Budget Deal Sealed
Congressional negotiators reach two-year budget deal. NYT: “The agreement, which would finance the government through Sept. 30, 2015, would eliminate about $63 billion in across-the-board domestic and military cuts. But it would provide $23 billion in deficit reduction by extending a 2 percent cut to Medicare providers through 2023, two years beyond the cuts set by the Budget Control Act of 2011 … The $63 billion increase over the next two years would be spread evenly between Pentagon and domestic spending, nearly erasing the impact of sequestration on the military. Domestic programs would fare particularly well because the 2 percent cut to Medicare health providers would be kept in place, alleviating cuts to programs like health research, education and Head Start.”
House vote expected Friday reports The Hill.
Conservatives attack deal for provided sequester relief, but doubtful they can sink it. Politico: “Many conservatives view the sequester cuts as harsh but necessary. It would take a sizable movement to sink the budget deal — likely requiring more than five Senate Republicans, or more than half of House Republicans, since many Democrats are expected to back the deal — which aides on both sides think is unlikely to happen … The looming $20 billion in cuts to defense spending set to kick in next month via the sequester are motivating some Republicans to back a potential deal who might have otherwise joined some conservatives to oppose it.”
Some Dems may reject for lack of jobless aid. Bloomberg: “While Democratic leaders spoke favorably of the deal last night, it doesn’t include an extension of expiring unemployment benefits for 1.3 million Americans that Democrats favor, and that Obama urged lawmakers to pass. That could cost some Democratic votes.”
Public pension cuts hit new workers but not current workers. W. Post: “Federal employees hired after Jan. 1 … would pay an additional 1.3 percent of salary toward retirement, saving the government $6 billion over 10 years. While federal employee unions strongly pushed against any additional payments from the workforce, the agreement is a much better deal for them than what Republicans and even President Obama had proposed.
No farm/food stamp bill this year though. The Hill: “They blamed bad weather in Washington for delaying budget scores that could have made a deal possible this week … [Sen. Debbie Stabenow] said scores could be ready to allow some kind of deal in principle by the time the Senate leaves for Christmas on Dec. 20 and that could allow a conference meeting after the congressional recess ends on Jan.7. House Agriculture Committee Chairman Frank Lucas (R-Okla.) also cited the lack of scores in announcing he plans to file a bill later Tuesday extending the now-expired 2008 farm bill through January.”
Volcker Rule Approved
Painstakingly crafted rule with “gray areas” approved by regulators. NYT: “But the Volcker Rule’s biggest tests may be just around the corner. The rule has plenty of potential gray areas that banks may be able to exploit. As a result, regulators will have to remain extremely vigilant, and understand highly complex trading books, if they are to properly enforce the rule … regulators will have to learn Wall Street’s ways. Traders who make bets for the bank’s own gain, for instance, have often worked alongside traders who serve customers. As a result, it may be extremely difficult for examiners to decipher which trades are for clients and which are not.”
“The devil now is in the details of implementation” says Simon Johnson: “Will there be enough disclosure and observable behavior for either the regulators or people on the outside to see whether the spirit of the Volcker Rule is being followed? For example, how exactly will traders be compensated and how much of this will be disclosed? Will data be available on trading activities, allowing independent researchers to look for patterns that might otherwise elude officials?”
“Wall Street Exhales” headlines Bloomberg: “Wall Street banks avoided their worst fears of the Volcker rule after regulators crafted the ban on speculative trading to leave market-making operations intact … The more-than 900 pages of regulations and preamble leave watchdogs room to interpret wording and decide whether firms are engaging in permitted hedging and market-making as opposed to proprietary trading … Market-making, or principal trading, is the business of using a firm’s capital to buy and sell securities with customers, while profiting on the spread and movement in prices. Proprietary trading involves banks placing speculative bets with their own capital. The Volcker rule seeks to stop banks with federally insured deposits from making such trades that could threaten their stability.”
Debate Churns How To Address Inequality
NYT’s Thomas Edsall questions Obama’s use of inequality rhetoric: “Voters are notoriously conflicted in their ideological outlook … by using broad terms with liberal ideological connotations like ‘inequality,’ … Obama risks activating voters’ ‘theoretical’ conservatism, as opposed to a strategy that stresses specifics in non-ideological terms, a kind of practical liberalism: raising the minimum wage, raising tax rates on unearned income, job training, early education.”
A higher minimum wage is one of the few anti-poverty tools we have, notes NYT’s Eduardo Porter: “The United States might not even need a minimum wage if it had some of the institutions that other advanced nations use to put a floor on workers’ living standards. But it doesn’t …Sweden may have fewer McDonald’s than the United States. Yet almost twice the share of Americans live in poverty … the floor can be raised without a minimum wage. Sweden, in fact, doesn’t have one. But it does have other tools — like a 70 percent unionization rate. In the United States, the union membership rate is about 7 percent.”
Pacific trade deal won’t happen this month, nor will congressional “fast-track” vote. NYT: “Much of the opposition comes from consumer, environmental and labor groups who argue that the deal might end up gutting American regulations, giving corporations too much power and moving jobs offshore … Leo W. Gerard, the president of the United Steelworkers union… said: ‘The politicians keep telling us the same song and dance that turns out not to be the truth. We’ve lost five million manufacturing jobs. The public gets it, and the politicians don’t.’ …officials involved in the Trans-Pacific Partnership talks have maintained optimism that a deal might come to fruition, and emphasized their intention to see it through. But a document published this week by WikiLeaks indicates that there might be more rifts behind the scenes than they have let on…”