OVERNIGHT MONEY: Budget, Cont’d

That topic should make Sen. Ron Wyden (D-Ore.), a panel member and longtime advocate of tax reform, especially happy. But while the notion of overhauling the tax code has attracted support from a variety of corners, discussion on some particularly knotty issues – including whether to tackle the corporate and individual tax systems together — has yet to really heat up. 

The New York Times’s David Leonhardt, meanwhile, has laid out some of the difficulties in overhauling the corporate rate, which currently maxes out at 35 percent. According to Leonhardt, 115 companies on the Standard & Poor’s stock index paid less than 20 percent in total corporate taxes over the last five years — meaning some of them, and their lobbyists, presumably don’t see much of a problem with the current setup. 

Witnesses at Wednesday’s hearing include Eugene Steuerle of the Urban Institute, who was involved in the last successful reform of the tax code 25 years ago, and Donald Marron of the Urban-Brookings Tax Policy Center, who has said that focusing solely on corporate tax reform could be an easier lift than going after a more comprehensive overhaul.

What Else to Watch For:

On the Hill: Rep. Nancy Pelosi (D-Calif.), the minority leader, and other House Democrats are set to be back in Washington on Wednesday to discuss job creation. Among the topics, according to Pelosi: “improvement of schools, hospitals, highways, ports and other transportation facilities needed for manufacturing and trade.”

Up in the Big Apple…: Commerce Secretary Gary Locke speaks at the Bloomberg China Investment Strategies Conference on Wednesday. The managing director of the Carlyle Grop and FedEx’s chief economist are also expected to participate. 

Think Tank Roundup: The Economic Policy Institute is scheduled to host a teleconference discussing the labor market during the recession, while the Brookings Institution will delve into the budgetary issues facing states at a web event at 12:30.

(On a related note, the Associated Press has detailed some pros and cons of allowing states to declare bankruptcy.)

Economic Indicators:

— The Labor Department is set to circulate December figures on employment for metropolitan areas.

— The Energy Information Administration is expected to drop its Week in Petroleum. 

— And the Mortgage Bankers Association will give a fresh look at the state of the housing market, when it releases its weekly data on mortgage applications.

Breaking Tuesday:

Back to Budget: In its first hearing of the week, the Senate Budget Committee heard an assortment of recommendations – dealing with rising health care costs and immediate budget cuts, for instance — for accelerating economic growth and tackling the deficit. 

Richard Berner, the chief U.S. economist for Morgan Stanley, told the panel that taxing employer health care benefits would be a “good place to start.” (Simon Johnson of the Massachusetts Institute of Technology, and formerly of the IMF, also advised tackling health care costs.)

Berner also said that cuts or freezes in discretionary spending were not nearly sufficient. For his part, Johnson called for an immediate fiscal summit to come up with a long-term deficit plan, but said that he didn’t suggest the sort of austerity measures currently in favor in the United Kingdom.  

And finally, David Malpass of Encima Global said the U.S. needs to “go on a diet now” to cause a “full upheaval in the culture of deficits and spending.” He also recommended imposing a new debt ceiling based on as little as 40 percent of GDP and winding down the Fed’s buying of government debt known as QE2.

The Senate Budget hearing came after a closed door meeting of between 30 and 40 senators on fiscal matters. Senate Budget Committee Chairman Kent Conrad (D-N.D.) said afterward that no concrete decisions were made at the meeting in term of moving legislation. The group of senators is trying to find a way to introduce all or part of the president’s debt commission recommendations as a bill. According to Sen. Mark Udall (D-Colo.), who attended the meeting, the group heard from investment advisers Kyle Bass of Hayman Advisors and Frank Brosens of Taconic Capital.

12K: The stock market closed over 12,000 for the first time since 2008 on Tuesday, a feat the Associated Press said put “the Great Recession even farther in the rearview mirror and erasing most of the damage it inflicted on tens of millions of retirement accounts.”

Writing Has Met Wall: He may not be happy about it, but Sen. Daniel Inouye (D-Hawaii), a longtime champion of earmarks, said Tuesday that the Senate Appropriations Committee would accept a two-year ban on the practice. But our Vicki Needham reports Inouye is saying he’ll take another look next year. 

Tell Us What You Really Feel, Mr. Reid: Sen. Claire McCaskill (D-Mo.), currently the only senator from her party that’s signed on to a measure that would dramatically reduce spending over the next decade, said Tuesday that she didn’t expect Sen. Harry Reid (D-Nev) to respond positively to the legislation. She was right, as our Erik Wasson reports, as the Senate majority leader said he would be happy to be stand in the way of the bill. 

What You Might Have Missed:

On the Money’s Tuesday:

— Chris Van Hollen warns of “blind” GOP spending cuts.

— Mark Udall is signing on to a balanced budget amendment. 

— David Vitter says no thank you to federal bailouts of state and local governments.

— The Senate Judiciary Committee played host to some bipartisan criticism of the administration’s efforts against foreclosures.

— Speaking of which, home ownership has reached 20th century levels.

— Timothy Geithner is heading south, to Brazil.

— And the IRS’s computer upkeep has headed north. 

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