Just when Democratic House leadership thought it was safe to bring a $183.6^* billion war supplemental spending bill to the House floor for a vote, the Blue Dog coalition bares their teeth. We briefly mentioned yesterday that the coalition has expressed their displeasure that an expansion of college benefits for veterans would not be offset. By signaling that they would not support the rules package under which the war supp would be debated, they have induced Democratic leadership to find offsets, thus postponing a vote until at least next week.

The provision is question is know in the Senate as the Post 9/11 Veterans Educational Assistance Act of 2008 (S. 22), a bill introduced by Sen. Jim Webb (D-VA) and cosponsored by 57 senators. The CBO scored the bill as costing $40 million the first year, $680 million the second, and totalling almost $52 billion over ten years.

Blue Dogs' insistence on offsetting these costs has drawn the ire of the Out of Iraq Caucus. Rep. Maurice Hinchey (D-NY) was incredulous ($). "How can the Blue Dog Coalition possibly say that an expansion of education benefits is too costly when their votes to spend hundreds of billions of dollars to fight in Iraq violate the same pay-as-you-go rules they claim to so deeply respect? It's an inconsistent logic."

But, is Hinchey right to insist the Blue Dogs selectively apply PAYGO?

^*That's the commonly-used dollar amount in press accounts. That number, however, does not include $11 billion for extended unemployment benefits (over 10 ten years) and $720 million for expanded GI Bill benefits (over 2 years). With those factored in, the bill would be about $200 billion

Most of the reasons offered up by President Bush and congressional opponents of the housing crisis plan sponsored by House Financial Services Committee chair Rep. Barney Frank (D-MA) have a yellow, off-tone ring to them. You hear that it's a bailout, that it rewards the miscreants who bamboozled homeowners into predatory loans, that it tosses the burden of foreclosure risk onto innocent taxpayers, that the administration has already tried it, that it is already working, that it won't work, that it will work and cost us -- enough reasons to suggest that unreasoned ideological skeevies are at play.

All well and good. But while President Bush has the luxury of ideology -- his name will never be on a ballot again -- this is not true of his GOP colleagues in the House and Senate, where election-year concessions to reality regarding the survival of the realty market (see this must-read story in today's NY Times) and of members of Congress themsleves trump adherence to a stubborn, shop-worn, incoherent set of empty shibboleths.

But Rep. Steven C. LaTourette (R-OH) wasn't making any quiet concessions yesterday, as he defended his vote, one of 39 from GOP House members, in support of the Frank bill:

What's offensive is some of the rhetoric. They say it rewards speculators. No, it doesn't. It's limited to homeowners. They say it's a $300 billion bailout. No, it's not. It costs $1.7 billion. Would I have written the bill the way Chairman Frank did? No, but we're not in charge anymore... People are expecting us to do something.

A growing number of GOP congressional incumbents doubt that another veto threat by the president would qualify as "something."

This afternoon, the House adopted the first in a set of housing-related bills, H.R. 5818, the Neighborhood Stabilization Act, by a vote of 239-188. The bill would establish a $15 billion, HUD-administered loan and grant program for the purchase and rehabilitation of vacant, foreclosed homes with the goal of occupying them as soon as possible. One half of the funds ($7.5 billion) would be for loans; half ($7.5 billion) would be for grants.

• allocates the loan and grants based on a state's percentage of foreclosures over the last four calendar quarters and the number of subprime loans delinquent over 90 days. States then allocate funds to government entities or for profit and nonprofit organizations for the purchase, rehabilitation, and resale of housing and the purchase, rehabilitation, and operation of rental housing
• provides revenues to the federal government from resale or, for rental properties, refinance proceeds. Loans for homeownership properties must be repaid within three years. For rental properties, the maximum loan term is five years. The federal government would receive up to 50 percent of any appreciation an owner realizes at resale
• targets housing to low-income families and families. Homes must be sold to families with incomes that do not exceed 140 percent of local area median income (AMI). Rental housing must serve families having incomes at or below local AMI

For descriptions of the set of housing-related bills, including H.R. 5818, the American Housing Rescue and Foreclosure Prevention Act (H.R. 3221), and Tax Provisions to Expand Refinancing Opportunities and Spur Home Buying (H.R. 5720), click here.

After sending mixed signals for weeks about H.R. 5830, the Frank FHA mortgage refinaince loan guarantee program, President Bush issued a Statement of Administration Policy (SAP) opposing a number of provisions in the housing stimulus package (H.R. 3221) being considered on the House floor today and declaring that he would veto the package in its current form.

Ironically, the elements in the bill intended to draw bipartisan support are "modernizing" the FHA and more stringent oversight of Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that guarantee the purchase and sale of home mortgages in the secondary market. But the administration statement called the inclusion of FHA modernization and GSE reform "largely symbolic" and said Frank's FHA rescue plan "would force FHA and taxpayers to take on excessive risk, and jeopardize FHA's financial solvency."

Yet, even in the worse case, the risk to taxpayers as estimated by the Congressional Budget Office could come to as much as $1.7 billion over five years, or roughly $400 million a year. Since there are over 100 million "tax units" in the U.S. (individuals plus households paying taxes), the Frank plan would, at most, cost the average taxpayer $4 dollars a year. How much of a risk is that against the backdrop of what Princeton Prof. Paul Krugman projects will be $6-7 trillion in home equity value lost in the housing crisis?

The SAP may be more of a veto threat than a promise in the end. As Jaret Seiberg, senior vice president at the Stanford Group, a Washington policy research firm told CNN this afternoon, "We see this more as an effort to gain leverage over the final shape of the bill and less about an actual veto. The politics of killing this bill are negative for the Republicans, who very much need to win either Ohio or Florida if they hope to keep the White House in November. Both of those states are suffering severely during the housing mess."

Stay tuned.

House Majority Leader Steny Hoyer (D-MD) and House Appropriations Chair David Obey (D-WI) told lawmakers today that Democratic House leadership will advance a $183.6 billion war supplemental spending bill. It combines the remainder of President Bush's FY 2008 request and his partial FY 2009 request and will fund the wars in Iraq an Afghanistan through the remainder of Bush's term.

The bill, which could be voted on early as Thursday, includes several domestic spending provisions:

• $11 billion (over 10 years) for unemployment insurance expansion
• $720 million (over 2 year) for expanded GI Bill benefits
• About $1.3 billion in international food aid
• A Bush-requested $5.8 billion for New Orleans levy repair

To remain under Bush's veto-threatened limit, $3.4 billion less than his request was provided to the military.

CQ Politics, Democrats Unveil War Supplemental Plans
CQ ($), Democrats Unveil War Supplemental Plans
CongressDaily PM ($), Dems Prepare $183.6B Supplemental, May Vote Thursday

Congressional opposition to the Frank housing bill is coalescing around apparently dubious propositions ($).

[Antonia Ferrier, spokeswoman for House Minority Whip Roy Blunt (R-MO)] also took aim at the [Rep. Barney] Frank proposal. "This bill perversely rewards those who borrowed more than they could afford — their monthly mortgage payments get reduced with the government footing the bill. How is that fair to the millions of Americans who worked hard and paid their mortgages on time? And who ends up holding the bag if all goes south? No surprise, the American taxpayer."

Meanwhile, economist and Fed Chief Ben Bernanke provides an "expert" opinion:

"High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy," [Federal Reserve Chairman Ben] Bernanke said Monday..."Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest," he said.

...

The current housing crises has clobbered some borrowers home prices dropped. That left them with mortgages that are bigger than the value of their home. When that's the primary problem, Bernanke said the best solution may be reducing the amount that the borrower owes on the loan or some other permanent modification to the loan.

Fine. Helping distressed homeowners can help everyone. But surely we cannot stand in the way of the the almighty market! That would be disaster.

Republican talking points obtained by Roll Call also suggested housing prices must fall further rather than be propped up by a new government program, an argument also made by [Sen. Richard Shelby (R-AL)] Shelby.

"The correction in the housing market is a necessary reaction to a prolonged period of reckless lending and borrowing practices that helped take housing prices to levels that were simply unsustainable. For the market to stabilize, prices will need to return to levels that ordinary Americans can afford," the talking points read.

Or not.

Rising foreclosures add to the glut of unsold homes and that put more downward pressure on prices, aggravating the housing slump, he said. More rapid declines in house prices could have an "adverse impact" on the broader economy and the stability of the financial system, [Bernanke] said.

Photo by Flickr user msabcmom used under a Creative Commons license

On Thursday, May 1, the the President officially requested that Congress appropriate $70 billion in supplemental funding to fight the wars in Iraq and Afghanistan. Combined with the $108 billion in supplemental funding that Congress is currently mulling to fulfill the remainder of Bush's FY 2008 request, contemplated combined spending package would total $178 billion -- by far the world's biggest supplemental spending bill. (This number omits some $20 billion in domestic spending that Congress has, of late, been considering attaching to the supplemental.)

Consider:

(click on image to enlarge)

While it's true that a few Senators have called for Iraq reconstruction funds to be doled out as loans rather than direct expenditures, the $3 billion in savings would be but a snowflake in the massing $805 billion snowball known as "war spending." However, by and large, Congress has been exceedingly pliant in writing checks to the Executive.

Clearly sums this large deserve some debate. It was, after all, a $22 billion sliver of daylight between the president's and Congress's FY 2008 budgets that was subject of reams of press statements not so long ago. Curious then that nearly $1 trillion can be shuttled off to the Pentagon, State, VA, and a few foreign governments without any real debate about the merits of such spending or what tradeoffs might be required to accommodate these vast outlays.

UPDATE: Correction -- The wrong state spending data were used on a chart that has since been replaced with the current one. We regret the error.

When we last left Reading First -- the Bush Administration's "education program," in which the Education Department "inappropriately influence[d] the use of certain programs and assessments" and "created an environment that allowed real and perceived conflicts of interest" -- the president was decrying the slashing of its FY 2008 budget by congressional appropriators.

In March, at a Reading First program directors' meeting, Secretary of Education Margaret Spellings implored the directors to "fight fiercely" for the program because "[]y]ou have seen the benefits of this program." And Tennessee Reading First director James Herman claimed that the program "has made so much of a difference in the lives of so many people."

According to a report released Thursday by the Education Department that Reading First doesn't actually make a difference:

• On average, across the 18 participating sites, estimated impacts on student reading comprehension test scores were not statistically significant.
• Average impacts on reading comprehension and classroom instruction did not change systematically over time as sites gained experience with Reading First.

Yesterday, the House Financial Services Committee approved a proposal by committee chair Rep. Barney Frank (D-MA) to permit the Federal Housing Administration to guarantee up to $300 billion in refinanced mortgages. !0 Republicans voted with the majority in the 46-21 bipartisan vote. The bill would require lenders to restructure the loans with an FHA-approved lender. Only loans on principal residencies made on or before Dec. 31, 2007, would qualify for the restructuring. Frank said:

I don't think that we should panic and stop the decline of house prices in some parts of the country, but the speed in which it is happening hasn't helped, so I think this will help. It could help stabilize the market, put some liquidity back in the market and not interfere with the market, I think, but help restore a market, because we don't have one.

The Administration's position on the bill is hard to ascertain. Roy Bernardi, deputy secretary of the U.S. Department of Housing and Urban Development, wrote a letter this week to Frank and committee ranking member Spencer Bachus (R-AL) and later addressed the annual conference of directors of the Federal Home Loan Banks -- apparently expressing the views of the Bush administration -- warning that "Americans don't want to pay for the risky financial behavior of others," Bernardi said. "And they don't want to make the federal government the lender of last resort, with the private sector dumping bad loans on FHA (the Federal Housing Administration) and the taxpayers themselves."

Meanwhile, Treasury Secretary Hank Paulson seemed to approve the bill, saying that the adminstration had already proposed a plan similar to Frank's and indicating that he was open to the bill. "There are not huge differences."

The bill has not been scored by the JCT, but the committee adopted an amendment exempting it from the strictures of PAYGO. After the vote, Frank expressed his hope that Congress can clear that package for President Bush's signature before the July Fourth recess.