It’s Now or Never for the Democrats

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
November 23, 2010

IN THIS ISSUE:

1. The “Must-Do” Lame Duck Agenda

2. The “Won’t Do” Agenda

3. Liberal Causes Flying Under the Radar

4. Conclusions

5. Happy Thanksgiving!

Introduction

The Republican landslide in the mid-term elections was no doubt a wake-up call for the Democrats and President Obama, even if they won’t admit it. With Republican control of the House of Representatives, there is virtually no chance that Obama will be able to advance the rest of his liberal agenda next year, such as sweeping immigration reform, his “cap-and-trade” energy plan, union “card check,” etc.

That naturally leads us to wonder if the lame duck session of Congress that began last week will address any or all of these sensitive issues while the Democrats still have control of both houses of Congress. House Speaker Nancy Pelosi has made it clear that she feels the Democrats should go for broke in this lame duck session, so it’s certainly possible.

I’m getting this question from friends and clients alike, so I thought we should address it this week as we head into the Thanksgiving holiday. Most political observers seem to feel that the lame duck Congress has too many other critical issues to deal with – such as extending the Bush tax cuts, passing a new budget to fund the government, etc. – and it won’t go after such controversial issues as immigration, cap-and-trade, card check, etc.

Likewise, most political observers feel that President Obama would not pressure Congress to pass the remainder of his key agenda items noted above as it would so enrage the American public to the point that he would not have a chance at a second term in the 2012 elections. Yet Obama is on the record as saying he would rather get these liberal issues advanced now, even if he is only a one-term president. So we can’t rule it out.

Put differently, given the upcoming change of control in the House, it’s now or never for Obama and the Democrats to pass the remainder of their big-government agenda.

I’m not one that likes to sound like an alarmist in regard to what Obama and the Democrats may want to force through Congress during the Lame duck session. However, if we learned anything from the healthcare bill debate (if you can call it that), it’s that President Obama, Senator Reid and House Speaker Pelosi will do anything to further their liberal agenda.

In this week’s E-Letter, I’m going to discuss some of the big issues that the Lame duck session must address. In addition, I’m going to shed light on some other pieces of legislation that are already being, or are likely to be, debated during the current lame duck session of Congress. I think you will be quite surprised at some of the proposals that you don’t hear much about in the news, but could have serious negative consequences if enacted.

As a side note, I realize that I’m writing about a moving target, in that the lame duck session is already under way. Wherever possible, I’ll provide the most up-to-date information but be aware that the status of some of the items discussed this week may have changed from what is presented below. Let’s get started.

The “Must-Do” Agenda

Before launching into pet liberal projects that may or may not come to pass, there are a number of legitimate issues that this lame duck session must address:

Bush Tax Cuts: As I have written about on several occasions this year, unless Congress takes action, the Bush tax cuts will expire at the end of this year automatically. This, in turn, would usher in one of the largest tax increases in history, if not THE largest. Thus, even if they do nothing, tax policy is going to change next year.

President Obama has indicated that he may reluctantly agree to extend the tax cuts for everyone (including those making over $250,000 per year) for one year. The Republicans, naturally, would like a longer extension. Some analysts have suggested that a compromise would be two years, which would take us through the next election cycle. The practical effect of such a compromise would be that Obama and members of Congress up for re-election in 2012 would not have to explain why they allowed the Bush tax cuts to expire.

Liberals, on the other hand, are trying to get Obama to put up a fight. I saw an MSNBC interview with Bill Press and two other liberal commentators where they said Obama should not give in to Republicans on the Bush tax cut issue. It’s no secret that some liberals have become dissatisfied with Obama because of his position on extending tax cuts, failure to withdraw troops from Afghanistan, silence on the don’t ask, don’t tell policy, etc, etc.

While it’s acceptable to be purely liberal in the context of being the host of a radio or TV show, Obama knows that he’s going to have to work with a Republican-controlled House over the next two years. Thus, I look for a compromise on this tax issue and at least a two-year extension of the Bush tax cuts for all income levels – unless Obama decides to dig his heels in.

Also note that the Bush tax cuts slashed the estate tax rate, which is currently zero for 2010. If allowed to expire, the estate tax would return to pre-2001 levels which included a 55% top bracket and $1 million personal exemption. While no one expects Congress to repeal the estate tax, both parties have also expressed an interest in a compromise that would decrease the maximum tax rate and increase the personal exemption from those in effect prior to 2001.

Budget/Appropriations: Another must-do agenda item is to provide for the ongoing funding of the federal government. Right now, we’re working under a Continuing Resolution that funds the government under last year’s levels. It’s unclear as to how Congress will approach this funding issue, but it must be addressed in order to keep the federal government from grinding to a halt.

Also related to the funding of government is the report due out on December 1 from Obama’s Debt Commission. While many agree with me that it will be difficult, if not impossible, to get 14 of the 18 Debt Commission members to agree to a comprehensive package of ways to reduce the federal deficit, both House Speaker Pelosi and Senate Majority Leader Reid have pledged to vote on the Commission’s recommendations in the lame duck session.

I am skeptical of this, especially since the preliminary report that I discussed in my November 16 E-Letter threatens both conservative and liberal sacred cows. Plus, time is very short to attempt to do this along with everything else that must be done this year, so I look for the lame duck session to kick the deficit reduction can on down the road, IF it ever sees the light of day.

The “Won’t Do” Agenda

In contrast to certain legislation that needs to be done this year, there are other pieces of legislation important to the left that won’t likely see the light of day, despite fierce rhetoric last summer to the contrary. Whether it’s the election results or the short duration of the lame duck session, the following bills probably won’t get out of the starting gate:

Cap-and-Trade Bill:

In a nutshell, the cap-and-trade energy bill would levy what amounts to a big tax on industries considered to contribute most to pollution. I wrote about the details of this bill in my July 14, 2009 E-Letter, so I won’t go into all of the negative consequences that such legislation could produce.

According to press reports, the cap-and-trade bill is considered dead for now, at least as far as the lame duck session is concerned. This isn’t much of a surprise, since there were a lot of Democrats from middle-America who questioned the wisdom of passing a law that would virtually guarantee higher prices for energy and anything produced by energy.

Though the cap-and-trade bill is considered dead from a legislative standpoint, it is most definitely alive in the minds of Obama and his liberal minions. There is now concern that Obama may try to implement cap-and-trade through executive orders and EPA rule making. Dick Morris writes:

The EPA is currently soliciting public comments for its plan to use the Clean Air Act of 1970 to regulate carbon dioxide emissions. The Clean Air Act, as the name indicates, is designed to fight against pollution — unhealthy chemicals that are belched into the air by smokestacks. It was passed to fight sulfur dioxide, particulates, nitrous oxides and other chemicals that cause human diseases. To use it to fight carbon dioxide — which we all breathe without ill effects — because of concerns about global warming — is a perversion of the law.

Such action could make economic development literally illegal in large sections of the country, not to mention increasing energy costs and unemployment. What should be illegal is the use of executive orders and bureaucratic regulations to defy the will of the people.

While the current legislation that would authorize cap-and-trade is dead, that’s not to say that there will be no energy-related bills considered during the lame duck session. Obama and the Democrats may have a Plan B. See my discussion below for more details.

Union Card Check: The union card check proposal seeks to do away with mandatory secret ballot voting in elections deciding whether to unionize or not. Loss of the secret ballot could lead to undue pressure (read: force) on workers to vote for union membership. According to most reports, card check is considered dead, at least as far as this lame duck session is concerned.

However, this doesn’t mean the issue has been forgotten by Big Labor. Unions have been actively seeking passage of card check legislation at the state level in order to help reverse declining union membership in private industry. In addition, there are also rumors that these state laws may provide a path for Obama’s appointees to dictate card check through regulation rather than through Congress.

Obama’s recent appointment of card-check supporter, Craig Becker, to the National Labor Relations Board is seen by some as a way to enact card check via bureaucratic rulemaking, bypassing the legislative process. The same Dick Morris article mentioned above also discusses the efforts to use back-door methods to ban the use of secret ballots in unionization elections.

Extension of Unemployment Benefits: Currently, the Emergency Unemployment Compensation program is set to expire at the end of November. This would immediately affect apprx. 2 million workers in December, and millions more by the end of next year. An extension of an additional 13 weeks of unemployment compensation has been proposed, but has run up against a growing desire by Republicans to cut spending.

The unemployment rate has remained at 9.6% and there are 14.8 million unemployed and 9.15 million “underemployed” according to estimates by the Bureau of Labor Statistics. That’s 24 million people whose pursuit of the American dream has been interrupted by the global financial crisis.

Those who are unemployed can qualify for 26 weeks of state unemployment benefits and up to 73 additional weeks of federal benefits, for a total of 99 weeks of compensation. However, there is a growing number of people who are now exceeding that limit, but they wouldn’t be helped by the proposal to continue emergency unemployment benefits. Instead, these “99ers” are lobbying for a separate bill providing for a Tier 5 extension of unemployment benefits beyond 99 weeks.

Right now, it appears that any extension of unemployment benefits isn’t likely in this lame duck session. Last Thursday, Republicans blocked legislation to extend benefits. While the issue may come up again, time is definitely an issue as the lame duck session sorts through the issues it must address before the Christmas break. While it’s not uncommon for lawmakers to kick the can down the road to a future Congress, failing to extend unemployment benefits will mean that some families will lose benefits before the next Congress is seated.

Liberal Causes Flying Under the Radar

While it’s possible that some of the big-ticket liberal causes may have been put on the back burner, at least as far as this lame duck session is concerned, there are other not so well known issues that just might see the light of day before the end of this year. Just because they haven’t all been addressed in the first week of the session doesn’t mean that Obama, Pelosi and Reid won’t use what’s left of their time in control to push through some or all of these liberal agenda items.

Dream Act: Last week saw a renewed emphasis on the “Dream Act,” which would provide a path to citizenship for children brought to the US illegally by their parents. Until last week, Obama had done little to promote the bill in Congress. However, he departed from his administration’s hard-line stance on immigration by announcing that he would push for the Dream Act’s passage during the current lame duck session.

According to a 2003 Senate Judiciary Committee summary (yes, it’s been around that long), the Dream Act:

“…sets up a two-stage process to apply for legal status. Immigrant students who have grown up in the U.S., graduated from high school here, and can demonstrate good moral character would initially qualify for “conditional lawful permanent resident” status, which normally would last for six years. During the conditional period, the immigrant would be required to go to college or join the military. At the end of the conditional period, those who meet at least one of these requirements would be eligible for regular lawful permanent resident status.”

Proponents of the bill say that children brought to the US illegally by their parents should have a path to citizenship, considering that many have lived their entire lives in the US. Opponents, however, say that this is just a stepping stone to a broader amnesty program for illegal aliens.

While the Dream Act has some Republican support (John McCain, Lindsey Graham and others), most conservatives oppose the measure. Some oppose it because of the amnesty issue, but others because it has been attached as an amendment to the Defense Department appropriations bill; the Dream Act has nothing whatsoever to do with defense. In a surprise move, Harry Reid announced last week that he would bring up a vote on this legislation as a stand-alone bill during the lame duck session. So, who knows what will happen.

Don’t Ask, Don’t Tell: Democrats have evidently made the commitment to repeal the “Don’t Ask, Don’t Tell” (DADT) rule that essentially bans gays from serving openly in the military, and the lame duck session may be their last chance. Last Friday, Senator Joe Lieberman announced that there were enough votes in the Senate to support the repeal of DADT, which would be in the form of an amendment to the National Defense Authorization Act.

Republicans, on the other hand, say that repeal of DADT would undermine morale, hurt unit cohesion and even make military service less attractive to heterosexuals. Democrats see little hope of passage after Republicans take control of the House in January, so it’s now or never.

I think the important question to ask is whether debate about this amendment is worth holding up the passage of a bill needed to fund our national defense. In a surprise move, even two groups that support gay and lesbian troops suggested that passage of the defense bill was a higher priority than repealing DADT. OutServe and Knights Out said that they “respectfully urge Congress to pass the FY 2011 National Defense Authorization Act to fund the aircraft, weapons, combat vehicles, ammunition and promised pay-raises for all troops, whether or not the repeal of ‘don’t ask, don’t tell’ is included.” Good for them!

The ban of gays from openly serving in the military is a highly charged issue that tends to polarize those who support and oppose it. However, it seems that given the very limited duration of the lame duck session, the DADT repeal might best be handled as a separate bill at a later time when the new people the American public just elected are serving in Washington.

Union Pension Bailout: There are currently two bills before Congress that would provide taxpayer money to help bail out union pension plans. It’s currently unclear as to whether these bills will be voted on during the lame duck session or not, but it is a clear indication that the Democrats are doing everything they can to cater to union demands.

The cost of this bailout could be more than $165 billion, just what taxpayers need as the cost of their healthcare is already increasing as a result of ObamaCare. While there are nine Republicans who have co-signed the bill, most conservatives are against this legislation because it lets the union officials who mismanaged pension accounts off the hook, placing the burden on the taxpayer.

However, this isn’t the worst part. On October 7^th, Senator Tom Harkin, Chairman of the Health, Education, Labor and Pensions Committee, held a carefully orchestrated hearing on the union pension bailout and retirement security. During that hearing, “Guaranteed Retirement Accounts” (GRAs) were also discussed.

I wrote about these accounts in my November 4, 2008 E-Letter, but the gist is that the GRA system would take away some of the tax benefits currently enjoyed by 401(k) plans and create the GRA, a mandatory 5% contribution retirement system, a sister to Social Security. Those who couldn’t afford the 5% contribution would receive a contribution from the government (i.e., taxpayers). Ongoing contributions would be placed into a special kind of government bond that would pay a guaranteed 3% rate of return.

Just what the federal government needs, another Social Security type slush fund to spend. Perhaps they’d use some of this money to bail out union pension plans – how convenient!

Note that back in 2008, it was widely reported that the GRA would require seizure of 401(k) assets, but this was somewhat overblown. In a 2008 discussion, it was suggested that those with 401(k) plans who had experienced large losses could trade in their balances for a GRA, but this was suggested as a voluntary swap, not a mandatory seizure.

More recently, however, there has been growing talk of taking over 401(k) balances and distributing them in a fairer manner, as in redistribution of wealth. We know that Obama has spoken in favor of such schemes in the past, so he’s not likely to hinder its passage. Perhaps the Democrats intend one of the recipients of this fair redistribution to be union pension plans.

When I originally wrote about this plan back in November of 2008, I got a whole host of liberal responses saying that I was needlessly alarming my readers based on a very unlikely idea. Here it is two years later and the GRA idea is still alive and well. The Dems were successful in taking the first step toward universal health insurance, so why not go for universal pension coverage as well?

Frankly, I think there’s more smoke than fire on this one. Any attempt to confiscate the retirement savings of American workers is sure to bring about very nasty political repercussions. Any such attempt could make the Tea Party look like, well, a tea party.

Energy Bill: While it’s doubtful that we’ll see any action on Guaranteed Retirement Accounts, I think it’s very possible that we’ll see some sort of energy legislation passed, or at least attempted, in this lame duck session. Harry Reid has sponsored such a bill - S.3815 - Promoting Natural Gas and Electric Vehicles Act of 2010.

According to the summary found in the bill, it seeks to encourage adoption of non-gas/diesel vehicles through a combination of tax incentives. However, considering that it nearly triples the tax oil companies pay into the Oil Spill Liability Trust Fund, consumers will be the ultimate losers through higher energy prices.

This, despite studies by J.D. Power and Associates, Deloitte Touche, Boston Consulting Group, Roland Berger Strategy Consultants, professor Henry Lee of Harvard’s Belfer Center for Science and International Affairs, and the Massachusetts Institute of Technology's Energy Initiative that all indicate there will be little demand for such vehicles in the future because they are far too expensive for most drivers and would have little impact on greenhouse gases.

Activist Judges: While not within the realm of new legislation, action to appoint Obama’s judicial nominees could be one of the longest-lasting legacies of this lame duck session. National Review reports that Democrats plan to push through some of the most controversial of Obama’s judicial nominees while they feel they have the votes to be confirmed.

Conclusions

Back in the summer, a number of conservatives spoke out about the danger of this lame duck Congress acting on the Democrats’ liberal agenda. As the predictions of a Republican rout gained more steam, the Democrats accused conservatives of fear mongering. On this point, one liberal article said, in part:

“But hold on: Are any of these criticisms accurate? Would a lame-duck session free up lawmakers to vote in ways they would not otherwise? ... Actually, it turns out these concerns are almost completely unfounded. If lame-duck sessions freed up lawmakers to vote differently than they otherwise would have, for instance, we would see radically different behavior from legislators after they announce their retirements (since from that point on, they are freed from those pesky "tethers"). In fact, there are no discernable differences in voting patterns for members of Congress after they announce they are leaving.”

They just don’t get it, do they? Conservatives are not afraid that liberal Democrats will change their voting patterns. Instead, they’re afraid that they will continue to vote like they have over the past two years, despite the overwhelming election results. Just thinking back to how the ObamaCare bill came into existence as a result of closed-door negotiations and outright bribes shows us how the liberals like to do business.

The general consensus is that the lame duck session will be just that – lame. Some of the liberal agenda items have already been taken off the table or defeated. So it’s possible that we won’t see much in the way of detrimental legislation enacted. However, I suggest that you keep an eye on the issues raised above, just in case.

Thoughts on Thanksgiving

Like most Americans, I am reflecting this week on all of the things I have to be thankful for. My initial thoughts are always for my family – my wife and business partner, Debi, and my two kids who are both going gangbusters in college.

My thoughts are always with our more than 900 faithful clients all around the country who entrust us with their hard-earned money. And with my excellent staff that works very hard to make our company run smoothly, day in and day out.

But above all, I am thankful to God who makes all of our blessings possible. Let us all remember that this week and every week.

With warmest Holiday regards,

Gary D. Halbert

SPECIAL ARTICLES:

What’s the lame duck done so far?
http://www.ntu.org/governmentbytes/economy/whats-the-lame-duck-done-so-far.html

The lame duck’s unfinished business
http://news.yahoo.com/s/csm/20101123/ts_csm/345130

The case against the Fed
http://www.hussmanfunds.com/wmc/wmc101122.htm