OMB Watch released a statement yesterday afternoon harshly criticizing the Democratically control Congress and the president for abandoning fiscal responsibility in the final hours of 2007 after they entire year was spent adhering to or attempting to adhere to righting our nation's fiscal course. From the statement:

Adding insult to a year of fiscal policy injuries, Congress has abandoned fiscal responsibility by waiving pay-as-you-go (PAYGO) rules in order to pass a one-year patch to the alternative minimum tax (AMT) without offsets. This tax cut adds another $50 billion to an already expanding deficit next year, and will give fewer options for our children and grandchildren to seek solutions to the problems of tomorrow.

While I expect as much from President Bush, this is a huge disappointment from the new Democratic majority in Congress whose number one promise was to uphold pay-as-you-go (PAYGO) rules. So much for promises:

This vote is particularly disappointing as Democrats have gone to great lengths this year to comply with PAYGO rules, particularly on spending. From student loan reforms to expansions of the State Children's Health Insurance Program and Food Stamps, Democrats have negotiated the turbulent fiscal waters of the federal budget responsibly, diligently, even courageously. That is why at this point, after all that work and sacrifice, the compromises and the concessions needed to construct balanced solutions to the AMT problem, it is unacceptable for them to abandon their stated principles of fiscal responsibility because they fear Americans will not accept paying up front for the services and benefits the country demands.

As the statement makes clear, there is plenty of blame to go around in Washington for this policy failure. What an awful way to end 2007.

CBO released its long-term budget outlook yesterday. Here's CBO Director Peter Orszag's testimony and the report itself. Key excerpt:

The rise in health care spending is the largest contributor to the growth projected for federal spending. Therefore, efforts to reduce overall government spending will require potentially painful actions to slow the rise of health care costs. There may be ways, however, in which policymakers can reduce costs without harming the health of Medicare and Medicaid beneficiaries. Changing those programs in ways that reduce the growth of costs—which will be difficult, in part because of the complexity of health policy choices—is ultimately the nation's central long-term challenge in setting federal fiscal policy.

You'd think that the fiscal policy community would respond to this message by calling for a redoubled effort into controlling health care costs. But to Robert Greenstein, executive director of the Center on Budget and Policy Priorities, the long-term outlook means that we should focus our efforts on enforcing PAYGO budgeting rules.

Moreover, enforcing Pay-As-You-Go rules — and paying for any tax cuts Congress elects to extend (and any entitlement increases) — is within policymakers' power. In contrast, as CBO explains, we probably won't be able to secure the needed reductions in projected Medicare and Medicaid costs without causing serious harm to low-income and elderly patients unless we can slow cost growth throughout the entire U.S. health care system. And while this is the nation's most important fiscal challenge, there is currently no consensus among health care experts about how to accomplish it; achieving such a consensus and fully implementing the appropriate policies could take years or decades.

Why doesn't he ask to speed this process up? Put more money into research, experiment with incentives, implement what the research has already found, ANYTHING that would actually solve the problem, instead of just keeping it from getting worse. He could be asking Congress to both enforce PAYGO and reduce costs. But he clearly prioritizes PAYGO way over trying to control costs now, I guess because he thinks there's nothing we can do. There's plenty to do.

Plus, waiting around for a consensus seems pretty silly. There's no consensus on what to do about a lot of things- basically everything. And the consensus is often wrong. It wasn't that long ago that there was a consensus that the only way to close the long-term budget gap was to raise taxes and cut benefits.

This attitude won't solve the problem. It's a recipe for a continuation of the status quo. At least Orszag gets that much greater emphasis needs to be put on containing health care costs, because that's the most important problem, and not enough is being done about it. Why doesn't CBPP get that we CAN do something about health care costs now? Am I missing something?

CBO estimates that the federal government recorded a deficit of $157 billion for the first two months of fiscal year 2008, about $35 billion more than the deficit recorded for the same period last year. Outlays were about $50 billion (or 11 percent) higher than they were in 2007, while revenues were about $15 billion (or 5 percent) higher.

CBO: Monthly Budget Review