Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Friday, May 30, 2008

Controversial Medicaid Rule Nixed by Court

A federal court has sent back (vacated and remanded, in regulatory-speak) to the Bush administration a rule aimed to limit government reimbursement for Medicaid providers. The rule is one of several the administration is attempting to codify in an effort to undermine the entire Medicaid program.

The process by which the Centers for Medicare and Medicaid Services finalized the rule was particularly sneaky, even by Bush administration standards. A New York Times editorial explains:

In a decision issued last week, Judge James Robertson of the Federal District Court in Washington ruled that the administration had overstepped its authority last year with a maneuver "deliberately designed to outfox a clear directive of Congress." The administration was seeking to evade the annoying fact that Congress had enacted a one-year moratorium on the administration's efforts to alter — and in the process cut — Medicaid reimbursements to public hospitals and nursing homes.

Congress had already passed, but President Bush had not yet signed, a broad funding bill that included the moratorium when the secretary of the Department of Health and Human Services rushed through a typo-ridden rule for "emergency display" on May 25, 2007, the very day the moratorium took legal effect. The rule, which had been in preparation for some time, was officially published a few days later. That shifty maneuver was too much for Judge Robertson to swallow. He found ample reason to overturn the rushed-through rule as a violation of Congressional intent.

The ruling should serve as a reminder to Bush administration higher-ups that Congress, not the Executive Branch, is primarily responsible for crafting federal policy. The role of federal agencies is to faithfully enforce the law in the spirit Congress intended, not to undermine it based on personal views — in this case, an ideological aversion to government programs meant to help the needy.

In his opinion, Judge Robertson writes to that effect:

[T]he Secretary treated an act of Congress seeking to control the substantive rules of Medicaid reimbursement as an "emergency," and prioritized issuance of his own rule over Congress's plain intent to prohibit his actions ... Although administrative law has evolved to allow agencies significant leeway to fill in the interstices of broad congressional mandates … control over the substance of the rules that govern the nation has always remained with Congress first. The Executive must comply with the duly enacted commands of Congress.

Posted by Matt Madia, 11:16:36 AM

Wednesday, May 28, 2008

Hi (Economist) Mom!

I just wanted to alert readers of a new blog we've been reading: EconomistMom - "where analytical rigor meets a mother's intuition."

Authored by economist and mom Diane Lim Rogers of the Concord Coalition, the blog's "particular focus [is] on the economics of fiscal responsibility," but Rogers also writes about broader issues.

She's been on a roll lately, explaining the trap of the "largest tax increase in history" rhetoric, expressing frustration about the 'extenders' tax cuts, and righteously high-fiving Steven Pearlstein for his column that connects the dots of the various economic woes of the day.

Good stuff.

Posted by Craig Jennings, 11:06:43 AM

Tuesday, May 27, 2008

Collender: Pentagon IG Report Signals Fraud

Federal budget sensei Stan Collender reads this WaPo story on the mismanagement of $15 billion Iraqi reconstruction funds and wonders if something more than incompetence isn't at work.

The Pentagon's own inspector general confirmed that this lack of concern for procedural safeguards was blatant and commonplace. That makes it hard to come to any conclusion other than that they were ignored rather than expedited or poorly executed.

It's also hard to come to any conclusion other than that the spending of taxpayer funds in Iraq bordered on, or actually was, simple and straightforward corruption.

Given the magnitude of the spending involved, Iraq may be the Bush administration's contribution to the biggest public corruption scandals of all time like Boss Tweed in New York, James Michael Curley in Boston, and Teapot Dome.

Posted by Craig Jennings, 05:16:49 PM

Friday, May 23, 2008

Senate Votes to Stop Medicaid Changes

Yesterday, the Senate passed an amendment to the war supplemental bill that will put the brakes on several controversial Medicaid regulations. The Bush administration has finalized, or is preparing to finalize, the regulations in an effort to cut federal funding for a variety of Medicaid programs administered by the states. (More details on the regulations here.)

The administration developed the regulations under the guise of "fiscal integrity," arguing state Medicaid programs are using loopholes to inappropriately claim federal funds. Bush has threatened to veto the bill. Fortunately, the amendment passed the Senate in a 75-22 vote and also cleared the House by a veto-proof margin.

On May 6, more than 100 hospitals, providers, school districts and public interest groups (including OMB Watch) wrote to Congress in support of the legislation, which will place moratoria on all seven of the regulations until April 1, 2009. The letter says, "Taken together, the impact of these regulations would undermine the viability of our nation's health care safety net and reduce or eliminate access to health care services for many millions of low income patients."

Critics also question the administration's authority to make such major changes to Medicaid. For example, one of the proposed rules would limit the ability of state governments to provide rehabilitation services (such as transitions to independent housing) for people with mental illnesses or developmental disabilities. The Bush administration floated this limitation as a legislative proposal in 2006, but Congress rejected it.

Kudos to members in both chambers voting yea: they stood up to the administration's efforts to hobble state Medicaid programs.

From a government operations standpoint, Congress should also be commended for reestablishing control over issues that are properly within its purview and rebuking the administration's efforts to reinterpret federal law through administrative means.

Posted by Matt Madia, 12:00:40 PM

Thursday, May 22, 2008

War Supplemental Update: Senate Approves Spending Amendments
...lobbing it back over to the House

The Senate has approved an amendment to the war supplemental spending bill (HR 2642) that would fund the wars in Iraq and Afghanistan through the end of Bush's presidency. The $165 billion spending measure was adopted 70-26.

And by a vote of 75-22, the Senate also adopted an amendment that would appropriate a bevy of domestic spending provisions including a $52 billion expansion of the GI bill, an $11 billion extension of unemployment insurance benefits, and $10 billion for Gulf Coast reconstruction. The amendment would also delay the implementation of a set of Medicaid rules designed to reduce federal spending on the health care program.

The bill now heads over to the House, which failed to add war funding to the measure when it voted on the bill last week. The House did, however, add a war policy amendment, which the Senate stripped from the bill. The House also added its own set of domestic spending, with some differences, the most significant of which is the House's $54 billion offset to the GI bill expansion.

Posted by Craig Jennings, 04:03:54 PM

House, Senate Set to Approve Budget Resolution

The House and Senate are set to vote on the FY 2009 Congressional Budget Resolution today. OMB Watch sent letters of support for the resolution to both the House and Senate Budget Committees yesterday (House letter, Senate letter). The letters highlight the positive (and negative) aspects of the resolution, as well as the recent historical difficulty of enacting a budget resolution during an election year (hasn't happened since 2000).

The resolution is good, but not great. Hopefully its enactment will help develop momentum for Congress to continue to draft and pass more fiscally-responsible, responsive fiscal policies in 2008 and beyond.

Posted by Adam Hughes, 09:02:59 AM

Wednesday, May 21, 2008

Jackson May Not Have Been Only Bad Apple at HUD

Carol Leonnig at the Washington Post wrote a great article over the weekend that gets further into the weeds on contracting problems at the Department of Housing and Urban Development under former Sec. Jackson. Leonnig profiles three small businesses that received huge jumps in the size of federal contracts they received over the last five or so years, often times despite objections of career contracting officers. It appears awarding contracts as political favors might have extended well beyond Jackson to many other high ranking officials at HUD:

Federal investigators are still sorting through HUD contract awards to friends of Secretary Alphonso Jackson, who resigned last month amid a criminal probe. But some career staff members and agency observers say problems in the agency's contracting process run much deeper than Jackson and involve officials who promoted certain companies while rebuffing concerns about their performance and qualifications.

The three companies profiled began as very small operations with little or no federal contracting experience. Harrington, Moran and Barksdale Inc. (HMBI) had no federal contracts until FY 2004, when they received over $71 million. During the Bush administration, HMBI was received almost $223 million in federal contracts, 80 percent of which were awarded without full and open competition. The other two companies, National Housing Group which received almost $52 million) and Drayton, Drayton, and Lamar, Inc. (which has been awarded about $32.5 million) have even worse records for competition. The National Housing Group received 92.2 percent of its funding without competition while Drayton, Drayton, and Lamar comes in at an astounding 98.6 perent without competition.

What is truly troubling about this story is that the career contracting employees at HUD who attempted to do the right thing on behalf of taxpayers were moved out of their positions after they raised objections, cited evidence of wrongdoing, or claimed political manipulation. In one case, not only were the claims of the 33-year veteran contract officer vindicated by subsequent investigations, but the company in question has had a principal employee charged with fraud related to the contract. The two contract officers who are profiled in the Post story retired shortly after being moved into policy positions.

HUD officials deny any wrongdoing in any of the cases cited in the Post article, instead blaming the contractors who they repeatedly attempted to favor through sole-source contract awards. HUD spokesman Jereon Brown contributed quite an understatement when he said "not all contractors perform as well as expected." As we have advocated before many times, what will help deter these types of instances is access to data on contractor performance and copies of the actual contract. Then we'll be able to judge for ourselves how well contractors are performing and how wise an investment various federal contracts are.

Wash Post: HUD Repeatedly Dismissed Staff Concerns About Contracts

Posted by Adam Hughes, 10:50:55 AM

Monday, May 19, 2008

Editorial Titans Go Head-to-Head on Housing

The lead editorials in the New York Times and Washington Post today both focus on the principal legislative solution to the nation's housing crisis -- the House-passed $1.7 billion plan to provide $300 billion in mortgage refinance guarantees, designed by Financial Services Committee chair Rep. Barney Frank (D-MA). The Senate Banking Committee is scheduled to mark up a similar bill tomorrow.

The Times editorial, Teeing Up the Next Mortgage Bust, describes the double-headed hydra that is the housing crisis: home "price declines provoke foreclosures, which provoke more price declines. And... there is an entirely different category of risky loans whose impact has yet to be felt — loans made to creditworthy borrowers but with tricky terms and interest rates that will start climbing next year."

The government has not acted, almost a year into the crisis now.

Yet the Senate Banking Committee goes on talking. It has failed as yet to produce a bill to aid borrowers at risk of foreclosure, with the panel's ranking Republican, Richard Shelby of Alabama, raising objections. In the House, a foreclosure aid measure passed recently, but with the support of only 39 Republicans. The White House has yet to articulate a coherent way forward, sowing confusion and delay...
There's a way to avert calamity. It's called foreclosure prevention. There is no excuse for delay.

Looking at the Post editorial, Holes in the Roof, one sees sown confusion. Citing the $1.7 billion five-year cost of the Frank bill, even though "preventing further damage to the economy is a valid reason to consider a bailout," the editorial concludes:

"we have our doubts. Economists forecast about 1.4 million foreclosures this year. The CBO estimates that Mr. Frank's bill would help about 100,000 borrowers a year over five years -- some of whom would eventually default again... In terms of systemic risk avoided, the bill may be oversold. Mr. Frank's program is voluntary... In the Senate, Banking Committee Chairman Christopher J. Dodd (D-Conn.), who backs the concept, is negotiating with ranking Republican Richard C. Shelby (R-Ala.), a skeptic.

Only opponents of the Frank plan term it a bailout, because it's not. It's a voluntary program, a point the editorial holds against the plan. The Post cites the CBO estimate that the plan would forestall over a third of the foreclosures forecast this year. Are we supposed to reject it as inadequate? What does the Post suggest as an alternative? Finally, calling Sen. Shelby -- who engineered a boycott of last week's mark up that thwarted a Banking Committee quorum -- a "skeptic" is like saying President Bush has some misgivings about appeasing terrorists.

What are the chances that Congress, in an election year, will indulge whatever ideological "skepticism" it might have about government action to prevent foreclosures? As Rep. Steven LaTourette☼ (R-OH), told the Post on May 8,

What's offensive is some of the rhetoric. They say it rewards speculators. No, it doesn't. It's limited to homeowners. They say it's a $300 billion bailout. No, it's not. It costs $1.7 billion. Would I have written the bill the way Chairman Frank did? No, but we're not in charge anymore ... People are expecting us to do something.

Apparently, the paper's editorial board did not hear -- or did not heed -- Rep. LaTourette's words.

Posted by Dana Chasin, 05:04:44 PM

Friday, May 16, 2008

GI Bill Surtax Would Affect 0.3% of All Taxpayers

When the House approved the domestic spending amendment to the war supplemental spending bill, it approved not only a $52 billion expansion of the GI Bill, but a 0.5% surtax on income for millionaire couples (individuals earning more than $500,000).

According a recent Citizens for Tax Justice report, the tax would affect about 0.3% of all taxpayers.

"The surtax would simply scale back the Bush tax cuts for the richest 0.3 percent of taxpayers, by an average of just 7 percent, to help the men and women returning from the wars and their families," said Robert S. McIntyre, director of Citizens for Tax Justice. "Lawmakers who oppose this proposal will prove that they really do value tax cuts for the wealthy over all else."

Annual effects of a proposed 0.47% surtax on adjusted gross income in excess of $1 million for married couples and $500,000 for others (at 2007 levels)
	Number affected by surtax	% of all taxpayers affected	Total tax change ($-billion)	Average tax change
Married couples	291,300	0.5%	$+3.0	$+10,240
Others	152,500	0.2%	+0.9	+5,960
ALL	443,800	0.3%	+3.9	+8,770
Source: Citizens for Tax Justice, "Surtax on Millionaires to Help Veterans Would Be A Tiny Sacrifice for the Richest 0.3 Percent of Taxpayers"

(click here to see full report chart)

Posted by Craig Jennings, 10:37:13 AM

DAILY FISCAL POLICY REPORT -- May 16, 2008

Tax Policy -- W&M Approves Extenders; Rejects AMT Patch: By a mostly party-line vote of 25-12, the House Ways and Means Committee approved at $57 billion tax package of an assortment of tax breaks yesterday. The committee also voted down a Republican-offered unpaid-for one-year AMT patch. The bill is expected to be on the House floor next week.

War Supplemental -- House Rejects War Funding Portion of War Sup: Anti-war Democrats voted "no" and 132 protesting Republicans voted "present" to defeat an amendment that would fund war operations in Iraq and Afghanistan to a war funding bill. A domestic spending package was approved along with provisions aimed at changing war policy. The Senate is expected to add war funds when it votes on the bill, probably after the Memorial Day break.

Farm Bill -- House and Senate Pass By Wide Margins: The Senate passed the farm bill reauthorization yesterday by a wide margin: 81-15, well above the 67 needed to override a promised presidential veto of the bill. The House has also passed the bill by much more than needed to override a veto in that chamber. The bill has almost $300 billion in spending over the next five years, with 73 percent of that spending going to people in poverty.

Posted by Craig Jennings, 09:01:01 AM

Thursday, May 15, 2008

War Supplemental Update: War Funding Bill Lacks War Funding Provision

For reasons not entirely clear -- other than simply throwing a temper tantrum -- House Republicans voted present on the amendment that would add $162.5 billion in war funding to HR 2642, the shell bill that was to be ultimately be the war supplemental spending bill. The vote to add war funding failed 141-149, as anti-war Democrats voted "no" and 132 Republicans voted "present." A second amendment, a provision that would set a Dec. 31, 2009 withdrawal date for troops in Iraq, passed 227-196. And a third amendment containing a bevy of domestic spending measures, including GI Bill expansion and an unemployment insurance benefit extension, passed 256-166.

The temper tantrum theory would appear viable considering that ranking House Appropriations Committee member Jerry Lewis (R-CA) had been incensed ($) that Democrats bypassed the committee process to speed passage of the bill.

"Regular order is designed to ensure that the people's voices and interests are heard as serious public policy questions move through the legislative process," Lewis said. "To have the Democrat leadership cut off the people's right to be heard by such crass parliamentary maneuvers results in great harm to the Appropriations Committee and seriously undermines the credibility of the world's most admired legislative body."

Last week, 177 Republicans voted to reconsider a previous (unanimous) vote on a resolution "Celebrating the role of mothers in the United States and supporting the goals and ideals of Mother's Day," (H. Res. 1113) in a bid to stymie congressional action.

Posted by Craig Jennings, 04:43:01 PM

Best Spin Ever: Doan Fought for Accountability!

When I posted at the end of April that the book had closed on Lurita Doan, former head of the General Services Administration, (GSA) apparently I was wrong. She has resurfaced in interviews in GovExec magazine, on Federal News Radio and most recently in this border-line ludicrous column in Federal Computer Week by Neal Fox, the former assistant commissioner of acquisition at the GSA.

Now I've come across some interesting spin in Washington in my time here, but I think this one has to take the cake. There are too many strange, misleading, and frustratingly vague statements (e.g. "Some people who had backed IGs began to have doubts.") in Fox's article to jump into all of them (Beverley Lumpkin over at POGO has a good rundown refuting many of them that is worth reading). But the overall tone of the piece implies that IG offices are a danger to good government and need to be reigned in. This perspective needs to be soundly dismissed.

Fox's main point seems to be that a thirsting for power and arrogance at the IGs office was the main issue at GSA, not any particular issue or problem they were investigating (and there were plenty). Fox's point is mind-numbingly ironic considering many of the actions the IGs office was investigating can not be seen as anything else than a power grab by a pretty arrogant Ms. Doan herself (see strong-arming contracting officers and side-stepping contracting protocols to help friends). Worst of all, Doan's unprecedented actions to attempt to cut the IG office's budget and outsource its contracting oversight responsibilities to, of all places, private contractors, was a deliberate attempt to keep prying eyes away from her attempts to operate on her own outside of federal laws and regulations.

I'm still hopeful, as I think POGO was at first glance, that vague assertions and unsubstantiated ramblings like those contained in Fox's article won't influence anyone (that would be a shame). In these times of poor oversight and significant corruption and incompetence in the federal government, we need strong IG offices more than ever to help develop a more effective and accountable government.

Posted by Adam Hughes, 12:37:26 PM

Wednesday, May 14, 2008

Ranks of Contracting Officers Grow, But Not Enough

Stephen Barr, who writes the Federal Diary column for the Washington Post, wrote on an interesting topic last week - the growth in federal contracting officers (COs) under President Bush.

Barr reported that the number of COs has increased 6.8 percent since President Bush took office, according to federal statistics. Barr also was correct in pointing out that there are concerns among many in Washington (both inside Congress and out) that despite these increases, there are still far too few COs and they receive sub par training and support in doing their jobs.

One of the most shocking things was that federal officials don't even know how many COs would be appropriate to have:

But how many contracting officers the government actually needs has not been determined, despite efforts by federal agencies, the Office of Personnel Management and the OMB over the past two years to develop plans for hiring and training contracting officers and specialists.

"We are still working real hard with OPM and the departments to try to figure out what the right number is," said Paul A. Denett, an Office of Management and Budget official in charge of government procurement policy. For his part, Denett added, "I believe we need to increase the hiring even more."

Let me give Mr. Denett a hint. You definitely need to hire more. While the COs workforce has increased 6.8 percent since Bush took office, federal contracting dollars have increased close to 100 percent - from $219.8 billion in FY 2001 to $430.1 billion in FY 2007. Those facts alone should be pushing the government to hire and better train more employees to oversee an immense area of discretionary spending by the federal government. That, plus the wide-ranging and seemingly continuous reports of waste, fraud, and abuse in federal contracting makes it almost shameful something hasn't been done already.

Posted by Adam Hughes, 02:58:17 PM

Down on the Farm Bill

A compromise reached on the farm bill, the House and Senate are expected to vote on final passage as early as today. The bill provides about $289 billion over five years in agriculture spending including nutrition programs and food stamps as well as reauthorization of crop subsidies, conservation programs and a special $3.8 billion trust fund for farmers who lose crops to flood, fire or drought, bumping up the baseline in the aggregate by about $10.3 billion.

The big question is whether the two houses will pass the bill with sufficient margins to overrule a presidential veto, which has been promised repeatedly.

Bush is down on the farm bill. In a statement yesterday, he said:

I am deeply disappointed in the conference report filed today as it falls far short of the proposal my Administration put forward. If this bill makes it to my desk, I will veto it...
Farm income is expected to exceed the 10-year average by fifty percent this year, yet Congress' bill asks American taxpayers to subsidize the incomes of married farmers who earn $1.5 million per year. I believe doing so at a time of record farm income is irresponsible and jeopardizes America's support for necessary farm programs.

Congress claims that this bill increases spending by $10 billion, but the real cost is nearly $20 billion when you include actual government spending that will occur if this bill becomes law. Instead of fully offsetting the increased spending, the bill resorts to a variety of gimmicks, such as pushing commodity payments outside the budget window.

Anti-Analysis: Who Wants to Be a Millionaire?

Posted by Dana Chasin, 10:31:03 AM

Friday, May 09, 2008

War Supplemental Update: Blue Dogs Balk at Waiving PAYGO for GI Bill Extension

Just when Democratic House leadership thought it was safe to bring a $183.6^* billion war supplemental spending bill to the House floor for a vote, the Blue Dog coalition bares their teeth. We briefly mentioned yesterday that the coalition has expressed their displeasure that an expansion of college benefits for veterans would not be offset. By signaling that they would not support the rules package under which the war supp would be debated, they have induced Democratic leadership to find offsets, thus postponing a vote until at least next week.

The provision is question is know in the Senate as the Post 9/11 Veterans Educational Assistance Act of 2008 (S. 22), a bill introduced by Sen. Jim Webb (D-VA) and cosponsored by 57 senators. The CBO scored the bill as costing $40 million the first year, $680 million the second, and totalling almost $52 billion over ten years.

Blue Dogs' insistence on offsetting these costs has drawn the ire of the Out of Iraq Caucus. Rep. Maurice Hinchey (D-NY) was incredulous ($). "How can the Blue Dog Coalition possibly say that an expansion of education benefits is too costly when their votes to spend hundreds of billions of dollars to fight in Iraq violate the same pay-as-you-go rules they claim to so deeply respect? It's an inconsistent logic."

But, is Hinchey right to insist the Blue Dogs selectively apply PAYGO?

^*That's the commonly-used dollar amount in press accounts. That number, however, does not include $11 billion for extended unemployment benefits (over 10 ten years) and $720 million for expanded GI Bill benefits (over 2 years). With those factored in, the bill would be about $200 billion

Continue reading...

Posted by Craig Jennings, 02:55:31 PM

Housing Debate: Real(i)ty Trumps Ideology

Most of the reasons offered up by President Bush and congressional opponents of the housing crisis plan sponsored by House Financial Services Committee chair Rep. Barney Frank (D-MA) have a yellow, off-tone ring to them. You hear that it's a bailout, that it rewards the miscreants who bamboozled homeowners into predatory loans, that it tosses the burden of foreclosure risk onto innocent taxpayers, that the administration has already tried it, that it is already working, that it won't work, that it will work and cost us -- enough reasons to suggest that unreasoned ideological skeevies are at play.

All well and good. But while President Bush has the luxury of ideology -- his name will never be on a ballot again -- this is not true of his GOP colleagues in the House and Senate, where election-year concessions to reality regarding the survival of the realty market (see this must-read story in today's NY Times) and of members of Congress themsleves trump adherence to a stubborn, shop-worn, incoherent set of empty shibboleths.

But Rep. Steven C. LaTourette (R-OH) wasn't making any quiet concessions yesterday, as he defended his vote, one of 39 from GOP House members, in support of the Frank bill:

What's offensive is some of the rhetoric. They say it rewards speculators. No, it doesn't. It's limited to homeowners. They say it's a $300 billion bailout. No, it's not. It costs $1.7 billion. Would I have written the bill the way Chairman Frank did? No, but we're not in charge anymore... People are expecting us to do something.

A growing number of GOP congressional incumbents doubt that another veto threat by the president would qualify as "something."

Posted by Dana Chasin, 09:38:13 AM

Thursday, May 08, 2008

House Passes First of Housing Bills, 239-188

This afternoon, the House adopted the first in a set of housing-related bills, H.R. 5818, the Neighborhood Stabilization Act, by a vote of 239-188. The bill would establish a $15 billion, HUD-administered loan and grant program for the purchase and rehabilitation of vacant, foreclosed homes with the goal of occupying them as soon as possible. One half of the funds ($7.5 billion) would be for loans; half ($7.5 billion) would be for grants.

The bill:

allocates the loan and grants based on a state's percentage of foreclosures over the last four calendar quarters and the number of subprime loans delinquent over 90 days. States then allocate funds to government entities or for profit and nonprofit organizations for the purchase, rehabilitation, and resale of housing and the purchase, rehabilitation, and operation of rental housing
provides revenues to the federal government from resale or, for rental properties, refinance proceeds. Loans for homeownership properties must be repaid within three years. For rental properties, the maximum loan term is five years. The federal government would receive up to 50 percent of any appreciation an owner realizes at resale
targets housing to low-income families and families. Homes must be sold to families with incomes that do not exceed 140 percent of local area median income (AMI). Rental housing must serve families having incomes at or below local AMI

For descriptions of the set of housing-related bills, including H.R. 5818, the American Housing Rescue and Foreclosure Prevention Act (H.R. 3221), and Tax Provisions to Expand Refinancing Opportunities and Spur Home Buying (H.R. 5720), click here.

Posted by Dana Chasin, 05:33:04 PM

Wednesday, May 07, 2008

Bush Issues Veto Threat Against Frank Housing Bill
But It May Not Turn Out to be a Veto Promise

After sending mixed signals for weeks about H.R. 5830, the Frank FHA mortgage refinaince loan guarantee program, President Bush issued a Statement of Administration Policy (SAP) opposing a number of provisions in the housing stimulus package (H.R. 3221) being considered on the House floor today and declaring that he would veto the package in its current form.

Ironically, the elements in the bill intended to draw bipartisan support are "modernizing" the FHA and more stringent oversight of Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that guarantee the purchase and sale of home mortgages in the secondary market. But the administration statement called the inclusion of FHA modernization and GSE reform "largely symbolic" and said Frank's FHA rescue plan "would force FHA and taxpayers to take on excessive risk, and jeopardize FHA's financial solvency."

Yet, even in the worse case, the risk to taxpayers as estimated by the Congressional Budget Office could come to as much as $1.7 billion over five years, or roughly $400 million a year. Since there are over 100 million "tax units" in the U.S. (individuals plus households paying taxes), the Frank plan would, at most, cost the average taxpayer $4 dollars a year. How much of a risk is that against the backdrop of what Princeton Prof. Paul Krugman projects will be $6-7 trillion in home equity value lost in the housing crisis?

The SAP may be more of a veto threat than a promise in the end. As Jaret Seiberg, senior vice president at the Stanford Group, a Washington policy research firm told CNN this afternoon, "We see this more as an effort to gain leverage over the final shape of the bill and less about an actual veto. The politics of killing this bill are negative for the Republicans, who very much need to win either Ohio or Florida if they hope to keep the White House in November. Both of those states are suffering severely during the housing mess."

Stay tuned.

Posted by Dana Chasin, 12:59:54 PM

Tuesday, May 06, 2008

War Supplemental Update: Bill Unveiled

House Majority Leader Steny Hoyer (D-MD) and House Appropriations Chair David Obey (D-WI) told lawmakers today that Democratic House leadership will advance a $183.6 billion war supplemental spending bill. It combines the remainder of President Bush's FY 2008 request and his partial FY 2009 request and will fund the wars in Iraq an Afghanistan through the remainder of Bush's term.

The bill, which could be voted on early as Thursday, includes several domestic spending provisions:

$11 billion (over 10 years) for unemployment insurance expansion
$720 million (over 2 year) for expanded GI Bill benefits
About $1.3 billion in international food aid
A Bush-requested $5.8 billion for New Orleans levy repair

To remain under Bush's veto-threatened limit, $3.4 billion less than his request was provided to the military.

CQ Politics, Democrats Unveil War Supplemental Plans
CQ ($), Democrats Unveil War Supplemental Plans
CongressDaily PM ($), Dems Prepare $183.6B Supplemental, May Vote Thursday

Posted by Craig Jennings, 04:54:26 PM

Fed Chief's Opinions on Foreclosure Remedies Differ from Frank Bill Oponents

Congressional opposition to the Frank housing bill is coalescing around apparently dubious propositions ($).

[Antonia Ferrier, spokeswoman for House Minority Whip Roy Blunt (R-MO)] also took aim at the [Rep. Barney] Frank proposal. "This bill perversely rewards those who borrowed more than they could afford — their monthly mortgage payments get reduced with the government footing the bill. How is that fair to the millions of Americans who worked hard and paid their mortgages on time? And who ends up holding the bag if all goes south? No surprise, the American taxpayer."

Meanwhile, economist and Fed Chief Ben Bernanke provides an "expert" opinion:

"High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy," [Federal Reserve Chairman Ben] Bernanke said Monday..."Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest," he said.

...

The current housing crises has clobbered some borrowers home prices dropped. That left them with mortgages that are bigger than the value of their home. When that's the primary problem, Bernanke said the best solution may be reducing the amount that the borrower owes on the loan or some other permanent modification to the loan.

Fine. Helping distressed homeowners can help everyone. But surely we cannot stand in the way of the the almighty market! That would be disaster.

Republican talking points obtained by Roll Call also suggested housing prices must fall further rather than be propped up by a new government program, an argument also made by [Sen. Richard Shelby (R-AL)] Shelby.

"The correction in the housing market is a necessary reaction to a prolonged period of reckless lending and borrowing practices that helped take housing prices to levels that were simply unsustainable. For the market to stabilize, prices will need to return to levels that ordinary Americans can afford," the talking points read.

Or not.

Rising foreclosures add to the glut of unsold homes and that put more downward pressure on prices, aggravating the housing slump, he said. More rapid declines in house prices could have an "adverse impact" on the broader economy and the stability of the financial system, [Bernanke] said.

Photo by Flickr user msabcmom used under a Creative Commons license

Posted by Craig Jennings, 03:11:23 PM

Monday, May 05, 2008

War Sup Could Fund Several Governments

On Thursday, May 1, the the President officially requested that Congress appropriate $70 billion in supplemental funding to fight the wars in Iraq and Afghanistan. Combined with the $108 billion in supplemental funding that Congress is currently mulling to fulfill the remainder of Bush's FY 2008 request, contemplated combined spending package would total $178 billion -- by far the world's biggest supplemental spending bill. (This number omits some $20 billion in domestic spending that Congress has, of late, been considering attaching to the supplemental.)

Consider:

(click on image to enlarge)

While it's true that a few Senators have called for Iraq reconstruction funds to be doled out as loans rather than direct expenditures, the $3 billion in savings would be but a snowflake in the massing $805 billion snowball known as "war spending." However, by and large, Congress has been exceedingly pliant in writing checks to the Executive.

Clearly sums this large deserve some debate. It was, after all, a $22 billion sliver of daylight between the president's and Congress's FY 2008 budgets that was subject of reams of press statements not so long ago. Curious then that nearly $1 trillion can be shuttled off to the Pentagon, State, VA, and a few foreign governments without any real debate about the merits of such spending or what tradeoffs might be required to accommodate these vast outlays.

UPDATE: Correction -- The wrong state spending data were used on a chart that has since been replaced with the current one. We regret the error.

Posted by Craig Jennings, 02:25:58 PM

Friday, May 02, 2008

Ed. Dept: Bush's Reading First Flunks Test

When we last left Reading First -- the Bush Administration's "education program," in which the Education Department "inappropriately influence[d] the use of certain programs and assessments" and "created an environment that allowed real and perceived conflicts of interest" -- the president was decrying the slashing of its FY 2008 budget by congressional appropriators.

In March, at a Reading First program directors' meeting, Secretary of Education Margaret Spellings implored the directors to "fight fiercely" for the program because "[]y]ou have seen the benefits of this program." And Tennessee Reading First director James Herman claimed that the program "has made so much of a difference in the lives of so many people."

According to a report released Thursday by the Education Department that Reading First doesn't actually make a difference:

On average, across the 18 participating sites, estimated impacts on student reading comprehension test scores were not statistically significant.

Average impacts on reading comprehension and classroom instruction did not change systematically over time as sites gained experience with Reading First.

Posted by Craig Jennings, 12:25:49 PM

Panel Sends Frank FHA Bill to House Floor
Administration of Mixed Minds

Yesterday, the House Financial Services Committee approved a proposal by committee chair Rep. Barney Frank (D-MA) to permit the Federal Housing Administration to guarantee up to $300 billion in refinanced mortgages. !0 Republicans voted with the majority in the 46-21 bipartisan vote. The bill would require lenders to restructure the loans with an FHA-approved lender. Only loans on principal residencies made on or before Dec. 31, 2007, would qualify for the restructuring. Frank said:

I don't think that we should panic and stop the decline of house prices in some parts of the country, but the speed in which it is happening hasn't helped, so I think this will help. It could help stabilize the market, put some liquidity back in the market and not interfere with the market, I think, but help restore a market, because we don't have one.

The Administration's position on the bill is hard to ascertain. Roy Bernardi, deputy secretary of the U.S. Department of Housing and Urban Development, wrote a letter this week to Frank and committee ranking member Spencer Bachus (R-AL) and later addressed the annual conference of directors of the Federal Home Loan Banks -- apparently expressing the views of the Bush administration -- warning that "Americans don't want to pay for the risky financial behavior of others," Bernardi said. "And they don't want to make the federal government the lender of last resort, with the private sector dumping bad loans on FHA (the Federal Housing Administration) and the taxpayers themselves."

Meanwhile, Treasury Secretary Hank Paulson seemed to approve the bill, saying that the adminstration had already proposed a plan similar to Frank's and indicating that he was open to the bill. "There are not huge differences."

The bill has not been scored by the JCT, but the committee adopted an amendment exempting it from the strictures of PAYGO. After the vote, Frank expressed his hope that Congress can clear that package for President Bush's signature before the July Fourth recess.

Posted by Dana Chasin, 11:45:55 AM

Thursday, May 01, 2008

War Supplemental Update

Sen. Robert Byrd (D-WV), chairman of the Senate Appropriations Committee, has announced that a war supplemental spending bill will be marked up in his committee next week. And perhaps because of this announcement, House Democratic leadership is signaling that a war supplemental spending bill will not see full House consideration next week. Plus, the House may add war policy language, like withdrawal timelines, to the measure.

CQ Politics:

"I don't know about next week. But soon,'' [Speaker of the House Nancy] Pelosi [(D-CA)] said afterwards, when asked when the House would consider the spending bill.

Meanwhile, John P. Murtha , D-Pa., chairman of the House Defense Appropriations Subcommittee, said Thursday he expects the war supplemental bill to carry Iraq policy riders — including timelines for withdrawal — that are likely to be veto bait, and to differ from President Bush's spending priorities.

UPDATE: Or maybe not ($):

Senate Majority Leader Harry Reid (D-Nev.) was noncommittal today about whether the Senate would mark up the pending war supplemental.

His comments come on the heels of Senate Appropriations Chairman Robert Byrd (D-W.Va.) saying Wednesday that he intends to mark up the bill next week.

Reid said today he wasn't sure how the situation would play out.

"I don't know if we need a mark up," Reid told reporters.

Posted by Craig Jennings, 03:46:28 PM

Op-Ed Dismissive of Contractor Oversight, Calls for More Contractors

WaPo published an op-ed Monday in which former senior Department of Defense officials Dov S. Zakheim and Lt. Gen. Ronald T. Kadish (Ret.) note a recent GAO report that finds massive cost and schedule overruns in weapons acquisitions by the Pentagon. The report implicates a degradation of competition between contracting firms resulting in, according to Zajheim and Kadish (ZK, hereafter), "a kind of 'design bureau' competition, similar to what the Soviet Union used."

After complaining about an Air Force tanker project won by EADS, a European defense contractor, ZK conclude that what's really needed to curtail waste, fraud, and abuse in military contracting is increased competition in the defense market spurred by an increase in domestic defense firms. Without really explaining why, they also claim that "[m]ore regulations and bureaucratic restrictions on contractors are not the answer."

Although the consolidations helped contractors survive the spending cuts, they now threaten to undermine the industry. That's because many in Congress and at the Pentagon want to impose stricter oversight and controls on weapons manufacturing and development while simultaneously demanding more competition -- driving the system to an immature and evolving "globalized" marketplace.

Here's the thing though: Better oversight and better procurement practices may not "fix the problem," but because of the nature of the defense "market," it may be the government's only tool to increase acquisition value.

Read more...

Posted by Craig Jennings, 11:08:38 AM

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