Following the tax cut agreement, there was a little boomlet of economic happy talk. Retail sales are looking good, too. But even now reality is starting to sink in. Last week, in "Dean Baker takes a look at the stimulus that isn't there", we saw just how small the actual economic stimulus was, given that most of it was simply continuing existing law, along with other limiting factors. As I quoted him, Baker concluded:
In sum, the net stimulus for the economy from this package in 2011 will be in the range of $70bn, or about 0.5% of GDP. This is not likely to provide a substantial boost to growth.
Chris, the history of Republics is they average 200 years of life, and they all fail in history over fiscal matters. They rot from within before they collapse."
Rot from within? Yes. Fiscal matters? Not so much. More like elite coups. Oligarchs and tyrants. Guys like Tom Coburn, in fact. "In order to save the republic, it was necessary to destroy it."
Even more serious is the proposed plan to push states into bankruptcy, in order to break public employee unions. The "incidental" financial wreckage could easily wipe out any sort of stimulative effect. D-Day had a new piece up at FDL yesterday discussing this.
"But all this is just political speculation!" I can just hear the cry. True enough. But what evidence is there that Democrats will do anything effective to fight back? Moreover, the housing news--from the sector where most of middle-class America's wealth resides--is not at all encouraging, as highlighted by two items from the BUILDER Pulse Newsletter from builderonline.com.
Home prices won't show any year-over-year appreciation in 2011, according to the latest average of 110 forecasts from economists and housing analysts surveyed by MacroMarkets LLC.
The survey shows that economists expect home prices to fall by 0.17% in 2011 as measured by the S&P/Case-Shiller index of home prices in 20 U.S. cities. The average forecast for 2010 calls for the Case-Shiller index to ultimately show that home prices ended the year down 1.13%.
Overall, economists expect home prices to rise by 7.2% over the five-year period ending in 2014. In May, that forecast called for a 12% rise in prices over the span.
Some 96 analysts surveyed made their forecasts public. Of those, 30 expect prices to fall next year, and another 30 are calling for annual home price appreciation of no more than 1%. The most bearish forecaster, A. Gary Shilling, president of A. Gary Shilling & Co., calls for prices to fall by 11% in 2011.
Normally, or historically, a new home sale occurred for every six resales. But who remembers normal? The ratio now has drifted to one new for every 16 existing home sales, and that ratio is not likely to decrease anytime soon, as the number of distressed or foreclosure sales expected to hit the market in the next 18 months may range from 3 to 8 million.
Here is an update to a graph I've been posting for several years. This graph shows existing home sales (left axis) and new home sales (right axis) through November. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Then along came the housing bubble and bust, and the "distressing gap" appeared (due mostly to distressed sales).
Initially the gap was caused by the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn't compete with the low prices of all the foreclosed properties.
The two spikes in existing home sales were due primarily to the homebuyer tax credits (the initial credit in 2009, followed by the 2nd credit in 2010). There were also two smaller bumps for new home sales related to the tax credits.
Throughout the 1980s, Democrats were chastized for being too concerned about the poor. They needed to be more "business-friendly". But there never was any clear dividing line between the poor and the middle class, as the Great Recession finally brought home. Now Obama's "business-friendly" administration has left tens of millions in the middle class to sink on their own, and--most likely--the hopes of an entire nation with them.
Germany is a power on the rise. Unlike much of the Western world, the country's economy is humming along as if the Great Recession had never even happened. Indeed, in the last quarter German GDP grew by a heady 2.2.%. This was the highest growth rate since the Berlin Wall fell two decades ago.
German employment is also holding up. At 7.6% in August 2010, German unemployment is actually lower than it was before the Great Recession. For those familiar with the depressing figures of American unemployment, this is quite shocking. How did Germany do it?
Tens of thousands of Americans rallied for jobs and justice at the Lincoln Memorial in Washington, D.C. on Saturday. Organizers say that 175,000 people turned out for the One Nation Working Together rally, which was organized by labor unions, the NAACP, and other progressive groups. In an interview with GritTV's Laura Flanders, AFL-CIO president Richard Trumka, a leader of the One Nation coalition, summed up the agenda: "Jobs, jobs, and more jobs."
America isn't working
In total, 8 million jobs have been lost in this recession and 2.5 million homes have been repossessed. According to the official figures, about 10% of Americans are unemployed. The true number may be much higher because the official stats don't count those who have given up looking for work. In AlterNet, NAACP President Benjamin Todd Jealous, another featured speaker at One Nation, points out that the black unemployment rate is nearly twice that of whites. Another 11 million Americans are underemployed, according Trumka.
No end in sight
An already bleak job market is about to get even bleaker. Last week, Senate Republicans scuttled a popular emergency fund to create jobs and an extension of long-term unemployment insurance benefits, as Andy Kroll reports in Mother Jones.
Steve Benen of the Washington Monthly offers more details on the now-defunct job creation program known as the Temporary Assistance for Needy Families (TANF) emergency fund. The fund provided cash to create jobs in the public and private sectors. Over 240,000 people in 32 states and the District of Columbia worked at jobs created with TANF subsidies. Last week, Senate Democrats lost their fight to extend the program for another 3 months. With the TANF money gone, layoffs will soon follow.
The Department of Labor will release the its monthly unemployment statistics on Friday. One group of independent analysts predicts that September's unemployment rate will be higher than the previous month, according to Brian Beutler of Talking Points Memo. Unemployment rose from 9.6% in July to 9.7% in August and experts surveyed by Bloomberg News expect the trend to continue. It's doubtful that the economy produced enough new jobs to make up for all the census workers whose temporary jobs ended.
Job skills for America
On the bright side, President Barack Obama is scheduled to unveil a new job training program this week, Annie Lowrey reports in The Michigan Messenger. The program is called Skills for America's Future. The goal of the project is to encourage partnerships between community colleges and corporations. Colleges and companies will work together to identify areas of rapid job growth and train students to fill those jobs. So far, five companies have agreed to participate in the program, including the Gap., Accenture, United Technologies, PG&E and McDonald's.
Lowrey argues that this kind of training program will do little to help unemployment in the short term. Right now, companies aren't hiring because there's an economy-wide lack of demand, not because they can't fill positions for lack of trained workers. Demand is low because unemployment is high. Quite simply, people buy less when they don't have jobs, or fear that they will lose their jobs. It's a Catch-22. The jobs won't come back because not enough people have jobs.
Food stamps are stimulus
At the most basic level, an economic stimulus package is designed to break the no jobs/no demand/no jobs impasse by injecting large amounts of cash into the economy. Extending unemployment benefits makes for very effective stimulus because the unemployed typically spend their money quickly. Food stamps are another very efficient stimulus because recipients redeem them right away. To give you some indication of how quickly, consider the Wal-Mart at Midnight effect, which Lowrey discusses in the Washington Independent.
Wal-Mart managers are noticing that increasing numbers of customers are buying staples like bread, milk, and baby formula at midnight on the first of the month. That's because state governments directly deposit welfare and food stamp benefits into debit accounts at midnight. Wal-Mart says it brings in extra staff to keep up with the influx of customers during this period.
By contrast, tax cuts are an inefficient stimulus, especially if the cuts go to people who are already wealthy. In tough times, people who already have everything they need may prefer to save their extra money instead of blowing it on luxuries. Rich people will not throng Best Buy at midnight on tax refund day, no matter how big their checks are.
The high cost of economic inequality
It would be nice to think that unemployment is part of a cyclical downturn, but there is mounting evidence that short-term unemployment is a symptom of a deeper problem: pervasive and growing inequality. Sam Petulla of the American Prospect interviews economist Jacob Hacker and political scientist Paul Pierson about their new book, Winner Take All Politics: How Washington Made the Rich Richer and Turned its Back on the Middle Class.
The authors note that the U.S. has greater inequality than other industrialized countries. Since the 1970s, the richest Americans have gotten much richer while the rest of us lagged further behind. The authors found that almost 40% of household income gains from 1979-2007 went to the richest 1% of households. The trend is accelerating: the top 1% of households pocketed over half of the economic gains of the 2000s. Hacker and Pierson blame tax cuts for the wealth, lax financial regulations that allow the wealthy to rake in unprecedented profits, and stagnating middle class wages for the widening gap between the ultra-rich and the rest of society.
This brings us back to the old demand/jobs paradox. Contrary to the platitudes of trickledown economics, shoveling an ever greater share of society's resources to the ultra-rich doesn't make everyone else better off. Shocking, right?
Right wing economists say that letting the ultra-rich accumulate still more wealth is good for the economy as a whole because the rich have more money to invest in businesses, which are the main source of jobs. The ultra-rich aren't stupid, however. They aren't going to start businesses unless they foresee demand for goods and services; and everyone knows that demand is flat because there are no jobs. Trying to stimulate the economy by making the rich richer is like shoving money into a black hole. The tried and true way to end a recession is to create jobs and provide social services for people who need the money enough to spend it.
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The economy is terrible. Jobs are nowhere to be found. Wall Street bonuses are through the roof. But mainstream business journalism is still praising the con-men who created this mess, yet attacking anybody who takes real solutions-like government spending to create jobs-seriously.
Surprise! Surprise! The stimulus worked! Only problem was it was far too small. That's the message form the latest CBO report on the stimulus (aka the American Recovery and Reinvestment Act [ARRA]):
CBO estimates that ARRA's policies had the following effects in the second quarter of calendar year 2010:
They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,
Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,
Increased the number of people employed by between 1.4 million and 3.3 million, and
Increased the number of full-time-equivalent jobs by 2.0 million to 4.8 million compared with what would have occurred otherwise.
At one level, this simply confirms what Paul Krugman said right at the start--the stimulus was too small (a huge number of economists agreed with that part) and the Democrats were making a huge political mistake, because they'd never be politically able to pass another major stimulus bill to make up for how far it fell short.
Yet, at a deeper level, that's only part of the problem, since "restoring the economy" to its pre-recession level would only have meant recreating a sick, sick, sick economy that was inevitably heading for a crackup. The following chart of housing prices--via Baseline Scenario based on data from Robert Shiller--shows, among other things, just how anomalous and unsustainable the pre-crash economy was, given that housing asset prices were sustaining spending at levels well above people's incomes:
What this inevitably points to--especially in light of its repurcussions for the broader economy discussed in a recenty NYT article, "Housing Fades as a Means to Build Wealth, Analysts Say.", is that we need a whole new foundation for our economy:
"Many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.
"The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.
"More than likely, that era is gone for good."
This was addressed by George Soros talking to BIll Moyers just before the 2008 election. First he explained the need for a fundamental restructuring to preserve the stability of homeowners in the short run (something, of course, that has not been done):
The Senate has finally passed a bill that will give aid to states to help them close budget gaps on Medicaid, as well as prevent layoffs of teachers, firefighters, police and other state workers. The bill achieved cloture this morning 61-38, with all Democrats and two Republicans (Snowe and Collins) voting in favor.
The final version of the bill totaled $26 billion. Combined with the $34 billion unemployment re-authorization two weeks ago, the final total on the "second stimulus" package comes out to a paltry $60 billion. Originally, the target had been $253 billion, for a much wider variety of programs and projects.
And they expanded the cuts to SNAP. A CBO score released last night shows the revised version more than pays for itself, reducing the deficit by $1.37 billion over the next ten years. SNAP benefits face a $11.9 billion rollback starting in April, 2014. A family of three can expect their benefits to drop about $50 a month.
Never before have congressional policies actually created a month-to-month cut in food stamps. Even in the 1996 rollback of numerous welfare programs, SNAP benefits just grew more slowly than food inflation.
The fight is on over the next 44 months to prevent these cuts from actually taking effect. It is difficult to imagine a way the cuts can be prevented in a 60-vote Senate, meaning that the fix will either have to happen in the budget process or after filibuster reform. The fight will be made even more difficult given that the White House suggested and supported these cuts.
The entire process behind the second stimulus saga seems to prove Stoller's theorem The theorem states that the most likely outcome is not the worst outcome, but rather the most annoying outcome. In this case, no unemployment extension and state aid bill would definitely have been the worst outcome, but a heavily watered down version that took up several months of Senate time, and cut foodstamps in the process, was definitely the most annoying outcome.
Congress finally authorized an extension of unemployment benefits on Wednesday, providing a critical lifeline to families across the country and an absolutely essential boost to the economy.
It is now very unlikely that West Virginia Governor Jim Manchin will appoint a successor to Roberty Byrd this week. He is calling the state legislature together for a special session on Thursday before making any announcement:
Manchin had told the news website Politico.com last week he would announce today whether he intends to run for the U.S. Senate. However, over the weekend, he changed plans. Machin told a Politico reporter he now plans to wait until after the Legislature has clarified state elections laws. He also will wait until after he appoints someone to occupy Byrd's seat until a special election takes place.(...)
Manchin plans to call state lawmakers to the state Capitol Thursday to clarify that a special election is needed under state law. He has said it is very likely he will run for the seat.
That is a lot of legislation that is being held up by the continuing delay in appointing a replacement to Robert Byrd. Granted, the timing of Senator Byrd's death did create confusion given current law, but it is still surprising there wasn't a plan in place for a smoother transition, given Senator Byrd's long-flagging health.
Additionally, Manchin's chances in a November special election are improving by the day. A recent Rasmussen poll showed that if Manchin did run, the only Republican who wold even have a remote chance against him would be Represenative Shelley Moore Capito. However, Capito herself now sounds unlikely to run:
But when asked if she's afraid to lose, Capito's response doesn't sound like she really wants to run.
Said Capito: "That doesn't scare me. I'm not afraid to lose. I'm afraid to lose momentum that I think I provide for the state."
This isn't a criticism so much as a bewilderment at how the White House sometimes says two different things in its messaging. To me, from a purely communications and observational point of view, one problem with the White House's handling of BP has been the message that is "we're in charge here, we will stop this" on one day, then "only BP can clean up the spill, they have the technology, we're powerless to stop it, no we're not going to nationalize them".
Well, here's Treasury Secretary Tim Geithner on The Kudlow Report last night:
Sec. GEITHNER: We have a pro-growth agenda. Part of the agenda is growing exports. They're central to our future. What the president today is to say, that is important to the United States, we're going to be committed to making sure we're that we're expanding opportunities for American business everywhere. Now, this president understands deeply that governments don't create jobs, businesses create jobs. And our job as government is try to make sure we're creating the conditions that allow businesses to prosper so they can hire people back, get this economy going again.
This echoes President Obama, as quoted in a piece by TAP's Tim Fernholz:
"Now, government can't create jobs, but it can help create the conditions for small businesses to grow and thrive and hire more workers," President Barack Obama said yesterday as he urged Congress to take up new jobs legislation at an event honoring Small Business Owners of the Year. "Government can't guarantee a company's success, but it can knock down the barriers that prevent small-business owners from getting loans or investing in the future."
The president was right, except for one little clause: the idea that government can't create jobs. Of course the government can create jobs, unless you rank police officers and teachers, or in a less Norman Rockwell-mode, DMV employees and meter readers, among the unemployed. Which, to be clear, you should not.
Aside from being (a) false, as Tim points out, and (b) a conservative talking point that encourages the "if we want to create jobs, we have to lower corporate taxes and loosen regulations" line of thinking, it doesn't make a lot of sense to me that this Administration has been saying for a year and a half "our Administration's stimulus package has either saved or created x number of jobs" over and over and over again, but then stomps on its own message in a quick effort to appeal to business and Wall Street.
And they wonder why no one in the public thinks the stimulus worked. Just a thought.
Two things that have taken a lot of heat lately is the Economic Stimulus and the Social Security insurance for America. In front of the federal budget deficit commission he argued that deficit spending is the best way to reduce and stabilize the national debt by stabilizing the economy and creating jobs. Meanwhile, others are defending Social Security against those who would continue to eliminate or privatize it.
After passing literally nothing of substance into law in June, Congress will be in recess off starting on Friday, July 2nd and resuming on Monday, July 12th. Considering how little they got done over the past five weeks, there is a long list of issues they will struggle with during the break, and when they return:
Dems need one more vote to pass unemployment extension. Passing a nearly stand-alone unemployment extension (it is coupled with an extension of the homebuyer's tax credit) is the only thing that could actually happen before recess. However, it might not, since Democrats are one vote short and Byrd's replacement won't be around until after recess. Annie Lowrey has the state of play:
Senate Majority Leader Harry Reid (D-Nev.) is telling reporters that he has the votes of two Republicans for his extension of federal unemployment insurance benefits. He also says he is one vote away from having 60 senators to vote for cloture on the bill, which would then move forward to a final vote.
Though there are currently 58 members who caucus with the Democrats, meaning the addition of two Republicans brings the number to 60, Sen. Ben Nelson (D-Neb.) is not in support of Reid's bill. "If we had Senator Byrd's replacement we would have 60," Reid told The Hill. "We have to wait and see what a couple of Republicans do." The two Republicans are most likely Sens. Susan Collins and Olympia Snowe of Maine, both of whom have signaled they would be willing to vote for a standalone measure.
A Senate Democratic aide says gaining the 60th vote with both Collins and Snowe likely on board is proving extremely difficult - because Sen. Scott Brown (R-Mass.) has indicated he will not vote for the proposal.
This bill originally had nearly $200 billion in new domestic spending. It included tens of billions, each, to prevent laying off teachers, preventing reduced Medicare payments to doctors, funding Medicaid, infrastructure projects, the extension of a variety of tax breaks, AND unemployment benefits. It was, in effect, a second stimulus bill. Now, even worn down the the nub, it is still in serious danger of being defeated.
Wall Street reform definitely will not be finished this week: This evening, House passed the conference report on Wall Street reform, 237-192 (with 3 Republican votes, actually). However, we are still going into the recess on this one. Harry Reid says Wall Street reform will not be done before the July recess:
Senate Majority Leader Harry Reid (D-Nev.) told reporters Wednesday that Senate procedures would not allow him to bring the bill to the floor on Thursday.
Members of the Senate will be away from Washington on Friday to attend the funeral of Sen. Robert Byrd (D-W.Va.) in Charleston.
"I can't because I can't procedurally get to it," Reid said.
The current plan is to file cloture on July 12th, the day Congress returns. So, Wall Street gets a chance to peel off enough votes to defeat the bill.
War supplemental legislation also headed until after recess: Yesterday, House Democrats stripped $3.9 billion in aid to the Afghanistan government from the war supplemental bill, citing corruption. That change alone guaranteed that this fight would not be finished before the break, since any changes to the bill have to also be approved by the Senate (which passed war supplemental that included the $3.9 billion). Today, House Dems are proposing a further change that would provide $10 billion in aid to states:
House Democrats today proposed adding $10 billion to a pending war-funding bill to prevent layoffs of an estimated 140,000 school teachers as part of an effort to revive a stalled jobs agenda
Given the fate of the second stimulus bill in the Senate, I am not confident about this passing. However, given that it will likely further delay passage of the war supplemental, I am all for it. No domestic economic relief funding, then no war funding. Block the bill until we get relief here at home.
Kagan continues to sail through confirmation hearings. No trouble spots have appeared for Kagan yet in her confirmation hearings. Don't expect any problems to appear, either. As Chriis Hayes said:
Just occurred to me that these hearings are MUCH easier when you don't have decades of decisions you need to both recall and defend.
Compromises continuing on climate change. Once Wall Street reform is passed or defeated in the first week after recess, it will be on to the energy / climate bill. Just in case you missed it, yesterday John Kerry beautifully summarized the state of that bill:
"We believe we have compromised significantly, and we're prepared to compromise further," Kerry said.
That's what's on tap in the Senate for the next month. And really, that is what's on tap in Congress until the elections. Once Congress adjourns in early August, they won't be back until after Labor Day. And, even when they do return, don't expect much to get done so close to the elections.
Immediately after the elections, there are two big fights:
Reforming Senate procedure:: On this subject, a new Brookings Institute paper on that subject is worth a read. It provides a good background on recent procedural fights in the Senate, and examines possibilities for reform. Of particular interest, it argues that just forcing the minority to engage in a "real filibuster" won't work.
Deficit commission report: Personally, I still think anything the deficit commission recommends (report due in Decemeber) in will be too unpopular to ever pass Congress. A coalition also seems impossible legislatively, as proposing just one tax increase, and one benefit reduction, would sink the whole enterprise. However, with even Andy Stern, one of the more progressive members of hte deficit commission, suggesting that some of the Social Seccurity trust fund should be invested in Wall Street, it seems like this is going to be a big fight we have to negage anyway.
That is what is on tap for the next six to seven months in Congress--plan accordingly.
Today on a press call with bloggers, in response to the impending Republican filibuster of the jobs bill, Senator Debbie Stabenow of Michigan said that Senate Republicans "want the economy to fail." She additionally said that it was the most cynical political move she has ever seen, likely because Republicans stand to gain from the economic pain they will cause.
Senator Stabenow also said that the moderate Republicans she was negotiating with--such as Susan Collins, Olympia Snowe, and Scott Brown--were negotiating in bad faith. Democrats satisfied all of their concerns, Stabenow said, but "they kept changing what the concerns were."
Sounding extremely frustrated, Stabenow said that "we have no choice but to move on," and drop the bill. The votes simply are not there for it right now, and other legislation needs to be addressed. She did urge calls to Senators as a last ditch attempt to pass the bill.
When asked if using the reconciliation process was a possibility, Stabenow noted that would require the Senate to pass a budget resolution that contained reconciliation instructions. And, she noted, all of that would take quite a bit of time, and face obstruction of its own.
When asked if Democrats should employ the nuclear option in response to this bad faith negotiating, Senator Stabenow said they are still looking at changing the Senate rules at the start of 2011, not right now.
Finally, Senator Stabenow noted that the White House had been involved in the negotiations, and were forcefully advocating to get the bill done.
Last night the AP reported that an aide to Harry Reid said the jobs bill (which extends unemployment benefits, various tax cuts, aid to state to pay for Medicare and Medicaid, and more) would be dropped if it failed a cloture vote today.
Earlier this morning, I spoke to an aide in Harry Reid's office who confirmed this story to me. Here is the state of play:
The bill is two votes short, as it faces united opposition from Republicans and assistance from Ben Nelson.
Republicans are offering a one-month extension, and Democrats are rejecting that offer. While it is not impossible that a deal would be struck before the vote today, it is unlikely.
If the cloture vote fails, then the Senate will not take up the bill again. Procedural delays have created a quagmire where many other pieces of legislation, including the Wall Street reform bill and others which can create jobs rather than just protecting them, need to be dealt with. A 30-day extension would just back up the process even further, as it means there would be another fight before the august recess.
Come Friday, 1.2 million people will lose access to the extended unemployment benefits, a number that will grow by several hundred thousand every week after that. Fifty million Medicare claims from June are currently in process at the reduced rate, which the AARP says has already caused some of its members to have trouble finding a doctor. And the Center on Budget and Policy Priorities estimates that dropping the $24 billion in aid to states will lead to cuts in services and thousands of layoffs, and that spending cuts to close states' aggregate budget shortfall absent new federal funds in 2011 would lead to 900,000 public- and private-sector layoffs.
The aide stressed that while the outlook is grim for today's cloture vote, and while you never know what will happen in the Senate, there is no path forward on the bill right now. It's just dead.
This is a monstrous defeat. This is going to hurt a lot of people, and Republicans won't pay any political price for it. No one is writing about this, and with Democrats in charge, they will be blamed for it. A huge, huge victory for Republicans. Looks like they didn't even need the 2010 elections.
An article in The Hill this morning claims that the U.S. is standing practically alone among G-20 nations in fighting "austerity" and promoting new spending to break out of the economic crisis.
The idea that the U.S. Is fighting austerity is preposterous. Here is what is actually happening in U.S. policy right now:
Democratic leaders in the Senate have apparently failed to win enough support to overcome a Republican filibuster of a bill to help the poor, the old and the jobless, despite making a series of cuts to the measure over the past several weeks to appease deficit hawks.
"It looks like we're going to come up short," said a senior Democratic aide on Wednesday evening.
The leader of the Obama administration's "deficit commission" is pushing zombie lies on social Security's supposed bankruptcy, and openly talking about how Social Security's funding has already been spent. From everything I have heard, even from the center-left members of the commission, the final report will recommend cuts to entitlement programs.
How all of this adds up to the U.S. fighting austerity and promoting spending is beyond me. Public policy in the United States has been captured by the forces of austerity, too.
Earlier today, Democrats badly lost a "test vote" on the economic relief bill (variously called the "jobs bill," the "tax extenders bill," or the "unemployment extension bill,") that is still, painfully, slowly, winding its way through Congress. On the motion to "waive budgetary discipline," which would have allowed the bill to pass with only 51 votes instead of 60, the vote was 52 against, and 45 in favor.
Forty Republicans and twelve Democrats voted against the rule, with no Republicans voting in favor. The Democratic "no' votes were Bayh, Begich, Feingold, Kohl, Landrieu, Lieberman, McCaskill, Menendez, Ben Nelson, Bill Nelson, Pryor and Webb. Generally ConservaDems, but a bit of a mix.
Senate Majority Leader Harry Reid had already withdrawn his cloture motion on the overall bill last night, so the Democratic leadership already knew it did not have the votes to pass the bill in its current, $140 billion form. That form is $27 billion larger than the version that passed the House on May 28th, primarily because of $24 billion in aid to states to pay for Medicaid.
The bill will now be shrunk in size to help achieve votes for passage. While the exact nature of the cuts are unknown, most of the speculation is on the $24 billion in aid to states for Medicaid (over which House Appropriations Chair David Obey is currently stalling war funding), and on the tens of billions for a 19-month extension of Medicare payments to doctors, without which doctors will start receiving a 21% cut in Medicare payments. Concerning the latter, the focus is on shortening the time period on the "doc fix" extension to something less than 19 months.
The continuing inability to pass the two spending bills before Congress (the economic relief bill and the Afghanistan funding bill), speaks to deep divisions within the Democratic Party. A minority on the left are opposed to continued funding of the war in Afghanistan, making it almost impossible to add any additional domestic stimulus spending to that bill (which all Republicans oppose). A minority on the right-wing of the party are joining with Republicans to demand steep cuts in public education and health care programs in return for their votes. The end result is continuing, stunning delays in these two spending bills, with an outcome that remains entirely unclear.
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