Dec 09, 2010
Health Reform Wins Another Round in Court
White House: The Framework for a Tax Agreement Is a Good Deal for Working Families
Giving Credit Where It's Due. WSJ Editorial
Speculators didn't destroy Greece
Dec 09, 2010, The Wall Street Journal, page 13
Well, what do you know? Credit-default swaps didn't cause Greece's fiscal collapse last spring after all.
That's the conclusion of a study by the European Commission. The paper was drafted in the run-up to the Greek bailout, but has belatedly come to light following a freedom of information request from the Dutch newspaper Het Financieele Dagblad [http://www.fd.nl/artikel/20852357/geen-enkel-bewijs-speculaties-tegen-eurolanden]. Last March, as Greek bonds tumbled and the price of credit-default swaps on the country's debt soared, Greek Prime Minister George Papandreou repeatedly blamed "speculators" whose "abuses" of the CDS market and the bond markets were, he claimed, to blame for Greece's predicament.
So the Angela Merkel of Germany and French President Nicolas Sarkozy joined Mr. Papandreou in calling on the European Commission to investigate whether over-the-counter credit-default swaps—which pay the buyer if a debtor can't or won't make his payments—were being used to manipulate the sovereign debt markets.
The Commission's report looked at the prices of CDS and the yields on government bonds and concluded that, if anything, credit default swaps seemed to be underpricing the risk of default. What's more, the paper says, in many ways the CDS market in Europe is more liquid and more transparent than the market in the underlying bonds. The paper also cautions that restricting or even banning "naked" CDS on government bonds, as some EU leaders proposed last spring, would raise the cost of borrowing in Europe by denying investors a way of hedging their exposure.
In other words, the Commission's inquest into sovereign credit-default swaps found a market, free from nefarious influences and largely unregulated, working more or less as you'd expect. No wonder Brussels buried the findings.
Statement by the President on Tax Cuts and Unemployment Benefits
Now, Republicans have a different view. They believe that we should also make permanent the tax cuts for the wealthiest 2 percent of Americans. I completely disagree with this. A permanent extension of these tax cuts would cost us $700 billion at a time when we need to start focusing on bringing down our deficit. And economists from all across the political spectrum agree that giving tax cuts to millionaires and billionaires does very little to actually grow our economy.
This is where the debate has stood for the last couple of weeks. And what is abundantly clear to everyone in this town is that Republicans will block a permanent tax cut for the middle class unless they also get a permanent tax cut for the wealthiest Americans, regardless of the cost or impact on the deficit.
So, sympathetic as I am to those who prefer a fight over compromise, as much as the political wisdom may dictate fighting over solving problems, it would be the wrong thing to do. The American people didn’t send us here to wage symbolic battles or win symbolic victories. They would much rather have the comfort of knowing that when they open their first paycheck on January of 2011, it won’t be smaller than it was before, all because Washington decided they preferred to have a fight and failed to act.
Make no mistake: Allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family. And that could cost our economy well over a million jobs.
At the same time, I’m not about to add $700 billion to our deficit by allowing a permanent extension of the tax cuts for the wealthiest Americans. And I won’t allow any extension of these tax cuts for the wealthy, even a temporary one, without also extending unemployment insurance for Americans who’ve lost their jobs or additional tax cuts for working families and small businesses -- because if Republicans truly believe we shouldn’t raise taxes on anyone while our economy is still recovering from the recession, then surely we shouldn’t cut taxes for wealthy people while letting them rise on parents and students and small businesses.
In exchange for a temporary extension of the tax cuts for the wealthiest Americans, we will be able to protect key tax cuts for working families -- the Earned Income Tax Credit that helps families climb out of poverty; the Child Tax Credit that makes sure families don’t see their taxes jump up to $1,000 for every child; and the American Opportunity Tax Credit that ensures over 8 million students and their families don’t suddenly see the cost of college shooting up.
I have no doubt that everyone will find something in this compromise that they don’t like. In fact, there are things in here that I don’t like -- namely the extension of the tax cuts for the wealthiest Americans and the wealthiest estates. But these tax cuts will expire in two years. And I’m confident that as we make tough choices about bringing our deficit down, as I engage in a conversation with the American people about the hard choices we’re going to have to make to secure our future and our children’s future and our grandchildren’s future, it will become apparent that we cannot afford to extend those tax cuts any longer.