Economic Recovery Measures
Today, the House passed HR 5297, the small business bill that had been stalled in Congress for weeks. It is expected that President Obama will sign it into law right away. Meant to provide capital for banks to loan to small businesses, the bill will establish a $30 billion lending fund that will buy equity in community banks and have them pay varying dividends based on how much they increase lending (CBO actually expects this provision to raise $1 billion over ten years).
With Congress back in session, the mid-term election right around the corner, and a looming expiration, the debate of the 2001-2003 tax cuts is getting hotter and hotter. Up until now, the debate over the tax cuts, which are set to expire at the end of the year, has mainly centered on whether or not to extend all of them or let them expire for the highest income earners. We believe that this type of debate is missing a key component: each plan’s specific and relative deficit impact.
Falling Into Pieces – Fall officially begins this week. A short congressional calendar and the quickly-approaching elections mean that the legislative agenda will largely fall by the wayside. Only a few bills will get passed this month, with a post-election lame duck session set to rake up with the rest.
Nobody's breaking out the champagne for this anniversary.
On this day two years ago, the collapse of Lehman Brothers turned an already bad-looking recession into an all-out financial panic. The collapse sent the stock market on a wild ride for the next month and rapidly accelerated the pace of job losses, turning 6 percent unemployment into 9.5 percent unemployment in just six months.
UPDATE: The Senate passed the small business package on Thursday 9/16, and the House is expected to pass the legislation early next week.
Kick-off Time – Football season got underway this weekend, and the final legislative drive before the mid-term elections also commences this week. The elections will loom over the work of lawmakers as they return to work for a short period before adjourning in October, making major breakthroughs unlikely. But stranger things have happened (like the Redskins winning).
Today, former OMB Director Peter Orszag debuted his new column in the New York Times and he sure made a splash. He tries to thread the needle of propping up the economy in the immediate-term and helping right the budget imbalances in the medium-term by suggesting that the tax cuts should be temporarily extended for all income brackets until 2013 and then allowed to expire.
Yesterday, the President announced two new plans for economic growth. Responding to pressure to deliver more job creation in a critical election year, Obama announced a plan to spend $50 billion next year on transportation and infrastructure—from roads to railways to airports. The proposal also includes plans for the creation of a national ‘infrastructure bank’ to attract private funding for further infrastructure improvement projects.
A Lot of Work Ahead – The end of the long Labor Day weekend heralds the effective end of summer: the pools are closed, the kids are back at school, and summer vacations are over. Congress goes back to work in Washington next week. Members of Congress may be hard at work back home campaigning now, but tough tasks wait for them in DC as well.
CRFB board member Laura Tyson makes the argument for additional economic stimulus in a recent New York Times op-ed. At the same time she mirrors CRFB in also proposing that policymakers “should enact a credible multiyear plan now to stabilize the ratio of federal debt to gross domestic product gradually as the economy recovers.” Additionally, she renews her membership in CRFB’s “Announcement Effect Club” by arguing that announcing a credible plan now would ease capital market concerns.