Government contractors are preparing for additional oversight, tighter regulations and responsibility rules, and perhaps even a downturn in the size of future contracts due to the Democrats takeover of Congress in 2007, according to The Washington Post.

Every company that does business with the government could feel the impact, but contractors that benefited most from work in Iraq and Afghanistan, from homeland security initiatives or from Hurricane Katrina are especially likely to be under the microscope. Big-ticket weapons programs are also expected to garner special attention, and it may become more difficult to get a no-bid contract, according to industry observers.

All I can say is it's about time.

WP: Contractors Face More Scrutiny, Pinched Purses

Conduct your own oversight with FedSpending.org
Don't forget you can conduct your own oversight and investigation into government contracts using OMB Watch's searchable online database of federal spending ---> FedSpending.org.

Check it out anytime you need to know how much money a government contractor receives from the federal government, what services or products are most often purchased at the national level, or which congressional district gets the most federal dollars.

Now that a program-slashing continuing resolution is nearly a sure thing, agency administrators (and not advocates or politicians, mind you) are speaking out. From CongressDaily PM ($):

The Social Security Administration has told congressional staff it might have to furlough every employee. HUD funding would not keep pace with demand for low-income housing vouchers, meaning "literally thousands of people would be out in the street," one source said. School breakfast and lunch programs would face a $1 billion shortfall, cutting off 1.2 million participants. The Veterans Health Administration would have to absorb the $3 billion increase to meet this year's requirements.

That's rather bleak. So how to appropriately respond to what could turn into extensive hardship and deprivation?

A [Sen. Tom Coburn (R-OK)] spokesman called such concerns "absurd." Given government spending has increased 50 percent since 2001 "any agency that can't figure out how to function under a one-year CR is incompetent, he said. He noted the VA has $1.7 billion in unspent funds left over from last year. "If appropriators took this seriously they wouldn't be wasting time earmarking and putting stoplights in their districts. The hypocrisy is astounding."

Right. Let's take a look at the numbers, Mr. Coburn's spokesman. This CR applies to domestic discretionary spending (which excludes defense and homeland security appropriations). And guess how much it's gone up since 2001? IT HASN'T. IT STAYED FLAT. A huge number of programs have been cut, many of them deeply.

So, no, there is no more fat to cut off this goose. In fact, you should be pleased; aren't these cuts exactly what you and your friends want for America? CQ ($):

“A CR will keep spending lower,”[Rep. Patrick McHenry (R-NC)] said. “It’s the best thing.”

The best thing- and just in time for the holidays! It's like Santa came early...and took away school breakfast, housing support and just about everything else.

Congressional Quarterly ($) reports today that GOP leaders have decided to enact a long-term continuing resolution when they return to session in December, effectively pushing off their failed budget work onto the new Democratic Congress in 2007.

Incoming Senate Majority Leader Harry Reid's spokesman, tacitly acknowledging the amount of homework heaped on Democrats' desks, said,

“This is only the latest example of why the American people rejected this do-nothing Congress at the ballot box earlier this month. Republicans couldn’t do a budget. And now they have decided that they can’t or won’t pass the bills that provide funding for health care, education, transportation, etc. that benefit millions of Americans.”

Outgoing Senate Majority Leader Bill Frist's Chief of Staff implicitly impugned his party's ability to control its addiction to earmarks:

“With speedy progress on separate bills in the Senate highly improbable, and passions high on the part of many against an omnibus due to concerns over earmarks, Senate leaders are talking about how long a wrap-up CR could go, and, from the administration and Chairman [Thad] Cochran, they’ll be getting guidance on what remaining anomalies exist so that essential government operations will not be throttled if a CR needs to go into next year.”

Anomalies never cease.

About a month after signing a defense appropriations bill containing $70 billion extra-budgetary "bridge fund" to pay for the wars in Iraq and Afghanistan, President Bush may request yet more funding for the conflicts. The next request could be an eye-popping $130 billion.

BNA ($):

Complicating the outlook for Democrats' own agenda would be the arrival of Bush's next supplemental spending request for the wars in Iraq and Afghanistan, others said. The next war supplemental is expected to be more than $130 billion, an aide to outgoing Senate Majority Leader Bill Frist (R-Tenn.) said. That supplemental request, which also would fall to the appropriations committees to tackle, would exceed all of Bush's previous requests for war spending.

This would be, by a long shot, the largest supplemental request for the Iraq and Afghanistan conflicts, and be the third such request in six months. In fact, this request would not only be the single-largest supplemental, but cost more than any single fiscal year’s war spending. It should raise a few eyebrows and bring Defense Secretary nominee Robert Gates to the witness table in January to answer a few questions, like How long will these funds last?. What exactly are we paying for that costs an order of magnitude greater than previous requests?, and Why, after three years is war spending still considered "emergency"?

This is not, however, totally unexpected. A few weeks ago we noted that the Defense Department might be seeking additional war funding. And while this week's reported figure is $30 billion less, it's still massive and is completely out-of-line in terms budget process.

If Congress does not take action soon, nearly 630,000 children may lose their health care. Why? A funding shortfall in a quirky health care program called the State Children's Health Insurance Program (SCHIP).

SCHIP was created in 1997 to shore up Medicaid. It covers children whose families have incomes that exceed Medicaid eligibility levels, but are still struggling to get by. This design has been remarkably successful- the share of low-income children who are uninsured has fallen by one fourth since 1997, despite a decline in employer-provided benefits.

Hundreds of thousands of enrolled children may get cut off the program now, though, for two reasons:

CQ.com ($) reports that the House has passed an extension of the stopgap funding measure known as the FY 2007 continuing resolution. The current continuing resolution was set to expire this Friday. Hence, the swift action from the House.

The House-passed version of the extension will expire on December 8th. It sets appropriations at the same levels that the resolution it extended did; that is, the lowest of the levels set in either the Senate-passed version, House-passed version or last year's appropriations bills. In any event, if you take inflation and population growth into account, extending this CR means that human needs programs are being cut.

The Senate is expected to pass a similar extension of the continuing resolution today or tomorrow. It will then go to the President for his signature. When Congress returns in December, they will attempt to wrap up work on the FY2007 budget, or pass a long-term extension of the CR until the next Congress. Regardless of what happens, there's a strong possibility that Congress will make deep cuts to social needs programs.

UPDATE: The Senate has passed H. J. Res 100 this evening to continue funding federal programs through December 8. The bill will now go to the president for his signature.

In a continued effort to totally ignore Congress's request to fund the wars in Iraq and Afghanistan through the regular annual appropriations process, the Defense Department is in the process of constructing a new supplemental funding request for the wars for FY 2007 - reported to be a whopping $160 billion. Combined with the current $70 billion FY 2007 apporpriations for Iraq and Afghanistan, the United States could spend $230 billion on the wars by the time this fiscal year ends next September. That's approximately half of the total spending on the wars so far!

As if this wasn't bad enough, an internal Defense Department memo sent at the end of October encouraged the individual services to include even more money outside of the war effort in their supplemental requests. From CQ Today: ($)

In an Oct. 25 memorandum that expanded the emergency spending to costs associated with the global war on terrorism, Deputy Defense Secretary Gordon England encouraged the services to seek large supplemental requests. In the past, the Pentagon has used supplementals only to seek money for fighting in Iraq and Afghanistan.

“Estimates are to include incremental costs related to the longer war against terror,” England wrote, specifically saying those costs could include repairing and replacing equipment as well as changing force structures.

We've said many, many, many times that the increasing reliance on supplemental appropriation requests poses significant threats to the fiscal health of the country. Supplementals weakenen fiscal responsibility, errode opportunities for congressional oversight (not that Congress is really all that interested in oversight these days), increase the opportunity for waste, fraud, and abuse of federal resources, and discourage long-term planning and preparedness. When is the Bush adiministration going to learn?

In an op-ed today in the San Fransico Chronicle, Bill Frenzel and Leon Panetta call for a "Budget Summit" to hash out the difficult budget issues:

What is needed now is for members of both houses, both parties, and the president to roll up their sleeves and grapple with these issues. No more denial. No more happy talk. No more delay. An equal number of Republicans and Democrats, along with the president, should participate, no matter how Congress is divided following the election, no matter which party is the majority, so that no single party will dominate the discussions or bear sole accountability for the choices.

Republicans (excepting the 2 years when the Senate was split) have controlled the Executive Branch and both houses of Congress for the past six years, and instead of "rolling up their sleeves" to make tough decisions, they instead chose to break the bank an make a run at ending Social Security.

Frenzel and Panetta continue...

While disappointing, it is not surprising that there has been bipartisan foot-dragging in confronting the realistic solutions to the nation's budget problems -- the fixes are difficult. Even the suggestion of the real choices -- increasing taxes and cutting spending -- is met with outrage, accusations and political attack ads.

This may be too rosy a bipartisan picture to paint, even for Frenzel and Panetta. While they are probably referring to Democrats rejection of Bush's Social Security overhaul proposals to complete their "bipartisan foot-dragging," it's certainly hard to drag your feet and have it make much of a difference when you are not in the majority. Particularly, I'm wondering if they missed the past few months of legislative action in which Republicans held hostage a popular package of tax cuts that enjoyed bi-partisan support in an attempt to push through a $750 billion dynasty tax cut?

While it would be nice if we could somehow get the relevant powers-that-be together in a room and force them into a compromise that everyone is happy with, we might as well wish for a few ponies as well, because balancing the budget to meet short- and long-term fiscal health will not happen as long as either side continues their no-exceptions ultimatums about possible solutions (i.e., no changes to Social Security, no tax increases at all). Republicans and Bush in particular are resolute about not rolling back the tax cuts, and as long as tax cuts are off table, there’s just not much point in attempting a compromise because it simply will fall short in the long run.

Until our elected leaders are willing and ready to make difficult policy decisions and devise a comprehensive solution that is focused on the long-term fiscal health of the nation, we will face an ever-narrowing range of options available for debate. Wishing upon a star is just not warranted.

Lockheed Martin, the nation's biggest government contractor, recently announced that its third-quarter profits topped $600 million. Let's assume the vast majority of that profit was earned on government contracts (a fair assumption since Lockheed receives more than two-thirds of its annual revenue directly from the government). Under our assumptions and extending out their quarterly profits - Lockheed will make about $2 billion in profit on government contracts this year.

For perspective, that $2 billion is roughly equal to:

• The entire budget of the Low-Income Energy Assistance Program (LiHEAP)
  
• About half the budget of the Women, Infants and Children (WIC) feeding program
  

Put it a different way- that profit pretty much matches up with the following program cuts that the President advocated in his FY2007 budget proposal:

• Cuts to the Community Development Fund beginning in FY2004
• 5-year cuts to the WIC program
• Aggregate of 5-year cuts to the Child Care and Development Block Grant and Housing for the Elderly

These are the President's priorities for the federal budget. Are they yours?

Looking again at the House Democrats' legislative agenda for the 110th Congress, a muddled picture emerges of the plan's composite fiscal outcome.

The Washington Post points out today that the House Democrats propose tens of billions of dollars in additional spending for revamping the military, tightening port and border security, fully funding first responder needs, increasing college tuition deductions, promoting renewable energy, and expanding incentives for personal savings accounts.

At the same time, the Democrats' plan drops fixes for both the alternative minimum tax and for the "doughnut hole" in prescription-drug coverage under Medicare. But it would allow the federal government to negotiate lower drug prices for Medicare, force companies to pay taxes on foreign profits, cut oil and gas company tax subsidies, and close the vaunted $345 bliion "tax gap."

So, what is the fiscal upshot? Without price tags and revenue estimates for all of the above items, it is anyone's guess. But theoretically, the plan aims at revenue neutrality:

[It] would prohibit the House from approving new spending or tax measures that widen the budget deficit. It would do that by restoring budget rules requiring that all future spending increases and tax cuts be offset by equivalent tax hikes or spending cuts.

Easier said than done; beware the slip 'tween cup and lip.