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Whose Side Are They On: GOP's 'Pledge to America' is really a Pledge to Return to Old, Failed Policies

September 29, 2010

DPC Contacts:

Tim Gaffaney

 

Erika Moritsugu

 

Jacqueline Garry Lampert

 

Ryan Mulvenon

 

While Senate Democrats have been fighting for the priorities of our nation’s middle-class, Republicans have made it clear whose side they are on. Republicans have been scheming with big special interests about the direction they would take our nation if they had their way. Whether it’s tax breaks for the wealthiest Americans, a health care system for the insurance companies, a retirement system and Wall Street oversight that only a hedge fund manager could love, or an energy policy designed for Big Oil, Republicans have turned their backs on America’s middle class. Republican plans represent nothing more than a return to the same failed economic policies that drove our economy into the ditch, costing us 8 million American jobs, wiping out trillions in middle-class family wealth, and doubling our national debt.

Recently, Republicans doubled-down on these failed policies with an agenda[1]that doubles the deficit in order to provide millionaires’ tax cuts, hikes taxes for 110 million middle-class families and millions of small businesses, and does nothing to stop the offshoring of American jobs or to end tax breaks that reward companies for shipping American jobs overseas. At the same time, the latest GOP scheme is sadly silent on any strategies to invest in high-quality education for our nation’s children; to grow key industries like clean energy and manufacturing; or to rebuild our crumbling roads, rails and runways.

To get a concrete picture of the course the Republicans would set if they had their way, this document examines GOP proposals in five areas: Fiscal Responsibility,Health Care,Retirement Security, Wall Street Reform, and Energy and the Environment. In each of these areas, Republicans have made clear that their so-called pledge to America is really just a pledge to special interests.

Fiscal Irresponsibility 

While Senate Democrats continue to fight for legislation that will help to create jobs and reduce the deficit, Republicans are calling for a return to the same Bush-era policies that almost bankrupted America. Unpaid-for tax breaks for multi-millionaires and special interests, a budget-busting new entitlement program, and full-scale wars in two countries left the nation reeling from the weight of debt. These policies turned record budget surpluses to record deficits, runaway spending, doubling of the national debt, and record debt owed to foreigners. 

Senate Republicans are pursuing an agenda that recalls Bush-era policies favoring multi-millionaires and special interests at the expense of the hard-working ordinary American.The Senate Republican tax scheme would impose a stunning cost to the American public as well, nearly doubling the nation’s projected deficits over that time period. (S. 3773)[2] Overall, Senator McConnell’s tax scheme would force the nation to borrow an additional $3.9 trillion over the next decade – much of it from foreign creditors like China – and increase interest payments on the national debt by $950 billion, for a total of $4.85 trillion over 10 years.[3] This enormous debt would saddle each American child – all 75 million – with a share of the national deficit amounting to more than $64,000.[4]

Simply extending the tax cuts for the wealthiest two percent of income earners (without counting Senator McConnell’s breaks in capital gains and the estate tax) would cost almost $700 billion over 10 years. This would require the nation to borrow another $700 billion over the next decade to give an average tax cut of $100,000 to Americans making over $1 million per year. Once the interest payments on this national debt are added, the full cost of maintaining the tax cuts for just the top 2 percent of income earners rises to $830 billion.[5] That is, the Senate Republicans’ tax scheme would force the nation to borrow $11,000 from every child in America in order to give $100,000 more in tax breaks to millionaires, on top of the tax breaks they would already receive. 

Separately, Republicans would hike the taxes of 110 million middle-class families and millions of small businesses with their plan to repeal the American Reinvestment and Recovery Act. (P.L. 111-5) The Recovery Act has made a number of substantial direct contributions to family incomes through tax cuts, cash payment, and in-kind transfers. These include the Making Work Pay refundable tax credit, which currently provides wage earners with up to $400 ($800 for joint filers) for the 2009 and 2010 taxable years.[6]

Latest round of giveaways to rich come on top of deficits GOP saddled the middle class with throughout the Bush years. This is the same GOP that turned record budget surpluses under President Clinton into record deficits. President Clinton ran a unified budget surplus of $236 billion, the largest in American history. Budget surpluses were expected to continue for another ten years when President Bush took office in January 2001.[7] But under the Republican’s watch, the federal budget plunged back into deficit, reaching record levels.[8] By 2002, the unified federal budget had returned to a deficit of $160 billion and last year, President Obama inherited a record deficit of $1.3 trillion.[9]

What happened? If their record is any indication, we can be sure that if Republicans get their way, they will reprise their deficit- and debt-driving policies that favored the rich, special interests, and pet projects. 

·Spending exploded.According to the non-partisan Congressional Budget Office (CBO) between 2001 and 2009, spending (outlays) increased 89 percent (from $1.9 trillion to $3.5 trillion).[10]

·National debt doubled.The day before George W. Bush assumed the presidency in 2001, the public debt was $5.7 trillion. On the last day of President Bush’s presidency in 2009, the debt stood at $10.6 trillion, approximately $35,000 for every man, woman, and child in America.[11]

·Debt owed to foreigners at record levels. President Bush more than tripled foreign-held debt under his watch to finance his record budget deficits, with total foreign-held debt standing at over $3 trillion as he left office.[12]

HealthUnCare

In an effort to advance what they perceive as their own political interests, Republicans are working to revoke benefits of health reform that have already begun or will begin within a year of enactment, including enhanced Medicare benefits for seniors, tax credits for small businesses, strengthened consumer protections, and other benefits.

The Republican scheme to repeal the Affordable Care Act would cruelly: 

·Raise drug costs for seniors. The Republican scheme to repeal health reform would eliminate the $250 rebate check for seniors who hit the“donut hole” and rescind the 50 percent discount on brand-name drugs and biologics purchased in the coverage gap next year to help seniors afford their medication. The Republican plot to repeal reform would ensure the “donut hole” remains in place, rather than being closed by 2020 as under the health reform law. 

·Revoke tax credits for small businesses. The Republican scheme to repeal health reform would deny small businesses tax credits for up to 35 percent of premium costs for small businesses that offer coverage to their employees. Effective this year, the full credit is available to firms with 10 or fewer employees and average annual wages of up to $25,000, while firms with up to 25 employees and average annual wages of up to $50,000 will also be eligible for a credit. Beginning in 2014, tax credits are available for up to 50 percent of premium costs. Republicans would put small business owners right back where they were before health reform was enacted, struggling to find affordable coverage options to offer their employees, or simply not offering coverage because affordable plans are unavailable. 

·Rescind coverage expansion for young adults. The Republican scheme to repeal health reform would revoke the new health insurance coverage options that allow young adults to stay on their parents’ health insurance plan until age 26. Before passage of the new law, many plans removed young adults from their parents’ policies at age 19 or upon graduation from high school or college.[13] Thirty percent of young adults age 19 through 29 are uninsured, the highest rate of any age group. For young adults, especially new college graduates facing a challenging job market, the option to stay on a parent’s health insurance could be the only reasonably priced insurance option they have. Without it, many will be forced to continue to go uninsured. 

·Eliminate protections for children. The Republican scheme to repeal health reform would deny children protection from having their health insurance coverage limited or denied completely due to a pre-existing condition. The Republican effort to repeal reform returns to insurance companies the freedom to deny coverage of a child’s pre-existing condition, including congenital conditions a child may have at birth. No child should be denied health care for a condition they were born with, and every parent deserves the peace of mind that comes with knowing their child’s health care is covered. 

·Roll back protections for uninsured adults with pre-existing conditions. The Republican scheme to repeal health reform would deny 5.6 million uninsured adults with pre-existing conditions the affordable coverage options health reform offers them, leaving them to face complete denials of coverage from insurance companies, or, in a best case scenario, to face premiums that are completely unaffordable for the vast majority of Americans.[14] Until 2014, when the Health Insurance Exchanges are operational and coverage denial of any type is banned, uninsured adults with pre-existing conditions need the quality, affordable health insurance option that the health reform law offers. 

·Leave early retirees without critical protections. The Republican scheme to repeal health reform would eliminate a $5 billion re-insurance program for employer health plans that offer coverage to retirees who are not yet eligible for Medicare, to help protect access to coverage while reducing costs for employers and retirees. Early retirees are at particular risk of becoming uninsured, or of being forced to pay exorbitant premium costs until they become eligible for Medicare, and the percentage of large firms offering retiree coverage has dropped precipitously, from 66 percent in 1988 to just 31 percent in 2008.[15] The Republican scheme would fail to protect early retirees, who will continue to be at a very high risk of becoming uninsured or of paying excessive premiums if they are lucky enough to maintain their health insurance coverage. 

·Revoke consumer protections and patients’ rights. The Republican scheme to repeal health reform would deny all Americans the consumer protections and patients’ rights guaranteed by the new health reform law. The Republican scheme would return control over health care decisions to the insurance companies by repealing the following protections for all new policies starting after September 23, 2010:

·Required coverage of preventive care with no cost-sharing;

·No coverage rescissions when Americans get sick (also applies to existing policies renewed after September 23, 2010);

·No lifetime limits on coverage (also applies to existing policies renewed after September 23, 2010);

·Regulated annual limits on coverage (also applies to existing group policies renewed after September 23, 2010);

·Fair opportunity to appeal coverage and claims decisions; and

·Patients’ rights to choose any participating primary care provider, or in the case of children, any participating pediatrician; a woman’s right to see an ob-gyn without securing prior authorization from insurers

Add $143 billion to the deficit.The nonpartisan Congressional Budget Office, the official scorekeeper of Congress, determined that the Affordable Care Act reduces the federal deficit by $143 billion over the first ten years of enactment.[16] The Affordable Care Act reduces the deficit while ensuring that 94 percent of Americans have health insurance and reducing the rate at which health care costs grow. Extrapolating from CBO’s estimates of the deficit savings of the Affordable Care Act, repeal of the legislation is likely to increase the deficit by $143 billion.

Retirement Insecurity 

This past August, America celebrated the 75th anniversary of Social Security, a critical program that was created at a time when the American economy had crumbled and was struggling to recover. Now, it is more important than ever. Without Social Security, nearly half of Americans age 65 and older would live in poverty. Instead, millions of Americans can live their lives with dignity and independence. 

Remarkably, Republicans are threatening once again to privatize and cut Social Security –turning it over to Wall Street just two years after they almost collapsed the American economy and destroyed millions of dollars in personal savings.[17] The financial and economic crises were the direct result of greedy and reckless behavior of Wall Street CEOs and Republican economic policies that encouraged excessive risk-taking and a laissez-faire approach to financial regulation and oversight. Would we really trust these same people with our retirement? 

According to the Wall Street Journal, “the stock-market rout has ignited a crisis of confidence for millions of Americans who manage their own retirement savings through 401(k) plans. Their success depends “largely on the luck of the stock-market draw.”[18] What does that mean? Simply that individuals who invest their retirement savings may not experience sufficient growth to retire comfortably. Even before the financial crisis took hold of the markets in the fall of 2008, observers expressed concern that “the most widely-watched domestic market benchmark [the S&P 500] is back below where it was in February 2000… Baby Boomers [who are] planning to dip soon into their life savings are quickly running out of time to recoup their losses.”[19]

To illustrate the risk of privatized Social Security, someone who invested in a recommended 401(k) account indexed to the S&P 500 the day before President Bush was sworn into office in 2001 would have lost money if they had withdrawn those funds when President Bush left office in 2009: When adjusted for inflation, the S&P 500 had actually declined by 47.73 percent between January 19, 2001 and January 16, 2009. A $1000 investment would have been worth only $522.72.[20]

Wall Street Unaccountability 

Republicans opposed Wall Street Reform at every step of the way, and they have made no secret of their intentions to overhaul the law if they had their way.[21] Last spring, they brought forward a CEO-friendly “plan” that would have failed to protect consumers, investors, and businesses from the predatory practices of Wall Street. This proposal, hastily written after Senators McConnell and Cornyn agreed to do Wall Street’s bidding, would have left hard-working Americans susceptible to the same reckless behavior that destroyed over 8 million jobs and trillions of dollars in life savings. It would have inserted loopholes for lobbyists and watered down or eliminated critical provisions found in Dodd-Frank Wall Street Reform and Consumer Protection Act.[22] If Republicans had their way, taxpayers, consumers, and investors would have been left in the lurch by a plan that includes:

No Solutions for Systemic Risk and Too Big to Fail Institutions 

TheDodd-Frank Wall Street Reform and Consumer Protection Act, which became law on July 21, 2010, establishes a new framework to prevent a recurrence or mitigate the impact of financial crises that could cripple financial markets and damage the economy. (P.L. 111-203) As part of the legislation, the new Financial Stability Oversight Council will monitor emerging risks to U.S. financial stability, recommend heightened prudential standards for large, interconnected financial companies, and require nonbank financial companies to be supervised by the Federal Reserve if their failure were to pose a risk to U.S. financial stability. The Republican proposal, by contrast, contains none of the regulations of large, interconnected financial institutions that are necessary to prevent another collapse. 

·Republican proposal excludes tough requirements to rein in the largest financial companies. Nowhere does the Republican plan require the Federal Reserve to impose tougher capital, leverage, and liquidity requirements, as well as living wills, on the largest and riskiest banking and nonbank financial companies. The Republican alternative maintains the “Too Big to Fail” status quo. 

·Republican proposal fails to prevent non-financial institutions like AIG from harming the financial markets. Nowhere does the Republican plan provide for oversight of “shadow banks” – large, complex nonbank financial companies to prevent future Goldman Sach’s, AIG’s, and Lehman’s (none of which were Fed-regulated before the crisis) from also wreaking havoc on financial markets, the economy, and jobs.

No Consumer Protections 

TheDodd-Frank Wall Street Reform and Consumer Protection Act established a new “cop on the beat” to protect consumers. The independent Consumer Financial Protection Bureau will provide American consumers with the information they need to empower them to make smart financial choices for themselves. The Bureau will also help guard against hidden terms and fine print that trap American families into unfair, deceptive and abusive financial products. By contrast, the consumer protection Council included in the Republican proposal would have stifled important new protections necessary to empower consumers to make good financial decisions and to prevent a future crisis. 

·Republican proposal worse than the status quo. Under the Republican plan, the consumer protection Council is unable to issue any consumer protection rules without the approval of prudential regulators, and likely would not be able to issue rules to address unfair, deceptive or abusive practices at all – practices which will stifle consumer protections. That is the status quo, or worse. It was the failure of federal prudential regulators to address consumer protection that led to this problem. 

·Republican proposal protects abusive lenders. Under the Republican plan, payday lenders, check cashers, debt collectors and the like are exempt from rules designed to prevent unfair and deceptive practices. Because of weak supervision and lax enforcement, the plan makes it easy for these entities to violate existing laws and operate under the radar. 

·Republican proposal cuts states out from consumer protection. The Republican plan cuts out the role of the states altogether in enforcing consumer protections. Additionally, gutting Attorney General-enforcement of consumer protection laws would, in effect, inhibit states from punishing people who break the law.

No Investor Protections 

The Republican proposal comes up short on its protections for all investors – from a hardworking American contributing to a union pension to a day trader to a retiree living off their 401(k). 

·Republican proposal limits “skin-in-the-game” requirements. The Republican plan requires risk retention (“skin-in-the-game”) ONLY for residential mortgage loans, leaving the financial system at risk for securitized loans of other toxic assets. 

·Republican proposal has inadequate regulation of credit rating agencies. The Republican plan glosses over the failure in our credit rating system, offering minor tweaks to the current broken structure rather than meaningful reform. Their plan does nothing to strengthen the SEC’s ability to monitor the credit rating industry, nor would it raise obligations for ratings firms to undertake appropriate due diligence, or hold them legally accountable for their actions. 

·Republican proposal fails to strengthen shareholder power. The Republican plan does not include any provisions to strengthen shareholder power through reforms of majority voting, say-on-pay, proxy access, or compensation disclosures – all of which are included in the Financial Stability Act. 

·Republican proposal would increase the risk of fraud. The Republican plan makes a drastic change to a provision of the Sarbanes-Oxley Act, which would decrease the reliability of financial statements, weaken internal controls, weaken the integrity of business operations, increase the risk of internal financial fraud, increase accounting restatements, and reduce investor confidence in financial statements.

Siding with Big Oil 

The explosion of the Deepwater Horizon oil rig earlier this year spewed 4 million barrels of oil into the Gulf of Mexico, upended the lives and livelihoods of Gulf Coast residents, and inflicted untold damages to the environment that will potentially last for generations. In the wake of the catastrophe, Republicans tried to protect Big Oil with a proposal (S. 3643) that would fail to address damages, provide recovery, ensure accountability, reduce the nation’s addiction to oil, or advance critical regulatory reforms.[23]

If Republicans have their way when another disaster strikes, they can be expected to follow a playbook that: 

·Protects Big Oil. The Republican playbook would have exposed American taxpayers to the possibility of paying for billions in economic damages caused by the Deepwater Horizon disaster and left the fishermen, hotels and other coastal tourism-related small businesses without the certainty of knowing BP would have compensated them for their damages. The bill also would have exposed American taxpayers to the possibility of paying for the billions in economic damages that could have been caused by future oil catastrophes and would have failed to ensure oil companies are required to compensate the businesses and economies that are damaged by an oil catastrophe for more than $75 million in losses. 

·Does not create jobs. The Republican playbook would have ignored the opportunity to create jobs in construction and manufacturing. The Home Star program in the Clean Energy Jobs and Oil Company Accountability Act proposed by Senate Democrats would create 168,000 jobs. 

·Prematurely resumes deepwater drilling. The Republican playbook would have increased the chances of additional deepwater oil spills by giving the green light to resume deepwater drilling before the Bureau of Ocean Energy had the opportunity to complete their analyses and development of offshore safety practices. 

·Denies just compensation to families of those killed. The Republican playbook would have denied the families of the eleven people killed on the Deepwater Horizon from receiving compensation for pain, suffering, and emotional trauma by failing to update antiquated maritime laws that provide liability protections to the operator of the Deepwater Horizon oil rig. 

·Extends nation’s addiction to oil. The Republican playbook would not take any action to reduce the nation’s dependence on oil, which weakens our economy and jeopardizes our national security.