Fresh from an election that saw the Democrats hold onto the presidency and gain seats in both the Senate and House, Sen. Chuck Schumer, D-N.Y., who stands fourth in the Senate leadership as vice chair of the Democratic Conference and chair of the Democratic Policy and Communications Center, spoke at a Christian Science Monitor breakfast meeting and laid out his views on the agenda for the coming lame-duck session of Congress.
The most important point to take away is that Schumer said that he is “heartened” by the remarks of House Speaker John Boehner, R-Ohio, and he believes the outlines of a “grand bargain” on the fiscal cliff are visible.
Since the House remains in the hands of Republicans, he said it is obvious that both sides have to compromise, and he believes this can be accomplished if the business community would help Boehner line up the necessary Republican votes for a deal. Schumer proclaimed that a deal should not be postponed until next year and should be done as quickly, broadly and deeply as possible.
The four overall points Schumer made were:
• Compromise. The election results have told both sides that they need to work together to achieve a compromise.
• Fiscal cliff. The House wants to cut spending, while the Senate wants to raise taxes on the wealthiest individuals. The tone of Boehner’s remarks indicates that a deal is possible, as the Speaker is open to considering raising revenues as part of a package.
Schumer made it clear that the arrangement cannot be based on so-called “dynamic scoring,” because this assumes one can turn straw into gold, and it won’t be scored by the Joint Committee on Taxation. He stated that he has spoken to some leaders of the business community and urged them to become active in the debate to cancel out the message of Grover Norquist, president of Americans for Tax Reform, that any revenue increases must be resisted.
The business leaders told Schumer that they would go along with an increase in the tax rate to 39.6 percent for the wealthiest taxpayers. Schumer said this would likely apply to those making more than $250,000, but he said his personal preference would be for those making more than $1 million. There could also be some haircuts with respect to deductions at that income level.
He said that corporate and small business taxation might be addressed separately, and he would not support increasing taxes on small business, properly defined.
Also, he would support increasing the capital gains tax while maintaining a differential in favor of capital gains.
Schumer said that spending cuts should come principally from efficiencies in Medicare and Medicaid, not through Social Security, which he said would not be credited in any event.
In response to a question, Schumer said that he endorsed the principles of Simpson-Bowles that provided for a balanced, bipartisan deal with a target of $4 trillion that would reverse the course of the deficit, but he does not agree that tax rates should be reduced to 28 percent for ordinary income and capital gains and does not believe this is a realistic proposal.
• Tea party crests. Schumer observed that the influence of the Tea Party on the Republican side has crested and begun to recede, since their candidates lost or nearly lost, as was the case with Rep. Michele Bachmann, R-Minn., and those who survived are likely to be chastened.
• Rove in retreat. Schumer suggested that if Karl Rove worked for a corporation, he would be fired for producing such a poor return, and he ventured that donors would not be impressed by Rove’s excuse that the margin of Democratic victory has been reduced.
In response to a question about the agenda for the next Congress, Schumer listed these items:
• Immigration reform. Schumer compared this to the fiscal cliff in the sense that the outlines of a deal are fairly clear, and he said Sen. John Cornyn, R-Texas, head of the Republican Senatorial Campaign Committee, recognizes that a deal is needed.
• Energy independence. Schumer said the Democrats want to build on progress made through Corporate Average Fuel Economy (CAFÉ) standards, closure of polluting power plants and a decline in the price of natural gas. He said that Sens. Jean Shaheen, D-N.H., and Rob Portman, R-Ohio, are working on this issue.
• Climate change. Schumer cited Superstorm Sandy as evidence that 100-year events are occurring more frequently. Asked about flood insurance, Schumer said 100,000 homes were destroyed, and the government will have to pay for those that are insured. There might be more interest in reviewing the flood insurance program, he added.
• Campaign finance reform. Schumer said that after this election, Republicans would be more amenable to looking at improved disclosure of campaign contributions at least.
Robert Feinberg served on the staff of the House Banking Committee for the 10 years that encompassed the savings-and-loan debacle and the beginning of its migration to the banking sector. Subsequently, he has consulted on issues related to the crisis for law firms, accounting firms, securities firms and trade associations.
Feinberg holds a BS.E. from the Wharton School and a J.D. from the Law School of the University of Pennsylvania. He has drafted dissenting views on landmark banking legislation, contributed to a financial blog and written hundreds of reports for clients to document the course of the financial crisis as it has unfolded over the past three decades.
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