Congressional Quarterly ($) reports today that GOP leaders have decided to enact a long-term continuing resolution when they return to session in December, effectively pushing off their failed budget work onto the new Democratic Congress in 2007.

Incoming Senate Majority Leader Harry Reid's spokesman, tacitly acknowledging the amount of homework heaped on Democrats' desks, said,

“This is only the latest example of why the American people rejected this do-nothing Congress at the ballot box earlier this month. Republicans couldn’t do a budget. And now they have decided that they can’t or won’t pass the bills that provide funding for health care, education, transportation, etc. that benefit millions of Americans.”

Outgoing Senate Majority Leader Bill Frist's Chief of Staff implicitly impugned his party's ability to control its addiction to earmarks:

“With speedy progress on separate bills in the Senate highly improbable, and passions high on the part of many against an omnibus due to concerns over earmarks, Senate leaders are talking about how long a wrap-up CR could go, and, from the administration and Chairman [Thad] Cochran, they’ll be getting guidance on what remaining anomalies exist so that essential government operations will not be throttled if a CR needs to go into next year.”

Anomalies never cease.

A GAO memo today from David M. Walker, Comptroller General of the United States, entitled "Suggested Areas for Oversight for the 110th Congress" says that "fiscal policy is on an unsustainable path."

Among the memo's suggestions are the following "needing Congressional attention":

--> Reimpose caps on discretionary spending. Under caps, consider special rules for well-defined “emergency” designations.

--> Reintroduce pay-as-you-go (PAYGO) requirements—on both the spending and revenue side of the ledger

--> Consider budget triggers that would signal the need for action when there is significant growth in mandatory programs

--> Review the use of supplementals and earmarks in order to determine needed reforms

--> Require estimates of long-term cost implications of major policy proposals (tax and spending) before they are acted upon

OMB Watch applauds Walker's efforts to focus Congress' attention on these reforms. We will be issuing a proposal shortly, based on the last of these suggestions, to require a JCT estimate of the debt implications of legislation to cuts taxes and increase spending.

About a month after signing a defense appropriations bill containing $70 billion extra-budgetary "bridge fund" to pay for the wars in Iraq and Afghanistan, President Bush may request yet more funding for the conflicts. The next request could be an eye-popping $130 billion.

BNA ($):

Complicating the outlook for Democrats' own agenda would be the arrival of Bush's next supplemental spending request for the wars in Iraq and Afghanistan, others said. The next war supplemental is expected to be more than $130 billion, an aide to outgoing Senate Majority Leader Bill Frist (R-Tenn.) said. That supplemental request, which also would fall to the appropriations committees to tackle, would exceed all of Bush's previous requests for war spending.

This would be, by a long shot, the largest supplemental request for the Iraq and Afghanistan conflicts, and be the third such request in six months. In fact, this request would not only be the single-largest supplemental, but cost more than any single fiscal year’s war spending. It should raise a few eyebrows and bring Defense Secretary nominee Robert Gates to the witness table in January to answer a few questions, like How long will these funds last?. What exactly are we paying for that costs an order of magnitude greater than previous requests?, and Why, after three years is war spending still considered "emergency"?

This is not, however, totally unexpected. A few weeks ago we noted that the Defense Department might be seeking additional war funding. And while this week's reported figure is $30 billion less, it's still massive and is completely out-of-line in terms budget process.

Billion-dollar budget questions loom as we move through the lame duck and into 2007, including: the scope of a continuing resolution (CR), how many years to extend the popular tax credit package that foundered with the Trifecta, whether to attempt an ATM patch, what havoc reinstatement of PAYGO would mean for all of the above.

Congress adjourned at the end of last week for a two-week Thanksgiving break, leaving all these questions behind. Current leading speculation and the budget implications of the choices ahead are as follows:

• a CR: on or before December 8, Congress will extend the current CR, either until early next near, or for the entirely of FY2007; in the balance would be spending of perhaps $10-15 billion dollars in Labor-HHS slice of the pie alone
  
• the Extenders: current debate focuses on whether the package of tax credits, ranging from the R&D credit to the tuition tax credit, should be extended by one year or two, the difference between the two being $20 billion
  
• ATM patch: a one-year patch would cost about $40 billion, and the working assumption is that it would be subject to PAYGO and thus require that amount in offsets. Even repealing the oil and gas industry subsidies in last year’s energy bill and the pharmaceutical sector’s tax breaks — oft-mentioned targets — would not suffice

Watch this space for further developments.

CQ.com ($) reports that the House has passed an extension of the stopgap funding measure known as the FY 2007 continuing resolution. The current continuing resolution was set to expire this Friday. Hence, the swift action from the House.

The House-passed version of the extension will expire on December 8th. It sets appropriations at the same levels that the resolution it extended did; that is, the lowest of the levels set in either the Senate-passed version, House-passed version or last year's appropriations bills. In any event, if you take inflation and population growth into account, extending this CR means that human needs programs are being cut.

The Senate is expected to pass a similar extension of the continuing resolution today or tomorrow. It will then go to the President for his signature. When Congress returns in December, they will attempt to wrap up work on the FY2007 budget, or pass a long-term extension of the CR until the next Congress. Regardless of what happens, there's a strong possibility that Congress will make deep cuts to social needs programs.

UPDATE: The Senate has passed H. J. Res 100 this evening to continue funding federal programs through December 8. The bill will now go to the president for his signature.

CBO Acting Director Donald B. Marron has not endeared himself to the House and Senate Budget Committee chairs of late for his assessment of the federal deficit's long-term sustainability, and now he looks as "unsustainable" as the deficit itself.

This summer, Senate Budget Committee chair Kent Conrad (D-ND) criticized Marron's remarks that the current budget deficits "appear to be in a range that's sustainable" compared to previous shortfalls.

According to today's BNA:

At the time, Conrad said the "sustainable" remark was "completely and totally irresponsible" and said it disqualified him, at least in Conrad's mind, for the permanent post. The Senate president pro tem and the House speaker jointly appoint the director, after considering recommendations from the budget committees, so Conrad's sentiments took on added weight with the Democratic takeover of the Senate in the midterm elections.

The House and Senate Budget Committees have traditionally alternated on choices to the post, which comes with a four-year term. With the Senate takeover, Conrad is expected to have the pick in 2007. Said Conrad: "As Chairman, and in consultation with incoming House Budget Committee Chairman Spratt, I will recommend the best available person for the position--someone who not only possesses superior professional credentials, but also understands and respects CBO's nonpartisan role."

Look for Sen. Conrad to choose someone rigorous and fair-minded, who has the correct party pedigree -- without appearing partisan.

Word is that the lame duck session of Congress will consist of this week, followed by a two-week break, with a final work period of Monday, December 4 to Friday, December 18.

The current Continuing Resolution (CR) funding federal government operations expires this Friday, November 17. So, this week, a new CR is must-pass legislation. Congress is expected to set an expiration date for the new CR of Friday, December 8.

The questions before Democrats and Republicans in both the House and Senate are:

• Will the GOP majority, in its final weeks, be able to summon the will to exercise its remaining authority to craft the FY2007 budget to reflect its policy preferences?
  
• Do the Democrats prefer a new CR that sets a 2007 date so that they can produce an FY2007 budget that expresses their own preferences -- or would they rather not have their fingerprints on a budget essentially drafted by the Bush administration?
  
• Are the Democrats fairly indifferent about the outcome of the FY2007 budget, focusing instead on passing the Pelosi First 100 Hours agenda?

Having fallen short in the Senate last year by only one vote and this year on a tie vote, and given a new Democratic majority in both houses of the 110th Congress, with budget hawks poised to take over as chairs of the House and Senate Budget Committees, Pay-Go’s time may finally have arrived.

Quoted in BNA, OMB Watch’s Director of Federal Fiscal Policy, Adam Hughes, said, "A one-vote difference" in the Senate could be enough to get it through in that body.”

Whether incoming Budget chairs Sen. Kent Conrad (D-ND) and Rep. John Spratt (D-SC) would propose a statutory or rules version of Pay-Go remains to be seen.

The former would most likely require the President to offset an increase in the expected deficit due from tax cuts or entitlement spending increases with an across-the-board sequestration in a number of federal mandatory outlays. The latter would impose a budget process point of order requiring 60 votes in the Senate to waive the requirement for budgetary offsets; the House would need to adopt a version applicable to the rules of that chamber.

The appetite for Pay-Go may be tested before the 110th Congress is sworn in, if the tax credit extenders package is brought up during the lame-duck session of Congress.

In a continued effort to totally ignore Congress's request to fund the wars in Iraq and Afghanistan through the regular annual appropriations process, the Defense Department is in the process of constructing a new supplemental funding request for the wars for FY 2007 - reported to be a whopping $160 billion. Combined with the current $70 billion FY 2007 apporpriations for Iraq and Afghanistan, the United States could spend $230 billion on the wars by the time this fiscal year ends next September. That's approximately half of the total spending on the wars so far!

As if this wasn't bad enough, an internal Defense Department memo sent at the end of October encouraged the individual services to include even more money outside of the war effort in their supplemental requests. From CQ Today: ($)

In an Oct. 25 memorandum that expanded the emergency spending to costs associated with the global war on terrorism, Deputy Defense Secretary Gordon England encouraged the services to seek large supplemental requests. In the past, the Pentagon has used supplementals only to seek money for fighting in Iraq and Afghanistan.

“Estimates are to include incremental costs related to the longer war against terror,” England wrote, specifically saying those costs could include repairing and replacing equipment as well as changing force structures.

We've said many, many, many times that the increasing reliance on supplemental appropriation requests poses significant threats to the fiscal health of the country. Supplementals weakenen fiscal responsibility, errode opportunities for congressional oversight (not that Congress is really all that interested in oversight these days), increase the opportunity for waste, fraud, and abuse of federal resources, and discourage long-term planning and preparedness. When is the Bush adiministration going to learn?