A tax even a Republican can like: A hot topic in certain circles is the possibility of the federal government enacting a "value-added tax," or VAT, as one solution to America’s fiscal mess. Basically, a VAT is a more easily enforced (and collected) retail sales tax. Democrats tend to love it and Republicans tend to hate it, because it adds revenue to fund more federal programs. Paul Volcker, head of President Obama’s economic advisory board, said a VAT was “not as toxic an idea” as it used to be. In April, Sen. John McCain, Arizona Republican, offered a "sense of the Senate" resolution expressing opposition to a VAT, which passed in the Senate by an 85 to 13 vote. So it interesting that five Republican House members are co-sponsoring a bill by Rep. Pascrell, New Jersey Democrat, that would impose a VAT on imports from countries that use the tax. In the Senate, Republican Senator Voinovich, Ohio Republican — who was the sole Republican vote in opposition to that sense of the Senate resolution — now has suggested that replacing income taxes with a VAT could be one way to streamline the tax code.
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Gulf oil clean-up: In response to the oil spill in the Gulf of Mexico, President Obama imposed a freeze on new offshore-drilling leases until a comprehensive review of the accident can be completed. Obama declined, however, to back away from the his earlier proposal to open vast expanses of water along the Atlantic coastline, the eastern Gulf of Mexico and the north coast of Alaska to oil and natural gas drilling, much of it for the first time. The April 20 explosion on the BP-operated Deepwater Horizon drilling platform about 50 miles off the southeast coast of Louisiana has left an untapped wellhead pouring about 5,000 barrels of oil a day into the Gulf. The Coast Guard estimates that 1.6 million gallons of oil have spilled since the explosion. BP Chief Executive Tony Hayward said in an interview with Reuters that the company would compensate those affected by the spill, but the cost could be $8 billion or more — and the company's stock price has already dipped 12%. The cost is about $6 million a day now, but will increase. Containing and cleaning up the spill are only the beginning as there will be millions — or even billions — of dollars in lost revenue for fishing, tourism and other industries. Lawsuits have already been filed and the share prices are tumbling for BP, the rig operator Transocean and Cameron International, which made the blowout protectors.
Now the Real Work Begins - Two years after the economic meltdown and two weeks into a legislative stalemate, Republicans and Democrats yesterday agreed to proceed with debate on the Senate's financial reform bill. Bloomberg reports that Republicans agreed to go forward after assurances that Democrats would remove from the bill a $50 billion industry-supported fund that would be used to wind down failing firms.
End of the financial reform stalemate. Republicans announced that they had achieved resolution of bailout loopholes on the financial regulatory reform bill Wednesday afternoon. "Now that bipartisan negotiations have ended, it is my hope that the majority's avowed interest in improving this legislation on the Senate floor is genuine and the partisan gamesmanship is over," said Senate Minority Leader Mitch McConnell, Kentucky Republican, in a statement. After failing to move forward on Monday and Tuesday on the financial reform bill by the exact same vote, Senate Majority Leader Harry Reid, Nevada Democrat, scheduled another vote on Wednesday which was promptly defeated as well. The count Wednesday was 56-42 with Senator Nelson, Nebraska Democrat, and Reid voting against the measure. Reid's "no" vote allows him to bring it up again. A vote later Wednesday, after Democrats threatened to hold an all-night session, succeeded in getting Republicans to drop their filibuster.
First Senate Move on Financial Reform Defeated - Despite control of the White House, the House and the Senate, and almost 70% of the country supporting financial reform, the Democrats could not prevail on a crucial financial services vote Monday. The first vote to move along the financial reform bill was defeated 57 to 41, with 60 votes needed. While the press today is full of attacks for Republicans voting (as did the Democrats) along party lines, a major cause for the loss was the fact that Democrat Ben Nelson (D-Neb) voted with the Republicans against the financial reform bill.
Financial reform: the first vote - Reuters reports that Sen. Ben Nelson (D-Neb.) broke with party ranks on Monday and voted against opening Senate debate on a financial reform bill. Nelson's action means that the Democrats lack the votes to go forward and that the bill will be blocked, at least for now. Democrats must pickup at least two Republicans to prevail and clear the way for consideration of the bill. Sen. Richard Shelby (R-Ala.) said Monday morning the Republicans had the 41 votes they needed to stop Democrats from beginning debate on the Senate floor on a bill to overhaul financial regulation, but he suggested it was unclear how long the GOP unity would last.“I believe that 41 Republicans – for right now – are going to stand together. I wish we’d stand together, period.” Republicans know that there is a significant political price to pay for opposing financial reform; even if the opposition may be well intentioned. According to a new ABC News/Washington Post poll out Monday, 65% of adults surveyed nationwide said they support regulatory reform, while 31 percent oppose it. Sixty-nine percent said in the poll that they support “increasing federal oversight of the way banks and other financial companies make consumer loans, such as mortgages and auto loans, and issue credit cards.”
If the Senate bill passes, what's next? - The Senate will vote today on its first steps toward passing a financial reform bill. Any financial reform bill that passes the Senate still needs to be reconciled with the House bill. Bloomberg reports two major -- but manageable -- differences between the House and Senate version. The Senate bill includes a plan to study how to implement Obama’s "Volcker Rule" banning proprietary trading by banks, named after former Fed Chairman Paul Volcker, who’s advising the president. The administration came up with the Volcker rule after the House had passed its bill. The Senate bill permits such a ban when the Fed finds a threat to the safety and soundness of the company or to national financial stability. Both bills propose a Consumer Financial Protection Agency; the Senate bill has the consumer protection bureau at the Fed, and the House bill proposes a standalone agency.
GM proudly reported on Wednesday that General Motors Co. repaid $5.8 billion to the U.S. Treasury and Export Development Canada. GM Chief Executive Ed Whitacre wrote in the Wall Street Journal that the company is paying back the loans “in full, with interest, years ahead of schedule." Whitacre said no one — neither taxpayers nor the company itself — was happy that GM needed government loans. “We believe we can best thank the citizens of the U.S. and Canada by making sure that their investments are hard at work every day, building high-quality, fuel-efficient vehicles our customers can count on,” Whitacre wrote.
A new feature begins today, which will provide insight into the connection between politics and business. At a time when the major political initiatives are health insurance, financial reform and regulating emissions, perhaps Washington politicos could use a fresh perspective — a business perspective.
President Obama is now saying that "we've recovered most of your money already, but we want all our money back." Does anyone really know how much money is out and how much is back? Is there money left on the table?
It's almost too bizarre to believe, but banks that received taxpayer money because they had toxic assets on their books have actually been buying more toxic assets from other banks, to sell back to the very government that provided them assistance.