Economic Analysis: Cut, cower — lawmakers back down to uproar

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WASHINGTON >> House Speaker Paul Ryan promises a big, bold agenda and says lawmakers won't shy from difficult choices. But several recent votes demonstrate Congress' continuing penchant for small ball and timidity — and the tendency of lawmakers to reverse course at the first tingle of political pain.

A recent budget and debt deal and separate legislation to fund highway programs were laced with gimmicks masquerading as offsetting spending cuts. And, when some of the few real cuts stirred protests in farm communities and among the nation's largest banks, lawmakers quickly served notice that they would back down.

The conventional wisdom is that Congress typically treads water closer to an election as politics swamp any prospect of cooperation on legislation. Former Speaker John Boehner, R-Ohio, who was forced out by disgruntled tea partyers, was intent on ducking fights with President Barack Obama that promised to put Republicans on the losing end of battles that could have led to a government shutdown or even a first-ever default on U.S. obligations.

Talking differently

But Ryan, R-Wis., who benefited as Boehner made progress on nettlesome debt and budget issues before leaving, is talking a different game going forward.

"The House of Representatives will not duck the tough issues. We will take them head on. Let's seize the moment. Let's rise to the occasion," Ryan said in a statement. "And when we are done, let us say we left the people — all the people — more united, happy and free."

Several recent episodes, however, dramatize the grip that back-home interests and old-fashioned parochialism have on lawmakers:

Dividends to banks

Currently, banks receive a guaranteed 6 percent dividend on the stock they are required to buy in the 12 regional Federal Reserve banks. A provision in the Senate's highway bill would cut the dividend to 1.5 percent for banks with assets of more than $1 billion, raising $17 billion to spend on highway and transit programs over the coming three years.

Not surprisingly, big banks like Bank of America Corp. and Citigroup Inc. went into lobbying overdrive and killed the provision in the House, which instead tapped into the Fed's surplus fund, generated by profits on its investments. It's a gimmick because the Fed-related "savings" are gained simply by shifting a pot of money around in the budget, which has no impact on the deficit while the additional highway spending most certainly will.

Crop Insurance

The bipartisan debt and budget deal that Obama signed into law last week contains $3 billion in cuts to the federal crop insurance program by trimming some of the generous government subsidies to crop insurance companies and limiting profits for the companies. Farm-state lawmakers griped that the move could force more companies out of business.


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