Economy -- Real GDP Holds Steady at 0.6%: The BEA reports today that the economy grew at an annual rate of 0.6 percent in the first quarter of 2008. The fourth quarter of 2007 also saw a 0.6 percent growth rate. Growth in personal consumption, exports, and government spending were offset by declines in residential housing and personal expenditures on durable goods.

Gov't Performance -- Bills to Reform IG System Gain: A compromise may be imminent between Sen. Claire McCaskill's (D-MO) S. 2324 and Rep. Jim Cooper's (D-TN) H.R. 928 -- bills to reform the federal government's system of insperctors general (IGs). Cooper's bill passed the House last October 2007; it drew a White House veto threat. The Senate adopted the McCaskill bill last week by unanimous consent. Among other things, the bills would require agency heads to inform Congress 30 days prior to removing an IG from office and mandate each agency to maintain a Web site direct link to the agency's IG Office. Sunlight Spotlight.

Gov't Contracting -- Sen. Clinton Offers F.A.R. Reform: Yesterday, Sen. Hillary Clinton (D-NY) introduced S. 2916, the Guaranteeing Real Accountability in Federal Transactions Act, extending Federal Acquisition Regulation (FAR) requirements to crack down on violations of federal criminal law by contractors or significant overpayments by the government and mandate that reported violations and overpayments be listed on the OMB Web site, www.USASpending.gov, that contains detailed information on government transactions that exceed $25,000. Clinton Statement.

Unemployment -- Job Loss Strain on Gov't Health Programs: A Kaiser Family Foundation study released yesterday indicates that each percentage-point rise in unemployment during the economic downturn would swell the uninsured by 1.1 million, the New York Times reports. Such an increased in the number of uninsured would require an additional $3.4 billion in spending for Medicaid and the State Children's Health Insurance Program, with $1.4 billion of it from the states. Story.

Interest Rates -- Fed on Horns of Stimulus/Inflation Dilemma: The Federal Reserve Bank will decide today whether to cut a key interest rate for the sixth time in a row, as a way to add liquidity to and stimulate the economy. A small, quarter-point cut is expected, down to two percent. The Fed has already cut rates by three percent since last summer. But inflation is now a countervailing concern for the Fed: "Inflation has been elevated, and some indicators of inflation expectations have risen [even as] the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters." Analysis.

War Supplemental -- Food Riots Prompt Aid Request: Responding to international strife caused by rapidly increasing food prices, Senate Majority Whip Dick Durbin (D-IL) is asking for $200 million in foreign food aid to be added to an anticipated war supplemental. In recent months, food shortages and rising prices have caused shortages in 36 nations and sparked riots in several. The funds would be in addition to $350 million in supplemental food aid requested by President Bush.

Stimulus 1.0 -- First Checks Going Out Today: The first of 130 million tax "rebate" checks provided under the first stimulus package signed in February will be going out today, earlier than previously announced. The rebates - up to $600 for an individual, $1,200 for a couple and an additional $300 for each dependent child are the biggest part of $168 billion stimulus. Story.

War Supplemental -- Bill Could Top $200 Bn.: According to BNA ($), the House is mulling a war funding bill that would include the remainder of the president's FY 2008 request ($108 billion), his FY 2009 partial-year request ($70 billion), and some $15 billion in domestic spending that may include an extension of unemployment benefits and increased funding for a childhood nutrition program.

Taxes -- Senate Panels Agree on FAA, Highway Package: Leaders of the Senate Finance and Commerce Committees announced late Friday an agreement on a tax package to boost funding for the Federal Aviation Administration and ensure solvency for the Highway Trust Fund. Among the provisions are a "truth in passenger tax disclosures" provision to prevent airlines from presenting fuel surcharges as government taxes and tax credit bonds for rail infrastructure. The package has not yet been scored. American Infrastructure Investment and Improvement Act.

OK, folks, it's finals time. Two-part question. The following statement was propounded by former CBO Director Douglas Holtz-Eakin on a recent conference call in his capacity as economic adviser to one of the three presidential candidates.

In the federal budget if you provide an earmark, that money gets spent. In the way the baseline is constructed it stays in there forever. It goes up at the rate of inflation. So you could as of 2006 find in the baseline $60 billion in spending that got introduced as earmarks and exists because of that. In the years since there have been an additional $35 billion in earmarks. So we are now at the point if you stare at a federal discretionary spending budget you find a $100 billion that wouldn't be there is it wasn't for earmarks.

1. True or false?

The candidate in question has said that $60 billion dollars a year can be saved from the federal budget by reducing earmarks. According to the Wall Street Journal on March 14 in Home Alone on Earmarks, "[i]n fiscal 2008, there were 11,747 appropriation earmarks totaling $16.8. That is down from a peak in 2005, when there were nearly 13,500 earmarks totaling almost $19 billion."

2. Who is that presidential candidate?

Economy -- Home Sales, Values Plunge: A key cause of the economic slowdown worsened last month as the Departments of Commerce and Housing and Urban Development reported yesterday that home sales fell to their lowest levels in over 16 years. Home sales have dropped 36.6 percent in the last twelve months. Home prices are down 11.3 percent during the same period. Among the fiscal impacts of the housing sector contraction: state coffers suffer as property tax revenues shrink along with values and foreclosures reduce the net number of homeowners. Sad Stats.

Budget -- Resolution Closer; Instructions Not Included: Prospects for an end to the month-long House-Senate budget resolution conference impasse improved, as negotiators indicated yesterday that the Blue Dogs had agreed to drop demands for reconciliation instructions to pay for the $70 billion AMT patch provision. This likely means the Senate's $35 billion stimulus reserve account instruction will be dropped. Conferees still need to work out a discretionary spending cap.

Taxes -- JCT Scores Housing Assistance Tax Act: The bill, approved last week by the House Ways & means Committee, which provides a low-income housing credit, tax-exempt housing bonds, and refundable credits for first-time home buyers, "would reduce budget deficits (or increase surpluses) by a total of $279 million over the 2008-2013 period and $18 million over the 2008-2018 period," per CBO. JCT Score. CBO Analysis.

Contracting -- House OKs Three Accountability Bills: The House voice voted three bills yesterday requiring those seeking federal contracts to disclose information about their companies:

• Close the Contractor Fraud Loophole Act (H.R. 5712) -- requiring prosective federal contractors disclose their involvement in administrative and legal proceedings initiated by the federal government
• Contractors and Federal Spending Accountability Act (H.R. 3033) -- requiring their disclosure overpayments and violations of federal criminal law relating to the award or performance of federal contracts, especially overseas contracts, and maintenance of a database with such information
• Government Contractor Accountability Act (H.R. 3928) -- requiring disclsoure of names and salaries of top executives and directors

Separately, the Contracting and Tax Accountability Act (H.R. 4881), which requires firms to submit, along with their contract bid proposal, a form certifying that they do not have any "seriously delinquent tax debt," passed the House on April 14. Story.

Budget -- Last-Ditch Effort at Budget Resolution Compromise: Budget resolution conferees have been at loggerheads for weeks about whether or not to pay for a one-year AMT patch, among other issues. A meeting today between House and Senate budget leaders with the House's Blue Dogs, a coalition of fiscal hawks, may be pivotal. Senate Budget Chair Kent Conrad (D-ND) is said to have offered an AMT compromise; details yet undisclosed. Barring compromise, House leaders are giving thought to "deeming" the resolution, which would allow them to set an independent discretionary spending cap for FY09. Background.

Stimulus -- House Vote on Housing Tax Title in Early May: If you are confused by the number of bills currently under consideration by Congress being called "stimulus," here is some clarification. We had a $160 billion stimulus package consisting mostly of a $3-600 per person tax rebate. It omitted things like food stamp assistance and unemployment insurance -- items likely to be rolled into a "Stimulus 2.0" in coming weeks. Under discussion is a domestic spending add-on to the war supplemental; some call that a stimulus because the spending would go to aiding the economy. Then come the House and Senate housing/foreclosure bills' tax titles, also being referred to as stimulus packages. The latest is that Majority Leader Hoyer indicated yesterday that H.R. 5720, the housing bill's tax title in the House ($11 billion, offset) would reach the House floor the week of May 5. Commentary.

OMB Watch released a statement on April 22 on the FY 2009 budget resolution negotiations. The statement urges both House and Senate negotiators to uphold the fiscally responsible principles promised by Democrats when they took over the majority in 2006. A key aspect of the ongoing budget negotiations is whether to offset the $70 billion cost of a one-year fix to the creep of the Alternative Minimum Tax (AMT). The House version of the resolution offsets the costs while the Senate does not.

OMB Watch was intensely critical of the president and Congress, particularly the Senate, at the end of last year when they abandoned PAYGO and passed a fix to the AMT that added over $50 billion to the tab of future generations. Congress has the opportunity to reverse course on this issue this week and make the difficult, but correct, choice to pay for their priorities. Let's hope they are able to muster the courage to do the right thing.

Supplemental -- Hoyer Expects Bill Late Next Week: Amid reports that congressional Democrats haven't settled on a strategy yet regarding the president's $108 billion war spending supplemental request, House Majority Leader Steny Hoyer (D-MD) told reporters yesterday that the House and Senate could take it up on the floor by the end of next week. "Democratic leaders have repeatedly said that, in the end, US troops in the field will be funded. But expectations are high that finally Congress will be able to extract a significant policy concession for that money." Story.

Contracts -- Reg. Change Short of Laggards Bill: A change to the Federal Acquisition Regulation falls short of the requirements of the Contracting and Tax Accountability Act, which passed the House on April 14. The change would require contractors to indicate whether they have been convicted over the past three years of violating any federal criminal tax law or failing to pay any tax. Contractors also would have to certify if they have been notified of an unresolved tax lien or any unsatisfied federal tax delinquency in excess of $3,000. See Federal Register change.

Economy -- Per Bush, It's a 'Slowdown', Not a Recession: "We're not in a recession, we're in a slowdown," Bush said at a news conference yesterday. Just a severe slowdown. For example, the National Association of Realtors released March home sales figures yesterday. The totals are down 20 percent from a year ago. See News Release. The president has a policy precription ready: "The key is for Congress not to raise taxes during this period of time and [to] send a signal that they're not going to raise taxes." Story.

Earmarks -- Pelosi OKs DOJ Probe of Rep. Young Conduct: In a reverse case of separation of powers, House Speaker Nancy Pelosi (D-CA) said yesterday that she concurs with last week's Senate vote referring the Rep. Don Young (R-AK) Coconut Grove improper earmark allegations to the Department of Justice. "The Speaker believes this a matter for the House ethics committee to look into, but she has no intention of standing in the way of the [Senate] bill as it moves forward to the president's desk," said Pelosi spokesman Nadeam Elshami.

Taxes -- CBPP Clarifies Fiscal Impact of Cap Gains Cuts: "Cutting capital gains rates reduces revenues over the long run. That's the conclusion of the federal government's official revenue-estimating agencies, as well as outside experts and the Bush Administration's own Treasury Department." Following misinformation by ABCNews last week regarding the fiscal impact of capital gains rate cute, the Center on Budget released a short paper, Experts Agree That Capital Gains Tax Cuts Lose Revenue, that clears up some misconceptions. Paper.

Taxes -- Details of Senate AMT Patch/Extenders Package: A comprehensive description of the titles and elements in S. 2886, the Alternative Minimum Tax and Extenders Tax Relief Act of 2008, introduced last week by Senate Finance Committee Chair and ranking member Sens. Max Baucus (D-MT) and Charles Grassley (R-IA), released by the Committee yesterday, is available here.

Posted by Dana Chasin, 10:03:49 AM

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