As the 2005 tax reconciliation conference continues to drag on, an interesting and puzzling rumor has emerged that will keep you scratching your head. Typical of three card monte games on the strip in Atlantic City, this most recent gem from Congress is the ultimate budget gimmickry.

The 2005 tax reconciliation bill is at a stand-still because House and Senate GOP leaders are trying to figure out how to squeeze capital gains and dividend tax cuts into the $70 billion filibuster-proof cap set out last year in the budget resolution. But they just can't make the numbers line up. There is this pesky Senate rule that prohibits reconciliation legislation from increasing the deficit outside of the budget window to which the legislation applies - and unfortunately, those capital gains and dividend cuts violate that rule by $31 billion.

Now, Republican leaders, especially in the House, do not want to have to offset that cost by - (gasp) - raising taxes. So what they are proposing is to offset the cost of the first tax cut with, unbelievably, another tax cut! Conferees are rumored to be considering lifting the income limits on conversions of traditional Individual Retirement Accounts (IRAs) to Roth IRAs. Such a change would allow taxpayers (most likely wealthy ones who would have the most to gain) to stock away huge sums of money that would grow tax free for years simply by paying a smaller amount of taxes during the temporary conversion period. This would result in a short-term boost in revenues for the government, but would be a big money-loser in the long run.

Yet that is all the conferees need - a short-term upswing in revenues caused by a tax change favoring the wealthy in the long run to cover the cost of giving away more taxes to the wealthy in the short run. See how everybody wins?

Kudos to the Center on Budget and Policy Priorities, the Committee for a Responsible Federal Budget, the Concord Coalition, and the Committee for Economic Development for highlighting this issue.

Interesting article on the position of a conservative Republican House Member - Rep. Mike Simpson (R-ID) - supporting the earmarking process in Congress. Simpson even goes so far as to say outlawing earmarks may be unconstitutional.

Simpson, a member of the Energy and Water Appropriations Subcommittee (a prime suspect for earmarks and pork spending each year), believes earmarks have positive results, such as leaving money in the control of local officials rather than Washington bureaucrats, focusing spending on short-term, targeted projects instead of never-ended Washington programs, and keeping Representatives intimately involved with the spending of taxpayer dollars.

Simpson favors increased transparency of earmark requests and approval, and even posts his own requests on his website.

USA Today's lead editorial today sharply criticizes supporters of the president's latest power grab - an line-item veto (or enchanced rescission power) proposal currently turning some heads in Congress. The editors make very good arguments, particularly the fact that this proposal would actually distract attention from the major issues at play with the errosion of our country's fiscal health, not help to make our government more fiscally responsible.

While the editors correctly point out the president has not vetoed any legislation in his time in office, they failed to mention that the president already has the power he is currently pushing to have granted to him - under the Impoundment and Control Act of 1974. Despite having this power, Bush has yet to prepare and request of Congress one, single rescission as president. He is the first president since it was created in 1974 not to use this power of the office.

Perhaps the president should focus more on using the tools currently in his toolbox before trying to spend a lot of money on a upgraded model that has questionable benefits. Talk about wasting resources.

Public Citizen has filed a federal lawsuit regarding the constitutionality of the budget reconciliation bill. They are seeking to overturn the bill, which was signed into law on Feb. 8 by President Bush, on the grounds that it is unconstitutional because a clerical error resulted in a different version of the bill being signed than what was actually passed. It is possible the courts could rule that the act violates the Constitution -- specifically the bicameral clause -- which requires both chambers to pass identical legislation before it can become law. In a conference call with reporters yesterday, Public Citizen President Joan Claybrook stated, "We haven’t found any other legislation that violated the Constitution like this or we would have challenged it."

This is the second lawsuit being brought against the legislation. The first was brought by Conservative Alabama attorney Jim Ziegler, whose suit cited the same issue. Additionally, House Democrats called for an ethics investigation and for the House to vote again on the original legislation.

The clause in question is over portion of the legislation limiting rentals of durable medical equipment other than oxygen equipment to 36 months. The measure passed by the Senate December 21 limited rentals to 13 months, while the version the President signed limited it to 36 months. The Congressional Budget Office has estimated the cost difference between a 13-month limit and a 36-month limit on the medical equipment to be $2 billion over five years.

The Emergency Campaign for America's Priorities (ECAP) has issued a statement relating to this bill. It appears that Speaker Hastert's (R-IL) office knew of the discrepancies between the two bills and even went so far as to ask "the administration to delay proceedings until the problem could be addressed by the House and Senate." [WSJ, 3/22/06] ECAP spokeswoman Cara Morris Stern stated:

It is shocking that in their fervor to cut vital programs for needy Americans, the President and White House staff ignored warnings from Speaker Hastert’s office that the bill did not pass even the most basic of constitutional guidelines, the Presentment Clause. The President ignored his responsibility to uphold the Constitution of the United States which requires a bill be passed in identical form by both the House and Senate.

Washington Post: Spending Measure Not A Law, Suit Says

OMB Watch released a statement yesterday about the vote in the Senate to increase the nation's debt limit for the fourth time in the last five years.

Read the statement

As part of their vote-a-rama yesterday, the Senate voted to increase the national debt limit by $781 billion, placing the debt limit at almost $9 trillion. The debt limit vote forced lawmakers to cast politically unpopular votes (because they essentially just added almost $1 trillion to U.S. debt), and a number of them showed their disapproval by threatening Majority Leader Frist that they would force votes on budget-reform amendments, including one on the line-item veto. Any amendments added to the debt limit legislation would have sent it back to the House and potentially could have led to a government default (which is why Frist wanted to avoid it).

The line-item veto legislation that Senators wanted to discuss, is expected to serve as a vehicle for other budget reform proposals. Caving to bipartisan pressure, Frist has agreed to schedule time to debate the issue. It is expected he could schedule up to one week of debate sometime before the August recess.

The line-item veto is a reform which would expedite the rescission process and give more power to President Bush. See this Watcher article for more information). Studies have shown that it would actually save very little, yet at the same time it would transfer some appropriating power from the legislative branch to the executive branch. A number of lawmakers, including the prominent House Appropriations Committee Chairman Jerry Lewis (R-CA) oppose line-item veto legislation, both because of its limited affect on truly affecting budget balances and because of this power transfer. As Lewis said in testimony before a House Rules subcommittee on March 15, "Presidents come and go." If lawmakers wanted to work towards truly balancing the budget books, they would reinstate full PAYGO rules.

Washington Post: Congress Raises Ceiling for Borrowing

Roll Call: Frist Agrees to Hold Debate on Line-Item Veto Legislation

Last night the Senate passed the budget resolution by a very close vote of 51-49. Vice President Dick Cheney was on hand in case he was needed to provide a tie-breaking vote. A series of amendments approved by a bipartisan majority added $16 billion in spending to the $2.77 trillion resolution for FY 2007 that came out of committee. The increased spending -- as well as deals made with Gulf Coast lawmakers for increased funding to their states -- helped ensure final passage. Budget caps on discretionary appropriations were raised by $3.3 billion to allow space for funding for low-income energy assistance programs. And, as we previously reported, $7 billion was added $7 billion to help fund education and health programs. This Washington Post article highlights the increased spending as being:

• $3 billion more for heating subsidies for the poor. It passed 51-49.
  
• $7 billion more for education, health and worker safety accounts. It passed 73-27.
  
• $3.7 billion more for military personnel costs.
  
• $1.2 billion more for aviation security and stopping Bush's proposed increase in airline ticket taxes. They advanced by voice vote.
  
• $1 billion more for benefits for military survivors.

Sen. Mary Landrieu (D-LA) was the sole Democrat to vote in favor of the budget, after being promised $10 billion from oil revenues to help rebuild levees and other hurricane-caused devastation her state. Five Republicans broke lines with their party to vote against the deficit-raising budget. These were Sens. Ensign (R-NV), Chafee (R-RI), Coleman (R-MN), Collins (R-ME), and DeWine (R-OH).

This massive budget egregiously includes tax breaks for the wealthy to the tune of $228 billion over five years. It also opens up the Arctic National Wildlife Refuge for oil drilling, a measure that is wildly unpopular with a number of GOP Senators. Notably the Inhofe amendment, which would have further increased discretionary cuts, was defeated 62-35. While Senate rejection of Bush spending caps in this budget is a good sign, the budget is still a fiscally irrepsonsible document that continues the trend of cutting taxes (mainly for the wealthy) while shrinking domestic programs in a time when more and more people are relying on them.

Wall Street Journal: Senate Republicans Break Ranks on Spending

New York Times: Senate Approves Budget, Breaking Spending Limits

The Harkin-Specter amendment restoring $7 billion to Labor-HHS passed the Senate today. It passed 73-27, with the following Republicans voting in favor of the amendment: Sens. Alexander, Bennett, Burns, Chafee, Cochran, Coleman, Collins, DeWine, Dole, Domenici, Frist, Grassley, Hagel, Hatch, Hutchison, Lott, Lugar, Murkowski, Roberts, Santorum, Smith, Snowe, Specter, Stevens, Talent, Thune, Voinovich, and Warner.

Additionally, an amendment offered by Senator Reed (D-RI) was agreed to by a close vote of 51-49. The amendment increases funding for the Low-Income Home Energy Assistance Program (LIHEAP) by $3.3 billion for FY 2007. This puts the funds available to carry out that program at the fully authorized level of $5,100,000,000, and pays for it by closing corporate tax loopholes.

Finally, the Senate voted to increase the debt limit today, 52-48.

The Senate will likely vote to increase the debt limit at some point tomorrow. Below are some good articles on the issue.

New York Times: Senate Could Vote Thursday to Hike Debt Limit

Los Angeles Times: Senate Stalls Debt-Ceiling Decision

The Hill: Debt Limit Vote Seen as Budget Reform Lever

When $8 Trillion Isn't Enough

As of 2:00 PM today the Senate had yet to vote on the Harkin-Specter amendment, which would provide an additional $7 billion over the President’s budget request — allowing Congress to fund the FY07 Labor-HHS bill at the level enacted two years ago, in FY05. A one-pager on the amendment, made available by Senator Harkin's office, is available here.Among many points made, the one-pager says:

The Senate budget resolution says it has more funding for health and education than the President’s budget does. Yet it includes the same total amount for discretionary spending. Therefore, there is no guarantee that the alleged health and education increases will ever materialize in the Labor-HHS appropriations bill. The only way to ensure more funding for Labor-HHS programs is to add money to the total spending level.

After completing 50 hours of debate on the budget resolution bill, the Senate started considering amendments yesterday. So far struck down they have struck down amendments offered by Sens. Kennedy (D-MA), Murray (D-WA), Conrad (D-ND), Bingaman (D-NM), and Akaka (D-HI). They unanimously adopted an amendment offered by Sen. Burns (R-MT) to provide increased funding for veterans health programs, and to negate the need for enrollment fees and increase in pharmacy co-payments.

After casting not one, but two votes last fall in favor or reinstating traditional two-sided PAYGO rules on the budget reconciliation bill (vote) and the tax reconciliation bill (vote), Sen. Tom Coburn caved to his Republican leadership and voted against the same exact PAYGO rules he supported last fall. Coburn's flip-flop on PAYGO was the crucial factor in the failure of the Conrad PAYGO amendment to the budget resolution yesterday.

Instead of moving the Senate toward fiscal restraint by requiring both entitlement increases and tax cuts to be offset (and therefore deficit neutral), Sen. Coburn - a self-declared deficit hawk - has allowed Congress to continue down its reckless fiscal path and has paved the way for more deficit-busting tax cuts in 2006. Any statement Coburn makes now on the importance of fiscal restraint and curbing deficits is little more than posturing - he missed his opportunity to truly make a difference with the country's deficits in Washington.

It is still unclear what caused Dr. Coburn to change his vote on this crucial budget issue. People around the country, particularly those in Oklahoma, who are concerned about the long-term fiscal challenges we face should contact Sen. Coburn (and the 49 other Republicans who voted against logic and responsibility) and share their outrage and disappointment with his vote yesterday.

Sen. Coburn's Washington office number is 202.224.5754.

Republican Senators voting in favor of the PAYGO amendment were Sens. McCain (R-AZ), Chafee (R-RI), Collins (R-ME), Snowe (R-ME), and Voinovich (R-OH).

New York Times: Senate GOP Blocks Tight Budget Rule

The right-wing House Republican Study Committee has put together their budget alternative, called "Contact for America: Renewed." It calls for a budget even more drastic (and frightening) then the one proposed by the President himself. Their process reform recommendations towards the end of the document however, are particularly interesting, especially in regards to areas such as earmark reform.

The Congressional Budget Office released the Monthly Budget Review yesterday, reporting that the government incurred a $219 billion deficit in the first five months of FY 2006. The CBO is estimating a total deficit for FY2006 to be $371 billion. The deficit in February was $121 billion, which is $7 billion more than the deficit recorded in February 2005.

The Treasury Department sent a report to Congress in December, reporting the FY05 federal deficit on an accrual basis as being $760 billion, a far higher number than $319 billion, which is what is generally accepted as the deficit level for FY05.

The $319 billion number uses the government's accepted barometer of cash outlays versus revenues, while the $760 billion number takes into account accrued benefits owed to veterans and federal employees. Rep. Jim Cooper (D-TN), a member of the Blue Dog Coalition, said:

"Businesses are required by law to use accrual accounting. If you want Congress to be run like a business, you need accrual accounting."

This Treasury report is garnering increasing attention from lawmakers who are worried about the nation's budget books, and there was a hearing yesterday about the matter. GAO Comptroller David Walker said the $760 billion net figure as well as the $8 trillion debt through the end of FY05 left out the costs of unfunded Social Security, Medicare, veterans' and other liabilities. He said:

"Given these and other factors, a fundamental re-examination of major spending programs, tax policies and government priorities will be important and necessary to put us on a prudent and sustainable fiscal path. This will likely require a national discussion about what Americans want from their government and how much they are willing to pay for those things."

Chairman of the Senate Budget Committee Judd Gregg (R-NH) criticized the President's budget plan yesterday, calling the White House budget practices "irresponsible" and "unrealistic." In an interview with CongressDaily Gregg said Bush has supported massive increases for defense, and has augmented those increases with emergency funding that does not fit within budget caps. He said to expect "a reasonably vanilla year in the area of budgeting," but noted that one of his goals will be to rein in "this new shadow budget called emergency spending." Gregg, who is also Chairman of the Senate Homeland Security Appropriations Subcommittee, said:

"It's a very strange approach to budgeting that they've taken. Because essentially what they're saying is, 'Everything else in the government is going to be subject to severe limitations in spending, but the area that we're interested in is going to have no budget process at all, it's simply going to be done outside the budget process through emergencies.' And I don't think they have any credibility on budgets. I've made my points very clear to the White House."

Bush's FY07 budget request has the Defense Department seeing a $24 billion increase over this year's budget; this increase does not include emergency funding. Bush has requested $115 billion in emergency funds for this year and next to finance wars in Iraq and Afghanistan.

Gregg also cited grievances regarding Bush's proposed cuts in Medicare and other entitlements through the budget reconciliation process, noting that this year there are added election-year pressures in voting. He said, "Last year was an extremely aggressive budgeting year, though there were a lot of people who pooh-poohed it. This year being an election year, I'd be happy to do another aggressive budget, but I've got to have 51 votes and I don't think I have them."

Here is more information on the bill which came out of the Senate Rules Committee yesterday, the Legislative Transparency and Accountability Act of 2006:

• The bill
  
• Bill summary

In terms of budget process reform, the bill creates a new Standing Rule (XLVI) that requires all Senate bills or conference reports to include both a list of all earmarks in the measure and the identity of the member proposing the earmark. The bill would also require supermajority of at least 60 senators to approve each earmark if a point of order is raised on the Senate floor. Additionally, the bill or conference report must be made available to Congress and the public on the internet 24 hours before its consideration.