Unemployment Claims -- June Starts off Much Like May: The number of first-time claims for unemployment insurance rose 25,000 in the week ended June 7 to 384,000 seasonally adjusted, according to the Labor Department's Employment and Training Administration data. The rise follows a decline of 16,000 in the week ended May 31. The unemployment extension bill having passed in the House yesterday (see here), these numbers may have some bearing on the Senate's deliberations. Today's ETA Report.

Earmarks -- Earmark Spending Makes a Comeback: From the front page of today's Wash Post, "Think of a way to spend money on defense, and it could easily be among the hundreds of projects added quietly to the House and Senate spending plans this spring. Many of the earmarks serve as no-bid contracts for the recipients." Earmark spending in the House's defense authorization bill alone soared 29 percent, from $7.7 billion last year to $9.9 billion now. Wash Post Story and Blog.

Taxes -- CBPP on PAYGO and the Extenders: A report issued this week by the non-partisan Center on Budget and Policy Priorities examines the fiscal implications of the tax extender bills the House and Senate are working on. Conclusion: "Unfortunately, key congressional Republicans are now arguing that any extension of existing tax provisions should be deficit financed, on principle. This claim will make it much tougher for Congress to live up to its pledge of fiscal discipline and could ultimately lead to multi-trillion dollar increases in the national debt." Report.

Unemployment -- What is the Fastest Vehicle?: House and Senate leaders haven't decided yet how best to pass a 13-week extension of unemployment insurance benefits for the nation's 8.55 million jobless workers. The House is inclining toward a stand-alone extension bill, believing that would quickly secure a veto-proof majority. Senate leaders and some Republicans such as Sen. Olympia Snowe (R-ME) say the "emergency" war supplemental "is the fastest vehicle" available. The House is expected to vote on a stand-alone version of the bill this afternoon or tomorrow. GOP Deserting Bush on UI.

Taxes -- Extenders on Hold as Cloture Vote Fails: By a vote of 50-44 yesterday, the Senate failed to invoke cloture -- cut off debate and move to a final vote -- on a $120 billion package of popular tax breaks known as "extenders" and a one-year AMT "patch." While the patch is not offset, the rest of the bill would be largely paid for by curtailing two tax breaks, consistent with a similar package that cleared the House May 21 (see Report). Senate Extenders Bill Summary.

Fiscal/Monetary Policy -- NY Fed Chair Speaks: Federal Reserve Bank of New York President Timothy Geithner shed new light Monday on the Fed's decision to help facilitate the sale of Bear Stearns to JP Morgan Chase. "We did this with great reluctance, and only because it was the only feasible option available to avert default... Although we assumed some risk in this transaction, that risk is modest in comparison to the risk of very substantial damage that would have accompanied default." Some believe the vast perponderance of the risk is being borne by U.S. taxpayers. NYT Commentary.

Taxes -- House Vote on Unemployment Benefit Extension: The House is expected to vote later this week on H.R. 4934, a bill to extend unemployment insurance for workers who have exhausted their benefits by up to 13 weeks in every state as well as an additional 13 weeks in states with higher levels of unemployment. The bill's language defines "higher levels" as a seasonally adjusted 6 percent total unemployment rate or a 4 percent insured unemployment rate. The bill is expected to cost about $14 billion, and the funding levels are not offset in the bill, raising possible "pay-go" concerns. CRS Bill Summary.

Taxes -- On Deck in the Senate: the Extenders: This week, and perhaps as soon as this afternoon, legislation patching the alternative minimum tax and extending expired or expiring temporary tax measures will hit the Senate floor, following a key vote on a bill to tax "windfall profits" from energy companies. An aide to Senate Majority Leader Harry Reid (D-NV) said if senators do not invoke cloture on the energy bill, the vote on the extenders bill -- price-tag: $55 billion -- would occur right away. Tax News story.

Contracting -- Bush Orders Contractors to Vet Illegals: On June 6, President Bush issued an executive order requiring federal contractors to participate in "E-Verify" -- the Department of Homeland Security's electronic system for verifying the immigration status of their workers, greatly expanding the reach of the administration's crackdown on employers who hire illegal immigrants. About 69,000 employers are now enrolled in the program, which is voluntary, up from about 5,900 in 2005, out of an estimated 7.4 million employers in the United States. Executive Order 12989.

Economy -- Gas Prices Hit National Average of $4: Gasoline prices reached a national average of $4 a gallon for the first time over the weekend, adding more strain to the economy. "This crisis really impacts those who are at the economic margins of society, mostly in the rural areas and particularly parts of the Southeast," said Fred Rozell, retail pricing director at the Oil Price Information Service. Gas prices have risen a dollar a gallon since January 1. NY Times.

Taxes -- Congress OKs Bill Punishing Tax Scoff-Laws: Last Friday, Congress sent a bill (H.R. 6081) to the president to provide military families with $1.2 billion in tax breaks, paid for in part by raising taxes on U.S. contractors who circumvent payroll taxes by hiring employees through offshore shell companies. The bill, which is entirely offset, would also raise revenue by taxing U.S. citizens and long-term U.S. residents on worldwide income, to prevent tax avoidance by renouncing their citizenship or moving overseas. President Bush has said he will sign the measure. H.R. 6081 Bill Summary.

Appropriations -- On Your Mark, Get Set... Stop?: With the FY09 budget resolution approved, attention now turns to the appropriation committees and subcommittees. In the House, a full slate of subcommittee spending bill markups has been scheduled. No action on the Senate side has been announced. House Appropriations chair Rep. David Obey predicted: "if we are filibustered to death or if the administration refuses to make any significant compromises as it did last year, that will obviously prevent bills from being finished." Appropriations Process.

Unemployment -- Monthly Rate Jump Highest Since Feb. 1986: The Bureau of Labor Statistics reported this morning that the nation's unemployment rate rose a half of a percent, from 5.0 in April to 5.5 percent in May, the fastest rise in 22 years, as 861,000 joined the ranks of the unemployed. Meanwhile, those with jobs have seen their real wages shrink this past year: hourly earnings have risen 3.5 percent, below the pace of inflation, which is running at about 4 percent. NY Times.

UI Benefits -- Unemployment Extension Back on Table: Even before this morning's unemployment report, word on Capitol Hill yesterday was that a 13-week extension of unemployment insurance benefits may be re-added to the war supplemental bill. House Majority Leader Steny Hoyer (D-MD) had all but ruled an extension out on Wednesday. But yesterday Hoyer told reporters that "It is still under discussion." Center on Budget Statement.

Budget -- Congress Adopts Resolution for FY09: It's certainly not the end, nor the beginning of the end, but it is a noteworthy end of the beginning of the FY09 budget-making process. By a narrow majority, 214-210, the House passed a budget resolution for the next fiscal year and the appropriations committees now have allocation caps for the spending bills they will begin marking up as early as next week. House Speaker Nancy Pelosi (D-CA) called the budget's adoption "a remarkable achievement." House Appropriations Markup Schedule.

The good folks over at the Congressional Budget Office (CBO) released their monthly budget review yesterday. Some highlights of the number crunching in the report are below:

The federal government incurred a deficit of about $317 billion during the first eight months of fiscal year 2008, CBO estimates, $168 billion more than the shortfall recorded through May of last year. About $50 billion of that change is due to the distribution to individuals of the tax rebates enacted in the Economic Stimulus Act of 2008. That amount is just under half of the total rebates expected for this year; most of the remainder will be disbursed during the next two months.

...

CBO estimates that the federal government recorded a deficit of $165 billion in May, about $97 billion more than the deficit recorded in May 2007. About half of that increase was due to rebate payments, which are recorded as either reductions in revenues or increases in outlays. (When a rebate exceeds an individual's federal income tax payment, the excess is classified as an outlay in the budget.)

...

Outlays were $174 billion higher than in the October-May period last year, far outpacing the $6 billion growth in net revenues...

The broad category of other programs and activities accounted for almost half of the increase in outlays through May. Spending for that category was up by 12.6 percent on an adjusted basis, reflecting an estimated $19 billion in rebate payments as well as double-digit growth in outlays for refundable tax credits, veterans' health programs, unemployment benefits, and food and nutrition services. Defense outlays have also grown rapidly in recent months, rising by 10 percent through May, compared with 7 percent in fiscal year 2007. Much of the growth this year has been driven by a 14 percent increase in spending for military operations, maintenance, and procurement, well above last year's average gain of 8 percent for those activities.

CBO: Monthly Budget Review

Washington, DC — Today, OMB Director Jim Nussle issued the following statement on Senate passage of the FY09 Budget Resolution:

It is disappointing that Democrats in Congress are repeating last year's tax and spend game plan. The Democrat's budget resolution would result in the largest tax increase in our nation's history, adds $25 billion in new spending this year and $209 billion more over 5 years, while failing to address the looming entitlement crisis.

Translation:

It is disappointing that the budget the president submitted to Congress in February repeats last year's tax and spend game, which repeated the same game going back six years (for which I am not responsible). His budget, which projects a budget surplus in four years (when I will not be responsible) based on lugubrious projections no one rightly takes seriously (not even me) will necessitate something like the biggest tax increase in history to yield a surplus that quickly. And it adds $57.8 billion in new spending... and that's just discretionary spending ($929.8 billion for FY08 vs. $987.6 billion for FY09).

Did someone say "entitlement crisis"? What's that?

But seriously, we look forward to the president working closely with Congress over the coming months on the FY09 appropriations bills ... since we trust that he does not want another continuing resolution to permit the next president to undo his handiwork and enact an FY09 budget of his own.

By a vote of 214-210, the House has approved a spending plan for FY 2009. The $3 trillion budget, adopted by the Senate yesterday, includes $1.013 trillion in discretionary spending and is the first budget to be passed in an election year since 2000.

Budget -- Senate Adopts FY09 Resolution: In a near-party line vote, the Senate passed a $3.03 trillion budget blueprint yesterday, 48-45. The resolution moves over to the House, which is expected hold a vote on it today. The thorniest long-term fiscal policy questions (about the AMT, extending the Bush tax cuts, etc.) will probably be deferred to the next Congress and the new president, but the appropriations process will at least start by regular order, at least in the House. Statement of Senate Budget Committee chair Kent Conrad (D-ND).

Transparency -- Bipartisan Bill Expanding Contracting Data Introduced: On June 3, Senate sponsors Barack Obama (D-IL), Tom Coburn (R-OK), and John McCain (R-AZ) introduced bipartisan legislation, the Strengthening Transparency and Accountability in Federal Spending Act, to expand the types of information relating to federal spending on government contracts mandated for inclusion on a searchable online database, www.USASpending.gov. The database would now cover "competitive bidding, the range of technically acceptable bids or proposals, the profit incentives offered for each contract, and the complete amount of money awarded, including any options to expand or extend under a contract," said Obama. OMB Watch blog and links.

Taxes -- Questions Surround Senate Extenders Bill: Senate Finance Committee chief Max Baucus (D-MT) said yesterday that the Senate would take up a package extending roughly three dozen tax breaks prior to the July 4 recess. But many important questions remain. What will be the final content of the package, which currently differs markedly with the House package. Will the Finance Committee would take up the bill or will it go directly to the Senate floor? Would the package be paired with an AMT patch? Would the patch and/or the extenders be paid for? Might some extenders be extended for more than one year? Which ones and for how long? Background Story.

By a 48-45 vote, the Senate approved a $3.03 trillion spending blueprint for FY 2009. The resolution's $1.013 trillion domestic spending level tops the president's request by some $24.5 billion.

The conference agreement on the budget blueprint was adopted 48-45 on a largely party-line vote. To accommodate the absences of hospitalized Sens. Edward Kennedy, D- Mass., and Robert C. Byrd, D-W.Va., Republican Sens. John W. Warner of Virginia and Pete V. Domenici withheld their "no" votes, pairing with the ailing Democrats.

Maine Republican Sens. Susan Collins and Olympia J. Snowe voted for the package, while Democrat Evan Bayh of Indiana voted against it. Sen. Barack Obama, D-Ill., his party's presumptive presidential nominee, voted for the package while his Republican counterpart, John McCain of Arizona, missed the vote. Hillary Rodham Clinton, D-N.Y., Obama's vanquished rival, also missed the vote — although she, like Obama, had spoken earlier in the morning to the American Israel Public Affairs Committee just blocks from the Capitol.

The budget blueprint, drafted solely by Democrats, will serve primarily as an election-year policy statement. Most of the hard choices on spending and tax policy will be deferred to the next Congress and the new president.

Sometime around noon today, the U.S. Senate is expected to vote on the FY09 budget resolution that has been in the works for nearly four months. If approved, it would be the first time a budget will have passed in an election year since 2000. The budget, which includes a five-year horizon, would achieve a surplus of $22 billion in FY12 and $10 billion in FY13.

But almost every GOP member of the Senate -- save Maine's Senators Susan Collins and Olympia Snowe -- is expected to oppose the resolution because they have some notion that it contains a really big tax increase necessary to achieve surplus. Budget policy experts and legislative counsel have, to this point, been unable to pinpoint where this provision is embedded in the resolution text.

"Another senator will pair with him," said [Senate Budget Committee chair Kent] Conrad, who declined to say who that would be. "Sen. Kennedy isn't here to vote, so under the Senate pairing rule, another senator would withhold his vote. He would be on the opposite side [of the legislation.] It is really a very respectful thing to do so that Sen. Kennedy's absence will not affect the outcome."

OMB Watch will be watching the vote. We've endorsed the resolution and look forward to its swift passage in the Senate today and the House tomorrow.

Posted by Dana Chasin, 10:53:08 AM



Obama-Coburn Continue Transparency March

Sens. Barack Obama (D-IL), Tom Coburn (R-OK), Tom Carper (D-DE), and John McCain (R-AZ) introduced new legislation on June 3 as a follow-up to the 2006 Transparency Act. The bill, the Strengthening Transparency and Accountability in Federal Spending Act (S. 3077), would augment the 2006 law but go further, making important new data more easily accessible to the public and making it easier for citizens to hold our government accountable for the fiscal stewardship of our shared resources.

It should be interesting to see if this new bill will generate the same amount of chaos, confusion, and excitement that the first bill did that Obama and Coburn worked together on. Stay tuned...

Taxes -- Extenders to Bypass Senate Finance Cmte.: With the election year compressing the legislative calendar and an underlying conflict on PAYGO simmering in committee, it appears the Senate bill extending expiring tax breaks will bypass the Senate Finance Committee and reach the Senate vote once the climate change bill is voted on. Committee member Mike Crapo (R-ID) warned: "When you bypass the committee, then you basically set up more of a partisan fight on the floor," he said, predicting a filibuster. Senate Extenders Bill Summary.

War Supplemental -- UI Extension may be Dropped House Democrats are likely to drop a 13-week extension of unemployment insurance benefits from a major spending package that includes continued funding for the wars in Iraq and Afghanistan and that would create a new education benefit for military veterans. The Senate-approved version of the war spending bill would cost more than $250 billion over 10 years, a price tag that the fiscally conservative caucus of "Blue Dog" House Democrats opposes. Wash. Post.

Transparency -- Levin Seeks Defense Spending Watchdog: Senate Armed Services Committee chair Carl Levin (D-MI) hopes to amend the 2009 defense appropriations bill to create a new senior defense official to oversee Pentagon program cost estimates, in an effort to address the huge overruns plaguing the military's system for buying new weapons and equipment. In a sign that the initiative should receive bipartisan support, the committee's top Republican, Virginia Sen. John Warner, said he would support the move. Wall Street Journal ($)

Posted by Dana Chasin, 09:44:58 AM

Tuesday, June 03, 2008

Economy -- Fed Chief Shifts Focus from Slowdown: In a sign that the round of rate-cutting since last summer may be ending, Fed Chief Ben Bernanke indicated more of a concern with inflation in a speech today than with the economic slowndown that has generate months' of speculation about a possible recession in the U.S. Bernanke Speech.

Economy -- Consumers Raid Nest Eggs to Spend: "After a long binge of borrowing, U.S. consumers face a credit crunch and a sagging economy. To sustain their living standards, many Americans are doing what comes naturally: scrambling to raise more cash... Consumer confidence hit a 28-year low in May, according to the latest Reuters/University of Michigan survey of consumer sentiment." Wall Street Journal ($).

And More Economy -- Empty Nest Syndrome: The number of foreclosed homes owned by lenders continues to rise despite signs that they are increasingly willing to slash prices to sell those properties. Lenders and investors in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007. Wall Street Journal ($).

Source: CQ Today

Monday, June 02, 2008