The Irish Independent reports that another €4bn package of tax rises and spending cuts will be needed in the December Budget just to stop the annual deficit getting even bigger, the Economic and Social Research Institute (ESRI) says in its latest quarterly commentary.
Even with such a Budget, government debt is set to reach 92pc of national income (GNP) next year, the ESRI says. The general government deficit will remain virtually unchanged, at 12.8pc of domestic product (GDP). Actual government borrowing will be €22bn, before any further re-capitalisation of the banking sector.
"We accept such a Budget will prolong the recession and increase unemployment," researcher Ide Kearney told a pre-Budget seminar organised by the ESRI. "But the contingent liabilities of the Government from the banking system hang over its ability to borrow in the markets."
She said it did not seem feasible to raise more than €1bn in taxes next year, so more than €2bn would have to be found on the spending side. "Cuts in current spending are inevitable," she said.
The report advocates a 20pc cut in child benefit, which Ms Kearney said was not welfare, but a universal payment. "It is an incredible waste of money if you are looking for a targeted intervention to reduce poverty. It makes no sense," she said.
But the report comes out against cuts in basic welfare benefits. It suggests a freeze on welfare rates rather than the 5pc reduction suggested in the McCarthy report. McCarthy argued that because of falling consumer prices, a freeze represents a real increase of almost 5pc in welfare payments.
A separate study showed that taxing child benefit would be much less damaging for poorer households than cutting the rate. For the same Exchequer savings, a benefit cut reduces the income of the lowest-paid fifth of households by 3.5pc, while a tax would cost them just 0.75pc of their income.
Household income
Household income will take a further hit as ECB rates rise and banks try to increase their small margins on mortgages, the quarterly report says. It expects ECB rates to reach 1.75pc by the end of next year, compared with 1pc now.
"Income per person will be back to 2004 level by next year. That is a truly dramatic change," Ms Kearney said.
The ESRI expects national income (GNP) to contract by 8.7pc this year and by 1.7pc in 2010. This fall of over 10pc in national income compares with an 8.3pc drop in output (GDP) as multi-national companies continue to perform well, but their profits are deducted from a declining GNP.
"Underlying these annual forecasts is a quarterly profile in which we expect growth to return in the latter part of 2010, although at a very modest pace," the report said.
"On employment, we are somewhat more optimistic now than when writing in July," senior researcher Alan Barrett said. Numbers in work should average 1.85 million next year -- a loss of over 200,000 jobs since the peak in 2007.
The Irish Independent also reports that middle-income earners would be hit hard by measures on pensions agreed in the new Programme for Government, the Irish Association of Pension Funds (IAPF) said last night.
The revised Programme for Government set out a plan to introduce a single 30pc rate for tax relief on private pension provision. At the moment, higher-rate taxpayers can claim relief on their pension contributions at the 41pc rate. Employees can also claim relief on PRSI payments and the health levy.
This means it costs roughly €51 for every €100 of pensions fund investment. Those on the 20pc tax rate can only claim relief at this rate, plus relief from PRSI and the health levy.
Introducing a single 30pc tax relief rate for all private pensions would mean it would cost a higher-rate taxpayer a net €62 for every €100 of pension investment.
Last month, the Commission on Taxation called for the lowering of the tax relief for higher-rate taxpayers to 30pc, along with recommendations on incentives to get lower-paid people to invest in pensions.
Policy
IAPF director of policy Jerry Moriarty said the change would attack those earning just over the average industrial wage and middle-income earners.
"The proposal ignores the fact pension income is taxed in the same way as any other income. For many savers the prospect of paying a rate of tax on their pension higher than the relief they can get on their contributions will make saving inefficient," Mr Moriarty said.
The IAPF said that a reduction in relief on pension contributions was not an attack on the wealthy, but 800,000 ordinary members of occupational pension schemes. "Research shows that those most affected will be lower to middle-income workers on salaries from €40,000," Mr Moriarty asserted.
"This move indicates a fundamental failure to understand the cost of pensions relief at the top rate. It will damage Ireland's ability to provide for an adequate income in retirement for those earning just over the average industrial wage and middle-income earners."
The Irish Times reports that the Financial Regulator has lower levels of resources dedicated to the prudential supervision of banks and insurers than its international peers, according to an unpublished report on the effectiveness of the regulatory body.
Accountancy firm Mazars concluded in a report on the regulator – commissioned by the regulator itself – that the regulator had more of a focus on consumer protection than regulators internationally.
The firm also found that the regulator’s IT systems did not adequately support core aspects of prudential supervision, and that the capturing and management of information was “cumbersome and manual in many cases”.
The report is particularly critical of the regulator’s senior management structure, concluding that a clear management and oversight framework with associated costs, which ensures that issues are escalated through the organisation, were “not fully in place”.
“There was an over-emphasis on internal management rather than reporting of core prudential, policy, market or outward facing activities,”said the report.
Mazars said the agenda of the regulator’s executive board was “primarily financial in nature rather than strategic or regulatory in focus” and that it did not have an executive function.
There were gaps in the level and type of management information provided to management groups and that the production of the information was “overly onerous and inefficient”.
The report, which was commissioned in January 2008 and presented to the regulator’s authority (board) last February, said that, in certain cases, resources were diverted from planned supervisory activities to address “reactive” or administrative support activities.
Lower levels of specialist regulatory support skills were also employed than at other regulators.
The cost of financial regulation was considerably higher in Ireland than in other countries, according to a survey of international regulators examined for the report.
According to the Mazars report, the cost of the regulator per thousand of population is €11.30 in Ireland, compared with an international average of €6. The cost of financial regulation per regulated entity amounted to €43,000 compared with an average of €36,000 among international regulators.
The Irish Times also reports that lands in Co Kildare on which a €19.5 million development loan was secured were valued at some €6 million last June, the Commercial Court has heard.
Following the decline in the value of the lands at Kilcock, the EBS Building Society has brought proceedings seeking judgment for some €18.3 million against M&M Construction Company Ltd and a director of the company, Anthony Murray, arising from guarantees allegedly given by him over the company’s liabilities.
The case was transferred to the Commercial Court this week by Mr Justice Peter Kelly, who fixed November 12th for the hearing of the judgment application.
Lyndon MacCann SC, for the defendants, said their defence would be put on the basis that the loan was not properly repayable at this time. His clients would also contend that the valuation in relation to the property was erroneous and that material properties were not included.
In its proceedings, EBS claims it agreed in June 2007 to provide a €19.5 million facility to M&M Construction, Old Lucan Road, Lucan, Co Dublin, for three years. It claims Mr Murray provided a written guarantee on July 27th, 2007, of due payment on demand of all monies due by the company.
The EBS claims the security for the €19.5 million facility was the guarantee of Mr Murray and a first legal charge over the 28.14 acre site at Kilcock.
It claims the loan terms provided that a maximum loan to value ratio of 66 per cent was to be maintained at all times through the duration of the loan facility, with independent valuations to be provided annually or at any time of the building society’s choosing.
If this term was breached, it claims the entire loan would be immediately repayable.
It is claimed M&M accepted the offer of loan facilities and later drew down some €18.3 million under the facility.
On June 17th last, CB Richard Ellis, property advisers and valuers, had provided a valuation of €6 million on the Kilcock site, with a possible uplift to €8.2 million upon a successful application for planning, EBS claims.
It claims the company was in breach of the term requiring a maximum loan to value ratio of 66 per cent. It had called in the entire facility in July last but the monies had not been repaid and some €18.375 million was due.
The Irish Examiner reports that Ryanair wants to reach an agreement to purchase 200 aircraft by the end of the year in a deal that could be worth close to €9 billion.
The airline said that if it does not finalise the aircraft purchase with either Boeing or Airbus over the coming months it will distribute cash to shareholders.
Should Ryanair come to an arrangement with the plane makers the aircraft would be delivered after 2012.
Chief executive Michael O’Leary said: "If for some reason we can’t conclude an agreement with Boeing and Airbus, certainly by the end of the year, we will simply announce we are not going to buy any more aircraft. We will then stop growing beyond 2012 when our current delivery stream runs out."
Ryanair’s fleet currently consists of Boeing aircraft but Mr O’Leary said if Airbus offered a better deal he would order Airbus planes.
However, sales chief at Airbus, John Leahy, said a month ago that his company isn’t discussing a plane order with Mr O’Leary and Stefan Schaffrath, a spokesman for Airbus, said yesterday that the comment stands.
"If you can’t get Boeing or Airbus to make a decision between now and December I will lose interest and go with plan B," said Mr O’Leary, who was speaking in London yesterday after the BBC current affairs TV programme Panorama broadcast a profile of the airline which said its website was misleading and that it imposed hidden charges.
"We have plenty of charges but none of them are hidden," said Mr O’Leary, who reiterated that charging passengers to use the toilets remained a longer-term aim.
Ryanair, which does not pay annual dividends, won’t make an investor payout as long as it can arrange the purchases soon, said Mr O’Leary.
"We are building up a lot of cash at the moment," he said. "If we bought the aircraft, then the cash flows would not be sufficient to fund a dividend."
The carrier flies only single-aisle 737-800s built by Chicago-based Boeing and has more on order.
Mr O’Leary reiterated that he doesn’t plan to bid a third time for Aer Lingus, in which Ryanair holds a 30% stake.
Buying Deutsche Lufthansa’s BMI airline is "one of the many strategic options" the company would consider if Aer Lingus collapses, he said.
Ryanair shares were down 2.5% to €3.36 yesterday. The value of the airline has increased by almost €2bn to €4.9bn over the last year.
The Financial Times reports that Germany’s new centre-right government is charting an aggressive pro-business course to focus on lowering tax and bureaucratic hurdles on companies, to the detriment of the large income tax cuts Chancellor Angela Merkel and her new allies promised before last month’s election.
Participants in the coalition negotiations between the chancellor’s Christian Democratic Union and the liberal Free Democrats told the Financial Times the government would make supporting business its priority over boosting private consumption as the fastest way to drag Germany out of the economic crisis.
The news will come as a disappointment to economists and politicians in the US and elsewhere, who had hoped that Ms Merkel’s new government would do more to rebalance its export-oriented economy by encouraging hitherto anaemic consumption.
The proposals – due to be finalised next week – could also make the centre-right coalition vulnerable to criticism from trade unions and an emboldened leftwing opposition in parliament that it is putting the interests of business before those of workers.
Senior officials from the CDU said Ms Merkel and her aides were determined not to make any decision in the coalition negotiations that would result in higher labour costs or levies on the country’s exporters.
“We must be careful not to do anything that would undermine ... competitiveness,”said one.
Negotiators from both parties said on Tuesday they had agreed that any additional social security contributions – needed primarily to fill a gaping hole in the finances of the state health insurance system – would be borne only by taxpayers, not by employers.
In the past, companies and employers have each contributed about 50 per cent of total contributions, resulting in comparatively high non-wage labour costs for German companies.
The decision means higher contributions are likely to offset whatever income tax cuts the two parties agree on. Given the rapidly rising federal deficit, one CDU negotiator said such tax cuts would be at the bottom of the scale currently under discussion. Proposals range from €15bn ($22bn, £14bn) to €35bn in income tax cuts spread over four years.
Senior officials from the FDP, future junior partner to the CDU, who had called for bigger tax cuts, have been backtracking this week, saying they would not agree to cuts that would force the government to raise more debt.
Unpublished calculations by the Finance Ministry, leaked to German media, suggest the changes under discussion to benefit companies would cut the total corporate tax bill by €6.7bn a year.
The FT also reports that many commentators have predicted that this century will belong to Asia, so it would seem natural that the region’s big banks start to make waves globally.
Recent months have seen a barrage of deals by financial groups including Australia’s Macquarie Group and Japan’s Nomura, which attest to the global ambitions of banking executives in the Asia-Pacific region.
Macquarie recently acquired Fox-Pitt Kelton Cochran Caronia Waller, the boutique investment bank with deep links in New York and London, and Delaware Investments, a US funds group with $150bn in assets under management.
Nomura last year snapped up the Europe and Asia operations of Lehman Brothers and is raising a further $5bn, partly to help bankroll a push into the US. Japan’s MUFG is expanding in the US after acquiring 20 per cent of Morgan Stanley.
Australia’s ANZ is beefing up its presence in Asian markets as part of a “super-regional” strategy and is preparing to take on western banks in the world’s fastest-growing economies.
Chinese lenders rank among the world’s top banks by market capitalisation and are looking to build overseas.
Since 2006, Industrial and Commercial Bank of China, the world’s biggest bank by market capitalisation and deposits, has struck deals with banks in Thailand, Indonesia, Macao, South Africa and Canada.
It is all a far cry from the aftermath of the 1997-98 Asian financial crisis, which exposed the poor lending practices and corporate governance of many of the region’s leading banks.
This time round, regional financial groups are taking advantage of the relative weakness of some troubled western groups to muscle in on territory previously regarded as out of bounds.
Asian banks in general, had limited involvement in structured credit products, have sound liquidity and funding structures, good earnings and capital buffers as well as access to funding from domestic markets.
According to Goldman Sachs research in Hong Kong, Asian banking sectors are “notably stronger” than many global peers. Average tier one capital adequacy is 9.5 or higher than counterparts in Spain, Germany and Italy.
However, financial strength alone will not translate into domination of global banking.
Analysts refer to the late 1980s when “Japan Inc” embarked on a global shopping spree. But its asset bubble popped and banks retreated to rebuild their domestic capital bases.
Whatever their problems, western financial groups such as Citigroup have global relationships and licences built up over the past century that will take some shifting. Tellingly, this week the US lender opened a retail branch in Vietnam – something no non-Vietnamese Asian bank has yet managed.
Local management capability and know-how, allied to financial firepower and ambition, will be crucial if Asian banks’ latest attempt to build their empires is to prove enduring.
The New York Times in a report on the fallout from the recession says the dark blue captain’s hat, with its golden oak-leaf clusters, sits atop a bookcase in Bryan Lawlor’s home, out of reach of the children. The uniform their father wears still displays the four stripes of a commercial airline captain, but the hat stays home. The rules forbid that extra display of authority, now that Mr. Lawlor has been downgraded to first officer.
He is now in the co-pilot’s seat in the 50-seat commuter jets he flies, not for any failure in skill. He wears his captain’s stripes, he explains, to make that point. But with air travel down, his employer cut costs by downgrading 130 captains, those with the lowest seniority, to first officers, automatically cutting the wage of each by roughly 50 percent — to $34,000 in Mr. Lawlor’s case.
The demotion, the loss of command, the cut in pay to less than his wife, Tracy, makes as a fourth-grade teacher, have diminished Mr. Lawlor, in his own eyes. He still thinks he will return to being the family’s principal breadwinner, although as the months pass he worries more. “I don’t want to be a 50-year-old pilot earning $40,000 a year,” he said, adding that his wife does not want to be married to a pilot with so little earning power.
In recent decades, layoffs were the standard procedure for shrinking labor costs. Reducing the wages of those who remained on the job was considered demoralizing and risky: the best workers would jump to another employer. But now pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.
State workers in Georgia are taking home smaller paychecks. So are the tens of thousands of employees in California’s public university system. The steel company Nucor and the technology giant Hewlett-Packard have embraced the practice. So have several airlines and many small businesses.
The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.
“What this means,” said Thomas J. Nardone, an assistant commissioner at the bureau,“is that the amount of money people are paid has taken a big hit; not just those who have lost their jobs, but those who are still employed.”
Bryan and Tracy Lawlor, both 34, have hidden their straitened circumstances from their four young children, mainly at his insistence. But as their savings dwindle, Christmas, a key indicator in the Lawlor family, will mean fewer presents this year. The Lawlors have made a practice of piling on toys and new clothes for their children at Christmas, buying relatively less the rest of the year. That will make a cutback noticeable this holiday season, and the parents are concerned that their children will begin to realize why.
“You don’t want to see disappointment on their faces; that makes me feel horrible,”Mr. Lawlor said. “You can be the best pilot in the airline and make the best landings, and in their eyes, I am not going to be as important as I was.”
A Dream Come True
Bryan Lawlor was five years out of Virginia Tech before he turned to aviation, his first love as a boy. His mother still cherishes a photo of her son, age 5, seated in a cockpit. But Mr. Lawlor studied chemistry in college and he used that skill, taking jobs as a chemical technician, to support his growing family. Layoffs marred those early years and in 2003 Mr. Lawlor made the “crossroads” decision to become a commercial pilot, borrowing $24,000 to learn to fly and to acquire the necessary licenses.
His current employer, ExpressJet Airlines, is a spinoff from a feeder operation for Continental Airlines. It brought passengers to Delta hubs as well, mainly in the West, and to help handle that traffic, Mr. Lawlor was promoted to captain from first officer in July 2007. His pay rose to $68,000, with the prospect of reaching $100,000 — roughly triple a first officer’s pay.
That is not so much money by the standards of an earlier era. Even senior captains on legacy airlines rarely earn above $200,000 today, as they often did in the past. Mr. Lawlor says pilots’ pay these days fails to recognize the training and skill involved in transporting passengers even more safely than in the past.
But Mr. Lawlor felt he was headed in the right financial direction until the economy, and the airline business, took a tumble. It is a setback that worries his wife, who wants her husband back on the income path that was interrupted one year ago this month. “I certainly don’t earn enough to make up for what he lost,” she said, adding that to make matters worse,“teachers didn’t get a raise in our school this year.”
Still, as her husband’s ordeal drags on, Mr. Lawlor in some ways has risen in his wife’s eyes. “I have more respect for him,” she said. “I can see he is angry and upset, but he does not show it very often, and never to the kids.”
That is less and less true, Mr. Lawlor said, amending his wife’s appraisal. One year into his downgrade, “never” has turned to “rarely” and, in recent weeks, “not so rarely.” He blew up last week at his 3-year-old son, Shayne, for refusing to take a nap, and sent the child whimpering to his room. Then, after arranging with another pilot to delay a flight so he could “dead-head” home in the early afternoon instead of having to wait for the next flight, he blew up at his wife for failing to appreciate the effort he had made and the stress involved.
“My mind is always on 20 different things,”Mr. Lawlor said.“What do I need to get done? How much will it cost? Is it necessary? Can I do it cheaper if I do it myself? Can I make the earlier commute home? Rush, rush, rush, and then suddenly someone makes the wrong comment and I become uncorked.”
A Different Kind of Provider
As a captain for ExpressJet in calmer times, Mr. Lawlor commuted across the country to Los Angeles, his home base, for each three- or four-day trip. Now, as a first officer, his base is Newark, a far shorter commute from the Lawlor home in this Richmond suburb. So he is home more. He spends that time caring for the two youngest children, Shayne and Jackson, 16 months, while his wife takes the two oldest, Zachary, 7, and Kelley, 10, with her to the elementary school where she teaches and they are enrolled as students.
“A lot of my friends say their husbands would not stay home with the kids on their days off, even to save money,”Mrs. Lawlor said,“but Bryan feels that if he is going to be home more that is what he should do, and he is doing it.”
Mrs. Lawlor praises her husband’s adeptness in the routines of child care. But money also drives him. Each day that Jackson and Shayne are not delivered to the home of the baby sitter is $50 that can be spent elsewhere. That wasn’t a priority while Mr. Lawlor was captain. In the 14 months that he held that rank, his $68,000 in pay and Tracy’s $40,000 as a fourth-grade teacher were enough, as Mr. Lawlor put it, for the family — for the first time — to spend freely and still save money.
He purchased a white gold 10th anniversary band for his wife and a bright yellow Harley-Davidson motorcycle for himself, imagining that he would take it for spins on his days off, the wind blowing in his hair as he raced along the sparsely populated roads in Richmond’s semi-rural suburbs. “It was a present to myself when I upgraded to captain,” he said.
The $10,000 Harley sat for months in the garage before it finally sold, with only 175 miles on the odometer. Mr. Lawlor had never ridden it much. His wife objected that he would exclude the family unless, as she pointedly put it, he could “find some way to strap the kids on the motorcycle.” Now the desire to ride the eye-catching hog is gone. If he ever makes another vanity purchase, Mr. Lawlor says, it will be something the family can use.
His mother, Patricia Lawlor, anguishes over this scaling back of his exuberance and the psychological effect of the pay cut.
“Let me put it this way,”she said of her only son, the oldest of her three children. “When we went out to dinner and he was a captain, with a captain’s pay, he for the first time picked up the check. He would say, ‘I’ll get it, Dad,’ instead of letting his father pick it up. It gave him a great deal of pride to do that. ‘Let me buy, Dad, for once.’ And now he does not say that anymore.”
While Mr. Lawlor was still a captain, his parents decided to move into smaller quarters, and the son and daughter-in-law bought their five-bedroom house, getting a break on the price but increasing their mortgage payment to $2,000 a month from the $1,200 they had paid for their smaller home nearby.
They closed on the house in August 2008, on the eve of the downgrade, and soon there were regrets. “We would not have bought the house on a first officer’s salary,” Tracy Lawlor said. She had considered giving up teaching to be a stay-at-home mom. “We felt we had some breathing room for the first time in our 11 years of marriage,” she said, “and that went out the window with the downgrade.”
She was sitting at her kitchen table, and her husband, across from her, winced, but did not disagree. Even if his captain’s rank and pay are restored she will continue to teach, she said. His pay could be cut again. They are convinced of that and, in preparation, they made certain there would be no more children. Their fourth, Jackson, was just 4 months old when the downgrade came, and soon after, Mr. Lawlor underwent a vasectomy.
“We could not take the risk of having another child,”he said.
Silver, and Dark, Linings
The West Coast assignment, while representing a promotion, meant long, often overnight commutes, with Mr. Lawlor sleeping fitfully in the jump seat of a FedEx cargo jet or in a sleeping bag rolled out in the cargo area. His first day home, he often spent dozing on the living room couch. His wife hated the time taken from the family, and her husband’s exhaustion.
“He was totally worn out the first day back, and tired the whole time he was home,”she said.
One year later, even after such a big pay cut, Mrs. Lawlor sees her husband’s shorter commute to his new base at Newark as a blessing she is reluctant to give up. Her husband says that moving back up to captain, with a captain’s pay, might mean commuting again to California. “If that is what it takes, I’ll do it,” he said, and this time his wife winced.
“I would probably not be happy,”she said. But she “wouldn’t trade him for another husband,” as she put it, and while she had never wanted her husband to be a pilot, at this point she would be alarmed if he left aviation in an attempt to please her.
“He likes what he does,”she said,“whereas before he did not like what he did. That has made him easier to be around, whereas before he became a pilot, he wasn’t happy at all.”
Mr. Lawlor is vice chairman for contract enforcement for the ExpressJet unit of the Air Line Pilots Association. He had volunteered some months ago for the unpaid role, and now his fellow pilots seek his help in resolving scheduling disputes, pay issues, meal reimbursements. The calls and e-mail messages come in on his cellphone. When he is home, minding his sons, he lets the children migrate to the living room to watch a cartoon on the family’s big-screen TV while he sits nearby, at the kitchen table, absorbed in mediating appeals.
That is not the same as commanding an airliner — walking through the airport wearing the captain’s hat — but it brings him part way back. “My point would be that being in the captain’s seat made me feel in command, and capable and powerful,” Mr. Lawlor said, “and that has been taken away, and through the union, I can still experience some of that, in the admiration of my peers for being able to step up and help them. Maybe psychologically that fills a void; maybe that is why I don’t feel as bad as I would otherwise.”
So the Lawlors soldier on, with plenty of family help. Their sisters have pitched in with baby-sitting, gratis. His parents bought their kitchen table, the dining room table, a playpen, a living room sofa and the deck furniture. His father’s two unmarried sisters, both retired teachers, insist on helping their only nephew — the one family member perpetuating the Lawlor name not only in this generation but, through his three sons, the next generation.
The aunts offer a subsidy. They insist, for example, that Bryan Lawlor eat healthy meals when he is on the road, even if that means spending more than his airline-allotted per diem. They’ll pay, and Mr. Lawlor says he does now eat properly. The aunts also paid $200 to rent “moon bounce” equipment for a Lawlor child’s birthday party last month. The birthday boy had asked for the party entertainment, and the Lawlors obliged, with the aunts’ help, not wanting the father’s loss of income to translate into constraints on the children’s lives.
Still, their savings, built up in the good years, have dwindled to $10,000, from $28,000 last fall, and Mr. Lawlor said the next rung down, to four figures, is in his mind a crisis level. “I am beginning to feel like, what if something happens to me, where does that leave Tracy?” he said.
He called in sick recently, suffering basically from fatigue. “I think the reason I felt fatigued is the stress,” he said.“It is always there.”
The NYT also reports that after months of relentless courting and suspense, Senator Olympia J. Snowe, Republican of Maine, cast her vote with Democrats on Tuesday as the Senate Finance Committee approved legislation to remake the health care system and provide coverage to millions of the uninsured.
With Ms. Snowe’s support, the committee passed the $829 billion measure on a vote of 14 to 9, with all the other Republicans opposed.
“Is this bill all that I would want?”Ms. Snowe said.“Far from it. Is it all that it can be? No. But when history calls, history calls. I happen to think that the consequences of inaction dictate the urgency of Congress taking every opportunity to demonstrate its capacity to solve the monumental issues of our time.”
Ms. Snowe’s remarks silenced the packed committee room, riveted colleagues and thrilled the White House. President Obama had sought her vote, hoping that she would break with Republican leaders and provide at least a veneer of bipartisanship to the bill, which he has declared his top domestic priority.
Mr. Obama, speaking in the Rose Garden, described the committee’s action as “a critical milestone” and declared, “We are now closer than ever before to passing health reform.” But he added: “Now is not the time to pat ourselves on the back. Now is not the time to offer ourselves congratulations. Now is the time to dig in and work even harder to get this done.”
With its vote Tuesday, the Finance Committee became the fifth — and final — Congressional panel to approve a sweeping health care bill. The action will now move to the floors of the House and the Senate, where the health care measures still face significant hurdles.
Aside from Ms. Snowe, no Republicans in Congress have publicly endorsed the bills in their current form. And Republican leaders are strongly opposed, saying the bills cost too much, raise taxes, cut Medicare and dangerously expand federal power.
Pressure from lobbyists is sure to grow in the coming weeks. And many more lawmakers will get involved in what promise to be impassioned and highly politicized debates in the Senate and the House.
After the Finance Committee vote, the chief architect of the bill, Senator Max Baucus, Democrat of Montana and chairman of the committee, declared: “It’s clear that health care reform will pass this year. Our action today provides terrific momentum.”
Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee, said the bill put the nation on“a slippery slope toward more and more government control of health care.”
Ms. Snowe helped write the Finance Committee bill, in months of bipartisan negotiations, but had not committed to vote for it. She said Tuesday that she shared many of her Republican colleagues’ reservations about the legislation, and pointedly warned Democrats that they could lose her support later in the legislative process.
“My vote today is my vote today,”she said. “It doesn’t forecast what my vote will be tomorrow.” And she observed,“There are many, many miles to go in this legislative journey.”
Ms. Snowe gave no clue how she would vote in the first few hours of committee deliberations Tuesday and she did not alert the White House to her plans.
While colleagues spoke, she kept her head buried in papers, fidgeted and spoke occasionally with aides. When Mr. Baucus stepped over to speak to her, a small army of photographers snapped pictures, with cameras clicking like a chorus of chirping crickets.
The Congressional Budget Office said the bill would cost $829 billion over 10 years. The costs include $345 billion for the expansion of Medicaid and $461 billion for subsidies to help lower-income people buy insurance.
The budget office said the costs would be completely offset by new fees and taxes and by cutbacks in Medicare, so federal budget deficits in the next 10 years would be $81 billion lower than now projected.
But Douglas W. Elmendorf, director of the Congressional Budget Office, said his agency had not estimated the impact of the bill on overall national health spending, public and private, and could not say whether it would “bend the cost curve,” as Mr. Obama and lawmakers want.
Likewise, Mr. Elmendorf said he did not know for sure how the bill would affect premiums.
Several senators said they would fight for changes on the Senate floor.
Liberal Democrats, like Senator John D. Rockefeller IV of West Virginia, said they would push for a public insurance plan. Senators Ron Wyden of Oregon and Robert Menendez of New Jersey, both Democrats, said they would seek changes to make insurance more affordable to middle-income families. And Senator John Kerry of Massachusetts said he wanted to require employers to provide insurance to their employees.
The bill does not include such an employer mandate. But employers with more than 50 workers would have to reimburse the government for some or all of the cost of federal subsidies provided to employees who buy insurance on their own.
Ms. Snowe said she liked the Finance Committee bill because it would prohibit insurance companies from discriminating against people on account of health status or sex and would create a network of insurance exchanges where individuals, families and small businesses could shop for coverage, with subsidies from the federal government.
At the same time, Ms. Snowe said she shared Republican “concerns about vast governmental bureaucracies and governmental intrusions.” That, she said, is why she had opposed amendments to create a government insurance plan and would continue to do so.
Ms. Snowe said she was open to a compromise under which a public plan could be “triggered” in states where people could not otherwise find affordable insurance. She said her “paramount concern” was that insurance might be too expensive for some people, even with government subsidies.
The Congressional Budget Office said the Finance Committee bill would provide coverage to 29 million people, but still leave 25 million uninsured in 2019. Of those left uncovered, about a third would be illegal immigrants.
