Disclosure: I'm advising Open Left in a paid capacity on procedure with regard to the Wall Street reform bill.
Among the many issues still unresolved in the Wall Street reform conference negotiations, there's one that stands apart as a sort of meta-issue, in that it's not a policy item in its own right, but can and most certainly will have an impact on the substantive content of the bill and its chances of passing.
The problem arises from the Republicans' unhinged screeching this spring about the $50 billion contingency fund -- paid for in advance by the country's largest financial institutions themselves -- that the bill's architects wanted to establish as a safeguard against future bailout costs. Republicans, in their desperation to deny Democrats any kind of win, simply squealed that the fund itself was the exact opposite of what it was -- that is, that it was a taxpayer-financed bailout. Completely backwards on the facts, but to no one's surprise, Democratic leaders caved anyway, and the fund is gone. Without it, though, the Congressional Budget Office (CBO) no longer scores the Wall Street reform bill as fully paid-for and imposing no net costs on the government, since any future bailout needs now leave the government exposed to having to lay that money out itself, should the need arise. A brilliant bit of fiscal conservatism!
But it works strategically for the Republicans in this case, and here's why: without the fund, the bill is no longer budget neutral, and that means it's subject to the PAYGO rules, and if the problem isn't rectified, a point of order on the Senate floor can stop the bill's progress unless they can get 60 votes to waive it -- just like we saw happen this week with the tax extenders and unemployment insurance bill.
Now, no doubt the plan is to find a way to patch this hole in conference, so that the conference report can avoid this problem. But things don't always come out as planned. But it also means that we'd do well to keep a close eye on exactly what the conferees are proposing in terms of making up the difference. As I've explained in past installments in this series, it's not that easy to influence the conference from the outside as grassroots activists. And this could turn out to be a particularly ticklish issue, since it'll be fast-moving, and no matter what solution is finally settled upon, it'll be sold as absolutely necessary to ensure the viability of the overall bill. That'll likely be an accurate description of the environment, too, which is something that creates leverage for inside operators that all too often comes at the expense of progressives, who typically fall in line behind the "we've got to pass this thing and get a win" argument.
I'm just not a financial regulation policy guy, but it might be wise to start hunting around for acceptable proposals for filling that pay-for gap, and get proactive about suggesting progressive ways to do it.
Senator Tom Coburn, a Republican from Oklahoma, is committed to opposing a supplemental spending bill that includes $33.5 billion to escalate war in Afghanistan, unless the funds to pay for it are found.
On May 10th Senator Coburn wrote to his colleagues asking for their support for an amendment that would offset the new spending in this bill with cuts elsewhere. I spoke on Monday with Senator Coburn's communications director John Hart who assured me that Coburn intends to oppose the supplemental spending bill unless such an amendment is passed.
The day after ramming through nearly $100 billion more for wars and $100 billion in loans to European banks through the IMF, the majority leader in the U.S. House of Representatives, Steny Hoyer, introduced a "PayGo" bill, requiring that any spending be paid for with cuts in other spending. But having this law on the books would not have stopped the previous day's legislation. War "supplemental" bills are deemed "emergencies" and an exception is made for them. And lending money you don't have and can't be sure of getting back, through an unaccountable organization with a record of damaging those it claims to help, is not considered spending at all.
On Tuesday President Obama proposed that any increases in federal spending on anything useful, such as healthcare or retirement security, must be balanced by cuts and savings to something else useful, such as healthcare or retirement security.
"The pay-as-you-go rule is very simple," Obama said. "Congress can only spend a dollar if it saves a dollar elsewhere." Except that it's not so simple. Obama would make an exception to allow Bush's tax cuts for millionaires to be extended past their 2010 expiration date, as well as to prevent the alternative-minimum tax from impacting the overclass. Still, the White House insists that everything is very simple:
I've long maintained that the Blue Dog caucus is basically a frat of white Southern men, with 88% of the caucus white and 88% men. The Blue Dogs themselves argue that the group is dedicated to balanced budgets and PAYGO rules, as the group says on its website: "The Coalition has been particularly active on fiscal issues, relentlessly pursuing a balanced budget and then protecting that achievement from politically popular "raids" on the budget."
Tucked into tonight's debate was a little noticed statement from Obama about fiscal responsibility and what he'll have to cut. He talked about how the country needs to live within its means and so he supports PAYGO, but importantly, also said we'll have to get back to that after we get through these rough economic times. I don't have the exact quote but it's very good news that he supports a Keynesian stimulus, and hopefully he'll be able to bring the Blue Dogs along. They want to renounce the stupid PAYGO rules, because making all policy revenue neutral prevents obviously good investment choices like bonding out government revenues to build mass transit, new energy systems, etc.
The first discussion of any import within the new Democratic caucus will take place on November 17, when the caucus decides the rules they will vote on in January. Those rules may include PAYGO or they may not; hopefully if they do include PAGYO there will be exceptions for investment activities that will eventually produce revenue. Good news, tonight. I didn't like the embrace of clean coal or Obama's stepping on progressive interest group aims as he did with charter schools and tort reform, but then, that's been consistent with his platform all along.
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