Building on yesterday's post, I think the costs that have been shifted are probably larger than first reported. Here's the Congressional Budget Office (CBO) report:

Medicare outlays are expected to rise twice as fast as Social Security spending in 2006 -by 11.8 percent -largely because of the ramping up of the new prescription drug program. That percentage increase from 2005 outlays, however, understates the growth in Medicare spending. A shift in certain payments from October to September 2005 and a legislated delay in payments at the end of this fiscal year have moved an estimated $11.3 billion in Medicare outlays from fiscal year 2006 into 2005 and 2007.

So not only have costs been shifted forward to 2007, but also shifted back to 2005, for a savings of $11.3 billion. That's about $6 billion more than we thought.

UPDATE: I just talked to someone at CBO, and he said that about $4 billion from FY 2006 was shifted to 2005. The money was for HMOs enrolled in the Medicare Advantage Plan. They get paid at the first of the month, or, if the first of the month is on a weekend on a holiday, the last business day before the first of the month. Last year, October 1st was on a Saturday, so the October payment went out in September, which was FY 2005.

He also said that the delayed payments will add up to about $7 billion, not $5.3 billion. All of it together is $11.3 billion, which brings the actual FY 2006 deficit to $271.3 billion.

Also, my suspicion that this gimmick accounted for the drop in entitlement spending this year is probably wrong. CBO said they accounted for both the early 2005 payment and the delayed 2007payment in their March estimate. The official I talked to said they don't know why health care spending dropped, but that they'll probably know in February.

Here's an interesting article on how budget cuts in child support are affecting state agencies in Texas.

AUSTIN — Federal budget cuts could cripple Texas' efforts to collect child support payments, forcing the state to lay off at least 1,750 employees.

Attorney General Greg Abbott informed legislative leaders Friday that if his office doesn't get more state funds next year, its child support division will be forced to lay off two-thirds of its employees.

"Over half our offices serving families across the state could close," he said.

Mr. Abbott's aides said child support collections would plunge by at least $2 billion, from $9 billion this year.

"That is money that will not go to families," said Janece Rolfe, spokeswoman for the child support division, which has slightly more than 2,700 employees.

The federal cuts were part of a deficit-reduction bill signed into law by President Bush last winter.

A year ago today, of course, Hurricane Katrina hit New Orleans. I don't have much to add to all that's been said so far, except for that we don't really know how the federal government has been spending the money it allocated for the relief and recovery effort.

Amy Liu, a researcher for the Brookings Institute who's been tracking the recovery for the last year, should know what the federal government has been spending the money on. But as she said on the Tavis Smiley show in July, nobody really does.

Tavis Smiley: So, let me ask whether or not Brookings or anybody else, to your knowledge, has any idea of how much of that 100 billion the government did not allocate back to itself, but really does have a chance of landing and being used on the ground in the rebuilding effort in New Orleans.

Liu: Tavis, I wish I could answer that question, but it’s so hard to track that money. But I will have to say that I think we’re only now beginning to see money being spent on the actual rebuilding effort. A lot of that money, I have to say, has gone to the emergency response right after the storm. And only now are we seeing money go into infrastructure building, into housing, and into job creation. And again, I hope that that money can be seen hitting the ground very soon. But I agree with you. The recovery and the evidence on the ground is still very thin.

By almost all accounts, the recovery has not been going well. More transparency on how the money's been spent would help the public hold public officials accountable for what they've done wrong. And maybe more pressure on the administration would speed the recovery, once the anniversary is over and the media spotlight shifts back other matters of national importance.

Last week we told you about efforts to smoke out the senator who has put a "secret hold" on a bill that would create a free, searchable database continuing information on all contracts and grants awarded by the federal government.

Today, TPMmuckraker updates us with the latest. They are reporting, based on reponses from thier readers, that as of this afternoon, 50 senators have denied putting a hold on the bill.

The quest to smoke out the Senator who is placing a "secret" hold on legislation to create a free, searchable, online database of all federal grants and contract continues today with a Cox News story that appeared in the Houston Chronicle. The story quote's OMBW own Gary Bass as saying:

It really is outrageous to do this in the dead of night as Congress is recessing. The public has a right to know how the government spends money.

Porkbusters 'Who's the Secret Holder?' page now lists 27 Senators as having publicly denied placing a hold on the legislation. If we assume a cosponsor of the bill would not place a hold on it, we can add in an additional 15 Senators, giving us 43 Senators. That means there are only 57 who could be placing the annonymous hold.

You Can Help Unveil The Secret Holder
Call the Capitol Hill switchboard (202.224.3121) and ask to be transfered to your Senators offices an ask them if they put the secret hold on S. 2590. When you get an answer, send me a note at ahughes @ ombwatch.org to let me know about it.

We noted earlier today how horrendously misleading and downright incorrect Sen. Grassley's statement about the CBO August Update report was in great detail, but thought it might be appropriate to compile a list of summer reading materials Grassley - or perhaps more importantly his staff - could read to get themselves up to speed on the issue.

Tops on the list is Jason Furman's excellent commentary in Slate Magazine concerning the Treasury Department's recent efforts at dynamic analysis. Perhaps the most important finding of the economists at the Treasury Department that Furman highlights is that making the Bush tax cuts permanent is unsustainable. From the Treasury Department report:

An important feature of this model is that a permanent reduction in taxes, as compared to baseline, would lead to an unsustainable accumulation of debt.

Furman further notes that if dramatically scaling back discretionary spending (by 50 percent) is an unrealistic option - which it is - then:

...the Treasury economists have another important finding: The sooner we get rid of the tax cuts, the better it will be for the economy. Specifically, they found that national output would be 0.9 percent higher in the long run if we let them expire in 2010 rather than allowing them to continue along, forcing us to face even bigger tax increases in the future to make up for all of the added deficits and debt.

We'll give the staff a couple of days to catch up on their summer reading list (we know August can be busy) and get through Furman's article and then post a few others items for them to consult.

As reported here, last week’s description of this year’s federal deficit by CBO Acting Director Donald Marron’s as “sustainable” provoked the ire of Kent Conrad (D-ND), the ranking Senate Budget Committee member, and John M. Spratt Jr. (D-SC), the ranking House Budget Committee member.

Maron became Acting director when Douglas J. Holtz-Eakin left at the end of 2005, roughly halfway through his term. Amid the stir raised last week by Marron’s comments, the question was raised regarding the tenure of a CBO acting director.

The answer, for now, from Congressional Quarterly (subscription required):

Betsy Holahan, a spokeswoman for Senate Budget Committee Chairman Judd Gregg, R-N.H., said Marron will remain acting director until Holtz-Eakin’s term expires at the start of 2007. CBO directors are appointed jointly by the Speaker of the House and the Senate president pro tempore, but by tradition the choice alternates between the House and Senate Budget chairmen. It’s the Senate’s turn to choose, but Gregg has not made a selection.

The Senate Budget Committee's Democratic Staff has released an analysis of the Congressional Budget Office's August Budget and Economic Update.

They share our perspective that the short-term good news in the CBO report only further masks the long-term fiscal crisis we are headed toward.

Sen. Budget Committee Minority Staff Analysis

Our very own Adam Hughes and Craig Jennings have an article on Congress's deficit addiction in today's TomPaine.com. Check it out!

This week, CBO released its initially cheery-sounding report that the federal deficit for 2006 would shrink to $260 billion, from $318 billion last year, the lowest level since 2001. Of course, the gloomier long-term fact is that extending President Bush’s tax cuts beyond 2010 and accounting for war and other hidden costs would add $1.75 trillion in debt over the next 10 years and widen annual deficits by about $250 billion from 2011 through 2016.

In particular, according to the New York Times, interest payments on the debt leapt by "almost 20 percent in 2006, to $220 billion, more than what is being spent on Medicaid or on the combined total for all federal income-support programs: unemployment compensation, food stamps, child nutrition programs and the earned-income tax credit” and would accelerate over the next decade, possibly crowding out key budget items.

CBO acting Director Donald B. Marron, who is serving out the unfinished term of former CBO chief Douglas Holtz-Eakin, may have misstepped in blithely noting that the 2006 deficit would come in at around 2 percent of GDP, comparing favorably with deficit over the last 40 years that have averaged about 2.3 percent: "[T]he message I would send is that we've gone from a period in which the fiscal deficits we were running in this country were large and not sustainable if they had persisted, to a situation in which, at least now and for next year, for several years going forward, deficits appear to be in a range that they're sustainable.”

At House and Senate Budget Committee ranking Democrats Rep. Spratt (R-SC) and Sen. Kent Conrad (D-ND), respectively, fired back at Marron.

Said Conrad: “I think it is completely and totally irresponsible. I think it misleads the American people as to the true status of the fiscal condition of the country. We’re in a very unusual situation where the amount of the deficit is a fraction of the increasing debt of the country, and that the debt is going to be what has to be repaid.”

And Spratt: "It disqualifies him, in my mind," from being considered for the job… I would not yet pass judgment on him, but I really thought the statement was uncalled for.”

Surprising in this exchange is the notion that Marron’s tenure may be in question. By statute, Marron is slated to serve out Holtz-Eakin’s term. Watch this space as the war of words continues.

CBO has released its full report on the state of the deficit. It's worth taking a look at.

The Christian Science Monitor is running a series of articles on pork-barrel politics, the latest of which focuses on defense earmarks in West Viriginia.

Here's what a defense contractor had to say about a military production facility (ABL) that earmarks have helped develop:

"This plant is the sole producer of more than a dozen critical weapons systems," says Pat Nolan, executive vice president for ATK Tactical Systems, which operates ABL under a contract with the Navy. "There's not one dollar spent on this plant that's not delivering value back to DOD.... We're a very critical part of [its] industrial base."

And here's what locals had to say:

But locals glad to see an economic rebound aren't concerned about the controversy over earmarks. "ABL is a tremendous asset to this region," says local historian Albert Feldstein.

Children no longer have to leave the region to find a job, says ABL program manager Paul Corwell, who says he has two brothers, a brother-in-law, two first cousins, and the wife of a cousin all working on site. "This plant really is a national asset and the reason people don't appreciate that is because they don't know about it," he adds.

Christian Science Monitor: Welcome to Byrd Country

It's been a slow day at the BudgetBlog, so we thought we'd point out a few interesting links.

Tax & Business Law Commentary Blog has two good posts up, one about howBig Pharma is stiffing the IRS on taxes it owes on its foreign sales and assets, and another on how Rep. Gary Miller (R-CA) is stiffing the IRS on taxes he owes on his property sales. Feel free to ponder the potential meta-connections between the posts.

And check out this article from the Rapid City Journal on the effects that federal budget cuts may have on water supply issues in South Dakota. It's pretty frightening stuff.

In addition to concerns about the repercussions of the drought, Anderson and Williamson said recent budget cuts have forced them to discontinue seven flow gauges within the past year.

The USGS gets the majority of its funding from “reimbursable funds” from federal, state and local cooperators, Anderson said. Nearly 70 different cooperators including the Army Corps of Engineers, the Bureau of Indian Affairs, the Department of Transportation and other state and local agencies allocate funding for the USGS.

Mid-fiscal-year budget cuts from the BIA forced the discontinuation of seven gauges in the eastern and central portions of the state. A further cut from the Corps of Engineers likely will lead to the shutdown of eight more gauges in the next year...

...“We think it’s significant to the people of South Dakota to know that gauges are being discontinued,” he said.

“It’s real hard to say much about climate change when all you have is a 10-year record,” Anderson said. “If you have a 100-year record of stream flow, we can look and see whether there are trends in the amount of water in the stream and what that says about climate change in our area.”

An April 11 article by John Schwartz of the New York Times said the loss of funding for stream gauges had contributed to a heightened danger of flash floods in some areas of the country.

Earlier, Matt asked:

[A]ny readers out there want to calculate how much lower the deficit would have been if the 2003 capital gains and dividends tax cuts hadn't been in effect?

Well, I'm not sure about the capital gains and dividends cuts, but the Center on Budget and Policy Priotities informs us that:

the tax cuts enacted since January 2001 are costing a total of $258 billion in 2006 (including the increased interest costs of the debt that result from the borrowing that is required to cover the lost revenues). This means that even with the spending for the wars in Iraq and Afghanistan and the response to Hurricane Katrina, the federal budget would essentially be in balance this year if the tax cuts had not been enacted, or if they had been offset by either increases in other taxes or cuts in programs, as would have been required under the Pay-As-You-Go rules that tax-cut proponents first ignored and then allowed to expire.

So, rather than debating where and when to cut Social Security and Medicare, Congress could be seriously debating the merits of an Apollo-like program aimed at moving the U.S. economy away from dependency on fossil fuels.

(Priorities, man, priorities)

Ya'll might have noticed an uptick in the quality of the blog since Monday. That would be the work of the newest member of the Budget & Tax program - Matt Lewis.

So, say 'Hi' to Matt when you get a chance.

The Congressional Budget Office (CBO) has just lowered its estimate of the Fiscal Year 2006 budget deficit by about $111 billion. So for now, FY 2006, which ends on September 31st, will probably result in a budget deficit of $260 billion.

The CBO estimate puts the deficit about $30 billion lower than the Office of Management and Budget (OMB), which revised its estimate in July. See here, here and here for more information on OMB's gimmicky deficit numbers.

Spending estimates account for almost all of the difference between the OMB and CBO reports. CBO projects about $10 billion less in Medicare and Medicaid spending, and $10 billion less in defense spending. Why the difference? They don't say. We'll have to wait until August 17th, when CBO comes out with its full report, for the explanation.

Unexpected gains in tax receipts are mostly responsible for the lower deficit, as they were when OMB revised its figures. Most of the new revenues come from corporate and capital gains taxes, which are generally income sources for the well-off. Tax receipts from the middle and working class, though, will rise far less. In other words, it's just more evidence of the widening income and wealth gap in this country.

One last thing- any readers out there want to calculate how much lower the deficit would have been if the 2003 capital gains and dividends tax cuts hadn't been in effect? Just asking...

The 1-year anniversary of the Katrina disaster is coming up, and the New Republic is featuring the plodding recovery effort in its most recent issue. From the editor's take on it (free registration required):

While some money has flowed to the shores of the lower Mississippi, this sense of national purpose has been completely absent. Reconstruction has proceeded aimlessly and without leadership. Mayor Ray Nagin hasn't even issued his grand plan for the city yet. (That is scheduled for the end of this year.) The municipal authorities who could make the city livable are starved for funds. Despite needing $2 billion in repairs following the storm, the city's water and sewage system has received a mere $32 million loan from Washington. Meanwhile, the feds have completely stiffed the city's bankrupt power company--which may pass $700 million in losses and rebuilding costs on to consumers, essentially requiring them to pay $100 more in utility costs each month for the privilege of living in a semi-habitable city.

Sigh.

This as news comes that FEMA housing contracts that were supposed to cost the government $400 million may now total $3.4 billion, for the same work that the contractors originally agreed to do.

Sen. Maria Cantwell (D-WA) - a key swing vote on the upcoming "trifecta" bill - has publicly announced she will vote against the bill. Cantwell's bold decision to stand up for working-class families in Washington and around the country who would get a bad break with this legislation is a significant blow to Sen. Frist's (T-RN) attempts to pass this crass and manipulative bill.

Sen. Cantwell should be praised for her brave leadership in speaking out against this effort. Kudos to her!