The latest in a NYT series on how well the federal government treats the oil and gas industry shows just how wasteful this nice treatment is.

The article focuses on an Interior Department study that found almost no benefit to giving energy companies a royalty break for drilling on public property. Over 40 years, these breaks will cost around $48 billion- and probably won't produce a drop of oil that wouldn't have otherwise been pumped.

The report estimates that the current incentives would have a tiny impact that is far exceeded by swings in market prices.

The report predicted that the current incentives would lead to the discovery of only 1.1 percent more reserves than if there had been no incentives at all. Total oil production from 2003 to 2042 would be about 300 million barrels more, or less than 1 percent, than it would have been anyway. Natural gas production would be 0.6 percent greater than it would have been otherwise.

But the cost of those royalty incentives would be high: about $48 billion less in royalty payments over the 40-year period. That loss would be offset by a slight increase in the prices that companies pay when bidding for leases in government auctions, but analysts said the net cost would still be above $40 billion.

What a great study. Could the government do one of these studies on every revenue break we give to businesses? That could give the 110th Congress much more "low-hanging fruit" to pay for programs under PAYGO. We might even get a better government out of it, too.

CongressDaily AM($) picked up a meeting of three former CBO directors who aren't very optimistic about the nation's fiscal health.

Pessimistic about Congress' willingness to address looming fiscal shortfalls in federal healthcare and Social Security programs, three former CBO directors said Tuesday the outlook is bleak for heading off the problems.

In a forum at the Urban Institute, former CBO directors Robert Reischauer, Rudolph Penner and Edward Gramlich largely agreed that the Democratic takeover of Congress provides dim prospects for resolving what they described collectively as an oncoming train wreck that might begin to derail the federal budget by the end of this decade.

I got to go to this meeting, and CongressDaily certainly got its tone right, though I'd add that everyone was pretty optimistic that problems with Social Security funding, being relatively minor, could be solved if the political leadership was there.

Most of the more intense gloom centered around health care. It's much harder to deal with health care costs because price escalation is being driven by factors that are harder to control. It's not just a matter of retinkering programs- that won't solve the problem. Health care programs will keep getting more expensive unless somebody does something such that costs are contained everywhere. It has to extend to the private sector as well, since most government programs rely on private providers.

Health care costs are both a budget problem and a sectoral problem. A policy fix for escalating health care spending requires something that goes much deeper than is now being considering. To fix the budget mess, we have to fix health care.