Author: Mike Lillis

One in five Americans is either jobless or underemployed, and one in six is without health insurance. What’s the GOP’s response? Gun amendments.

Senate Republicans, led by Sen. Tom Coburn (Okla.), are readying a number of gun-friendly amendments they intend to offer this year on must-pass appropriations bills, Roll Call’s John Stanton reports today.

Coburn “believes it’s important to stay on offense, so he wants to have a Pattonesque approach to amendments,” a veteran Senate GOP operative said.

This operative said that in the wake of Sen.-elect Scott Brown’s (R-Mass.) win in last month’s special election, Republicans believe it is critical that they try to make Democrats appear out of step with the public. They believe amendments on guns and spending in particular will help GOP Senators achieve that goal.

Among the provisions Coburn is eying, Stanton writes, is a proposal allowing veterans deemed “mentally defective” to own firearms, and another extending concealed-carry permits across state lines. The latter failed in the Senate last summer by just two votes. GOP strategists think that Brown’s arrival could tip the scales in favor of the provision the next time around.

Via The Hill, here’s House Minority Leader John Boehner (R-Ohio) telling Fox News yesterday that the extended debate over Democratic priorities (ie, health care reform) has created an uncertainty in the business community that has hobbled economic recovery.

“It’s the policies that are coming out of this administration and liberals here in Congress that are holding back employers,” Boehner said during an interview on Fox News. “And until there’s some certainty out there in the marketplace … I expect them to continue to sit on their hands.”

And here are other Republican leaders taking credit for stalling the debate indefinitely.

1) Sen. Mike Enzi (Wyo.): “We’re being rushed. Deadlines in this thing should be irrelevant.”

2) Sen. Charles Grassley (Iowa): “It’ll be a lost opportunity if Democratic leaders in Congress and the administration force action on health care legislation that’s not ready because of the complexity of the issue and the high stakes in getting it right.”

3) Michael Steele: “The Democrats have accused us of trying to delay, stall, slow down and stop this bill. They are right. We do want to delay, stall, slow down and ultimately stop them from experimenting on our nation’s health care.”

4) And, of course, there was the famous stall-tactics memo from Sen. Judd Gregg (R-N.H.).

So, if extended debate is responsible for slowing economic recovery, and the GOP is responsible for the extended debate, does the transitive property apply?

With unemployment in double digits and no relief in sight, swift passage of the Democrats’ “jobs agenda” — set to be unveiled today in the Senate — might seem like a sure thing.

Well, not quite.

Not only are Senate Republicans balking at early proposals to cover the substantial costs, but moderate Democrats in both chambers — spooked by Republican Scott Brown’s astonishing Senate win in Massachusetts last month — have grown wary of big spending bills, fearing that support for such measures could haunt them on the campaign trail this year. As a result, Democrats are under pressure to scale down their jobs bills at the same time leading economists warn that the severity of the unemployment crisis demands a much larger package. The saga has left party leaders in a familiar pickle: They need to boost short-term spending to create jobs, but to do it they need the backing of fiscal conservatives — notably the House Blue Dogs — who are already apprehensive about enormous deficits. The Democrats, despite their commanding majorities, are learning the hard way that it’s no easy needle to thread.

“They’ve got to do something on job creation,” said Charles Stenholm, a former Blue Dog Democrat from Texas and now a lobbyist with the Washington-based firm Olsson Frank Weeda. “But people are very concerned about the debt buildup of the United States and the inability of Congress to come up with solutions. It’s a very difficult situation that Congress finds itself in.”

Front and center will be the Blue Dogs, a group of fiscally conservative House Democrats now 54-members strong. Although House Democratic leaders already ushered a $154 billion jobs bill last December, they’ll have to repeat the process in order to accommodate the changes expected from the Senate. Furthermore, the December vote was hardly a rout. Indeed, despite the Democrats’ lopsided 81-seat advantage in the lower chamber at the time, the bill squeaked by 217 to 212, with 38 Democrats opposed. Most were Blue Dogs critical of the bill’s proposal to tap extra money from the Troubled Asset Relief Program — money that was initially aimed at paying down the debt.

Rep. Betsy Markey (Colo.) was one such Democrat. Her spokesman, Ben Marter, said this week that the Colorado Blue Dog supports the idea of a jobs bill, but not the idea of tapping TARP funds to pay for it. “That’s not just a free pot of money,” he said. “That’s borrowed.”

“It’s all money we don’t have,” said another Blue Dog aide, who wasn’t authorized to speak on the record.

Other moderate Democrats are simply skeptical that a jobs bill can be effective regardless of how it’s funded. Alyson Heyrend, spokeswoman for Rep. Jim Matheson (D-Utah), another Blue Dog, said the congresssman “has concerns about just how much the federal government can do to create job growth.” Although Matheson voted in favor of the Democrats’ $787 billion stimulus bill a year ago, he opposed December’s jobs bill. “It’s that balancing act,” Heyrend said, referring to the need for job creation versus the push to rein in spending. “The devil’s always in the details.”

The offices of other leading Blue Dogs — including Reps. Stephanie Herseth Sandlin (D-S.D.), Baron Hill (D-Ind.), Heath Shuler (D-N.C.) and Allen Boyd (D-Fla.) — did not return multiple requests for comment.

On Thursday, Senate leaders are scheduled to outline their legislative plans for creating jobs. The strategy — which will feature several bills, not just one as the House had passed — includes tax credits for small businesses, tax incentives for businesses that hire new employees, new infrastructure spending and funding to spur jobs in the green-energy sector. Separately, party leaders hope to extend both unemployment insurance and the jobless health-care benefits under the COBRA program. But they haven’t said publicly how they plan to pay for the bill. Early proposals to tap TARP funds, as the House had done, drew howls from Senate Republicans, who know well that Brown’s victory has stolen the Democrats’ filibuster-proof majority.

And it’s not only Republicans pushing back against the thought of Congress borrowing once more to fund another large spending bill. In a back-and-forth with President Obama on Wednesday, Democratic Sen. Evan Bayh (Ind.) said all the deficit spending is simply “bad economics.”

“It’s unfair to our children to ask them to pay these bills,” Bayh said. “Ordinary citizens are making sacrifices, and yet we want our earmarks or pet projects.”

The effects of the Brown election are also evident in the House, where the refusal of moderate Democrats to take up the Senate’s health reform bill has stalled the party’s top domestic priority indefinitely. If those election-year jitters are an indication of a trend, the jobs bill might also face an uncertain future. House Speaker Nancy Pelosi (D-Calif.) is reportedly resisting the Senate strategy of carving the bill into pieces, but opposition within her own party might leave her little choice.

“It’s clear that Massachusetts has had an impact on moderate Democrats’ willingness to stick with the presidents’ agenda,” said John Schmitt, senior economist at the liberal Center for Economic and Policy Research. “The recent politics makes things much more difficult to pass a jobs bill.”

House Democratic leaders will have this going for them: the Senate jobs package is widely expected to be significantly smaller than the $154 billion House-passed bill. Still, many economists don’t consider lean, in this case, to be an asset. Indeed, they’re arguing that the Democrats’ proposals are far too small to tackle the nation’s unemployment crisis.

Schmitt, for his part, estimated that Washington’s stimulus effort — stretching back to the $787 billion bill — is “at least $600 billion” short of where it needs to be to tackle the jobs crisis. “They’re a factor of three, four or five off,” he said, referring to the size of jobs bill Democrats are eying this month. “They’re not winning any awards for sensible economic policy at the moment.”

The Economic Policy Institute, another liberal policy group, has summarized the severity of the jobs crisis this way:

The United States has lost 8 million jobs (5.9% of all jobs) during the recession so far, the sharpest drop since World War II. But bringing back even 8 million jobs would not return us to the pre-recession unemployment rate of 4.9% because the population has grown since then. Each month we need to create 127,000 jobs just to keep unemployment from rising. Therefore, we actually need 10.9 million new jobs to get us back to 4.9% unemployment.

Economists at EPI have outlined their own plan to battle unemployment. The pricetag: $400 billion — a cost, they say, that’s well worth the short-term effects on the deficit. “The long-term costs of an extended recession will far outweigh the additional interest payments on the national debt required to fund a major intervention,” EPI notes.

Some lawmakers agree outright. “We’re not going to save our way out of this recession,” Rep. James Clyburn (D-S.C.) told Fox News on Monday. “We’ve got to spend our way out of this recession, and I think most economists know that.”

Whether the message reverberates on Capitol Hill is another story.

There’s probably a perfectly good reason why the latest job notice from the Nuclear Energy Institute, circulating on the Internet today, tells applicants to send their resumes to the communications director for Rep. Buck McKeon (R-Calif.). But I can’t think of one at the moment.

I made calls to both NEI and McKeon’s office; no response yet.

Update: An NEI spokesman responds:

I haven’t the foggiest. The job notice is out there, and we have a couple of recruiters working on it, but not Buck McKeon’s communications director. Our HR department thinks one of our recruiter’s e-mails mistakenly got Lindsey Mask’s contact info included – perhaps she received an e-mail and forwarded it on to someone else and her auto signature got inserted.

Update II: Lindsey Mask explains that an acquaintance, working for the firm contracted to assist NEI’s hiring, forwarded the job notice to Mask asking for referrals. As the messages were swapped, Mask said her email signature was mistakenly added to the notice. “I don’t even know anyone at NEI,” Mask said.

Here’s the job notice:

Staff Writer

Nuclear Energy Institute www.nei.org

Washington, DC (Farragut West metro)

OVERVIEW:

As the need for alternative energy sources increases, the Nuclear Energy Institute (www.nei.org) is at the forefront of communicating the benefits of building clean-air nuclear power plants and promoting the safety of existing plants to Capitol Hill staff, policy makers, media outlets and NEI members.

As one of six writers in a 20+ staff communication services department, you will have the opportunity to contribute your writing skills in a variety of forms including newsletter articles, fact sheets, policy briefs, web updates, reports, issue briefs, presentations, brochures and other collateral material.

Bring several years experience in journalism from a newspaper, public relations or magazine setting. While a background in nuclear energy or scientific writing is not required, the ability to grasp complex issues is. Accordingly, a homework assignment will be administered prior to interviewing demonstrating your research and writing ability on new subject matters.

RESPONSIBILITIES:

·         Serve as a contributing writer for NEI’s daily compilation of industry news, Nuclear Energy Overview, and for Nuclear Energy Insight, as assigned.

·         Maintain overall responsibility for tracking issue developments and key events related to NEI’s essential activities.

·         Coordinate activities with other department staff to maintain timely Web postings for news items.

·         Retain strategic focus on beats in coordination with NEI issue managers.

·         Write, edit and position NEI fact sheets and policy briefs to serve NEI’s strategic needs in keeping with its annual plan.

·         Develop copy and content as needed for NEI’s public and member Web sites, reports, issue briefs, presentations, brochures and other collateral materials as assigned.

·         Assist senior NEI management in developing speeches and presentations as needed.

QUALIFICATIONS:

• Minimum three (3) to five (5) years journalism experience in news writing, public relations or magazine writing.
• Two (2) to three (3) years experience in producing and writing for electronic media highly desired.
• Knowledge of HTML preferred.
• Ability to write compelling copy on complex, often technical, subjects under tight deadlines, translating technical concepts into everyday language.
• Ability to express ideas effectively through a wide variety of communications materials, with a concentration on Web-based platforms.

EDUCATION:

Bachelor’s degree in journalism (preferred), public relations or English.

SALARY: $65K

Send resume to:

Lindsey Mask
Communications Director
Howard P. “Buck” McKeon (CA-25)
2184 Rayburn House Office Bldg
.
202-225-1956

[email protected]

On Monday, President Obama (via his budget proposal) put out the request for six additional months of extra federal Medicaid funding to help strapped states weather the economic downturn. Today, Senate Democrats complied.

Sens. Harry Reid (D-Nev.), the majority leader, and Jay Rockefeller (D-W.Va.), chairman of a key health panel, will introduce legislation this week to provide the extra help through June 2011, the lawmakers announced Wednesday.

“Too many families depend on this program for us to allow a shortfall of funding,” Rockefeller said in a statement.

For state health officials, the extension is vital because most state budgets run on a calendar stretching from July through June. That means that the enhanced funding provided by last year’s economic stimulus bill — funding that expires at the end of this year — would take the states through only half of fiscal year 2011, leaving a great deal of uncertainty (not to mention anxiety) as state legislators are composing their budgets this winter. The sooner Congress passes the Reid-Rockefeller bill, the happier the nation’s governors will be.

In a town that wallows in trivia and hollow controversy, this tale takes the cake.

Yesterday, speaking about jobs in New Hampshire, President Obama pointed out the obvious: In lean economies, people tend to spend their money on the things they need, rather than unnecessary luxuries.

“When times are tough, you tighten your belts,” Obama said. “You don’t go buying a boat when you can barely pay your mortgage. You don’t blow a bunch of cash in Vegas when you’re trying to save for college. You prioritize. You make tough choices.”

Not really a provocative thought — unless, of course, you’re a politician representing Nevada. Indeed, Sen. John Ensign (R-Nev.) shot out a series of statements (here, here and here) demanding an apology from the president.

Obama slams Las Vegas again. I am calling on the President to apologize for his remark.

Las Vegas is suffering through one of the highest unemployment rates in the country and we cannot afford

for the President to bring us down any further.

Senate Majority Leader Harry Reid (D-Nev.) soon followed suit, issuing a statement telling Obama to “lay off Las Vegas and stop making it the poster child for where people shouldn’t be spending their money.”

They seem offended that Vegas — which, to its lucrative advantage, has built its reputation and business model around the singular concept of excess — has become symbolic of that very idea.

Obama responded in a letter to Reid, telling the majority leader that he “wasn’t saying anything negative about Las Vegas.”

I was making the simple point that families use vacation dollars, not college tuition money, to have fun.

He’ll have a chance to prove it. Later this month, Obama will be in Vegas to stump for Reid, who’s facing a tough reelection in November.

In the face of widespread suspicion that health care reform is stalled indefinitely, House Speaker Nancy Pelosi (D-Calif.) told reporters this afternoon that Democrats will succeed in passing the party’s top domestic priority, adding that “we are very close to doing that in a comprehensive way.”

How? Well, it won’t happen by the House simply taking up the Senate bill. “Our members will not support the Senate bill,” Pelosi said. “Take that as a fact.”

Instead, she wants both the House and Senate to pass an amending bill through the budget reconciliation process, which requires only 51 votes in the Senate. “Don’t even ask us to consider passing the Senate bill,” she warned, until after that amending proposal clears both chambers.

In the meantime, Pelosi said, the House will strip out several provisions of the larger reform proposal — provisions that aren’t permitted to move via reconciliation — in hopes of passing them as stand-alone bills. Next week, for example, House leaders will consider a proposal to repeal the anti-trust exemption enjoyed by health insurers for over 60 years.

“Just because we reach a bump in the road doesn’t meant that we turn back,” Pelosi said. “We will get the job done.”

Hoping to nullify the Supreme Court’s recent decision freeing corporations to spend infinitely on federal elections, Reps. Donna Edwards (D-Md.) and John Conyers (D-Mich.) today introduced a proposed constitutional amendment “permitting Congress and the States to regulate the expenditure of funds by corporations engaging in political speech.”

“The ruling reached by the Roberts’ Court [sic] overturned decades of legal precedent by allowing corporations unfettered spending in our political campaigns,” Edwards said in a statement. “Another law will not rectify this disastrous decision.  A Constitutional Amendment is necessary to undo what this Court has done.”

It’s not only House leaders eyeing that option. Testifying before the Senate Rules Committee this morning, Sen. John Kerry (D-Mass.) also promoted that idea.

“We need a constitutional amendment to make it clear once and for all that corporations do not have the same free speech rights as individuals,” Kerry said.

For campaign finance reform supporters, it’s exactly the right move.

“The court’s overreach is so shocking, and the certain consequences so damaging, that we must have a constitutional corrective,” Robert Weissman, president of Public Citizen, said in a statement. ”The First Amendment was never intended to protect the likes of ExxonMobil, Pfizer or Goldman Sachs, nor should it.”

The Obama administration’s budget blueprint for fiscal year 2011, unveiled yesterday, includes $49 billion to expand federal unemployment benefits, which otherwise expire at the end of the month. That’s more than the $41 billion the House passed in December to extend the benefits for six months, but wouldn’t be enough to satisfy that long list of Senate Democrats urging a 10-month extension.

“This would allow for some near-term extension of expanded unemployment benefits,” analysts at the Economic Policy Institute wrote today. “However, with costs of around $7 billion per month, this funding level would not be sufficient to extend the current benefit structure through the end of the year.”

It’s hardly set in stone. A spokesperson for the Labor Department said this week that the $49 billion is just a “placeholder,” included to recognize that the administration intends to work with Congress later to hash out the details of the unemployment insurance extension. “The Administration will propose legislation for later transmittal,” the budget declares.

They’re running out of time. Under current law, unemployed workers who exhaust their current tier of federal benefits after Feb. 28 won’t be eligible for the next. A Senate Democratic aide said Tuesday that the upper chamber, while expected to release the details of its jobs bill later this week, also intends to offer the UI and COBRA proposals as separate legislation. No word yet when that bill will surface.

Here’s how history gets rewritten: Last week, the Senate killed legislation to create a bipartisan panel designed to tackle the country’s skyrocketing debt. President Obama endorsed it — as did many conservative Republicans — but it failed after six GOP co-sponsors and Senate Minority Leader Mitch McConnell (R-Ky.), a one-time fan, bailed at the last moment, evidently more intent on preventing an Obama victory than on enacting the bill McConnell once called “the best way to address the [budget] crisis.” (The vote was 53 to 46. If those seven Republicans had supported the proposal, it would have passed.)

No matter. Today, during a Senate Budget Committee hearing, Sen. Lamar Alexander (R-Tenn.) implied that the failure of the deficit task force bill was somehow Obama’s. Grilling Peter Orszag, the White House budget director, Alexander wondered what “problems” prevented the bill’s success the first time through.

You might want to consider a suggestion about bringing [the Conrad-Gregg proposal] up again, amending it, and finding out what the problems are. It had 16 Republican votes. If the president with 59 or 60 votes can’t pass something that’s important to him, it’s going to be a long four years.  So that’s a good start and maybe there are some adjustments that could be made in the statutory commission.

Or maybe there are some adjustments that could be made in the Republican strategy of blocking everything the White House supports, just for the opportunity to call the president ineffective.

The trouble facing Democrats hoping to use repaid bailout money to fund other things is this: The Troubled Asset Relief Program stipulates that all such funds be used to pay down the nation’s staggering debt.

That little inconvenience hasn’t dissuaded the Obama administration from proposing a $30 billion small-business loan program using repaid TARP cash. But it does set the White House up for a good deal of criticism from budget hawks. On cue, Sen. Judd Gregg (N.H.), senior Republican on the Budget Committee, issued a statement today reminding Democrats that “TARP is not a piggybank.”

Under the TARP law, repaid TARP funds must be used to reduce the debt — and given that we will have a $1.6 trillion deficit this year and the Senate just voted to increase the debt limit to more than $14 trillion, the requirements of the TARP law should not be changed…

TARP dollars should not be used as a slush fund for the President’s other priorities. The TARP program should end immediately, and, as the TARP law requires, all repaid funds should be used to reduce our staggering debt burden, not used in a way that will add to it.

Gregg would know. He authored the TARP provision requiring any returned funds to go toward debt reduction.

Politico’s David Rogers has the story of Rep. John Murtha (D-Pa.), the powerful head of the House Appropriations defense subpanel, is in intensive care in Virginia today following gall bladder surgery last week.

Murtha’s congressional office confirmed that he underwent scheduled laparoscopic surgery to remove his gallbladder at Bethesda Naval Hospital last week. But the congressman’s spokesman refused comment on the seriousness of his condition or any complication that required hospitalization.

As we’ve written here before, Medicaid funding is a tricky business, not least of all because program enrollment always jumps in times of economic turmoil, when state budgets are least able to absorb the additional costs.

In recognition of that flawed formula, Congress last year provided an increase in the federal portion of Medicaid funding — an $87 billion provision designed to prevent low-income families from losing health coverage amid the recession. Trouble is, that money runs out at the end of this year — exactly halfway through the fiscal year of most states. That looming deadline has left state legislators in a pickle, unsure whether to craft their budgets under the assumption that the extra federal funds will keep coming, or expire.

Today, those officials will be cheering: The Obama administration’s budget blueprint is pushing for an additional six months of enhanced federal Medicaid payments — a move that would allow states to stabilize their Medicaid rolls trough the end of fiscal year 2011. The Wall Street Journal reports:

Obama’s budget plan estimates the U.S. will spend $317.6 billion in grants for state health programs in fiscal 2011, up 7.8% from an estimated $294.6 billion in fiscal 2010 and up 18.4% from spending in fiscal 2009 of $268.3 billion.

Of course, this is different from actually fixing Medicaid’s funding flaw.

More scrutiny of President Obama’s proposed bank regulations coming this week. Not only will Paul Volcker, chairman of the White House Economic Recovery Advisory Board, be testifying tomorrow before the Senate Banking Committee, but another hearing featuring Wall Street executives has been scheduled for Thursday, the committee just announced.

Volcker, of course, will be defending the proposed regulations, which would limit both the size and the trading activities of Wall Street’s largest firms. (After all, he wrote them.) Don’t expect the same enthusiasm from Gerald Corrigan, managing director of Goldman Sachs, or Barry Zubrow, executive vice president of JPMorgan.

The question remains: Can the Democrats pass tighter restrictions on the nation’s banks — a long-term strategy designed to prevent another Wall Street collapse — even as they’re pushing short-term fixes to stimulate the ailing economy?

After a good deal of public airing, the Senate last week shot down a proposal empowering a bipartisan budget panel to recommend deficit-slashing strategies that Congress would then be forced to consider. Politico’s Mike Allen pointed out Tuesday that six GOP co-sponsors, including 2008 president candidate Sen. John McCain (R-Ariz.), voted against their own bill. Today, The Washington Post’s Fred Hiatt reminds us that Senate Minority Leader Mitch McConnell (R-Ky.) was also once an avid supporter of the proposal, which is sponsored by Sens. Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.). Indeed, as recently as last May, McConnell argued that the bill is the “best way to address the [budget] crisis.”

But that was before (1) the Democrats decided to actually consider the bill, and (2) President Obama endorsed it. After those things happened, McConnell voted against the “best way” to rein in federal spending. Here’s Hiatt’s analysis:

It’s impossible to avoid the conclusion that the only thing that changed since May is the political usefulness of the proposal to McConnell’s partisan goals. He was happy to claim fiscal responsibility while beating up Obama for fiscal recklessness. But when Obama endorsed the idea, as he did on the Saturday before the vote — and when the commission actually, against all odds, had the wisp of a chance of winning the needed 60 Senate votes — McConnell bailed.

Worth noting: The vote on the Conrad-Gregg bill was not subject to the usual pressures of Washington. That is, it wasn’t really being lobbied by any industry, and it wasn’t inspiring the voter reaction of, say, health care reform. So why would Republicans kill a bill they’d endorsed? McConnell’s office sent Hiatt an elusive statement implying that the senator fears that the deficit panel would suggest tax hikes as part of its balanced-budget solution — which has only been a central element of the Conrad-Gregg proposal since its inception years ago.

“Our problems are not a result of taxing too little, but of spending too much,” McConnell said.

McConnell and the Republicans have, for the last year, said that their opposition to the Democrats’ agenda is rooted in the simple notion that they think their legislative preferences to be superior. McConnell’s flip-flop on the Conrad-Gregg bill communicates another reality altogether. It says that GOP leaders would rather see the nation fail than the Democrats win.

To hear Treasury Secretary Tim Geithner tell the tale, the federal officials negotiating the taxpayer bailout of American Insurance Group had no choice but to provide full payment to the company’s trading partners, including Goldman Sachs.

“There was no way, financial, legal, or otherwise, we could have imposed haircuts, selectively default on any of those institutions, without the risk of downgrade and default,” Geithner told lawmakers on the House Oversight and Government Reform Committee last week.

Don’t tell that to Rep. Dennis Kucinich. The Ohio Democrat — who heads the committee’s domestic policy subpanel — says that federal officials had plenty of leverage to push Goldman for a lesser payout, but simply chose not to use it. Indeed, an investigation by his office, Kucinich says, found that Goldman was already preparing to take less than 100 cents on the dollar for the complex, AIG-backed securities it held at the time. He’s charging that Geithner — who headed the New York Federal Reserve when it funneled billions of dollars through AIG to other firms — simply put Goldman’s interests above those of taxpayers.

“There was only one way for Goldman Sachs to get all of the billions they claimed from AIG, and that was if the New York Fed voluntarily agreed to give it to them,” Kucinich, the populist former mayor of Cleveland, said in a little-noticed exchange with Geithner last week. “If the Fed had fought for taxpayers, Goldman would have had to take some losses and the cost to the people could have been minimized.”

Some legal experts agreed. “This ‘legally obligated’ stuff is a lot of nonsense,” said an expert on the Wall Street bailout who wasn’t authorized to speak on the record. “They [Fed officials] are only as legally obligated as they want to be.”

That Goldman is such a powerful player in Washington politics (then-Treasury Secretary Henry Paulson once headed of the firm) could only have contributed to the decision to pay on par, the expert noted. “The idea of imposing a haircut [on Goldman] just kind of wasn’t in the bloodstream of the people involved.”

The controversy stems from the $27 billion the Fed paid in late 2008 to settle roughly $62 billion in insurance contracts that AIG held with a number of large firms. As the mortgage market tanked, AIG had paid out billions to those companies — collateral based on the falling value of the securities. But the banks were all scrambling to cash out on the balance because they were allowed to make more collateral calls as AIG’s credit rating was being downgraded — and because the value of those mortgage bundles was still sinking fast. Effectively, the Fed scrapped the insurance contracts and bought the securities outright. “We paid the fair market value at that time for the assets,” Geithner said last week.

Critics of that arrangement have long wondered why the Fed agreed to pay the full amount, rather than negotiate a better deal for the taxpayers footing the bill. More recently, the scandal has surrounded news that the Fed, at the time, tried to hide those full payments from the public.

The gist of Kucinich’s beef, which focuses just on Goldman’s contract, is more nuanced: Because of a months-long disagreement with AIG over the value of the underlying securities, Goldman took out supplemental insurance policies on $2.5 billion it feared it would lose if AIG failed — much like seniors take out supplemental health policies to cover services that Medicare doesn’t. Goldman executives have said repeatedly that, aided by those policies, the firm was fully protected in the event that AIG went under.

“If AIG had defaulted on its obligations, our shareholders would have been protected against loss because we were fully hedged,” Goldman spokesman Michael DuVally said in an email Friday. “But, because AIG could meet its obligations, it avoided default.”

Left unmentioned, Kucinich says, is that Goldman’s supplementary policies were invalid in the case of a government takeover of AIG — which was the only way the insurance giant was ultimately able to meet its obligations. Translation: After the government stepped in to rescue AIG, Goldman was in a position to lose $2.5 billion, leaving the Fed with a good deal of leverage to negotiate lower payments on behalf of taxpayers.

“The New York Fed had a lot of leverage — a lot of leverage — to negotiate a reduction which would have saved taxpayers billions,” Kucinich told Geithner.

He wasn’t the only lawmaker making a stink about the deal. Rep. Stephen Lynch (D-Mass.) blasted Geithner over the Goldman payments, arguing that Fed officials had “every opportunity” to negotiate a better arrangement for taxpayers.

“The commitment to Goldman Sachs trumped the responsibility that our officials had to the American people,” Lynch said.

Geithner, for his part, fought back against all the critics. The Treasury secretary argued that — because current law doesn’t allow regulators to unwind troubled investment houses the way they can unwind failing commercial banks — officials were left will little choice but to prop up AIG and make good on all of its financial obligations. “We faced a very simple choice: Let AIG default or prevent it,” Geithner said. Allowing the former, he maintained, would have led to an economic collapse much worse than the one that occurred.

“Thousands of more factories would have closed their doors,” he testified. “Millions more Americans would have lost their jobs. The value of Americans’ houses and savings would have fallen even further than they did at that time. People would have rushed to take their money out of banks. It would have brought about utter collapse.”

A March 2009 report from the special inspector general of the Troubled Asset Relief Program indicates that AIG’s trading parties were well justified to fight for full payment on behalf of their shareholders. “[F]rom the counterparties perspective, offering a concession would mean giving away value and voluntarily taking a loss, in contravention of their fiduciary duty to their shareholders,” the report states. “They were contractually entitled to the par value of the [securities].”

But some critics of the Goldman payments have argued that, shareholders or none, the giants of Wall Street should have shown more willingness to absorb the consequences of a financial meltdown caused largely by them.

“Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won’t be laid off,” former New York governor Eliot Spitzer wrote last year. “Why can’t Wall Street royalty shoulder some of the burden?”

Instead, champagne-sipping Goldman employees are celebrating their bonuses this month.

Kucinich, representing a part of the country decimated by foreclosures in recent years, preferred to focus his criticisms not on the firms, but on the federal officials charged with protecting the public.

“The government gave Goldman Sachs more than Goldman Sachs had any right to expect while at the same time giving no financial relief whatever to millions of Americans facing a foreclosure crisis,” he told Geithner. “If that doesn’t illustrate what the New York Fed thought it was working for — or who it was working for — I don’t know what does.”

Via The Hill, Rep. Steve Buyer will announce today that he won’t seek reelection this year. The nine-term Indiana Republican has been in hot water recently over allegations that his charity, the Frontier Foundation, has acted simply as a vehicle for siphoning campaign contributions from corporate leaders. Earlier this week, Citizens for Responsibility and Ethics in Congress filed ethics complaints against both Buyer and the Frontier Foundation.

Local news is reporting that he wants to spend more time with his family.

From The Associated Press:

Scott Brown says he has already told Senate Republican leaders they won’t always be able to count on his vote. […]

“I already told them, you know, ‘I got here with the help of a close group of friends and very little help from anyone down there, so there’ll be issues when I’ll be with you and there are issues when I won’t be with you,’” Brown said Thursday during the half-hour interview. “So, I just need to look at each vote and then make a proper analysis and then decide.”

A radical idea in polarized Washington.

From one human rights champion to another, Rep. John Lewis (D-Ga.) just issued a statement on yesterday’s passing of Howard Zinn, praising the former Spelman College historian as one “who not only wrote history but lived and made history.”

[I]t was his voice crying out, speaking out, organizing teach-ins against the war in Vietnam that had a major impact on mobilizing people all across America in the work to end our involvement in South East Asia. The death of Howard Zinn is a tremendous loss to a generation of young people who came to know him and love him as a teacher, but also as a friend.

Zinn, 87, died Wednesday of a heart attack.

Just so history isn’t rewritten during the current outcry over deficit spending, here’s a recap of the national debt during the reign of the last five presidents. (All numbers come from the Treasury Department, here and here.)

When Ronald Reagan was elected in 1980, the federal debt was just under $908 million. Eight years and several tax cuts later, it was $2.6 trillion. Difference: +186%.

Taking the $2.6 trillion debt he inherited, George H.W. Bush took us up to $4.1 trillion in 1992. Difference: +58%.

In eight years under Bill Clinton, the debt jumped from $4.1 trillion to $5.7 trillion. Difference: +39%.

Under George W. Bush, that $5.7 trillion in 200o grew to more than $10 trillion in 2008. Difference: 75%.

Last year, under Barack Obama’s reign (but not his budget), the figure went from $10 trillion to $11.9 trillion. Difference: 19%.

Which begs two questions: (1) Why do Republicans consider themselves the more fiscally responsible party? And (2) how did Reagan become the poster child of conservative budget policy?