House Version Of Bailout Bill Examined

The House voted Friday on the financial rescue plan that the Senate passed Wednesday. The new version includes billions of dollars in tax breaks and credits. Keith Ashdown, chief investigator at Taxpayers for Common Sense, says lawmakers in the Senate piled on as much baggage onto what they saw as the last legislative train leaving the station.

Copyright © 2008 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

ROBERT SIEGEL, Host:

By Friday, we expect the bailout bill will be voted on in the House of Representatives. As its supporters have been at pains to point out, the Emergency Economic Stabilization Act of 2008 is not just for Wall Street but for Main Street. And the fact is that the package of tax incentives attached to it also finds some side streets and some back roads to benefit as well. It includes billions of dollars of tax breaks and credits for the likes of Microsoft, Harley Davidson, and the wool manufacturers. Many of the provisions are extensions of existing tax incentives, but some others are new. Keith Ashdown is the chief investigator for Taxpayers for Common Sense. He's been pouring over each line of the 451-page bill. Welcome back to the program, Keith.

KEITH ASHDOWN: Hello, Robert. Nice to be with you.

SIEGEL: Let me ask you about a new tax break that's made some headlines. The children's wooden arrow tax break, 39 cent excise tax repealed, what's that about?

ASHDOWN: Well, what we have with that tax provision was it's a provision that supports a few manufacturers of wooden arrows in the state of Oregon and, I think, one or two manufacturers in Wisconsin, and it provides an excise tax reduction on the manufacturing of wooden arrows.

SIEGEL: But as I understand it here, the provision in question would exempt wooden arrows that are made for children's bow and arrow toys from the broader category of wooden arrows which would still pay the excise tax.

ASHDOWN: Yeah, correct. It was Senators Wyden and Gordon Smith from Oregon that decided that this was an important provision. And it's unclear if this is moving votes, but it's definitely something that is sort of added, sort of a left turn on this bill at the last moment here.

SIEGEL: An interesting fact, Senator Wyden - who had promoted this on behalf, I gather, of Oregon manufacturers - ended up voting against this bill last night in the Senate.

ASHDOWN: Yeah, and I think, principally, you know, this is one of the toughest votes that a lot of our lawmakers have ever had to make on a piece of legislation. Nobody's happy with the legislation. But at least in the Senate, there was this idea that, hey, this is the last legislative train leaving the station, so let's put as much baggage onto it as possible. And that's why we had an increase of $110 billion to the final package that was voted on last night.

SIEGEL: And would save the 10 manufacturers, evidently, of children's toy wooden arrows $200,000 a year for the next 10 years, a $2 million tax break.

ASHDOWN: Right. You know, according to reports, one of the manufacturers is this company called Rose City Archery in Myrtle Point, Oregon, and they are definitely one of - one company that's definitely benefiting from this final bill.

SIEGEL: Now, there are two tax breaks. They're estimated at $478 million for movie and television producers who choose to shoot films in the United States. Do we know who sponsored that one?

ASHDOWN: The long-term supporter of these types of tax breaks has been a woman named Representative Diane Watson who is from Southern California. I don't know who the Senate sponsor is, but we know Representative Watson has been a big advocate for Hollywood to keep their production in the U.S.

SIEGEL: Keith, these are not spending projects. These are tax incentives. So I guess they're not technically earmarks. But they are provisions that individual members work for, try to get attached to something, and in this case they get attached with, I would say, dubious relevance to this huge bailout of the financial sector.

ASHDOWN: Exactly. Under congressional definition of them, they're called tax earmarks. So they're a little different that we're normally dealing with in the annual appropriations bills. But what listeners should remember, it's these are, you know, honey pots. You want to add them as slices to legislation, so it's like the old adage of sausage making this right. There's a lot that is being added to this bill, so we can have a final vote in the House that firms the legislation, so the president can sign it.

SIEGEL: So that some member can say, sure, I voted for that bill, but for me it was a matter of keeping 20,000 movie set jobs in this country instead of see them go north to Canada, or something like that.

ASHDOWN: In some of these provisions, to be fair about - the proponents will argue that they have some economic stimulus. And so, you know, what I've heard from Capitol Hill all week is this is one of the toughest bills anyone's ever had to vote on. Nobody likes the legislation, but everyone feels that we have to do something to make sure we turn our economy around.

SIEGEL: Well, Keith Ashdown of Taxpayers for Common Sense, thanks a lot for talking with us again.

ASHDOWN: Thank you.

Copyright © 2008 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

As Bailout Bill Grows, So Do Its Chances

When Treasury Secretary Henry Paulson offered Congress his $700 billion prescription for buying up troubled securities nearly two weeks ago, it was a three-page plan.

Now the proposal, which the Senate approved Wednesday night, runs 450 pages and includes "sweeteners" such as a temporary increase in federal deposit insurance and as much as $150 billion in tax breaks.

As the time ticks down to Friday's crucial House vote, President Bush and congressional leaders are now trying to get the bill over the goal line. They are leaning on lawmakers in the House to ensure that the bill gets passed.

The House narrowly defeated a similar bill on Monday, sending the Dow Jones industrial average into a record 778-point swoon. That, House Republican Leader John Boehner told Fox News, "really had a chilling effect on a lot of our members and a lot of their constituents."

House Speaker Nancy Pelosi vowed not to have a repeat of that debacle. She said she would not bring the measure to the floor without being sure that it would pass. The chief Republican vote counter, Roy Blunt of Missouri, said, "I think we will be able to go to the floor and be successful sometime tomorrow."

Investors, for their part, are already looking past passage of the plan. They have started focusing on what the economy will look like in the aftermath of this crisis. The Dow fell nearly 350 points, or 3.2 percent, on Thursday.

Investors were worried about two gloomy reports that suggest the economy is headed for recession. The Labor Department reported that jobless claims reached a seven-year high. The Commerce Department said factory orders fell 4 percent, a full percentage point more than economists had forecast.

Adding insult to injury, the Mortgage Bankers Association said that U.S. foreclosures in the second quarter rose to a record 2.75 percent of all mortgages issued.

Rep. Zach Wamp (R-TN) voted against the bill on Monday. He said in stark terms that he had changed his mind and would support it Friday.

"If some of us don't change our vote, tomorrow's going to be a real ugly day in America, and I don't want to be part of that," he told Fox News.

Rep. James Clyburn (D-SC) was asked at a news briefing if any Democratic budget hard-liners — who want to make sure any tax breaks are offset by less spending — will oppose the bailout because the Senate added tax breaks without paying for them.

"I haven't gotten any hard noes on the pay-go issue, but I've gotten a lot of concern on the pay-go issue," he said.

Credit Problems

President Bush, for his part, focused on the problems in the credit markets when he spoke to reporters during a Thursday meeting with business executives at the White House. He said the crisis had "gone way beyond New York and Wall Street" and was now paralyzing the nation's business.

"This is an issue that is affecting hardworking people," the president said. "They are worried about their savings; they're worried about their jobs; they're worried about their houses; they're worried about their small businesses."

Indeed, the credit markets have been nonplused by all this activity on Capitol Hill. Banks that have cash aren't lending it. The cost of borrowing dollars in London for three months rose for the fourth day running and shows no signs of falling. LIBOR is considered a good barometer of how much banks trust — or don't trust — each other. And right now banks have determined they aren't willing to risk lending out their cash because they might not get it back.

And their wariness is not misplaced. European and U.S. governments have had to rescue five banks in the past week alone.

Because of the tight lending conditions, banks and institutional firms are going to the Federal Reserve to get cash. The central bank released a report Thursday showing that commercial banks averaged $44.5 billion in daily borrowing over the past week — compared with a little more than $39 billion the week before. Investment firms drew almost $148 billion for the week ending Wednesday, compared with just $88 billion the previous week. Commercial banks often go to the Fed to get loan privileges so they can cover their reserve requirements. Back in March, as it scrambled to avoid a market meltdown, the Fed gave investment houses permission to do that, too. This is the broadest use of the central bank's lending power since the Great Depression.

Finding The Votes

The president spent part of his day personally calling lawmakers to drum up support for the bill. White House spokesman Tony Fratto said the president had a call list of about three dozen members, most of whom were in the House. Fratto said the White House was "fairly optimistic" the House will pass the bill.

He said House members who told the president they were changing their votes to support the bill said that they were largely motivated by two things: the stock market declines after their Monday vote defeating the bailout program and the revisions the Senate added this week.

Boehner said as much on Fox News. "The big drop really had a chilling effect on a lot of our members and a lot of their constituents," he said. With the Senate's changes, he said, the legislation "has a much better chance" of passing this time.

House Finance Services Committee Chairman Barney Frank (D-MA) said he thinks there are enough votes to pass the measure.

"I think a number of members who voted no are going to be voting yes," he told CNBC on Thursday morning. "The economic consequences of the failure on Monday are going to have an impact."

The bill looks very different from what the administration originally proposed. The government would now dole out the $700 billion for buying bad loans in three parts. The measure gives taxpayers some assurance that they will be paid back if and when the financial institutions they rescue get back on their feet. The program now has more oversight, and executives who have the Treasury buy up their bad mortgages will have a ceiling on their compensation.

The Senate's sweeteners included temporarily raising the limit on federal deposit insurance to $250,000 from $100,000 per account and about $150 billion in tax breaks, including an extension of the alternative minimum tax and property tax relief.

Focus Turns To Implementation

Investors are also focusing on how the U.S. Treasury is actually going to administer the program. Analysts said that until the Treasury explains how it will buy and sell this toxic debt, the nervousness will continue.

Indeed, the Treasury will have to walk a fine line. On the one hand, there is concern that the Treasury will buy the debt at such bargain-basement prices that it will hurt the banks, rather than help them. And if the Treasury just gives the banks the price the market would give them right now, it raises the question as to why the government needs to be involved in the first place.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: