Deal Struck to Modify Insurance Tax

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Union Leaders Back Tax Deal

McClatchy describes the deal struck between the White House, congressional leaders and union leaders to modify high-premium insurance tax: “Under the agreement, the threshold for taxation would be adjusted based on companies’ or unions’ relative age, gender and ratio of workers in high-risk jobs. Dental and vision coverage would be exempt. It also would give collective bargaining units a five-year delay before they’re subject to the excise tax. Over time, more Americans could get their insurance through a government-managed private insurance exchange, especially if they live in states with high insurance costs or participate in collective bargaining units. The aim, as union bosses see it, is to tax high-end health insurance plans carried by wealthy business executives while shielding middle-class workers who bargained away their salaries in exchange for high-end health-care coverage.”

NYT adds: “For people in certain high-risk occupations, including police officers and construction workers, thresholds would be higher [than premiums $24,000 a year for a family]: as high as $27,000 for a family.”

Time’s Karen Tumulty on the impact on financing reform: “The deal signficantly reduced the amount of money that would be raised by the tax. Where the original version would have generated $150 billion over 10 years, the new one would raise $90 billion, union officials said. (White House officials declined to confirm that amount.)”

LAT on where additional revenue could come from: “Democrats familiar with the negotiations said a leading option was to go along with a Senate proposal to hike the Medicare payroll tax on upper-income earners — and possibly expand it to cover investment income rather than wages alone.”

Biotech execs may pay a price. Politico: “President Barack Obama told House Democrats on Thursday that he wants to reduce the amount of time certain biotechnology treatments are protected under an agreement in both the House and Senate bills … one thing that both bills share [is] a 12-year exclusivity deal allowing the producers of so-called biologics to make and market these treatments without competition from generic manufacturers. One option on the table would reduce the exclusivity period to 10 years, sources say … when California Rep. Anna Eshoo, who supports the longer, industry-backed protections, asked Obama which he prefers, the president said he favors a shorter window … the president now seems to be pushing for a shorter window to generate more revenue.”

USA Today cautions: “several remaining sticking points in the health care legislation — including the thorny issue of abortion.”

Wonk Room’s Igor Volsky says temporarily exempting union agreement from tax is sensible policy: “Critics will interpret the temporary exemption as a special interest carve out for a vital political constituency, but it makes perfect policy sense. Unlike non-union labor negotiations which can be re-negotiated annually, collective bargaining agreements tie unions down for multiple years. The temporary exemption allows them to get out of the way of a moving train. After all, collective bargaining agreements are not the same as raise negotiations for non-union employees. While the latter operates under the implicit assumption that a certain percentage of compensation is dedicated for health benefits and is exempt from taxation, a union collective bargaining agreement enters into an explicit trade off between taxable and nontaxable compensation.”

Republican talking point in LA Times: “Antonia Ferrier, a spokeswoman for House Republican leader John A. Boehner of Ohio, said: ‘This union kickback is the latest in a long line of backroom payoffs and sweetheart deals…'”

Union defense in Politico: “[AFL-CIO’s Trumka] defended the special exemption for union plans, saying that most of the changes labor had won would apply to all workers.”

Health insurance exchange may be more accessible in new deal. Ezra Klein: “On a conference call earlier today, the union representatives mentioned that the exchanges would open to collective bargaining units and Taft-Hartley plans in 2017. This is, potentially, a very big deal. But details are hard to come by. Does it mean that the exchanges open up to all employers in 2017? A later conference call with White House officials saw repeated questions on this front (including one from me), and a studied vagueness: ‘We’re working very hard on the exchanges,’ they said. But there was a clue to the direction the bill is moving: ‘Over time, the exchanges will open to more and more people,’ said one of the officials on the call … if the combination of the excise tax and union concerns with the vulnerabilities of the employer-based market lead Congress to open the exchanges to everyone in 2017, then this has been a successful negotiating process indeed, and this bill is a lot better than it was a week ago.”

TPMDC notes hint of uncertainty from unions at effect of compromise. Quotes AFL-CIO’s Trumka: “We hope the bill will do what its supposed to do — and cost containment measures will start to ratchet down health care [costs]. Hopefully no Americans will bump up against the excise tax. If that doesn’t work, you could see the excise tax kick in and people face higher premiums. [Hopefully] the bill works and that doesn’t happen.”

The Hill reports lead tax opponent Rep. Courtney “conditionally” supports, quotes Courtney: “However, the devil is in the details and I will reserve judgment on any compromise until I have had the time to review the proposal.”

Rep. Woolsey expects health care bill to pass. TPMDC concludes, “…despite all the heartache and all the compromises, House Speaker Nancy Pelosi might not lose many progressive votes when health care comes to a final vote.”

Feingold sends letter of concern to Reid. Politico: “Sen. Russ Feingold (D-Wis.) sent Reid a letter asking that all ‘sweetener’ provisions be struck from final legislation — a reference to agreements with Sen. Ben Nelson (D-Neb.), Sen. Mary Landrieu (D-La.) and others to help secure their votes.”

President previews how he will frame health care debate in upcoming elections to House Dems: “This year alone, this reform will ban some of the worst practices of the insurance industry forever. They’ll no longer be allowed to refuse coverage for preexisting conditions for children or drop coverage when folks get sick and need it the most. They’ll no longer be allowed to impose restrictive annual limits on the amount of coverage that you receive, lifetime limits on the amounts of benefits received. They’ll be required to offer free preventive care — like checkups and routine tests and mammograms — at no cost. Patients will have rights. They will get what they pay for … it’s reform that finally offers Americans the security of knowing that they’ll have quality, affordable health care whether they lose their job or change their job or they get sick … you have nothing to apologize for when it comes to talking about deficit reduction. The irresponsible thing would have been to do nothing, and that’s not what you’ve decided to do. This represents the biggest step towards deficit reduction in years … If Republicans want to campaign against what we’ve done by standing up for the status quo and for insurance companies over American families and businesses, that is a fight I want to have. “

The Hill reports former “No” votes in the House may support new compromise legislation: “‘There were a lot of things in the Senate bill that the coalition had its eye on, specifically in terms of cost containment, very early on,’ the Blue Dog member said. ‘Most of us, if not all of us, who voted no but issued pretty moderated statements leaving open the door to voting yes, are waiting to see what the final product is, so that we can get the budget analysis of what’s been negotiated.’ At least one of those members, Science Committee Chairman Bart Gordon (D-Tenn.), confirmed to The Hill that he’s indeed keeping the door open to becoming a yes vote.”

Stupak reserving judgment on health bill’s abortion language,” reports The Hill.

AARP Opposes Undemocratic Conrad-Gregg Debt Commission

AARP comes out swinging against anti-SocSec/Medicare debt commission. CQ quotes letter to senators: “”We oppose providing fast-track authority to a task force that will function with limited accountability outside of the regular order of Congress, and with an exclusive focus on debt reduction … We further oppose the establishment of such a task force in light of the targeted Medicare savings and proposed Medicare Payment Board [that would have further authority to reduce Medicare spending] in the pending Senate health care reform legislation.'”

Obama advisor Axlerod schools Karl Rove on deficit reduction in W. Post oped: “… the Bush administration’s swing from surpluses to deficits added more debt in its eight years than all the previous administrations in the history of our republic combined. And its spending spree is the unwelcome gift that keeps on giving: Going forward, these unpaid-for policies will continue to add trillions to our deficit … An analysis by the Washington Times concluded that in this first year, Obama had been more successful in getting his proposed cuts through Congress than his predecessor was in any of his eight years in office [and] the [health care] legislation making its way through Congress upholds this principle [of deficit reduction].”

Bank Tax React

Felix Salmon backs the tax: “…something along these lines is actually required by law: … TARP recipients should have known all along that this was coming, and it’s a bit rich for them to start complaining now. … the only thing I’m mildly worried about is that the fee is large enough to be passed on to consumers, but small enough that they won’t react by moving their money to a smaller bank. My guess is though that the big banks are maximizing the fees they charge already. Might they lend a little less? That’s possible — but, on the other hand, maybe the fee will force them to lend a little more, and hold less money in cash. Overall, any harm done by this tax will be minimal, while the benefit is likely to reach a good $100 billion or so. I call that a no-brainer.”

Open Left’s Chris Bowers likes the politics: “…the White House has decided to move up the timetable, showing that it isn’t completely tone deaf on the political implications of the bailout … the White House says the tax will run as long as is necessary to recoup all of the losses … Republicans hate the idea. Banks hate the idea … This is all very good.”

Dean Baker argues it won’t produce much reform: “The administration was projecting that the tax would raise roughly $9 billion annually over the next decade. By comparison, the annual profits of the banks in question run close to $90 billion a year. The bonuses at these institutions are likely to be in the same neighborhood. This means that the tax will be equal to roughly 5 percent of the combined profits and bonuses at the large banks. From the standpoint of those wishing to make the industry pay for some of the damage that it has done, this is better than nothing, but it certainly is not going to lead to any fundamental changes in the way business is conducted on Wall Street.”

Bloomberg notes not all Dems are on board: “Many Democrats remained silent about the plan Obama announced yesterday. Others, such as Senate Finance Committee Chairman Max Baucus of Montana, were noncommittal in their reaction. And some of Obama’s fellow Democrats expressed opposition. ‘I just don’t think the financial services industry is a piggy bank that government can dip into anytime it needs to solve its budget problems,’ said Representative Michael McMahon, a Democrat who represents parts of New York City … While there’s a good chance Obama’s proposal will pass the House, its fate in the Senate is less certain, reported FBR Capital Markets analysts led by Paul Miller.”

If bonuses continue to anger public, “lawmakers may push for a more punitive tax,” reports W. Post: “Rep. Peter Welch (D-Vt.) introduced a bill Thursday that would impose a 50 percent tax on big bank bonuses and use the money for small-business lending; nearly two dozen lawmakers signed up as co-sponsors. Proposals already pending in the House include a 75 percent tax on bonuses and a new tax on all financial transactions. Meanwhile, House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.), who favors the administration’s proposal, is planning to hold hearings next week to consider additional measures.”

Wall Street looks to change perception of bonuses … by breaking the record by less. Bloomberg: “Wall Street firms, facing pressure from lawmakers and shareholders to rein in pay, may report smaller bonus pools because of lower fourth-quarter revenue and mounting public outrage, analysts say. Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank may hand out $27.6 billion in bonuses, according to analysts’ estimates. While that’s 49 percent higher than a year ago and more than the previous high of $26.8 billion in 2007, it’s less than some analysts expected in October.”

Will Dodd Trade Away Consumer Financial Protection Agency?

WSJ reports Dodd offering GOP no CFPA in exchange for ” a beefed-up consumer-protection division within another federal agency.” Naked Capitalism unimpressed: “With Dodd on his way out, the consumer financial protection agency is likely to be folded into the Treasury, where it is certain to be neutered. The argument is that the operations of the to-be-created agency might conflict with those of the systemic risk regulator. Huh? First, I’d like to hear some hypothetical examples where the two might disagree … if there were a bona fide tradeoff between consumer protection and stability, it might be salutary to have that conflict be explicit to force examination and debate.”

Paul Volcker backs Bernanke on expanded Fed regulatory power. W. Post: “Fed Chairman Ben S. Bernanke released a letter and an 11-page document he sent to the Senate Banking Committee arguing that the Fed has unique abilities to oversee complex financial institutions, that those powers are intertwined with its broader responsibility for financial stability, and that it has learned from its mistakes in the run-up to the financial crisis. Separately, former Fed chairman Paul Volcker gave a speech in which he said he was ‘particularly disturbed’ by proposals to move bank supervision elsewhere in the government.”

Bad Reviews For Financial Crisis Commission’s Les Leopold finds commission flinching from key questions: “After two days of hearings, the Financial Crisis Inquiry Commission seems to be drifting away from the biggest questions that haunt our economic system like the oligopoly of banks that are far too big to fail, the mal-distribution of wealth, and the failure to prevent destructive financial innovations.”

Newsweek’s Michael Hirsh argues bankers getting off the hook: “…a series of mostly general and scattershot questions that turned what should have been a hot seat for the bankers into a Barcalounger … What has been missing most of all since the real dimensions of the meltdown became known is a sustained effort to consider our out-of-control financial system as a whole. Both Washington and Wall Street continue to see the financial crisis as a matter of toxic assets, when the entire financial system has become toxic … Regulators—especially FDIC chair Sheila Bair, who remains ahead of the curve—are demanding new pay incentives that reward a focus on long-term corporate value, and promoting ‘clawbacks’ of bonuses and salary for instruments that do poorly. But there’s already an internal battle over Bair’s proposal ….”

Krugman appalled by “clueless” banker testimony: “… the bankers’ testimony showed a stunning failure, even now, to grasp the nature and extent of the current crisis. And that’s important: It tells us that as Congress and the administration try to reform the financial system, they should ignore advice coming from the supposed wise men of Wall Street, who have no wisdom to offer … Wall Street executives will tell you that the financial-reform bill the House passed last month would cripple the economy with overregulation (it’s actually quite mild). They’ll insist that the tax on bank debt just proposed by the Obama administration is a crude concession to foolish populism. They’ll warn that action to tax or otherwise rein in financial-industry compensation is destructive and unjustified. But what do they know? The answer, as far as I can tell, is: not much.”

Kevin Drum stunned by JPMorgan’s complete dismissal of a potential housing bubble: “If they could model the fantastically complex derivatives that they routinely wrapped around mortgage securities, they could certainly have modeled this if they’d wanted to. It wouldn’t even be that complicated compared to a lot of the stuff they do on an everyday basis. And as for the risk of a huge price drop being “very small,” surely even a crude model should have shown that risk becoming pretty sizable as prices starting heading into the stratosphere? There were certainly an awful lot of inputs that suggested it.”

McClatchy catches Goldman Sachs trying to reverse CEO’s testimony: “A day after Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, characterized as ‘improper’ his firm’s practice of betting that securities it was selling as safe would plummet in value, the company denied he said that to the Financial Crisis Inquiry Commission.”

SEC and FDIC own up to mistakes. W. Post: “Bair and SEC Chairman Mary Schapiro spoke strongly Thursday in favor of a broad range of regulatory reforms, including transparency in the shadowy market for financial derivatives, elimination of the designation of firms as ‘too big to fail,’ tougher consumer-protection measures, more oversight of credit-ratings agencies, and changes in executive compensation structures to discourage excessive risk-taking. Bair said that as lawmakers consider overhauling financial regulation, their approach ‘must be holistic and give regulators the tools to address risks through[out] the system.’ Schapiro also acknowledged regulatory lapses at the SEC and encouraged strong new reforms.”

Angelides to expand inquiry to Clinton-era regulators. WSJ: “Former California Treasurer Phil Angelides said in an interview he wanted to know ‘what did the FBI, the Fed, the Department of Justice and others know about subprime lending; when they know it, and why didn’t they act?’ Mr. Angelides said former Federal Reserve Chairman Alan Greenspan and current Chairman Ben Bernanke likely would be called to testify at future commission hearings.”

Justice investigating Wall Street mortgage fraud. McClatchy: ” Turning its scrutiny to bigger fish in the subprime mortgage scandal, the Justice Department is investigating whether lenders or Wall Street firms defrauded investors in the sale of risky mortgage securities, its Criminal Division chief disclosed Thursday.”

Climate Bill Still On Tap

Climate Progress flags Sen. Reid speech predicting climate bill this year, attacking Murkowski’s lobbyist-written anti-EPA amendment. Quoting Reid: “…the House has passed a comprehensive clean energy and climate bill that does many of these things. I support addressing each of these issues in the Senate’s version, and I expect that to happen this spring … If [Sen. Murkowski] succeeds, it could keep Congress from working constructively in a bipartisan manner to pass clean energy legislation this year. That’s why I will work hard to defeat this misguided amendment.”

White House still supports bill this year. GreenWire: “[US climate enjoy Todd Stern] said the Obama administration fully intends to press ahead with energy and climate legislation designed to reduce U.S. emissions, though he did not endorse a particular approach such as a cap-and-trade program.”

Stern also defends Copenhagen Accord. NYT: “The three-page Copenhagen Accord is not legally binding, and the 192 nations that took part in the December talks did not formally accept it. But a sizable group of those countries said they would accept its terms and provide plans to reduce greenhouse gas emissions by Jan. 31. Wealthy countries also said they would follow through on promises to come up with $30 billion over the next three years to help developing countries adapt to global climate changes. ‘It is incredibly important that those things happen,’ Mr. Stern told investors gathered for a conference at the United Nations in New York, in his first public comments since the Copenhagen talks ended on Dec. 19. ‘The accord is lumbering down the runway, and now it needs to get speed so it can take off.'”

Mother Jones’ Kate Sheppard on Murkowski’ legislative strategy and possible motive: “Environmental advocates once saw Murkowski as one of the few Republicans who might support a cap-and-trade bill. But her anti-EPA machinations have them wondering whether she is simply a savvier type of obstructionist than her GOP colleagues. Murkowski, who is up for re-election this year, hails from an oil and gas state, and throughout her career has received more funding from electric utilities than any other industry.”

Possible crackdown on oil speculation jacking up gas prices. W. Post: “The effort to adopt new limits on the trading of oil and other energy commodities is a sharp reversal after years when regulators left those markets alone. The proposal from the Commodity Futures Trading Commission, which oversees oil and energy trading, would introduce new restrictions on what the largest traders can do. Concerned that some firms can amass such large holdings in energy commodities that their trades can have an outsize effect on the price of gasoline, heating oil or natural gas, officials said they would prevent traders ‘from establishing extraordinarily large positions.'”