Earmarks -- House Cmte. Chair to Ignore Bush Order: Earlier this year, the president issued an Executive Order barring government agencies from using funds for earmarks added in House and Senate committee or conference report instead of the original bill's language. Per House Armed Services chair Ike Skelton (D-MO)'s spokeswoman: the "committee does not believe and does not acknowledge the president's assertion that report language should have no weight. The president's executive order would tear away years of history and tradition concerning the relationship between Congress and the Department of Defense." Story.

Budget Resolution -- On Eve of Vote, a Tax Dispute: With a vote on final passage expected for the FY09 budget resolution this week, a difference of opinion about it persists. Senate Budget Committee ranking member Judd Gregg (R-NH): "It includes the largest tax increase in history." Center on Budget: "This year's budget plan does not include a tax increase. It actually calls for a $340 billion reduction in revenues, reflecting its assumption that Congress will extend some parts of the 2001 and 2003 tax cuts without offsetting the costs." CBPP Statement.

Taxes -- Baucus Open to Paying for Extenders: Following a meeting with House Ways and Mean chair Charles Rangel (D-NY), Senate Finance Committee chair Max Baucus (D-MT) said of the tax changes to the treatment of deferred compensation paid by managers of offshore hedge funds and the delay for nine years the implementation of the worldwide interest allocation rule -- which Rangel proposes to use to pay for his extenders bill: "I think those are plausible offsets." But Baucus' extenders package is broader and provides for two-year extenders; Rangel's are for one year.

Contracting -- Fair Share Act Attached to Veterans Tax Bill: Yesterday, the House passed (403-0) a tax bill aimed at veterans and servicemembers (HR 6081) that includes language from the Fair Share Act of 2008 (HR 5602). The Fair Share Act would prevent US firms working on federal contracts and employing American workers through foreign shell companies from avoiding paying payroll taxes. The measure had been approved by the House in April when it passed The Taxpayer Assistance and Simplification Act of 2008 (HR 5719) in April.

Housing -- Senate Banking Compromise Mark-Up Today: The Senate Banking Committee's compromise housing package, the Federal Housing Finance Regulatory Reform Act, will be marked up by the committee this morning. The bill, which provides $300 billion in mortgage guarantees, includes "major efforts to help prevent the rising number of foreclosures, to create more affordable housing for Americans and to reform the regulation of government-sponsored [housing finance] enterprises in order to improve their role in the housing finance system." Committee Release.

Farm Bill -- Veto and Override Vote Loom Ahead: Congress awaits action from the president on a new five-year farm bill (H.R. 2419), which passed both houses by a veto-proof margin during the week of May 12. The $289 billion, five-year measure includes a $10 billion increase in domestic and international nutrition programs over 10 years. The Senate's 81-15 vote was the widest margin for a farm bill since 1973. NYT Analysis.

Taxes -- HSAs Benefit Wealthy; Used as Tax Breaks: A Government Accountability Office (GAO) report indicates that Health Savings Accounts (HSA) are used disproportionately by affluent households. The GAO findings also suggest that HSAs are being used extensively as tax shelters. The average adjusted gross income of tax filers who made HSA contributions in 2005 was $139,000, as compared to $57,000 for all other tax filers under age 65. GAO Report. CBPP Comment.

Taxes -- Sup Ct OKs State Bond Tax Breaks: In a 7-2 vote yesterday, the Supreme Court ruled that states may offer special tax breaks for investing in their municipal bonds. All 50 states had asked the court to uphold Kentucky's system of exempting its residents from paying taxes on the interest from the state's own bonds. Justice Souter wrote the opinion; JUstices Alito and Kennedy dissented. Story.

American Public Media's Marketplace has produced an on-line game called Budget Hero, which allows players to try their hand at balancing the federal budget. Pick your policy priorities and fund them with real-life pay-fors. Or don't pay for them and see what year your budget goes bust.

Once you've tackled the Budget Hero challenge and seen how you stack up against other players, Marketplace welcomes your insights into how the game could be improved, what you learned, how it affected your views on the election or any other thoughts on the game. You can do this through the "Comments" feature at the end of the game.

On your mark, get set, Go!

Among the major outstanding fiscal issues likely to see congressional action this week, in advance of the Memorial Day recess:

Budget Resolution -- An FY09 Budget by Friday?: The budget resolution conference committee is expected to meet to hash out the FY09 budget resolution. Conferees and leaders are hoping to approve the budget before lawmakers leave town for the Memorial Day recess. If it is approved, it will mark the first time since 2000 that Congress has been able to agree on a budget blueprint in an election year. Story.

War Supplemental -- Senate Action This Week: Senate Majority Leader Harry Reid (D-NV) has indicated that the Senate will begin debate on a $193 war funding bill this week. The Senate will take up the House version of the bill and offer Senate Appropriations Committee language to replace the recently-passed House amendments on domestic spending and war policy. The Senate's bill contains $10 billion more in domestic funding but does not offset the cost of an expansion of the GI Bill. A final vote on the bill is not expected before the Memorial Day recess.

Taxes -- Extenders to Hit House Floor?: The House this week will take up a $57 billion tax bill extending and expanding a range of incentives dealing with renewable energy production, conservation, and individual and business tax breaks. The measure does not include a one-year fix for the alternative minimum tax, because that would cost $62 billion and Democrats have not identified the appropriate offsets.

Housing --- Senate Banking Mark-Up Set for Tomorrow:The Senate Banking Committee is slated Tuesday to mark up its measure that would provide new oversight to mortgage giants Fannie Mae and Freddie Mac, with language that would use the two's assets to fund a proposal to insure up to $300 billion in new mortgages for financially troubled borrowers. A deal on the bill could result in passage of an overall package that would also reform the FHA's mortgage insurance program and provide housing-related tax breaks.

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."

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.

War Supplemental -- House and Senate Action Today: The House is scheduled to vote on a $183.7 billion war supplemental spending package today. The Senate Appropriations Committee will begin work on marking up companion legislation also today. but it's unlikely a bill will reach President Bush by the Memorial Day break. House Amendments to Bill.

Unemployment Insurance -- House, Senate Approps Votes Slated: The full House and the Senate Appropriations Committee are scheduled to vote on an amendment to the war supplemental to extend UI benefits. The House bill provides a 13-week extension in most states, 20 weeks in with the highest unemployment rates -- it's 33 weeks in the Senate version. The percentage of workers who exhaust unemployment benefits currently is 36 percent, higher than at the beginning of any of the past five recessions.

Tax Policy -- Ways and Means to Mark Up Extenders: The extenders package covers dozens of tax credits and breaks, costing $57 billion. On top of that, , GOP members of the panel are expected to propose a one-year AMT unpatch, unpaid for, during the mark up. H.R. 6049 Energy and Tax Extenders Bill Summary. JCT Scoring.

PAYGO -- Congress Pays Heed to PAYGO: On three fronts, Congress paid heed to the principles of PAYGO this week, planning to pay for tax cuts and spending increases in the farm bill, the tax extenders package, and (most surprsingly; see below) the supplemental. The farm bill's new tax credits would be paid for, in part, by limiting the net operating loss carryback to $200,000 on businesses' non-agriculture income if they receive commodity payments. The extenders would raise revenue by limiting the deferral of offshore corporate income. That's the plan for now. Here's how PAYGO works.

War Supplemental -- Compromised Reached with Blue Dogs?: Politco's The Crypt is saying that House Democratic leadership will offset a $52 billion expansion of the GI Bill with a half percentage-point increase on income for couples earning more than $1 million. (CongressDaily reports that the increase applies to individuals earning more than $500,000 as well).

Taxes -- Senate Finance Hears Ideas on Tax Reform: The Senate Finance Committee heard ideas from left, center, and right on individual income tax reform yesterday at Cracking the Code, the first of three hearings chair Sen. Max Baucus (D-MT) plans in the coming months. From AMT to the estate tax, the individual income tax code will probably see significant reform in the next couple of years. The Brookings Perspective.

Taxes -- Rangel Eyeing Extender Offsets: House Ways and Means chair Rep. Charles B. Rangel (D-NY) is sifting through potential revenue-raisers to pay for a set of tax credit and deduction extensions expected to hit the House floor by or immediately after Memorial Day. A prime contender: offshore nonqualified deferred compensation, which would defray $23 billion. Less likely: "The carried interest is dead on arrival. Schumer killed the whole thing. I expect that he would do the same in the Senate — in a quiet way, behind the scenes — on Rangel's 'payfor,'" a lobbyist said.

War Supplemental -- House Looking for GI Bill Offsets: To get the House Blue Dog coalition to back a war supplemental spending bill, Democratic leadership is mulling its options to offset a $52 billion GI Bill expansion. CongressDaily reports ($) that one plan would involve closing the carried interest loophole.

Budget -- Resolution at Last; Deal Sealed: Senate Budget Committee chair Kent Conrad (D-ND) announced yesterday that budget resolution negotiators had reached a deal last Friday, but its terms were still under seal under conferees can be named and meet. The domestic discretionary topline is close to $1.012 trillion.

Tax Expenditures -- JCT Releases "Reconsideration": Yesterday, the Joint Committee on Taxation released an examination of federal tax expenditures -- $1 trillion in annual spending that goes relatively unnoticed, because it is comprised of tax credits, deductions, exemptions, exclusions, deferrals, and rate reductions not considered in the appropriations process. JCT's "Reconsideration".

With Congress and President Bush entering negotiations over the next tranche of war funding, via an emergency supplemental appropriations bill, now is a good time for a little emergency check.

As the lead editorial in today's Washington Post, Not an Emergency, points out, "[f]ive years into paying for two wars, in Iraq and Afghanistan, it's outrageous that so much of the financing continues to be approved outside the normal budget process, through 'emergency' spending bills that must be passed, must be passed in a hurry..."

So, five years to the month after "mission accomplished," after half a trillion dollars in war spending through supplementals, maybe it's time to focus attention on a budget reform proposal that has been circulating in Washington for, well, at least five years. It seeks to end a practice, which, as we have said "obscures or distorts important aspects of the fiscal impact of federal spending and, therefore, undermines the general fiscal responsibility of the federal government."

This proposal would re-define "emergency" for supplemental appropriations purposes as:

• an essential or vital expenditure, not one that is merely useful or beneficial
• sudden—quickly coming into being, not building up over time
• urgent—pressing and compelling, requiring immediate action
• unforeseen—not predictable or seen beforehand as a coming need
• not permanent—the need is temporary in nature

So, who has been issuing this salutary proposal again and again, year in, year out, while it falls on deaf ears in the rest of official Washington?

None other than... President Bush.

With two weeks before the Memorial Day break, Congress will focus on a few key outstanding fiscal policy issues, foremost among them:

• Budget Resolution -- Mind the Cap Gap: Senior congressional budget committee staffers say that if compromise is not reached and a budget resolution passed before the break, Congress will not have an FY09 budget. A small House-Senate discretionary spending cap gap -- about $1.5 billion -- remains to be resolved. OMBW Statement.

• War Supplemental -- Domestic Content Dispute: President Bush has threatened to veto a war supplemental bill with any domestic spending content. Both the House and Senate supplemental bills have such content -- including a GI-style bill for Iraq war veterans and an unemployment benefits extension provision -- amid disagreement over what needs to comply with PAYGO, and how. WSJ Story.

Major fiscal policy items unlikely to see floor action until after the Memorial Day break:

• Housing -- Will Lawmakers Hear about it Back Home?: The $2.7 billion mortgage refinance bill providing $300 billion in loan FHA guarantees, passed by the House last week, faces significant obstacles in the Senate and the administration. Its fate may be cast by what lawmakers hear from constituents about the issue during "district work" week at the end of the month. NYT Editorial.

• Taxes -- AMT Patch and Popular Extenders: The House plans to address these two issues in two bills and, probably, to see that both are paid for -- and may act before Memorial Day. The Senate will act on a bill combining the issues, with 41 GOP Senators refusing to pay for them; Senate floor action isn't expected 'til June. Senate Bill Summary.

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

Housing -- House Passes Two Key Housing Bills: Yesterday, the House passed the first two bills to clear the chamber addressing the nation's housing sector crisis. The first, the Neighborhood Stabilization Act, which was adopted 239-188, establishes a $15 billion, HUD-administered loan and grant program for the purchase and rehabilitation of vacant, foreclosed homes. The second, an FHA mortgage refinance program providing up to $300 billion in loan guarantees at a cost of $1.7 billion over five years, passed 266-154. Bill Summary. Both bills face veto threats.

Farm Bill -- Compromise Reached but Bush Promises Veto: After months of negotiations, congressional leaders announced yesterday that they had concluded a compromise on H.R. 2419, providing a five-year farm policy measure with some reforms, including lowered income threshold for eligibility to receive farm payments and an optional crop revenue program. The final votes will be watched for the possibility of an override of a veto promised by President Bush. Story.

Infrastructure -- CBO Chief Doubts Stimulus Value: Peter Orszag, director of the Congressional Budget Office, said yesterday that it was unclear how quickly federal infrastructure projects could provide a boost to the economy, as some lawmakers have suggested, because they can often have lengthy planning and permitting stages. "How quickly, if you're going to spend $100 on this project, what share of that $100 will you get out the door rapidly?" he asked at a joint hearing of the House Budget Committee and the House Transportation and Infrastructure Committee. Testimony and Charts.

War Supplemental -- Blue Dogs Hold Line on PAYGO: Frustrating House Democratic leadership efforts to bring to a vote on the $183.6 billion war supplemental spending bill to the House floor today, the Blue Dog coalition is balking at supporting the rules under which the bill would be considered. Their concern is that a measure to increase GI Bill funding violates pay-as-you-go rules, because it would be a new entitlement not be offset by revenue increases or spending decreases.

Taxes -- Senate Dems Push Windfall Profits Tax on Big Oil: Yesterday, Senate Democrats unveiled legislation that would levy a new 25 percent tax on major oil-producing companies that do not reinvest their profits in increased capacity or renewable energy technologies and repeal a tax deduction provided to them as manufacturers of oil and gas products. The Consumer-First Energy Act would use the revenues from the 25 percent "Windfall Profits Tax" for new consumer price protections, and renewable energy development and energy efficiency technologies. The repeal of the Section 199 manufacturing tax credit for the five largest oil and gas companies would raise $17 billion over 10 years to pay for the energy independence trust fund.

Taxes -- New York Senate Adopts Gas Tax Holiday: The New York State Senate approved a bill yesterday that would create a "summer gas tax holiday" by eliminating three state taxes on motor fuel. The bill would suspend 32 cents per gallon in taxes from Memorial Day through Labor Day. While the bill passed the Republican-controlled Senate by a vote of 46-15, it is expected to die in the Democratic-controlled state Assembly. Sen. Liz Krueger (D), an opponent of the bill, said it was "obviously meant to prey on the desperate need for relief of New York's suffering drivers."

Posted by Dana Chasin, 10:13:17 AM

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