The Year in Congress

I found this article at the CSM that highlights that we actually had a Do-a-Lot congress this year and it has a nifty self test on political knowledge in 2010 you may want to take.  They highlighted six big laws that were passed this year.  All of them were definitely steps in the correct direction even though they had flaws that will have to be worked out.  I’m not sure I’d consider all of them great successes but when you look back on the list, you’re sure to find something naughty and nice.

Here’s there intro to the list.

The post-election lame-duck session – typically a mopping-up operation to get out of town – also made history, passing key pieces of legislation, often with greater input from Republicans than had earlier been the case. People can argue the merits of what Congress did, but it’s hard to quibble with the scope of the undertaking. Here are six of this Congress’s major accomplishments, in the order in which they were approved.

Here are their list of “six big achievements”.

1. American Recovery & Reinvestment Act

The $819 billion economic stimulus package, signed into law February 2009 less than a month after Barack Obama became president, is the largest stand-alone spending bill in US history. It included tax cuts, as well as new spending for public works, education, clean energy, technology, and health care.

2. Patient Protection and Affordable Care Act

Congress battled for a year to pass health-care reform, which was finally a done deal March 23, 2010. The law mandates that all Americans obtain health insurance coverage, and it sets up entities called health exchanges to provide people with affordable options.

3. Financial regulatory reform

Known officially as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the new law is the most significant regulatory overhaul of the financial system since the Depression ended in the 1930s. Signed into law in July 2010, it aims to end bailouts forced on taxpayers by financial institutions deemed “too big to fail” and to protect consumers. Included in the legislation is a powerful, independent consumer-protection bureau, an early-warning system for financial groups deemed too big to fail, new oversight of credit agencies, and lower fees on debit-card charges. It also directs much of the $600 trillion over-the-counter derivatives trade through clearinghouses and exchanges.

4. Big tax-cut extension, plus new stimulus

Congress averted the largest tax increase in American history by voting in December to extend the Bush-era tax cuts for two years, including for the highest-income households.

5. Repeal of ‘don’t ask, don’t tell’

Fulfilling campaign pledges of the last two Democratic presidents, Obama on Dec. 22 signed a law that repeals a 17-year ban on gay men and women serving openly in the US armed services.

6. New nuclear arms pact with Russia

The new Strategic Arms Reduction Treaty (START) with Russia reduces the US and Russian arsenals of deployed strategic nuclear warheads to 1,550 apiece within seven years. The Senate ratified the treaty Dec. 22 by a vote of 71 to 26.

Juju--my youngest daughter's christmas cat--studies the list

Okay, I’ll put it to you!

 

Naughty or Nice list?

 

See, even JuJu the Christmas Cat wants in on the project!!!  (I guess my youngest daughter still hasn’t gotten through the doll phase yet.)


Obama and the Enhanced Status Quo

monopoly smoke ringsWe were promised changed. What we are getting is perpetuation of the status quo. Let’s try this headline at the Guardian on for size “Goldman Sachs to make record bonus payout”.

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Staff in London were briefed last week on the banking and securities company’s prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever. Figures next month detailing the firm’s second-quarter earnings are expected to show a further jump in profits. Warren Buffett, who bought $5bn of the company’s shares in January, has already made a $1bn gain on his investment.

The bold part says it all. There continues to be a systematic elimination of competition from merger mania in the financial sector which has created two classes of too-big-to-fail institutions. We now have those that function completely with government funding and those that function by funding candidates for government. Goldman Sachs is benefiting immensely from both.

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He’s no FDR

DeLong skewers the the Stimulus Plan Claim via the Unemployment rate

DeLong skewers the the Stimulus Plan Claim via the Unemployment rate with stylized facts

With the release of financial regulation reform and healthcare reform that has Wall Street breaking open the bubbly, I just want to join the chorus of highly skeptical economists. The tune of the last few days is hard to miss. Take this piece from the NY Time’s Dealbook as an example: Only a Hint of Roosevelt in Financial Overhaul. There’s also Paul Krugman’s Op-Ed Column today Out of the Shadows which is the typical on-the-one-hand-on-the-other hand economist behavior. (Could I just mention in passing that I like the OLD Paul better? The one that was an out spoken advocate for liberal economists? I’m not sure what happened at that White House Dinner, but I’m beginning to think we now have a Manchurian economist at Princeton. Oh, where is our Shrill One?) Oh, and you can still read my first impressions here. I’m going to start with Financial Reform but don’t leave me yet. Brad deLong takes on Christine Romer’s The Lessons of 1937 at The Economist and since he still hasn’t been invited to dinner at the White House, it’s classic Brad.

So what does Krugman think about the Alphabet Soup Agency reheat slugging its way through that perpetual Hall of Wall Street minions we know as our Congress? He believes that it throws some light on the shadow banking industry in that the Alphabet Soup gang at the FED get to see more balance sheets and books. There is also a stab at standardizing the process, but custom fitted Credit Default Swaps remain. The essential riskiness remains. Let’s examine the Krugman critique.

But what about the broader problem of financial excess?

President Obama’s speech outlining the financial plan described the underlying problem very well. Wall Street developed a “culture of irresponsibility,” the president said. Lenders didn’t hold on to their loans, but instead sold them off to be repackaged into securities, which in turn were sold to investors who didn’t understand what they were buying. “Meanwhile,” he said, “executive compensation — unmoored from long-term performance or even reality — rewarded recklessness rather than responsibility.”

Unfortunately, the plan as released doesn’t live up to the diagnosis.

Well, maybe the White House Pastry chef did not completely overwhelm the shrill one.

Tellingly, the administration’s executive summary of its proposals highlights “compensation practices” as a key cause of the crisis, but then fails to say anything about addressing those practices. The long-form version says more, but what it says — “Federal regulators should issue standards and guidelines to better align executive compensation practices of financial firms with long-term shareholder value” — is a description of what should happen, rather than a plan to make it happen.

Furthermore, the plan says very little of substance about reforming the rating agencies, whose willingness to give a seal of approval to dubious securities played an important role in creating the mess we’re in.

In short, Mr. Obama has a clear vision of what went wrong, but aside from regulating shadow banking — no small thing, to be sure — his plan basically punts on the question of how to keep it from happening all over again, pushing the hard decisions off to future regulators.

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