Nutter's Washington

Corporate Jet Deduction: It is a joke, right?

The President is serious of cutting the deficit, although there has been no tangible proof of such. (like any spending cuts) He says the deficit is a serious problem. To demonstrate his determination to cut it and buff up his reputation as a fiscal titan, he has proposed to change the depreciation schedule on corporate jets by making it seven years rather than the current five years. Of course, this does not really increase any nominal taxes over the life of the asset as the full cost is depreciated over time but it does affect the time value of the money on the payment of the taxes. Hence, revenue pick up over current law.

Mr. Obama mentioned the corporate jet break six times yesterday in his press conference. Now that is bold, powerful and deep thinking. If Congress would just make that change the whole mess would be over. No? I see, such a change is projected to put only $3 billion into the Treasury in the next 10 years. To put that is prospective; the deficit this year will be roughly $1.65 trillion or about $4.5 billion a day. So this change would be less than a day of deficit reduction but over a ten-year period or some 3650 days more or less. If the problem were not so serious, this would be comical.

Obama Presser will result in Kick the Deficit Down the Road

President Barack Obama in a press conference today showed a bit of indignation.  He warned that Republicans must cave in and accept tax hikes as part of any deficit deduction. If they did not agree with him and head off a debt default there would be a "significant" blow to the economy. Wow, Mr. “Tough Guy”. Mr. “Take it or Leave it”.  Mr. “Sarcastic”.

It was hard to look at the press clips and not think there is something not genuine here. Maybe it is politics, maybe posturing. The President tried to dismissed criticism that his own leadership was lacking in the showdown over raising the government's $14.29 trillion borrowing authority ahead of an August 2 deadline.

Carried Interests: Taxing Big Oil through the Back Door or Debt Reduction?

The Debt Limit extension talks continue. The President, in orchestrated events yesterday, met with the Senate Democrat and Republican Leaders. Each side staked their well-known positions. No real news, lots of political posturing. More to come but a deal will get done in time to avoid a financial debacle. We will have to see at the end, which are the winners and losers, politically and economically.

 The Democrats are bent on raising taxes. Everyone knows that.  The list is long, the gimmicks plentiful and if you move the wrong way, you are in the sights to be taxed more. However, it was interesting to note Democratic leaders are again targeting repeal or at least a substantial modification of a “carried interest”, despite repeated failures to eliminate it in recent years. The concept has been in the President’s budget for some time and passed the Democrat-controlled House in the last Congress. 

Gore Essay: Climate Change Policy Revisited

Former Vice President Al Gore has written a 7,000-word essay for Rolling Stone magazine posted online Wednesday in which he criticizes President Obama for failing to take “bold action” on climate change. Gore contends the Obama Administration has made little progress on the issue. The former VP is a strident believer carbon dioxide created from burning fossil fuels is the overwhelming cause of climate change, an undeniable scientific fact according to him. I am not going to debate the science, the reasons of changes in weather, finger pointing at climate change deniers, discuss climate data fabrication or the plight of the polar bears. The interesting question raised: Is Gore right or he is wrong on the President’s actions or lack thereof?

 The history of climate change policy or global warming legislation in this country and attempts to address it are far more complicated and involved than the 7000 words penned by Gore. By way of disclosure, let me say, I worked on climate change legislation and greenhouse gas (GHG) emissions for the past 5 years.

The Deficit Saga Takes a Turn: Eric Cantor bows out.

House Republican Majority Leader Eric Cantor stated today he was going to stop attending the budget deficit and debt limit negotiations conducted under the guidance of Vice President Biden because the group had reached an impasse on taxes. No duh. What did you expect? Republicans have stated, in a consistent fashion, they would not and could not agree to the type of tax increases sought by the liberals. Democrats, of course, do not want to curb any spending and insist of raising taxes. So there you have it. 

As I have stated before, the issue of raising the Federal Debt Ceiling will not be resolved without the senior participation from the White House. Unfortunately, Mr. Biden is not senior. It is time to lead here, Mr. President or at least try to show you care or are involved in some fashion.

I am not going to write off as yet the work of the Biden Group. Sometimes it takes a person to walk  away to get the attention of others. 

A final note on all of this, the participants have been discussing deficit reduction in the neighborhood of $2 trillion over a ten year period. That is a considerable amount of money but not when compared to the trillions of addition debt that will be added each year. It is an average of  $200 billion a year and a good part of that will take place later on. Who knows what the economy will be in three years much less ten. Everyone knows that the deficit will continue until three components come into line-economic growth, entitlement cuts and taxes. It is about that simple. 

The political breakdown was unexpected so soon.I thought there would be an impasse but later on next week. I thought the parties would continue the charade and then pass it over to the big boys. Cantor's announcement just accelerated the process. 

Do not Delay on Deficit Reduction and Debt Limit, Mitch

Republican Senate Minority Leader Mitch McConnell (R-KY) said in a sparsely noticed comment made on one of those used-to-be-important Sunday morning news shows that the Congress with White House consent could raise the government’s borrowing limit for just a few months rather than striking some grand bargain.(aka deficit reduction) It would mean there would be most likely some minor adjustments here and there but no revisions of entitlement programs and no big tax increases. One thing I have come to greatly appreciate in the past 2 to 3 years is that when Mitch talks everyone should listen.

As everyone who has been paying attention knows, the Federal debt limit of some $14.2 trillion dollars was reached in May. The deadline has been extended somewhat through some creative accounting on the part of the U.S. Treasury. However, the game will be up in early August and unless Congress raises the limit, the Federal Government will not be able to increase its borrowing and could possibly default on its existing obligations. In other words, like millions of Americans, the government would be maxed out on its credits cards and unable to pay the rent.

The Vice President and a group of lawmakers have been trying to find a way to make a deal to cut the budget deficit. In exchange for some fiscal changes, a separate agreement to raise the government’s debt ceiling would be passed in Congress.  Republicans have advocated large spending cuts, while Democrats have been pushing for modest and out-year (like after the election in 2016) spending cuts and large tax increases, particularly against the oil companies and high-income earners.

All of this brings us back to Senator McConnell. In my opinion, no one has recently demonstrated more political acumen and determination than the senior Senator from Kentucky. Since President Obama took office, Mitch McConnell has keep his meager band of Republicans together in the Senate on most issues and has used every tactic in the book to promote a conservative agenda and to thwart liberals whenever possible. His only lapse was at the end of last year when Democrats were quite successful in passing a number of last minute initiatives (including, ironically, the Bush tax cut extension). 

I have been following the debt limitation process like it was the last quarter of the Super Bowl with one play left in a tied game.  It has been and will continue to be clash of will and ideas. The outcome will determine the financial health of the country, growth of government, the level of taxation and ultimately the next election. For intrigue, politics and policy, it does not get any better in the political world. The lines have been drawn but now, the Senator is hinting of a delay, a few months of respite to continue negotiations. His message is--there is not enough time now and we can take it up in the fall. Now I understand the axiom of “good things come to those that wait” but I think the time is right for a showdown. What purpose would be served to wait? What new information will be forthcoming? Does anyone think the deficit will go away?  I mean what have all these guys been doing?  The Senate has hardly been even working. It did not pass a budget and most measures considered have been minor ones at best. Goodness knows, Biden does not have much to do and for the rest of them, get to work.

The placemats are on the table, the silverware is out, the timer is set, the meal is in the oven and the crowd is ready to dine. The Administration is not going to improve their offer in the fall or their attitude with more time to negotiate. Republicans are not going to be less insistent. Unless the wily Senator has a Machiavellian strategy, then get it done now. Settle the issue.  Make the deal before the meal gets burnt. It is High Noon, get out in the street and face down your adversary. Get the big boys together, get serious, lock the door and duke it out. No need to delay the inevitable but, of course, unless Senator McConnell has a better outcome in mind but is not sharing it.

 

 

 

Suggestion for Liberals to Raise Taxes: State and Local Deduction

The machinations of the group led by Vice President Biden discussing ways to increase the Federal Debt Limit in exchange for cuts in Federal spending continue on. The pace is picking up as a number of meetings are scheduled this week with the participants wanting to announce some deal before Congress goes out for its July 4^th recess. Republicans want a significant reduction in spending and the Democrats want to do as little as possible except for an increase in the debt limit which allows funding of the government through borrowing through the next election However, if the Democrats put forth anything, they want the package to include tax increases, a concept Republicans have vowed to resist.

 It is difficult to see where all this is going. There are 5 weeks to go until the government will not be able in theory to pay its debt. The parties seem far apart but both want to avoid a financial calamity.  While this group of surrogates may be making a sincere effort, there will be no real agreement until someone more senior at the White House and the real big boys on the Hill sit down.

The Ethanol Wall of Tax Shame

The Senate yesterday failed to invoke cloture of an amendment by Senator James Coburn (R-OK) that would have ended the $6 billion a year plus tax credit subsidy for ethanol blending starting July 1.  

The vote count, with 40 in favor of ending debate on Coburn's amendment and 59 opposed, was far short of the 60-vote majority needed. The provision would have eliminated the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit (VEETC) and the 54-cent-per-gallon tariff on imported ethanol. If Congress takes no further action the tax credit will expire at the end of this year.

The failure to pass the amendment represents a victory for agriculture lobbyists, oil and gas industry as well as others.  Senate Democratic leadership showing no interest whatsoever in addressing this tax break   opposed the measure.

There were plenty of rationalizations on why the cloture vote failed miserably, including some mentioning procedural grounds as well as possible alternatives to the elimination of the credit. In my opinion these are weak excuses, particularly from Democrats who rail against the federal deficit or those that want to strip the oil industry of some of its favorable tax preferences.

The Senate Republican leaders voted with Coburn, but 14 mostly agriculture-state Republicans voted to keep the credit and tariff in place. As I stated before, I can give the farm state folks a pass but not the others.

 This is not the end of this issue as pressure continues to do something. The Senate Majority Leader Reid (D-NV) has stated another vote on ethanol may be forthcoming but the substance of what that will be is not known. 

 

In any event, I give you the Ethanol Hall Of Tax Shame: 

 

Vote Summary ( Congressional Record)

Question: On the Cloture Motion (Motion to Invoke Cloture on the Coburn Amdt. No. 436 )
Required For Majority:	3/5	Vote Result:	Cloture Motion Rejected
Statement of Purpose:	To repeal the Volumetric Ethanol Excise Tax Credit.

 

Vote Counts:	YEAs	40
	NAYs	59
	Not Voting	1

YEAs ---40
Alexander (R-TN) Ayotte (R-NH) Barrasso (R-WY) Boozman (R-AR) Brown (R-MA) Burr (R-NC) Cantwell (D-WA) Chambliss (R-GA) Coburn (R-OK) Collins (R-ME) Corker (R-TN) Cornyn (R-TX) Crapo (R-ID) DeMint (R-SC)	Enzi (R-WY) Graham (R-SC) Hatch (R-UT) Heller (R-NV) Hutchison (R-TX) Inhofe (R-OK) Isakson (R-GA) Johnson (R-WI) Kyl (R-AZ) Lee (R-UT) Lieberman (ID-CT) Manchin (D-WV) McCain (R-AZ) McConnell (R-KY)	Murkowski (R-AK) Paul (R-KY) Pryor (D-AR) Risch (R-ID) Rubio (R-FL) Sessions (R-AL) Shelby (R-AL) Snowe (R-ME) Tester (D-MT) Toomey (R-PA) Vitter (R-LA) Webb (D-VA)

 

NAYs ---59
Akaka (D-HI) Baucus (D-MT) Begich (D-AK) Bennet (D-CO) Bingaman (D-NM) Blumenthal (D-CT) Blunt (R-MO) Boxer (D-CA) Brown (D-OH) Cardin (D-MD) Carper (D-DE) Coats (R-IN) Cochran (R-MS) Conrad (D-ND) Coons (D-DE) Durbin (D-IL) Feinstein (D-CA) Franken (D-MN) Gillibrand (D-NY) Grassley (R-IA)	Hagan (D-NC) Harkin (D-IA) Hoeven (R-ND) Inouye (D-HI) Johanns (R-NE) Johnson (D-SD) Kerry (D-MA) Kirk (R-IL) Klobuchar (D-MN) Kohl (D-WI) Landrieu (D-LA) Lautenberg (D-NJ) Leahy (D-VT) Levin (D-MI) Lugar (R-IN) McCaskill (D-MO) Menendez (D-NJ) Merkley (D-OR) Mikulski (D-MD) Moran (R-KS)	Murray (D-WA) Nelson (D-FL) Nelson (D-NE) Portman (R-OH) Reed (D-RI) Reid (D-NV) Roberts (R-KS) Rockefeller (D-WV) Sanders (I-VT) Schumer (D-NY) Shaheen (D-NH) Stabenow (D-MI) Thune (R-SD) Udall (D-CO) Udall (D-NM) Warner (D-VA) Whitehouse (D-RI) Wicker (R-MS) Wyden (D-OR)

 

 

 

Republican New Hampshire Kickoff Debate: Handicapping the Race

Seven Republicans seeking the nomination of their party to face off against the incumbent President 16 months from now held a joint appearance last night in New Hampshire. It was a friendly affair, moved along quite nicely by the moderators from CNN for the most part with only a twinge of their bias showing. With the country still exhausted politically and still digesting the last election, it seems early to me to start all of this. Maybe all the dialogue helps focus on the options and problems before the country, but I suspect, this was really an event for political junkies.

The appearance left an impression of the various participants. They all agreed the Obama Administration has been disappointing at best and a total failure at worst. Each one tried to stay on their message and highlight their strengths, their vision. No real fireworks ensued against each other. No real drama. If you could not watch because Leave It to Beaver was on another channel, do not worry, as this nominating process will go on for some time. Beside, an overwhelming super majority of Republicans who will pick their nominee have already decided they will vote even for Felix the Cat over the current White House occupant.

Ethanol Subsidies: Coburn Proposes Time to Vote on VEETC

 If things hold to their course, the Senate will vote on Tuesday on an amendment by U.S. Senator Tom Coburn, (R-OK) to repeal the ethanol tax blender credit and tariff. If enacted, the provision would eliminate approximately $3 billion in subsidy this year and $6 billion annually. In order to be considered for a vote, the Senator and his supporters must get 60 votes, a requirement of the way the Senate does its business these days. 

The history and merits of the ethanol subsidies were reviewed a few weeks ago. In summary, the ethanol credit is no longer necessary and should be repealed. It is a poster child-like the “Bridge to Nowhere”- of excessive government largess at best and just shameful waste of money at worst.