During this period of political gridlock, it's rare to find a bipartisan legislative initiative that we can enthusiastically support. But tomorrow, the House of Representatives will vote on just such a bill, the Digital Accountability and Transparency Act (DATA Act). The DATA Act would greatly enhance federal spending transparency, bringing new datasets online and helping standardize reporting across the government.

Federal spending transparency is a relatively new field, with Congress passing the first law mandating online, public access to spending data in 2006. This law, the Federal Funding Accountability and Transparency Act (FFATA), created the bedrock of current federal spending transparency, USAspending.gov. This site, which collects agency data on contracts, grants, and loans, is used by thousands of people every day, including national and local journalists, government officials at every level, and concerned citizens. But USAspending.gov is hampered by limited scope and shaky funding.

The DATA Act creates a new commission, the Federal Accountability and Transparency (FAST) Commission, to oversee federal spending transparency. The FAST Commission would set the standards for several new reporting systems. The DATA Act specifically calls for so-called "ultimate recipient reporting," which requires every recipient to report on their use of funds, no matter how many times a federal award is subcontracted (currently, both FFATA and the Recovery Act stop at the second-tier recipient). The commission would also have $51 million in dedicated funding, each year, giving it the funds it would need to succeed.

These changes would allow the public to have a full sense of how their tax dollars are being used. With ultimate recipient reporting, users can follow the money all the way down the chain. For instance, say a local school district receives a grant from the federal government to fix up a neighborhood school. Currently, if a local contractor receives an award to do the work, it will show up in USAspending.gov as a subrecipient. But if that contractor then subcontracts the work out to, say, a large multinational corporation, the government database wouldn't show that, since we've exhausted the "tiers" in the current law. Ultimate recipient reporting, however, would show every recipient, every subcontractor, who receives more than $100,000 in federal awards.

The FAST Commission would have the additional responsibility of setting up a totally new dataset from the Treasury Department. Since the Treasury is the agency actually signing the checks for all federal contracts and grants, its spending data has long been seen as the mythical gold standard for spending information. But opening up these books has been difficult, and the DATA Act forces Treasury to work with the FAST Commission to make this information publicly available.

By overseeing all of these reporting systems, the commission would be able to take a more big-picture view of spending transparency. Currently, recipients of federal awards often face several reporting requirements. In addition to whatever reporting requirements the awarding agency might have, FFATA might require the recipients to report their activities to USAspending.gov, as well. But the commission would have several ways of trying to reduce this reporting duplication, chiefly by setting data standards and pre-populating data fields. This means that recipients of federal dollars should only have to report once, in one place, to satisfy several requirements.

The DATA Act also calls for all this information to be as open and accessible as possible, allowing anyone to use and remix it however they want. Additionally, the commission would regularly produce a slew of reports for Congress and the public. These would include one on the benefits of spending transparency, and another on the feasibility of publishing data on tax expenditures, the more than $1 trillion worth of spending with no transparency whatsoever.

Loyal OMB Watch followers may remember that we originally were opposed to the DATA Act. However, since the House Oversight and Government Reform Committee first voted on the bill, a number of changes have been made. It no longer repeals FFATA, the landmark transparency law. And the new version also has a less restrictive sunset so that only the FAST Commission is up for another vote in seven years, not the entire bill and the new reporting requirements. While there are other, small changes, these two are enough to convince us to support the new version of the bill.

The version of the DATA Act coming to the House floor tomorrow afternoon enjoys wide support, both inside and outside government. The bill passed unanimously through the House Oversight Committee last year, and both Democrats and Republicans vocally support the bill. Yesterday, 23 good government groups, including OMB Watch, called on Congress to pass the DATA Act.

Now we're asking for your help. Please let your representative know you support transparency, too. Write your representative and urge him or her to pass the DATA Act to make government spending more open to citizen oversight!

UPDATE (April 25, 2012): The DATA Act passed the House by an overwhelming voice vote this afternoon.

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

Yesterday, Rep. Paul Ryan (R-WI) released his latest budget proposal, called "The Path to Prosperity," which serves as an update to his plan from last year. The proposal, which is the draft of the fiscal year (FY) 2013 House budget resolution, is supposed to be a fiscal framework for the House for the coming year. However, the congressman's tax plan is not a serious proposal for change.

Ryan slashes upper-income taxes while vaguely promising to get rid of unnamed tax breaks. The assumptions behind his economic growth estimates are fuzzy, and without strong economic growth, the Republican proposal could cause the national debt to balloon. What is clear is that the proposal would unquestionably cause income inequality to explode.

Ryan correctly highlights the sorry state of the federal tax code. It is overly complex, so complex, in fact, that Americans pay $160 billion a year for tax preparation assistance. When the nation is spending almost three times as much on tax preparation as on pharmaceutical research and development, as Ryan points out, something is wrong.

But his proposed "solutions" disproportionately benefit the wealthy. Ryan points out that the top one percent of taxpayers benefit the most from tax loopholes, and then proceeds to give these same taxpayers sweeping tax breaks by tripling down on the Bush tax cuts. Ryan's proposal slashes the top personal income tax rate by ten percentage points, from 35 to 25 percent. The other five tax rates would be condensed into one bracket of ten percent. Ryan does not stipulate the incomes subject to the different tax rates, but the end result is clear: the upper class will receive a massive tax break, and the tax code's progressivity, in which those earning more pay more in taxes, would essentially disappear overnight.

At the same time, Ryan would repeal the Alternative Minimum Tax (AMT), an additional tax upper-income taxpayers pay now if their taxes are below a certain level. Because the AMT was not indexed to inflation, it is starting to hit more middle class families (not just the wealthy), but there are ways to re-target the tax without repealing it entirely. The AMT greatly increases the progressivity of the tax code, and currently brings in about $600 billion over ten years. Erasing it from the tax code would both decrease revenues and increase inequality.

Ryan would also cut the corporate tax rates. To reform the corporate tax code, Ryan uses the plan put forward by the House Ways and Means Committee chairman, Dave Camp (R-MI), which proposes cutting the corporate tax rate by ten percentage points, to 25 percent, and closing loopholes. This move, by itself, would decrease revenue, since the Joint Committee on Taxation recently estimated that the corporate tax code could not be lowered below 28 percent without losing revenue, even if Congress got rid of all the loopholes to pay for it.

Ryan would also change to a "territorial" tax system, which essentially only taxes corporate profits that are generated in the United States. According to Citizens for Tax Justice, such a change would only encourage companies to move more of their activities off-shore, cutting job growth and costing the government tens of billions of dollars in lost revenue each year.

The Republican budget resolution does not specify how these tax cuts would be paid for. Ryan writes that "[this] budget would eliminate tax subsidies ... to lower rates," but doesn't name a single loophole or credit that he would eliminate. Slate economics writer Matt Yglesias complained that Ryan's lack of details reached new levels of "tax reform vagueness."

By slashing tax rates, abolishing four tax brackets, eliminating the AMT, and lowering the corporate tax - all without specifying any offsets - Ryan's budget could likely drastically lower the amount of revenue the government collects. The Tax Policy Center noted that policies such as Ryan's, if not offset, could cost as much as $4.5 trillion over the next ten years. In 2022 alone, Ryan would need to eliminate about $700 billion in tax breaks to make up the gap in revenues.

Ryan assumes that his budget will keep producing the same amount of revenue despite his massive tax cuts, but does not provide the details for how he arrives at that conclusion. He even told Congress' budget scorekeeper, the Congressional Budget Office, that his budget would produce revenues equal to 19 percent of the economy each year by 2030. To add up, Ryan's budget probably employs dynamic scoring, a discredited concept that predicts tax cuts will pay for themselves through economic expansion. But such economic growth is unlikely. Instead, Ryan's budget would likely cause the national debt to skyrocket even higher.

The Ryan budget resolution is in stark contrast to the President's budget, released in early February. The President would restore higher tax rates on the wealthy (let the Bush tax cuts on higher income households expire), which Ryan extends permanently; institutes new measures to ensure the nation's wealthiest pay their fair share; and has targeted by name a number of tax loopholes to close. Instead of severe cuts in domestic discretionary spending and entitlement programs, President Obama proposed new revenue streams, targeted investments to promote economic growth, and selected cuts to both social services and defense programs. This approach would begin to increase tax fairness and to reduce inequality. The Ryan Republican plan does just the opposite.

For more on revenue options that Congress could choose, visit We Have Choices and voice your preferences.

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

“The state of the union is getting stronger.” That is how President Obama characterized the current state of the union. But, as we wrote in our State of the Union preview on Tuesday, we still have a long way to go before the economy is back on its feet. In our article, we recommended doing away with the looming budget cuts, increasing taxes on capital gains and financial transactions, and using the additional revenue to pay for more infrastructure projects and public protections. So what fiscal issues did Obama talk about in his speech on Tuesday?

One of the main themes of the speech was fairness, which we said was important for creating opportunity and building a vibrant middle-class. First, the president again called for the tax code to follow the “Buffett Rule,” which would ensure that millionaires such as financier Warren Buffett pay at least as much in taxes as their secretaries. In his “blueprint” document accompanying the speech, Obama interprets the rule as meaning millionaires should have an effective tax rate of at least 30 percent.

However, he is unclear on exactly how this would be accomplished. The only specific policy change mentioned is limiting tax breaks for millionaires, saying “there is no reason that those making over $1 million per year should get any tax subsidies for housing, health care, retirement, and child care.” (And even this policy provision is ambiguous; is the president proposing eliminating itemized deductions and all credits for anyone making more than a million dollars?) But this policy change alone most likely won’t increase most millionaire’s tax rates, since their low rates are often a function of the preferable tax treatment of capital gains.

As we wrote in our Watcher article, the best way to increase fairness in the tax code is to treat capital gains (which is profit from stocks, bonds, and other investments) as ordinary income (such as wages). Right now, the top capital gains rate is less than half the top rate for wages, which allows millionaires, such as Mitt Romney, to have a low tax rate. While the president has called for allowing the upper-income Bush tax cuts to expire, which would bring the top capital gains tax rate up to 20 percent from 15 percent, he has resisted advocating for taxing capital gains like wages (for the wealth, this would mean a tax rate of 35 percent on capital gains). However, his argument for millionaires to pay at least 30 percent of their income in taxes functionally amounts to the same thing.

We also wrote about infrastructure spending in our State of the Union preview, saying that such spending (in the form of grants to the states) is one of the best ways the government can boost the economy. In his speech, the president proposed increasing infrastructure spending, and paying for it with half of the savings from the troop drawdowns in Iraq and Afghanistan. This proposal would add approximately $500 billion to infrastructure spending over the next ten years, based on estimates included in the president’s fall deficit reduction plan. According to the Congressional Budget Office, that much spending could – thanks to multiplier effects - spur the economy by more than a trillion dollars, while giving the nation’s workforce a helping hand.

The most disappointing budget news was that the president appears to be sticking by the cuts contained in the Budget Control Act (BCA, also known as the debt ceiling deal). He praised these cuts several times in his speech, and even called for more deficit reduction on top of the BCA. These cuts of almost two trillion dollars over the next nine years will slow our nascent recovery. However, if taxes on the wealthy are raised and all the Bush tax cuts expire, such cuts won’t be necessary to reduce the deficit.

The BCA's budget cuts are already written into law, whereas many of the changes Obama called for in his State of the Union speech require congressional approval. So, if nothing new passes this year (with Congress mired in partisan gridlock and elections swiftly approaching, this seems likely), the budget cuts will go forward as planned, and we’ll have a de facto austerity budget in place. This will be damaging to the economic recovery effort and would set back efforts to make this a more fair and equitable nation.

Image by Flickr user Secretary of Defense used under a Creative Commons license.

On Dec. 31, 2011, Recovery Accountability and Transparency Board Chairman Earl Devaney stepped down after leading the Board for almost three years. Devaney did more than anyone else to ensure Recovery Act spending was as transparent as it was, and his presence will be sorely missed.

While he didn't create the transparency provisions in the Recovery Act (those were written into the law or created by the Office of Management and Budget (OMB)), Devaney implemented the law's requirements. He and his team created the Recovery.gov website from scratch in remarkably little time and did a great deal to ensure that recipients understood their reporting responsibilities under the law. As a former inspector general (for the Department of the Interior), Devaney placed a strong emphasis on finding and preventing fraudulent contracting and wasteful spending, creating the Recovery Operations Center. He also insisted on making maps of Recovery Act spending the focal point of Recovery.gov, arguing that the government needed to do more to display information in useful ways.

Devaney understood the importance of providing information to the public and talked of empowering an army of citizen inspectors general. We appreciated the fact that he frequently reached out to the transparency community to get feedback and guidance. When we raised concerns about the quality of the data from the first rounds of recipient reporting, the Board moved quickly to fix the problems it could, such as automatically filling in some data fields for recipients (for example, pulling in company information from existing contracting databases) and creating algorithms to spot potential red flags (such as recipients reporting that they had spent more money than they had received).

Devaney also championed transparency beyond the Recovery Act. He has been a vocal supporter of unique identifiers for recipients of federal funds, a thorny problem that has long plagued federal spending transparency. For the past six months or so, he has also been the head of the Government Accountability and Transparency (GAT) Board, created by President Obama last year to "provide strategic direction for enhancing the transparency of Federal spending and advance efforts to detect and remediate fraud, waste, and abuse." The GAT Board's recent report advocated for many reforms, most importantly centralizing spending databases and streamlining reporting obligations, in addition to calling for a universal system of unique identifiers for contracts and grants throughout the federal government.

Devaney will be replaced by current Education Department Inspector General Kathleen Tighe. Tighe has been on the Recovery Board since March 2010, serving as the chair of the Board's Accountability Committee since March 2011. Interestingly, Tighe will not be stepping down from her inspector general role, which possibly indicates a diminution of the position of Recovery Board chair. The chair was a full-time job for Devaney, who stepped away from his Department of the Interior position to lead the Board, and Devaney clearly had Vice President Biden's ear, meeting frequently with him to discuss various issues related to the Board's work.

The chair's reduced prominence is likely a reflection of the administration's desire to move on from the Recovery Act. With most of the Recovery Act money already spent, Tighe's job will largely be overseeing the dissolution of the Board and the application of lessons learned from the Recovery Act to the entire federal government, a process Devaney has already started with the GAT Board. There's still much to be done to improve federal spending transparency, but hopefully, even in a part-time role, Tighe will bring to her new position just as much passion and success as Devaney.

Image by Flickr user OversightandReform.