Newest spat in Congress not helping economy
By Jennifer Liberto @CNNMoney September 23, 2011: 8:09 AM ET
WASHINGTON (CNNMoney) -- In a year when lawmakers barely averted a federal shutdown and a default on its debts, Congress is poised to spread more uncertainty on an economy already suffering from a consumer confidence crisis.
The latest spat on Capitol Hill is over how to relieve disaster-struck states. It threatens to hold up a stop-gap budget measure needed to avert a federal shutdown when the new fiscal year begins Oct. 1.
Shortly after midnight on Friday, the House approved a spending bill that the Senate is expected to reject. Senate Majority Leader Harry Reid immediately called the House bill "not an honest effort at compromise."
Economists warn that such squabbles send the wrong signal from Washington at a time when consumers, markets and our global partners are befuddled by a "political system that looks manifestly broken," in the words of Treasury Secretary Tim Geithner at a Thursday forum sponsored by National Journal.
Washington policy analyst Brian Gardner said the current fight is far more drama than the nation and its economy needs.
"It''s another complicating factor and it adds incrementally to uncertainty at the least opportune time," said Gardner, with investment firm Keefe, Bruyette & Woods.
Congress'' gridlock tax in full effect
Several economists told CNNMoney that few companies or investors outside the capital are closely watching the threat of a shutdown at this point. But they say that the world is looking to Washington for a sign that it''s getting its fiscal house in order.
Economists say the world may have to wait a bit longer.
"Whether it''s from Congress or the Fed, uncertainty is a huge problem for the economy," said Carl Riccadonna, a senior economist for Deutsche Bank. "It''s just very hard to plan for the future, when you don''t know the conditions or the rules of the road. That goes for companies, for investors and for households."
Keith Hembre, chief economist for Nuveen Asset Management, warned that uncertainty will continue to reign supreme in this economic recovery, in large part due to lack of "consistent fiscal policy" out of Washington.
"They''re not consistent as to a way forward, and without that, policy uncertainty is going to be a factor" as we head toward next fall''s election, said Hembre, a former Minneapolis Fed researcher.
Congressional veterans suspect lawmakers want to avoid another potential political crisis and get a budget deal, including money for disasters, in the next week.
They say lawmakers recognize the damage they inflicted, if not on the economy, then on their own plummeting popularity through the summer-long imbroglio over raising the debt ceiling.
Geithner blasted Congress on Thursday for inflicting "lasting damage" to the financial system during the debt-ceiling debate, during his appearance Thursday.
"We''ve got to work hard to heal that damage," Geithner said.
Obama: Jobs plan is insurance against a ‘recession’
President to send Congress $447 billion jobs bill and urge lawmakers to quickly pass itWASHINGTON — The $447 billion American Jobs Act is an insurance policy against the economy retreating back into recession, President Barack Obama told NBC in an interview aired on Monday.
“There are still a lot of folks hurting out there. And my job as president of the United States is not to worry about my job — my task is to worry about their jobs and their economic situation,” he said in an exclusive interview with NBC’s Brian Williams.
Obama will send Congress his new jobs bill on Monday and urge lawmakers to quickly pass it, a White House official said.
The centerpiece of the plan is lower payroll taxes for individuals and businesses. There''s also new spending to hire teachers and rebuild schools, among other things.
Teachers, police officers, firefighters and others will join the president to call for passage, according to the official, who spoke on condition of anonymity ahead of the president''s remarks.
The Democratic National Committee is launching a television ad campaign to boost support for Obama''s new jobs plan. The 30-second ads, which show portions of Obama''s speech to Congress last week, will air beginning Monday in politically important states from Nevada to New Hampshire. The ads urge viewers to "Read it. Fight for it. ... Pass the President''s Jobs Plan."
Story: Lawmakers face limits in fight to fix economy Last December, Congress passed a one-year cut in Social Security taxes, reducing the rate for workers from 6.2 percent to 4.2 percent for 2011. Employers still pay the 6.2 percent rate, which is applied to wages up to $106,800.
Obama proposes to extend the tax cut for a year and make it bigger, reducing the Social Security taxes paid by workers to 3.1 percent for 2012. He''s also now proposing to extend the payroll tax cut to businesses on the first $5 million of their payroll. About 98 percent of companies have payrolls below the $5 million threshold, according to the White House.
Extending and enlarging the payroll tax cuts costs $240 billion.
Obama urged lawmakers to "pass this jobs plan right away." But he left the responsibility for paying for the $447 billion plan to a special bipartisan House-Senate panel created to reducing deficits by at least $1.2 trillion over the coming decade. The panel''s top Republican wasn''t happy about it.
The jobs plan also calls for $130 billion in aid to state and local governments, providing either a welcome infusion of cash for those struggling with budget gaps, government layoffs and crumbling roads or merely a temporary patch for budget holes that are likely to remain long after the federal money runs out.
The perspective of governors and state lawmakers varies but often follows political affiliation, with Democrats generally praising Obama''s plan and Republicans remaining skeptical.
"It''s a no-brainer: Congress should pass the bill. Now," said California Gov. Jerry Brown, a Democrat, whose state would receive some $13 billion for construction projects and teaching and public safety jobs at a time when it has the nation''s second highest unemployment rate.
Many Republican lawmakers and governors are less enthusiastic about accepting the federal money, especially if it locks in costs.
"If we''re given the flexibility to spend it as we see fit and not as they see fit, I could see some benefit," particularly for long-delayed infrastructure projects, said Missouri House Budget Committee Chairman Ryan Silvey, a Republican. "I''m not a big fan of using one-time money for ongoing expenses. I think that''s what the state should be getting away from, not getting deeper into."
Obama''s plan has to clear a politically divided Congress, which could scuttle it entirely or enact bits and pieces of it. As envisioned by Obama, state and local governments would receive $50 billion for transportation projects, $35 billion for school, police and fire department payrolls, $30 billion to modernize public schools and community colleges, and $15 billion to refurbish vacant and foreclosed homes or businesses.
It would mark the second, sizable infusion of federal cash to states in less than three years, coming just as they are burning through the last of the billions of dollars they received under the 2009 stimulus act.
In many cases, states used the original stimulus money to fill in for declining tax revenue and lessen or delay spending cuts for public schools, health care programs and other services. But those budget holes remain in many states as high unemployment persists and government tax revenue remains lackluster.
With another round of money, "the federal government may be able to play a critical role in helping states close their budget gaps," said David Adkins, executive director of the Council of State Governments.
But he said the prospects for receiving the money appear "very, very slim" given the focus on reducing government spending among Republicans in Congress. He said state government leaders are more interested in long-term stable federal funding for transportation projects and education programs.
The Associated Press contributed to this report.