Obama speech offers glimmer of hope for pre-election PTC vote
Obama strode into the East Room at midday to intensify the battle around the thornier question of how to address individual income tax rates that are scheduled to rise at the end of this year. The president wants rates for taxpayers earning more than $250,000 to return to 1990s levels and wants to preserve the current rates for everyone else; Republicans are seeking an across-the-board extension of the existing rates, which were established during the George W. Bush administration.
The speech did not mention other ostensibly temporary tax measures, such as the production tax credit for wind, that are scheduled to expire at the end of this year, and most immediate analysis focused on the broader political dynamics surrounding the remarks and Obama’s campaign for a second term amid a still-weak economy.
But analysts at ClearView Energy Partners, a Washington-based research firm, saw in the speech a glimmer of hope for the PTC to be dealt with before November, a scenario they and most other observers had pretty much written off.
“For our purposes, today’s speech represents a meaningful, if minute, change to our expectations: it suggests that it may now be possible for Congress to pass a pre-election tax-cut extension bill that could include ‘energy extenders’ language under the broader aegis of job creation,” the firm wrote in a note to clients yesterday afternoon.
Renewal of the PTC and other so-called extenders during a lame-duck session still remains the most likely outcome of the ongoing political wrangling, ClearView notes, but there are two possibilities for a pre-election grand bargain that could give the credit new life. One is a “continuing resolution” that is likely to be needed to keep the government funded after fiscal 2012 ends Sept. 30; the other is a “sequester stopper” bill to undo mandatory spending cuts — including to defense — triggered by the 2011 Budget Control Act and subsequent failure of the Joint Select Committee on Deficit Reduction.
“I wouldn’t give it extremely high odds, I’d just give it odds,” Kevin Book, a ClearView analyst, said in a brief interview yesterday afternoon.
Book said he does not expect any serious movement before the August recess, although the Republican-controlled House and Democratic-controlled Senate are each expected to vote on bills hewing to their parties’ positions on the Bush-era tax cuts. But he does not count out the possibility of a last-minute deal if extenders are added to sweeten the pot.
The report highlights several variables that will affect the fate of the tax discussion, including messaging from Obama and House Republicans and questions over how much fiscal discipline members of Congress will bring to the discussion.
An effort from Sen. Debbie Stabenow (D-Mich.) to extend the PTC and several other green energy tax incentives fell short earlier this year when an amendment she offered to the transportation bill fell on a 49-49 vote. ClearView blames that failure in part on the $12.8 billion the amendment would have added to the bill’s costs. The report suggests that a narrower set of popular extenders could encourage support for a broader tax and spending deal, although some already-expired provisions such as the so-called 1603 grant program or 48C manufacturing incentives may not survive.
“As we have pointed out in the past, Congressional fiscal discipline only matters until something else matters more,” the report says. “A tax cut extension that comes loaded with a broad range of business tax extenders could be that something, especially if it includes popular, non-energy tax cut provisions like 100% bonus expensing.”
A seemingly out-of-the-blue extenders package is not unprecedented, Book said. He noted that in 2008 the credits were facing similar expectations that they would not be dealt with until the lame-duck session, but the credits ultimately were attached to the legislation establishing the Troubled Asset Relief Program that passed in October in response to the financial crisis.
Although “TARP was a bigger free-spending opportunity than this is likely to be,” it is too soon to discount the possibility of a last-minute deal, Book said.
The wind PTC, which provides developers a tax credit of 2.2 cents per kilowatt-hour, has significant bipartisan support and could fit well into a broader deal marketed as a jobs package. It could prove an especially attractive target for Republicans from windy states looking for an accomplishment to tout on the campaign trail.
“It’s their wind farms now,” Book said of such Republicans. “And they’d love to bring home the bacon before the election if they could.”