Government Billion-Dollar Giveaway to Paper Companies in the Works

Government Billion-Dollar Giveaway to Paper Companies in the Works By Christopher Hayes, The Nation

Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry--handsomely--to use more fossil fuel. "Which is," as a Goldman Sachs report archly noted, the "opposite of what lawmakers likely had in mind when the tax credit was established."

The massive tax subsidy has barely been reported in the press, but it's caused a stir in the paper industry, which is struggling to stay profitable in the teeth of the recession. "Everybody's talking about it," paper industry analyst Brian McClay told me. "In the US and elsewhere in the world--in Canada and Brazil and Chile and Europe."

On March 24 International Paper (IP) announced it had received its first check from the IRS for a one-month period this past fall. The total? A whopping $71.6 million. "It's probably close to a billion a year of cash," McClay said. "If you look at the economics of this business, to make that kind of money today you'd have to be on another planet." IP's stock rose 12 per-?cent on the news.

The origins of the credit are innocent enough. In 2005 Congress passed, and George W. Bush signed, the $244 billion transportation bill. It included a variety of tax credits for alternative fuels such as ethanol and biomass. But it also included a fifty-cent-a-gallon credit for the use of fuel mixtures that combined "alternative fuel" with a "taxable fuel" such as diesel or gasoline.

Enter the paper industry. Since the 1930s the overwhelming majority of paper mills have employed what's called the kraft process to produce paper. Here's how it works. Wood chips are cooked in a chemical solution to separate the cellulose fibers, which are used to make paper, from the other organic material in wood. The remaining liquid, a sludge containing lignin (the structural glue that binds plant cells together), is called black liquor. Because it's so rich in carbon, black liquor is a good fuel; the kraft process uses the black liquor to produce the heat and energy necessary to transform pulp into paper. It's a neat, efficient process that's cost-effective without any government subsidy.

"Seventy-three percent of the energy we use in our mill system we produce," says Ann Wrobleski, IP's vice president for global government relations. "We feel like we're the original green industry, if you will." (In developed nations, paper is the third-largest industrial greenhouse gas emitter, behind the steel and chemical industries.)

By adding diesel fuel to the black liquor, paper companies produce a mixture that qualifies for the mixed-fuel tax credit, allowing them to burn "black liquor into gold," as a JPMorgan report put it. It's unclear who first came up with the idea--Wrobleski told me it was "outside consultants"--but at some point last fall IP and Verso, another paper company, formerly a part of IP, began adding diesel to its black liquor and applied to the IRS for the credit. (Verso nabbed $29.7 million at just one of its mills in the final quarter of 2008 for its use of mixed fuel.)

Despite the obvious contrivance of the procedure, Wrobleski is unapologetic: "The credit is supposed to encourage the use of green fuel." Sure, I said, but isn't it a bit weird you're now adding diesel fuel to the process in order to take advantage of it? "It is what it is," she said.

Others are less charitable. "You use the toilet every day," said one hedge fund analyst who's been closely following the issue. "Imagine if you could start pouring a little gasoline into the bowl and get fifty cents a gallon every time you flushed."

No one in Congress seems to have anticipated this creative maneuver. This past fall the Joint Committee on Taxation computed the cost of extending the tax credit for three months and projected it would cost a manageable $61 million. It now appears that the extension (which was passed as part of the TARP) could cost as much as $2 billion before the credits expire at the end of this calendar year.

Conservatives Holding Up Increasing Number Of Key Obama Nominees

Conservatives Holding Up Increasing Number Of Key Obama Nominees
Conservatives in Congress and in the media are attempting to block or delay a growing number of critical nominees for what amount to ideological witch hunts and self-interested horse-trading. As the President attempts to deal with the significant legal and logistical questions surrounding two wars, closing Guantanamo Bay, and caring for our nation’s veterans, the people Obama has picked to assist him with such issues are being forced to wait in the wings.

In the last week alone, at least four separate nominees who thought they were on track to be approved will have to wait at least a few more weeks:

Department of Defense: Sens. Richard Shelby (R-AL) and Jeff Sessions (R-AL) announced today that “they are blocking President Barack Obama’s nomination of Ashton Carter as Under Secretary of Defense for Acquisition, Technology, and Logistics.” The senators want assurances that Carter will not “change the criteria” on which the Pentagon considers a refueling tanker contract that could benefit defense contractors in their state.

Department of Veterans Affairs: Sen. Richard Burr (R-NC) asked the Senate Veterans Affairs committee to delay voting on the “nomination of Tammy Duckworth, an injured Iraq war helicopter pilot, to be an assistant secretary at the Department of Veterans Affairs.” Contacted by ThinkProgress, Burr’s Press Secretary, David Ward said that Burr is waiting for the answers to several questions he’s put to the White House and Duckworth, but would not disclose what those questions were.

White House Office of Legal Council: Dawn Johnsen’s nomination as head of the OLC has been delayed in part because Sen. John Cornyn (R-TX) has ideological differences with her. As the Legal Times explained, “citing Johnsen’s criticisms of Bush national security policies, [Cornyn] accused her of lacking ‘the seriousness and necessary resolve’ to fight terrorism,” while “other Republicans have targeted her work as legal director for NARAL Pro-Choice America from 1988 to 1993.”

Department of State: Right wing commentators are working to block the appointment of Harold Koh to the State Deptment’s top legal adviser, smearing him as a “threat to democracy” for his being an international law expert. As the Century Foundation notes, “The fervent opponents of Harold Koh turn out to be enthusiastic defenders of John Yoo.”

Additionally, Chris Hill’s nomination as ambassador to Iraq is still being held up by Sen. Sam Brownback (R-KS) at the behest of the right wing. This despite the fact that Secretary of State Robert Gates recently issued a rare statement on a diplomatic appointment saying, it is “vital that we get an ambassador in Baghdad as soon as possible.” These delays are just the latest in a long string of delays. The nominations of Attorney General Eric Holder, Labor Secretary Hilda Solis, and Presidential Science Adviser John Holdren were also held up for largely partisan reasons.

Falsehoods relating to President Obama's budget proposal

Myths and falsehoods relating to President Obama's budget proposal
Following the release of President Obama's proposal for the fiscal year 2010 budget, media figures and outlets have promoted a number of myths and falsehoods about the proposal. These myths and falsehoods include the suggestion that Obama's proposal would increase taxes on a large percentage of small businesses and the suggestion that using reconciliation to pass major policy goals would represent an unusual or unprecedented tactic. Media have also engaged in a pattern of criticizing Obama for addressing heath care in the budget or elsewhere, given the size of the current and projected U.S. federal debt, without addressing the president's response that health-care reform is essential to the long-term economic and fiscal health of the country.

1. Obama's budget proposal would increase taxes on a large percentage of small businesses

Many media figures and outlets, including CNBC host Joe Kernen, CNBC host Maria Bartiromo, ABC News' Jake Tapper, CNN's Dana Bash, Fox News' Sean Hannity, CNN's David Gergen, Politico, the Associated Press, The Washington Post, and The New York Times, have advanced, uncritically repeated, or failed to challenge the debunked Republican falsehood that Obama's income tax proposals would increase taxes on a large percentage of small businesses. For example, Kernen didn't challenge Sen. Judd Gregg (R-NH) on the March 26 edition of CNBC's Squawk Box after Gregg referred to Obama's proposal as a "tax policy that basically is focused on raising taxes on small businesses especially."

In fact, according to the Tax Policy Center's table of 2007 tax returns that reported small-business income, 481,000 of those returns -- about 2 percent -- are in the top two income tax brackets, which include all filers with taxable incomes that would be affected by Obama's proposals to let portions of the Bush tax cuts for wealthy taxpayers expire and to reduce the tax rate at which families making more than $250,000 could take itemized deductions.

2. Using reconciliation to pass major policy goals would be an unusual or unprecedented tactic

Media figures and outlets have advanced the falsehood that the Democrats' potential implementation of the budget reconciliation process, which would allow Congress to pass "policy changes in mandatory spending (entitlements) or revenue programs (tax laws)" by a simple majority in both Houses, is unusual, unprecedented, or was not recently used by Republicans. A March 31 article in The Hill, for instance, pointed to "GOP critics" claiming that the reconciliation process "was never intended to ram through major legislation" but did not mention that Republicans used the budget reconciliation process to pass several major Bush initiatives, as The New York Times and the blog Think Progress have noted. Similarly, Fox News correspondent Molly Henneberg made the false claim on the March 27 edition of Special Report that "[r]econciliation was last used in 2001 by Republicans to pass the first Bush tax cuts" -- an "error" for which her colleague Bret Baier later "apologize[d]," noting that Republicans had in fact used reconciliation more recently. Indeed, Republicans used the process to pass Bush's initiatives throughout his tenure, including the Economic Growth and Tax Relief Reconciliation Act of 2001, the Jobs and Growth Tax Relief Reconciliation Act of 2003, and the Tax Increase Prevention and Reconciliation Act of 2005.

Additionally, Hannity falsely claimed on March 20 that reconciliation would allow the Obama administration to pass legislation "without any Republicans even having an opportunity to vote." In fact, the budget reconciliation process does not deny Republicans or any member of Congress "an opportunity to vote." According to the House Rules Committee's description of the budget reconciliation process, the version of reconciliation legislation agreed to during the conference process is then "brought back to the full House and Senate for a vote on final passage. Approval of the conference agreement on the reconciliation legislation must be by a majority vote of both Houses."

3. Obama should not attempt health-care reform given the current and projected federal debt

Many media figures have claimed or suggested that given the size of the current and projected U.S. federal debt, the Obama administration's health-care reform proposal is untenable. For instance, Hannity said on March 26 that "Obama wants to expand government. We've got health care, unbelievable amounts of spending -- we're gonna bankrupt the country." However, in making such statements, neither Hannity nor other media figures addressed the argument Obama has repeatedly made in response to such claims: that health-care reform is essential to the long-term economic and fiscal health of the country.

For instance, during the question-and-answer session following his March 24 press conference, Obama said: "What we have to do is bend the curve on these deficit projections. And the best way for us to do that is to reduce health care costs. That's not just my opinion; that's the opinion of almost every single person who has looked at our long-term fiscal situation." Indeed, Office of Management and Budget director Peter Orszag, who formerly headed the Congressional Budget Office, said in March 4 testimony before the House Ways and Means Committee about the administration's 2010 budget that "[t]he principal driver of our Nation's long-term budget problem is rising health care costs." Orszag continued:

If costs per enrollee in our two main Federal health care programs, Medicare and Medicaid, grow at the same rate as they have for the past 40 years, those two programs will increase from about 5 percent of GDP today to about 20 percent by 2050. (As the Congressional Budget Office (CBO) and others have noted, there are reasons to expect cost growth to slow in the future relative to the past even in the absence of policy changes. But the point remains that reasonable projections of health care cost growth under current policies shows that they are the central cause of the Nation's long-term fiscal imbalance.) Many of the other factors that will play a role in determining future fiscal conditions -- including the actuarial deficit in Social Security -- pale by comparison over the long term with the impact of cost growth in the Federal government health insurance programs. Health care is the key to our Nation's fiscal future, and health care reform is entitlement reform. [emphasis added]

Fox News Whitewashes G.W. Bush

Misstating BBC question to PM Brown, Fox News' Carlson continued media pattern of whitewashing Bush
On the April 1 edition of Fox News' Fox & Friends, referring to a question asked at that morning's press conference with President Obama and British Prime Minister Gordon Brown, co-host Gretchen Carlson asserted that the "question was so poignant from the BBC because it started out saying that Gordon Brown, who was standing right in front of him, has blamed you, President Obama, for all of the problems over there." In fact, in his question, BBC correspondent Nate Robinson did not say that Brown had singled out Obama for blame. Rather, Robinson noted that "[t]he prime minister has repeatedly blamed the United States of America for causing this crisis" [emphasis added], and, indeed, Brown's criticism of U.S. policy in relation to the global financial crisis dates back to when President Bush was in office.

For instance, in an October 9, 2008, article, on who is to blame for the global financial crisis, ABCNews.com reported, "British Prime Minister Gordon Brown was quick to point the finger last week. 'This problem started in America. They have got to sort it out,' he said then."

Media Matters for America has documented numerous instances of media disappearing the Bush administration when discussing the global recession and recovery efforts.

From Fox News' coverage of Obama and Brown's April 1 press conference:

ROBINSON: The prime minister has repeatedly blamed the United States of America for causing this crisis. France and Germany blame both Britain and America for causing this crisis. Who is right, and isn't the debate about that at the heart of the debate about what to do now?

From the April 1 edition of Fox News' Fox & Friends:

CARLSON: Actually, that question was so poignant from the BBC because it started out saying that Gordon Brown, who was standing right in front of him, has blamed you, President Obama, for all of the problems over there. So it was a very poignant question.

Fox News Blames Unions For Auto Companies’ Demise, Suggests Firing UAW Head

Fox News Blames Unions For Auto Companies’ Demise, Suggests Firing UAW Head
When Detroit’s Big Three auto companies first came to Washington last fall to ask for bailout funds, conservatives immediately insisted the companies’ woes were the fault of the United Auto Workers (UAW). Even though the Senate Republicans effectively blocked a fair bailout deal, they pointed the finger at the UAW, falsely claiming it was “willing to make no concessions — zero.”

Today, President Obama announced that the government will recommit to providing assistance to General Motors and Chrysler — but only if the companies presented restructured plans, including the firing of GM CEO Rick Wagoner. Fox News and Fox Business was apoplectic, insisting that the UAW had never been forced to make concessions (a false claim) and that the union’s leader, Ron Gettelfinger, should be fired instead:

– GRETCHEN CARLSON: Where’s the union in all of this? … Not one mention of the union possibly making concessions in this whole thing.

– BILL HEMMER: If you can fire the CEO, why can’t you fire the head of the union?

– STUART VARNEY: The union and General Motors have not agreed on how to take care of these legacy costs — that is, the health and pension benefits for retired UAW workers. That is what is breaking the bank at General Motors.

– SEAN HANNITY: I didn’t see any union reps get told that they had to get out in this endeavor, because Barack Obama wouldn’t anger his political base.

Watch a compilation:

It’s no surprise that Fox’s immediate instinct is to blame the UAW; the network has a history of animus toward organized labor. Just weeks ago, ThinkProgress tracked Fox’s misleading attacks on the Employee Free Choice Act, which would make unionization easier.

Unlike Fox News hosts, President Obama recognized that restoring the auto industry to health will require a shared sacrifice from everyone involved in the industry — including but certainly not limited to the union:

What we are asking is difficult. It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. It will require creditors to recognize that they cannot hold out for the prospect of endless government bailouts. […]

Let there be no doubt, it will take an unprecedented effort on all our parts — from the halls of Congress to the boardroom, from the union hall to the factory floor — to see the auto industry through these difficult times.

It’s clear that the Fox hosts’ anti-UAW rhetoric has nothing to do with the specifics of the auto industry’s woes and everything to do perusing their own favorite pastime: union busting.

Dick Cheney was right

Dick Cheney was right - Deficits don't matter -- and Republicans who are complaining about Barack Obama's spending are hypocrites.
Dick Cheney once observed that "deficits don't matter," which may well have been the most honest phrase he ever uttered. His words were at least partly true, which is more than can be said for the great majority of the vice president's remarks -- and they certainly expressed the candid attitude of Republicans whenever they attain power. His pithy fiscal slogan should remind us that much of the current political furor over deficit spending in the Obama budget is wrong, hypocritical, and worthy of the deepest skepticism.

In our time, the Republican Party has compiled an impressive history of talking about fiscal responsibility while running up unrivaled deficits and debt. Of the roughly $11 trillion in federal debt accumulated to date, more than 90 percent can be attributed to the tenure of three presidents: Ronald Reagan, who used to complain constantly about runaway spending; George Herbert Walker Bush, reputed to be one of those old-fashioned green-eyeshade Republicans; and his spendthrift son George "Dubya" Bush, whose trillion-dollar war and irresponsible tax cuts accounted for nearly half the entire burden. Only Bill Clinton temporarily reversed the trend with surpluses and started to pay down the debt (by raising rates on the wealthiest taxpayers).

Republicans in Congress likewise demanded balanced budgets in their propaganda (as featured in the 1993 Contract with America), but then proceeded to despoil the Treasury with useless spending and tax cuts for those who needed them least. Even John McCain, once a principled critic of those tax cuts, turned hypocrite when he endorsed them while continuing to denounce the deficits they had caused.

But was Cheney wrong when he airily dismissed the importance of deficits? In the full quotation, as first recounted by Paul O'Neill, Bush's fired Treasury Secretary, he said, "You know, Paul, Reagan proved deficits don't matter. We won the [Congressional] midterms [in November 2002]. This is our due." What he evidently meant -- aside from claiming the spoils -- was that the effects of deficit spending tend to be less dire than predicted. And that insight deserves to be considered if only because all the partisan barking over the projected deficits in the Obama budget is so hysterical -- as if nothing could be worse than more federal spending.

Such is the institutional bias of the Washington press corps, which habitually refers to deficits "exploding" and to the nation "engulfed in red ink," and so on. But in fact the United States has recovered from considerably deeper indebtedness than that now on the horizon. Besides, as history warns, there are things much worse than deficits and debt. One such thing was the Great Depression, prolonged when Franklin Roosevelt decided to curb the deficits that had revived the economy, and ended only when he raised spending even higher in wartime. Another was worldwide fascist domination, a threat defeated by expanding America's public debt to unprecedented levels during World War II. No sane person cared then that public debt had risen well above gross domestic product.

Those scary charts and graphs often deployed to illustrate our parlous state of indebtedness rarely date back as far as the Forties and Fifties -- and the reason is simple. The massive deficits incurred during the war didn't matter, as Cheney might say, because the wartime national investments in industry, technology and science undergirded a postwar boom that lasted for nearly three decades, creating the largest and most prosperous middle class in human history.

The average annual growth rate remained close to four percent for that entire period -- and over time the combination of constant growth and smaller deficits reduced the ratio of debt to a fraction of its postwar dimension. What mattered more than the size of the deficits was whether they were spent on things that enabled consistent growth.

Today, President Obama is more troubled by the enormous threats to the nation's future than by deficits, even if they are projected in trillions of dollars. Clearly he believes that there are still some things worse than debt.

Norm Coleman - Probably Indicted, Whether or Not He Steals Election

Exec says Coleman donor ordered $100K payments
The former finance chief of a Texas company controlled by Nasser Kazeminy, a close friend of former Sen. Norm Coleman, said in a deposition last week that Kazeminy ordered $100,000 in fees be paid to a Minneapolis insurance agency where Coleman's wife was employed.

B.J. Thomas, who was chief financial officer of Deep Marine Technology Inc., said that $75,000 of that sum was paid to Hays Companies even though he saw no evidence of Deep Marine receiving any consulting services from Hays.

Thomas' deposition, taken under oath on March 19 and obtained by the Star Tribune, is the first corroboration from an official at Deep Marine of allegations made by company founder Paul McKim in a lawsuit filed last year against the company.

In the two weeks before the November U.S. Senate election, two lawsuits were filed against Deep Marine -- one by McKim and one by a group of minority shareholders. In them, Kazeminy was accused of funneling payments to Hays to benefit the Colemans, as well as other alleged financial wrongdoing.