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  • A historic shutdown is nearly over. It leaves no winners and much frustration

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    The longest government shutdown in history could conclude as soon as today, Day 43, with almost no one happy with the final result.Democrats didn’t get the health insurance provisions they demanded added to the spending deal. And Republicans, who control the levers of power in Washington, didn’t escape blame, according to polls and some state and local elections that went poorly for them.The fallout of the shutdown landed on millions of Americans, including federal workers who went without paychecks and airline passengers who had their trips delayed or canceled. An interruption in nutrition assistance programs contributed to long lines at food banks and added emotional distress going into the holiday season.The agreement includes bipartisan bills worked out by the Senate Appropriations Committee to fund parts of government — food aid, veterans programs and the legislative branch, among other things. All other funding would be extended until the end of January, giving lawmakers more than two months to finish additional spending bills.Here’s a look at how the shutdown started and is likely to end.What led to the shutdownDemocrats made several demands to win their support for a short-term funding bill, but the central one was an extension of an enhanced tax credit that lowers the cost of health coverage obtained through Affordable Care Act marketplaces.The tax credit was boosted during the COVID response, again through Joe Biden’s big energy and health care bill, and it’s set to expire at the end of December. Without it, premiums on average will more than double for millions of Americans. More than 2 million people would lose health insurance coverage altogether next year, the Congressional Budget Office projected.“Never have American families faced a situation where their health care costs are set to double — double in the blink of an eye,” said Senate Democratic leader Chuck Schumer, D-N.Y.While Democrats called for negotiations on the matter, Republicans said a funding bill would need to be passed first.“Republicans are ready to sit down with Democrats just as soon as they stop holding the government hostage to their partisan demands,” Senate Majority Leader John Thune, R-S.D., said.Thune eventually promised Democrats a December vote on the tax credit extension to help resolve the standoff, but many Democrats demanded a guaranteed fix, not just a vote that is likely to fail.Thune’s position was much the same as the one Schumer took back in October 2013, when Republicans unsuccessfully sought to roll back parts of the Affordable Care Act in exchange for funding the government. “Open up all of the government, and then we can have a fruitful discussion,” Schumer said then.Democratic leaders under pressureThe first year of President Donald Trump’s second term has seen more than 200,000 federal workers leave their job through firings, forced relocations or the administration’s deferred resignation program, according to the Partnership for Public Service. Whole agencies that don’t align with the administration’s priorities have been dismantled. And billions of dollars previously approved by Congress have been frozen or canceled.Democrats have had to rely on the courts to block some of Trump’s efforts, but they have been unable to do it through legislation. They were also powerless to stop Trump’s big tax cut and immigration crackdown bill that Republicans helped pay for by cutting future spending on safety net programs such as Medicaid and SNAP, formerly known as food stamps.The Democrats’ struggles to blunt the Trump administration’s priorities has prompted calls for the party’s congressional leadership to take a more forceful response.Schumer experienced that firsthand after announcing in March that he would support moving ahead with a funding bill for the 2025 budget year. There was a protest at his office, calls from progressives that he be primaried in 2028 and suggestions that the Democratic Party would soon be looking for new leaders.This time around, Schumer demanded that Republicans negotiate with Democrats to get their votes on a spending bill. The Senate rules, he noted, requires bipartisan support to meet the 60-vote threshold necessary to advance a spending bill.But those negotiations did not occur, at least not with Schumer. Republicans instead worked with a small group of eight Democrats to tee up a short-term bill to fund the government generally at current levels and accused Schumer of catering to the party’s left flank when he refused to go along.“The Senate Democrats are afraid that the radicals in their party will say that they caved,” House Speaker Mike Johnson, R-La., said at one of his many daily press conferences.The blame gameThe political stakes in the shutdown are huge, which is why leaders in both parties have held nearly daily press briefings to shape public opinion.Roughly 6 in 10 Americans say Trump and Republicans in Congress have “a great deal” or “quite a bit” of responsibility for the shutdown, while 54% say the same about Democrats in Congress, according to the poll from The Associated Press-NORC Center for Public Affairs Research.At least three-quarters of Americans believe each deserves at least a “moderate” share of blame, underscoring that no one was successfully evading responsibility.Both parties looked to the Nov. 4 elections in Virginia, New Jersey and elsewhere for signs of how the shutdown was influencing public opinion. Democrats took comfort in their overwhelming successes. Trump called it a “big factor, negative” for Republicans. But it did not change the GOP’s stance on negotiating. Instead, Trump ramped up calls for Republicans to end the filibuster in the Senate, which would pretty much eliminate the need for the majority party to ever negotiate with the minority.Damage of the shutdownThe Congressional Budget Office says that the negative impact on the economy will be mostly recovered once the shutdown ends, but not entirely. It estimated the permanent economic loss at about $11 billion for a six-week shutdown.Beyond the numbers, though, the shutdown created a cascade of troubles for many Americans. Federal workers missed paychecks, causing financial and emotional stress. Travelers had their flights delayed and at times canceled. People who rely on safety net programs such as the Supplemental Nutrition Assistance Program saw their benefits stopped, and Americans throughout the country lined up for meals at food banks.”This dysfunction is damaging enough to our constituents and economy here at home, but it also sends a dangerous message to the watching world,” said Sen. Jerry Moran, R-Kan. “It demonstrates to our allies that we are an unreliable partner, and it signals to our adversaries that we can’t work together to meet even the most fundamental responsibilities of Congress.”

    The longest government shutdown in history could conclude as soon as today, Day 43, with almost no one happy with the final result.

    Democrats didn’t get the health insurance provisions they demanded added to the spending deal. And Republicans, who control the levers of power in Washington, didn’t escape blame, according to polls and some state and local elections that went poorly for them.

    The fallout of the shutdown landed on millions of Americans, including federal workers who went without paychecks and airline passengers who had their trips delayed or canceled. An interruption in nutrition assistance programs contributed to long lines at food banks and added emotional distress going into the holiday season.

    The agreement includes bipartisan bills worked out by the Senate Appropriations Committee to fund parts of government — food aid, veterans programs and the legislative branch, among other things. All other funding would be extended until the end of January, giving lawmakers more than two months to finish additional spending bills.

    Here’s a look at how the shutdown started and is likely to end.

    What led to the shutdown

    Democrats made several demands to win their support for a short-term funding bill, but the central one was an extension of an enhanced tax credit that lowers the cost of health coverage obtained through Affordable Care Act marketplaces.

    The tax credit was boosted during the COVID response, again through Joe Biden’s big energy and health care bill, and it’s set to expire at the end of December. Without it, premiums on average will more than double for millions of Americans. More than 2 million people would lose health insurance coverage altogether next year, the Congressional Budget Office projected.

    “Never have American families faced a situation where their health care costs are set to double — double in the blink of an eye,” said Senate Democratic leader Chuck Schumer, D-N.Y.

    While Democrats called for negotiations on the matter, Republicans said a funding bill would need to be passed first.

    “Republicans are ready to sit down with Democrats just as soon as they stop holding the government hostage to their partisan demands,” Senate Majority Leader John Thune, R-S.D., said.

    Thune eventually promised Democrats a December vote on the tax credit extension to help resolve the standoff, but many Democrats demanded a guaranteed fix, not just a vote that is likely to fail.

    Thune’s position was much the same as the one Schumer took back in October 2013, when Republicans unsuccessfully sought to roll back parts of the Affordable Care Act in exchange for funding the government. “Open up all of the government, and then we can have a fruitful discussion,” Schumer said then.

    Democratic leaders under pressure

    The first year of President Donald Trump’s second term has seen more than 200,000 federal workers leave their job through firings, forced relocations or the administration’s deferred resignation program, according to the Partnership for Public Service. Whole agencies that don’t align with the administration’s priorities have been dismantled. And billions of dollars previously approved by Congress have been frozen or canceled.

    Democrats have had to rely on the courts to block some of Trump’s efforts, but they have been unable to do it through legislation. They were also powerless to stop Trump’s big tax cut and immigration crackdown bill that Republicans helped pay for by cutting future spending on safety net programs such as Medicaid and SNAP, formerly known as food stamps.

    The Democrats’ struggles to blunt the Trump administration’s priorities has prompted calls for the party’s congressional leadership to take a more forceful response.

    Schumer experienced that firsthand after announcing in March that he would support moving ahead with a funding bill for the 2025 budget year. There was a protest at his office, calls from progressives that he be primaried in 2028 and suggestions that the Democratic Party would soon be looking for new leaders.

    This time around, Schumer demanded that Republicans negotiate with Democrats to get their votes on a spending bill. The Senate rules, he noted, requires bipartisan support to meet the 60-vote threshold necessary to advance a spending bill.

    But those negotiations did not occur, at least not with Schumer. Republicans instead worked with a small group of eight Democrats to tee up a short-term bill to fund the government generally at current levels and accused Schumer of catering to the party’s left flank when he refused to go along.

    “The Senate Democrats are afraid that the radicals in their party will say that they caved,” House Speaker Mike Johnson, R-La., said at one of his many daily press conferences.

    The blame game

    The political stakes in the shutdown are huge, which is why leaders in both parties have held nearly daily press briefings to shape public opinion.

    Roughly 6 in 10 Americans say Trump and Republicans in Congress have “a great deal” or “quite a bit” of responsibility for the shutdown, while 54% say the same about Democrats in Congress, according to the poll from The Associated Press-NORC Center for Public Affairs Research.

    At least three-quarters of Americans believe each deserves at least a “moderate” share of blame, underscoring that no one was successfully evading responsibility.

    Both parties looked to the Nov. 4 elections in Virginia, New Jersey and elsewhere for signs of how the shutdown was influencing public opinion. Democrats took comfort in their overwhelming successes. Trump called it a “big factor, negative” for Republicans. But it did not change the GOP’s stance on negotiating. Instead, Trump ramped up calls for Republicans to end the filibuster in the Senate, which would pretty much eliminate the need for the majority party to ever negotiate with the minority.

    Damage of the shutdown

    The Congressional Budget Office says that the negative impact on the economy will be mostly recovered once the shutdown ends, but not entirely. It estimated the permanent economic loss at about $11 billion for a six-week shutdown.

    Beyond the numbers, though, the shutdown created a cascade of troubles for many Americans. Federal workers missed paychecks, causing financial and emotional stress. Travelers had their flights delayed and at times canceled. People who rely on safety net programs such as the Supplemental Nutrition Assistance Program saw their benefits stopped, and Americans throughout the country lined up for meals at food banks.

    “This dysfunction is damaging enough to our constituents and economy here at home, but it also sends a dangerous message to the watching world,” said Sen. Jerry Moran, R-Kan. “It demonstrates to our allies that we are an unreliable partner, and it signals to our adversaries that we can’t work together to meet even the most fundamental responsibilities of Congress.”

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  • Spending Recklessly in Good Times Is a Recipe for Disaster in Bad Times

    Spending Recklessly in Good Times Is a Recipe for Disaster in Bad Times

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    Some policy experts who, over the last few decades, saw little need for serious fiscal austerity because the government could borrow at low interest rates are now changing their tune. Their argument is that with rates now rising and the government’s interest payments set to become extremely expensive, it’s time to adjust. While I suppose that’s progress, they fail to see that the past calls for austerity were attempts to avoid precisely what’s happening today.

    Indeed, the need for fiscal responsibility was never based on an inability to afford extra debt back then. It was because the moment was destined to arrive when adjustments became necessary, and rising indebtedness ensured that these changes would become more painful.

    Let me explain. Consider two well-respected economists and former high-ranking government officials, Lawrence Summers and Jason Furman, who previously suggested that in the aftermath of the Great Recession, concerns expressed by “deficit fundamentalists” (like me) were excessive, and that some of the efforts we championed to reduce the debt were unnecessary.

    Despite the growing national debt, interest rates remained historically low, meaning the cost of servicing it was not particularly burdensome. This, they argued, made calls to control the debt out of touch. Better yet, those low rates were said to present an opportunity to “invest” in productive projects like infrastructure and education. This spending, in turn, would fuel productivity and raise economic growth, helping offset the future cost of the debt.

    Now, unlike some who subscribe to similar ideas, Summers and Furman aren’t extremists. They acknowledged that debt cannot accumulate indefinitely. But they mocked calls for austerity measures back in the 2010s as premature, while encouraging government investments paid for with debt accumulation.

    Undoubtedly, interest rates were low. As Summers and Furman highlighted in a 2019 paper, “in 2000, the Congressional Budget Office (CBO) forecast that by 2010, the U.S. debt-to-GDP ratio would be six percent. The same ten-year forecast in 2018 put the figure for 2028 at 105 percent. Real interest rates on ten-year government bonds, meanwhile, fell from 4.3 percent in 2000 to an average of 0.8 percent last year.”

    This thinking has problems. First, it assumes government officials have the right incentives and knowledge—in addition to a comparative advantage over the profit-driven private sector—to “invest” productively. Not all government spending qualifies as productive investment, especially when most comes in the form of transferring wealth from one group to another and the rest is driven largely by interest group politics rather than by sound cost benefit analysis.

    Second, 10-year projections are really unreliable. Later, in 2008, CBO projected that in 2018, public debt would be 22.6 percent of GDP. It turned out to be 78 percent. Then, in 2018, CBO projected that in 2028, debt would be 96 percent of GDP. It’s now projected to be 108 percent. Meanwhile, CBO projections for interest rates since the Great Recession have been higher than what they wound up being. Starting last year, that flipped, and actual rates are much higher than the projection. That gap between projected rates and actual rates is likely to continue. It could expand.

    Overestimating interest rates means the federal government pays less than projected. Yay. An underestimation, however, means higher interest payments, more borrowing, and more debt than expected. Add to this misfortune an underestimation of debt levels and you quickly see a lot of red ink.

    That’s why betting on low interest rates to argue that we should not worry about a growing debt burden is risky. Interest rates are influenced by a variety of factors and can rise fast. In fact, back in 2021, many continued to wrongfully argue that rates would not go up. Is it crazy, then, to believe we would be in a better position to face the rate hikes today if the government had better controlled its debt over the last 10 or 20 years?

    Finally, anyone looking at CBO budget forecasts could always see that the disconnect between government spending and revenue was growing. Even assuming no significant rises in interest rates, as well as no emergencies requiring more borrowing and no new congressional or presidential spending programs—all things that have come to pass—official debt projections never looked good. Why add more debt to that?

    In the end, the risks associated with high levels of debt were never about what we could afford while rates were low. It was always about understanding that when change inevitably comes, we can better address the challenge if we are not in over our heads.

    COPYRIGHT 2023 CREATORS.COM.

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    Veronique de Rugy

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  • Exploring Which Stakeholders Stand To Benefit Most From NHIA

    Exploring Which Stakeholders Stand To Benefit Most From NHIA

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    It’s a painful reality: The cost of homes is putting homeownership beyond the reach of a growing share of Americans.

    A new bill called The Neighborhood Homes Investment Act (NHIA) strives to address this problem, encouraging affordable home building and spurring renewal of distressed neighborhoods through the creation of a new tax credit.

    By supporting affordable housing initiatives through tax credits, The American Bankers Association (ABA)-backed NHIA would work much like the Low-Income Housing Tax Credit (LIHTC). Developers or investors would receive the tax credits, which would lessen their federal tax liability, in return for building or renovating housing properties.

    “On the surface, the ABA’s endorsement paints a picture of community-focused growth,” says Brian Pillmore, founder and CEO of Oklahoma City, Okla.-based Visbanking, which offers banking tools and services.

    “A deeper dive reveals that many of its members could significantly benefit. The banking world, especially those involved as lenders or sponsors in housing transactions, have an undeniable vested interest in such tax credits being ratified. A successful implementation of the NHIA could amplify their transaction volumes, opening up avenues for heightened interest and fee income. It’s essential to juxtapose this backing with the broader implications and beneficiaries of the act.”

    Rich potential

    The NHIA offers the attractive promise of revitalized development and revived enclaves. But transforming this rich potential into on-the-ground reality is more complicated, Pillmore believes. There’s little question the tax credit could attract development to the distressed areas where it is needed the most, and where the credits would be focused.

    However, according to Pillmore, “There’s a looming shadow: The interests of financial behemoths. Banks and developers with their expansive reach and financial clout, are poised to leverage these credits optimally. Thus, while we might witness a cosmetic revival of neighborhoods, the deep-rooted challenges of housing affordability might remain largely unaddressed.”

    The NHIA is touted as advancing the cause of housing affordability and galvanizing community investment, both of which augur a more hopeful future for housing in distressed areas. But Pillmore believes the “true value and direction of these investments” remains in doubt. A report by the CBO, he adds, suggests the supply of affordable housing may not be increased as a result of the act. He believes that while neighborhoods could see cosmetic improvements from the NHIA, the lasting impact of the act on housing affordability remains debatable. With banks and developers poised to garner a larger share of the advantages, the community-centered goals of the act could take a back seat to the financial interests of these stakeholders.

    Dual role

    Pillmore envisions a conflict of interests emerging as a result of passage of the NHIA.

    “Banks undeniably have a critical role in shaping community futures and are pivotal in the housing development ecosystem,” he says. “Tax credits, like those proposed in the NHIA, offer them an avenue to both support housing initiatives and realize financial gains. But this dual role can sometimes lead to conflicting interests.

    “While banks can significantly impact community development and make homeownership a reality for many, their inherent business model, centered around profitability, can sometimes overshadow community-centric goals. With the NHIA, while banks might play a significant role, the larger question of balance between financial interests and genuine community development remains at the forefront.”

    Should the NHIA become reality, a surge in housing activities in earmarked zones seems inevitable. But a core issue remains, Pillmore says. Will neighborhoods benefit from real and lasting improvement? Or will the enhancement turn out to be little more than window dressing? Will the primary beneficiaries be homeowners, or will they be banks, developers and mortgage companies?

    “The NHIA, while promising on paper, reignites a pressing debate,” Pillmore concludes. That debate centers, he says, “On the real essence of affordable housing in America, and the actors that shape its destiny.”

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    Jeffrey Steele, Contributor

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