The Senate today kicked the FY 2007 budget can down the road, adopting a continuing resolution (CR) to allow funding for federal government operations through Nov. 17. The Senate has been able to pass only the Defense (HR 5631) and Homeland Security (HR 5441) FY 2007 appropriations bills before the new fiscal year starts Oct. 1.

Should the House follow suit as expected, the result will be a mish-mash of spending levels. The CR sets funding at the lower of the House-only or Senate-only passed appropriations bills. The Labor-HHS-Education bill (HR 5647) cleared neither chamber, leaving funding for the vast domestic programs under the bill at the fiscal 2006 level, an effective cut, after inflation.

Congress is expected to take up the remaining appropriations bills when it reconvenes on Nov. 14, meaning that a second continuing resolution is all but inevitable. A senior congressional staffer tells me that this budget irresolution could continue until into 2007 itself.

The White House wants Congress to agree to a line-item veto bill soon.

If the Senate does vote on the line-item veto this year, it will probably happen during the November lame-duck session.

A line-item veto would give the President the (probably unconsitutional) power to force an up-or-down vote on a package of spending projects that the President wants stripped from spending or revenue legislation. The House passed a bill granting this authority (H.R. 4890) 247-172 on Jun. 22, and the Senate Budget Committee reported out a broader budget reform bill on Jun. 21 that included presidential line-item veto powers.

For a more technical summary of the House bill, see the Congressional Budget Office's report here. And for a variety of reasons, a Presidential line-item veto is not a good idea.

The Department of Education's Reading First Program has let favoritism guide who gets grants.

Four years ago, a nonprofit education firm called Success for All occupied four floors in a Towson office building and employed 500 people. Hundreds of schools across the country were signing up to use its highly regarded reading curriculum, which stresses phonics.

Today, Success for All has laid off two-thirds of its employees and shrunk to two floors. A federal inspector general's report appears to explain why. It says the U.S. Department of Education steered federal grant money to certain reading programs and away from others.

The report, issued last week, accuses the department of favoritism, conflict of interest and mismanagement in the awarding of $4.8 billion in federal funds.

The U.S. has lost its spot atop a ranking of the world's most "competitive" economies. Why? In part, our deficit is too high.

The US trade deficit is expected to top last year's record level of $717bn (£378bn; 565bn euros) in 2006, while the budget shortfall, although expected to be significantly lower than last year, is still forecast to be close to $300bn.

"US competitiveness is threatened by large macroeconomic imbalances, particularly rising levels of public indebtedness associated with repeated fiscal deficits," the report said.

"Its relative ranking remains vulnerable to a possible disorderly adjustment of such imbalances."

Today, the Senate Committee on Homeland Security and Governmental Affairs is having a hearing on the disclosure of tax expenditures.

Not many people know it, but tax expenditures are a huge part of the federal budget. The Joint Committee on Taxation estimates that the federal government spent $947 billion in tax expenditures just this year. And much of that enormous sum goes to programs that are ineffective, ineffecient, and highly regressive, according to the Congressional Research Service.

Read our statement for the hearing here. We suggest that the S. 2590 database include some data on tax expenditures to help the public track them.

Looks like Congress will pass the defense appropriations bill ($$) before the campaign recess.

It's the first appropriations bill Congress will have passed this year, and most likely one of only two they'll pass before the October 1st deadline for appropriations. It will also carry a continuing resolution that negotiators assured would get lots of support (though we haven't had a look at it yet, so who knows). Here's more:

House and Senate appropriations conferees wrapped up negotiations on the $447.4 billion Defense spending bill during a brief meeting Thursday evening, readying the massive measure for a vote in both chambers next week.

The appropriators also agreed to make the Defense bill a vehicle for a continuing resolution, a stopgap measure Congress must pass by the end of this month to continue funding for most government agencies at FY06 spending levels through Nov. 17. Congress expects to pass only the Defense and Homeland Security spending bills by Oct. 1, the start of the new fiscal year.

Appropriators had been opposed to attaching any measure to the Defense bill, amid fears that it could slow down the must-pass bill. But House Defense Appropriations Subcommittee Chairman C.W. (Bill) Young, R-Fla., said he has received assurances from GOP leaders that it will be a "clean" continuing resolution "with no extraneous issues, no anomalies."

To follow up on H. Res. 1000, the new House earmarks rule, two points of clarification (courtesy of congressional sources):

• When will it apply, in the first instance? In the case of appropriations bills already passed by the House, H. Res. 1000 will apply only to items “air-dropped” in conference. Appropriations bills not yet passed will need to list all earmarks/sponsors in committee reports and conference reports.
  
• Would it apply to a facility named after a sponsoring Member? That interpretive question hasn’t been resolved yet, but since the money would be directed to only one specific location (even if a large one, such as a highway), current thinking is that it would likely come within the ambit of the rule.

The transparent inadequacies of the new House rule on earmarks disclosure are enumerated in a powerful Washington Post editorial today.

Noting the insufficency of disclosure, the modesty of the rule's scope and the Senate's to failure to act at all, the editorial concludes:

Sponsors of some of the most egregious earmarks have been eager to have their names attached to the pork-barrel spending. Remember "Don Young's Way"? This $230 million earmark for a bridge was part of a transportation spending bill that the Alaska Republican, who chairs the House transportation committee, bragged was "stuffed like a turkey." Somehow, we doubt that forcing Mr. Young to disclose his sponsorship of Don Young's Way would have done much to persuade him to spend taxpayer dollars any more wisely.

First, no one should be fooled into thinking that the House's minor, loophole-ridden change is anywhere near enough. And no one should tolerate the Senate's failing to live up to even the low standard set by the other body.

As Congress nears its target adjournment date of Sept. 29, the odds of its passing more than a small handful of the outstanding FY 2007 spending bills are lengthening.

Congressional procrastination means that passage of a continuing budget resolution will be necessary to keep the government operating when the 2007 fiscal year begins on Oct. 1, followed by a (probably lame-duck) omnibus spending package comprising appropriations bills uncompleted before the end of the year. These conference reports and omnibus packages are notorious vehicles for feather-bedding earmarks.

But last week, the House adopted an internal earmarks disclosure rule, that ruffled the feathers of House Appropriations Committee Chair Jerry Lewis (R-CA) and his thirteen subcommittee “cardinals.”

The first clues about what effect the House disclosure rule will have on the practice of earmarking will come when appropriations conference reports reach the House floor before Oct. 1, or when an omnibus appropriations package comes under consideration thereafter.

When the rules hit the road, will the (cardinals') feathers start flying?

TomPaine.com has a good article on the cost of a privatized military here.

Each week seems to add new counts to the indictment against the administration’s reconstruction quagmire. The Campaign for America’s Future has compiled the basic case in a damning report it is making public today. That report chronicles “a procurement process that rewards cronies and condones widespread abuse.” It describes how half of the $270 billion spent on the reconstruction effort between the fall of Hussein and 2005 was distributed without competitive bidding and reveals that the government can’t even track the distribution of more than $20 billion.

Here's our summary of the House's new rule on earmark disclosure.

After intense horse-trading and vote-counting, the House voted 245-171 this afternoon to impose upon itself a "house" rule requiring that a House committee identify the sponsor of each earmark contained in legislation that it reports. The rule will stay on the House books until the current Congress adjourns; it would have to be re-approved de novo to apply to succeeding Congresses.

Majority Leader John Boehner (R-OH) and other GOP leaders made some late concessions, upward of a dozen Republican Appropriators voted for the measure against the wishes of Committee Chair Jerry Lewis (R-CA), and a third of the Democrats — bucking the position of Minority Leader Nancy Pelosi (D-CA) -- supported it as well, to provide the comfortable margin in the end.

In the aftermath of the Jack Abramoff scandal and the resignation of disgraced former Rep. Randy "Duke" Cunningham (R-CA) and months of House and Senate negotiations on a broader lobby reform bill , the House has now approved this modest and temporary rule.

Proponents regard today’s reform measure as an important precedent and beachhead for further legislative action. Opponents deride it as a fig-leaf.

In the Senate, Majority Leader Bill Frist (R-TN) has now directed the top Republican and Democrat on the Rules and Administration Committee to develop a similar package of rules changes.

But, said Dave Obey (D-WI), Ranking Member of the House Appropriations Committee, "this bill represents the death of lobby reform.”

Douglas Holtz-Eakin, former director of the Congressional Budget Office (CBO), testified at a House Budget Committee hearing on dynamic analysis yesterday. He is a well-respected, center-right economist, and people take his opinion seriously. And he is a fan of dynamic analysis.

Lots of progressives worry that dynamic analysis could justify nasty tax cuts with voodoo-supply-side economics. But from a political perspective, dynamic analysis may not be such a bad thing.

Dynamic analysis, as you may recall, is just a way of figuring out how much a bill costs , or "scoring" a bill. The CBO already does some dynamic analysis, in that it tries to predict how people on a micro-level will react to a policy. The kind of dynamic analysis that Holtz-Eakin is talking about would open up scoring to predictions about how policy could affect macroeconomic trends, or how the economy works at the big-picture level.

Holtz-Eakin and his successor at CBO have been experimenting with macro-dynamic analysis, and the results have been pretty interesting. And the Treasury Department found that if the tax cuts were made permanent, they would make almost no impact on the economy. If CBO and Treasury had made such a claim when the tax cuts were being debated, it would have been much more difficult for anti-tax zealots to argue that tax cuts are good for the economy, and that they'll pay for themselves.

Plus, real dynamic analysis would also have to take into account the affect that deficit spending has on the economy, which could even show that tax cuts negatively impact economic growth. Peter Orszag at the Brookings Institute has done a lot of interesting work on this subject.

Now, not all forms dynamic analysis are equal. It all depends on how you do the analysis. We would need to see if a proposal to institute dynamic analysis treated spending and taxation fairly, and if the analysis was based on sound assumptions. Economists disagree on what a sound assumption really is, and it may be that economic models are just not capable of making the elaborate predictions required of macro-dynamic analysis.

So the debate might come down to the important question of whether dynamic analysis can be done reliably, as Leonard Burman of the Urban Institute testified at the Budget hearing. If it can't, we probably shouldn't use it.

Even so, politically speaking, the facts are on our side. We shouldn't be afraid of dynamic analysis. In fact, we might think about embracing it.

UPDATE:I mistakenly used the term "dynamic analysis" in this post, when I meant "dynamic scoring." Dynamic analysis is a way of determining the affect of a policy on the economy. Dynamic scoring uses dynamic analysis to assign a cost to a bill.

Posted by Matt Lewis, 04:25:01 PM



Bolting from Boehner -- Earmarks in the Balance

The political battle lines remain blurred, so the outcome is unclear, as the House prepares to vote later today on H. Res. 1000, the House's own earmark disclosure rule.

As we’ve noted, House Appropriations Chair Jerry Lewis (R-CA) is finding excuses to oppose the proposed rule and may have enough Committee colleague with him to defeat it. “The Appropriations Committee is clearly together,” Lewis said yesterday.

Rep. Rahm Emmanuel (D-IL) has complained loudly that the rule does not go far enough, but, according to CQ, House Minority Leader Nancy Pelosi had not announced her position as of late yesterday.

In a vote with GOP members of the Appropriations Committee bolting from Boehner’s party line and joining Democrats united in opposition, the measure would lose.

This afternoon, the House Rules Committee released H. Res. 1000, providing for earmarking reform in the U.S. House of Representatives.

It hasn’t gone through Committee yet. It won’t have the force of law even if ultimately passes. It will have a shelf life of maybe three months in any case. And it doesn’t inclujde a single of the lobbying restrictions passed by the House earlier this year and now withering in conference.

Among its key provisions, for the first time, committee reports would be required to list all earmarks included, along with the names of Members requesting the earmark, in order to be considered on the floor.

As noted by OMB Watch, any effort to clean House (or to name owners of dirty laundry) is bound to get immediate attention -- and this one is actually bound for a vote, perhaps as early as tomorrow.

Posted by Dana Chasin, 02:14:08 PM

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