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Dodd-Frank Act Is a Target on G.O.P. Campaign Trail

That has not stopped Republican presidential candidates from using the Dodd-Frank Act, the sprawling regulatory effort to address the causes of the financial crisis, as their newest anti-Obama target for what ails the economy.

Republicans have repeatedly invoked the law’s 848-page girth — and its rules on, among other things, trading derivatives and swaps — as a symbol of government overreach that is killing jobs.

But in trying to turn Dodd-Frank into the new “Obamacare,” the disparaging term that opponents use to refer to the new health care law, Republicans are largely ignoring the basic trade-off that the financial law represents, supporters say.

“Dodd-Frank is adding safety margins to the banking system,” said Douglas J. Elliott, an economic studies fellow at the Brookings Institution. “That may mean somewhat fewer jobs in normal years, in exchange for the benefit of avoiding something like what we just went through in the financial crisis, which was an immense job killer.”

So far, only a small portion of the law, which was signed by the president in July 2010, has taken hold. Of the up to 400 regulations called for in the act, only about a quarter have even been written, much less approved.

Dodd-Frank aims to rein in abusive lending practices and high-risk bets on complex derivative securities that nearly drove the banking system off a cliff. It creates a bureau to protect consumers from financial fraud, cuts fees banks charge for debit-card use, and sets up a means for the government to better supervise the nation’s largest financial institutions to avoid expensive and catastrophic failures. And it calls for swap execution facilities, or exchanges on which derivatives and other complex financial instruments are traded.

Republicans say Dodd-Frank is the root of some of today’s economic problems. It has stopped banks from lending to “job creators,” they contend, and is a direct cause of high unemployment. “It created such uncertainty that the bankers, instead of making loans, pulled back,” said Mitt Romney, the former Massachusetts governor, speaking at a South Carolina rally over Labor Day weekend where he again called for the law’s repeal.

“I think part of that flows from the fact that the people who were putting that together, Dodd and Frank,” he continued, referring to Democratic lawmakers former Senator Christopher J. Dodd of Connecticut and Representative Barney Frank of Massachusetts, “as much as anyone I know in this country were responsible for the meltdown that we had.”

Mr. Frank demurs. “Their claims are literally based on nothing but misconception,” he said. “The legislation is very popular. Nobody wants to go back to totally unregulated derivatives. Nobody wants banks to go back to making loans without having to retain some of them. This is a debate that is being conducted for the right wing.”

Rick Perry, the governor of Texas, has also called for the repeal of Dodd-Frank. “We have to end it right now,” he said, on the same weekend in the same state as Mr. Romney. Newt Gingrich said it is “a devastatingly bad bill” that is “killing small banks, killing small business, killing the housing industry.” Representative Michele Bachmann regularly reminds voters that she introduced the first Dodd-Frank repeal bill this year.

Former Gov. Jon Huntsman of Utah agrees, but he wouldn’t stop there. He would also eliminate the Sarbanes-Oxley law passed in 2002, which set standards for corporate accountability in the wake of the Enron scandal.

The candidates could find that there are some political dangers to their deregulation strategy, as Republicans in Congress learned last year during the debate over the legislation. Then, opponents of measures to address the causes of the financial crisis found themselves rather easily painted as defenders of Wall Street financiers and the banking industry, rather than being on the side of borrowers and consumers. Mr. Obama has signaled recently that in the 2012 campaign he plans to portray Republicans as defending corporations and the wealthy.

Article source: http://feeds.nytimes.com/click.phdo?i=eb4d6f910b07d210bd8811b2e846f106

Slow Recovery Worsens Financial State of Medicare

The estimates, in the annual report by the Medicare trustees, were immediately swept up into the already inflamed political battle over federal spending, debt and the future of entitlement programs.

The trustees said that payroll tax revenues, which provide most of the money for Medicare’s hospital insurance trust fund, were lower than expected last year because earnings were “considerably lower than projected” and the economy was weaker than expected.

Republicans said the bleaker picture for Medicare showed a need for immediate action to shore up the finances of the program, which insures 47.5 million people who are 65 and older or disabled.

“The biggest threat Medicare faces right now is the status quo,” said the House speaker, John A. Boehner, Republican of Ohio. “The trustees’ report makes it clear that if we do nothing, Medicare will not be able to pay promised benefits to American seniors.”

Democrats said that the financial outlook for Medicare would have been much worse without the new health care law. The law, which President Obama cites as one of his greatest political accomplishments, promises to be a central point of conflict in the 2012 presidential election.

Without the new law, said Kathleen Sebelius, the secretary of health and human services, “Medicare would have gone bankrupt in 2016, only five years from now.”

Senator Max Baucus, Democrat of Montana and chairman of the Senate Finance Committee, said, “The current economic crisis has hit the Medicare trust fund, and hit it hard.” Mr. Baucus, an architect of the new law, and other Democrats vowed to resist Republican efforts to repeal it.

The trustees said the financial outlook for Social Security had changed little. They said the Social Security trust fund would be exhausted in 2036, one year sooner than projected in last year’s report, and even then, they said, tax revenue would be sufficient to pay three-fourths of promised benefits through 2085.

It is inconceivable that politicians would allow either program to run out of money. The projected dates of insolvency are widely used as a measure of the financial condition of Social Security and Medicare, which together account for more than one-third of all federal spending.

In unveiling the new estimates, Treasury Secretary Timothy F. Geithner, the managing trustee of the trust funds, noted the need for additional borrowing to keep the government’s myriad commitments in other programs.

“On Monday,” Mr. Geithner said, “just three days from today, the United States will reach the debt limit set by Congress. Because Congress has not yet acted, we have now set in motion a series of extraordinary measures that will give Congress some additional time to raise the debt limit.”

As a condition of increasing the debt limit, many Republicans are demanding changes in benefit programs. But House Republicans have discovered that they are playing with political dynamite when they propose major changes in Medicare.

The reports were signed by the six trustees: three cabinet officers, the Social Security commissioner and two public representatives.

The Medicare report included a disclaimer by the chief Medicare actuary, Richard S. Foster. “The financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations” in the short term or the long range, said Mr. Foster, a civil servant whose independence is protected by law.

The projections assume that Medicare will cut doctors’ fees by 29 percent on Jan. 1, as required under current law, but Congress routinely intercedes to block such cuts.

Moreover, the report says that projected Medicare costs over 75 years are about 25 percent lower because of the new health care law.

Under the law, Medicare will hold down payments to hospitals and other health care providers to reflect presumed increases in productivity. But, Mr. Foster said, if these constraints are kept in place, Medicare payments to providers will eventually be “far below the levels paid by private health insurance.”

Article source: http://feeds.nytimes.com/click.phdo?i=a2cdd2adf7ec023684b061b4a7a400f4

Dodd-Frank Act Is a Target on G.O.P. Campaign Trail

Slow Recovery Worsens Financial State of Medicare

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