A New Era Of Comity And Bipartisanship

by dday

It’s hardly worth pointing out that conservatives like Jim DeMint think they’re noble freedom fighters saving the world from the grip of socialism. Incidentally that’s verbatim.

“We have to have a remnant of the Republican Party who are recognizable as freedom fighters,” Mr. DeMint said. “What I’m looking to do as a conservative leader in the Senate is to identify those Republicans, and even some Democrats, and put together a consensus of people who can help stop this slide toward socialism.”

DeMint is out of his gourd, but he’s not really the problem. The problem is that Barack Obama remains committed to securing the votes of people like this and will weaken his own legislation in an effort to do so.

President-elect Obama and his advisers are resisting attempts to include a provision in the economic stimulus bill backed by congressional Democrats that would allow bankruptcy judges to shrink mortgages.

In a hastily convened Democratic Caucus meeting last week, Obama economics adviser Jason Furman made it clear to lawmakers that Obama thinks the so-called “cramdown” provision would cost GOP votes and endanger bipartisan support in the Senate.

He committed to dealing with the issue after the bill passes, as did House Speaker Nancy Pelosi (D-Calif.).

Lead supporters of the cramdown provision say the time to deal with the issue is now. Rep. Jerrold Nadler (D-N.Y.) said it’s worth losing some Republican support to help homeowners.

“I would take that risk,” Nadler said. “I don’t think you’re going to get a lot of Republican votes anyway.”

Exactly. “Cramdown” would allow bankruptcy judges to restructure the amount owed on a home in a way that would give lenders and homeowners the impetus to modify terms of the loan. The lenders take a haircut but it’s a better situation for them than a foreclosure, and those who get to keep their homes can continue to contribute to the economy. It’s a great idea and a major step toward reforming the hideous 2005 bankruptcy bill.

The reason Obama wants it out of the recovery seems purely ideological. He has made a fetish of bipartisan support, and will not risk a few votes on the margins to limit foreclosures now. And what buy-in on this “grand bargain” has he received from the business community? Surprise, calls for more tax cuts.

And anyone who thought K Street would stop seeking its share of the stimulus pie after convincing Democrats to add the mysteriously named “net operating loss carryback” to the stimulus … well, you’d be wrong. K Street wants more tax breaks for businesses — and the latest one is called the “cancellation of indebtedness (COI) waiver.”

The second half of this Journal article explains the COI tax break well. Essentially, any company buying up its own outstanding debt at a discount price — which usually means a private equity firm that has taken over a struggling corporation — the purchaser of debt has to pay taxes on the amount of debt it forgives. If I buy up your $100 debt at a discount of $40, leaving you on the hook to me for $60, the cancelled $40 of debt is still taxable.

The Chamber of Commerce, and 35 other trade associations in the home building and retail sectors, are seeking a COI waiver that would allow cancelled debt to be tax-free.

Here’s some more recommendations from those nice fellows at the Chamber of Commerce (who essentially have their hands up the asses of half the Republicans in Washington, if not more). They’re concerned about the “balance” of tax and spending provisions and would like it awfully so much if the businesses they represent could be handed bagfuls of money. Isn’t the era of comity grand?

The Chamber believes that a truly effective stimulus package must have the proper balance of tax and spending provisions to trigger near-term economic growth while underpinning long-term economic growth. The Chamber supports the tax relief provisions in H.R. 598 […] However, in sum, the Chamber believes that the tax provisions in H.R. 598 are simply too small to have the desired impact.

In addition to tax relief for debt repurchase, the Chamber believes other provisions could also ease the liquidity problems plaguing the economy. Notably, the Chamber supports:

Temporarily allowing foreign subsidiary earnings of U.S. companies to be repatriated at a reduced tax rate would ease liquidity challenges, relieve stress on the commercial paper market, help companies meet funding requirements in employee pension plans, and generally increase available funds. This could be achieved while generating revenue for the Treasury.

Making TARP funds available to expand access to the Commercial Paper Funding Facility (CPFF) for “Tier 2” commercial paper would ease liquidity problems, thereby thwarting unnecessary job loss and enabling companies to better meet their working capital needs.
Making TARP funds available to capitalize a Federal Reserve liquidity facility for new commercial mortgages and unsecured commercial real estate loans to permit commercial real estate credit markets to restart and clear in an orderly fashion.

Lease newly-available offshore oil and gas resources on the Outer Continental Shelf (OCS), which could yield as much as $1.3 trillion in new royalty income to the federal government, create more than 75,000 new jobs, and reduce the cost of H.R. 598.

Reduce the corporate capital gains rate to 15% to encourage unlocking of appreciated assets held by companies. This would generate substantial tax revenues for the government and provide much needed capital that would be redeployed more efficiently into the economy.

Oh, and they think that all environmental laws should be eliminated so that infrastructure projects can begin “without delay.” And they aren’t much into expanding health care eligibility for COBRA because it would “impose significant administrative burden on and economic costs to employers.”

Other than that, you know, great stimulus.

And here’s what the House GOP is up to, using Obama’s words against him to create a perception of their own victimhood:

Wednesday, a group of House Republicans will argue that Obama’s Hill colleagues haven’t embraced his vision of shared sacrifice, arguing that Democratic leaders cut the GOP out of negotiations over the new administration’s first big bill.

Some members of the group, organized by Minority Whip Eric Cantor of Virginia and Rep. Dave Camp of Michigan, the top Republican on the Ways and Means Committee, are upset that Democrats abruptly canceled a meeting last week with Republicans before unveiling the $800 billion stimulus. The GOP group has requested to meet with Obama later this week.

Republicans, led by Minority Leader John A. Boehner, complained that Democrats were refusing to work with the GOP on a package that focuses more heavily on tax cuts for middle-class households and small businesses.

Republicans would love Democrats to “sacrifice” some of their power and negotiate.

See, the President said he would bring people together and yet nobody’s working with us to eliminate taxes and destroy government.

Obama would be right not to listen to any of this, but he clearly wants to open with a big bipartisan victory. There’s a case to be made that giving Republicans and Blue Dogs some ownership of the stimulus would make it easier to go back to them for other important legislation, like re-regulation of the financial sector. But that assumes that Republicans would take that ownership seriously, that they would even allow themselves to vote for this if they didn’t get essentially the bill George Bush would sign, and that they care about consistency or coherence. They don’t. They care about trench warfare.

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