In the parable of the cave, Plato describes the difference between the appearance of the handshadows on the cave wall, which is all that observers see and know of reality, political and otherwise. The shadows are distortions projected for popular consumption, while leaders' actual words and gestures indicate the reality that is to follow, according to Plato in The Republic, his most famous dialogue.

So it appears in the case of the ongoing FY 2008 budget dialogue between the While House and congressional leaders. While veto threats and promise to override grab the headlines, the reality is somewhat different.

A signal moment in the budget deliberations was the decision last week by Senate Majority Leader Harry Reid (D-NV) to schedule a vote on OMB Director-nominee Jim Nussle immediately following the August recess, avoiding a protracted clash over Nussle on the Senate floor. As battles raged in Congress during the days prior to the recess, the first family and Mr. and Ms. Pelosi (D-CA) sat down to a quiet dinner that Tuesday. Summits among Bush, Reid, and Pelosi are workmanlike and progress is being made, reportedly.

As Congress Daily put it last week, both sides "view each other as vital for achieving things Democrats can take to voters and President Bush can use to buff his legacy."

For OMB Watch's own dialogue examining the madness, mathematics, and metaphysics behind the Bush approach to the FY 2008 budget, click here.

In his post about the president's call for a corporate tax cut, Matt asks:

And what if an unhinged market was the root cause of all this trouble [a potential economic downturn]?

I submit that the market is in fact completely hinged. That is: rapid expansion in financial markets (i.e. bubbles) is always followed by rapid contraction (i.e. bubble bursting). Oscillations between growth and contraction is the nature of the market.

And it is precisely because markets behave this way that some government policies are necessary. They provide a buffer between the humans that depend on constant sources of food, shelter, and security and the rough-and-tumble, unpredictable cruelness of The Market.

I'm going to go out on limb and suggest that of all the programs on which the government could spend money to mitigate the human misery caused by the housing bubble bust, corporate tax breaks would be the least effective.

Senate Majority Leader Harry Reid has announced that the Senate will vote on the nomination of Jim Nussle to be the new Director of the Office of Management and Budget on Monday, September 4 - the first day back from the August recess. Reid announced there will be three hours of debate on the nomination beginning at 2:30 pm. One hour each for the chairman and ranking member of the budget committee, and one hour controlled by Sen. Bernie Sanders (I-VT).

Sanders has announced a hold on Nussle's nomination because he has serious concerns about the nominee and his philosophical differences with the administration's fiscal policies. Sanders said:

President Bush is completely out of touch with the economic realities facing working families in America. Bush needs to hear the truth, not an echo. He needs a budget director who will make him face the facts, not fan his fantasies.

Earlier this afternoon, the Senate Budget Committee approved Jim Nussle's nomination to head OMB, 22-1. The lone dissenter was Sen. Bernie Sanders (I-VT), who announced that he had placed a hold on the nomination because

President Bush is completely out of touch with the economic realities facing working families in America. Bush needs to hear the truth, not an echo. He needs a budget director who will make him face the facts, not fan his fantasies.

Budget Committee chair Kent Conrad (D-ND) indicated after the vote that at least one Democrat had also placed a hold on the nomination. Sen. Pete Domenici (R-NM) said that the Energy Department loan program issue he had flagged at the Nussle hearing last week had been resolved and that he had dropped his hold.

Nussle and Sen. Sanders are likely to meet later today. At least until then, it is not clear whether or for how long Sanders will maintain his hold or who else might have holds or how easily negotiated those hold positions might be. Suffice it to say that, in all probability, Nussle's nomination will not get a floor vote in the Senate until September.

Current OMB Director Rob Portman leaves his post tomorrow. Barring the dropping of the Nussle holds or a recess appointment by the president during the August congressional recess, OMB may be formally leaderless for the next month, or longer.

Below, we had a quick look at the President's speech last week to the American Legislative Exchange Council in Philadelphia. We noted its rhetorical tone, which did not seem well-suited to successful summitry.

This week, Stan Collender of National Journal finds six substantively suspect statements in the speech. Among the incidents of "incorrect information, substantial misinformation, and disingenuous statement" was when the president

bragged about how the FY07 deficit would be "lower than the national average over the last 10 years." But that calculation seems to exclude the surpluses that existed from FY98 to FY01. When those four years are included, the average deficit is 0.9 percent of GDP, and the FY08 number the president cited is well above it.

The only way the president's statement is correct is if he looks just at the past six years. So what he was really saying wasn't that this year's deficit would be less than the average from the past decade, just that it will be lower as a percentage of GDP than the average of the six deficits that have occurred while he has been in office. That just doesn't sound as good, and isn't.

Thanks, Stan, for pointing this out. I'm not sure this will "keep" the administration honest, but at least he and we at OMB Watch are, well, watching.

CRAIG: President Bush makes no sense, he's vetoing the Homeland Security spending bill, but not Military Construction (MilCon), the Ag bill, but not Financial Services for budget reasons. What's up with that?

DANA: It looks random, but... wait, haven't his veto statements all said that he wants Congress to pass spending bills totaling not a penny over his $933 discretionary spending topline for FY 2008?

CRAIG: Sure, but then why is he vetoing some bills where Congress' 302(b) allocations for FY 2008 exceed his February budget request -- but not others?

DANA: It's like the adage about dogs -- because he can. What is the "underage" -- the total difference between Bush and Congress on the spending bills where Bush has actually asked for more money than Congress has?

CRAIG: Let's see, that's State-Foreign Operations ($700 million more), Energy-Water ($600 million), Legislative Branch ($300 million), and Defense ($3.5 billion), for a total of... $5.1 billion.

DANA: OK, and which are the bills that where Congress has asked for more money than Bush, but Bush has not issued veto threats against? And what's the total "overage?"

CRAIG: That would be MilCon (a $4 billion difference) and Financial Services ($1.3 billion), for an identical $5.1 billion total.

DANA: I think that explains everything. It looks like he doesn't have to veto MilCon to keep to his $933 discretionary spending topline for FY 2008.

CRAIG: Gotcha -- that explains why he's got to veto the Ag bill. Congress is asking $1 billion more for Ag than he is. But Bush has spent down all of his $5.1 billion wiggle room -- he's got nothing left. He has no choice.

DANA: As random as his veto threat selection seems -- here but not there, this but not that -- maybe there is method in his veto madness after all.

Today's summit meeting on the FY 2008 budget process between President Bush and Congressional leaders has broken and, it's safe to say, the budget process for the year remains as broken as ever. Neither side retreated from its discretionary spending targets and the President showed no sign of backing away from any of his veto threats, leaving open the possibility of a budget showdown or even government shutdown later this year.

Noting the $22 billion difference between the President's and Congress' discretionary spending targets, Senate Majority Leader Harry Reid (D-NV) said, after the summit, "The difference is so small — why are we having all these veto threats?"

The most immediate question is what impact, if any, the stalemate might have on Senate Budget Committee deliberations regarding Jim Nussle's nomination to the post of OMB Director. Committee chair Kent Conrad (D-ND) said last week that the outcome of the summit would have a direct bearing on his committee's deliberations on Nussle.

The Heritage Foundation just put out a report on the fiscal responsibility-ness of the Senate's SCHIP bill. It's stupid, but it begins with the fair point that the legislation would sunset, in 2013, the funding increases it would set up.

The Senate bill would gradually increase federal funding for SCHIP from the current $5.6 billion level to $14.1 billion in 2012. Then, suddenly, funding would plummet to $6.2 billion and $4.7 billion over the subsequent two years, and not top $5.0 billion again through 2017 (see chart 1).[4] If Congress enacts this legislation, lawmakers in 2013 will face two options:

1. Drop SCHIP funding 70 percent, substantially reducing the number of enrollees, or

2. Add approximately $60 billion in new spending over the next five years to maintain current enrollment.[5]

There is also a third option: add the $60 billion in new spending in 2013, when SCHIP will need to be reauthorized anyway, and pay for it. Indeed, if Congress does not pay for it then, they'd violate PAYGO rules if they're still around. Heritage is lying when they say there are only two options and that a paid-for renewal isn't one of them.

Ideally, Congress would have paid for this expansion now and gotten it over with. But just because the bill's finances are less than ideal, doesn't mean a serious violation has occurred. There will be pressure to extend this funding and not pay for it, but folks like us will bring pressure going the opposite way, too, and no rule has been broken.

And to attack a budget gimmick with more smoke and mirrors shouldn't fly either. Two wrongs don't make a right and all.

This morning, the Senate Homeland Security and Governmental Affairs Committee unanimously approved Jim Nussle's nomination to serve as OMB Director.

As of this hour, the Senate Budget Committee is still wrestling with whether to hold its vote in the next couple of days or, say "see in you in September." Word is expected later today, after the Congressional-White House "fiscal summit."