Yesterday, the Senate voted once again against beginning debate on a package of tax cuts called the "extenders" for the fourth time this year. The vote was 51-43, and will put off any consideration of the legislation until Congress returns from their August recess on September 8.

The two main holdups are a deadlock between Democrats and Republicans over whether and how to address high gas prices (which is unrelated to the extenders bill), and the continuing debate over whether to pass fiscally responsible legislation. As I wrote yesterday, the first appears to be just election-year shenanigans typical these days in Washington. The second issue, however, is central to the debate over the future of the U.S. government's fiscal health and the economic health of our country.

In the wake of the continuing deterioration of both short and long-term budget deficit projections, yet another increase in the country's credit limit, sustained, disturbingly-large military expenditures with no end in sight, and continued woeful economic performance, it is long past time for Congress and the president to wake up to some fiscal realities.

Despite what the president and some Republicans in Congress would have us believe, the U.S. Treasury is not a bottomless money pit. It's time Congress and the president stop passing fiscal policies like they are on spring break with Mom and Dad's credit card and prioritize policies in a fiscally responsible way. We elect our leaders to make difficult decisions - that's part of the job. But the fiscal policies of the last eight years skirt those choices by pretending we can have our cake and eat it too.

Yet the Bush administration continues to care very little about the impact of current policies on future generations. Once again, they released a Statement of Administration Policy (SAP) opposing the extenders bill because it attempts to comply with pay-as-you-go (PAYGO) rules - because it offsets extension of some tax cuts with different tax increases. And the Republicans in the Senate continue to bury their heads in the sand and fall in line with that ideology. Even the usually respectable and sometimes responsible Sen. Charles Grassley (R-IA), ranking member on the Senate Finance committee, cannot find a compromise that is fiscally responsible (i.e. he won't accept any tax increases). Does Grassley honestly believe we can keep running up debt in the current fiscal environment with no consequences? Does he understand the larger context of the decisions he is making - or more accurately, the ones he is not making?

The Democrats aren't much better. They've talked a good game on fiscal responsibility since taking back Congress in 2006, but when the going gets tough during policy debates or votes on high-priority issues, they lose their gumption. Witness how the Democrats caved last year over the Alternative Minimum Tax debate or the passage this year of the expansion of the G.I. Bill as just a couple of examples. Unfortunately, despite their tough talk, there is little evidence to point to a change this time around.

So, in the end, our nation's fiscal policy comes down to a battle between those willing to look the other way and those who don't know which way to look. Awesome.

The Commerce Department, via the Bureau of Economic Analysis (BEA), released initial ("advance") second quarter GDP figures and revisions to previous quarters' estimates. BEA reports that in the second quarter of this year, the economy grew at a tepid 1.9 percent annual rate. Economic growth was spurred by the economic stimulus payments from the government and strong exports boosted by the declining value of the dollar.

The bureau also revised downward first quarter's growth from 1 percent to a 0.9 percent. Noteworthy is BEA's revision of fourth quarter, 2007 growth: that figure was decreased from a plus 0.6 percent to a negative 0.2 percent.

Given dip into negative territory in Q4 and Q2's less-than-expected growth rate, supporters of a second stimulus package now have additional ammunition to argue for such a package in September. Yesterday, Senate Appropriations Committee chair Robert Byrd (D-WV) released details (CongressDaily, $) of $24 billion stimulus package that he plans to take up in September after the August recess. Also yesterday House Majority Leader Steny Hoyer (D-MD) announced (also CD, $, sorry) a September agenda that included room for a second stimulus package.

BEA: Second Quarter GDP News Release

News Coverage:

• Financial Times: "Weak US growth adds to gloom"
• Washington Post: "U.S. Economic Growth Improves Over First Quarter"
• New York Times: "G.D.P. Grows at Tepid 1.9% Pace Despite Stimulus"

OMB Watch released new federal spending data on contracts and assistance spending on FedSpending.org yesterday. The site now has full spending data for federal contracts from FY 2000 through the first two quarters of FY 2008 and federal assistance data (grants, loans, and related spending) from FY 2000 through the first three quarters of FY 2007. The FedSpending.org database currently contains over $18.7 trillion in federal spending dating back to FY 2000. This update also made minor site improvements, including added advanced search functionality and bugs fixes.

The data update also marks an important milestone for FedSpending.org - 10 million searches - which occured at some point around July 1. The site is a bit less than two years old, but in that time, FedSpending.org has grown to process more than 1 million searches from approximately 400,000 unique visitors each month. On July 1, Alexa.com ranked FedSpending.org 32,259 in traffic among websites on the Internet. Yowza!

The site has continued to surpass all of our expectations that we held when we created it. I hope we can continue to make the site useful and relevant for users in the years to come.

FedSpending.org Reaches 10 Millionth Search

The Special Inspector General for Iraqi Reconstruction (SIGIR) has released a new audit report today concerning the work (or lack thereof) of Parsons Delaware, Inc., a contractor who was doing design and construction work on Iraqi prisons and civil justice infrastructure. Parsons is a major U.S. contractor, having received over $4.1 billion in contracts since 2000, according to the latest data from FedSpending.org.

The SIGIR report was picked up by the Associated Press, so hopefully the disturbing findings will gain wide attention. Here's the breakdown of what the taxpayer received from the $333 million that Parsons and other subcontractors received through May 21, 2008 on the contract, according to the SIGIR report:

Far less was accomplished under this contract than originally planned; only about one-third of the planned projects were completed. Although the failure to complete some of the work is understandable because of its complex nature and the unstable security environment in Iraq, millions of dollars in waste are likely associated with incomplete, terminated and abandoned projects under this contract. However, precise amounts of funds expended for projects that have not been completed are not easily aggregated because of the uncertain future of incomplete projects. Some measure of the funds expended for which there was not a usable facility is suggested by the fact that slightly more than $142 million, or almost 43% of the contract's disbursed funds, were spent on projects that were either terminated or canceled, although a number of projects were subsequently completed. Contract management weaknesses also played a key role in the contract outcomes.

One particular project funded under this contract was the Kahn Bani Sa'ad Corrections Facility, in Diyala Province (pictured above). The U.S. government canceled Parsons' funding for this project after repeated delays in construction and then attempted to finish the prison by using two separate subcontractors in Iraq. When security became too difficult to complete construction in June, 2007, the government walked away, having spent $40 million on a half finished prison that the Iraqi government has no plans to use. The efficiencies of the free market at work.

SIGIR sums up the problems pretty succinctly - not enough oversight and management of the contractors:

The reconstruction projects under this contract were executed in unstable security conditions and were beset by insufficient contract management and oversight personnel. Because of poor security conditions and limited personnel resources, it was difficult for responsible government officials to visit project sites, plan and define project requirements, and oversee contractor performance once construction began. These conditions created a high-risk contracting environment and approaches that ultimately led to a high level of project failure and waste.

Responding to skyrocketing energy prices, Senate Republicans voted Saturday to deny increased assistance for heating and cooling bills for low-income families. Instead, they would prefer to deliver help 10 years from now, the soonest ANWR or outer continental shelf oil could possibly be delivered to the market.

The bill (S 3186), introduced by Sen. Bernie Sanders (I-VT), would nearly double funding the Low Income Heating Assistance Program (LIHEAP) by supplementing FY 2008's $2.6 billion appropriation with an additional $2.5 billion. The program, which provides low-income households with subsidies to lower their heating and cooling bills, has $100 million left until the end of the fiscal year (Sept. 30).

Although a dozen Senate Republicans support the measure, most voted with GOP leaders who would rather spend the time trumpeting their call to expand offshore oil drilling before Congress takes six weeks off for vacation and the presidential nominating conventions.

"The American resources on the Atlantic and Pacific coasts contain 14 billion barrels at a minimum ... more than we have imported from the Persian Gulf in the last 15 years," said Sen. Pete Domenici, R-N.M.

Democrats needed 60 votes to substitute the measure on heating and air-conditioning aid in place of the debate on an expansion of offshore drilling championed by President Bush and GOP presidential candidate John McCain. They got 50 votes Saturday, with 35 Republicans voting against changing the topic.

Those wacky legislators in Congress are at it again. Democrats have added language to once again increase the national debt ceiling, or debt limit, which is the maximum amount of debt the federal government can issue. Democrats added language to a housing relief bill increasing the limit by another $800 billion to an astounding $10.615 trillion (that's trillion with a "t"). While the current national debt stands at $9.456 trillion, about $400 billion below the current debt limit according the Treasury Department, their projections show that limit might be reached before the year is over and after Congress has ajourned for the year. It seems the Dems are taking this action mostly as a precautionary move.

This will mark the sixth time in the last seven years that Congress has increased the debt limit (see chart below). Most of those increases came during Republican control of Congress, although the last two increases have been while Democrats control both chambers.

Unfortunately, it is unlikely the trend will change anytime soon as Congress has only given lip-service to issues of fiscal responsibility. Congress' current committment to pay-as-you-go (PAYGO) rules is tenuous at best, and Craig posted last week about a Congressional Budget Office report showing some pretty dire consequences for the national debt if Congress does not adopt more responsible tax policies than they are currently considering.

Appropriations Committee chair Robert Byrd (D-WV) stated yesterday that he is postponing markups of the Interior-Environment and Legislative Branch FY 2009 appropriations bill and a second supplemental bill. The announcement to push off the supplemental comes a week after Bryd announced July 10 that he planned to markup the measure July 24. His reluctance to move Interior-Environment is similar to that of House Appropriations Committee chair David Obey's (D-WI) -- uncertainty about their ability to block Republican-backed oil and gas drilling provisions that would be tacked on to the bill. In late June, Obey brought the appropriations process in the House to halt.

And citing ounting priorities in Congress, including the extenders tax package, energy, and housing legislation, Senate Byrd said that he does not plan to markup a second supplemental spending bill before the August recess. And according to this CongressDaily piece ($), an aide to Senate Majority Leader Harry Reid (D-NV) said that it is "evident that [the House] will not be marking up a stimulus bill until after the recess,"

With the Congressional appropriations process grinding to a halt in the House and the future of FY 2009 appropriations bills in doubt, Democratic leaders announced ($) last week that they absolutely intend to pass one appropriations bill before the start of the fiscal year on Oct. 1 - the Defense Department appropriations bill. Speaker of the House Nancy Pelosi (D-CA) said that she knows the bill will be passed because, "that is our responsibility." Apparently she doesn't feel the same responsibility to pass the other 11 appropriations bills on time. Hmmmm.....

The White House also wants to the bill to be passed before Congress leaves town for the elections this fall. According to this CQ story, not passing the bill will cause problems:

The White House and the Pentagon badly want the Defense bill enacted before Congress leaves so the department does not have to deal with the planning and accounting problems associated with not having its full budget in place at the start of the fiscal year.

Unfortunately, the White House doesn't appear to have any concerns about the "planning and accounting problems" all the other federal agencies will inevitably experience if and when Congress fails to enact those appropriations bills. Looks like for both the Democratic Congress and the White House, defense funding is the only game in town. I guess educating, feeding, housing, and giving people health care just isn't that sexy anymore.

Well, at least we aren't experiencing an economic downturn that is putting pressure on average Americans and their economic well-being. Yes, thank goodness for that.

A second stimulus package may be in the works. Yesterday, CQ Politics reported that Senate Appropriations Chair Robert Byrd (D-WV) may announce on Thursday that his committee will markup another stimulus package.

"The need seems to be apparent," Hoyer told reporters after joining Speaker Nancy Pelosi , D-Calif., and other Democratic House leaders in a two-hour meeting with private-sector economists. "All the economists we talked to today indicated that additional action is needed," he added.

Hoyer said the package would include elements already widely discussed — more infrastructure funding, heating assistance for low-income Americans, more money for food stamps and for state Medicaid programs. Pelosi said the proposal also could include another round of rebates for taxpayers, but she made no commitments.

The Center on Budget and Policy Priorities has once again released an analysis of state government budget health, and the news continues to deteriorate. In their lastest analysis, they rank all 50 states according to changes in three main economic indicators - employment, poverty, and housing foreclosures. The report finds:

States across the country have projected budget shortfalls totaling at least $48 billion for 2009. To meet their balanced budget requirements, they are being forced to raise taxes and/or cut expenditures — both of which reduce overall demand and thereby weaken the impact of the recent federal stimulus package. Federal fiscal relief would limit the need for such actions.

CBPP argues pretty convincingly that because the states that are showing the most economic problems are the same ones that are having budget issues, fiscal relief for state budgets would go a long way to improving econonmic conditions. Good stuff. Maybe Congress should consider this, huh?

CBPP: ECONOMIC DATA CAN BE USED TO TARGET STATE FISCAL RELIEF EFFECTIVELY

The Center on Budget and Policy Priorities has released a report from leading economists and budget experts criticing a recent paper from the Brookings Institute and the Heritage Foundation called "Taking Back Our Fiscal Future." From the CBPP press release:

Sixteen leading economists and budget experts issued a major critique today of a recent proposal to address future federal budget deficits through radical changes in budget procedures for Social Security, Medicare, and Medicaid.

These experts, who include a Nobel Laureate in economics, two former Office of Management and Budget Directors, and a former Deputy Director of the Congressional Budget Office, agree that the nation faces large, persistent budget deficits that would ultimately risk significant damage to the economy. They also concur that policymakers should begin now to make the tough choices needed to avert such deficits.

But they believe the methods set forth in "Taking Back Our Fiscal Future" (TBOFF), a recent proposal by some analysts at the Brookings Institution, the Heritage Foundation, and other groups, are misguided. Instead, they believe policymakers should begin the hard work of building consensus on specific spending and tax measures that would start reducing longterm deficits, and they recommend a series of such measures.

So, the Brookings/Heritage paper was signed by 16 "longtime federal budget and policy experts" and now CBPP has released their own report from another 16 prominent and expert folks. Seems like the right-of-centrists and left-of-centrists are gearing up for what could be major reforms to fundamental federal government supports and programs in 2009. Should be quite a fight - stay tuned.

Reports:
CBPP: A Balanced Approach to Restoring Fiscal Responsibility
Brookings/Heritage: Taking Back Our Fiscal Future

Commentary:
Matthew Yglesias (The Atlantic): Fiscal Sanity How?
Matthew Yglesias (The Atlantic): Leninism's Return
Robert Kuttner (The American Prospect): Sensible Budget Wonks Strike Back Against Conservatives
Mark Schmidt (The American Prospect): "Leninist Strategy" 2.0
Matt Lewis (Inclusionist): A Better Way on Long-Term Deficits
Diane Lim Rogers (EconomistMom): But Really, Fiscal Responsibility Is Easier Under a Benevolent Dictatorship

Things just keep getting worse and worse for the FY 2009 appropriations bills. First, House Appropriations Committee members get all hot and bothered with each other and refuse to continue to work on appropriations bills. Then, House Majority Leader Steny Hoyer (D-MD) casts doubt that any appropriations bills will be passed by the House this year.

And now, Senate Majority Leader Harry Reid (D-NV) has speculated he believes Congress won't enact any bills until long after President Bush starts working on his presidential library. The Hill reported today that Reid

expects Congress will not pass any annual spending bills this year, saying lawmakers will likely postpone that responsibility until President Bush is out of office.

So no appropriations bills this year. That gives Congress only about 6 or so weeks left of work this year. Quite the haul. That should give them enough time to pass another (yes, another) supplemental appropriations bill. Senate Appropriations Chair Robert Byrd (D-WV) announced today his committee would mark up a second supplemental bill on July 22.

ugh...

The Hill reports today about some border-line shady behavior from Rep. Paul Kanjorski (D-PA) related to his earmark requests in the 2005 transportation bill. Turns out the earmark request Kanjorski submitted to build a parking garage at, of all places, the Kanjorski Cetner (pictured above) did not meet federal guidelines. From The Hill:

The Department of Transportation is refusing to move forward on an earmark backed by Rep. Paul Kanjorski (Pa.), the rare House Democrat facing a tough reelection this fall.

Transportation (DoT) is blocking funds to build a $5.6 million parking garage to the Kanjorski Center, which was constructed to attract economic development in the city of Nanticoke in Kanjorski's Eastern Pennsylvania district. Kanjorski's earmark for the project was included in the 2005 transportation bill.

DoT contends the garage does not meet federal rules intended to spur the use of public transportation. Those rules allow federal funds for parking garages only if they are connected to other public transportation facilities outside a business area with a population of 50,000 or more, or if it serves high-occupancy vehicles (HOVs) and public mass transportation passengers.

Turns out this isn't an isolated incident for Kanjorski. The Department of Transportation has "taken exception to more than 20" of his transportation earmarks over the last couple of years. And local leaders and Democratic party officials aren't that happy with some of the optics of Kanjorski's ties to the beneficiaries of his earmark requests.

But Kanjorski's family ties to some of the groups that have benefited from his earmarks have stirred criticism and animosity among local Democratic officials.

While I'm hoping that recent transparency reforms and a continued focus on developing a more accountable government will eventually bear fruit, this looks like more politics as usual.

The Hill: Big earmark headache for Rep. Kanjorski

The Senate Energy-Water Appropriations Subcommittee has approved its version of the FY 2009 Energy-Water funding bill. The $33.2 billion measure would provide $1.9 billion more than President Bush's request to the Department of Energy, Bureau of Reclamation, and the Army Corps of Engineers.

One feature I'd love to see added is a summary or way to total earmarks data by sponsor. In order to see who requested or sponsored an earmark, you currently have to drill down a long way in the database - sometimes four or five levels. Adding up the total amounts of earmarks secured by legislator - or by the president - would go a long way to improving accountability for federal spending.

While OMB has done a good job making this kind of data accessible and understandable, we could know a lot more if better data was required to be made public. More importantly, it would be significantly easier to hold our elected leaders accountable if the information was available before debate and voting on appropriations bills took place in Congress. That's what would be required if a provision originally sponsored by Sen. Jim DeMint (R-SC) would be adopted by Congress. DeMint's provision was originally included in a reform package passed by the Senate in early 2007, but it was later dropped in conference.

It's almost assured Congress will not adopt anything like the DeMint amendment this year, but I'm hopeful when the 111th Congress begins in January, better reforms will be adopted that allow the public to weigh in on spending proposals before Congress passes them.

CBO has released its Monthly Budget Review for June. It finds that while the stimulus payments accounted for a $21 billion decline in monthly revenue (compared to last June), June's surplus would still have been lower than last year's when the rebates are accounted for. Details below.

The federal government incurred a deficit of $268 billion for the first nine months of fiscal year 2008, CBO estimates, $148 billion more than the shortfall recorded during the same period in 2007. About $79 billion of that change is due to the distribution to individuals of the tax rebates enacted in the Economic Stimulus Act of 2008. Compared with their level in 2007, outlays have risen by more than 6 percent, whereas revenues have declined by about 1 percent.

[...]

The surplus for the month this year was about $51 billion, CBO estimates, $23 billion more than the corresponding figure last year. The increase in the June surplus is largely attributable to certain one-time receipts and to differences in the timing of some payments. Adjusted for those factors, the surplus would have been lower than it was last June, even in the absence of rebate payments, which totaled $28 billion this June.

CBO estimates that net receipts were about $21 billion (or 8 percent) lower this June than they were in June 2007. Nearly all of the decline—$19 billion—can be attributed to payments to individuals of the tax rebates (in addition, an estimated $9 billion of those rebates was recorded as outlays).

CBO: Monthly Budget Review

CQ reports ($) that Congress intends to reverse OMB's decision to stop issuing printed budgets to various government offices.

The committee report accompanying the fiscal 2009 Financial Services appropriations bill, which includes funds for White House operations, instructs OMB to send paper copies of the budget to Capitol Hill next year.

"Committees and Members' offices frequently rely on the printed budget as one of many tools to analyze the president's proposals," the report reads.

The report also complains that the administration's decision "appeared to be a matter of shifting costs to the legislative branch from the executive branch" by requiring congressional offices to buy their own copies of the president's budget.

OMB has responded by saying that printing the budget documents is wasteful -- about 480 trees are felled each year to print the volumes and that printing is simply unnecessary when the documents are available online.

The Fiscal Policy Team and Congress both return to action this week with a number of fiscal policy issues to be tackled during the next five weeks. Below is a rundown of issues coming up soon, with most of the action happening in the Senate:

• Debate continues between Senate Democrats and Republicans over whether to offset the cost of a popular package of tax breaks called the "extenders." The latest development is that Senate Republicans are now challenging Democrats to offset the cost of the package with spending cuts rather than other tax increases. BNA ($)
• The Senate will also resume work on a bill to stave off a cut in payments to Medicare physicians by giving them the same reimbursement levels they had during the first six months of this year. Senate Republicans, who blocked legislation before the July 4 recess by one vote, have agreed to take up the legislation again this week after intense pressure from outside groups, particularly the American Medical Association. AMA Statement, AMA Television Ads
• Legislation to help people hurt by the mortgage crisis was also blocked before the holiday recess by Sen. John Ensign (R-NV), who wanted to have an amendment added to the bill to give tax cuts to encourage the production of renewable energy. The Senate plans to take another crack at that bill this afternoon.
• The appropriations season is well under way in Washington, but not much has been accomplished. With only about 10 weeks left until the start of the new fiscal year, neither the House nor Senate has approved any appropriations bills yet. After a old-fashioned temper-tantrum in the House appropriations committee before the July 4 holiday, prospects for completion of even one appropriations bill by Congress this year seems less and less likely.
• Finally, the Government Accountability Office has a new report out showing the weapons systems currently being developed by the Department of Defense will cost an astronomical $1.6 trillion to complete, of which $335 billion will be needed in the next five years. Yikes! Washington Post