Get ready for more brinkmanship over the Doc Fix

The Democrats were too clever by half. They didn't put the so-called Doc Fix into the bill for ObamaCare because they wanted to pretend that it didn't cost as much as it truly did. They have passed several temporary fixes to the problem of insufficient Medicare doctor payments. The last one expires on December 31. Without a fix, Medicare provider rates would drop 25%. The Republicans want to tie the doc fix to partial repeal of ObamaCare.

The idea of tying the doc fix to a partial health reform repeal has legs because it comes with a clear rhetorical message: Congress should not start creating new entitlements without the necessary funding to uphold existing ones.

Sen. Orrin Hatch (R-Utah), who will serve as ranking member on the Finance Committee next session, would not comment on specific budgeting but he did indicate that the committee would not move forward with a doc fix that was not fully funded.

"Ensuring that Medicare reimbursement rates aren't slashed is important, but so too is making sure that we stop adding to our already sky-high deficit," Hatch told POLITICO in a statement. "Over the next month, I'll be working with my colleagues to accomplish a longer-term fix that's paid for and doesn't add to the deficit."

The prospect of Republicans yanking reform funds puts major pressure on the Democrats to come up with a yearlong patch before the lame-duck session ends. But so far, Democrats have been unable to find the necessary $19 billion in offsets to finance a yearlong fix.

One aide said health reform's preventive health spending is one of the "top three" offsets in the law that congressional Republican staffers are eyeing, with the idea that a few moderate Democrats facing tough races in 2012 could eventually be brought on board.

And the Republicans have found the part of ObamaCare that they want to exchange for the doc fix.

As for which part of the health reform law to pull funds from, Republicans have long derided the multibillion Prevention and Public Health Fund as wasteful spending, scoffing at its investment in bike paths and farmers' markets. One Republican Senate aide quipped that it was a "slush fund for jungle gyms."

The fund, which began this year with $500 million, will grow to a $2 billion per year allocation by 2015. Totaling $15 billion over the next 10 years, the fund would be nearly enough to offset an entire, yearlong doc fix.

Obama would probably veto such a plan, but watch out for more brinkmanship on this question.

The Democrats' inability to pass a budget comes back to bite them

Byron York points out this nice little irony. Remember how the Democrats crammed through ObamaCare under the rather arcane rules of reconciliation that allowed them to pass it with 51 votes and avoid a filibuster? Their defense was that the Republicans had done the same thing with the Bush tax cuts in 2001 and 2003. So why couldn't they push through the sort of tax cut provision they wanted in the lame duck session when they still had large majorities in each house? Ah, here is where the irony sets in. Reconciliation must be attached to a budget. But the Democrats haven't passed a budget.

To pass a measure by reconciliation, the Senate must pass a budget that contains what are called reconciliation instructions. But this year, as they faced an angry electorate and grim prospects in the midterm elections, the Democratic leadership made the specific decision not to pass a budget. Revealing their spending priorities to voters already unhappy with out-of-control federal expenditures was just too risky, so Sen. Harry Reid and party leaders punted, even though passing a budget is one of Congress' core constitutional responsibilities.

With no budget, there could be no reconciliation. And no possibility of using reconciliation to extend the Bush tax cuts -- which were originally passed with bipartisan support -- on the Democrats' terms. Shirking your constitutional responsibilities can have consequences.

Without that option, and with Republicans united, the only question was how long it would take for Democrats to admit defeat.

The Democrats haven't done what their basic job is - passing a budget for the government and it's just delicious that their cowardice has come back to bite them.

A man unused to compromise

The President's speech last night on the deal he'd worked out with the Republicans on extending the Bush tax rates sounded particularly irritated. You could tell that he was not happy with the deal that he had to strike and that he was also doing his best to convince his own supporters that this is a good idea. What also struck me was this was perhaps his first time to truly work out a compromise with members of the other party for an issue on which he had campaigned promising to let the rates go up on those he calls rich. It doesn't seem to be working with the left. His base is angry. In fact, it is the Republicans, as Jennifer Rubin writes, who feel that they've won.

To say that Republicans are triumphant would be an understatement. They won the philosophical point (tax hikes impede economic growth) and, candidly, are more than delighted to have a repeat of this debate for the presidential campaign in 2012. Ryan Ellis of Americans for Tax Reform, which strenuously pushed for extension of the Bush tax cuts, tells me,"If 2012 is a referendum on Obamacare and tax hikes, we win." Well, there will be lots of other issues, and 2012 in political terms is a long way off. Still, I see his point.

James Capretta writes,

More broadly, the president’s agreement to this deal is an implicit admission that voters aren’t buying what the Democrats have been selling on the budget for the past year. The primary argument Democrats pushed throughout 2010 was that the country simply could not afford to “spend” anything more on tax cuts for the wealthy. The president went so far as to say he could find much better uses for the hundreds of billions of dollars that would be “spent” by extending the top Bush tax rate at 35 percent.

But this kind of language only betrayed an attitude toward the private sector that most voters find entirely distasteful. Democrats talk as if private earnings are somehow the property of the federal government and $100 billion not collected in taxes is the same as $100 billion spent on a new government program. Most voters don’t see it that way at all. To them, allowing today’s tax rates to rise next year is a tax hike, not a spending cut. And fiscal conservatism does not consist in piling more taxes on the productive sector of the economy in order to finance an ever growing federal government. What voters want is for the elected officials to concentrate on fitting spending within what’s available from today’s tax rates, not on back-door ways to hike taxes to cover increases in spending.

With the extension of unemployment insurance for another year on top of what we have already extended, do you realize that unemployment insurance now last longer than welfare benefits last under the Welfare Reform Act?

Some conservatives such as Michelle Malkin oppose the deal. Malkin points to the burden that extended unemployment benefits are putting on the states. The unemployment insurance systems in many states are going up. Malkin links to this story of what the cost of unemployment insurance has done to many Colorado firms.

Businesses are being hit with large premium increases to prop up Colorado's broke unemployment-insurance fund.

In notices that went out over the past two weeks, some firms are facing rates that have more than quadrupled from last year.

"I had to pick myself up off the floor after I opened the letter," said Linda Greene, owner of Westminster-based Merry Maids North. Her first-quarter premium for 2011 will be $2,200, compared with $497 a year earlier.

"Money doesn't just fall out of the sky, so I'm going to have to totally rework my budget and hope for the best," said Greene, who employs 28 workers.

The Colorado Unemployment Insurance Trust Fund covers the cost of payments to jobless workers. Record numbers of unemployment claims caused the fund to go broke this year, forcing Colorado to borrow, so far, $368.5 million from the U.S. government.

At least 40 other states also are borrowing from the federal government to cover their fund deficits.

Colorado's unemployment-benefit payments rose from $305 million in 2005 to $1.06 billion in 2009.

With rate hikes like those, how many of those small businesses are going to increase employment?

We're going to head into the 2012 election arguing once again about extending these tax rates and the unemployment benefits.

Spain needs their own Ronald Reagan

Spain is facing a devastating air controllers strike that has paralyzed all air traffic over the country. Despite being extremely well paid, earning up to a million euros annually, the controllers are upset over plans to privatize the Spanish state's airports. And the result has been chaos for anyone trying to travel over that part of Europe.

Hundreds of thousands of passengers were left stranded by the walkout, which came during one of Spain's busiest weekends for travel.

The government is talking tough about prosecuting the striking workers for breaking the law and the military is taking over Spain's air space, but there aren't enough military air traffic controllers to do the job. I well remember all the predictions of calamities when Reagan fired the striking air traffic controllers, but no such disasters developed. May Spain's government show similar backbone. Unless European governments can stand tough against such labor extortions, they will never be able to address their deep-seated economic problems.

Cruising the Web

Glenn Reynolds has an intriguing metaphor for the Obama presidency for the similarities between Obama and the fictional guitarist in Spinal Tap.


But now Obama is trying to win more friends in a Gulf region still furious over the extended ban on offshore drilling by buying Gulf Coast seafood for White House parties this year.

John Kyl demonstrates how to deal with media bias in terming the fight over extending tax cuts or tax rates.

Just in case you had any doubt, the new president of the Washington Teachers' Union has made it clear what the union's true mission is - to protect its members. Of course it is. That is what the mission of any union is. That's fine, but just don't try to also pretend that the teachers' unions are all about the children and improving education. That is far down on their list of priorities.

Check out Hot Air's polling of its readers for the best and worst of the 2010 season.

The head of Mossad retires ... with a bang.

Keynesianism might be dead, but its adherents don't seem to have gotten the message.

If you have some extra money, you can purchase the Unabomber's Montana property.

Tim Carney explores how the new Food Safety bill won't do anything to protect food-borne illnesses because inspectors can't detect bacteria. Meat and poultry processing plants, the major source of illnesses, are already inspected every day. The real story is how the large food producers are supporting a bill that will harm smaller producers.

Just in case you had any doubt, Helen Thomas has exposed yet again her own deep anti-semitism.

J.R. Dunn argues that the whole idea of multiculturalism has been exposed for dangerous feel-goodery that it really is.

Obama's nanny state now to control school bake sales

Once President Obama signs the new child nutrition bill that Michelle Obama has been pushing for, just wait to see how schools will change. The bill directs the Department of Agriculture to write new guidelines to make school meals more healthful. But it won't stop there. Wait till the federal government starts telling us what can be sold at fundraisers. Say good bye to bake sales to raise money for the band or theater program. It will now be up to the Department of Agriculture whether or not schools can host such sales.

The legislation would apply to all foods sold in schools during regular class hours, including in the cafeteria line, vending machines and at fundraisers.

It wouldn't apply to after-hours events or concession stands at sports events.

Public health groups pushed for the language on fundraisers, which encourages the secretary of Agriculture to allow them only if they are infrequent. The language is broad enough that a president's administration could even ban bake sales, but Secretary Tom Vilsack signaled in a letter to House Education and Labor Committee Chairman George Miller, D-Calif., this week that he does not intend to do that. The USDA has a year to write rules that decide how frequent is infrequent.

Margo Wootan of the Center for Science in the Public Interest says the bill is aimed at curbing daily or weekly bake sales or pizza fundraisers that become a regular part of kids' lunchtime routines. She says selling junk food can easily be substituted with nonfood fundraisers.

"These fundraisers are happening all the time," Wootan said. "It's a pizza sale one day, doughnuts the next... It's endless. This is really about supporting parental choice. Most parents don't want their kids to use their lunch money to buy junk food. They expect they'll use their lunch money to buy a balanced school meal."

Perhaps Vilsack will have some sympathy for schools with diminished budgets. Since they're not getting as much money from the states, such extracurricular programs will be ever more dependent on outside fundraising to support their activities.

Instead of such decisions being made at the school level, they will be made by bureaucrats in Washington. New Yorkers might like having a nanny mayor telling them when they're eating too much, but others might not. But once you give up control to Big Nanny in Washington, such decisions are out of the hands of those closest to the students and schools. Such is the road we're on.

It's time to cut out all the government support for ethanol

There is now bipartisan support, as the WSJ reports, for removing government subsidies of ethanol.

Last week, no fewer than 17 Senators signed a letter calling ethanol "fiscally indefensible" and "environmentally unwise." Led by Democrat Dianne Feinstein and Republican Jon Kyl, the group said Congress shouldn't extend certain subsidies that expire at the end of the year, including the 45-cent-per-gallon tax credit for blending ethanol into gasoline and tariffs on cheaper imports. Conservatives like Tom Coburn dislike this costly industrial policy, while liberals like Barbara Boxer and Sheldon Whitehouse are turning against the hefty carbon emissions that come with corn fuels.

Even Energy Secretary Steven Chu seems to have found the anti-ethanol religion. Speaking at the National Press Club last Monday, Mr. Chu said that "ethanol is not an ideal transportation fuel" and that the government's focus should be "on ways that we can actually go beyond ethanol." Like most greens, he still supports so-called advanced fuels that aren't made from corn and also aren't commercially viable, but we'll take his partial conversion.

Hallelujah for such wisdom. Now if the government would only these politicians would go full hog into their new ethanol-free religion and remove all the government requirements that a certain percentage of all fuel sold must include ethanol.

As the Senators dryly noted, "Historically our government has helped a product compete in one of three ways: subsidize it, protect it from competition, or require its use. We understand that ethanol may be the only product receiving all three forms of support from the U.S. government at this time."

Sure enough, also last week, the Environmental Protection Agency ruled that under the 2007 energy bill Americans must use at least 13.95 billion gallons of ethanol next year, or about 8% of total U.S. fuel consumption. In protecting its free ride, the ethanol lobby is like Fannie Mae before the crash. But at least now there's a glimmer of political hope for taxpayers.

Corn-state senators will howl, but now that the efficacy of ethanol as a means of having cleaner energy has been disproven, why should we still have that requirement?

What can we learn from the Deficit Commission's report

Over at AOL News, John Merline highlights the final report from the Deficit Commission as they give us what they call "The Moment of Truth" about the nation's real state of debt. They find duplication in government services. For example, there are 44 separate federal job-training programs. And there has been downright duplicity in how the politicians hid the debt. Take all those pie-in-the-sky promises about how ObamaCare would bring down spending on health care. All lies, just as conservatives pointed out at the time.

2) Health reform's cost savings apparently were bogus. Remember how Democrats boasted that health reform would cut the budget deficit by $170 billion over the next decade and far more after that? The deficit commission must not have gotten that memo. It says health spending projections under the new law "count on large phantom savings" and the reform law's new long-term care program that the report calls "unsustainable." As a result, Congress will still need to enact "a number of other reforms to reduce federal health spending and slow the growth of health care costs more broadly."

And next time you hear President Obama whining about all the spending that he inherited from the Bush administration as if he hasn't been adding way more, remember this detail.

5) Obama is a big spender. Although President Barack Obama has talked about fiscal discipline -- and set up this deficit commission -- his own budget plan would spend $350 billion more on so-called discretionary programs over the next decade than if the government were just left on autopilot, according to the report.

So when Obama acts like he spent a lot the past two years just because of the emergency we were in, remember: he plans to keep up the trend.

This is the most encouraging bit of news from the report.

6) It's actually not that hard to cut the deficit. The report talks loudly about the "painful" choices ahead and how there's "no easy way out." But what the report really shows is that a comprehensive package of relatively modest and reasonable policy changes can bring deficits under control.

The tax reform plan, for example, is modeled on the reforms enacted under President Ronald Reagan, which also lowered and simplified income tax rates in exchange for cutting back on a thicket of tax loopholes. The Social Security reforms are all unexceptional and slowly phased in. The cuts in discretionary spending mainly just strip out the massive spending increases enacted over the past couple of years. Indeed, probably the toughest medicine in the plan is a 15 cent per gallon hike in the federal gas tax by 2015 -- which would cost an average driver about $100 a year.

Now, if only our politicians would have the same proclivity for truthfulness about spending that the Commission's leaders have demonstrated.

Cruising the Web

Margery Eagan talks to Massachusetts unemployed workers and finds surprisingly weak support for extending unemployment benefits yet another time. They have a lot of suspicion of their fellow unemployed workers who are "gaming the system."

Bill Simmons has a very sweet column about how he was working to make sure that his five-year old daughter develops the correct loyalties in basketball.

Mary Katharine Ham has a lot of fun with Harry Reid's celebration of Nevada football.

Jonah Goldberg argues that Obama has a "Never Mind" energy policy.

Mark Tapscott points to many of the ways that the federal government is dampening growth in the economy.

Apparently, banks will be charged with racism if they require people getting FHA-backed loans to have strong credit histories. Don't they remember what got us into this recession in the first place - guaranteeing loans to people who were taking out more than they could repay?

Welcome Changes

Politico reports on some of the procedural changes that the Republicans are planning to implement in the House. John Boehner is going to change the budgeting process so that we don't get these huge omnibus bills where everything is rolled into one ginormous bill that no one reads. Congress delays and stalls passing the 12 Appropriations bills all year long and then, minutes before the government is going to shut down, they put all the bills into one large omnibus bill and stick in all sorts of pork sweeteners to gain the votes of individual members. We don't find out what is in the bill until months later when someone reports on the more egregious elements. Instead Boehner is planning to break the appropriations bills down into many smaller bills. Members would have to go on record for each one of these funding bills and it would not be as easy to hide in extra spending.

House Republicans seem intent on blowing up the staid appropriations process when they take power in January — potentially upending the old bulls in both parties who have spent decades building their power over the federal budget.

The plans include slicing and dicing appropriations bills into dozens of smaller, bite-size pieces — making it easier to kill or slash unpopular agencies. Other proposals include statutory spending caps, weekly votes on spending cuts and other reforms to ensure spending bills aren’t sneakily passed under special rules.

On some level, their plans may create a sense of organized chaos on the House floor — picture dozens of votes on dozens of federal program cuts and likely gridlock on spending bills. And don’t forget that a lot of these efforts will die with a Democratic-led Senate and a Democrat in the White House.

But the intent is to force debate as much as to actually legislate — and make Old Guard Republicans and Democrats uncomfortable with a new way of thinking about the size and scope of government.

Those members whose power base comes from being on the Appropriations Committee are warning dire fates if they no longer have the ability to decide for everyone how money should be spent.

Insiders who have made a living under the old system are sure to push back, and many fear that Rep. John Boehner (R-Ohio) may not understand what he is doing.

“John should talk with the professional appropriators about the complexities, rather than talk off the top of his head. His plans would take a huge amount of the House’s time, but what would it accomplish?” said a dubious former House Republican member of the Appropriations Committee who spoke on condition of anonymity.

Ed Morrissey comments,

“Professional appropriators”? Houston, we’ve found our first problem. We don’t need “professional appropriators,” nor do we need “12 Cardinals” directing all of the spending — and aggrandizing their own personal power. It seems Boehner has a better idea of what he needs to do to reform the system than some on his team.

They don't get the budget passed under the procedures now in place. We're a few weeks away from the end of the session and they still haven't even brought up the budget for next year. So please don't try to convince us that any alteration in the present system is Armageddon. Let the House debate how it spends money. That's what people want - clarity and transparency. If the politicians are embarrassed in how they spend money, let them face the music.

And here's another welcome change. The House is going to do away with all the meaningless feel-good resolutions.

And next week the GOP plans to adopt a rule that will block a bill from coming to the floor if it "expresses appreciation, commends, congratulates, celebrates, recognizes the accomplishments of, or celebrates the anniversary of an entity, event, group, individual, institution, team or government program; or acknowledges or recognizes a period of time for such purposes."

Under Pelosi the House would spend time passing these empty resolutions, but then wouldn't have time for a full debate of bills such as the health care bill which was rushed through with minimum debate.

To understand the need for such a rule, it helps to better understand the status quo. Take March 19, 2010, which was a pretty important Friday: It was an ObamaCare turning point, with Speaker Pelosi locking down the final votes to pass the bill later that weekend. But the House wasn't debating health care.

Instead, Ms. Pelosi had packed the schedule with pointless resolutions. These included decrees honoring African-American scientists; the 50th anniversary of the exploration of Mariana Trench; the Detroit Catholic Central High School Division I state champion hockey team; and "the goals and ideals of National Women's History Month." It also named a post office in Virginia for Clarence D. Lumpkin and inducted a "national day of recognition" for the novelist Donald Harrington.

Republicans insisted on talking about the largest new entitlement since the Great Society, which resulted in more than a few beyond-parody moments. "The fact is we are honoring a great American novelist, but we have to divert that important conversation to focus on health care," said Minnesota Democrat Keith Ellison, according to the Congressional Record.

This kind of filler has become a routine Pelosi gambit so Democrats can avoid controversy, while sometimes it is simply a lack of quality control. The lame-duck Congress is moving all kinds of last-minute bills, but yesterday the House spent the better part of an hour on a resolution "honoring and saluting golf legend Chi Chi Rodriguez for his commitment to Latino youth programs."

Ending such silliness is a welcome change.

Now that the Republicans are altering the procedures, let's get down to debating the substance.

The Basketball Capital of the World

While politics is always interesting, my real love these days is following Duke basketball and enjoying their hard-fought win over Michigan State last night. Since we moved to the Triangle area in North Carolina in 1988, I've come to realize the primacy of basketball in our universe. Ben Cohen has a very nice column arguing that today North Carolina has a good argument for why it is the true center of basketball.

In recent decades, North Carolina, a relatively rural state in the American South, has made a convincing case to be described by the following title: Basketball Capital of the World.

North Carolina's first claim to basketball fame is Michael Jordan, the kid from Wilmington who went on to attend the University of North Carolina, win six NBA titles and become one of the planet's most famous and widely admired athletes. It includes Duke coach Mike Krzyzewski, who has guided U.S. teams to gold medals at the 2008 Olympics and 2010 World Championships. It has spread more recently to John Wall of the Washington Wizards, last year's No. 1 overall NBA draft pick, who hails from Raleigh.

At the college level, North Carolina and Duke have won back-to-back NCAA titles—and together with North Carolina State and UNC Charlotte, have racked up a nonpareil 34 Final Four appearances in 50 years—nearly twice as many as schools from the next-highest state, California.

The future looks just as bright: Three of the state's college programs have incoming recruiting classes considered to be among the nation's 10 best. And while North Carolina ranks No. 10 in the U.S. in population, it has eight high-school players ranked by scouting services among the nation's top 100 for 2011—a number only matched by Illinois.

"We've had some great time periods, but this is about as good as any," said North Carolina coach Roy Williams. "I'm trying to think of other times, and I'm not coming up with anything."

He goes on to discuss how North Carolina, over the past 50 years built up a culture of basketball that allows the top young players to compete and develop their talents.

The state's march to basketball dominance might have seemed unlikely at the end of World War II. Like most of the Southeast, the Tar Heel state was football country in the 1940s. Basketball, said Bucky Waters, a former North Carolina State player and Duke's coach from 1969 to 1973, "was sort of what you did when it wasn't football season."

All that changed in 1946 when Everett Case, a high-school coach from Indiana, moved to Raleigh to take over the coaching duties at North Carolina State. "His goal was to make North Carolina like Indiana in that there was a basket in every driveway," said Mr. Waters, who played for Mr. Case.

Mr. Case was as much an entrepreneur as a strategist. His greatest legacy was the Dixie Classic, an annual eight-team tournament in Raleigh. It was a way for North Carolina's Big Four to test their mettle against the finest teams in the country, and a North Carolina school won the tournament all 12 years it existed, from 1949 to 1960. From the time Mr. Case—and his coaching counterpart at North Carolina, Frank McGuire—took over, the state's interest in basketball built toward a fevered pitch. And with no pro-sports franchises in the state to distract attention, these basketball programs laid down deep roots.

The Dixie Classic was retired in 1961 after a point-shaving scandal, but the burgeoning rivalries between the Big Four schools were stoked by proximity and a series of names that a North Carolina boy knows from the time he can make a layup: Art Heyman, Billy Packer, Jim Valvano, Dean Smith, Mr. Krzyzewski, Christian Laettner and Mr. Jordan.

As a teacher, I've witnessed how each of my students has picked a favorite team and will launch into strong arguments for their chosen team even when that team is experiencing a down year. I've found that the easiest way to discuss political partisanship is to help them to see the similarities to team loyalties.

North Carolina is continuing to find ways keep the excitement about basketball at a strong clip even when the season is over.

Last summer, for the third straight year, Durham's North Carolina Central University hosted something called the Greater N.C. Pro-Am, nicknamed the Rucker of the South.

At this unusual event, which has become something of a statewide basketball reunion, the teams consist of high-school, college and NBA talent. One game, which matched the incoming freshman classes at N.C. State and North Carolina, drew more than 3,000 people in a standing-room-only gym. About 1,000 more were turned away. "It's hard to figure out where else in the world that could happen," Mr. Williams said.

While the eyes of basketball fans will be turned tonight to LeBron's return to Cleveland, I'll be happy to be viewing the game from the true center of the basketball universe.

What Pelosi's dawdling has wrought

The Democrats have stalled taking votes on important, necessary business all year because they didn't want to take a tough vote on whether to raise taxes, or patching up the Alternative Minimum Tax or even to pass a budget. And now they have all these issues piled up to pass in the remaining days of their lame-duck session. And they're still stalling. Karl Rove summarizes all that will result if Nancy Pelosi continues to take these votes.

Thanks to her dogmatic rigidity and unquenchable passion for class warfare, House Speaker Nancy Pelosi continues insisting on extending the Bush tax cuts only for those who make less than $250,000. Mrs. Pelosi doesn't have the votes to pass her proposal using a special House rule, the suspension calendar, which requires a supermajority and does not permit amendments. She might well lose if the bill proceeds through normal House rules—Democrats could join with Republicans to offer an amendment allowing an up-or-down vote on extending all the Bush-era tax cuts, which could pass.

Even if she pushes it through, it won't get through the Senate because Mitch McConnell has gotten all 42 Republican senators to agree not to vote for a bill that does not extend all the Bush tax cuts. Here is what will happen if Pelosi continues to block such an extension.

If that happens, every worker will receive a smaller paycheck in the New Year. This will happen regardless of what action the new Congress takes—because the Treasury Department must very soon send employers and payroll processers instructions for 2011 tax withholding. If no bill passes in the next 10 days, the Treasury Department will have to assume the Bush tax cuts expire and order more withheld from everyone's pay.

The impact would be dramatic. H&R Block's Tax Institute, for example, has estimated that a married couple earning $80,000 will receive $221.48 less in each bimonthly paycheck starting in January, just when Christmas bills show up.

Then there is the Alternative Minimum Tax which is set to include many more people if Congress doesn't pass a patch to let those middle-class workers off the hook that Congress had crafted with them a long time ago without adjusting the AMT for inflation.

Then there are the households—as many as 27 million—that the Congressional Budget Office says may get walloped by the Alternative Minimum Tax if it is not adjusted to exempt middle-class earners.

Congress normally enacts a so-called patch to the AMT early in the calendar year. But this year Mr. Obama and the Democratic Congress dawdled. Even if the new Congress patches the AMT in January, Internal Revenue Service Commissioner Douglas H. Shulman warns that one of every six taxpayers may be prevented from filing returns early or getting timely refunds as his agency scrambles to gear up for the change.

Yes, Congress could get around to fixing the AMT patch next year, but the damage would already be done while the economy is trying to work up some steam.

Taxpayers could end up forking over tens of billions that they'll eventually get refunded once the IRS sorts it all out—but in the meantime consumer spending, job creation and the economy will take a hit.

If Congress fails to act on the expiring Bush tax cuts, the new GOP House majority that takes office Jan. 4 will immediately act to extend the Bush tax cuts, retroactive to New Year's Day. It will also patch the AMT to protect taxpayers' 2010 earnings. The Republicans' bill will likely gain Senate passage and Mr. Obama's reluctant signature.

But it will take weeks to reprogram payroll computers and months to work through the IRS's difficulties. That's a bad way for the economy—and the president—to start the year.

Instead of focusing on these questions, the Pelosi and Reid Democrats are working on a whole list of other issues like the DREAM Act, repealing Don't Ask Don't Tell and food safety. And don't forget that they never got around to passing next year's budget. Remember all this when they try to tell us how they're focused like a laser on improving the economy and how they want to help small business. Everything they do seems aimed at increasing uncertainty.

Oh, and if you are perhaps buying into the Democratic rhetoric about only taxing millionaires not affecting the economy, think again.

Mr. Schumer argues that if the income threshold for higher taxes is raised to $1 million, Republicans will no longer be able to claim that this plan taxes small business income.

Not so. The Small Business Administration classifies a small business as an entity with fewer than 500 employees. The Schumer plan shifts the tax onto larger, more profitable firms from relatively smaller ones. But this still puts jobs at risk. A business with $1 million or $10 million of net income has many times more employees and does a lot more hiring than a business with, say, $60,000 of net income or one that is losing money.

The Tax Foundation estimates that of tax filers reporting income of more than $1 million a year, about 80% have business income and that more than 60% of millionaire income is either business or investment income. So about two of every three dollars raised would come directly out of business coffers—i.e., from the capital that businesses need to expand their operations.

And the Democrats never seem to learn that their might predictions of how much money could be raised from taxing the rich never come to fruition. They seem to continually forget that rich people can hire tax attorneys and accountants.

Democrats say a millionaire surtax would raise about $50 billion a year, but don't count on it. Millionaires tend to be financially sophisticated and are well equipped to respond to higher rates by finding tax shelters, exploiting loopholes (municipal bonds!) or simply working less. If high tax rates were irrelevant to economic decisions, the soak-the-rich states of New York, New Jersey and California wouldn't be losing millionaires to better tax climates.

Tax payments by millionaire households more than doubled to $273 billion in 2007 from $132 billion after the tax rates were cut in 2003. The number of tax returns with $1 million or more in annual reported income doubled over that period thanks to the strong economic rebound. Tax payments by millionaires also increased dramatically after the Reagan and Kennedy tax rate reductions.

Instead of searching for some way to raise taxes on somebody, Congress should focus on giving businesses some certainty so that they can figure out how to invest money and help the economy grow.

Republicans shouldn't oversell an extension of the current tax rates as an economic panacea. Making the lower rates permanent would do far more for economic growth by removing one more source of uncertainty. And there are many spending and regulatory threats to growth that must be removed. But at least an extension would avoid a tax blow to a recovery that is still struggling to become a sustainable expansion.

The Constitution presents a small roadblock to Harry Reid

While Harry Reid focuses on all sorts of things other than the fact that the funding of the government ends this weekend and that taxes are set to increase on January 1, it turns out that even the House Democrats are balking at his run around the Constitution. The Constitution states quite clearly that all bills raising revenue must originate in the House, but the Senate Majority Leader either forgot about that or figured that it would be okay to ignore that provision with the new food safety bill.

A food safety bill that has burned up precious days of the Senate’s lame-duck session appears headed back to the chamber because Democrats violated a constitutional provision requiring that tax provisions originate in the House.

By pre-empting the House’s tax-writing authority, Senate Democrats appear to have touched off a power struggle with members of their own party in the House. The Senate passed the bill Tuesday, sending it to the House, but House Democrats are expected to use a procedure known as “blue slipping” to block the bill, according to House and Senate GOP aides.

The debacle could prove to be a major embarrassment for Senate Democrats, who sought Tuesday to make the relatively unknown bill a major political issue by sending out numerous news releases trumpeting its passage.

Section 107 of the bill includes a set of fees that are classified as revenue raisers, which are technically taxes under the Constitution. According to a House GOP leadership aide, that section has ruffled the feathers of Ways and Means Committee Democrats, who are expected to use the blue slip process to block completion of the bill.

“We understand there is a blue slip problem, and we expect the House to assert its rights under the Constitution to be the place where revenue bills begin,” the GOP aide said.

The blue slip could lead to one of two likely outcomes. Senate Majority Leader Harry Reid (D-Nev.) could simply drop the issue and let the next session of Congress start from scratch, a strategy that would allow him time in the lame-duck session to tackle other last-minute priorities, such as the expiring 2001 and 2003 tax cuts, a long-term continuing resolution, an immigration bill and a repeal of the military’s ban on openly gay service members.

Or he could try to force the issue in the Senate after the House passes a new version of the bill. But in order to do that and still tackle the other issues, he would need a unanimous consent agreement to limit debate.

According to Senate GOP aides, a unanimous consent agreement is all but certain to be a nonstarter because the bill’s chief opponent, Sen. Tom Coburn (R-Okla.), will not agree to such a deal.

If this were such a great bill, why couldn't Reid have waited for the House to pass it first? After all, his party has overwhelming control of the House until January. But in his eagerness to trumpet at least one achievement this week, he just let the Constitution slip his mind. Any surprise that Reid forgot about the Constitution?

Thomas Friedman continues to be China's useful idiot

Thomas Friedman continues his weird obsession with the superiority of China to the United States. He takes the gimmick of imagining what a Chinese diplomat's cable home about the United States would read like if Wikileaks put their cables on the web. Here's a taste of Friedman's Chinese-filtered observations.

The ambassador recently took what the Americans call a fast train — the Acela — from Washington to New York City. Our bullet train from Beijing to Tianjin would have made the trip in 90 minutes. His took three hours — and it was on time! Along the way the ambassador used his cellphone to call his embassy office, and in one hour he experienced 12 dropped calls — again, we are not making this up. We have a joke in the embassy: “When someone calls you from China today it sounds like they are next door. And when someone calls you from next door in America, it sounds like they are calling from China!” Those of us who worked in China’s embassy in Zambia often note that Africa’s cellphone service was better than America’s.

But the Americans are oblivious. They travel abroad so rarely that they don’t see how far they are falling behind. Which is why we at the embassy find it funny that Americans are now fighting over how “exceptional” they are. Once again, we are not making this up. On the front page of The Washington Post on Monday there was an article noting that Republicans Sarah Palin and Mike Huckabee are denouncing Obama for denying “American exceptionalism.” The Americans have replaced working to be exceptional with talking about how exceptional they still are. They don’t seem to understand that you can’t declare yourself “exceptional,” only others can bestow that adjective upon you.

This follows Friedman's column from a year ago wishing that we could have the same sort of one-party autocracy that China has for just a day so that that government could impose health care and climate reform as China has supposedly done. Of course, Friedman ignores the reality of Chinese pollution.

If Friedman thinks that China is some clean-air paradise, he should get out more. Or perhaps just read something besides Chinese PR announcements. Take, for example, this Australian news report from this summer.

In recent decades, China has seen unparalleled economic growth and this country’s environment has faced an unprecedented assault. Rivers which can only be described as toxic, are everywhere to be seen. If you chose a random city or town here and go looking for a waterway, you’ll be very lucky if it’s fit for any human use. We saw people growing vegetables next to a river which has turned black. They’re either oblivious the state of this water, are ignoring the dangers of using it or have no other choice.

Then there’s the air quality. China’s air pollution problem is enormous. The impact of coal fired power stations and heavy industry is felt right across the country - and when it comes to industrial pollution of all types, factory employees are at the front line.

Or even Friedman's own New York Times from a few years ago.

Environmental degradation is now so severe, with such stark domestic and international repercussions, that pollution poses not only a major long-term burden on the Chinese public but also an acute political challenge to the ruling Communist Party. And it is not clear that China can rein in its own economic juggernaut.

Public health is reeling. Pollution has made cancer China’s leading cause of death, the Ministry of Health says. Ambient air pollution alone is blamed for hundreds of thousands of deaths each year. Nearly 500 million people lack access to safe drinking water.

Chinese cities often seem wrapped in a toxic gray shroud. Only 1 percent of the country’s 560 million city dwellers breathe air considered safe by the European Union. Beijing is frantically searching for a magic formula, a meteorological deus ex machina, to clear its skies for the 2008 Olympics.

Environmental woes that might be considered catastrophic in some countries can seem commonplace in China: industrial cities where people rarely see the sun; children killed or sickened by lead poisoning or other types of local pollution; a coastline so swamped by algal red tides that large sections of the ocean no longer sustain marine life.

Despite the ridicule that Friedman's 2009 column received, he still just hasn't gotten over his admiration for the Chinese system. I guess he just prefers tanks putting down protests, slave-labor camps, forced organ donation, the crushing of religious dissent to any of our messy, inefficient democratic government.

Perhaps in his spare times, he relaxes by reading some of Walter Duranty's old NYT columns praising Stalin's Russia.

Cruising the Web

A bipartisan group of senators has written a letter to Harry Reid calling for the end of the subsidies of ethanol. May this be the beginning of the end.

With all the usual caveats about early results of medical research, this story of how gene therapy preventing memory problems in mice with Alzheimer's disease gives us some hope.

The Republicans are considering term limits for their leadership positions. The article speaks of concerns that there are constitutional problems with having term limits for the Speaker of the House because the Speaker is in the line of succession behind the Vice President. I don't understand that problem with having term limits for the Speaker since the Speaker's position in succession is determined by statute, not the Constitution. The Constitution says that the House can choose their own officers and Speaker so why couldn't they institute term limits as part of that choice? Perhaps some constitutional scholar could explain this.

Narcissistic personality disorder is now no longer a mental disorder according to the newest edition of the Diagnostic and Statistical Manual of Mental Disorders.

Jim Geraghty relates a creepy anecdote about President Obama embarrassing an overweight staffer by pressing him to eat a salad at lunch. How would you like your boss presuming to order your lunch for you and then embarrassing you in front of other co-workers?

One of my favorite conservative writers, Jennifer Rubin, has left her perch at Commentary to write a blog, Right Turn, at the Washington Post. That's a real loss for Commentary and a very smart hire for the Post.

If you haven't read this report on the Stuxnet worm, then do so. It's totally fascinating. But J.E. Dyer offers some perspective on why we shouldn't be relaxing other efforts to block Iran's development of a nuclear weapon.

A little tax history

Thomas Sowell offers up these statistics on tax collections in the 1920s before and after the Coolidge-era tax cuts on the rich.

Internal Revenue Service data show that there were 206 people who reported annual incomes of one million dollars or more in 1916. But, as the tax rate on high incomes skyrocketed under the Woodrow Wilson administration, that number plummeted to just 21 people reporting a million dollars a year in income five years later.

What happened to all those millionaires? Did they flee the country? Were they stricken with fatal diseases? Did they meet with foul play?

Not to worry. Right after Congress enacted the cuts in tax rates that Mellon had been urging, there were suddenly 207 people reporting taxable incomes of a million dollars or more in 1925. As Casey Stengel used to say, "You could look it up." It is on page 21 of an Internal Revenue publication titled "Statistics of Income from Returns of Net Income for 1925."

Where had all the income of those millionaires been hiding? In tax-exempt securities like state and local bonds, among other places. Mellon had urged Congress to end tax exemptions for such securities, even before he got them to cut tax rates. But he succeeded only with the latter, and only after a political struggle with those who made the same kinds of arguments that are still being made today by those who cry out against "tax cuts for the rich."

Still, one out of two is not bad, when it comes to getting Congress to do something that makes sense economically, rather than something that looks good politically.

The government, which collected less than $50 million in taxes on capital gains in 1924, suddenly collected well over $100 million in capital gains taxes in 1925. At lower tax rates, it no longer made sense to keep so much invested in tax-exempt securities, when more money could be made by investing in the economy.

As for "the rich"-- who really were rich in those days, when $100,000 was worth more than a million dollars is worth today-- those in the highest income brackets paid 30 percent of all taxes in 1920 and 65 percent of all taxes by 1929, after "tax cuts for the rich."

How can that be? Because high tax rates on paper, that many people avoid, often does not bring in as much tax revenue as lower tax rates that more people actually pay, after it is safe to come out of tax shelters and earn higher rates of taxable income.

Interesting, eh? If only today's politicians understood such things.