Mother Jones has a good article on the privatization fad that's sweeping the nation. A deal in Indiana to sell a toll road to a private company has started up conversations across the country about privatizing other roads. Which public assets are next? And how far will privatization go?

"the road is one succession of dust, ruts, pits, and holes." So wrote Dwight D. Eisenhower, then a young lieutenant colonel, in November 1919, after heading out on a cross-country trip with a convoy of Army vehicles in order to test the viability of the nation's highways in case of a military emergency. To this description of one major road across the west, Eisenhower added reports of impassable mud, unstable sand, and wooden bridges that cracked beneath the weight of the trucks. In Illinois, the convoy "started on dirt roads, and practically no more pavement was encountered until reaching California."

It took 62 days for the trucks to make the trip from Washington...

GovExec reports today that the Bush administration's push for "E-government" has not yet to show big returns, according a report by the Office of Management and Budget (OMB).

E-gov is one of the five planks of the President's management agenda. The basic idea is to make government programs and data easier to use by setting up "one-stop shop" websites. A lot of these websites are up and running. Check out Grants.gov for a good example.

Yet, site traffic and usage are low. Nobody really knows about these websites, and the administration hasn't been asking agencies to use them enough. Some site functions still don't work very well, either.

"We're in the second phase [of e-government] and we're trying to drive utilization and usage of these initiatives across the government," [OMB official Andrew] Ciafardini said. "The first phase was getting these programs implemented. It was more proof of concept -- get these things up and running."

In his budget proposal last year, the President claimed that the vast majority of federal agencies had made enough progress on the E-gov initiative. The next budget is coming out in February. How will the President grade agencies on E-gov then?

TODAY, The office of the House Democratic Leadership released an Honest Leadership/Open Government Rules Package," identifying ethics, lobbying, and key process reform priorities, as well as rationales for their selection.

EJ Dionne has an insightful column on a vital question that's been coming up a lot recently: how should we pay for wars?

This debate began as a moral one. Dionne thinks that conservatives have paid for the Iraq and Afghanistan wars in an unfair, irresponsible way. Through it all, they've supported lower taxes for the wealthy, run high deficits, and cut domestic programs.

Who then pays the cost of a war financed almost entirely by deficit spending? Mostly, it's subsequent generations of taxpayers, who have to pay our bills when we don't live within our means. In the near-term, the administration has made policy decisions that have put additional burdens on the lower and middle classes. It has cut taxes on the wealthy and slashed discretionary spending on social programs. This at a time when the rising tide is only lifting yachts.

Dionne believes that this approach has had practical consequences, too. He argues that we now just don't have the resources that more hawkish conservatives want to continue the fight. That could very well be. Another practical consequence of this strategy may have been to undermine the political will to fight a war. Perhaps it is now resented by those who fight and pay for it alone. And perhaps those who were never asked to contribute to it feel like they won't lose much if the war is discontinued.

In general, President Bush's fiscal policies have helped divide this country against itself. Could it be that this unfair approach has also helped turn it against the war?

In a press conference yesterday, incoming House Speak Nancy Pelosi re-affirmed her commitment to key budget process reforms long-supported by OMB Watch. Among the "First 100 Hours" rules package will be the following reforms:

• EARMARKS: mandatory disclosure of all earmarks and the requirement that members certify that spouses do not directly benefit from the added project
• DEFICIT DISCIPLINE: budget Reconciliations will not be considered if they reduce the budget surplus or increase the deficit
• PAYGO: re-instatement of pay-as-you-go budget rules, requiring that new tax cuts or entitlement spending be offset with corresponding spending cuts

We applaud Pelosi's commitment to this bold and admirable agenda and will hold her to her own high standards, which she enunciated at the press conference:

[N]o new deficit spending ... that will be part of the rules of the House, and we'll also introduce it as a statute, so, hopefully, it will be part of the full budget process.

Here's an interesting article on the mixed blessings of an earmark-free funding year.

Congressional Democrats will strip all pet-project "earmarks" from the 2007 federal budget early next year to help pay for the war in Iraq, says U.S. Sen. Patty Murray, D-Wash.

But that move will have a downside for Clark County, she said Wednesday. Murray's address to the Vancouver Rotary Club delivered a stiff dose of fiscal reality.

The county won't get the $2 million Murray hoped to deliver for the next phase of improvements to the $120 million Salmon Creek-Interstate 5 interchange, an appropriation that would have made the federal government a partner in the project for the first time.

What's more, Murray is framing this as a way to pay for the Iraq war, by which she means the $5.5 billion that the House added to the Defense appropriations bill in September.

Democratic leaders in the 110th Congress will have to find $5.5 billion in cuts to avoid running up the deficit in the current budget cycle, she said. Democrats have settled on a strategy of eliminating funding for special earmarks and adopting a continuing resolution to keep the government going for the next nine months at current spending levels, while focusing on crafting their own budget for 2008.

And finally, Murray says she supports reforming the earmarking process.

Reform of the congressional earmarks process is needed, Murray said. As things stand now, committee chairmen can insert money into the federal budget for their favorite projects at the last minute with no oversight or public notice.

Earmarks "need to be transparent," she said. "They must be done in the full committees with public input."

OMB Watch has made a public statement on the General Service Adminstration's (GSA) controversial decision to reduce and outsource oversight over government contracts.

To reduce oversight, GSA wants to undercut its accomplished Office of the Inspector General (OIG). The GSA OIG has exposed irresponsible contractors at Abu Ghraib, and did investigations that led to the high-profile conviction of David Safavian, the former GSA chief of staff. So why is GSA trying to have OIG do less investigating? And how is it that manipulating oversight this way is even possible?

For background, see this fact sheet on GSA's plans and blog entries here and here.

A story in today's New York Times entitled "Democrats Plan to Take Control of Iraq Spending" raises a number of interesting questions about budgeting war costs.

How can you put such an unpredictable item as war costs into an annual budget? Should war funding requests go to appropriations or a substantive policy review committee such as armed services? What degree of congressional oversight is appropriate for an emergency supplemental spending request?

Reporter Carl Hulse raises one issue, however, that is a complete red-ink-herring:

... adding the war costs to the annual budget could carry risks for Democrats who want to write a spending plan that meets their priorities but eliminates the deficit in five years or so. Adding the war spending at the same time Democrats want to enforce “pay as you go” budget rules would require some of that spending to be made up by reductions elsewhere.

No definition of PAYGO we've ever heard of would apply to even non-emergency discretionary war funding requests.

The Brookings Institute's Katrina Index, which is still performing the invaluable task of tracking the Gulf Coast recovery, reports today that inadequate public services seem to be slowing down the pace of the recovery in New Orleans. Bad public services have may caused stagnation in the housing market particularly, as former residents have been reluctant to move back to neighborhoods that lack adequate sanitation, electricity, gas and water services.

These interdependent trends may lock in a cycle of slow growth. If no new residents show up, why should the city build better public services? Yet, if public services aren't built, why would anyone want to move back?

Even now, 1+ years after the hurricane hit, letting the market do its thing won't rebuild New Orleans. Breaking this cycle would seem to require more public intervention.

Furthermore, the federal government and local governments have shut down a few key sources of information on the recovery.

Interestingly, as long-term recovery problem solving continues, available data to measure the housing, economic, and social recovery on the ground appears to be slowing. For instance, the Bureau of Labor Statistics has stopped reporting data on the status of evacuees while some local entities have temporarily stopped or slowed reporting on noteworthy data such as home sale prices, public transportation ridership levels, current level of utility customers, and the opening of new restaurants.

Incoming Senate Budget chair Kent Conrad (D-ND) said today that the strictures of PAYGO would not block an extension of middle-class tax breaks such as the child tax credit, which make up about two-thirds of Bush's tax policies expiring in 2011. These extensions "are gonna sail through here even if they're not paid for," he said, adding that PAYGO rules, as currently contemplated, could be waived with a supermajority vote.

Conrad also noted that PAYGO would most likely be adopted as a Senate rules change or as part of the budget resolution, because Bush will not sign it into law.

Much about the full-year continuing resolution is still up in the air- even the formula by which all funding will be determined. GovExec has the story.

Details about how a yearlong continuing resolution -- or joint resolution, as lawmakers have termed it - - would function began to emerge this week as congressional staff discussed the fallout from the decision to drop the nine unfinished fiscal 2007 spending measures.

The current continuing resolution to keep all departments but Defense and Homeland Security, which have separate appropriations, running was signed into law last Friday just before lawmakers left Washington for the year. It will run through Feb. 15 and generally funds agencies and programs at the lowest of the following three levels: House-passed fiscal 2007, Senate-passed fiscal 2007, or fiscal 2006 enacted.

The establishment of an independent, outside Office of Public Integrity to review and investigate ethics charges against members of Congress is "definitely on the table," Democratic leadership aide told Congress Daily ($$) today, confirming a report in today's New York Times that "House Democrats are seriously exploring the creation of an independent ethics arm to enforce new rules on travel, lobbying, gifts and other issues."

Such an office, "if approved, would be a major break with tradition," the Times reported. But "some lawmakers have said an independent entity could be unconstitutional," which may or may not be an impediment to action by Congress -- expected in the spring.

On Monday, Paul Krugman wrote a good column ($) on government outsourcing. A key point:

It's now clear that there's a fundamental error in the antigovernment ideology embraced by today's conservative movement. Conservatives look at the virtues of market competition and leap to the conclusion that private ownership, in itself, is some kind of magic elixir. But there's no reason to assume that a private company hired to perform a public service will do better than people employed directly by the government.

In fact, the private company will almost surely do a worse job if its political connections insulate it from accountability -- which has, of course, consistently been the case under Mr. Bush. The inspectors' report on Afghanistan's police conspicuously avoided assessing DynCorp's performance; even as government auditors found fault with Landstar, the company received a plaque from the Department of Transportation honoring its hurricane relief efforts.

And at the last minute, Congress passed a short-term funding fix for the State Children's Health Insurance Programs (SCHIP) that will prevent cuts in services until at least May, according to the Congressional Research Service (Sorry, a link to the CRS report quoted below is unavailable at the moment).

The SCHIP provisions of H.R. 6164 delay shortfalls to the first part of May 2007, according to current CRS projections. Although the provisions redistribute an additional $125 million for projected FY2007 shortfalls, the shortfalls remaining for the rest of the fiscal year are projected at $716 million.

In an ironic and perplexing development today, the Bush Administration expressed dismay with yesterday's decision by incoming Congressional leaders to extend the FY2007 continuing resolution (CR) through the end of the current fiscal year.

"The announcement from the incoming congressional majority is disappointing," said OMB Director Rob Portman, adding that “should there be a long-term continuing resolution, the administration would want to assure we maintain fiscal discipline and avoid gimmicks and unwarranted emergency spending.”

Almost every spending level in the CR was set by the Bush Administration, when it sent its FY2007 budget proposal to Congress in February. Incoming Congressional leaders said yesterday that they will adhere to the discretionary spending cap of $873 billion for FY2007, set by the Administration.

The CR contains no emergency spending provisions. In fact, the White House is expected to sumbit an Iraq war supplemental in the range of $160 billion early next year, the largest such request ever submitted to Congress.

Incoming Senate Budget Committee chair Kent Conrad (D-ND) announced today that he has selected Brookings Institution economics scholar Peter Orszag to serve as the new director of the Congressional Budget Office, replacing Donald Marron.

Conrad said that he selected Orszag after consulting with incoming House Budget Committee chair John Spratt (D-SC), current Senate Budget Committee chair Judd Gregg (R-NH), and the incoming House Budget Committee ranking member Paul Ryan (R-WI).

Though praised by Gregg and a noted budget hawk, Orszag is not regarded as a conservative economist. Prior to joining Brookings, he served as a lecturer at U. Cal., Berkeley and as the top economic advisor to the Director of the National Economic Council and the senior economist on the Council of Economic Advisers in the Clinton Administration.

He is a vocal opponent of Social Security privatization, testifying in May 2005 that:

The Administration’s proposal to introduce individual accounts within Social Security would substantially increase debt, while failing to reduce the projected Social Security deficit and likely increasing it.

So the budget battle of 2006 will end with a whimper, not a bang. The new Democratic leadership wants to (CQ, $) extend the continuing resolution for the entire 2007 fiscal year, with some adjustments.

Though not ideal, it's probably the best of all available options. It will:

• Impose a "moratorium" on earmarks, which could put the next Congress on a path toward more earmark reforms
• Remove a distraction for the new Congress, giving it more time to focus on an ambitious 100-hour agenda
• And let the new Congress make "adjustments" to funding formulas to avoid cuts in key services

The CR's unusual format does raise a few questions, though.

• What qualifies as an earmark under the "moratorium"?
• Will the "moratorium" be applied retroactively or prospectively? What will its fiscal impact be?
• And which "adjustments," which presumably won't qualify as earmarks, will be made?

We'll probably have to wait until January for the answers.

A Washington Post article today reprises the "table talk" from yesterday about entitlement reform.

If anyone can charm congressional Democrats into a dialogue on how to contain Social Security, Medicare, and Medcaid costs, no one in the Bush Administration stands a better chance than OMB Director Rob Portman, a former six-term member of the House, who sat on the Ways & Means Committee.

But when Portman approached former Ways & Means colleague Rep. John Tanner (Blue Dog-TN) last month to solicit ideas, Tanner said later, "I told him to stay in touch. Whether or not we can get something concrete done in the next two years, I just don't know."

The article's final sentence captures the state-of-play of entitlement reform perfectly:

"We have a bit of an Alphonse-and-Gaston routine right now of who's going to go first," Tanner said, invoking the cartoon Frenchmen famously stymied by unctuous politeness. "We've got to figure out how to get a level of trust. This is radioactive in terms of political fallout."

So, which branch will take the first bite?

Expect a long-term continuing resolution for the "punted" 2007 budget. Following announcements by the chairmen of the Appropriations Committees favoring a CR, Rep. Nancy Pelosi and Sen. Harry Reid issued this statement today:

The Do Nothing 109th Congress is now complete, but too much of its work remains far from finished......To give state and local governments certainty about how and what the government is funding, and to give Congress the time to legislate these issues as it should, we support Senator Byrd and Congressman Obey in their plan to pass a year-long joint resolution early in the 110th Congress. It is not a perfect solution, but it is the best available given the fiscal mess the 109th Congress has left behind.

Posted by Matt Lewis, 06:27:03 PM



Entitlement Spending Solutions: Table This

Entitlement growth is a growing problem, budget policymakers in Congress and the Administration agree.

Time to deal with it is of the essence, with the '08 campaign soon likely to make debate on solutions too hot to handle, both sides agree.

"Everything is on the table," incoming Democratic Budget Committee chairmen, Rep. John M. Spratt Jr. and Sen. Kent Conrad say. Treasury Secretary Henry M. Paulson Jr. and White House Office of Management and Budget Director Rob Portman have not ruled anything out.

“My message to Portman and Paulson is: Put something on the table that is near and dear to them to prove their sincerity,” Spratt said last week, according to CQ.

“As the administration, we are in a listening mode,” Portman replied.

Incoming Senate Finance Committee chair Max Baucus said that a solution can be found “only if [Bush] makes it clear that everything is on the table."

I think I need a new prescription -- I can't see anything on the table.

On Friday we posted on a House vote to extend the term of the Special Inspector General for Iraq Reconstruction (SIGIR). Keeping tabs on how the $38 billion pledged by the United States for Iraq Reconstruction is spent is the job of the SIGIR. Released over the weekend, this CBO report delves into the ins-and-outs of Iraq reconstruction finances, and on page 5 the CBO references the work of the SIGIR:

...a recent audit report, Review of Administrative Task Orders for Iraq Reconstruction Contracts, found that relatively high overhead costs-as much as 55 percent of the contract value-were being billed to reconstruction contracts by private contractors. The greater the amount spent on overhead, the less is available for actual reconstruction. The total dollar value of the contracts audited in that report was $1.3 billion. [emphasis mine]

Fifty-five percent!?! Kudos to the House for deciding to keep the SIGIR around a little longer.

GovExec reported that new GSA chief Lurita Doan, who's had it out for the GSA's Inspector General office, got two serious letters from Congress last week.

One of the letters, from Reps. Henry Waxman (D-CA), James Oberstar, (D-MN), and Eleanor Holmes Norton, (D-DC), questioned Doan's plan to hire contractors to conduct "pre-contract award audits" that the Inspector General's office has been doing for quite some time. The letter says the move raises conflict of interest and privacy concerns. Rightly so.

The other letter, from Sens. Barack Obama (D-IL) and Tom Coburn (R-OK), questioned why Doan deemed it necessary to cut the IG's budget request for 2008, despite mounting concerns of waste, fraud and abuse in federal programs. The effective budget cut was apparently unprecedented, as Inspectors General offices are supposed to maintain a large degree of independence within the agency they've been charged to monitor. Otherwise, there's a clear conflict of interest, once again.

Now, it's too easy just to blame Doan for all this mess (she called the IG a "terrorist" in a memo that was leaked to the Washington Post). After all, Doan is only exploiting loopholes in policy that Congress has failed to close- loopholes which allow for the systemic co-option of IG's offices and the systemic outsourcing of contractor oversight to other contractors.

Congress is doing the right thing by questioning GSA here. And it might have been the only thing they could do, since improvements in procurement oversight policy just weren't an option in the last Congress, of course. But this is ultimately a policy issue, and if the next Congress wants to put a stop to these abuses, letters and hearings and what have you will only be the beginning. Let's hope they do some follow-up in January.

On Saturday morning, the President signed an extension of a stopgap continuing resolution, making few changes to its destructive funding formula. It will last until February 15th. CQ ($) reports:

The stopgap spending measure does not contain major deviations from the funding formula in the previous resolutions, despite lobbying by veterans’ groups for $3 billion in additional veterans’ health care money.

The resolution calls for agencies that have not yet had their fiscal 2007 appropriations measures enacted to get the lowest of the House-passed, Senate-passed or previous year funding level.

But in a nod to concerns that veterans health care would be harmed by that formula, the resolution allows the Veterans Affairs Department to transfer up to $684 million to the Veterans Health Administration for medical services.

In the early morning hours on Saturday, the Senate voted 79-9 to combine and adopt two House bills in a sprawling $45.1 billion tax, trade, energy, and health package entitled the Tax Relief and Health Care Act of 2006."

The final version of the bill differed little from the version summarized here.

The $35.9 billion in tax break extensions includes the following major provisions (costs of two-year two extensions -- covering 2006 retroactively and 2007; five-year costs indicated by *):

• R&D tax credit -- $16.5 billion
• State and local sales tax dedecution -- $5.5 billion
• College tuition dedeuction -- $3.3 billion
• Welfare-to-Work credit -- $980 million *
• Teachers' Classroom Expenses -- $380 Million

The bill also included a $4.9 billion provision to lift federal spending for retired miners' health benefits and abandoned mine reclamation, $3.5 billion in (mostly alternative) energy tax breaks, and $1 billion in health savings accounts incentives.

This last provision was snuck into the bill, according to the Washington Post, by "several major business lobbies eager to reduce their medical-insurance costs [and] Ways and Means Committee Chairman Bill Thomas (R-CA) [who] championed it and pressed it through to final approval in the wee hours Saturday morning."

Tracking inversely with income inequality over the past 20 years has been the rate of union membership among American workers. From a peak of 20.1% in 1983, the unionization rate has fallen to 12.5% in 2005 (the latest year for which the latest data are available). In addition to this correlation are empirical data which show that declining union membership explains 15-20% of the increase in income inequality for males.

Increasing rates of unionization would slow the trend in income inequality, and removing obstacles to forming unions is one of the ways to boost union membership. The New York Times reports today that Speaker of the House-elect Nancy Pelosi (D-CA) is proposing to do just that by moving the Employee Free Choice Act, aka "Card Check", to a vote next year.

Even before the Democrats won control of Congress, the bill, the Employee Free Choice Act, had 216 co-sponsors in the House, including 14 Republicans, just 2 short of a majority.

With the Democrats capturing both houses, labor and its allies voice confidence that the bill will pass in the House, but they fear a formidable battle in the Senate, where some foresee a Republican filibuster. Representative Nancy Pelosi, the incoming speaker, said yesterday that the bill would probably go to the House floor in the early spring.

[...]

"We certainly will be passing the card check, the Employee Free Choice Act," Mrs. Pelosi, Democrat of California, told reporters.

This afternoon, the House defeated, 205-207, an amendment by Rep. Edward J. Markey (D-MA) to require oil companies with royalty-free offshore leases to renegotiate those deals before winning new leases in certain areas.

Rep. Charles Rangel (D-NY), the House Ways and Means ranking Democrat, had added language to the amandment, CQ ($) reports "to allow a 2007 “patch” for the alternative minimum tax that would have cost $48 billion."

Given incoming Speaker Nancy Pelosi's First 100 Hours agenda, this may have been Congress' last opportunity to approve such a patch without having to find $48 billion in offsets.

In a stroke of good judgment, the House has decided that oversight of $38 billion in Iraq reconstruction funds is, in fact, something that should be conducted beyond next year.

CQ (no link):

The House by voice vote cleared S 4046, to extend the term of a special inspector general for Iraq reconstruction until 10 months after 80 percent of Iraq reconstruction funding has been spent -- a threshold expected to be reached in late 2008. A provision of the fiscal 2007 defense authorization law set Oct. 1, 2007, as the end of the inspector general's term.

Update: $30 billion figure updated to $38 billion to reflect latest CBO report

Though popular, the tax extenders package that seems headed for approval today is not without its perverse aspects.

For instance, a funding patch for the State Children's Health Insurance Program (SCHIP) was stripped out of the package, at the same time that funding for Health Savings Accounts (HSA) was added. SCHIP benefits low-income children- HSAs the wealthy and privileged.

For more, see this statement by Robert Greenstein of the Center on Budget and Policy Priorites.

It has been known all year that without additional SCHIP funding, 17 states would face SCHIP shortfalls in 2007. The Administration included a proposal in its budget to address these shortfalls. Various bills to resolve the problem were introduced in Congress. But when decision time came, Congressional leaders declined to act. Coverage for up to 600,000 low-income children will be at risk as a result.

As business draws to a close on the penultimate day of the 109th Congress, House and Senate negotiators have substantially agreed on the terms of a tax extenders package. Cost: $45 billion over 10 years.

The package features a broader array of tax break extensions and modifications than had been part of the package in the reconciliation, pension, and trifecta bills earlier in the year (the largest element of which is the R&D credit, at $16.5 billion). Cost: $35.9 billion

It also includes:

• other, miscellaneous provisions, most notably, for surface mining reclamation expensing. Cost: $4.7 billion
• nearly a dozen -- mostly renewable -- energy tax provisions. Cost: $3.4 billion
• several health savings accounts provisions. Cost: $1 billion

The JCT has published itemized details of the package in its current form. The House is expected to vote on the package late this evening and send it to the Senate, which is expected take it up tomorrow.

Back in September, you may recall a series of reports based on an internal investigation of the Interior Department that, essentially, showed that gas and oil companies were getting away with skimping on royalty payments. Interior just wasn't auditing these companies enough to compel the royalties they owed for extracting natural resources from public property.

Now, CBS News reports that not only were they not auditing enough, they didn't actually do the auditing they said they did. Interior misrepresented the number of audits they had been doing all along!

If the report's correct, that's pretty bold stuff. It seems almost a certainty that Democrats will hold hearings on this issue in 2007.

The Iraq Study Group, a bipartisan panel convened to ascertain the Iraq war and recommend courses of action, released its report yesterday. Recommendation 72 of the ISG is that:

Costs for the war in Iraq should be included in the President’s annual budget request, starting in FY 2008: the war is in its fourth year, and the normal budget process should not be circumvented. Funding requests for the war in Iraq should be presented clearly to Congress and the American people. Congress must carry out its constitutional responsibility to review budget requests for the war in Iraq carefully and to conduct oversight.

Almost four years into the conflicts in Iraq and Afghanistan, the president is still making emergency requests for funding. Including the $70 billion "bridge fund" in the FY2007 Defense approps bill, we have spent over $500 billion on the two wars - the vast majority of which is outside the normal budget process. Not only does "emergency" funding circumvent legislated budget caps, but, as the ISG report notes, it results in only a "perfunctory review" of the requested funds.

(via ThinkProgress)

CongressDaily AM($) picked up a meeting of three former CBO directors who aren't very optimistic about the nation's fiscal health.

Pessimistic about Congress' willingness to address looming fiscal shortfalls in federal healthcare and Social Security programs, three former CBO directors said Tuesday the outlook is bleak for heading off the problems.

In a forum at the Urban Institute, former CBO directors Robert Reischauer, Rudolph Penner and Edward Gramlich largely agreed that the Democratic takeover of Congress provides dim prospects for resolving what they described collectively as an oncoming train wreck that might begin to derail the federal budget by the end of this decade.

I got to go to this meeting, and CongressDaily certainly got its tone right, though I'd add that everyone was pretty optimistic that problems with Social Security funding, being relatively minor, could be solved if the political leadership was there.

Most of the more intense gloom centered around health care. It's much harder to deal with health care costs because price escalation is being driven by factors that are harder to control. It's not just a matter of retinkering programs- that won't solve the problem. Health care programs will keep getting more expensive unless somebody does something such that costs are contained everywhere. It has to extend to the private sector as well, since most government programs rely on private providers.

Health care costs are both a budget problem and a sectoral problem. A policy fix for escalating health care spending requires something that goes much deeper than is now being considering. To fix the budget mess, we have to fix health care.

House-Senate negotiations on the oft-deferred tax extenders package broke down today. With adjournment for the year expected by week's end, prospects now look more likely for a lump of coal than a compromise.

The sticking point: a provision to forestall a scheduled five percent cut in Medicare payments to physicians, scheduled to take effect in January. The provision would cost an estimated $10.8-12 billion over five years.

Still, the Senate may float the provision, along with numerous trade measures -- "a Hail Mary pass" over to the house, in the words of one Senate GOP aid.

This morning, we witnessed a remarkable moment in American history: a sitting President's policy castigated and condemned in person by members of a highly-respected bipartisan group -- including a former Supreme Court Justice, former Secretaries of State, and former Presidential Chiefs of Staff -- over military policy relating to one of the five or six major wars ever undertaken by this country.

And to think, that group, the Iraq Study Group, was created by a tiny earmark inserted into a war supplemental bill by a rank-and-file Republican member of the House.

As the New York Times put it:

One never knows what some lawmaker will insert into a spending bill without public scrutiny: a remote bridge, or maybe a bike path. Then there is the Iraq Study Group, better known as the Baker-Hamilton commission.

...

Representative Frank R. Wolf, Republican of Virginia, created the commission single-handedly last year when he inserted a $1 million earmark into a supplemental spending bill for the war.

But why did Wolf introduce this as an obscure earmark? “The fact is that there were members of Congress who would have opposed it... Should I have allowed that to stop me from doing what was in the best interest of the country?”

Lame Duck Session Holds Little Hope for Appropriations Bills

Alternative Minimum Tax Likely to be Large Issue in 2007

The House Democratic caucus may have gotten our memo.

Following a caucus meeting today, to-be-House Majority Leader Steny Hoyer announced that when President Bush sends up his "emergency" supplementary war funding request (expected arrival: next February; pricetag: as much as $160 billion):

There will be vigorous involvement by our committees [and] very substantial oversight and involvement by the Congress... We believe there has not been accountability, there has not been oversight, there has not been a question of policy in the last six years. To that extent, the Congress has been complicit and complacent. We’re going to change that.

With the clock ticking before the sands run out on the 109th Congress and Democrats take the reins for the first time in 12 years, retiring Senate Majority Leader Bill Frist is working feverishly to assure passage of the set of two-year tax break extensions (known as the extenders."

He is working to pass a clean version of the popular package, unencumbered by Christmas tree ornaments. He is working to pass a version with a provision delaying implementation of cuts in Medicare payments to physicians. "I've got both tracks working," he said yesterday.

Let's see if he can avoid a train wreck this time.

On Dec. 1, National Public Radio's Morning Edition ran a short segment by John Ydstie on the Alternative Minimum Tax (AMT), entitled "Democrats Promote Relief from the Alternative Minimum Tax."

3.5 million taxpayers had to file income tax returns under the AMT in 2006. Unless addressed by Congress, this number will increase to 23.4 million in 2007, as we have noted.

The segment indicates that the average AMT filer must pay $3,000 more in taxes each year than under the regular system.

Meanwhile, the 10-year cost of ATM repeal is estimated by CBPP to be around $1.2 trillion.

An excellent overview of the ATM, the program segment (listen here) brings home how powerfully this issue is likely to play in the media over the coming months.

The Center on Budget and Policy Priorities (CBPP) has written up an analysis of the Census Bureau's survey of material hardship from 2003. Among the more startling findings:

* Between one-fourth and one-third of black African American families with children (28 percent) experienced at least one of three hardships — overcrowded housing, hunger or the risk of hunger (termed “food insecurity” by the government), or lack of needed medical care — in the 12 months before the survey was conducted in summer 2003. [2] This was double the comparable rate for non-Latino white families with children (14 percent).

* Nearly one in three families with children headed by a Latino citizen (31 percent) experienced at least one of these three hardships, not significantly different from the rate for black families.

What's more, this might be the last time researchers and advocates are able to gauge the unmet need. The survey used by CBPP (and countless other analysts) - called the Survey of Income and Program Participation - will be terminated unless Congress appropriates more funding for the Census Bureau (we commented on this development back in June). That'd be a shame if Congress didn't restore sufficient funding. How else will we know how effectively federal programs are dealing with material hardship?

ThinkProgress notes that, as of Saturday, the current minimum wage has gone the longest without an increase since its inception in 1938.

The Washington Post had a truly appalling front page article over the weekend on efforts by the administrator of the General Services Administration to undermine oversight and investigation into contracts by the agency's Inspector General (IG).

WP: GSA Chief Seeks to Cut Budget For Audits

Posted by Adam Hughes, 10:53:06 AM



WP on Congress and Appropriations: Lame!

The Washington Post had a good editorial today on the unfinished appropriations bills.

ONE OF the basic functions of Congress is passing spending bills to fund the operations of government. Congress regularly fails to complete this work in a timely way, but the 109th Congress is set to leave on an especially negligent note. Unless something dramatic changes, it will limp to a close having completed work on just two spending bills for fiscal 2007, which began Oct. 1. The upshot is that, at best, the fiscal year will be nearly one-third over by the time the 110th Congress finishes the work left incomplete by the 109th.

This is inexcusable. The House passed all but one spending bill. The Senate Appropriations Committee reported all the spending measures by July, the earliest that's been accomplished in 18 years. Then the full Senate punted. Only two bills -- covering defense spending and homeland security -- became law; one other, for military construction, won initial Senate passage, but the conference agreement worked out with the House is now stalled.

New York Times tax and budget beat reporter David Cay Johnston, endorsed the general concept of ATM reform rather than repeal in his his book Perfectly Legal. Johnston indicated to us today that he hadn't heard discussion of any compromise solution that would mend AMT, not end it.

Today, 3.5 million taxpayers file income tax returns under the Alternative Minimum Tax (AMT). If the current AMT fix expires at the end of the year, the number will increase dramatically to 23.4 million in 2007 and to 32.4 million by 2010. If the Bush tax cuts are extended, 52.6 million taxpayers will pay the AMT in 2017.

Amid a rapidly-growing bipartisan congressional consensus that the AMT's creep reaches into the middle class must be stopped, two solutions are propounded:

1) continue annual patches fixing the number of taxpayers filing AMT returns -- estimated cost: $20 billion in FY2007, increasing annually
2) repeal ATM entirely and immediately at an estimated cost of $25 billion in FY 2007 and $1.2 trillion for the 2006-2015 period.

Under the rules of the brave new PAYGO world the Democrats have committed to establishing, the cost of repeal would require $1 trillion-plus in tax hikes and/or spending cuts and mean a decade of extreme pain.

Compromise Prescription: re-instate the original intent of the AMT framers by limiting liability to millionaires and, this time, index it to inflation, so the middle class is held harmless.

Cost: Using Tax Policy Center figures, when the AMT is applied only to millionaires, we project total AMT revenues through 2017 to be about $200 billion.

To get this statistic, we projected current millionaires' liability through 2017, extrapolated the growth rate in the number of millionaires liable, calculated the additional interest expense from foregone revenue, and came up with a total figure of $197 billion in savings over continued annual patches or full AMT repeal (credit to my colleague Craig Jennings, who provided the back of his envelope).

The dynamic duo of Ornstein and Mann have an op-ed in the Philadelphia Inquirer today that's worth a read. Their highest-priority reforms to help make Congress functional again:

• New ethics and lobbying rules, including an independent enforcement panel
• 5-day work weeks and a minimum number of weeks in session
• A return of regular order to bill votes, amendments, and debate

These seem like realistic proposals. And the new Congressional leadership seems to be listening. Both Senator Reid and Rep. Pelosi have promised longer weeks, hours, and days, and Reid has scheduled an intense first seven weeks of the session. Pelosi will introduce a rules package that includes ethics reform as the first order of business in the House. And both, to my knowledge, have promised a return to more bipartisan, open legislative procedures.

That's easier said than done, of course. We'll still have to hold them to these promises, and make sure that they go far enough.

The two guys from Harlem and Wall Street will meet in the Library of Congress next month when incoming House Ways and Means chair Charles Rangel (D-NY) and Treasury Secretary Henry Paulson attend a daylong "bipartisan 'retreat' to find common ground on tax and trade policy."

Accoring to Bloomberg News, Rangel suggested that the Ways and Means Committee might hold similar retreats with Paulson during the 110th Congress "to see whether we could work in some of the good ideas with legislation that could be supported by the administration," on issues such as Social Security, Medicare and Medicaid.

They will need to find a pretty big room in the Library to accommodate a table with so many big-ticket items on it.

But, as he has before, Rangel ruled one item off the table, a rollback of the 2003 Bush dividends and capital gains, saying:

Repealing tax cuts that are locked into place, that people have depended on these tax cuts, invested in these tax cuts, not only is it bad tax policy to repeal it retroactively, but it's dumb politics to do it, especially when it's going to get vetoed. Forget about it.

With the bursting of the real estate bubble and increases in interest rates, access to cheap home equity loans is drying up and adjustable-rate mortgages (ARMs) are taking up larger portions of homeowners’ take home pay. As household finances begin tightening, consumers will be increasingly reaching for their credit cards, and not just for big-ticket purchases like plasma TVs, but for more everyday expenses like food and utility bills.

At a time when Americans are under unprecedented levels of household debt, credit card companies enacting unfriendly consumer practices, and headlines about consumer privacy violations, the 110th Congress may be looking at ways to shield consumers from some of the more devious clever fees and interest rates credit card companies charge their customers.

BNA ($):

"If credit card companies do not promptly take the initiative to clean up their industry, Congress and the regulators--including the Federal Reserve, the Federal Trade Commission, and the Office of the Comptroller of the Currency--must take action," [Sen. Carl] Levin [(D-MI)] said in remarks prepared for a Nov. 30 policy forum sponsored by the Center for American Progress.

[..]

At the forum, Levin highlighted several examples of practices he found disturbing including companies requiring payment of interest on charges already paid through "double-cycle" billing, he said.

For example, a credit cardholder might pay off a charge of $490 out of $500, leaving a $10 balance, but the bank still charges the customer interest on the entire $500 charge. Other practices include requiring borrowers to pay back debt with a lower interest rate first before they can pay back debt with a higher interest rate, he said.

Additionally, Levin highlighted the practice of charging consumers fees of $5 to $15 to make an on-time payment by phone, potentially in order to encourage people to mail payments so the company can earn interest on them.

Meanwhile, in the House, Rep. Barney Frank (D-MA) has announced his consumer-protection agenda for the next Congress (CongressDaily ($)):

House Financial Services ranking member Barney Frank, D-Mass., said today his top priorities as incoming chairman are bills to restrict predatory lending on home mortgages, strengthen data security and ensure that the nation's top bank regulators do not override state consumer protections.