part of the slowdown could be because mild weather led companies to boost hiring in the winter at spring's expense.
But recent weakness in everything from retail sales to business sentiment suggests something more fundamental is at play.

"We're not expecting things to take off in the second half of the year," said Sara Klein, an economist at Moody's Analytics in West Chester, Pennsylvania. "Weather wasn't the only factor."

Will States Drag Feet On Imposing Health Exchanges, and Other Thoughts

If the states don't have health care exchanges in place by 2014, when the individual mandate kicks in, they'll be cut out of the loop and the federal government will impose its own version of the exchanges, with the funding structures intact (the state will have to kick in its set percentage, regardless of whether it acts to impose its own exchange or not).

Some states are going to drag their heels, hoping that Congress reverses its decision to impose the individual mandate and that Romney wins the White House so that the White House doesn't repeal the measure.

Others are moving ahead, since the feds are providing funds to help get the exchanges going. Nearly $1 billion has been distributed thus far, so states that don't get with the program will find themselves shut out on the funds needed to get the exchanges rolling.

Perhaps some states think that this might get the feds to kick in a greater contribution towards the startup costs. They may have a point, but unless Congress pushes the IM deadline back, those states that aren't moving towards an exchange will find themselves in a mess.

Consumers in those states will be at a disadvantage if the states don't get their exchanges going since they'll be without the insurance coverage available to other states. In some places, like LA, TX, and FL, they have the highest rate of uninsureds, which means that a significant portion of the electorate would be voting against their own interest if the IM gets repealed (those states would benefit most from exchanges). But the GOP is trying to capitalize on fear-mongering that the IM is somehow stripping away freedoms, even as they were touting IM as a sign of personal responsibility just a few years ago before President Obama made it part of the health care reform package.

As it is, some states are likely to drag their feet on the Medicare expansion.

Why would states reject the expansion of Medicaid? For some, it might be that the expanded program means a larger chunk of funding that the state must provide to cover its share of Medicaid costs (Medicaid is only partially funded by the federal government; between 2014 and 2022, the federal government ends up paying for $931 billion and the states $73 billion toward the costs of the expanded Medicaid). For some others, we have to question a possible motivation that simply won’t countenance additional federal “welfare” to poor people—and believe you me, an income of 133 percent of the federal poverty level, roughly $30,700 for a family of four, is poverty no matter how you define it.  

So the court said the federal government couldn’t bully the states into participating in the expanded coverage by threatening all of their Medicaid funding. Republicans around the country are crowing that their states will opt out against, in the words of the governor of Alabama, Robert Bentley, “an overreach by the federal government that creates more regulation, bureaucracy, and a dramatic increase in costs to taxpayers.”

ProPublica hints at what we think will actually happen. Like the stimulus, when Republican governors huffed and puffed that they would turn down the federal moneys, in the end, nearly all of the stimulus refuseniks accepted the federal dollars, and those that didn’t were generally overruled by their legislatures, even one governor named Sarah Palin. Don’t bet on states telling poor families that middle class people can get coverage under the PPACA, but because of a governor’s ideological pique, they won’t.

Fact checking Obama and Romney on health care claims.

For those keeping score, the following claims were deemed false:
* Obama has stated some form of "if you're happy with your health insurance, you'll be able to keep it." Nothing in the law states that you will be able to keep your plan; employers can change plans as they see fit (that's no change to the existing system in place)
* Romney's claims that the ACA will add to the deficit are false; it's based on the CBO's worst case scenario, while the CBO middle range figures expect it to cut the deficit over time - assuming that the law doesn't change over time.

True:
* to a degree, Obama's claims that Americans will see rebates for costs already paid. It will be a modest amount for some of those affected by overpayments over time.
* Romney's claims that the ACA will mean $500 billion in tax hikes, though most of that amount falls on high income earners, including $200 billion from additional Medicare payroll tax.
* partially true that the provisions relating to dependents 26 and younger have meant millions have gotten insurance. The figure is probably closer to 3 million, though one study puts it above 6 million (the figure Obama cites).

I'd put this in the indeterminate range:
* Romney's claims that the ACA will kill jobs. It does mean people are more likely to leave the workforce, but not for reasons Romney states. People will no longer continue working because they'll have access to health insurance outside jobs. That potentially opens the door to new employees and more job movement - not necessarily a bad thing. It doesn't reflect that jobs will be destroyed because of the ACA.

Heavy Dose of Irony With Supreme Court's Decision on Health Care Act

Yesterday's historic decision upholding the constitutionality of the Affordable Care Act (HCR/Obamacare) was not without a heavy dose of irony.

Where can one start? How about with the person who was the swing vote: Chief Justice John Roberts.

Roberts had been nominated by President George W. Bush and many on the left castigated his conservative views. Indeed, the confirmation vote split Democrats neatly in half. Here's the list of those who voted against Roberts' confirmation as Chief Justice of the Court:

Democrats voting no:
Daniel Akaka of Hawaii
Evan Bayh of Indiana
Joseph Biden of Delaware
Barbara Boxer of California
Maria Cantwell of Washington
Hillary Rodham Clinton of New York
Jon Corzine of New Jersey
Mark Dayton of Minnesota
Dick Durbin of Illinois
Dianne Feinstein of California
Tom Harkin of Iowa
Daniel Inouye of Hawaii
Edward Kennedy of Massachusetts
John Kerry of Massachusetts
Frank Lautenberg of New Jersey
Barbara Mikulski of Maryland
Barack Obama of Illinois
Harry Reid of Nevada
Charles Schumer of New York
Debbie Stabenow of Michigan
Jack Reed of Rhode Island
Paul Sarbanes of Maryland

You'll note more than a few of those Democrats were among those who were behind enacting the PPACA (PL 111-148). They're now loudly hailing the affirmation of the health care reform package and individual mandate but were opposed to Roberts on ideological grounds. Likewise, many Republicans who had supported Roberts, were gravely disappointed about the decision and were vowing to repeal the Act as soon as next month. Pundits and bloggers alike were calling for Roberts' head.

The job of the Senate in confirmation isn't making sure that the nominee of the Court has pure political views that align with the wishes of Congress. It is to advise and consent - does the nominee have what it takes to sit on the highest court in the nation.

I always thought that Roberts was supremely qualified for the Court - as did many Republicans.

Yet, it was the vote on the health care reform package that upset the apple court. Those Democrats who pushed for the health care reform are now cheering Roberts for upholding the health care act's individual mandate, while Republicans and right wingers are calling for Roberts' head because he somehow ruled the individual mandate constitutional when they thought it wasn't.

Roberts held true to his confirmation hearing statement - his job is to call balls and strikes, not to pitch or bat. As his opinion in the case shows, he rejected the Commerce Clause and Necessary and Proper clause because they were Congressional overreach, and yet sustained the Act on taxation powers grounds. He also directly addressed judicial activism and construing acts of Congress:

Now, the Court, of course, has the obligation, and has been recognized since Marbury v. Madison, to assess the constitutionality of acts of Congress, and when those acts are challenged, it is the obligation of the Court to say what the law is. The determination of when deference to legislative policy judgments goes too far and becomes abdication of the judicial responsibility, and when scrutiny of those judgments goes too far on the part of the judges and becomes what I think is properly called judicial activism, that is certainly the central dilemma of having an unelected, as you describe it correctly, undemocratic judiciary in a democratic republic.

That's exactly what was done, and yet Republican after Republican was calling the Act unconstitutional, including GOP Nominee for President Mitt Romney.

Republican leaders pounced, with Senator Mitch McConnell of Kentucky, the minority leader, declaring: “This law is a tax. This bill was sold to the American people on a deception.”

Mr. Romney chose instead to cast the health care overhaul as poisonous to the economy and a prime example of the Obama administration’s expansion of government.

“What the court did not do on its last day in session, I will do on my first day as president of the United States,” Mr. Romney said in a rare appearance on Capitol Hill shortly after the ruling. He added, “Our mission is clear: If we want to get rid of Obamacare, we’re going to have to replace President Obama.”

Romney's vow to act to repeal the Act is not without its own sense of irony. He was Governor of Massachusetts when the state enacted its own form of individual mandate. Romney was once one of the biggest proponents of the kind of health care reform ultimately backed by President Obama.

Then, there the matter that Republicans in general had backed some form of individual mandate for more than 20 years until the Obama Administration decided to use its own version of individual mandate. That's when the Republicans shifted to oppose it at all costs and repeatedly called it unconstitutional.

What can anyone make of the fact that they were pushing a policy objective for 20 years that they only considered unconstitutional once the other side of the aisle took them up on the matter and enacted it as law.

I really think that if a Republican in the White House went ahead with the same proposals, the sides would be a mirror image of what we've got- Republicans would be hailing the decision while Democrats would be aghast at the imposition of the individual mandate (but because it didn't go nearly far enough). Much of the rancor and rhetoric is purely partisan politics at work. After all, who in their right mind would repeal provisions that extend benefits to dependents up to age 26 (expanding coverage to millions) or eliminating lifetime insurance limits. The GOP has made it a central part to their campaigns going into November that they would seek to repeal the entirety of the reform act, but if they simply switched around a few minor provisions, they'd be more than happy to declare Obamacare dead and rename it. They want to deny President Obama any achievement, especially on health care reform.

Despite the landmark ruling, there are issues with the reform package that need reform. Treatment of OTC drugs for flex spending accounts should be revised to once again include it as a reimbursable item. Congress has already address onerous paperwork requirements. Costs for procedures and drugs should be made more transparent so that everyone knows what items cost - and allow for more comparison shopping, which should work towards bending the cost curve and produce additional savings for consumers and health care providers alike.

If Congress wants to find a different way to fund the variety of programs, then by all means let them figure out a way to do so. But with the GOP refusing to accept any tax hikes, even those that are the result of a Congressional decision to allow tax rates to return to pre EGTRRA (Bush tax cuts) levels when the rate cuts expire (and they've already extended the cuts into 2013), that's pretty much a nonstarter.

What is also surprising is that when polled on specific items of the reform act, they show significant support, but they oppose the package as a whole. That goes to how the Republican message has won the day on health care reform, even though their constituents largely approve of changes. It also points out the complexity with the health care law and how most people don't understand what's going on.

Health Care Reform Act Survives the Supreme Court

In a huge surprise to many on the right, the US Supreme Court upheld the individual mandate provisions of the Patient Protection and Affordable Care Act of 2010 (HCR/Obamacare). The Court ruled that it was a constitutionally permissible tax imposed by Congress.

The bottom line of the Court's decision, where Chief Justice John Roberts broke with the conservative group (Scalia, Thomas and surprisingly Kennedy), is that the entire ACA is upheld, with the exception that the federal government's power to terminate states' Medicaid funds is narrowly read.

That overturns the decisions by the 11th Circuit that found the law unconstitutional.

As I've noted, the individual mandate serves as a tax, and that's the grounds on which the Court found that the individual mandate is constitutional. The mandate provisions are set forth at 26 USC 5000A (the Internal Revenue Code) and imposes an annual penalty of $95, or up to 1% of income, whichever is greater, on individuals who do not secure insurance in 2014, which rises to to $695, or 2.5% of income, by 2016 and after (and adjusted for inflation). Families are hit with higher penalties. There are exemptions to the "fine" in cases of financial hardship or religious beliefs

This is a not insignificant sum of money we're talking about. This provision is expected to raise several billion dollars every year it is in operation beginning in 2014, and is part of the revenue side of reforming the health care funding across the country. It is also seen as a critical tool to getting people into the health care insurance pools so that they can help spread the costs of health care for those who are more likely to utilize the insurance policies.

The tax and spend power of Congress is unquestioned. The question was how the Administration had considered this not to be a tax. I thought that was a poor decision on their part. The Administration focused on a Commerce Clause justification, but the Court found that the power was vested in the Congressional power to tax.

UPDATE:
The decision can be found here: NATIONAL FEDERATION OF INDEPENDENT BUSINESS ET AL. v. SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL. No. 11–393

Ron Paul SuperPAC Operated By Conspiracy Kook

Last week, Revolution PAC filed a notice with the FEC that it couldn't file required reports to identify donors due to a bank error.

This week, reporters have finally noticed that the PAC is operated by a Gary Franchi, a kook who sees conspiracies everywhere from 9/11 coverups to FEMA concentration camps and the New World Order. Oh, and it wouldn't be a conspiracy theorist without claiming that President Barack Obama is ineligible to be President of the US.

The leader of the group, its founder, chairman and treasurer, is Gary Franchi, a promoter of conspiracy theories and sophisticated social-media entrepreneur in the resurgent movement known as the Patriots.
The 34-year-old political activist from the Chicago suburbs told msnbc.com that his goal is a "non-violent intellectual revolution, which results in a full restoration of the federal Constitution."

Online videos produced by Franchi, and online interviews with him, add specifics:

• Franchi has supported the 9/11 Truth Movement, which supports the idea that the terrorist attacks of Sept. 11, 2001, werean inside job to create a pretext for a reduction in American liberty, or at least involved a cover-up, with the World Trade Center brought down by a planned U.S. demolition, instead of terrorist-controlled airplanes. Franchi founded the Lone Lantern Society (a reference to Paul Revere indicating that foreign enemies are on American soil). The group supports "the birth of freedom and the death of the New World Order," a secretive elite that is supposedly trying to set up a world government. Lone Lantern has held street demonstrations on the 11th of every month in Chicago and elsewhere, demanding an investigation of 9/11. In New Hampshire in 2008, a video shows Franchi asking Tom Ridge, the former secretary of Homeland Security, who was campaigning for Sen. John McCain, whether Ridge would support an investigation of the "controlled demolition" of the World Trade Center. Ridge was having none of it, saying, "I just don't buy into that. That's a conspiracy theory that has no basis in fact. It's almost out of the Twilight Zone."
  
• According to a 2010 reportby the Southern Poverty Law Center, which tracks domestic fringe groups, "Gary Franchi is one of the leading promoters of a resurgent Patriot conspiracy theory that alleges the government is creating concentration camps for U.S. citizens." In 2009 he co-wrote and co-produced the video "Camp FEMA: American Lockdown," which claims that the Federal Emergency Management Agency is creating concentration camps on air bases and in vacant buildings to house political dissenters when the federal government proclaims martial law. "Your church may have already signed a deal with the devil," reads promotional material for the film. The film questions whether Census data will be used to round up Americans. Clips from Franchi's film on YouTubeshow Hitler youth marching while the narrator ominously describes President Obama's plans to expand AmeriCorps and the USA Freedom Corps, the volunteer initiative launched by the Bush administration after 9/11.
• Franchi operates Restore the Republic, which opposes the Federal Reserve, the IRS and the income tax, decries the control of the economy by the Rockefellers and the "banking cartel," and warns of government plans to plant RFID microchips into all Americans. The group was founded by Franchi and filmmaker and Libertarian presidential candidate Aaron Russo, and has been operated by Franchi since Russo's death from cancer in 2007. RTR shares an address with Revolution PAC in Northbrook, Ill. The group, which describes itself as a social media platform for like-minded individuals, promotes Russo's film, "America: Freedom to Fascism," in which Ron Paul declares, "If that's the definition of a police state — that you can't do anything unless the government gives you permission —we're well on our way." In a YouTube video interview with Franchi in 2008, Paul credited the Russo video with bringing a lot of people to his presidential campaign. The group has also placed billboards fueling the bogus claim that Obama is not an American citizen, asking, "Where's the REAL birth certificate?"

No surprise that Franchi has been a regular guest on Alex Jones' conspiracy-minded talk show.

What's surprising is that the media hasn't taken a closer look at Paul's supporters and super PACs until now. It's fertile ground for exposing the extremist views that are permeating Paul's campaign, to say nothing of the spillover effect on the rest of the Republican party, who feels that catering to extremists is the way to go.

Spiteful Newt Gingrich Complains New Yorkers are Elites

Newt Gingrich is a spiteful and hateful politician whose antics were sufficient that his fellow Republicans all but kicked him to the curb as House Speaker and helped impose a $300,000 fine against Gingrich for his ethics violations.

His latest utterances have got New Yorkers shaking their heads in befuddlement:

Many New Yorkers aren’t happy with Republican presidential candidate Newt Gingrich after a comment he made about residents of the Big Apple earlier this week while stumping in Nevada.

The former House Speaker called Manhattanites who live in high rises “elites” because they ride the subway, somehow suggesting that New Yorkers aren’t real Americans.

“I’m not elite,” said one straphanger. “I work 70 hours a week. Always come down, take a train to Queens and work.”

Maybe the comment stems from Gingrich losing out on an endorsement by New York billionaire Donald Trump, who despite reports that he would be backing the former House Speaker, threw his support to Mitt Romney instead.

Put bluntly, who are the "subway-riding elites" that Gingrich is busy complaining about? Are they the Manhattanites who toil for 70 hours a week working to make ends meet? The secretary rushing to a medical office to care for her patients? The utility worker who is helping keep the city that never sleeps humming along?

If you're a subway rider, I guess you're elite.

I miss out. I don't ride the subway regularly. I ride PATH. That makes me sub-elite.

This is Gingrich's latest attempt at a cultural war, in that he's complaining about the publishing elites around New York City that haven't taken a liking to what Newt's offering. And with Donald Trump apparently spurring his entreaties and endorsing Mitt Romney instead of Newt, I guess that also includes Trump as well.

I guess Newt's idea of what makes a person elite is quite different than the rest of us. To me, an elite is someone who can pull down multimillion dollar lobbying gigs, and has walked the halls of power in Congress as speaker. That's an elite. A schlub who rents an apartment in a walk-up and spends his commute on the subway catching up on sleep while working 60-70 hours a week isn't elite.

That's the heart of what makes New York City beat.

Just Who Was President Obama Trying To Convince With Jobs Speech?

President Obama addressed a joint session of Congress in order to propose a jobs program but that doesn't mean that the speech was meant for consumption on Capitol Hill.

To answer that crisis, Obama was proposing what he called the American Jobs Act, which he said would cut payroll taxes in half for working Americans and most small businesses; boost spending on public works, like roads, by $105 billion; and make permanent a temporary cut in the individual tax rate, which was reduced from 6.2 percent to 4.2 percent for this year only.

Other political news of note
First Read: The CBO and short-term fixes

The Congressional Budget Office released a report in January that looks at some of the short-term policies the president might ask Congress to enact in his speech Thursday night.
Analysis: Perry takes the heat but keeps on smiling
Perry's Merck link in spotlight following vaccine order
Payroll tax cut likely hub of Obama's jobs plan
Congressional debt reduction panel kicks off

Obama calculated that the "typical working family" would get a $1,500 tax cut and that small companies with 50 employees would save $80,000, which he said would "provide a jolt to an economy that has stalled."

Obama didn't say how much the plan would cost, but advisers told NBC News it would run about $450 billion. Obama said he hopes to pay for it by closing corporate tax "loopholes" and by raising taxes on wealthier Americans.

"We need a tax code where everyone gets a fair shake and everybody pays their fair share," he said. "And I believe the vast majority of wealthy Americans and CEOs are willing to do just that if it helps the economy grow and gets our fiscal house in order."

Earlier this summer, Republicans forced a partial government shutdown over their refusal to raise any taxes at all, but Obama told them they should "pass this jobs plan right away," because "the millions of Americans who are watching right now, they don't care about politics. They have real-life concerns."

There were several constituencies he was speaking to. First, he had to craft a proposal for the public to hear and see that he's trying to do something. He had to propose something that Congressional Democrats might be able to work with. But then he has to deal with the reality that a jobs program and the funding for it will be dominated by the House Republicans, and they're in no mood to give the President anything, even if it means that people will remain out of work and that they want to see offsetting budget cuts.

The President attempted to speak to the public directly, but just how many people tuned him out, expecting the ongoing political stalemate to block anything from being accomplished. The thing is that the President is right - and Republicans are going to have to show more than merely blocking Obama to their constituents as a policy choice if they have a chance at winning in 2012. They need to show tangible proof of leadership and accomplishments to take home to their constituents.

Claiming that they blocked the President from enacting tax hikes may help keep the faithful in line, but it does nothing for the millions who are out of work or are in marginal jobs.

That said, did what the President propose have merit?

Absolutely. We do need to spend money on improving infrastructure. Maintenance costs money, but we can't keep treading water. We need to do more. Spending on infrastructure is a down payment on the future - not only improving current infrastructure, but putting a better infrastructure in place for future use. That goes to things like the power grid, rail systems, highways, bridges, and tunnels - but such projects should be focused on areas where the most benefit will be gained for the dollar (a cost benefit analysis and not merely dividing out monies based on what politicians can be bought off).

The speech then went on to discuss the merits of reforming Medicare and Medicaid to improve the solvency and long term outlook for those programs.

Eliminating tax loopholes is a good thing, except when it's your loophole they want to close. Such is the case when dealing with energy companies and other major corporations that can muster lobbyists to thwart such actions.

I think speaking past Congress to the public was a good idea, but it wont be enough to get Congress to act in a responsible way. The lure of elections in 2012 is far too strong and this crop of Republican leaders is more interested in expanding their political power than putting forth a responsible economic program of their own. Instead, they believe that the way to deal with the fiscal crisis is to pull the rug out of the safety net that protects millions of Americans.

That's not fiscally prudent nor responsible.

A Debt Limit Deal In the Works

I know that everyone's holding their breath over a handshake agreement on raising the debt ceiling and proposing spending cuts.

It should come as no surprise that the CBO has scored the latest proposal close to the previously announced Reid and Boehner plans.

Once again, it's heavily backloaded with cuts. It gets a staggered raise in the debt limit in exchange for $917 billion in cuts that are delineated over 10 years and possible additional cuts that may get superimposed. It seems to mirror the Reid deal in dollar value but like the Boehner plan, doesn't count the military as part of the reductions.

The agreed-upon plan would see $21 billion cut in 2012, $42 billion in 2013, and rise to $156 billion cut in 2021 to total out $917 billion in cuts over a 10 year period. Most of that is once again backloaded in the final years of the deal. There's another $1.2 trillion that might get added to that amount, but that isn't broken out in the deal because it's based on what a panel of Congress members will decide. That too will likely be backloaded in a similar fashion.

Once again, the CBO has to assume that the AMT doesn't get adjusted and that the Obama-extended Bush tax cuts are also allowed to expire (because that's the assumptions that the CBO must take in to account when figuring out revenues and spending on these bills - it must assume that the law will not be changed from as it in effect upon passage of the bill under consideration).

Raising the ceiling was never really in doubt beyond all the outrageous hyper hyperbole - and the two conferences would get something through, even if it was an interim measure. That's why I didn't really get worked up over the looming deadline, and I'm not particularly surprised that the deal is so heavily backloaded. When those spending cuts never materialize down the road, the country will be in as bad or worse fiscal shape - especially if the expiration of the Bush tax cuts once again gets put off and/or the economy doesn't turn around and we see significant economic growth.

Gaming the CBO Scoring on Debt Limit Talks

The Congressional Budget Office has released its scoring on two competing deficit reduction packages, and the results aren't good in either instance.

Rep. John Boehner (R-OH) would cut about $850 billion over the 10 years studied by the CBO, but only $1 billion is cut in FY 2012.

While the headline says that the Sen. Harry Reid (D-NV) plan will save more than twice what is included in the Boehner plan, the fine print shows that the bulk of those savings come from capping military expenses for Afghanistan and Iraq - and counting them towards the calculations. That savings is not likely to be realized either (for the same reasons that the Boehner plan fails IMO).

Both plans are seriously backloaded; though Reid's plan provides more up front cuts - $30 billion in FY 2012, $99 billion in FY 2013, $156 billion in FY 2014, etc. However, when you back out the nearly $1 trillion in Afghanistan and Iraq limits, the overall savings under the Reid plan still exceeds that of the Boehner plan, but only by about $250 billion (again mostly backloaded).

CBO scoring requires a 10 year outlook, so everyone games the cuts to be backloaded to maximize the savings that are never actually realized. Reid cuts more up front and that gives him a slight edge, but about half of his cuts are based on reductions in Afghanistan and Iraq spending.

Reid's proposal is just slightly less deficient than Boehner's plan. Both plans are heavily reliant on backloading cuts that anyone in politics knows will never actually occur because Congress will change its mind down the line.

Because the Reid proposal includes more cuts up front, I'd put Reid's proposal ahead of Boehner's plan.

Everyone's trying to delay actual cuts (both the GOP and Dem leadership) - because no one wants to deal with the structural budget situation since it would lead to cuts in programs that both sides actually rely upon.

News America Doesn't Need: Employment Figures Stink Up the Joint

The economy continues to be the top story as it has been since the real estate market and credit markets crashed. Employment figures remain in the doldrums and the recovery has been far slower and weaker than anyone could have hoped for.

The May and June figures give little reason to hope that a lasting recovery is in the offing.

U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dousing hopes the economy would regain momentum in the second half of the year.

Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists' expectations for a 90,000 rise.

The unemployment rate climbed to a six-month high of 9.2 percent, even as jobseekers left the labor force in droves, from 9.1 percent in May.

"The message on the economy is ongoing stagnation," said Pierre Ellis, senior economist at Decision economics in New York. "Income growth is marginal so there's no indication of momentum.

U.S. stock index futures fell sharply on the data, while U.S. bond prices rose. The dollar rose against the euro.

The government revised April and May payrolls to show 44,000 fewer jobs created than previously reported.

There's no way to put a positive spin on any of this. Job creation is key to a recovering economy, and the lack of jobs means not only that the unemployment rate isn't going to improve, but that businesses aren't seeing the kind of expansion and growth that would spur them to hire more people.

This is bad news for the Obama Administration, which needs the economy to recover in order to convince voters that he deserves a second term in office, but the GOP isn't exactly offering anything more than demagoguery. The real estate morass is the real impediment to a lasting economic recovery, and it will take years to see the effects of the foreclosures and lost real estate values be assumed by the parties to those transactions (and by the taxpayers who have picked up additional losses in a vain attempt by politicians to stabilize the markets).

There are no easy answers and there are no silver bullets that will automagically create millions of jobs or bring back the construction industry and related industries that were lost because of the real estate crash. A new stimulus package wont solve matters either, and the prior stimulus package (ARRA of 2009) spent hundreds of billions on transfer payments to states to prop up state budgets that were crashing down under massive deficits rather than pumping hundreds of billions of dollars into infrastructure investments as was claimed. Had that money gone to true infrastructure projects, we might see more of a recovery in the construction industry. Alas, that was not to be.

Instead, we'll continue to see the economy limp along despite the best and worst intentions of politicians across the political spectrum.

Wishful Thinking Permeates Budget and Deficit Talk In DC

President Barack Obama gave a good speech yesterday that appeared to draw a line in the sand that he would not give a further extension to the EGTRRA/JGTRRA tax cuts that he extended through 2012 for high income Americans. It was essentially his opening salvo in the 2012 presidential campaign, but I found it curious that he claimed that by not extending those tax rate cuts, that he would reduce tax spending by $1 trillion over the next decade.

Eliminating tax cuts are not a reduction in tax spending. They are a tax hike on those affected. It's a semantic argument, and it does relate to how he views income and tax policy.

But more to the point, his plan is full of wishful thinking. For starters, his plan would assume that he's going to win the Presidency in 2012 and that Congress would see things his way and allow for the programmed tax increases to occur - where the rates that are now currently 33% and 35% would rise to 35% and 39.6% respectively. If that were to occur, it's the only part of his deficit reduction package that can be accurately scored for the year it takes effect - Congress and his successor in the White House can adjust the rates and other tax policy items as they see fit, and they can therefore reduce or increase the deficit.

He further couched a significant portion of the deficit reduction in the form of tax simplification, which is something that both sides of the aisle have been clamoring for - except when it comes to their pet projects/constituencies. The rest of his deficit reduction plan consists of betting that the tax hikes and reducing spending around the fringes will result in $1 trillion less in deficit in the form of interest on debt. If those spending reductions don't materialize, the deficit will increase above and beyond what they're claiming will happen.

True tax simplification would eliminate the AMT and merge it in with the existing standard tax calculations since it would eliminate the annual dance in Congress over adjusting the AMT threshold for inflation. The CBO routinely scores legislation based on the law as in effect, and that means that the AMT scoring is routinely off because it doesn't reflect the fact that Congress changes that law annually. Tax simplification means that credits and deductions should be eliminated and the rates reduced to result in a revenue neutral proposal, but Democrats are likely to want the rates increased to increase revenue - that's the true battle here (whether to tackle tax simplification as a revenue neutral matter or as a way of enhancing tax revenues - as an increase in the marginal rates paid by taxpayers).

Most of the rest of the President's deficit reduction plan is based on assumptions and actions that will take effect long after his presidency is over - whether he is out of office in 2012, or whether he wins through 2016.

For the GOP, the plan proffered by Rep. Paul Ryan is little more than slash and burn of programs regardless of whether they serve the greater good and are effective programs or not. Cutting programs such as earthquake and tsunami detection systems to save even $100 million is foolhardy especially considering the Japanese experience where a few moments to minutes notice saved countless lives in a devastating 9.1 earthquake last month - and such measures could reduce damage by billions of dollars if equipment is shut down to protect it against damage.

Gutting clean air and water programs wont bring back jobs, but it will make the air and water much dirtier and contribute to higher health care costs, which is another area in which the President hopes to bring about savings in how Medicaid is funded.

Reducing the social safety net isn't going to bring about the kinds of savings that the GOP hopes for either - it merely shifts the burdens on to localities and the families that are planning for having those programs in place as they enter their retirement years.

Also, all these plans rely on not having to wage further wars overseas or natural disasters that require massive infusions of federal funds to help recover from the damage. The US is regularly hit with major natural disasters, and whether it is a hurricane battering the Southeast or the West Coast being overdue for a major earthquake, it's bound to happen and will throw budget projections off.

Taking the Iraq and Afghanistan wars off the table (as in seeing the money being spent removed from the books at their conclusion) may well help reduce the deficit over the long term - but that's only if the money isn't spent elsewhere. With the US reducing its role in Iraq in 2011, 2012 and beyond, and the US role in Afghanistan up in the air, spending on those two conflicts is likely to continue to decline going forward. That doesn't mean that the money can and should be spent elsewhere- it means that it should not be spent at all.

A Path To Fiscal Responsibility

A path to fiscal responsibility will not come from following the inane (insane) $500 billion cut in discretionary spending proposed by Rand Paul, who pretty didn't find a program or department he couldn't cut by billions of dollars.

No, a path to fiscal responsibility means coming to terms with the fact that there are government programs and departments that engage in essential business - whether it is public health like the CDC or the NOAA in predicting weather and climate and their impact on the economy.

Paul would impose massive hardships by reducing/eliminating funding for all kinds of agencies throughout the federal government without regard to the repercussions.

He would cut funding for the National Oceanic and Atmospheric Administration (NOAA) by 36%, claiming that the agency has gone off mission by looking at economic impacts from climate changes. How exactly is studying the climate and economic effects is off-scope? Weather related events cause billions of dollars in damage annually. Knowing how that happens, and how to work towards predicting severe weather events is... umm... the core mission.

Next, Paul would like to see the Department of Energy eliminated, even though the Department's not just tasked with regulating oil prices. It is to develop alt-energy and find ways to improve energy efficiency and now is responsible for the nation's nuclear weapons program, nuclear reactor production for the United States Navy, energy conservation, energy-related research, radioactive waste disposal, and domestic energy production.

DOE also sponsors more basic and applied scientific research than any other US federal agency; most of this is funded through its system of United States Department of Energy National Laboratories.

Not only is there no chance of eliminating the agency, but it would directly affect and undermine US national security by reducing our ability to maintain and upgrade our nuclear deterrence and nuclear infrastructure (including aircraft carriers and our ability to protect our interests around the world). Of course, Paul would cut foreign assistance to nothing and leave our allies hanging, so this is all part of a grand strategy to neuter the nation, which is something we can simply not afford.

Yet that doesn't mean that the government can't find places to cut and reform shouldn't be undertaken.

Even the President acknowledged the need to cut bloated agencies and bureaucracies that make no sense (from the SoTU Transcript):

We live and do business in the Information Age, but the last major reorganization of the government happened in the age of black-and-white TV. There are 12 different agencies that deal with exports. There are at least five different agencies that deal with housing policy. Then there’s my favorite example: The Interior Department is in charge of salmon while they’re in fresh water, but the Commerce Department handles them when they’re in saltwater. (Laughter.) I hear it gets even more complicated once they’re smoked. (Laughter and applause.)

Now, we’ve made great strides over the last two years in using technology and getting rid of waste. Veterans can now download their electronic medical records with a click of the mouse. We’re selling acres of federal office space that hasn’t been used in years, and we’ll cut through red tape to get rid of more. But we need to think bigger. In the coming months, my administration will develop a proposal to merge, consolidate, and reorganize the federal government in a way that best serves the goal of a more competitive America. I will submit that proposal to Congress for a vote –- and we will push to get it passed. (Applause.)

That addresses one side of the fiscal picture - spending, but the other side - revenue generation - needs reform as well.

It means making difficult choices, but it also means addressing the insanity that is the current tax code (Title 26 of the USC). It's out of control, and both sides of the aisle have repeatedly stated that they would be open to the idea of tax simplification.

Not only would simplification allow a more rational tax policy and ease compliance, but it would eliminate many of the distortions to various markets and economic decisions. It would also allow the end of various gimmicks and the dreaded alternative minimum tax (AMT). The CBO's Doug Elmendorf notes:

Deficits should shrink to about 3.6 percent of GDP, starting next year and for the next several years, he said. But that will occur only if Congress does three things which both Republicans and Democrats are reluctant to do:

* Allow the alternative minimum tax to bite more and more middle-class people. (Congress has repeatedly passed one-year AMT “patches” to keep the tax from affecting the middle class. It has a big impact especially on taxpayers in relatively high-income states with high state taxes, such as Maryland and New York.)
* Raise taxes on upper-income people by reverting to the pre-2001 income tax rates. (Obama and Congress agreed to a two-year postponement of this tax increase, but Obama renewed his call for the tax hike on Tuesday night.)
* Curb the annual increase in Medicare’s payment rates for physicians, to bring them into line with the inflation rate in the wider economy. Again, Congress has repeatedly passed temporary “doc fix” bills to shield doctors from these cost curbs.

If Congress can’t find the will to do those three things, Elmendorf said, deficits from 2012 through 2021 would average about 6 percent of GDP and debt would rise to a level not seen since right after the Japanese signed the instrument of surrender on the battleship Missouri.

The CBO provides projections based on existing law, rather than what the law could be after Congress gets done making hash of the tax code.

Instead of trying to expand the AMT to hit a higher percentage of taxpayers that were never intended to be included, we need to eliminate this tax altogether and wrap them back into the existing tax code. I've written extensively on this, and such a reform would reduce burdens on all taxpayers trying to file returns and inserts common sense into the tax code in a way that we haven't seen in more than a generation (since 1986 when the code was last revised).

Sizing Up A Legendary Lame Session

It's typically understood that a lame duck session doesn't result in significant or notable outcomes. Legislators typically attempt to wind down the session with bills that are still pending.


Usually, significant legislation doesn't pass.

In fact, the 20th Amendment was supposed to eliminate lame duck sessions, but that Amendment hasn't worked out as its backers had envisioned.


The usual outcomes don't apply to the ongoing Congressional lame duck session. In fact, this is shaping up to be a legendary and historic lame duck session because of the issues being tackled.

The era of don't ask, don't tell is about to end as legislation repealing 10 USC 654, the statute that prohibits gays and lebsians serving in the military, awaits President Obama's signature. After the November election, this was not an outcome one would have expected and it is to the credit of its backers that they persevered to get it done.

Congress passed a two-year extension of the Bush tax cuts, which again wasn't a done deal.

The Zadroga 9/11 compensation package for the Ground Zero workers is still pending, and its backers are hopeful for its passage. The START treaty is also pending, and it is possible that the treaty will not go before the session and instead it will be taken up in the new Congress. The same can't be said for the DREAM act. That bill is not going to pass.

What Will Happen To Expiring Bush Tax Cuts

Under President Bush, Congress enacted a series of tax cuts in 2001 and adjusted in 2003. Those tax cuts expire after December 31 of this year and the rates will revert to those in effect prior to 2001. That means significant and hefty tax hikes for all Americans.

Congress has not acted to sort out this mess and it will be left to the lame duck session to deal with the issue. At stake are hundreds of billions of dollars - both in terms of tax revenues and in income that taxpayers can hold on to.

The Times sets out a bunch of possible outcomes, but emphasizes that the tax cuts are costing the government hundreds of billions, rather than noting that the tax cuts put more money into the pockets of the taxpayers.

Of the possible outcomes, the most likely to occur is the punt - the lame duck Congress will simply extend the status quo (rates in effect for tax year 2009) for another year or two. I don't seem them making a quantitative and qualitative change to the tax structure.

What would potentially make quite a bit of sense is one that addresses both the AMT and tax rates for high income taxpayers. A new bracket could be created for taxpayers at a 45% rate (or 40% depending on the income threshold, which could be anywhere from $1.5 million to $5 million) - and no deductions, credits, or exemptions. For taxpayers now making $250,000 to that $1.5 million (or up to $5 million), they would see limited deductions, credits, and exemptions and a 35% rate. Keeping the other rates and income levels as they are would provide stability for tax planners, begin the institution of tax simplification that makes it easier to comply with the tax code, and improves compliance.

In other words, one possible implementation could be a 40% rate from $1.5 million to $5 million; 45% for $5 million or more, both subject to no credits, deductions, exemptions, and no AMT. Or, it could be 45% from $1.5 million and limited credits, deductions, and exemptions for taxpayers making up to $5 million.

At the same time, the dual nature of the AMT could be eliminated in one fell swoop as the tax systems are rolled into one method that eliminates needless complexity and annual battles in Congress to adjust the AMT for inflation. Currently, the top tax rate is 35% on incomes over $373,650 with multiple credits, deductions, and exemptions that serve to reduce the effective tax rate significantly.

This simplification and clarity on high income taxpayers could lead the way to simplification at the lower tax brackets. Since it would eliminate the complexity in calculating tax due, compliance would increase and tax avoidance would be reduced - both serving to increase tax revenues without having to adjust rates further.

What Happens If Republicans Win Big And Nothing Changes?

Republicans are looking like they're going to regain control over the House of Representatives and a slim chance at winning control of the Senate. A divided Congress would mean that the only way that key legislation could get through - and that includes the budgets, military appropriations, etc., is on the basis of compromise.

Such compromise isn't exactly in the vocabulary of the Tea Party voters who are trying to send a message to Washington that the status quo is unacceptable. Their candidates that do get elected will quickly find themselves in a position of having to vote on measures that should deserve their vote.

These are candidates who have overpromised change and fiscal responsibility, but which will get a bitter lesson in the fiscal realities of the federal government. They may hope to overturn the health care legislation enacted earlier this year only to find that they lack the votes or wherewithal to get that legislation passed through Congress, let alone obtain sufficient votes to overrule a Presidential veto that would surely come with such efforts.

They may hope to cut funding on social programs, but find that they again run into the same political realities.

That, in turn, may result in a moderation of the party leadership into a more pragmatic view towards the long term. What this may do to the Tea Party is nothing short of causing apoplexy.

In other words, just as Republicans once painted Democrats as socialists, Marxists, and communists for their health care plans and takeover of whole sectors of the economy - the reality turned out to be quite different. Democrats did make hash of the health care reform (as I've repeatedly pointed out problems with the legislation that actually impose higher costs on consumers - not reduced costs as promised).

Now, we've got Democrats painting Republicans as extremists and the reality may turn out to be quite different.

Or one could hope.

If the Republicans do indeed turn out to be far more radical in their policy shift than their public persona - the Tea Party - then we will face a far more acrimonious two-year period running up to the 2012 elections than in any recent election.

So, what would happen if the Republicans don't win the majority in the House, and fail to take the Senate. Then all bets are off as to what the Tea Party would do. They would probably riot against the Republican leadership and blame the leadership for failing to win the votes rather than finding that the real fault lay in truly flawed candidates who were incompetent, racist, and blowhards, out-of-touch with reality, and far more radical than their constituencies (all voters, not just party faithful).

House Democrats Punt on 9/11 First Responder Bill; Senate Moves Ahead

This time, there's absolutely no ambiguity over who is to blame for again failing to address and pass a first responder medical assistance package. Democrats have delayed the vote once again, even though there were signs that it would have been done this week. Democrats are claiming that the want a pledge from Republicans to not attach an anti-illegal immigration provision to the bill.

That follows yesterday's surprise announcement that the Senate would attach the provisions to the military funding bill. The $7.4 billion package, named after James Zadroga, would provide medical treatment and assistance for Ground Zero responders suffering from medical ailments that can be traced to the responders' work at Ground Zero.

However, even the Senate version isn't a done deal given that the Democrats attached a provision to end "don't ask, don't tell" and another provision that would grant kids of illegal immigrants a chance at citizenship if they are in the armed services or college which has Republicans upset.

That's all despite the fact that a new slew of studies have found that those firefighters who worked at Ground Zero have four times worse lung capacity than those firefighters had before the 9/11 attacks. Children living in Chinatown have an increased susceptibility to lung ailments, and one study even noted that a group children born to women who were pregnant on 9/11 suffered from a wide range of ailments that are seemingly linked to the exposure to contaminants released in the collapsing towers.

In other words, good legislation that would ordinarily pass with widespread support is being used as a political football by both parties to attach (or threaten to attach) more offensive and controversial legislation.

Some legislation should be above this kind of petty politics; this is one of those situations.

NBER Says Recession Over, But Woes Remain Prevalent

The independent body that determines when the nation is or isn't in a recession has declared that the recession ended June 2009. The NBER, which said that the recession began November 2007, announced today that the longest post-World War 2 recession ended in June of 2009.

That's both good and bad news.

Here's the good news - we should be seeing improved economic conditions.

Here's the bad. We aren't, and moreover, the so-called stimulus package had nothing to do with ending the recession or improving the economy as the proponents had long claimed (or more like hoped).

The ARRA of 2009 (the stimulus package) was passed in February 2009. The recession ended in June 2009. That means that only a fraction of the package was spent in four months - and that the economy was already improving even as the ink was drying on the stimulus package according to the NBER, which made the determination that the economy was growing sufficiently to call the recession over in 2009.

Now, the economic conditions are ripe for a double-dip, and the growth has been tepid even as unemployment remains significantly higher than the pre-recession levels. Throw in the ongoing real estate woes, and the economic situation remains extremely troublesome for the White House and Democratic chances to maintain their strong majority in Congress. So, while Wall Street has managed to recover quite a bit of the losses from the lows, it is still about 40% lower than its peak levels before the recession.

It's little wonder then that President Obama is busy trying to convince the American people that his policies have led to improvements, but you can't point to his economic policies when there was an upward trajectory before his centerpiece bill - the ARRA of 2009 - was enacted.

Some parts of the country are still mired in the depths of a recessionary environment, while other areas are slightly more stable. States that led the way with foreclosures and the real estate bubble burst are still in dire shape. That includes Florida, California, Arizona, and Nevada. California, Illinois, New York, and New Jersey are still battling massive deficits.

The real estate bubble still needs to deflate in some parts of the country and people aren't spending because they are worried that the other shoe is going to drop.

The stimulus package papered over those problems for one year, which means that the structural deficits remain in those cases and the lack of political will means that those states are not going to take meaningful action to close budget deficits and rein in spending as they must for long term stability.

Higher State Tax Collections Don't Offset Serious Problems That Remain

My alma mater has released a report on the state tax revenue collections, and while the Wall Street Journal highlighted the fact that the state tax revenues were up year over year, the reason for the increased revenues was that those states raised tax rates to achieve the gains.

The states did not see organic growth in tax revenues. Instead, these states saw gains only after imposing higher tax rates.

And there are several high profile states that continue to see declining tax revenues, even with the higher taxes. Meanwhile, corporate income tax collections remains off as sales and personal income tax collections have moderated.

The second-quarter gains were driven by growth in sales and income taxes, both of which have been raised in many states. Second-quarter sales-tax revenue increased 5.9% in the 47 states surveyed by the Rockefeller Institute, while the take from personal income taxes grew 1.6%. Collections from corporate income taxes, which tend to be volatile and are just a small slice of most states' collections, fell nearly 19% over the period.

Some 30 states saw tax revenue in the second quarter rise from a year earlier. Many of the strongest performers were places where collections were hard-hit by the recession. Florida saw a nearly 14% increase. Arizona—which, like Florida, has been among the states most affected by falling real-estate prices and lackluster construction activity—saw a 3.9% increase.

Still, revenue declined in several big states. In California, tax revenue declined 0.9%, despite a nearly 12% increase in income-tax collections largely driven by higher taxes, according to the Rockefeller Institute. Illinois saw revenue decline 7%, while Michigan's collections fell 3.8%.

Farce on the Hill

A pox on both the House Democrats and Republicans.

The Republicans deserve scorn and derision for their abject failure to support a measure to provide assistance and compensation for Ground Zero workers who toiled on the pile and were sickened by their service to recover the remains of nearly 3,000 people who were pulverized by the collapsing Twin Towers.

The Democrats had put forth a measure that would have provided $7.4 billion to compensate sickened workers, expanded the Victim Compensation Fund, and provided medical care. The bill fell 255-159, largely along party lines. It required a 2/3 passage. 95% of Democrats voted for the bill and 98% of Republicans voted against it. The roll call tells the tale of this measure. And among those who voted no was NJ Rep Scott Garrett (R), who knows or should have known that this would directly affect some of his constituents adversely - because his district encompasses part of Northern New Jersey and whose citizens were affected by the attacks directly.

That's absolutely insane, especially when President Bush, in the days following the attacks, asked Sen. Chuck Schumer, the senior senator from New York, what was necessary, and the President promised everything that the state needed it would get.

The same courtesy should have been extended to the workers who toiled to recover the remains of nearly 3,000 people and the debris that showered down all over Lower Manhattan. Nearly nine years later and the country is still treating these workers little different than the Soviet Union did the liquidators who toiled to put out the fires and enclose the nuclear reactors at Chernobyl.

Meanwhile, Democrats and their leadership deserve to take all the scorn and derision for their continued support and protection of corrupt Democrats, the latest of which is Rep. Charles Rangel, the senior Democrat from New York. The findings by the ethics panel reflect the news reports for more than two years that show just how Rangel gamed the system to his advantage and steadfastly refused to abide by tax laws of the local, state, and federal levels (and where at the federal level he was in charge of setting tax policy as Chairman of House Ways and Means), didn't feel that he was subject to rent stabilization laws, ignored ethics rules and guidelines, and generally treated his position as an entitlement and in the process disrespected his constituents.

The leadership refused to move against him in 2008, fearing that it might anger the Congressional Black Caucus (which is essentially a subgroup of Democrats in Congress). Instead, they let him keep his chairmanship until earlier this year when the evidence became such that even the leadership could no longer ignore the festering problem. That it's taken more than two years to act on this ethics probe shows the unseriousness that Democrats had to cleaning up the swamp of corruption in Congress (which is just as bad as when the Republicans were in charge).

In fact, both instances show that neither party should be trusted with power. The party out of power thinks that they can act as irresponsibly as they want without repercussion to their actions while the party in power thinks that they can act with impunity and without regard to the will of the people or in disregard to the law.

A pox on both their houses.

UPDATE:
Republicans claimed that their opposition was on procedural grounds.



Rep. Anthony Weiner was right in being outraged over the failure to pass this legislation. Rep. Peter King, one of the few Republicans to vote for the measure also castigated his fellow caucus.

UPDATE:
Some are calling Weiner's righteous rant on the floor the wailings of a 4-year old whose video game was taken away claiming that this was a vote on the merits against watered down legislation. Nonsense. That's not what the legislation contained and anyone who paid attention to what was in the legislation would know that.

UPDATE:
Gothamist has more on the contentious floor debate over the 9/11 workers bill.