• CongressDaily reported ($) yesterday that "House Democratic leaders appear to be moving toward bringing a $100 billion economic stimulus package to the floor during a lame-duck session the week of Nov. 17" and that Democratic leadership might include "federal matching funds for state Medicaid programs, an extension of unemployment benefits, expanded food stamp spending and money for infrastructure projects" in the package.
  
  
• House Minority Leader John Boehner (R-OH), meanwhile, has other plans. Earlier this week, he was touting a Republican stimulus package that would be composed mostly of tax cuts. Noteworthy, however, is that his plan would increase the child tax credit from $1,000 to $2,000. The rest of the measures would cut taxes for businesses and owners of stocks outside of retirement plans.
  
  
• The White House is taking a different approach. Stepping back a bit from being "open" to a second stimulus, the chairman of the president's Council of Economic Advisors does not believe that such a package is "the right way to go." Instead, the administration would prefer to re-brand the Wall Street bailout plan (TARP) as "stimulus," because it's "a huge amount of money, and...it's targeted at exactly the right thing."
  
  

• But it doesn't seem like anybody is listening to the experts. At hearing held by the Joint Economic Committee, NYU economics professor Nouriel Roubini testified that "$300-400 [billion] of public works is more effective and productive than just spending $700 [billion] to buy toxic assets and/or recapitalizing financial institutions." MIT professor Simon Johnson, after articulating the mathematics supporting his suggestion, testified similarly: "Added together, this yields a total stimulus package of around $450 billion, or about 3% of GDP, spread over about 3-4 years. It also implies a way to time the short-term and long-term programs..."

  On hand to provide the standard conservative perspective was American Enterprise Institute Visiting Scholar and Ohio University economics professor Richard Vetter. Vetter fears that the government has already provided too much stimulus and implemented perilous monetary policy. His advice to Congress is to skip economic stimulus altogether and to "[r]elax and recover from [their] labors and allow the healing properties of markets to be asserted again."

Image by Flickr user Thomas Hawk used under a Creative Commons license.

The Treasury Department has been writing checks to banks for a couple weeks now. And although the law that created the Troubled Asset Relief Program (TARP) mandates the Secretary to "make available to the public, in electronic form, a description, amounts, and pricing of assets acquired under this Act, within 2 business days of purchase," the Treasury Dept. has yet to publish such information.

However, ProPublica is using media reports to track Treasury's purchases of financial institution stock under TARP's Capital Purchase Program.

It's great that ProPublica is providing this service, but they shouldn't have to be. The government should already be doing this. How hard could it be to put a spreadsheet up on website?

One of the starkest indicators is that the number of people who have been unemployed for 27 weeks or more reached two million in September. That's 21% of the total unemployed, and approaching the prior peaks of about 23% in 2003 and 1992.

[...]

And while the unemployment rate is at a five-year high at 6.1%, a broader measure of weakness that includes people who have stopped looking for work or whose hours have been cut to part-time is 11% -- the highest in 15 years.

The jobs numbers sure look like we're in a recession, but here's the thing:

During the so-called "jobless recovery" following the 2001 recession, jobs continued to be shed after it was officially declared over. But the current weakness comes as the country heads into a recession that is now forecast to be deeper and longer than previously thought.

"No one thinks we are anywhere near the bottom of this, and we're already rivaling these other recessions," says Heidi Shierholz, an economist at the Economic Policy Institute, a left-leaning think tank in Washington.

Yikes!

But with Fed Chair Ben Bernanke supporting a second stimulus measure, President Bush signaling he is "open" to it, and Senate Minority Leader Mitch McConnell (R-KY) climbing onboard (CongressDaily, $), chances of Congress passing something in November are increasing.

In this week's Watcher, we write about how the political landscape for a fiscal stimulus package is shaping up. Essentially, everyone agrees there needs to be some sort of fiscal policy legislation called "a stimulus package," but that's where the agreement stops. At issue is the size and what elements should be included in the package. We get into these issues in the article, but here I wanted to flag what I think will be typical of the ensuing debate.

House Republicans are also calling for purchasers of homes that are not primary residences to be entitled to the same capital gains exclusion as owners who sell their primary residences. Currently, a single homeowner can exclude $250,000 of capital gains on a sale, while couples can exclude $500,000.

The proposal would only apply to people who bought second or third properties over the next 18 months and held their properties for at least five years.

"This could help take foreclosed properties off the market, raising home values," said House minority leader John Boehner, R-Ohio.

This is just crazy talk. Not only is this sort of tax break aimed at those wealthy enough to own second (and third!) homes, but it will do next to nothing to stimulate the economy. Boehner rightfully rails against "pork-barrel spending masquerading as 'stimulus'," yet this is exactly the kind of non-stimulative giveaway that he abhors. Hopefully, when Congress reconvenes in November, this sort of nonsense will be ignored by legislators in favor of passing an economically-sound package that delivers aid to those who need it and those most likely to spend it.

Image by Flicker user Usonian used under a Create Commons license.

Pushing back against Democratic congressional leadership's call for another stimulus package, White House spokesperson Dana Perino told reporters:

A lot of their discussions yesterday, as I understood it, are not necessarily items that we think would stimulate the economy. Additional benefits to individuals who may need support during an economic downturn aren't necessarily stimulative.

And yet, about three weeks ago, the non-partisan Congressional Research Service issued a report on the economic slowdown saying just the opposite.

...different proposals could get modestly more "bang for the buck" than others if they result in more total spending....The primary way to achieve the most bang for the buck is by choosing policies that result in spending, not saving....Presumably, recipients in economic distress, such as those receiving unemployment benefits, would be even more likely to spend a transfer or tax cut than a typical family.

Simple ignorance or blind devotion to ideology or a toxic mixture of the two?

On Tuesday, President Bush issued one of his infamous signing statements for a bill that will improve the independence of inspector general (IG) offices within the federal government. Since IG offices monitor efficiency, waste, and fraud in the government, but are also housed within the federal government, Congress saw fit to enact new measures to insulate IG offices from political pressures. (More on the bill here.)

Bush objects to a part of the bill that attempts to stem political interference in the work of IG offices. If administration officials find an IG particularly vexing, they can slash the IG's budget in order to reduce their capacity to uncover government fraud and waste. Since the budget process is not transparent, the administration can claim its request is all the IG needs — without revealing the intra-administration conflict.

The bill requires the president to include in his annual budget request to Congress a separate line item for each agency's IG. More importantly, it requires the president to submit the IG's original request for funds, that is, what each IG believes he or she needs to carry out the functions of the office.

In the signing statement, Bush basically makes the claim that the president can ignore this provision. He complains, "[T]he bill includes provisions that purport to direct or regulate the content of the President's budget submissions, including provisions that purport to direct the President to include the comments of Inspectors General with respect to those submissions."

Actually, upon Bush's signature, the bill does not "purport" anything. Bills passed by Congress and signed a president become law. They set rules and conditions of behavior for the government and society. Mr. Bush would do well to consult a dictionary for the meaning of both words.

Bush goes on to state, "The executive branch shall construe section 8 of the bill in a manner consistent with the President's constitutional authority to recommend for congressional consideration such measures as the President shall judge necessary and expedient."

Of note, the bill does not require the president or Congress to actually abide by the IG's request; it merely requires greater transparency so that Congress and the public have access an important bit of government information. As it is, nothing in the bill impedes a president's ability to carry out any function.

Luckily for inspectors general, and for the prospects of good governance, Bush won't be submitting any more budget requests to Congress.

Following a closed-door meeting with economic experts, Speaker of the House Nancy Pelosi (D-CA) said that she is instructing various committee chairs to begin holding hearings on what should be included in an economic stimulus package that could be voted on in November should the House return to Washington for a lame-duck session. No price tag has been placed on a potential, a backtrack from statements made last week an adequate stimulus package would cost $150 billion.

The package would likely include funds for infrastructure projects, an unemployment insurance extension, a boost to the Food Stamp program and Medicaid, and financial aid to states. While Pelosi stated that tax cuts were "in the mix of consideration," she emphasized that other components would be prioritized.

But first we want some of the issues that were not dealt with in the last package, because we want this to truly be a recovery package.

And therefore we have to make the investments in rebuilding America, and in doing so in a green way, with innovation and job creation; and to, again, recognizing the unemployment in our country, have an extension of unemployment benefits and some improvement on that policy, as well; to have emergency food assistance, recognizing the dire straits of many people in our country; and to do, also, in this very strong component of aid to the state to meet the health needs of our children and our seniors, to name a few.

Those would be our priorities. We'll look at what else we might do, in terms of tax cuts.

The Democrats' push for economic stimulus comes days after the president signed the $700 financial rescue plan. But, as we noted in The Watcher last week, the Wall Street bailout would do nothing to mitigate the effects of the impending recession. Quick action on such a stimulus indicates that Congress believes more action is necessary to protect millions of American families.

Photo: REUTERS/Hyungwon Kang
U.S. House Speaker Nancy Pelosi (D-CA) is flanked by former Securities and Exchange Commission Arthur Levitt (L), and Joseph Stiglitz of Columbia University (R) at a forum with economic experts to help Congress develop an economic recovery plan that focuses on creating jobs and strengthening our economy in her office on Capitol Hill in Washington, October 13, 2008.

Some said it couldn't be done. Others doubted his resolve. But it looks as though President George Bush has broken his own record this week - the largest budget deficit on record. Woohoo! The Congressional Budget Office (CBO) has released new estimates on the federal budget deficit for FY 2008 - which they believe will come in at an incredible $438 billion, or 3.1 percent of GDP. This shatters Bush's previous record set in 2004 of $413 billion.

CBO Director Peter Orszag blogged about the estimates yesterday:

CBO released its Monthly Budget Review today. Based on data from the Daily Treasury Statements, CBO estimates that the federal budget deficit was about $438 billion in fiscal year 2008, $276 billion more than the shortfall recorded in 2007. (The Treasury Department will report the actual deficit for fiscal year 2008 later this month.)

Relative to the size of the economy, that deficit was equal to 3.1 percent of gross domestic product, up from 1.2 percent in 2007. (The average deficit over the preceding five years, 2002-2006, was 2.6 percent of GDP.) The $438 billion figure is about $31 billion more than the $407 billion deficit CBO projected this summer, primarily because revenues are lower than we anticipated and spending for defense and deposit insurance is turning out to be higher.

An Associated Press article published today rips into President Bush and his administration's fiscal record, noting "virtually every administration promise on the deficit has failed to come to pass," and "a later promise to cut the deficit in half by the time Bush leaves office is in tatters, and virtually no one takes seriously his proposed path to a balanced budget by 2012." Ouch!

Related Resources:
AP Story: U.S. Budget Deficit Hits Record $438 Billion For Year
CBO Blog: Monthly budget review: FY 2008 deficit of $438 billion
Statement of Senate Budget Committee Chair Kent Conrad (D-ND)

Stan Collender ponders the bottom line of the Troubled Asset Relief Program (AKA "TARP", AKA "Wall Street Bailout", AKA "financial rescue", AKA "Just Trust Us") and what it means for the next administration inthis week's Fiscal Fitness column.

Because of TARP, my estimate is that the budget deficit could easily reach or exceed $1 trillion this year. This includes my estimate of a $600 billion? deficit before TARP and an additional $400 billion afterwards. A deficit of? that size would be between and 6 percent and 7 percent of gross domestic? product, a level that hasn't been reached since fiscal 1942-1946 when the? United States was fighting and paying for the direct costs of World War II.

But the bigger cost of TARP may well be less in dollar terms than in? making progress in other areas. A $1 trillion, 7-percent-of-GDP deficit? likely will chill most of the spending and taxing plans of whoever is? elected as hoped-for tax cuts and spending increases have to be delayed.? There could even be a big push for deficit reductions if the market reacts? very negatively to the 1-year, 10 percent increase in the national debt and? interest rates are pushed higher by the bond market vigilantes that were so? evident at the start of the Clinton administration.?

In a stark reversal of Monday's vote, the House approved the Senate-passed version of a financial market rescue bill. By a vote of 263 to 171, the House passed a $700 billion plan to buy up troubled financial assets, patch the AMT for a year, and extend dozens of expiring tax cuts (some for a year, some for two). While the final cost to taxpayers of the bailout is impossible to estimate, the tax portion of the bill will reduce revenues by $107 billion.

Moments after passage, President Bush signed the bill into law.

President Bush signs the Emergency Economic Stabilization Act of 2008 in the Oval Office after the House passed the $700 billion financial bailout bill at the White House in Washington, Friday, Oct. 3, 2008. (AP Photo/Charles Dharapak)

Great news from the technology trade pubs today - FedSpending.org has been selected by PC World Magazine as one of the top five sites out there that will raise your political awareness. Woohoo!

Below is the screenshot of the article:

Read the full article: 5 Sites That Will Boost Your Political Awareness

Last night, the Senate approved a financial rescue (or Wall Street bailout) bill, HR 1424, by a 74-25 vote. As we noted yesterday, the package includes not only a provision that grants the Treasury Secretary $700 billion to purchase troubled financial assets, but also a package of tax cuts passed previously by the Senate.

According to the Congressional Budget Office (CBO), the ten-year cost of the tax cuts, which include a fully-offset set of tax incentives for renewable energy production; an extension of dozens of miscellaneous individual and business tax cuts; and a $64 billion patch for the Alternative Minimum tax, would total $107.1 billion. The CBO, however, indicates that the cost of the asset purchase program is "impossible at this point to provide a meaningful estimate of the ultimate impact on the federal budget from enacting this legislation," but would be "substantially smaller than $700 billion." Nor can CBO estimate the cost of increasing FDIC limits on insured deposits.

Congressional Budget Office: Letter to Honorable Christopher J. Dodd (estimated budgetary effects)
Joint Committee on Taxation: Estimated Budget Effects of the Tax Provisions Contained in an Amendment in the Nature of a Substitute to HR 1424

Neil Gordon blogs over at the Project on Government Oversight about a troubling provision in the current debate over a bailout proposal for Wall Street that would give Secretary of the Treasury Hank Paulson the ability to waive provisions and requirements of the Federal Acquisition Register (FAR), the set of regulations that govern how the feds run government contracting. Gordon points out a very disturbing irony of this provision:

This would have enabled the Treasury Secretary to award billions of dollars in sole-source contracts to private asset managers firms and financial consultants, even those with a direct financial interest in the bailout. In addition, the Secretary could waive other FAR provisions that protect taxpayers.

Gordon also points out the fascinating analysis released Monday from the Center for Responsive Politics which showed a relationship between campaign contributions from the finance, insurance, and real estate sectors and the way House members voted on the bailout on Monday. The data might shock you - it shocked me, although I suppose after so many years working in Washington, these things should stop surprising me.

It seems that House members who voted for the bill on Monday have collected about 51 percent more in campaign contributions from the affected industries (finance, insurance and real estate) than those who voted against it. Among Democrats, that discrepancy between bill supporters and opponents is an even more astonishing 88 percent.

I wonder if any of those contributions came from companies who may gain from a government contract to fix this mess? Gulp!