Economy & Budget

The economy could spiral into hyperinflation not seen since the early 1980s if the Federal Reserve does not tighten its monetary policy soon, Sen. Chuck Grassley (R-Iowa) warned Tuesday.

Grassley, speaking about the renomination of Federal Reserve Chairman Ben Bernanke to a second term as head of the Fed, asserted that Bernanke's ability to reign in inflation would be the metric by which the Fed's success would be measured.

"We won't know for a year if he's done a good job so far, because he shoveled money out of an airplane to save banks and the financial system," Grassley said in a conference call with Iowa reporters. "But shoveling money out of an airplane to solve problems can be inflationary -- in this case, hyperinflationary -- if he doesn't stop mopping up some of the money that's out there."

Grassley, the ranking member of the Senate Finance Committee, said that inflation as a result from government spending on bailouts could result in inflation rivaling rates in 1980, when it hit a peak of 13.5 percent.

"The Fed has the ability to put money out, it's got the ability to take money back in, and if they don't do that, we will have hyperinflation worse than we had in 1980 and '81," Grassley said. "And I hope he demonstrates that ability."

Grassley argued that while it would be a year until lawmakers will know whether Bernanke has been successful at bringing inflation under control, it would probably be best to keep the chairman on board for a second term as head of the Federal Reserve.

"I would suggest that right now, when everybody's nervous about the economy, that you don't change horses in the middle of the stream, and consequently, it would probably be detrimental to not have him reappointed," he said.

Federal Reserve Chairman Ben Bernanke will not enjoy an easy Senate path to being confirmed as chairman of the Federal Reserve, Sen. Chris Dodd (D-Conn.) pledged late Monday night.

Dodd, the chairman of the Senate Banking Committee, said that while he will "probably" personally support Bernanke, "serious questions" remain about Bernanke and the Fed.

"While I have had serious differences with the Federal Reserve over the past few years, I think reappointing Chairman Bernanke is probably the right choice,"

A top labor official said Monday that President Obama and White House Chief of Staff Rahm Emanuel have indicated that they will not bring up "card check" legislation until after healthcare reform is done in Congress.

AFL-CIO Secretary-Treasurer Richard Trumka, the expected incoming president of the influential union, pledged during a web chat on the liberal blog firedoglake that organized labor would work to pass healthcare reform in order to move onto one of its top priorities, the Employee Free Choice Act (EFCA).

"The President/and Emanuel have both said they dont intend to bring Employee Free Choice Act up until Health Insurance Reform is done," Trumka wrote on the blog. "Which gives us an additional reason to do Health Insurance Reform now!"

The remarks all but acknowledge that EFCA, one of labor's most prized legislative goals, will take a backseat to the Obama administration's most pressing priority for the meanwhile.

Obama has endorsed the union organizing bill, though he and other senior administration officials have spoken about it much less in public as centrist Democrats in the Senate have been reluctant to fully back the bill.

Republicans, for the most part, have opposed the bill as a threat to businesses.

Trumka also sent a message to allies in the White House and Congress that they expected eventual movement on EFCA, and that it could not be put off indefinitely.

"We WILL PASS EMPLOYEE FREE CHOICE ACT legislation, we will not allow our

Healthcare reform shouldn't cost the $1 trillion price tag forecasted by the Congressional Budget Office (CBO), one freshman Democrat told constituents this weekend.

Rep. Betsey Markey (D-Colo.) expressed frustration at the projected cost for House health reform bills.

"We are right now spending more money than any other country on health care," Markey said at a town hall meeting, according to the Greeley Tribune. "It shouldn't cost us a trillion dollars to fix it."

"The bill is estimated by the Congressional Budget Office to cost $1 trillion over 10 years, and I do think right now that's unacceptable," she told the Tribune in a separate interview.

Those words echo concerns by other centrist Democrats about the overall cost of healthcare reform. Senate Budget Committee Chairman Kent Conrad (D-N.D.) said Sunday that a health bill would have to cost "significantly less" than is currently estimated in order to win enough votes to make it out of Congress.

Markey, a freshman lawmaker from a relatively conservative Colorado district, argued that the centerpiece of the bill, a public (or "government-run") option for consumers, would actually cost very little, but should only be funded through premiums in the plan, and not government subsidization.

She also pledged to only support a bill that addresses long-term budgetary concerns.

"I won't vote for a bill that doesn't bring efficiencies into the system and lower the cost," she told attendees of the town hall.

Mega investor Warren Buffett urged lawmakers to cut spending or raise taxes in order to stave off destructive inflation.

Buffett, in a New York Times op-ed column Wednesday, wrote that the record federal deficit this year will lead to public debt levels that can only be reduced through lower spending or more tax revenue. The independent Congressional Budget Office said that 2009 deficit would reach $1.8 trillion (though budget analysts expect the deficit to be $1.6 trillion)

Buffett, CEO of investment firm Berkshire Hathaway, likened the threat of inflation to that of global warming.

"Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt," he said. "The dollar's destiny lies with Congress."

While he said that the immediate focus should be on an economic recovery, he said that Congress needs to address the debt so that it grows in line with the economy. He noted that the debt-to-GDP level is "mushrooming" this year because of the deficit, going from 41 percent to 56 percent.

"Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity," Buffett wrote. "But a few more years like this one and we will find out."

He added that the obvious ways to finance big deficits -- borrowing from foreigners or from Americans -- won't be enough to prevent inflation, and that Congress will need to make serious changes to fiscal policy.

"Washington's printing presses will need to work overtime," Buffett wrote. "Slowing them down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can't come close to bridging that sort of gap."

Buffett hasn't hesitated from giving advice to Congress and the president before. He told lawmakers to pass bailouts for banks last fall to avoid "the biggest financial meltdown in American history." Buffett, a billionaire and the third-richest person in the world, has also criticized income tax rates on the wealthy, noting that he
pays a lower rate than his receptionist

--Walter Alarkon

The nation is enduring one of the worst job markets in decades with 9.4 percent of the population unable to find a job. Considering that one eastern metropolis is ripe for a gold rush on jobs: Washington, DC.

A new report from job-search site indeed.com shows that the nation's capital has a ratio of six job openings to every one unemployed person, ripe for those looking to work at the center of politics and government.

The worst city? That would be Detroit, Michigan, the home of several struggling domestic automakers. For every one job opening in Detroit, a whopping eighteen people cannot find a job.

The data used is from this June and was drawn from the 50 most populous metropolitan areas in the United States.

The Senate Finance Committee will drop a controversial provision on consultations for end-of-life care from its proposed healthcare bill, its top Republican member said Thursday.

The committee, which has worked on putting together a bipartisan healthcare reform bill, will drop the controversial provision after being derided as "death panels" to encourage euthanasia by conservatives.

"On the Finance Committee, we are working very hard to avoid unintended consequences by methodically working through the complexities of all of these issues and policy options," Sen. Chuck Grassley (R-Iowa) said in a statement. "We dropped end-of-life provisions from consideration entirely because of the way they could be misinterpreted and implemented incorrectly."

The Finance Committee is the only congressional committee to not report out a preliminary healthcare bill before the August congressional recess, but is expected to unveil its proposal shortly after Labor Day.

Grassley said that bill would hold up better compared to proposals crafted in the House, which he asserted were "poorly cobbled together."

"The bill passed by the House committees is so poorly cobbled together that it will have all kinds of unintended consequences, including making taxpayers fund health care subsidies for illegal immigrants," Grassley said. The veteran Iowa lawmaker said the end-of-life provision in those bills would pay physicians to "advise patients about end of life care and rate physician quality of care based on the creation of and adherence to orders for end-of-life care."

"Maybe others can defend a bill like the Pelosi bill that leaves major issues open to interpretation, but I can't," Grassley added.

As his campaign heads to his native Bath County, Virginia gubernatorial candidate Creigh Deeds (D) tied his opponent Bob McDonnell (R) to former President George W. Bush.

Deeds' attack demonstrates the extent to which his state's governor's race has been nationalized. President Obama appeared with Deeds at a campaign rally last week and McDonnell delivered the Republican weekly address this weekend.

@DeedsCountry, a new Deeds campaign Twitter account, tweeted Sunday:

Heading to Bath County...@BobMcDonnell thinks Bush economic policies helped here

McDonnell also played an early role in bringing national issues into the campaign, pressuring Deeds to say if he supports Democratic card-check, healthcare reform, and climate change legislation.

Cross-posted to the Twitter Room

Ten Democratic senators urged President Obama today to support stronger protections for U.S. manufacturing in major climate legislation.

In a letter to Obama, the senators asked for a strong "border adjustment mechanism" to help U.S. industries adjustment to higher energy costs. Such a "mechanism" might include a tax or tariff against foreign manufacturers whose costs aren't affected by the legislation.

"Any climate change legislation must prevent the export of jobs and related greenhouse gas emissions to countries that fail to take actions to combat the threat of global warming comparable to those taken by the United States," the senators write.

"It is essential that climate change legislation include a border mechanism, sufficient allowances to energy intensive industries and other effective measures that encourage international agreements and maintain a level playing field for American manufacturers."

U.S. trading partners have warned that a "border tax" might trigger retaliatory tariffs.

The letter's signatories hail mostly from midwest and/or industrial states: Ohio, Wisconsin, Michigan, Pennsylvania, West Virginia, etc.

The climate bill narrowly passed the House but has yet to come up for a vote in the Senate.

The signatories include: Sherrod Brown (D-Ohio), Debbie Stabenow (D-Mich), Russell D. Feingold (D-Wisc.), Carl Levin (D-Mich.), Evan Bayh (D-Ind.), Robert P. Casey (D-Pa.), Robert C. Byrd (D-W.V.), Arlen Specter (D-Pa.), John D. Rockefeller IV (D-W.V), and Al Franken (D-Minn).

Read the full letter after the jump.

Read more...

Sen. Claire McCaskill (D-Mo.) has cooled her once vigorous opposition to an extension for the money-starved "Cash for Clunkers" program, saying that she now considers the matter a "tough call."

"This is a tough call, but at least wanted to let eveyone (sic) know that I'm studying all of it and trying to make a decision that is not rushed, but thoughtful," McCaskill wrote on her blog Tuesday.

Last week, the centrist Democrat tweeted that she "will vote no on any extension of Cash for Clunkers program."

Now McCaskill has taken a more measured approach. She reached out members of the auto industry to discuss issues facing a prolonged version of the program. McCaskill tweeted late Tuesday night:

Still getting info on C4C. Phone calls to Mo car deaers today getting their view.Need to know how many deals are in the pipeline.

Also worried about inventories.Chrysler dealer today told me inventory low,& we could be pushing his customers to foreign if we extend.

Will push tomorrow for GM, Chrysler,& Ford available inventory,and if we extnd can progrm be closed down without penalizing dealer/consumer?

Of course the cash for clunkers program is popular, we're giving away money. My concerns are first, that we... http://tumblr.com/xbx2kx50y

The junior senator linked to the aforementioned blog post, saying "I realize all car sales, both foreign and domestic, are good for the economy, but I hate the idea that there may not be a level playing field for the next few weeks because of inventory issues."

Yesterday, Senate Majority Leader Harry Reid (D-Nev.) said that the upper chamber will extend the "Cash for Clunkers" program before recess commences over the weekend. Reid made his remarks after the Senate Democratic Caucus lunched with President Barack Obama.

Cross-posted to the Twitter Room