On Monday, Paul Krugman wrote a good column ($) on government outsourcing. A key point:

It's now clear that there's a fundamental error in the antigovernment ideology embraced by today's conservative movement. Conservatives look at the virtues of market competition and leap to the conclusion that private ownership, in itself, is some kind of magic elixir. But there's no reason to assume that a private company hired to perform a public service will do better than people employed directly by the government.

In fact, the private company will almost surely do a worse job if its political connections insulate it from accountability -- which has, of course, consistently been the case under Mr. Bush. The inspectors' report on Afghanistan's police conspicuously avoided assessing DynCorp's performance; even as government auditors found fault with Landstar, the company received a plaque from the Department of Transportation honoring its hurricane relief efforts.

And at the last minute, Congress passed a short-term funding fix for the State Children's Health Insurance Programs (SCHIP) that will prevent cuts in services until at least May, according to the Congressional Research Service (Sorry, a link to the CRS report quoted below is unavailable at the moment).

The SCHIP provisions of H.R. 6164 delay shortfalls to the first part of May 2007, according to current CRS projections. Although the provisions redistribute an additional $125 million for projected FY2007 shortfalls, the shortfalls remaining for the rest of the fiscal year are projected at $716 million.

A Washington Post article today reprises the "table talk" from yesterday about entitlement reform.

If anyone can charm congressional Democrats into a dialogue on how to contain Social Security, Medicare, and Medcaid costs, no one in the Bush Administration stands a better chance than OMB Director Rob Portman, a former six-term member of the House, who sat on the Ways & Means Committee.

But when Portman approached former Ways & Means colleague Rep. John Tanner (Blue Dog-TN) last month to solicit ideas, Tanner said later, "I told him to stay in touch. Whether or not we can get something concrete done in the next two years, I just don't know."

The article's final sentence captures the state-of-play of entitlement reform perfectly:

"We have a bit of an Alphonse-and-Gaston routine right now of who's going to go first," Tanner said, invoking the cartoon Frenchmen famously stymied by unctuous politeness. "We've got to figure out how to get a level of trust. This is radioactive in terms of political fallout."

So, which branch will take the first bite?

Entitlement growth is a growing problem, budget policymakers in Congress and the Administration agree.

Time to deal with it is of the essence, with the '08 campaign soon likely to make debate on solutions too hot to handle, both sides agree.

"Everything is on the table," incoming Democratic Budget Committee chairmen, Rep. John M. Spratt Jr. and Sen. Kent Conrad say. Treasury Secretary Henry M. Paulson Jr. and White House Office of Management and Budget Director Rob Portman have not ruled anything out.

“My message to Portman and Paulson is: Put something on the table that is near and dear to them to prove their sincerity,” Spratt said last week, according to CQ.

“As the administration, we are in a listening mode,” Portman replied.

Incoming Senate Finance Committee chair Max Baucus said that a solution can be found “only if [Bush] makes it clear that everything is on the table."

I think I need a new prescription -- I can't see anything on the table.

CongressDaily AM($) picked up a meeting of three former CBO directors who aren't very optimistic about the nation's fiscal health.

Pessimistic about Congress' willingness to address looming fiscal shortfalls in federal healthcare and Social Security programs, three former CBO directors said Tuesday the outlook is bleak for heading off the problems.

In a forum at the Urban Institute, former CBO directors Robert Reischauer, Rudolph Penner and Edward Gramlich largely agreed that the Democratic takeover of Congress provides dim prospects for resolving what they described collectively as an oncoming train wreck that might begin to derail the federal budget by the end of this decade.

I got to go to this meeting, and CongressDaily certainly got its tone right, though I'd add that everyone was pretty optimistic that problems with Social Security funding, being relatively minor, could be solved if the political leadership was there.

Most of the more intense gloom centered around health care. It's much harder to deal with health care costs because price escalation is being driven by factors that are harder to control. It's not just a matter of retinkering programs- that won't solve the problem. Health care programs will keep getting more expensive unless somebody does something such that costs are contained everywhere. It has to extend to the private sector as well, since most government programs rely on private providers.

Health care costs are both a budget problem and a sectoral problem. A policy fix for escalating health care spending requires something that goes much deeper than is now being considering. To fix the budget mess, we have to fix health care.