Congress, back from the summer recess this week, will be focused on what to do about the struggling economy from now until November.
On Tuesday, the Senate is scheduled to vote on procedural votes to advance the Democrats’ $30 billion small business-lending bill. On Wednesday, lawmakers will poke China for holding down its currency and ballooning the trade deficit. On Thursday, Treasury Secretary Tim Geithner will join them when he testifies about his department's latest foreign exchange rate report. Looming above all is the fate of the Bush-era tax cuts.
BOEHNER ON TAX CUTS
House GOP Leader John Boehner’s Sunday statement that he could vote for an extension of only the middle-class tax breaks is still getting play.
Reuters: “Top Republican hints at tax compromise” http://yhoo.it/drkEk6
AP: “Boehner says he’d support a middle-class tax cut” http://yhoo.it/aEpfbw
NYT: “House GOP Leader signals he’s open to Obama tax cut” http://nyti.ms/cMGJtQ
ICYMI, Boehner on CBS’s “Face the Nation”: "If the only option I have is to vote for some of those tax reductions I'll vote for them... But I've been making the point that we need to extend for all... If that's what we can get done. But I think that's bad policy. I don't think that's going to help our economy."
White House press secretary Robert Gibbs later on Sunday: “We welcome John Boehner's change in position and support for the middle class tax cuts, but time will tell if his actions will be anything but continued support for the failed policies that got us into this mess.”
Boehner in response to Gibbs: "Raising taxes on any American, and especially small businesses, in a struggling economy is the exact wrong thing to do, a position shared by not only by my Republican colleagues, and several of my Democratic colleagues, but by a vast number of economists... If the president is serious about job creation, there's a clear way forward, and that's for us to come together and pass legislation immediately that cuts spending to 2008 levels for the next year and stops all of the coming tax hikes by freezing all current tax rates for the next two years. Anything short of that may selfishly check a political box for the president, but it fails the American people."
TPM’s Josh Marshall says Boehner blinked: “The backdrop here is that President Obama has been hitting the airwaves claiming that Republicans and Boehner in particular are holding the middle class tax cuts hostage. And Republicans are suggesting that this is only Boehner's attempt to refute the president's claims.” http://bit.ly/cfGaQc
But don’t forget the Senate math... Senate GOP Leader Mitch McConnell tells the Washington Post that the Obama plan to pass only the middle-class cuts won’t pass the upper chamber. "That's a debate we're happy to have. That's the kind of debate that unifies my caucus, from Olympia Snowe to Jim DeMint," McConnell said. http://bit.ly/ddoL4Y
Why it still matters: The Obama-Boehner fight has implications both for the midterms and for how Congress moves forward after November on the economy, expected remain sluggish for months.
The Wall Street Journal’s front page reminds us of how bad it is...
Hed: “Waning Economic Recovery Fuels Uncertainty”: “The dominant outlook for the global economy: A long period of lackluster growth, with little progress in bringing down unemployment in the hardest-hit advanced economies such as the U.S., Ireland and Spain. Some parts of the world most likely will do fine. But the chances of a much better outcome have become more remote, while the risk that things could get worse is significant." ... Three scenarios -- feeble growth, double-dip recession and upside surprise, which is the least likely of the three (10 percent chance). http://bit.ly/92HBLs
Geithner blames the gridlock: The Treasury secretary told the WSJ that Washington paralysis is economy's biggest challenge. "If the government does nothing going forward, then the impact of policy in Washington will shift from supporting economic growth to hurting economic growth," Geithner said. http://bit.ly/9Lj9ag
George Will blames Dems’ borrowing and spending: “Democrats who say that another stimulus is necessary for job creation but who dare not utter the word ‘stimulus’ are sending three depressing messages: The $862 billion stimulus did not work; the public so loathes the word that another stimulus will not happen; therefore prosperity is not ‘just around the corner,’ as Herbert Hoover supposedly said (but did not). Consumers and businesses are responding to those messages by heeding Polonius's advice in ‘Hamlet’: ‘Neither a borrower nor a lender be.’” http://bit.ly/auURk7
Economic Impact Story of the Day: “U.S. poverty set for record gains as election looms.” AP: “The number of people in the U.S. who are in poverty is on track for a record increase on President Barack Obama's watch, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty... The anticipated poverty rate increase — from 13.2 percent to about 15 percent — would be another blow to Democrats struggling to persuade voters to keep them in power.” http://bit.ly/aV8NPi
Economic Impact Story of the Day #2: “Bad Economy Drives Down American Arms Sales.” NYT: http://nyti.ms/9cEpBs
Related... Defense contractors are trying to get ahead of Secretary Gates’ spending cuts, writes Gordon Adams, the new defense writer at the boffo budget blog, Capital Gains and Games. http://bit.ly/aUYmKS
YUAN UNDER SCRUTINY
There’s a spurt of news on China’s currency pegged to this week’s congressional hearings on the exchange rate. The Ways and Means kicks them off Wednesday. On Thursday, Geithner goes before both Ways and Means and the Senate Banking Committee. Global exchange rates are expected to be on agenda at the next G20 meeting in mid-November.
Geithner says in a WSJ interview that “of course” he’s not satisfied with China’s progress on revaluing the yuan.
TreasSec: “China took the very important step in June of signaling that they’re going to let the exchange rate start to reflect market forces. But they’ve done very, very little, they’ve let it move very, very little in the interim.” http://bit.ly/cjz55m
Paul Krugman asks why the U.S. doesn’t do what Japan is doing, which is getting tougher on the Chinese for artificially inflating the yuan, which hurts U.S. exports. http://nyti.ms/c5oiVO
Bloomberg notes that the strengthening consumer demand in China is hurting its government’s case to slowwalk yuan appreciation. http://bit.ly/dmnbCl
RELATED: Dems Use Trade Anxiety as Campaign Tool. WSJ: “With polls showing the party losing crucial working-class voters in dozens of House districts and broad disapproval of the Democrats' economic agenda in Washington, strategists now see trade as their most effective weapon in minimizing election losses.”
But the story also notes that the Obama administration is also looking to pass FTAs with Korea, Colombia and Panama to expand economic growth and reach the president’s goal of doubling exports within five years. http://bit.ly/bsfy06
Finreg moves abroad... World panel backs rules to avert banking crisis. http://nyti.ms/dco7nE
Bloomberg wire analysis: “Basel Compromise Means Higher Capital Ratios, Time to Comply. http://bit.ly/aTaAsx
What about Bloomberg (the mayor, not the wire)?: Mike Bloomberg is still looking to raise his national profile, but no one’s sure why. Politico: “Bloomberg has become something of a spokesman for swaths of elites who comprised President Obama's base in 2008 but have become disenchanted with him—ranging from Wall Streeters enraged by the new financial reform bill to liberals who support the ground zero-area mosque.”
Possibilities floated: Treasury Secretary, World Bank, President. http://politi.co/aAdeF6