Chris Edwards of the Cato Institute testified at a Senate Finance Hearing on Tuesday.

Essentially, Edwards argued that the federal government has a "spending problem." Increased spending, he said, is almost entirely responsible for the last 5 years of high deficits. Therefore, we ought to get to the root of the problem and cut back on spending to get the deficit under contol. This is the same tack that Senate Budget Committee Chairman Judd Gregg (R-NH) has taken while advocating for drastic budget cuts.

There are a lot of things wrong with this line of reasoning, not the least of which is the canard that spending increases alone have caused the deficit. The Center on Budget and Policy Priorities has shown that the cost of the 2001 and 2003 tax cuts is three times the cost of all legislated spending increases. And revenues as a percentage of GDP are far lower than historical averages, suggesting that it's revenues that are out of whack, not spending.

Anyway, the most important thing that's wrong with this argument is that it doesn't matter what policies created the deficit. We don't have a "revenue" or a "spending" problem. What we really have is a deficit problem.

Mr. Edwards points out, correctly, that spending has gone up a great deal since 2001. Yet much of that spending increase has been for defense and homeland security. By Edwards's logic, if defense spending increases created a bigger deficit, we must cut back on defense spending. But nobody wants to do that just yet (including Mr. Edwards), because defense spending is a national priority.

The point is, the factors that caused the deficit tell us nothing about how to address it. We budget according to what our priorities are. We should decide how to address the budget deficit in similar fashion.

Per a report today in Congressional Quarterly, House and Senate Appropriations Committee chairs Rep. Jerry Lewis (R-CA) and Sen. Thad Cochran (R-MS) told their respective leaders House Speaker J. Dennis Hastert (R-IL) and Senate Majority Leader Bill Frist (R-TN) this week:

While progress is being made with ... two [out of 12] major bills, we want to reiterate our commitment to moving each of the individual appropriations subcommittee conference reports at the earliest possible date this year.

In terms of appropriations bills passed to date, right now there's one down, 11 to go. Almost everyone involved in the budget process in Washington assumes that a lame-duck session of Congress will take up the FY 2007 budget in an omnibus bill. But this would circumvent the regular order appropriations process and thus undermine Lewis and Cochran’s considerable authority.

Lewis and Cochran have a stake in the regular order and it can be expected to try to pursue it diligently. But with FY 2007 less than a week away, now they tell us they want to?

Sen. Frist has promised to finish work on the Homeland Security and Defense appropriations bills before Congress goes on recess. Will he deliver?

Senate Majority Leader Bill Frist (R-Tenn.) promised lawmakers an aggressive work week Sept. 25, saying he is planning to use the next six days to finish critical appropriations bills, border security legislation, and measures dealing with President Bush's electronic surveillance program and military tribunals.....

...Both Frist and House Majority Leader John Boehner (R-Ohio) have said they may keep lawmakers in session until Sept. 30 to finish priority bills but then are determined to stick to their plans to adjourn. Legislation that is not finished by then, they said, will be held over until a post-election session to be held in November.....

....The GOP leader also said that he will be ready to bring to the floor conference agreements reached on the must-pass Department of Defense appropriations bill (H.R. 5631) and the spending bill for the Department of Homeland Security (H.R. 5441). But while conferees on the DOD bill already have announced a deal on that legislation, some issues raised by the Homeland Security bill have yet to be resolved, bringing into question when that measure will be ready for floor action. Conferees on the latter bill were planning to meet late Sept. 25 in an attempt to finish the legislation.

"We absolutely must finish this week" the two FY 2007 appropriations bills, Frist said.

According to a provacative new paper by Peter Francia and Renan Levine, Bush's policies have disproportionately benefited red states over blue states.

On average, red states get more money from the federal government than they give back in taxes, and blue states tend to give more money in taxes than they get back from the federal government. Now, socio-economic and demographic realities, for the most part, dictate where federal resources are going. The 10 poorest states in 2004 were red states, and 8 of the 10 richest states were blue states. But, in recent years, the income gap between red and blue states has been closing, even as the federal spending gap has widened. And this trend has continued under Bush.

When analyzing the change between 2000 and 2004, we find evidence in favor of the supporter benefits hypothesis. Even when controlling for all other independent variables, the model predicts that voting for President George W. Bush in 2000 increased the state’s level of net benefits by five cents from 2000 to 2004.

The paper's findings suggest that, in terms of fiscal policy, Bush supporters are in fact voting their pocketbook. The flow of federal dollars to red states may also explain why Bush's Social Security initiative failed. The paper concludes:

The implications of our analysis suggest that if the Republicans rolled back any significant programs, they would risk a backlash where they are strongest: in the poorest red states that receive the most benefits per tax dollar. As a result, the Republican Congress has left entitlement programs largely intact since coming to power in 1994. In the process, once Democratic programs now disproportionately benefit Republican states in the heartland.

Looks like Congress will pass the defense appropriations bill ($$) before the campaign recess.

It's the first appropriations bill Congress will have passed this year, and most likely one of only two they'll pass before the October 1st deadline for appropriations. It will also carry a continuing resolution that negotiators assured would get lots of support (though we haven't had a look at it yet, so who knows). Here's more:

House and Senate appropriations conferees wrapped up negotiations on the $447.4 billion Defense spending bill during a brief meeting Thursday evening, readying the massive measure for a vote in both chambers next week.

The appropriators also agreed to make the Defense bill a vehicle for a continuing resolution, a stopgap measure Congress must pass by the end of this month to continue funding for most government agencies at FY06 spending levels through Nov. 17. Congress expects to pass only the Defense and Homeland Security spending bills by Oct. 1, the start of the new fiscal year.

Appropriators had been opposed to attaching any measure to the Defense bill, amid fears that it could slow down the must-pass bill. But House Defense Appropriations Subcommittee Chairman C.W. (Bill) Young, R-Fla., said he has received assurances from GOP leaders that it will be a "clean" continuing resolution "with no extraneous issues, no anomalies."

Oregon politicians are looking for ways to replace a shortfall in federal Head Start funding.

This East Portland Head Start program looks like the last place you'd expect a visit from politicians. Three- and four-year-olds are drawing pictures and practicing songs. A few months ago, they might have seemed all but forgotten. The president of the National Head Start Association, Sarah Greene, called a press conference in June to press Congress for money.

Sarah Greene: "It all boils down to this: hundreds of Head Start programs across the United States are in the grips of a vice-like cost squeeze today that may result in a major jump in program closures and severe program shutdowns. This alarming trend involves the rapidly growing number of Head Start programs that are unable to deal with the double whammy of federal budget cuts and rising costs of health care, wages, transportation, and other major expenses."

Greene was still reeling from a 1% cut to this year's budget. It triggered layoffs and bigger class sizes. Some programs were closed.

Now these kids have something to sing about, on a number of levels. 39 US Senators signed a letter in support of a bigger Head Start budget for 2007, though the proposal probably won't be voted on for months. Officials in Oregon aren't waiting. Governor Ted Kulongoski visited is advocating a $40 million increase from the state for Head Start.

We're getting reports that the White House has drawn up a "continuing resolution" that keeps the government funded if Congress, which it won't, has not passed all appropriations bills by October 1st. The CR would set funding at the lower of either the Senate or House-passed versions of each annual appropriations bills.

This CR format will wreak havoc in programs that are funded by an appropriations bill that has passed at least one chamber. Congress used the same format last year to drastically cut many programs .

Fortunately, this format would also preserve this year's funding for the Labor/HHS appropriations bill, because neither chamber has passed a version of the bill. That's good news, because the version of the Labor/HHS bill that the House Appropriations Committee has approved -but the House has not passed- would have made deep cuts to many human needs programs.

This CR would last until November 17th. Congress is likely to extend the CR once more, as the current expiration date may not leave enough time to finish all appropriations bills. That is what happened last year, at which point Congress passed another CR that cut deeper into discretionary spending.

Rep. Jim Cooper (D-TN)’s article in Roll Call today points out that “The Financial Report of the United States,” a document so embarrassing to the While House that it published only 2,100 copies this year, reveals a true accounting of the deficit -— one that encompasses veterans’ benefits, civil service retirement, Social Security, and Medicare.

Cooper notes that a partial unmasking of the true extent of the nation’s financial condition was mandated this summer, when:

[t]he Federal Accounting Standards Advisory Board voted 6-4 to include Social Security and Medicare obligations as liabilities on our national balance sheet. Incredibly, we elected officials have been promising the benefits without bothering to budget for them.

He also includes this unsettling forecast: Standard & Poor’s, the nation’s leading credit analyst, is projecting that the United States will lose its AAA bond rating by 2012 and fall to junk bond status by 2025.

Donald Marron, acting Director of the Congressional Budget Office, as recently as last month, called the nation's deficit "at least now and for next year, for several years going forward, deficits appear to be in a range that they're sustainable.”

Guess he didn't get one of the 2,100 copies of the report.

The Bush administration is trying to cut Medicaid through a rule change, instead of asking Congress to enact legislation, yet again. The target now: kids in special education.

School districts nationwide could be squeezed even harder on their special-education expenses under federal proposals that threaten to wipe out Medicaid funds for disabled low-income students.

U.S. Sen. Dick Durbin (D-Ill.) and U.S. Rep. Danny Davis (D-Ill.) joined superintendents from Chicago, Elgin, Carpentersville and other Downstate districts Tuesday to protest the proposed cuts. They warned that this newest hit will force districts to cut even deeper into regular education programs if they are no longer reimbursed for mandated special-education services.

In Illinois, as much as $132 million could be lost to districts this school year--$38 million alone for Chicago Public Schools. Nationwide the cuts are expected to top $650 million this year, legislators said.

"It is a despicable deed that needs to be rethought and changed," said Davis, who argued that the federal government already falls far short of its promise to pay for required services, covering only 19 percent of special-education mandates. "If these cuts stand, we are going to leave millions of children behind."

We reported earlier last week that Congress had passed legislation that pushed some Medicare spending for this year into next year. Now the White House might get into the game, too. Budget guru Stan Collender has been hearing rumors that the White House might delay some spending from this fiscal year until the next. The point, of course, is to make this year's deficit smaller than it really is, and brag about it during the run-up to the November election.

Collender sets up some questions we should all ask to get to the bottom of the rumors.

First, is the government contracting community becoming publicly agitated? Payments to contractors are most vulnerable if a slowdown occurs and a one- or two-week delay could mean cash flow problems for many businesses.

Second, does OMB Director Portman make as aggressive a statement about not gaming the system as he did when the midsession budget review was released?

Third, do Wall Street estimates of short-term government spending change in the next few weeks?

Finally, is a budget-related media event at the White House or on the campaign trail tentatively scheduled for the second to third week in October?

I have one more question: Will spending on the hurricane recovery suddenly accelerate at the beginning of the next fiscal year (October 1st)? If the President is playing budget politics with Katrina victims, we should find out soon.

The Senate is now taking up the must-pass-eventually defense appropriations bill. From BNA (subscription):

Senate Majority Leader Bill Frist (R-Tenn.) said the Senate will convene Sept. 5 and immediately take up the DOD spending bill that lawmakers failed to finish prior to the August recess.

The DOD measure, the largest of the FY 2007 discretionary spending bills, is also the vehicle for another $50 billion installment for the wars in Iraq and Afghanistan. Frist, who has scheduled the first vote later that day, also said he wants the Senate to consider the spending bill for military construction programs in September.

Also possible is final action on the annual spending bill for the Department of Homeland Security. The legislative agenda in September, aides said, will reflect the GOP's desire to highlight the party's record on security matters in advance of the election.

The defense appropriations bill, though, is only the tip of the iceberg. BNA again:

The Senate could turn to other appropriations measures after disposing of the DOD bill. With the start of the new fiscal year less than a month away, the Senate has passed only the Department of Homeland Security spending bill (H.R. 5441).

The House, on the other hand, has passed all but one of its funding bills--for the departments of Labor, Health and Human Services, and Education, and related agencies (H.R. 5647). Republicans have held up the movement of the Labor-HHS bill primarily because of concerns about the minimum wage provision attached during committee deliberations.

To date, none of the regular spending bills have been signed into law.

Congress needs to have passed all appropriations bills for FY 07 by October 1st, the beginning of the new fiscal year. But the Senate has so much work left to do on appropriations that it's virtually guaranteed that it won't finish on time, in which case they'll hold a lame-duck session after the November election to pass all the remaining appropriations bills. In the meantime, they will have to pass a "continuing resolution," which temporarily extends this year's appropriations policy into FY 07. More here:

The remaining nondefense, nonsecurity FY 2007 appropriations bill all appear destined now to be finished in November.

With many of the bills reflecting the cuts to domestic programs that Bush proposed in his own budget, GOP leaders have sought to avoid debates on the bills until after the election. And once the elections are over, aides said, it may be easier to cut deals to complete the bills.

At this point, aides said that appropriators plan to pass a continuing resolution to keep the government running for several weeks after FY 2006 ends Sept. 30. But a second CR will likely be needed to last through late November to give lawmakers ample time to wrap up their work, they said.

Perhaps Congress should have put in a little more time on the job this session. Or maybe saving America from sin and iniquity could have waited until we got done paying our bills.

Think you can spend the public's money better than the government has? Well, you should check out the National Priorities Project here to find out how your congressional district could have spent the money we gave to the richest 1% in tax cuts this year.

And for an example of how federal budget cuts are affecting local communities, take a look at this article from the Cleveland Plain Dealer.

Cleveland has lost a quarter of the federal money it gets to spend each year on community development over the past decade -- close to $10 million annually -- while consistently claiming the title as one of the nation's poorest cities.

Because the flexible Community Development Block Grants can be steered to an almost unlimited array of programs, from AIDS prevention to vacant-house demolition, the money is particularly crucial to urban areas trying to fight the widespread damage poverty inflicts.

The money helps people "make the connection to the economic mainstream," explained Bruce Katz, director of the Metropolitan Policy Program at the Brookings Institution in Washington.