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[image: In this newsletter: Tax Increases v. Closing
Tax LoopholesFinancial Shorts: New Hedge Fund Rules; Dismal Economic
OutlookPolitical Shorts: Another Campaign Finance Ruling; Collective
Bargaining]


*Washington Update– June 28, 2011*
[image: In this newsletter: Tax Increases v. Closing Tax
LoopholesFinancial Shorts: New Hedge Fund Rules; Dismal Economic
OutlookPolitical Shorts: Another Campaign Finance Ruling; Collective
Bargaining] [image: In this newsletter: Tax Increases v. Closing Tax
LoopholesFinancial Shorts: New Hedge Fund Rules; Dismal Economic
OutlookPolitical Shorts: Another Campaign Finance Ruling; Collective
Bargaining] [image: 1. Tax Increases v. Closing Tax Loopholes A bit
more information has surfaced over the last few days detailing the exact
state of the budget negotiations when they collapsed. Both sides, as they
often said, were shooting for about $2.4 trillion in deficit reduction over
10 years. They'd already agreed on around $1 trillion in spending cuts and
were making good progress on the rest of it. But Democrats insisted that
$400 billion -- roughly 17 percent -- of the package be tax increases. And
that's when Republicans walked. Senator Jon Kyl (R-AZ), the No. 2 Republican
in the Senate, left room for maneuver on raising revenue in ways that might
not be defined as a tax increase. Proposed ways to reduce the US budget
deficit include ending tax breaks for ethanol producers or other energy
companies, and revising tax deductions for corporate jets. Some call those
steps tax increases, while others describe them as closing tax
loopholes.Earlier talks have focused on areas of easier agreement, including
cuts to farm subsidies and possible reductions in retirement benefits to
federal workers. Democrats are continuing to press for higher tax revenue.
Republicans insist that spending cuts must exceed any increase in the debt
ceiling. Many members of their party were elected last year on a pledge to
force dramatic spending cuts. Republicans have insisted they won’t approve
any tax increases. Still, Democrats say there is increased hope for a deal
on revenue after a June 16 Senate vote in which 33 Republicans voted with
Democrats in favor of eliminating a tax credit and a tariff that subsidize
ethanol production.The targeting of long-protected tax breaks — for ethanol,
research and development, manufacturing and foreign company income — is a
sign that key House Republicans are ready to break with the orthodoxy of
past tax debates while ditching special interests that have long held sway
in tax reform discussions. In going after some of these tax credits,
Republicans on the House Ways and Means Committee are proposing a trade-off
by lowering corporate and individual tax breaks. And while Republicans would
like to keep tax reform discussions separate from the deficit reduction
talks, the negotiators may still discuss closing certain tax loopholes.If
Republicans have successfully redefined tax increases as "new revenues that
come from higher marginal rates" but not "new revenues that come from
cutting tax breaks and closing loopholes," that opens up a lot of space for
compromise. House Majority Leader Eric Cantor, told reporters “We are not
opposed to revenues. We are just opposed to tax increases." Coming on the
heels of the consequential votes Senate Republicans cast against ethanol
subsidies -- and for more revenues -- that's an important statement.There is
some skepticism. Not of the fact that Republicans are increasingly
interested in ridding the code of some special-interest tax breaks, but if
they are ready to raise serious amounts of revenue by going after the big
tax breaks, and therefore the sources of big revenue. According to the Tax
Policy Center, the largest tax expenditures, in order, are the breaks for
employer-provided health care, pension contributions, mortgage interest,
depreciation of capital equipment, state and local tax payments, and
charitable contributions- all of which are tax preferences for the middle
class.So far, the discussion over raising revenues by cleaning out the code
has used comfortably vague language about "tax breaks" and "loopholes" and
"expenditures." But to see serious money from this effort, these are the
sorts of breaks, loopholes and expenditures that they will have to go after.
At this point, Republicans are looking at some green energy subsides they
don't like and Democrats have mostly been talking about some fossil-fuel
subsidies they don't like. But getting rid of subsidies for ethanol and oil
and gas manufacturers will not do much for the deficit. And as of yet, no
one has really been talking about the big tax breaks that will actually
generate the big revenue.The President is meeting with Congressional leaders
from both parties this week to try to obtain a deficit-reduction package
from Congress in exchange for legislation to increase the country's
borrowing limit from $14.2 trillion. Congress has until August 2 to increase
the debt ceiling or risk a default that would agitate world markets. 2.
Financial ShortsSEC’s New Hedge Fund RulesThe SEC has adopted new rules in
which hedge fund and private equity funds that manage more than $150 million
will have to register with the SEC as well as turn over crucial information,
including the size of the funds they oversee, information about their
investors and the names of their auditors and marketers. Some 750 hedge fund
and private equity fund managers will face the new requirements, which take
effect in March 2012. Managers of these private funds have been able to
avoid registering with the SEC under a rule that exempts advisers with fewer
than 15 clients, because each fund counted as a single client, even if it
had scores of investors. Many funds are already making voluntary disclosures
to the SEC.The rules come with some exceptions. For example, they do not
apply to venture capital funds and hedge funds that manage less than $150
million. Venture funds can also invest up to 20 percent of their money in
investments that don’t fit the description of venture capital and still
qualify for lighter regulation. Also beyond the reach of the new regulations
are family offices. To separate them from money managers that serve
unrelated clients, the SEC had to define “family,” settling on a definition
of all lineal descendants of a common ancestor no more than 10 generations
in the past. Still, the exempt funds will have to file periodic reports that
lay out basic information, like the name of their owner, potential conflicts
of interest and disciplinary problems.The SEC split 3 to 2 on the key vote,
with two Republican commissioners opposing the measure. They argued that the
SEC went further than it should have by requiring some disclosures from fund
managers that, under the law, it could have exempted from the new
requirements. It remains unclear how much the SEC will be able to do with
its new regulatory authority. Agency leaders have said the SEC’s budget has
not kept pace with its growing responsibilities. But many hedge funds that
previously reported to the SEC — an estimated 3,200 of the 11,500 now
registered with the agency — will in the future become the responsibility of
state regulators.An Adjusted Dismal Economic OutlookThe economic recovery is
slowing and the outlook for next year has gotten worse, according to Federal
Reserve Chairman Ben Bernanke, backing away from the view that the slowdown
of the past few months was merely temporary. The central bank released new
economic projections that showed weaker growth in both 2011 and 2012 than
had been forecast just two months ago. Despite the slowdown, the Fed said it
will end a program of buying vast sums of Treasury bonds (QE2) at the end of
June as scheduled and gave no sign it is contemplating new action. The Fed
left its policy of ultra-low interest rates unchanged and will continue to
hold massive amounts of securities in a bid to foster growth. Bernanke said
the Fed had no solid answers as to why, two years into an economic recovery,
growth keeps disappointing. He suggested that problems in the financial
sector and the housing market, and with consumers trying to pay down their
debt, had been underestimated.The central bank’s new economic projections
show how quickly the nation’s economic outlook has deteriorated since the
last Fed projections were made in April. Fed officials now project GDP will
rise 2.7 to 2.9 percent this year, which is too slow to put Americans back
to work in any large numbers. Two months ago, they thought growth would be
just over 3 percent. In January, they saw growth approaching 4 percent. That
weaker 2011 growth is driven in part by temporary factors such as the run-up
in oil prices over the first few months of the year and the supply
disruptions caused by the Japanese earthquake. However, the adjustments the
Fed made to its 2012 forecast show that the leaders of the central bank see
a longer-lasting malaise.Bernanke did give a bit of new clarity on what the
Fed would do if the situation worsened — if the economy seemed to be falling
back into recession or if deflation became a risk. He mentioned several
possible steps: making more purchases of securities, which would expand the
money supply and put downward pressure on interest rates; cutting an
interest rate that banks are paid for money they park at the Fed; or giving
more specific promises for how long the Fed will keep its target interest
low and its big balance sheet in place.3. Political ShortsAnother Campaign
Finance RulingThe Supreme Court issued a 5-4 decision striking down part of
an Arizona law providing public funds for campaigns. In the case, Arizona
Free Enterprise Club’s Freedom Club PAC v. Bennett, the court struck down a
provision in the Arizona law that provided additional funds to publicly
funded candidates running against opponents who outspend them outside the
system. Advocates for reducing the role of money in politics, feared that
the high court, which has in the past issued sweeping rulings striking down
campaign finance restrictions as violations of free speech, would use the
case to rule broadly on the constitutionality of programs that provide
public money to candidates. The ruling appears unlikely to impact the
federal presidential public financing system, which lacks such a provision,
but also has fallen out of favor since Barack Obama in 2008 declined to
participate while raising a record-shattering $750 million for his
campaign.The Arizona case was brought by a pair of small government groups –
the Washington-based Institute for Justice and the Phoenix-based Goldwater
Institute – on behalf of Arizona state candidates who rejected public funds
and argued that the provision infringed on their freedom of speech by
compelling them to spend less money to avoid triggering the additional
funds.Chief Justice John Roberts, writing for the majority, agreed, writing:
“We hold that Arizona’s matching funds scheme substantially burdens
protected political speech without serving a compelling state interest and
therefore violates the First Amendment.” In the dissent, however, Justice
Elena Kagan wrote that the plaintiff candidates “are making a novel
argument: that Arizona violated their First Amendment rights by disbursing
funds to other speakers even though they could have received (but chose to
spurn) the same financial assistance. Some people might call that
chutzpah.”Advocates for strict campaign finance rules, many of whom filed
briefs defending the law, blasted the decision as empowering special
interests. But they also stressed that it did not rule unconstitutional
public financing regimes, in general, and, in fact, left room for them to
push long-shot proposals in Congress to overhaul the presidential system and
to enact a congressional public financing system.Collective Bargaining in
WisconsinThe Wisconsin State Supreme Court ordered the reinstatement of Gov.
Scott Walker’s (R) controversial plan to end most collective bargaining for
tens of thousands of public workers. The court found that a committee of
lawmakers was not subject to the state’s open meetings law, and so did not
violate that law when it hastily approved the collective bargaining measure
in March and made it possible for the Senate to take it up. In doing so, the
Supreme Court overruled a Dane County judge who had halted the legislation,
ending one challenge to the law even as new challenges are likely to
emerge.Republicans praised the majority decision, but Democrats decried the
Supreme Court decision for finding lawmakers do not have to follow the open
meetings law. They said they would move to amend the state constitution to
make them subject to the meetings law, a process that would take years and
be difficult to start while they remain in the minority.In February, Walker
proposed eliminating most collective bargaining for public workers except
police, firefighters and State Patrol troopers. The day the Senate was to
take up the bill, the Democrats prevented action on the bill by fleeing the
state. Under the state constitution, at least 20 senators had to be present
to pass the measure because it included fiscal elements- Republicans hold
just 19 seats. After three weeks, Republicans stripped out the parts of bill
that were considered “fiscal”, passed the legislation and Walker signed it.
The Democratic Dane County District Attorney filed a court complaint
alleging the committee violated the open meetings law since it needed to
give 24 hours’ notice before meeting and had to allow more people into the
room. So, the Court majority found lawmakers must obey the state
constitution, but not the open meetings law, which spells out when meeting
notices must be published and when public entities can meet in closed
session.] [image: 1. Tax Increases v. Closing Tax Loopholes A bit more
information has surfaced over the last few days detailing the exact state of
the budget negotiations when they collapsed. Both sides, as they often said,
were shooting for about $2.4 trillion in deficit reduction over 10 years.
They'd already agreed on around $1 trillion in spending cuts and were making
good progress on the rest of it. But Democrats insisted that $400 billion --
roughly 17 percent -- of the package be tax increases. And that's when
Republicans walked. Senator Jon Kyl (R-AZ), the No. 2 Republican in the
Senate, left room for maneuver on raising revenue in ways that might not be
defined as a tax increase. Proposed ways to reduce the US budget deficit
include ending tax breaks for ethanol producers or other energy companies,
and revising tax deductions for corporate jets. Some call those steps tax
increases, while others describe them as closing tax loopholes.Earlier talks
have focused on areas of easier agreement, including cuts to farm subsidies
and possible reductions in retirement benefits to federal workers. Democrats
are continuing to press for higher tax revenue. Republicans insist that
spending cuts must exceed any increase in the debt ceiling. Many members of
their party were elected last year on a pledge to force dramatic spending
cuts. Republicans have insisted they won’t approve any tax increases. Still,
Democrats say there is increased hope for a deal on revenue after a June 16
Senate vote in which 33 Republicans voted with Democrats in favor of
eliminating a tax credit and a tariff that subsidize ethanol production.The
targeting of long-protected tax breaks — for ethanol, research and
development, manufacturing and foreign company income — is a sign that key
House Republicans are ready to break with the orthodoxy of past tax debates
while ditching special interests that have long held sway in tax reform
discussions. In going after some of these tax credits, Republicans on the
House Ways and Means Committee are proposing a trade-off by lowering
corporate and individual tax breaks. And while Republicans would like to
keep tax reform discussions separate from the deficit reduction talks, the
negotiators may still discuss closing certain tax loopholes.If Republicans
have successfully redefined tax increases as "new revenues that come from
higher marginal rates" but not "new revenues that come from cutting tax
breaks and closing loopholes," that opens up a lot of space for compromise.
House Majority Leader Eric Cantor, told reporters “We are not opposed to
revenues. We are just opposed to tax increases." Coming on the heels of the
consequential votes Senate Republicans cast against ethanol subsidies -- and
for more revenues -- that's an important statement.There is some skepticism.
Not of the fact that Republicans are increasingly interested in ridding the
code of some special-interest tax breaks, but if they are ready to raise
serious amounts of revenue by going after the big tax breaks, and therefore
the sources of big revenue. According to the Tax Policy Center, the largest
tax expenditures, in order, are the breaks for employer-provided health
care, pension contributions, mortgage interest, depreciation of capital
equipment, state and local tax payments, and charitable contributions- all
of which are tax preferences for the middle class.So far, the discussion
over raising revenues by cleaning out the code has used comfortably vague
language about "tax breaks" and "loopholes" and "expenditures." But to see
serious money from this effort, these are the sorts of breaks, loopholes and
expenditures that they will have to go after. At this point, Republicans are
looking at some green energy subsides they don't like and Democrats have
mostly been talking about some fossil-fuel subsidies they don't like. But
getting rid of subsidies for ethanol and oil and gas manufacturers will not
do much for the deficit. And as of yet, no one has really been talking about
the big tax breaks that will actually generate the big revenue.The President
is meeting with Congressional leaders from both parties this week to try to
obtain a deficit-reduction package from Congress in exchange for legislation
to increase the country's borrowing limit from $14.2 trillion. Congress has
until August 2 to increase the debt ceiling or risk a default that would
agitate world markets. 2. Financial ShortsSEC’s New Hedge Fund RulesThe SEC
has adopted new rules in which hedge fund and private equity funds that
manage more than $150 million will have to register with the SEC as well as
turn over crucial information, including the size of the funds they oversee,
information about their investors and the names of their auditors and
marketers. Some 750 hedge fund and private equity fund managers will face
the new requirements, which take effect in March 2012. Managers of these
private funds have been able to avoid registering with the SEC under a rule
that exempts advisers with fewer than 15 clients, because each fund counted
as a single client, even if it had scores of investors. Many funds are
already making voluntary disclosures to the SEC.The rules come with some
exceptions. For example, they do not apply to venture capital funds and
hedge funds that manage less than $150 million. Venture funds can also
invest up to 20 percent of their money in investments that don’t fit the
description of venture capital and still qualify for lighter regulation.
Also beyond the reach of the new regulations are family offices. To separate
them from money managers that serve unrelated clients, the SEC had to define
“family,” settling on a definition of all lineal descendants of a common
ancestor no more than 10 generations in the past. Still, the exempt funds
will have to file periodic reports that lay out basic information, like the
name of their owner, potential conflicts of interest and disciplinary
problems.The SEC split 3 to 2 on the key vote, with two Republican
commissioners opposing the measure. They argued that the SEC went further
than it should have by requiring some disclosures from fund managers that,
under the law, it could have exempted from the new requirements. It remains
unclear how much the SEC will be able to do with its new regulatory
authority. Agency leaders have said the SEC’s budget has not kept pace with
its growing responsibilities. But many hedge funds that previously reported
to the SEC — an estimated 3,200 of the 11,500 now registered with the agency
— will in the future become the responsibility of state regulators.An
Adjusted Dismal Economic OutlookThe economic recovery is slowing and the
outlook for next year has gotten worse, according to Federal Reserve
Chairman Ben Bernanke, backing away from the view that the slowdown of the
past few months was merely temporary. The central bank released new economic
projections that showed weaker growth in both 2011 and 2012 than had been
forecast just two months ago. Despite the slowdown, the Fed said it will end
a program of buying vast sums of Treasury bonds (QE2) at the end of June as
scheduled and gave no sign it is contemplating new action. The Fed left its
policy of ultra-low interest rates unchanged and will continue to hold
massive amounts of securities in a bid to foster growth. Bernanke said the
Fed had no solid answers as to why, two years into an economic recovery,
growth keeps disappointing. He suggested that problems in the financial
sector and the housing market, and with consumers trying to pay down their
debt, had been underestimated.The central bank’s new economic projections
show how quickly the nation’s economic outlook has deteriorated since the
last Fed projections were made in April. Fed officials now project GDP will
rise 2.7 to 2.9 percent this year, which is too slow to put Americans back
to work in any large numbers. Two months ago, they thought growth would be
just over 3 percent. In January, they saw growth approaching 4 percent. That
weaker 2011 growth is driven in part by temporary factors such as the run-up
in oil prices over the first few months of the year and the supply
disruptions caused by the Japanese earthquake. However, the adjustments the
Fed made to its 2012 forecast show that the leaders of the central bank see
a longer-lasting malaise.Bernanke did give a bit of new clarity on what the
Fed would do if the situation worsened — if the economy seemed to be falling
back into recession or if deflation became a risk. He mentioned several
possible steps: making more purchases of securities, which would expand the
money supply and put downward pressure on interest rates; cutting an
interest rate that banks are paid for money they park at the Fed; or giving
more specific promises for how long the Fed will keep its target interest
low and its big balance sheet in place.3. Political ShortsAnother Campaign
Finance RulingThe Supreme Court issued a 5-4 decision striking down part of
an Arizona law providing public funds for campaigns. In the case, Arizona
Free Enterprise Club’s Freedom Club PAC v. Bennett, the court struck down a
provision in the Arizona law that provided additional funds to publicly
funded candidates running against opponents who outspend them outside the
system. Advocates for reducing the role of money in politics, feared that
the high court, which has in the past issued sweeping rulings striking down
campaign finance restrictions as violations of free speech, would use the
case to rule broadly on the constitutionality of programs that provide
public money to candidates. The ruling appears unlikely to impact the
federal presidential public financing system, which lacks such a provision,
but also has fallen out of favor since Barack Obama in 2008 declined to
participate while raising a record-shattering $750 million for his
campaign.The Arizona case was brought by a pair of small government groups –
the Washington-based Institute for Justice and the Phoenix-based Goldwater
Institute – on behalf of Arizona state candidates who rejected public funds
and argued that the provision infringed on their freedom of speech by
compelling them to spend less money to avoid triggering the additional
funds.Chief Justice John Roberts, writing for the majority, agreed, writing:
“We hold that Arizona’s matching funds scheme substantially burdens
protected political speech without serving a compelling state interest and
therefore violates the First Amendment.” In the dissent, however, Justice
Elena Kagan wrote that the plaintiff candidates “are making a novel
argument: that Arizona violated their First Amendment rights by disbursing
funds to other speakers even though they could have received (but chose to
spurn) the same financial assistance. Some people might call that
chutzpah.”Advocates for strict campaign finance rules, many of whom filed
briefs defending the law, blasted the decision as empowering special
interests. But they also stressed that it did not rule unconstitutional
public financing regimes, in general, and, in fact, left room for them to
push long-shot proposals in Congress to overhaul the presidential system and
to enact a congressional public financing system.Collective Bargaining in
WisconsinThe Wisconsin State Supreme Court ordered the reinstatement of Gov.
Scott Walker’s (R) controversial plan to end most collective bargaining for
tens of thousands of public workers. The court found that a committee of
lawmakers was not subject to the state’s open meetings law, and so did not
violate that law when it hastily approved the collective bargaining measure
in March and made it possible for the Senate to take it up. In doing so, the
Supreme Court overruled a Dane County judge who had halted the legislation,
ending one challenge to the law even as new challenges are likely to
emerge.Republicans praised the majority decision, but Democrats decried the
Supreme Court decision for finding lawmakers do not have to follow the open
meetings law. They said they would move to amend the state constitution to
make them subject to the meetings law, a process that would take years and
be difficult to start while they remain in the minority.In February, Walker
proposed eliminating most collective bargaining for public workers except
police, firefighters and State Patrol troopers. The day the Senate was to
take up the bill, the Democrats prevented action on the bill by fleeing the
state. Under the state constitution, at least 20 senators had to be present
to pass the measure because it included fiscal elements- Republicans hold
just 19 seats. After three weeks, Republicans stripped out the parts of bill
that were considered “fiscal”, passed the legislation and Walker signed it.
The Democratic Dane County District Attorney filed a court complaint
alleging the committee violated the open meetings law since it needed to
give 24 hours’ notice before meeting and had to allow more people into the
room. So, the Court majority found lawmakers must obey the state
constitution, but not the open meetings law, which spells out when meeting
notices must be published and when public entities can meet in closed
session.] [image: 1. Tax Increases v. Closing Tax Loopholes A bit more
information has surfaced over the last few days detailing the exact state of
the budget negotiations when they collapsed. Both sides, as they often said,
were shooting for about $2.4 trillion in deficit reduction over 10 years.
They'd already agreed on around $1 trillion in spending cuts and were making
good progress on the rest of it. But Democrats insisted that $400 billion --
roughly 17 percent -- of the package be tax increases. And that's when
Republicans walked. Senator Jon Kyl (R-AZ), the No. 2 Republican in the
Senate, left room for maneuver on raising revenue in ways that might not be
defined as a tax increase. Proposed ways to reduce the US budget deficit
include ending tax breaks for ethanol producers or other energy companies,
and revising tax deductions for corporate jets. Some call those steps tax
increases, while others describe them as closing tax loopholes.Earlier talks
have focused on areas of easier agreement, including cuts to farm subsidies
and possible reductions in retirement benefits to federal workers. Democrats
are continuing to press for higher tax revenue. Republicans insist that
spending cuts must exceed any increase in the debt ceiling. Many members of
their party were elected last year on a pledge to force dramatic spending
cuts. Republicans have insisted they won’t approve any tax increases. Still,
Democrats say there is increased hope for a deal on revenue after a June 16
Senate vote in which 33 Republicans voted with Democrats in favor of
eliminating a tax credit and a tariff that subsidize ethanol production.The
targeting of long-protected tax breaks — for ethanol, research and
development, manufacturing and foreign company income — is a sign that key
House Republicans are ready to break with the orthodoxy of past tax debates
while ditching special interests that have long held sway in tax reform
discussions. In going after some of these tax credits, Republicans on the
House Ways and Means Committee are proposing a trade-off by lowering
corporate and individual tax breaks. And while Republicans would like to
keep tax reform discussions separate from the deficit reduction talks, the
negotiators may still discuss closing certain tax loopholes.If Republicans
have successfully redefined tax increases as "new revenues that come from
higher marginal rates" but not "new revenues that come from cutting tax
breaks and closing loopholes," that opens up a lot of space for compromise.
House Majority Leader Eric Cantor, told reporters “We are not opposed to
revenues. We are just opposed to tax increases." Coming on the heels of the
consequential votes Senate Republicans cast against ethanol subsidies -- and
for more revenues -- that's an important statement.There is some skepticism.
Not of the fact that Republicans are increasingly interested in ridding the
code of some special-interest tax breaks, but if they are ready to raise
serious amounts of revenue by going after the big tax breaks, and therefore
the sources of big revenue. According to the Tax Policy Center, the largest
tax expenditures, in order, are the breaks for employer-provided health
care, pension contributions, mortgage interest, depreciation of capital
equipment, state and local tax payments, and charitable contributions- all
of which are tax preferences for the middle class.So far, the discussion
over raising revenues by cleaning out the code has used comfortably vague
language about "tax breaks" and "loopholes" and "expenditures." But to see
serious money from this effort, these are the sorts of breaks, loopholes and
expenditures that they will have to go after. At this point, Republicans are
looking at some green energy subsides they don't like and Democrats have
mostly been talking about some fossil-fuel subsidies they don't like. But
getting rid of subsidies for ethanol and oil and gas manufacturers will not
do much for the deficit. And as of yet, no one has really been talking about
the big tax breaks that will actually generate the big revenue.The President
is meeting with Congressional leaders from both parties this week to try to
obtain a deficit-reduction package from Congress in exchange for legislation
to increase the country's borrowing limit from $14.2 trillion. Congress has
until August 2 to increase the debt ceiling or risk a default that would
agitate world markets. 2. Financial ShortsSEC’s New Hedge Fund RulesThe SEC
has adopted new rules in which hedge fund and private equity funds that
manage more than $150 million will have to register with the SEC as well as
turn over crucial information, including the size of the funds they oversee,
information about their investors and the names of their auditors and
marketers. Some 750 hedge fund and private equity fund managers will face
the new requirements, which take effect in March 2012. Managers of these
private funds have been able to avoid registering with the SEC under a rule
that exempts advisers with fewer than 15 clients, because each fund counted
as a single client, even if it had scores of investors. Many funds are
already making voluntary disclosures to the SEC.The rules come with some
exceptions. For example, they do not apply to venture capital funds and
hedge funds that manage less than $150 million. Venture funds can also
invest up to 20 percent of their money in investments that don’t fit the
description of venture capital and still qualify for lighter regulation.
Also beyond the reach of the new regulations are family offices. To separate
them from money managers that serve unrelated clients, the SEC had to define
“family,” settling on a definition of all lineal descendants of a common
ancestor no more than 10 generations in the past. Still, the exempt funds
will have to file periodic reports that lay out basic information, like the
name of their owner, potential conflicts of interest and disciplinary
problems.The SEC split 3 to 2 on the key vote, with two Republican
commissioners opposing the measure. They argued that the SEC went further
than it should have by requiring some disclosures from fund managers that,
under the law, it could have exempted from the new requirements. It remains
unclear how much the SEC will be able to do with its new regulatory
authority. Agency leaders have said the SEC’s budget has not kept pace with
its growing responsibilities. But many hedge funds that previously reported
to the SEC — an estimated 3,200 of the 11,500 now registered with the agency
— will in the future become the responsibility of state regulators.An
Adjusted Dismal Economic OutlookThe economic recovery is slowing and the
outlook for next year has gotten worse, according to Federal Reserve
Chairman Ben Bernanke, backing away from the view that the slowdown of the
past few months was merely temporary. The central bank released new economic
projections that showed weaker growth in both 2011 and 2012 than had been
forecast just two months ago. Despite the slowdown, the Fed said it will end
a program of buying vast sums of Treasury bonds (QE2) at the end of June as
scheduled and gave no sign it is contemplating new action. The Fed left its
policy of ultra-low interest rates unchanged and will continue to hold
massive amounts of securities in a bid to foster growth. Bernanke said the
Fed had no solid answers as to why, two years into an economic recovery,
growth keeps disappointing. He suggested that problems in the financial
sector and the housing market, and with consumers trying to pay down their
debt, had been underestimated.The central bank’s new economic projections
show how quickly the nation’s economic outlook has deteriorated since the
last Fed projections were made in April. Fed officials now project GDP will
rise 2.7 to 2.9 percent this year, which is too slow to put Americans back
to work in any large numbers. Two months ago, they thought growth would be
just over 3 percent. In January, they saw growth approaching 4 percent. That
weaker 2011 growth is driven in part by temporary factors such as the run-up
in oil prices over the first few months of the year and the supply
disruptions caused by the Japanese earthquake. However, the adjustments the
Fed made to its 2012 forecast show that the leaders of the central bank see
a longer-lasting malaise.Bernanke did give a bit of new clarity on what the
Fed would do if the situation worsened — if the economy seemed to be falling
back into recession or if deflation became a risk. He mentioned several
possible steps: making more purchases of securities, which would expand the
money supply and put downward pressure on interest rates; cutting an
interest rate that banks are paid for money they park at the Fed; or giving
more specific promises for how long the Fed will keep its target interest
low and its big balance sheet in place.3. Political ShortsAnother Campaign
Finance RulingThe Supreme Court issued a 5-4 decision striking down part of
an Arizona law providing public funds for campaigns. In the case, Arizona
Free Enterprise Club’s Freedom Club PAC v. Bennett, the court struck down a
provision in the Arizona law that provided additional funds to publicly
funded candidates running against opponents who outspend them outside the
system. Advocates for reducing the role of money in politics, feared that
the high court, which has in the past issued sweeping rulings striking down
campaign finance restrictions as violations of free speech, would use the
case to rule broadly on the constitutionality of programs that provide
public money to candidates. The ruling appears unlikely to impact the
federal presidential public financing system, which lacks such a provision,
but also has fallen out of favor since Barack Obama in 2008 declined to
participate while raising a record-shattering $750 million for his
campaign.The Arizona case was brought by a pair of small government groups –
the Washington-based Institute for Justice and the Phoenix-based Goldwater
Institute – on behalf of Arizona state candidates who rejected public funds
and argued that the provision infringed on their freedom of speech by
compelling them to spend less money to avoid triggering the additional
funds.Chief Justice John Roberts, writing for the majority, agreed, writing:
“We hold that Arizona’s matching funds scheme substantially burdens
protected political speech without serving a compelling state interest and
therefore violates the First Amendment.” In the dissent, however, Justice
Elena Kagan wrote that the plaintiff candidates “are making a novel
argument: that Arizona violated their First Amendment rights by disbursing
funds to other speakers even though they could have received (but chose to
spurn) the same financial assistance. Some people might call that
chutzpah.”Advocates for strict campaign finance rules, many of whom filed
briefs defending the law, blasted the decision as empowering special
interests. But they also stressed that it did not rule unconstitutional
public financing regimes, in general, and, in fact, left room for them to
push long-shot proposals in Congress to overhaul the presidential system and
to enact a congressional public financing system.Collective Bargaining in
WisconsinThe Wisconsin State Supreme Court ordered the reinstatement of Gov.
Scott Walker’s (R) controversial plan to end most collective bargaining for
tens of thousands of public workers. The court found that a committee of
lawmakers was not subject to the state’s open meetings law, and so did not
violate that law when it hastily approved the collective bargaining measure
in March and made it possible for the Senate to take it up. In doing so, the
Supreme Court overruled a Dane County judge who had halted the legislation,
ending one challenge to the law even as new challenges are likely to
emerge.Republicans praised the majority decision, but Democrats decried the
Supreme Court decision for finding lawmakers do not have to follow the open
meetings law. They said they would move to amend the state constitution to
make them subject to the meetings law, a process that would take years and
be difficult to start while they remain in the minority.In February, Walker
proposed eliminating most collective bargaining for public workers except
police, firefighters and State Patrol troopers. The day the Senate was to
take up the bill, the Democrats prevented action on the bill by fleeing the
state. Under the state constitution, at least 20 senators had to be present
to pass the measure because it included fiscal elements- Republicans hold
just 19 seats. After three weeks, Republicans stripped out the parts of bill
that were considered “fiscal”, passed the legislation and Walker signed it.
The Democratic Dane County District Attorney filed a court complaint
alleging the committee violated the open meetings law since it needed to
give 24 hours’ notice before meeting and had to allow more people into the
room. So, the Court majority found lawmakers must obey the state
constitution, but not the open meetings law, which spells out when meeting
notices must be published and when public entities can meet in closed
session.] [image: 1. Tax Increases v. Closing Tax Loopholes A bit more
information has surfaced over the last few days detailing the exact state of
the budget negotiations when they collapsed. Both sides, as they often said,
were shooting for about $2.4 trillion in deficit reduction over 10 years.
They'd already agreed on around $1 trillion in spending cuts and were making
good progress on the rest of it. But Democrats insisted that $400 billion --
roughly 17 percent -- of the package be tax increases. And that's when
Republicans walked. Senator Jon Kyl (R-AZ), the No. 2 Republican in the
Senate, left room for maneuver on raising revenue in ways that might not be
defined as a tax increase. Proposed ways to reduce the US budget deficit
include ending tax breaks for ethanol producers or other energy companies,
and revising tax deductions for corporate jets. Some call those steps tax
increases, while others describe them as closing tax loopholes.Earlier talks
have focused on areas of easier agreement, including cuts to farm subsidies
and possible reductions in retirement benefits to federal workers. Democrats
are continuing to press for higher tax revenue. Republicans insist that
spending cuts must exceed any increase in the debt ceiling. Many members of
their party were elected last year on a pledge to force dramatic spending
cuts. Republicans have insisted they won’t approve any tax increases. Still,
Democrats say there is increased hope for a deal on revenue after a June 16
Senate vote in which 33 Republicans voted with Democrats in favor of
eliminating a tax credit and a tariff that subsidize ethanol production.The
targeting of long-protected tax breaks — for ethanol, research and
development, manufacturing and foreign company income — is a sign that key
House Republicans are ready to break with the orthodoxy of past tax debates
while ditching special interests that have long held sway in tax reform
discussions. In going after some of these tax credits, Republicans on the
House Ways and Means Committee are proposing a trade-off by lowering
corporate and individual tax breaks. And while Republicans would like to
keep tax reform discussions separate from the deficit reduction talks, the
negotiators may still discuss closing certain tax loopholes.If Republicans
have successfully redefined tax increases as "new revenues that come from
higher marginal rates" but not "new revenues that come from cutting tax
breaks and closing loopholes," that opens up a lot of space for compromise.
House Majority Leader Eric Cantor, told reporters “We are not opposed to
revenues. We are just opposed to tax increases." Coming on the heels of the
consequential votes Senate Republicans cast against ethanol subsidies -- and
for more revenues -- that's an important statement.There is some skepticism.
Not of the fact that Republicans are increasingly interested in ridding the
code of some special-interest tax breaks, but if they are ready to raise
serious amounts of revenue by going after the big tax breaks, and therefore
the sources of big revenue. According to the Tax Policy Center, the largest
tax expenditures, in order, are the breaks for employer-provided health
care, pension contributions, mortgage interest, depreciation of capital
equipment, state and local tax payments, and charitable contributions- all
of which are tax preferences for the middle class.So far, the discussion
over raising revenues by cleaning out the code has used comfortably vague
language about "tax breaks" and "loopholes" and "expenditures." But to see
serious money from this effort, these are the sorts of breaks, loopholes and
expenditures that they will have to go after. At this point, Republicans are
looking at some green energy subsides they don't like and Democrats have
mostly been talking about some fossil-fuel subsidies they don't like. But
getting rid of subsidies for ethanol and oil and gas manufacturers will not
do much for the deficit. And as of yet, no one has really been talking about
the big tax breaks that will actually generate the big revenue.The President
is meeting with Congressional leaders from both parties this week to try to
obtain a deficit-reduction package from Congress in exchange for legislation
to increase the country's borrowing limit from $14.2 trillion. Congress has
until August 2 to increase the debt ceiling or risk a default that would
agitate world markets. 2. Financial ShortsSEC’s New Hedge Fund RulesThe SEC
has adopted new rules in which hedge fund and private equity funds that
manage more than $150 million will have to register with the SEC as well as
turn over crucial information, including the size of the funds they oversee,
information about their investors and the names of their auditors and
marketers. Some 750 hedge fund and private equity fund managers will face
the new requirements, which take effect in March 2012. Managers of these
private funds have been able to avoid registering with the SEC under a rule
that exempts advisers with fewer than 15 clients, because each fund counted
as a single client, even if it had scores of investors. Many funds are
already making voluntary disclosures to the SEC.The rules come with some
exceptions. For example, they do not apply to venture capital funds and
hedge funds that manage less than $150 million. Venture funds can also
invest up to 20 percent of their money in investments that don’t fit the
description of venture capital and still qualify for lighter regulation.
Also beyond the reach of the new regulations are family offices. To separate
them from money managers that serve unrelated clients, the SEC had to define
“family,” settling on a definition of all lineal descendants of a common
ancestor no more than 10 generations in the past. Still, the exempt funds
will have to file periodic reports that lay out basic information, like the
name of their owner, potential conflicts of interest and disciplinary
problems.The SEC split 3 to 2 on the key vote, with two Republican
commissioners opposing the measure. They argued that the SEC went further
than it should have by requiring some disclosures from fund managers that,
under the law, it could have exempted from the new requirements. It remains
unclear how much the SEC will be able to do with its new regulatory
authority. Agency leaders have said the SEC’s budget has not kept pace with
its growing responsibilities. But many hedge funds that previously reported
to the SEC — an estimated 3,200 of the 11,500 now registered with the agency
— will in the future become the responsibility of state regulators.An
Adjusted Dismal Economic OutlookThe economic recovery is slowing and the
outlook for next year has gotten worse, according to Federal Reserve
Chairman Ben Bernanke, backing away from the view that the slowdown of the
past few months was merely temporary. The central bank released new economic
projections that showed weaker growth in both 2011 and 2012 than had been
forecast just two months ago. Despite the slowdown, the Fed said it will end
a program of buying vast sums of Treasury bonds (QE2) at the end of June as
scheduled and gave no sign it is contemplating new action. The Fed left its
policy of ultra-low interest rates unchanged and will continue to hold
massive amounts of securities in a bid to foster growth. Bernanke said the
Fed had no solid answers as to why, two years into an economic recovery,
growth keeps disappointing. He suggested that problems in the financial
sector and the housing market, and with consumers trying to pay down their
debt, had been underestimated.The central bank’s new economic projections
show how quickly the nation’s economic outlook has deteriorated since the
last Fed projections were made in April. Fed officials now project GDP will
rise 2.7 to 2.9 percent this year, which is too slow to put Americans back
to work in any large numbers. Two months ago, they thought growth would be
just over 3 percent. In January, they saw growth approaching 4 percent. That
weaker 2011 growth is driven in part by temporary factors such as the run-up
in oil prices over the first few months of the year and the supply
disruptions caused by the Japanese earthquake. However, the adjustments the
Fed made to its 2012 forecast show that the leaders of the central bank see
a longer-lasting malaise.Bernanke did give a bit of new clarity on what the
Fed would do if the situation worsened — if the economy seemed to be falling
back into recession or if deflation became a risk. He mentioned several
possible steps: making more purchases of securities, which would expand the
money supply and put downward pressure on interest rates; cutting an
interest rate that banks are paid for money they park at the Fed; or giving
more specific promises for how long the Fed will keep its target interest
low and its big balance sheet in place.3. Political ShortsAnother Campaign
Finance RulingThe Supreme Court issued a 5-4 decision striking down part of
an Arizona law providing public funds for campaigns. In the case, Arizona
Free Enterprise Club’s Freedom Club PAC v. Bennett, the court struck down a
provision in the Arizona law that provided additional funds to publicly
funded candidates running against opponents who outspend them outside the
system. Advocates for reducing the role of money in politics, feared that
the high court, which has in the past issued sweeping rulings striking down
campaign finance restrictions as violations of free speech, would use the
case to rule broadly on the constitutionality of programs that provide
public money to candidates. The ruling appears unlikely to impact the
federal presidential public financing system, which lacks such a provision,
but also has fallen out of favor since Barack Obama in 2008 declined to
participate while raising a record-shattering $750 million for his
campaign.The Arizona case was brought by a pair of small government groups –
the Washington-based Institute for Justice and the Phoenix-based Goldwater
Institute – on behalf of Arizona state candidates who rejected public funds
and argued that the provision infringed on their freedom of speech by
compelling them to spend less money to avoid triggering the additional
funds.Chief Justice John Roberts, writing for the majority, agreed, writing:
“We hold that Arizona’s matching funds scheme substantially burdens
protected political speech without serving a compelling state interest and
therefore violates the First Amendment.” In the dissent, however, Justice
Elena Kagan wrote that the plaintiff candidates “are making a novel
argument: that Arizona violated their First Amendment rights by disbursing
funds to other speakers even though they could have received (but chose to
spurn) the same financial assistance. Some people might call that
chutzpah.”Advocates for strict campaign finance rules, many of whom filed
briefs defending the law, blasted the decision as empowering special
interests. But they also stressed that it did not rule unconstitutional
public financing regimes, in general, and, in fact, left room for them to
push long-shot proposals in Congress to overhaul the presidential system and
to enact a congressional public financing system.Collective Bargaining in
WisconsinThe Wisconsin State Supreme Court ordered the reinstatement of Gov.
Scott Walker’s (R) controversial plan to end most collective bargaining for
tens of thousands of public workers. The court found that a committee of
lawmakers was not subject to the state’s open meetings law, and so did not
violate that law when it hastily approved the collective bargaining measure
in March and made it possible for the Senate to take it up. In doing so, the
Supreme Court overruled a Dane County judge who had halted the legislation,
ending one challenge to the law even as new challenges are likely to
emerge.Republicans praised the majority decision, but Democrats decried the
Supreme Court decision for finding lawmakers do not have to follow the open
meetings law. They said they would move to amend the state constitution to
make them subject to the meetings law, a process that would take years and
be difficult to start while they remain in the minority.In February, Walker
proposed eliminating most collective bargaining for public workers except
police, firefighters and State Patrol troopers. The day the Senate was to
take up the bill, the Democrats prevented action on the bill by fleeing the
state. Under the state constitution, at least 20 senators had to be present
to pass the measure because it included fiscal elements- Republicans hold
just 19 seats. After three weeks, Republicans stripped out the parts of bill
that were considered “fiscal”, passed the legislation and Walker signed it.
The Democratic Dane County District Attorney filed a court complaint
alleging the committee violated the open meetings law since it needed to
give 24 hours’ notice before meeting and had to allow more people into the
room. So, the Court majority found lawmakers must obey the state
constitution, but not the open meetings law, which spells out when meeting
notices must be published and when public entities can meet in closed
session.] [image: 1. Tax Increases v. Closing Tax Loopholes A bit more
information has surfaced over the last few days detailing the exact state of
the budget negotiations when they collapsed. Both sides, as they often said,
were shooting for about $2.4 trillion in deficit reduction over 10 years.
They'd already agreed on around $1 trillion in spending cuts and were making
good progress on the rest of it. But Democrats insisted that $400 billion --
roughly 17 percent -- of the package be tax increases. And that's when
Republicans walked. Senator Jon Kyl (R-AZ), the No. 2 Republican in the
Senate, left room for maneuver on raising revenue in ways that might not be
defined as a tax increase. Proposed ways to reduce the US budget deficit
include ending tax breaks for ethanol producers or other energy companies,
and revising tax deductions for corporate jets. Some call those steps tax
increases, while others describe them as closing tax loopholes.Earlier talks
have focused on areas of easier agreement, including cuts to farm subsidies
and possible reductions in retirement benefits to federal workers. Democrats
are continuing to press for higher tax revenue. Republicans insist that
spending cuts must exceed any increase in the debt ceiling. Many members of
their party were elected last year on a pledge to force dramatic spending
cuts. Republicans have insisted they won’t approve any tax increases. Still,
Democrats say there is increased hope for a deal on revenue after a June 16
Senate vote in which 33 Republicans voted with Democrats in favor of
eliminating a tax credit and a tariff that subsidize ethanol production.The
targeting of long-protected tax breaks — for ethanol, research and
development, manufacturing and foreign company income — is a sign that key
House Republicans are ready to break with the orthodoxy of past tax debates
while ditching special interests that have long held sway in tax reform
discussions. In going after some of these tax credits, Republicans on the
House Ways and Means Committee are proposing a trade-off by lowering
corporate and individual tax breaks. And while Republicans would like to
keep tax reform discussions separate from the deficit reduction talks, the
negotiators may still discuss closing certain tax loopholes.If Republicans
have successfully redefined tax increases as "new revenues that come from
higher marginal rates" but not "new revenues that come from cutting tax
breaks and closing loopholes," that opens up a lot of space for compromise.
House Majority Leader Eric Cantor, told reporters “We are not opposed to
revenues. We are just opposed to tax increases." Coming on the heels of the
consequential votes Senate Republicans cast against ethanol subsidies -- and
for more revenues -- that's an important statement.There is some skepticism.
Not of the fact that Republicans are increasingly interested in ridding the
code of some special-interest tax breaks, but if they are ready to raise
serious amounts of revenue by going after the big tax breaks, and therefore
the sources of big revenue. According to the Tax Policy Center, the largest
tax expenditures, in order, are the breaks for employer-provided health
care, pension contributions, mortgage interest, depreciation of capital
equipment, state and local tax payments, and charitable contributions- all
of which are tax preferences for the middle class.So far, the discussion
over raising revenues by cleaning out the code has used comfortably vague
language about "tax breaks" and "loopholes" and "expenditures." But to see
serious money from this effort, these are the sorts of breaks, loopholes and
expenditures that they will have to go after. At this point, Republicans are
looking at some green energy subsides they don't like and Democrats have
mostly been talking about some fossil-fuel subsidies they don't like. But
getting rid of subsidies for ethanol and oil and gas manufacturers will not
do much for the deficit. And as of yet, no one has really been talking about
the big tax breaks that will actually generate the big revenue.The President
is meeting with Congressional leaders from both parties this week to try to
obtain a deficit-reduction package from Congress in exchange for legislation
to increase the country's borrowing limit from $14.2 trillion. Congress has
until August 2 to increase the debt ceiling or risk a default that would
agitate world markets. 2. Financial ShortsSEC’s New Hedge Fund RulesThe SEC
has adopted new rules in which hedge fund and private equity funds that
manage more than $150 million will have to register with the SEC as well as
turn over crucial information, including the size of the funds they oversee,
information about their investors and the names of their auditors and
marketers. Some 750 hedge fund and private equity fund managers will face
the new requirements, which take effect in March 2012. Managers of these
private funds have been able to avoid registering with the SEC under a rule
that exempts advisers with fewer than 15 clients, because each fund counted
as a single client, even if it had scores of investors. Many funds are
already making voluntary disclosures to the SEC.The rules come with some
exceptions. For example, they do not apply to venture capital funds and
hedge funds that manage less than $150 million. Venture funds can also
invest up to 20 percent of their money in investments that don’t fit the
description of venture capital and still qualify for lighter regulation.
Also beyond the reach of the new regulations are family offices. To separate
them from money managers that serve unrelated clients, the SEC had to define
“family,” settling on a definition of all lineal descendants of a common
ancestor no more than 10 generations in the past. Still, the exempt funds
will have to file periodic reports that lay out basic information, like the
name of their owner, potential conflicts of interest and disciplinary
problems.The SEC split 3 to 2 on the key vote, with two Republican
commissioners opposing the measure. They argued that the SEC went further
than it should have by requiring some disclosures from fund managers that,
under the law, it could have exempted from the new requirements. It remains
unclear how much the SEC will be able to do with its new regulatory
authority. Agency leaders have said the SEC’s budget has not kept pace with
its growing responsibilities. But many hedge funds that previously reported
to the SEC — an estimated 3,200 of the 11,500 now registered with the agency
— will in the future become the responsibility of state regulators.An
Adjusted Dismal Economic OutlookThe economic recovery is slowing and the
outlook for next year has gotten worse, according to Federal Reserve
Chairman Ben Bernanke, backing away from the view that the slowdown of the
past few months was merely temporary. The central bank released new economic
projections that showed weaker growth in both 2011 and 2012 than had been
forecast just two months ago. Despite the slowdown, the Fed said it will end
a program of buying vast sums of Treasury bonds (QE2) at the end of June as
scheduled and gave no sign it is contemplating new action. The Fed left its
policy of ultra-low interest rates unchanged and will continue to hold
massive amounts of securities in a bid to foster growth. Bernanke said the
Fed had no solid answers as to why, two years into an economic recovery,
growth keeps disappointing. He suggested that problems in the financial
sector and the housing market, and with consumers trying to pay down their
debt, had been underestimated.The central bank’s new economic projections
show how quickly the nation’s economic outlook has deteriorated since the
last Fed projections were made in April. Fed officials now project GDP will
rise 2.7 to 2.9 percent this year, which is too slow to put Americans back
to work in any large numbers. Two months ago, they thought growth would be
just over 3 percent. In January, they saw growth approaching 4 percent. That
weaker 2011 growth is driven in part by temporary factors such as the run-up
in oil prices over the first few months of the year and the supply
disruptions caused by the Japanese earthquake. However, the adjustments the
Fed made to its 2012 forecast show that the leaders of the central bank see
a longer-lasting malaise.Bernanke did give a bit of new clarity on what the
Fed would do if the situation worsened — if the economy seemed to be falling
back into recession or if deflation became a risk. He mentioned several
possible steps: making more purchases of securities, which would expand the
money supply and put downward pressure on interest rates; cutting an
interest rate that banks are paid for money they park at the Fed; or giving
more specific promises for how long the Fed will keep its target interest
low and its big balance sheet in place.3. Political ShortsAnother Campaign
Finance RulingThe Supreme Court issued a 5-4 decision striking down part of
an Arizona law providing public funds for campaigns. In the case, Arizona
Free Enterprise Club’s Freedom Club PAC v. Bennett, the court struck down a
provision in the Arizona law that provided additional funds to publicly
funded candidates running against opponents who outspend them outside the
system. Advocates for reducing the role of money in politics, feared that
the high court, which has in the past issued sweeping rulings striking down
campaign finance restrictions as violations of free speech, would use the
case to rule broadly on the constitutionality of programs that provide
public money to candidates. The ruling appears unlikely to impact the
federal presidential public financing system, which lacks such a provision,
but also has fallen out of favor since Barack Obama in 2008 declined to
participate while raising a record-shattering $750 million for his
campaign.The Arizona case was brought by a pair of small government groups –
the Washington-based Institute for Justice and the Phoenix-based Goldwater
Institute – on behalf of Arizona state candidates who rejected public funds
and argued that the provision infringed on their freedom of speech by
compelling them to spend less money to avoid triggering the additional
funds.Chief Justice John Roberts, writing for the majority, agreed, writing:
“We hold that Arizona’s matching funds scheme substantially burdens
protected political speech without serving a compelling state interest and
therefore violates the First Amendment.” In the dissent, however, Justice
Elena Kagan wrote that the plaintiff candidates “are making a novel
argument: that Arizona violated their First Amendment rights by disbursing
funds to other speakers even though they could have received (but chose to
spurn) the same financial assistance. Some people might call that
chutzpah.”Advocates for strict campaign finance rules, many of whom filed
briefs defending the law, blasted the decision as empowering special
interests. But they also stressed that it did not rule unconstitutional
public financing regimes, in general, and, in fact, left room for them to
push long-shot proposals in Congress to overhaul the presidential system and
to enact a congressional public financing system.Collective Bargaining in
WisconsinThe Wisconsin State Supreme Court ordered the reinstatement of Gov.
Scott Walker’s (R) controversial plan to end most collective bargaining for
tens of thousands of public workers. The court found that a committee of
lawmakers was not subject to the state’s open meetings law, and so did not
violate that law when it hastily approved the collective bargaining measure
in March and made it possible for the Senate to take it up. In doing so, the
Supreme Court overruled a Dane County judge who had halted the legislation,
ending one challenge to the law even as new challenges are li