I'm sure you all already read all of the Congressional Budget Office's 2010 Budget Outlook since I blogged about it the other day, but in case you missed it, the outlook also included a special section on the Recovery Act. The main take away from this section is that the CBO predicts that the overall cost of the Act will be higher than initially estimated, thanks to a couple of factors.

The first factor is higher unemployment. When the CBO initially estimated the Recovery Act's cost, it predicted an 8% unemployment rate, not today's 10% rate. This higher rate means that the unemployment insurance provision of the Act will cost more as more people qualify for unemployment; $21 billion more in fact, over the life of the Act.

The second factor is the food stamp program. There's a very complex reason why the program's cost is increasing, involving inflation and baskets, but explaining it would take up a couple pages, so just take CBO's word that it's going to cost an extra $34 billion.

Finally, another $26 billion in additional spending comes from the Build America Bond program which, according to the CBO, "pays state and local governments for 35 percent of their interest costs on taxable government bonds issued in 2009 and 2010 to finance capital spending." The program is more popular than the CBO initially estimated, generating more costs over the next ten years.

All told, the CBO is estimating that the Recovery Act will cost $862 billion over the Act's lifetime, up from $787 billion. The CBO helpfully provides the below chart to show how these costs are broken down over time by program.

Note that this year, FY 2010, will be by far the most expensive year of the Act. Although that shouldn't be too surprising since it's the first full year since Congress passed it.

Surprisingly, the news of a higher Recovery Act price tag has not created much of a stir. Earlier today (a full three days after this report came out!) I got a press release talking about Obama's "$787 billion American Recovery and Reinvestment Act." These things take time, I guess.

This past Tuesday, Federal Reserve Chairman Ben Bernanke wrote a letter to the Government Accountability Office, calling for an audit of "all aspects of our involvement in the extension of credit to AIG." The letter sparked a storm of interest, with pundits saying it was a move by Bernanke towards supporting increased Fed transparency, a hot topic these days as Bernanke waits for the Senate to confirm his new term as Fed chair. There were literally hundreds of articles about the letter, with every major news outlet writing it up, making the letter a major piece of news.

Most of the articles, however, ignored one key fact: the GAO already has the authority to audit the Fed's extension of credit to AIG. It has since May, when Congress passed a bill which authorized the GAO to audit "any action taken by the Board under the third undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 343); with respect to a single and specific partnership or corporation." This covers the Fed's actions with Bank of America, JP Morgan Chase, etc., companies which received special, individualized assistance. What aren't covered under the GAO's increased authority are the more opaque emergency lending actions, which potentially affected hundreds of banks across the nation, and the Fed's support of foreign banks, which has drawn the wrath of many populists.

If Bernanke came out in support of auditing all of the Fed's emergency lending actions, that would be news. For now though, this letter is like a taxpayer writing to the Internal Revenue Service, giving it permission to audit their tax return (which it already has). Apparently, the GAO received Bernanke's letter with about as much interest as the IRS would receive such a letter, with Chuck Young, a GAO spokesman, telling Bloomberg News the GAO will review Bernanke's request "in the context of our future work priorities."

Image by Flickr user isriya used under a Creative Commons license.

While most of the nation's attention seems to have been focused on health care and budget issues as of late, the Office of Management and Budget has been hard at work on the Recovery Act recently. With the start of the second recipient reporting cycle rapidly approaching, on Friday OMB put out a new Recovery Act guidance, this one specifically addressing job creation estimates and data quality issues. These two areas have been huge problems for OMB and the Recovery Act in general, with many of the story lines from the last cycle focusing on terrible data quality and suspect job creation estimates. With the new guidance, OMB is hoping to head off some of these stories for the coming reporting cycle.

Overall, the guidance is very helpful. First, it lays out ways in which agencies can help recipients report better data. Agencies now are supposed to highlight for recipients data elements that have been shown to have significant errors, such as recipient name, award amount, and job creation estimates, with the hope that recipients will pay more attention to these sections when entering their data. The agencies also are instructed to have recipients examine their reports for logical inconsistencies, such as if a recipient reports having created a large number of jobs despite not yet starting a project.

Most of the document though, fourteen pages of the twenty-four page document, are dedicated to guidance on job creation estimates (so called "full time equivalents," or FTEs). The new guidance is surprisingly in-depth, providing multiple examples covering a range of possible scenarios. It even includes a worksheet at the end giving step-by-step instructions for how recipients should go about calculating FTEs.

Perhaps the most significant change in the new guidance is in this FTE section. In the previous reporting cycle, many recipients were confused about the distinction the OMB made between jobs created and jobs retained. Earlier guidance was not very clear about when a job should be counted as created or saved. Under the new guidance, however, this distinction is largely eliminated. Recipients now simply report FTEs based on the hours worked on Recovery Act funded projects, regardless of whether those hours were worked by a new or retained employee.

That said, the new guidance isn't perfect. Among other problems, the guidance is very, very late. OMB released it on the night of December 18, a Friday night a week before Christmas, meaning that agencies have less than a week to act on the new guidelines before the second reporting cycle beings on January 1. Because of this short turnaround time, it doesn't seem likely that much of this clarifying guidance will make it down to the recipients in time for the upcoming cycle.

At the same time, the guidance also includes several December 22 deadlines, which is today, the Tuesday after the Friday OMB published it. I imagine many agencies will not meet these deadlines, since, thanks to the epic Snowpocalypse of 2009, the federal government was not open on Monday, and is still not operating at full strength.

Finally, and perhaps most disappointingly, the guidance still does not provide for a standardized FTE. OMB still leaves it up to the recipient to decide how many hours constitute a "full time" job (although the new guidance changes the period of time an FTE should be measured by to a quarter, down from the life of a project). So despite all of the changes and positive clarifications delivered through the guidance, it will still be impossible to compare FTEs between recipients.

Yesterday, in what most news organizations are calling a "flurry" of legislative action, the House passed a relatively large package of contentious bills, including the Defense appropriations bill, an increase to the debt limit, and a jobs bill. The Defense bill, originally thought to be the most difficult of the four bills, easily sailed through the House, 395 to 34, and the Senate immediately began its debate on the bill. The other two bills, however, proved to be much closer, and foreshadow legislative confrontations in the beginning of 2010.

Perhaps most importantly for the fiscal health of the nation, the House agreed to lift the debt ceiling by $290 billion, to $12.4 trillion. Without the increase, the nation would run out of money and begin defaulting on its debts in two weeks, sending a significant shock throughout the world's economy. Considering the consequences, the House vote was surprisingly close, 218 to 214, with 39 Democrats joining all 175 Republicans in voting against the debt increase.

The vote yesterday only pushes the issue down the road, as the $12.4 trillion ceiling will only last until February of 2010. The $290 billion increase buys time for House leaders to negotiate a larger, more permanent solution, such as increasing the debt ceiling by some $2 trillion, early next year.

Shortly after increasing the debt ceiling, the House also narrowly passed a $150 billion jobs package, 217 to 212. The bill includes $48.3 billion in infrastructure projects, $26.7 billion for public sector jobs (teachers, fire fighters, police officers, etc), and $79 billion for social safety net programs such as unemployment insurance, COBRA, and Medicaid. Although it isn't in the legislation, Congress intends to pay for the jobs package using unspent TARP authorization funds, although it's unclear if the savings would cover the entire package.

The Washington Post called the jobs bill "largely symbolic," since the Senate, which is fully consumed with health care and the Defense appropriations bill, will not be able to get to the bill until sometime next year. Further imperiling the bill's future, it may be attached to a "pay-as-you-go" provision when brought to the Senate, a measure which the House originally passed in July but should prove controversial in the upper chamber. Regardless, the bill, in conjunction with the delayed vote on a higher debt limit, does ensure that a significant portion of the next legislative year will be taken up by fiscal policy.

Finally, the House also passed a continuing resolution for Defense, since even though it passed the department's full appropriations bill, the Senate is not expected to pass the bill before the original continuing resolution expires at the end of the week. The new continuing resolution passed the House by voice vote.

Image by Flickr user chrisjohnbeckett used under a Creative Commons license.