OVERNIGHT MONEY: Payroll tax cut conference waits in the bullpen

Meanwhile, top Democrats and Republicans are — perhaps not surprisingly — saying the other side is to blame for the current predicament.

Senate Majority Leader Harry Reid (D-Nev.) suggested Tuesday, as he did last week, that he would move forward with his own proposals if the conference committee fails to produce something by early next week.

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GOP leaders declared that Democrats are stalling after forcing Republicans to back down on the payroll tax at the end of last year.

But Democrats accuse Republicans of playing their own brand of election-year politics, saying the GOP wants to slow-walk a tax break that could give the economy a needed jolt.

The chairman of the payroll tax conference committee, Rep. Dave Camp (R-Mich.), is urging leaders of both warring parties to back off and let the panel try to strike an agreement.

Camp, the head of the House Ways and Means Committee, told reporters on Tuesday that comments from leadership on both sides of the aisle warning about a stalemate were unhelpful.

Meanwhile, Mark Zandi, chief economist with Moody's Analytics, said a bill has to get done that includes the payroll tax cut and an extension of unemployment benefits to keep the economic recovery chugging along. 


WHAT ELSE TO WATCH FOR 

Tax reform: With the conference committee out of action, Camp is headed back to his normal stomping grounds, the House Ways and Means Committee, on Wednesday.

The panel will discuss financial accounting rules through the lens of tax reform, under the premise that Washington officials at times don’t take those rules into account when changing tax policy.

Michael Fryt, corporate vice president for tax at the FedEx Corp.; Mark Schichtel, senior vice president and chief tax officer at Time Warner Cable; Michelle Hanlon, associate professor of accounting at the MIT Sloan School of Management; Tom Neubig, national director of quantitative economics and statistics at Ernst & Young LLP; and Timothy Heenan, vice president of treasury and tax at Praxair, Inc., are scheduled to testify.

Chamber chat: Sen. Pat Toomey (R-Pa.) is headed to the U.S. Chamber of Commerce tomorrow. The freshman senator and former bond trader will be diving into the weeds with the business lobby tomorrow, discussing the impact of efforts to reform money market funds.

Curbing CFPB: The fight over the Consumer Financial Protection Bureau enters Round 128 or so tomorrow at the House Financial Services Committee. There, a subcommittee will be debating a trio of GOP-sponsored bills aiming at limiting the reach of the contentious new agency. One would bring its budget under the congressional appropriations process, another would remove the CFPB director from his voting spot on the board of the Federal Deposit Insurance Corporation and the third would guarantee that proprietary information obtained by the CFPB in the course of its examinations would not violate attorney-client privilege. Expect Democrats to push back against the bills, just as they have other Republican attempts to rework the agency.

Later in the afternoon, another Financial Services panel will be chatting about Dodd-Frank. In particular, the topic of the day will be how to limit the reach of the Wall Street overhaul so it does not impede financial activity happening abroad.


HEARING ROUNDUP

— The House Appropriations subcommittee on the Legislative Branch holds a hearing on the U.S. Capitol Police budget while the subcommittee on Defense talks costs for military healthcare.

— The Senate Veterans Affairs Committee will chat about the Veteran’s Affairs budget.


BREAKING NEWS

GSEs and the budget: The House on Tuesday passed a bill — 245-180 — that would put government-sponsored enterprises Freddie Mac and Fannie Mae more fully on budget. The approach is supported by the Congressional Budget Office but opposed by the White House. Only seven Democrats voted in favor of the bill.

The measure, sponsored by Rep. Scott Garrett (R-N.J.) would force the Congressional Budget Office and Office of Management and Budget to consider not only the borrowing costs of the federal government but also the costs of the market risk.

Up next is the fourth of 10 GOP reform bills, the line-item veto that would give the president powers to request rescinding specific spending items. The bill, sponsored by Rep. Paul Ryan (R-Wis.), is supported by the White House.

Spotlight on federal pensions: The House Oversight and Government Reform Committee cleared a bill on Tuesday, on a party-line vote, that would drastically reduce pensions for new federal workers, and require government employees to contribute more to their pensions.

Republicans have been eyeing federal salaries and pensions to help pay for other initiatives, and Rep. Dennis Ross (R-Fla.) said Tuesday that government benefits had become a major driver of U.S. deficits.

"The American people are demanding from their elected representatives a willingness to live under the laws they pass," Ross said at the markup. "They are tired of the perks and hypocrisy they witness in the Congress and are rightfully outraged by the pension benefits guaranteed to a federal workforce that has grown too large."

For their part, Democrats and public employee unions say Republicans are unfairly targeting federal workers.

"Congress would never apply this selective middle-class payroll tax increase to America's private-sector workers," Joseph Beaudoin of the National Active and Retired Federal Employees Association said in a statement. "It is just as unacceptable to reduce the wages of America's federal workers such as our letter carriers, food safety inspectors and FBI officers."

Blame game: Senate Democratic leaders on Tuesday accused Republicans of trying to derail the national economic recovery for political purposes after talks to extend the payroll tax holiday hit a wall.

“We’ve had five straight months of the unemployment rate coming down. Let’s make no mistake, there are some Republicans who think that doesn’t really work with their strategy of defeating President Obama. These are some of the same voices who are opposing any bipartisan agreement to extend the payroll tax cut,” said Senate Democratic Whip Dick Durbin (Ill.).

Deficit nightmares: Sen. Kelly Ayotte (R-N.H.) had a simple question Tuesday for Federal Reserve Chairman Ben Bernanke: What keeps you up at night?

Bernanke responded with the federal deficit, which he said is on pace to become "unsustainable" in 15 to 20 years — unless financial markets lose confidence in U.S. policymakers before that.

"We clearly need some major changes in our fiscal planning," he told members of the Senate Budget Committee, calling on them to act "as soon as possible" to address the deficit.

Keeping an eye on oil prices: Bernanke is also keeping a watchful eye on the price of oil. He warned lawmakers on Tuesday that a major disruption in foreign oil supplies that sent prices skyward could thwart the economic recovery, but expressed optimism that the United States is becoming less vulnerable to such dislocations.

“A major disruption that sent oil prices up very substantially could ... stop the recovery,” he told the Senate Budget Committee, noting that oil price spikes feed inflation and act as a “tax” on consumers.

Turmoil in Libya helped send oil prices above $113 per barrel in late April and early May of 2011, pushing nationwide gasoline prices to almost $4 per gallon — a level exceeded in many areas — before falling back.

Gimme that back: The two House Democrats originally behind legislation banning insider trading by members of Congress are bristling at House Majority Leader Eric Cantor's (R-Va.) handling of the legislation.

Reps. Louise Slaughter (N.Y.) and Tim Walz (Minn.) on Tuesday complained that Cantor "snatched away" their version of the Stop Trading on Congressional Knowledge (STOCK) Act, and is now reworking it without their input.

"We are doing an insider-trading bill with insiders behind closed doors not sharing with us," complained Walz. "Bring this dang thing out in the open."


ECONOMIC INDICATORS 

MBA Mortgage Index: The Mortgage Bankers Association releases its weekly report on mortgage application volume. 


WHAT YOU MIGHT HAVE MISSED

— GOP to push 'Pelosi Provision' in insider-trading bill

Economic forecasts expected to improve on jobs data

— CBO: January deficit smaller than last year

— Senators launch assault on veterans' high unemployment

Economic confidence increasing, Gallup finds


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