–President Obama’s New ideas Unlikely to Move In Divided Congress
–Fate of ’01 and ’03 Tax Cuts To Dominate September Deliberations
–Congress Must Still Pass All 12 FY’11 Spending Bills
–House, Senate Expected To Have Limited Agenda Before Nov. 2 Elections
–Fall Hearings Are Expected On Housing Finance and China Currency
–Senate Democratic Leaders Seek Votes On Three Fed Nominees
By John Shaw
WASHINGTON (MNI) – For those hoping for a productive fall session
of Congress in which critical legislation is given, at minimum, a full
and careful debate, it would make sense to reflect on four words: “small
business lending bill.”
This refers to legislation that was on the Senate floor for several
weeks before the August recess. The bill would establish a $30 billion
lending fund for small businesses and provide $12 billion in tax breaks.
The package is fully offset, so it would not increase the deficit.
The small business lending bill is a strikingly modest bill that is
targeted to a politically popular group. In many years, it would have
passed the Senate quickly–possibly by a voice vote.
But not this year.
With partisan tensions rising and critical mid-terms approaching,
the bill was blocked by Senate Republicans for weeks, ostensibly over
the issue of how many amendments the Senate would vote on in relation to
the bill.
Privately, Republican lawmakers say that they have been told by
their leadership not to support any initiatives that might be
politically helpful to Democrats before the mid-term elections in early
November.
Given this, the short-term fate of President Obama’s fall package
of economic stimulus measures — a $50 billion package of infrastructure
spending and a nearly $200 billion package of business oriented tax
breaks that he is set to announce in Cleveland on Wednesday — is very
uncertain.
Rep. Dave Camp, the top Republican on the House Ways and Means
Committee, said Tuesday that the president’s plan for a research and
development tax credit and full business expensing writeoffs is a
“serious proposal.”
But in a statement, Camp said the “most urgent” tax issue is the
fate of the 2001 and 2003 tax cuts that are set to expire at the end of
the year.
Camp accused Democrats of planning a “$3.8 trillion tax hike” by
not renewing these tax cuts.
What will happen this fall after Congress returns next week is far
from certain.
The House Ways and Means Committee will hold a hearing on Sept. 15
on whether China has made progress on reforming its currency. The House
Financial Services Committee is expected to hold a hearing later this
month on reforming housing finance.
Rumblings about congressional action on overhauling
government-sponsored-enterprises this fall remain more wishful thinking
than reality based analysis. Even if Democrats were to cohere around a
plan, Republicans, increasingly hopeful that they will control one or
both houses of Congress in 2011, would certainly block the measure.
The administration has said it will offer a comprehensive housing
finance overhaul plan next year and many months of congressional
deliberations on the plan are likely.
Lawmakers are expected to be in Washington for only about three
weeks in September and early October before adjourning for the mid-term
elections.
Senate Democratic leaders have said they want to work on the small
business lending bill, the defense authorization bill, middle class tax
cuts, and possibly various energy proposals, including eliminating a cap
on the liability of oil companies in the event of a major oil spill.
Senate Democratic leaders are hoping to secure Senate confirmation
of Obama’s three nominations to the Federal Reserve Board: Janet Yellen
to serve as vice chairman and Peter Diamond and Sarah Bloom Raskin to
serve as Fed governors. But Diamond nomination will require a re-vote in
the Senate Banking Committee, because of a rarely used procedural move
that Republicans used last month.
Since the House and Senate have passed none of the 12 annual
spending bills for the 2011 fiscal year which begins Oct. 1, Congress
will have to pass a stop-gap spending bill that will keep the government
funded.
Congress may try to pass a few of the FY’11 spending bills before
the elections, but the bulk of the budget work is expected to occur
after the Nov. 2 mid-term elections.
Congressional debate on the fate of the 2001 and 2003 tax cuts is
likely to dominate the fall agenda, but it remains far from clear if
there will be votes on a tax package this month.
Senate Finance Committee Chairman Max Baucus has said he would like
to convene his panel to work on a tax package this month, but added he
will need assurances from Republicans that they will focus on tax
matters and not try to revive the debate on health care or other issues.
House Speaker Nancy Pelosi has said the House will let the Senate
go first on the tax package.
Both the administration and congressional Democrats have repeatedly
said that tax cuts for individuals making up to $200,000 and couples
earning up to $250,000 should be extended.
The cost of extending these tax cuts would be about $1.4 trillion
over a decade. Extending all of the 2001 and 2003 tax cuts would cost
more than $2 trillion over a decade.
Congressional Republican leaders support extending all of the 2001
and 2003 tax cuts.
White House press secretary Robert Gibbs repeated Tuesday that the
administration supports tax cuts only for middle income and lower income
people.
** Market News International Washington Bureau: 202-371-2121 **
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