The Leader's Ledger

Good morning,

Yesterday, nearly 20 Democrats joined House Republicans to stop the tax hike that will hit all Americans on January 1st. Today, we will pave the way for pro-growth tax reform that will help simplify the tax code and make America more competitive. As Leader Cantor said this morning, “If you want to put a priority on economic recovery, jobs and growth, you ought not to raise taxes. You either want higher taxes or higher growth. That's the bottom line.” We have also made clear we stand ready to act in August if Senate Democrats will work with us to avert the looming tax hikes and defense cuts at the end of the year. While it’s not surprising, it is deeply disappointing that Harry Reid has already decided he would rather continue to play politics and push the economy closer to the edge of the fiscal cliff.

This Day In History: In 1990, Iraq invaded Kuwait gaining control over 20% of the world’s oil reserves. When Saddam Hussein refused to withdraw his troops from Kuwait, the United States launched Operation Desert Storm on January 16, 1991.

Birthdays: Patrick Ruffini, Peter O’Toole, Wes Craven, Garth Hudson, Mary-Louise Parker, and Sam Worthington

Here Are The Top Stories We’re Watching:

1. State Of Play: Leader Cantor: You Either Want Higher Taxes Or Higher Growth. “It comes down to the question, if you want to put a priority on economic recovery, jobs and growth, you ought not to raise taxes. You either want higher taxes or higher growth. That's the bottom line. This insistence that somehow it's just not fair that somebody's not paying enough taxes right now, I think for some it’s a priority. For me and most of us on the Republican side of the aisle, the priority is jobs. We have to win the war on jobs globally and we have to get people back to work here at home. We saw that Ernst and Young put out a study a couple of weeks ago that said the President’s plan, the one that Steny Hoyer supports, will cost the economy over 700,000 jobs.” CNBC

2. Tax Debate: House Votes To Stop The Tax Hike On All Americans. The House approved GOP legislation late Wednesday that would extend all current tax rates for another year, and also turned away a Democratic bill that would have allowed rates to rise for higher income earners. The Job Protection and Recession Prevention Act was approved in a 256-171 vote that saw 19 Democrats vote with Republicans, highlighting division in the Democratic party over taxes. Only one Republican, Rep. Tim Johnson (Ill.), voted no. Democrats voting in favor of the bill were Reps. John Barrow (Ga.), Sanford Bishop (Ga.), Dan Boren (Okla.), Leonard Boswell (Iowa), Ben Chandler (Ky.), Gerry Connolly (Va.), Jim Costa (Calif.), Mark Critz (Pa.), Henry Cuellar (Texas), Joe Donnelly (Ind.), Larry Kissell (N.C.), Dave Loebsack (Iowa), Jim Matheson (Utah), Mike McIntyre (N.C.), Jerry McNerney (Calif.), Bill Owens (N.Y.), Collin Peterson (Minn.), Mike Ross (Ark.), and Tim Walz (Minn.). With the House vote, both chambers have now spoken on tax policy, which will allow both parties to make their case on the campaign trail. The Hill

3. The Obama Economy: Weekly Jobless Claims Increase. The number of U.S. workers filing applications for jobless benefits rose last week, continuing an uneven pattern that suggests job creation was likely modest in July. Initial jobless claims, an indication of layoffs, increased by 8,000 to a seasonally adjusted 365,000 in the week ended July 28, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires had forecast 370,000 new applications for jobless benefits last week. Claims for the July 21 week were revised up to 357,000 from an initially reported 353,000. Still the four-week moving average of claims, which covers nearly all of July, fell by 2,750 to 365,500, the lowest level since March. The moving average is considered a more-reliable measure because it smoothes out weekly data. A Labor Department official said claims are volatile in July due to temporary layoffs in the automotive industry. The numbers come a day ahead of July's payroll report. Typically job creation increases when layoffs decline. Economists expect that the economy added 95,000 jobs in July, which would be a slight improvement from the 80,000 added in June. They see the unemployment rate stuck at 8.2%. Wall Street Journal

4. Pro-Growth: Rep. Schock: Reform Taxes, Don’t Raise Them. President Obama claims his tax hike only affects 3 percent of Americans. But according to the nonpartisan Joint Committee on Taxation, that translates into nearly 1 million of the most profitable small businesses across the country who are in a position to grow and hire. The President’s tax increases would hit over 50% of all the income generated by small businesses. The Small Business Administration (SBA) states that small firms accounted for 65 percent, or 9.8 million, of the 15 million net new jobs created between 1993 and 2009 – this is 7 out of 10 new jobs created. Yet, this tax increase is focused on precisely the same group of individuals most likely and capable of hiring new workers…I believe there is better approach. This week the House will vote to extend all the current rates for one year to provide certainty for individuals and small businesses. During that year, the House Ways and Means Committee, on which I serve, can continue to move forward with comprehensive tax reform which will simplify our tax code for both employers and individuals, leaving us with lower tax rates for both and setting the stage for private sector economic growth to flourish. These reforms include a top corporate tax rate of 25% and eliminating the six rate categories for personal income and replacing them with two: 10% and 25% for individuals. By doing so, we can throw out the 70,000 pages of tax code, no longer have the highest business tax rate in the world, and lower the individual rates; making the tax code fairer, simpler, and reducing the yearly tax obligations for everyone. Town Hall

5. Small Biz: Drop In Small Business Lending Only One Symptom Of Our Ailing Economy. Lending to small businesses fell in June to the lowest level since October, a report showed on Wednesday, suggesting the economy's recent loss of momentum is likely to persist absent any new action by policymakers. The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small U.S. companies, sagged to 98.5 from 103.8 in May, PayNet said. The index, which points to changes in overall economic growth several months in the future, has fallen in five of the past six months. "Small businesses really took a dive," said PayNet founder Bill Phelan. "What this means is, the slowdown is going to continue." Borrowing rose 2 percent in June from a year earlier, the slowest year over year pace since July 2010. Reuters

6. ObamaCare Update: Small Firms Hit Hard By Health Law. Randall Tabor, who owns two Quiznos sandwich restaurants in Virginia Beach, Va., once aspired to triple the number of outlets he owns. But after the federal health-care overhaul passed in 2010, Mr. Tabor says, he shelved those plans. The law requires that employers with 50 or more full-time workers provide health insurance to employees by 2014 or pay a penalty. Mr. Tabor, who employs 36 people at his two Quiznos shops and another restaurant, wants to stay small so he doesn't trigger the requirement…Restaurants and retailers face some of the toughest changes now that the Supreme Court has kept the overhaul in place. These industries historically are among the least likely to provide insurance to workers. Many franchisees of big chains hover around the threshold at which they will be required to start insuring workers or pay the penalty. With high turnover and a large percentage of part-time and seasonal workers, restaurant and retail operators must juggle several variables in figuring out whether they will cross the threshold…Some restaurant owners who offer limited health-benefit plans say they will drop them and pay penalties rather than provide the more expensive insurance required under the law. For employers above the threshold, the penalty starts at $2,000 a worker, although the first 30 employees don't count toward the levy. John Motta, who owns 10 Dunkin' Donuts in New Hampshire and 10 in Virginia, said he offers workers a choice of two insurance plans and pays half the premiums. He is weighing whether to drop coverage but said the cost of the penalty could put him out of business in Virginia, where his stores are struggling. Other franchisees are looking at ways to avoid the requirement by cutting workers' schedules so they work fewer than 30 hours a week—the law's definition of a part-time worker—since only full-time workers are counted toward the insurance coverage requirement. Wall Street Journal

7. National Defense: Obama Administration Holding Back Information On Defense Cuts & Potential Layoffs. Republicans, however, complain that a move by the Department of Labor this week advising contractors against sending out layoff notices in advance of the elections is aimed at letting the White House off the political hook for Obama’s strategy of taking defense spending hostage. Under the Worker Adjustment and Retraining Notification Act, employers are supposed to give at least 60 days notice of expected mass layoffs, but the DOL said doing so would be inappropriate under the law. The guidance noted that it’s not clear at this point where the cuts would come from and that both parties are working to find an alternative to the sequester…“The only reason the administration sent out this guidance to employers earlier this week was to keep people in the dark about the impact these defense cuts will have — until after the election,” Senate Minority Leader Mitch McConnell said. The Kentucky Republican complained that even as the administration was telling private employers not to issue layoff notices, the Office of Management and Budget was issuing guidance this week to agencies to start preparing for the looming cuts.“So let’s get this straight: Government workers should prepare for cuts, but private businesses and their employees shouldn’t?” McConnell asked, calling it another sign of the president’s “contempt for the private sector.” “What a perfect summary of this administration’s approach to the economy and jobs over the past three and a half years...The private sector’s doing just fine. It’s the government that needs help. That’s the message the administration’s sending,” he said. Roll Call

8. Foreign Policy: Congress Overwhelmingly Approves New Sanctions On Iran. Congress voted Wednesday to slap sanctions on Iran's energy, shipping and financial industries, convinced that increasing the economic pressure on Tehran will derail its suspected nuclear weapons program. The House overwhelmingly passed the bill 421-6 and a short time later, the Senate approved it by voice vote. The measure now heads to President Barack Obama for his expected signature. The legislation builds on the current penalties directed at financial institutions that do business with Iran's central bank and adds sanctions to undermine Tehran's oil income. "Ultimately, we will all be judged by a simple question: Did we stop Iran from getting a nuclear weapons capability?" said Rep. Ileana Ros-Lehtinen, R-Fla., during the House debate. "If the answer is no - if we fail - then nothing else matters. If we fail, it would be of no comfort to the American people, whose security and future would be put in danger. If we fail, it would be of no comfort to our ally Israel, whose very existence would be put in danger." Associated Press

9. Keeping Tabs: The Death Tax: One More Reason The Democrats’ Tax Plan Is Destructive. There is no more vivid or offensive example of the “you didn’t build that” philosophy on the books than the federal death tax, which supposes that when you die a hefty portion of everything you built up over a lifetime ought to go to government. It’s a vestige of the feudal days when all property was owned by the king. That’s probably why the death tax is the “worst tax — that is, the least fair” according to polling by the Tax Foundation. And it’s also why our founders thought the idea of seizing an estate at death so outrageous that they prohibited it as a penalty for treason in the U.S. Constitution (Article III, Section 3). And yet now, seizing more than half of it as a penalty for accomplishing the American dream is the preferred policy of Democrats in the United States Senate. You’re born. You work hard. You pay your taxes all your life. Maybe, you build something along the way. But when you die the IRS can tax you again. This year, they can take 35 percent of everything above $5 million. Senate Democrats announced yesterday that as of January 1, they want to raise that to 55 percent of everything above $1 million. And because the $1 million is not indexed to inflation, over time this confiscatory tax would hit almost everyone who achieves some success and wants to pass it on. That means family farms and businesses will be forced to shut down when the founder dies just to pay the tax bill. Former Congressional Budget Office director Douglas Holtz-Eakin estimates that the Democrats’ 55 percent death tax would destroy as many as 1.5 million small-business jobs, walloping an already weak economy. That’s the problem with taxing “the rich” — even after they die — the real pain is suffered by the people they employ, who lose their jobs. Daily Caller

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