The Year 2010 Federal Fiscal and Legislative outlook below is an overview of the year provided to Hoosier Patriots as a courtesy by Freedom Works and will be updated as necessary.
2010 Federal Fiscal Policy Outlook
Prepared by Max Pappas, Vice President For Public Policy, FreedomWorks.
DATE: 1/24/2010
The Democratic leaders of Congress finished 2009 by passing several major bills, all of which had one thing in common: they put off the tough decisions, like dealing with the federal debt and growing long-term unemployment, for two months. This, along with the fact that Democrats left much of their agenda awaiting attention as they spent 2009 focused on comprehensive health care reform, means they have a lot to do in 2010.
Jobs will be an overarching theme throughout the year as unemployment is expected to remain unacceptably high, and January, February, and March will start the year with a challenging trio of issues. In January the Senate will debate Federal Reserve management as a growing bipartisan coalition of Senators calls for an audit of the Fed. President Obama' s 2011 budget is due in February, at which time the debt ceiling will again need to be raised unless the Senate in January succeeds in raising it by much more than the House called for, and March will bring a painful fight in the House over new war funding for Afghanistan!
In addition to these items that need to be done, Democratic leaders in Congress also hope to pass health care reform, a second stimulus/jobs bill, energy regulations, financial regulations, labor reforms, and let the Bush tax cuts expire and reduce the deficit.
This wish-list needs to be considered in the context of this being a mid-term election year, shortening the calendar and decreasing Congressional desire to tackle controversial issues. Looking further into these top fiscal issues:
Health Care Reform: The election of Scott Brown of Massachusetts to the Senate makes it very unlikely that President Obama will sign a health care reform bill into law in the coming weeks, as he had hoped. But this does not mean the fight is anywhere near over this year. Even if Democrats are unable to pass the comprehensive plan they have been pushing-and there are still options available to them like moving the Senate bill through the House with a companion bill that makes the changes House members want, without requiring another Senate vote on the comprehensive bill-they will search for ways to pass parts of it. This is an ideological issue for the left that will never go away. Remember, they have been fighting for government health care for 70 years, and will never give up. It is almost certain Democrats will have smaller majorities next year, so they will fight for the rest of this year to pass something.
Ensuring health care reform will remain in the headlines all year no matter what happens, Republican candidates have already announced they will run for office this year calling for the repeal of ObamaCare, should it pass.
It is not insignificant that both the House and Senate have each passed their own health care reform bills, so we must remain on the offensive. But in addition to the loss of the Massachusetts seat, there are still major obstacles keeping a final bill from President Obama's desk. First, the House and the Senate have to see if they can come to an agreement on the differences between their bills including the public option, abortion funding, illegal immigrant access, and "Cadillac plan" tax increases. Finding agreement that 60 senators will support became more difficult with a Republican winning the seat Kennedy held in Massachusetts for so long, not only because Democrats no longer hold a 60-seat majority, but also because most politicians are primarily interested in keeping their jobs, so it will now be even more difficult for Democrats in competitive races to vote for the bill.
Another hurdle that Democrats may have to overcome in the health care debate is legal action from the states. 27 states are currently taking legislative steps to combat the Democrats' health care takeover bills and 13 state Attorney Generals have joined together to question the constitutionality of the sweetheart deals included in the bill to secure votes. Others have questioned the constitutionality of mandating the purchase of a product, namely health insurance.
Democrats have talked about scaling back the bill to pass a more modest version. They will soon learn that the reason the bill is so big is because once the government starts tinkering with one part of the market, it creates more and more problems it will seek to address. When you require insurance to be issued to everyone, there is no reason to buy insurance until you are sick, so they add the mandate. The additional regulations increase costs, so prices rise, necessitating subsidies. Subsides have to be paid for, so taxes are added. But they may still try to pass these pieces individually.
Jobs: With unemployment remaining high and the workforce losing another 85,000 jobs this past December, Democrats will be forced to address joblessness early in 2010, and probably throughout the year. They will not want voters going to the polls in November with unemployment over 10%.
The House has passed what Democrats are calling a "jobs bill" (HR 2847) with $154 billion for highway construction and extended unemployment benefits. The Senate will soon consider its own jobs bill which will likely be significantly different than the one that was passed in the House.
Getting Americans back to work will be at the forefront of the Democrats' agenda in 2010 and will undoubtedly be a major part of the President's State of the Union address. Republicans will point out that all the major issues-health care, cap and trade, card check, tax hikes, regulations-are jobs issues, in that the plans the Democrats have proposed kill jobs and stifle job creation.
Cap and Trade: Long on the wish-list of the left, cap-and-trade passed the House in 2009 219-212 with the help of 8 Republican votes. The bill stalled in the Senate and, given the global warming statistics scandal, continued high unemployment, and the unpopularity of the House bill, it will be difficult for the Senate to get past committee hearings on their version of the legislation. However, that does not mean the federal government will not try to impose considerable costs on the economy by artificially increasing the cost of energy use that results in carbon dioxide emissions.
Rather than waiting for Congress to produce legislation, the Environmental Protection Agency (EPA) has declared that carbon dioxide "threaten(s) the public health and welfare of the American people" and now plans to regulate carbon dioxide with or without the legislative branch legislating. Significantly, Sen. Blanche Lincoln (D Ark.) joined a growing list of Senators opposed to such actions.
In the 2010 White House budget, President Obama predicts that the instillation of a cap and trade program will raise $646 billion in new revenues for the federal government. Senate Majority Leader Harry Reid (D-Nev.) had said that-aside from health care reform-cap and trade is his top priority. It is unclear whether or not his very low poll numbers have changed that.
Tax Hikes: After bailing out failed banks and automakers, passing a $787 billion stimulus bill, and potentially spending trillions more on health care and job creation legislation, Congressional Democrats will be forced to deal with the unpopular issue of tax increases this year, whether they want to or not.
The Bush tax cuts-including the marriage tax cut, the child tax credit and the one year elimination of the death tax-are set to expire in 2010. Conservatives want Democrats to make such cuts permanent, but their spending agenda depends upon the increased revenue that the expiration of the Bush cuts may provide.
There will be a messaging war between the two sides, and it is important that conservatives get out early and with the right messaging on these tax hikes.
Financial Regulation: In December of 2009, the House passed HR 4173, the Wall Street Reform and Consumer Protection Act of 2009. Included in the legislation is the establishment of the Consumer Financial Protection Agency (CFPA). The bill represents the largest package of financial reforms since the early 1940s. It will cost an estimated $4.5 billion to create the CFPA which aims to provide greater oversight of private enterprise.
The Senate will attempt to pass its own sweeping overhaul of the nation's financial regulations in 2010. The Senate bill, however, is expected to be significantly different than the House bill. It will likely leave out the creation of the CFPA but it may strip the Federal Reserve of its regulatory powers.
It will be easy for many conservatives to fall for the trap of defending the financial services industry and supporting the status quo, which is both bad policy and bad politics. Bush's "Wall Street Bailout" was the spark that lit the Tea Party grassfire, and the Obama administration has so far been successful in continuing to increase the ties between Wall Street and Washington while at the same time demonizing bankers for political gain. This presents a big opportunity for the right to throw off the image of being owned by business interest when what we really support are free markets. Big business and free market are not the same thing, and we need to make that clear. Big businesses use the power of big government to their advantage better than anyone, and the population is coming to realize that thanks to the transparency created by the internet. The House financial services bill was rightly criticized as creating a permanent bailout fund-permanently disconnecting risk from loss, but not from reward, severing the tie that makes a market function.
If the bailouts continue, and if a health care plan similar to the Senate version passes, we will have ample evidence that the Democrats who control Washington are doing the bidding of the very businesses they criticize, to the detriment of taxpayers.
Labor Issues: Considering how much they invested in bringing Democrats to power, the unions are not likely to let their agenda slide much longer. While "card check" itself may not come back this year in any legislation, labor will try to get mandatory binding arbitration attached to a big must-pass bill. While not as morally offensive as card check, it is certainly as damaging economically, if not more so.
Deficit Reduction: In 2010, Democrats have to appear more serious about fiscal responsibility. Expect a year-long messaging strategy that begins in earnest with President Obama's State of the Union address. With his own budget due in February, President Obama will have presented his second budget and will no longer be able to credibly say the deficits belong to President Bush-although some of the debt does.
The House Democrats tried to pass a $1.8 trillion debt ceiling increase in December, which would have been enough to get the government through the November elections, but failed. Instead, they passed a $290 billion increase in the debt ceiling that should take the federal government into February, if the Senate passes it (although they are considering $1.8 trillion). Congress will seek another increase early this year, which is currently expected to be at least a $1 trillion.
The timing of this second debt ceiling increase is very unfortunate for the Democrats, which is why they wanted to get it all done in December, as it will hit around the same time the President is announcing his 2011 budget and its associated deficits, and when they will presenting any new health care.
There are two ways to balance the budget-by raising taxes or by cutting spending. Letting the Bush tax cuts expire to help "balance the budget" will be presented as being fiscally responsible, and will be a trap that we need to help keep conservatives out of by presenting a substantial cost-cutting plan as a legitimate alternative.
2010 Federal Fiscal Policy Outlook
Jobs: With unemployment remaining high and the workforce losing another 85,000 jobs this past December, Democrats will be forced to address joblessness early in 2010, and probably throughout the year. They will not want voters going to the polls in November with unemployment over 10%.
Financial Regulation: In December of 2009, the House passed HR 4173, the Wall Street Reform and Consumer Protection Act of 2009. Included in the legislation is the establishment of the Consumer Financial Protection Agency (CFPA). The bill represents the largest package of financial reforms since the early 1940s. It will cost an estimated $4.5 billion to create the CFPA which aims to provide greater oversight of private enterprise.