Last week, Washington Post columnist David Broder highly praised a "provocative piece" on the tax treatment of health care by Jason Furman of the Center for Budget and Policy Priorities, a left-wing think tank that often attacks the Heritage Foundation's research. Furman piece appeared in the new publication Democracy: A Journal of Ideas, which aims "to build a vibrant and vital progressivism for the twenty-first century that builds on the movement’s proud history, is true to its central values, and is relevant to present times." And so perhaps it is strange that we too write in praise (mostly).

In "Our Unhealthy Tax Code" (free subscription required for full text) Furman makes the argument, near and dear to our hearts, that the first major step in curing health care in the U.S. is "to put the tax code on the examination table"--something, Furman rightly notes, that his partisan allies have been unwilling to do. The current tax treatment of health care, he describes, tilts the playing field in favor of employer-provided coverage and is, in effect, quite regressive. Worse, "The tax code also increases wasteful and unnecessary spending by subsidizing health insurance pland that discourage health consumers from being cost-conscious." The way we tax health coverage, he concludes, "is literally making America sick."

Furman inevitably nods towards the expected--"A single-payer national health care system would, by definition, remedy the problem"--but then changes tack towards pragmatism. This is the reform plan he sketches:

In fact, if we turned our irrational health tax subsidies right-side up--by curbing subsidies for higher-income workers and those with more generous health insurance plans--we could raise tens of billions of dollars annually, money that could go toward increasing access to health insurance. Taking it a step further, we could scrap the current deduction altogether and replace it with progressive tax credits that, together with other changes, would ensure that every American has affordable health insurance. In either case, reducing subsidies for pricey plans would likely lead to a health insurance system that includes more cost sharing, promotes more consumer consciousness, and plays a modest, but potentially meaningful, role in restraining health spending.

Getting down to details, a lot of what Furman proposes is predictable and bad: wasting more money on an expanded Medicaid, employer mandates that cement in place some of the biggest drawbacks of the current system, and subsidies to join the Federal Employees Health Benefit Plan (FEHBP). But then there's the tax credit part--that sounds familiar.

In fact, that part of Furman's plan reads a lot like Heritage VP Stuart Butler's tax credit proposal for the employees of small businesses (which Furman identifies, rightly, as "the weakest link of the employer-sponsored system"). The key part of Butler's proposal is this "Create a refundable tax credit for workers in small firms in order to eliminate the bias against employees choosing their own coverage and to subsidize those who need the most help."

More broadly, Furman's progressive tax credit sounds a lot like Butler and Ed Haislmaier's 1989 manifesto "A National Health System for America," published by Heritage. Here's a tidbit:

[E]xisting tax policies are most responsible for the system's problems and failures.

While, at one time, the longstanding policy of excluding the value of employer-provided health insurance from tax liability expanded access to health care, today it is a major cause of the inflation afflicting the system. This tax policy encourages Americans to think that their health care is paid for by someone else. As such, they lack the normal incentives to question the need for care or the prices charged for it....

The essential first step is to eliminate the tax exclusion of employer-provided health insurance and treat these benefits as the rest of a worker's cash income is treated. This would give workers an incentive to seek lower cost medical care or insurance by allowing them to pocket any resulting savings....

The way to avoid the political opposition to eliminating the tax exclusion for employer-provided health insurance would be to offset it with expanded tax deductions or tax credits in the personal income tax code for health insurance purchased directly by workers for themselves and their families.

The Heritage proposal is, at its essence, a conservative approach to achieve the widely shared goal of universal coverage. It accomplishes this through the market and by relying on personal responsibility. What, if anything, is "progressive" is the manner of its political pragmatism and its fairness. Leveling the playing field, knocking down the regressivity of the current system--along with all the distortions it introduces--and broadening coverage are goals shared by conservatives and progressives, and so progressives could support the Heritage proposal as, at least, a workable second-best solution.

And Furman isn't the first on the Left to be drawn to this work, either. Then-Editor of The New Republic Michael Kinsley called it "the simplest, most promising, and in an important way, the most progressive idea for health care reform." But to be sure, there haven't been many admirers from that ideological camp.

And so it's good that Furman sees the light, and perhaps some of his allies will be drawn in, too.

Posted by Andrew Grossman at 04:31 PM in Health Care | Permalink | TrackBacks (0)

Now that the line-item veto has passed the House, advocates of budget reform are pushing for its quick passage. Rep. Chris Chocola (R.-ID) is confident the measure will pass, according to the South Bend Tribune:

"This is going to be law," Chocola said of the "enhanced recision" measure that would give the president a limited power to excise pork-barrel projects from the federal budget.

An editorial in this morning’s Denver Post urged local senators to support the measure, which it called “a good first step toward reforming a culture of profligacy that grips Congress and the Bush administration.”

We urge Sens. Wayne Allard and Ken Salazar to support the measure, which largely reflects the thinking of its chief Democratic sponsor, Rep. Mark Udall of Eldorado Springs.

It also emphasized the bill’s bipartisan origins, citing Rep. Udall’s (D.-CO) involvement:

As a member of the minority party, Udall was realistic about the chances of a bill passing with himself as prime sponsor. So he worked closely with Rep. Paul Ryan, R- Wisc., and the Ryan-Udall bill as passed by the House now reflects the key Udall principle that both houses of Congress will have to approve by simple majorities to rescind an item vetoed by the president.

Senator Chambliss (R-GA), who co-sponsored Judd Gregg’s broad SOS bill, warned Congress about the consequences of avoiding reforms:

If we don't get a handle on federal spending and make serious reforms now, we will pass this burden on to our children and grandchildren. I believe that as Congress restrains discretionary spending and continues to reevaluate entitlement spending, we can achieve the much needed reforms to our broken budget process, put an end to wasteful spending, and implement the fiscal responsibility the taxpayer deserves.

But while many Republicans are joining the supporters of Gregg and Ryan’s reforms, some are still defending the ongoing practices. Andy Roth criticizes Rep. Jack Kingston’s (R.-GA) reply to one constituent who asked:

Congressman Kingston, why haven't you joined other Georgia Republican Congressman and the Club for Growth in cutting government spending?"

According to Roth:

[Kingston] essentially argued that in order to pass appropriations bills, you need to convince members of both parties to vote YES. How do you do that? You buy them off with pork projects. Kingston doesn’t say it that explicitly, but there’s no denying that that was his meaning.

Some see Ryan’s line-item veto as too weak to reduce spending significantly. A story on Bloomberg.com cites experts who believe such reforms aren’t worth much:

"These budget-process reform ideas tend to be fig leaves," said Phil Joyce, a former Congressional Budget Office analyst who now teaches at George Washington University in Washington. "The things they could do that would actually have the effect of putting the budget on a better footing are all things that would inflict pain on some people."

In fact, some experts say the measure might actually have the opposite effect of increasing spending:

Donald Marron, the acting CBO director, told the Senate Budget Committee last month that the plan may end up increasing federal spending. He said lawmakers may strike deals to support the president's spending priorities in return for his agreement not to use the line-item authority, as has happened in many states that allow line-item vetoes.

Conservative columnist Cal Thomas and Democratic strategist Bob Beckel came up with another solution to cut spending: Congressmen can’t spend if they’re not in session, so Congress should have longer recesses. They told USA Today:

Bob: …But Congress can't spend if it's not in session. The Supreme Court adjourns in late June or early July until the first Monday in October. The right bipartisan coalition of Republicans and Democrats — those who want to end out-of-control spending — could propose a rule that would end the congressional session, in an election year, from the end of July through Election Day. If emergency spending were needed, the president could call Congress back into session. I'm betting the public and the news media would rally around the idea, and members who oppose it would be labeled "porkers." What say you?

Cal: Might work. Here's one other idea for your consideration. If Congress thinks it needs more time to finish whatever it considers important work, let it meet more than Tuesday-Thursday. Members could spend an extra day or two a month in Washington instead of jetting in and out of town. Frankly, I don't feel they need more time; they simply need to cooperate. The more time members spend in Washington, the more mischief they can do. That includes money for unnecessary projects and further temptations from lobbyists.

Jeff Flake’s efforts to fight earmarks are getting wide acclaim, with The Wall Street Journal calling the Arizona congressman “a political guerrilla with a smile, a ringer for actor Owen Wilson who crashes not weddings but his own Republican Party.”

And like no one else, he has taken on the scandal-plagued House Appropriations Committee, a Republican power structure assigned the task of earmarking billions of dollars for home-state projects among members this election year.

The WSJ cited Flake’s criticism of Republicans:

"I don't think our leadership fully appreciates the trouble we are in," Mr. Flake says, explaining that Republicans are cutting their throats politically by continuing to sanction earmarks as part of an "all politics is local" re-election strategy. The approach, he says, sacrifices the party's credibility with voters who want more control of spending. "What's just mystifying is the sense of entitlement now: You have the right to have your projects and to ask for it through the process without anyone else knowing about it or being able to challenge it. That's your inherent right as a member of Congress."

Rep. Dan Lungren (R.-CA) echoed Flake’s comments on congressmen’s sense of entitlement saying:

Mr. Lungren, who says he admires Mr. Flake's efforts, served in Congress in the 1980s under Ronald Reagan and was astonished when he came back in 2004 by the changed attitudes within his party -- and at home. "When I was here before people had the hope that maybe they would get something," he said. "Now they have the expectation and they say to you, 'If you don't give it to us, somebody else will get it.'"

In the meantime, earmarks like the Frank Wolf’s (R-VA) Journey Through Hallowed Ground National Heritage Area Act are moving forward. The bill would set aside the U.S. 15 corridor, taking land from Virginia, West Virginia, Maryland and Pennsylvania and putting it under the control of preservationist group:

Wolf's bill, the Journey Through Hallowed Ground National Heritage Area Act, is a pork-barrel earmark awarded to preservationist interest groups. Only instead of merely providing pork, this would actually purchase lobbyists.

The legislation essentially deputizes the National Trust for Historic Preservation, other like-minded preservationist groups and the Park Service to oversee land-use policy in the corridor. This consortium would form a "management entity" and be given a federal mandate to create an "inventory" of all property in the area that it wants "preserved," "managed," or "acquired" because of its "national historic significance."

Posted by J. Lawrence Scholer at 04:07 PM | Permalink | TrackBacks (0)

This past week, the Rhode Island created a corporate tax credit program to provide educational scholarships for low-income families to send their children to a private school of their choice, according to the Alliance for School Choice. The program—capped at $1 million in donations—will help hundreds of children attend private school.

School choice programs have been gaining momentum across the nation. In June alone, three states—Arizona, Iowa, Rhode Island—enacted new school choice programs. In 2006, four additional states—Florida, Ohio, Utah, and Wisconsin—have passed targeted school choice bills. In Arizona, Iowa, and Wisconsin, the measures were signed into law by Democratic governors.

In Rhode Island, the effort to increase school choice passed thanks to bipartisan support. The measure passed the Senate by a vote of 33-5, and the House 60-15. In Rhode Island and beyond, legislators on both sides of the aisle are realizing that school choice is an effective way to improve educational opportunities. As Rev. Bernard A. Healey of the Catholic Diocese of Providence told the Alliance for School Choice, "The program makes sense. It saves money for the public schools and it gives poor kids a choice in education and allows them to afford non-public schools."

The push for parental choice in education is quickly spreading across the country. The future for American children is getting brighter with every state that expands educational freedom.

Posted by Evan Feinberg at 11:05 AM | Permalink | TrackBacks (0)

In today’s Chicago Sun-Times, Heritage Foundation President Ed Feulner compared congressmen to teenagers with too many credit cards:

In recent years, lawmakers have been spending like a college freshman with a fistful of new credit cards. They've jacked up federal spending by 45 percent in the five years since 2001, to a peacetime record of $23,760 per household. They've expanded entitlements and let them grow unchecked. That combination means taxpayers eventually will have to pay an enormous bill: some $46 trillion in current debt and unfunded social insurance obligations.This profligacy has motivated Sen. Judd Gregg (R-N.H.) to take steps to cut up Congress' credit cards.

Feulner explained Gregg’s SOS bill, cites its spending caps, its limits on “emergency”spending and its checks on entitlements, and says it would “do something that’s long overdue: begin to fix the fenedal budget process.” But he has a suggestion for the percent-of-GDP targets the bill would make into law:

The S.O.S. Act would make it law that the budget deficit next year couldn't exceed 2.75 percent of GDP. That figure would then decline each year until it hit 0.5 percent of GDP by 2012. If the deficit climbed above the target, there would be an automatic "spending reconciliation" process forcing the budget committees to trim entitlement spending to meet the target.

Because it's difficult to project GDP -- and therefore deficits -- the bill might be better if it set a specific spending target for each entitlement program and forced lawmakers to meet that goal. The most important thing is to force our elected officials to pay attention to entitlements and to start bringing them under control.

Fiscal hawks may face a choice of a stand-alone line-item veto or a line-item veto as part of the comprehensive SOS legislation. According to BNA:

Aside from timing, line-item supporters also face a choice on which path to take toward getting the legislation passed: Ryan's stand-alone or Gregg's broader approach. Ryan has said he and a group of GOP conservatives in the House favor making budget process reforms on a piecemeal, incremental basis, instead of a bulkier approach that has been tried unsuccessfully in the past.

Gregg wants his much wider reforms to pass because they tackle the bigger spending problems, not just earmarks:

But Gregg argued that dealing with the looming retirement of the baby boomers and its effect on government finances is more important than reining in earmarks, which usually have little effect on overall spending levels…

"Line-item veto is a whiff. You know, all our budgets are within the president's request for appropriated spending--the discretionary spending. And that's not busting the budget," he said.

He cites widespread support for his comprehensive measures and told BNA that:

"I put this package together because I wanted something substantive and I felt it addressed the bigger issue of, long term, having a government our kids could afford and facing the baby boom retirement," he said. Talking to reporters, Sen. Kit Bond (R-Mo.), who was at the White House meeting, echoed Gregg's sentiment, saying, "I think the rescission proposal that is in the Gregg bill is probably workable, but if you really want to get the deficit under control, you have to go after entitlements."

Many congressmen and the White House are focusing on the line-item veto bill that passed the House. Rep. Jean Schmidt (R.-OH) wrote in The People’s Defender:

The line item veto is a tool that will be beneficial to the legislative branch as well as the executive branch. It will give fiscal watchdogs extra ability to shine a new and focused light on wasteful spending. It will, however, also work as a preventative measure. Earmarks for frivolous pet projects slipped into spending packages might be less common if the request is subject to broad public scrutiny…

It is now up to the Senate. If the Senate agrees Congress can send the final package to the President and this important tool could be in use for the coming budget. I hope we can give the President the authority for the line-item veto, but it will not be easy.

Yesterday, the President gave a speech about the economy and strongly pushed for the line-item veto to help cut wasteful spending. Today’s New York Times reported that the measure has become a White House priority:

Winning a line-item veto would give Mr. Bush a much-needed Congressional victory. He had been trying to push through new immigration laws, but last week the House decided to have a series of national hearings before taking action. Mr. Bush said Tuesday that he was not giving up on that fight.

But he said that in the meantime he had asked his new budget director, Rob Portman, to make securing the line-item veto a top priority. Mr. Portman, a former Republican congressman with strong ties on Capitol Hill, has discussed the veto with lawmakers in the last week. "It's important that the Republican Party continue to let people know that the Republicans are the party of fiscal discipline," Mr. Portman said, adding that he was also trying to bring along Democrats.

One reason the line-item veto is getting so much attention is because earmarks are getting a lot of negative scrutiny. Just this morning the American Enterprise Institute’s Norman Ornstein wrote a scathing article about what he considers legal--but unethical--congressional practices:

[I]t is not what is illegal that is the outrage, to use the old phrase, but rather what is legal.

Let us just consider some of the stories that emerged last week, starting with the Chicago Tribune’s story, amplified by The Washington Post, about the tidy real estate profits made by Speaker Dennis Hastert (R-Ill.) and California GOP Reps. Ken Calvert and Gary Miller.

Hastert made nearly $2 million from rural land purchased in his district, done in part through a series of transactions involving a land trust he set up with partners. The land had no major access road nearby when the Speaker purchased it--apparently, according to his office, on impulse, for $2.1 million when he drove past and saw a house on it that he admired.

But soon after the purchase, the Speaker muscled through $207 million in earmarks to build a highway and interchange five miles or so from his property. Not long after the earmark, the land trust sold some of the property to a developer for $5 million, handing the Speaker a windfall of $1.8 million.

The scandal is so embarrassing that Governor Blagojevich (D.-IL) has tried to disassociate himself from the Prairie Parkway project, even though he supported it:

The governor said the proposed Prairie Parkway was not a priority for him even though it was listed as a transportation priority in the official joint city-state federal initiative document being handed out Tuesday signed by Daley and Blagojevich. The document was released at the news conference at the exact time Blagojevich, a few dozen yards away, was downplaying his interest in the road.

Ornstein called on Congress to stop these kinds of scandals by enacting reforms:

Illegal or not, much of this behavior is unethical and repugnant. It underscores the deep need for a real package of ethics, earmarking and lobbying reforms--which in turn underscores the shameful and pathetic behavior of the leaders in both chambers who have failed to act and who are trying to sneak through a sham bill. They hope journalists will tire of these stories and that voters won’t notice. I hope they are wrong.

John McCain wrote a tough indictment of earmarks at Porkbusters.org:

Where corruption can easily occur and where profligate spending is presently out of control is when a lobbyist, knowing the rules of the game, receives special treatment for his or her client, irrespective of the public interest, simply by enjoying a relationship with a member of Congress who can, by this process we call earmarking, provide their clients a benefit that is seldom scrutinized by Congress as a whole.

He illustrated the magnitude of the problem with the highway bill:

The highway bill we passed last year, and which the President signed into law, was twelve billion dollars over his request, and contained 6,731 earmarks, which included the now infamous "bridge to nowhere." That's quite an explosion in the growth of earmarks, which you have the privilege of paying for with your gas taxes. And it represents 6,371 separate opportunities for a lobbyist to ask a single member of Congress for a favor that the rest of Congress won't vote on and most members won’t even notice.

McCain then called on Republicans to go back to Reagan-era small government conservatism:

The total number of earmarks in spending bills has grown from 4,126 in 1994, the last year of Democratic control, to 14,404 in 2004. That's a 240 percent increase in ten years time. In dollars, the cost borne by taxpayers for earmarks has nearly doubled. That's not a record Ronald Reagan would have been proud of. And it's not a record Reagan Republicans should be proud of today. We need to stop this . . . now, and remember, as Ronald Reagan always remembered, that we were sent to Washington because of the principles we pledged to defend, not because our constituents thought we needed a change of address.

Another Member fighting profligate spending is Sen. Tom Coburn (R.-OK). Kristina Rasmussen notes his successes in a post for NTU’s blog:

Dr. Coburn won a few for America last week on the annual Defense authorization bill.

1. Requiring Defense pork to be reported and its effectiveness analyzed,
2. Cutting off all payments on the over-budget, under-performing Defense Travel System (an electronic booking and reimbursement system for Defense employees when they travel) until it actually works, Ending the outrageous practice of paying Defense contractors “performance bonuses” - up to $8 billion in wasted bonuses over a 4-year period) when those contractors do not perform the terms of their contract, much less in the exemplary way that the bonuses are supposed to reward, and finally
3. forcing Katrina-related contracts to be awarded after a competitive process (many are currently not competed).

Americans for Prosperity is going after earmarks with new stops for the Ending Earmark Express. It’s now heading West:

It promises to be another great swing. One of the most notable stops is at Congressman Jerry Lewis' million-dollar swimming pool in Banning, California, $500,000 of which is still pending in a conference committee after the House failed to approve Congressman Jeff Flake's amendment to remove the funding.

Posted by J. Lawrence Scholer at 04:34 PM | Permalink | TrackBacks (0)

The Illinois School Choice Initiative, a grassroots project of The Heartland Institute, is laying the groundwork to provide educational opportunities for children in Illinois. To this end, the Initiative seeks to educate the public on the advantages of school choice.

Throughout 2006, the Initiative is hosting a monthly "Educational Choice Speaker Series 2006" featuring national school choice experts. Speakers so far have included Milwaukee School Board president Kenneth L. Johnson, Virginia Gentles (Florida's top school choice official), Lawrence Patrick of BAEO, president and CEO of the Hispanic CREO Rebeca Nieves-Huffman, and Robert Enlow, the executive director of the Friedman Foundation. These individuals represent some of the nation's leading experts in school choice policy.

And now the Initiative is reaching beyond the borders of Illinois. It is publishing an audio weblog with its monthly speeches. The format is extremely user-friendly, and the speeches are extremely informative and accurate in diagnosing the problems in education and moving this country closer to an education system that empowers parents and increases student achievement. Go give it a listen.

Posted by Evan Feinberg at 10:21 AM in Education | Permalink | TrackBacks (0)

James Taranto is a treasure:

You can see why Buffett would want to give his billions to charity. The federal death tax is currently being phased out, but it will reappear in 2011 unless Congress acts--which means that if Buffett lives that long, the government will confiscate 55% of his assets upon his death. But wait. Buffett is, as a New York Sun editorial notes, "an avowed supporter of the estate tax." As we noted in 2001, so is Bill Gates Sr., the Microsoft founder's old man, who is an executive of the Bill and Melinda Foundation. As the Sun notes:

Mr. Buffett could have let the government take its share of his estate after he dies. But just as Mr. Buffett has accumulated his vast wealth without paying much personal income tax, he has found a way to avoid the tax man in this maneuver as well, even writing in his letter to Bill and Melinda Gates that a condition of the gift is that the foundation "must continue to satisfy legal requirements qualifying my gifts as charitable and not subject to gift or other taxes." On the estate tax, watch what Mr. Buffett does, not what he says. The Gates Foundation isn't the only recipient of his largesse--three foundations headed by Mr. Buffett's three children, Susan, Howard, and Peter, will get hundreds of millions of dollars. Tax documents show that in 2004, Peter Buffett and his wife Jennifer each took a $40,000 a year salary for what they reported was 30 hours a week each of work on the foundation.

When billionaires back the death tax, keep in mind that they have no intention of actually paying it. They are being "generous" with other people's money. This is the way in which the superrich wage class warfare against the merely affluent.

Posted by Andrew Grossman at 04:26 PM in Taxes | Permalink | TrackBacks (0)

The Financial Times reports on the line-item veto and notes a conference call for conservative activists that the White House orchestrated last week:

Another activist who was on the conference call last week, said: “It is part of an ongoing effort by the new regime of Josh Bolten [White House chief of staff] and Rob Portman to take conservative input more seriously and take the temperature of the conservative movement on a more regular basis. A lot of people had felt they were shouting at the top of their lungs and were not being heard.”

The line-item veto still faces a challenge in the Senate, and the President is pushing for it hard. The Note reports:

Supporters of the line item veto aren’t where they need to be either, because the issue will be front and center… when President Bush speaks at the JW Marriot Hotel in Washington, DC. The President is also planning to meet with a group of Senators, including Sen. Ben Nelson (D-NE), this morning to discuss getting a line item veto plan through the Senate.

[W]e've got to do everything we can to control the spending that Congress votes on and approves every year. That's called discretionary spending. My administration is doing its part on discretionary spending. Every year since I took office, we've reduced the growth of discretionary spending that is not related to the military or homeland security. And the reason why we haven't reduced the growth on spending for the military is because so long as we've got troops in harm's way, they're going to have whatever it takes to win the war on terror.

The line-item veto took center stage: the White House released a fact sheet about the bill to go along with the speech, and the President spoke at length about the measure:

Many members in Congress, I know, want to do the right thing. And so one of the interesting things about the line-item veto is it will help deal with that dilemma I described, either all or nothing when it comes to voting for appropriations bills. You know, sometimes a member of Congress gets a special project for the district, and they go back and tout the project. Then you have members who don't agree with earmarking, and they don't have any special project to tout to the district. And yet, the people in their district are voting for the special project for the other person's district. And I think the line-item veto -- I know the line-item veto would help resolve this dilemma.

He emphasized the bill’s bipartisanship and pushed Senators to pass it:

Now the Senate is going to take up the measure. And again, I want to thank the Senators who are here for strategizing on how we can get the bill moving. Senator Frist is committed to getting the bill moving. Senator McCain is one of the important co-sponsors, as is Senator John Kerry. I remember campaigning against him in 2004, and I remember him talking about the line-item veto, and I appreciate the fact that he's living up to the political promises he made. It's a good sign, and I applaud Senator Kerry for taking the lead on the line-item veto. And I hope members of his party listen to his justifications for that important piece of legislation.

Tim Chapman commented on how the President targeted earmarks:

A line-item veto would be a vital tool that a President could use to target spending that lawmakers tack on to the large spending bills. That’s called earmarking, and that’s become quite a controversial subject here in Washington, D.C.

The Financial Times had reported that the President would be trying to improve the government’s bad record on spending:

In an effort to re-establish his credentials for fiscal discipline with conservative Republicans, President George W. Bush will urge the Senate in a speech on Tuesday to pass the line-item veto, giving him more power to cut “wasteful spending”…

The speech forms part of an increasingly aggressive effort by the White House to woo back disgruntled conservatives, who have become disaffected by the expansion of government spending during his two terms.

But it seems there’s no end to the bad news on spending. The New York Times adds to the list of stories on government waste and excess today. It reports that the Hurricane Katrina “produced one of the most extraordinary displays of scams, schemes, and stupefying bureaucratic bungles in modern history, costing taxpayers up to $2 billion.” The article continues:

The most recent audit came from the Government Accountability Office, which this month estimated that perhaps as much as 21 percent of the $6.3 billion given directly to victims might have been improperly distributed….

Congressional investigators, meanwhile, have referred another 7,000 cases of possible fraud to prosecutors, including more than 1,000 prison inmates who collected more than $12 million in federal aid, much of it in the form of rental assistance.

Taxpayers in New Jersey are fighting back against big spending and rallied over the weekend to kill Governor Corzine’s inflated budget plan. Americans for Prosperity lists a fair amount of the media coverage:

“Wearing red t-shirts and carrying signs denouncing everything from Corzine’s spending plan to lax federal immigration laws, the group heard from a handful of politicians and others who complained the governor’s proposed $30.9 billion budget will hurt already-overtaxed residents.

Gary Marx at Human Events Online outlines what conservatives should and should not be doing before the next presidential election. Coming in at number two:

Do scale back federal spending, eliminate federal earmarks and attack wasteful spending abuses like the “bridge to nowhere.” Many fiscal conservatives feel discouraged by the spending priorities of Congress and the White House and it is vital that spending is brought under control. Conservatives should fight for the elimination of earmarks as a method of cleaning up corruption in Washington; the ease and availability of this budgeting loophole has indirectly led to some of the recent scandals facing representatives of both parties.

Posted by J. Lawrence Scholer at 03:38 PM | Permalink | TrackBacks (0)

State tax revenues are soaring, thanks to the surging the economy, due in no small part to the 2003 tax cuts. Yesterday's Wall Street Journal reported that most states are seeing big budget surpluses--40, altogether, are in the black and overall state and local revenues grew a massive 10.5 percent last year. Unfortunately, though, state budgets are keeping page. The Journal estimates that "State spending is expected to increase by double digit rates this year."

A couple years ago, after the last boom went bust, the National Federation of Independent Business (NFIB) put out an interesting report titled "Laissez Les Bon Temps Roulez." The states were in bad shape: revenues were down and making cuts to balance budgets was a difficult task. The National Governors' Association was putting out dire calls for federal assistance. But the states made this mess themselves, and now they're doing it again, it seems.

According to the NFIB, real per-capita state expenditures surged 40 percent from FY 1986 to FY 2000. Of course, this was a period of rising revenues, and so states truly could, as Louisiana's Gov. Edwin Edwards put it, "Laissez les bon temps roulez!" Then the economy slowed, the dot-com bubble burst, and the ride stopped. With all kinds of new programs, new employees, new departments, and new projects under their belts, state governments found it tough to cut back when the revenues stopped surging and even fell. This is the spending ratchet, and if forces states legislators to make bad choices—too often squeezing essential services to preserve pork programs, raiding the rainy-day fund, or looking into "revenue raisers."

State legislators should have learned this lesson the last time around. They also might have learned, at some point over the past 50 years, that high taxes sap economic growth and competitiveness and that government spending has negative effects too. But they did not. As the Journal reports, state expenditures are surging across the country. Some (large and permanent) spending increases are even tied to minor and usually temporary tax cuts.

Clearly, most state legislatures are unable to maturely confront rising revenues. The solution, then, is to limit legislators' discretion. This was the idea behind Colorado's Taxpayers Bill of Rights (TABOR), which capped spending annually, based on inflation and population growth, and required that all extra funds be returned to taxpayers. This broke the ratchet. But unfortunately, Colorado's lawmakers pushed voters to bypass TABOR for five years, effectively increasing state taxes by $3 billion. Other states have tax and expenditures limitation laws (known as TELs) of varying degrees of effectiveness. TABOR, however, remains the gold standard.

And with federal revenues rising, Members of Congress could use the same lessons. If anything, federal-level action is more urgent—while surging revenues mean that the deficit is on the road to drop precipitously, massive unfunded liabilities from entitlement programs lay ahead, and these will swamp the federal budget beginning in just a few years. Focused on the short-term, however, lawmakers are finding it as difficult as ever to rein in spending, even with a major budget crunch all but inevitable just outside of the current budget-forecasting window. Brian Riedl argues that a federal-level TABOR would finally get the federal budget under control. But Congress has got a lot of learning to do before it realizes that.

Posted by Andrew Grossman at 09:18 AM in Federal Spending | Permalink | TrackBacks (0)

The Los Angeles Times reports that more and more states are moving ahead to reduce the ranks of the uninsured within their borders. In large part, state legislators are driven by costs: not covering the uninsured can swell states' Medicaid programs, causing costs to explode. But the economics of health care coverage have also made this a hot political issue:

On the topic of health insurance, legislators are responding to clamor from voters who say they cannot afford the kind of regular medical maintenance it takes to stay well — and really cannot afford treatment if they get sick. State lawmakers know they keep their jobs by creating policy that people want and need, Tobler said.

As large and small employers slash insurance benefits — sometimes eliminating coverage entirely — much of the states' efforts are directed at the working poor. Health insurance premiums have climbed so high that some people cannot afford coverage even when they are eligible, Tobler said

With that political reality, states are moving ahead, but many are moving in the wrong direction. Maine's command-and-control solution has proven unpopular in the state and, according to the Times, barely costs less than more flexible private plans. This is fortunate for Maine--if the state plan were more popular, it would cost the state's taxpayers plenty.

Other states, as one analyst quoted in the article puts it, "are, at best, moving chairs on the deck." Sometimes this can bring about marginal improvements. For example, matching subsidies with patients, rather than hospitals, can change the incentives that hospitals face to pursue cost-effective care. While a good move, though, that's hardly revolutionary.

Really only one state has struck out into revolutionary territory. Massachusetts's new plan, due to go into effect next year, involves all manner of contortions to work around the federal tax policy, which heavily advantages employer-purchased insurance. A new "Connector" will serve as a clearinghouse for health insurance of the state and allow workers without insurance to purchase it with the benefit of that federal tax advantage. A disadvantage of this complex may be its complexity, something necessitated by the federal tax code's preferences. Still, this market-based approach is promising and likely to fare better than Maine's government-controlled approach.

It is a waste of time and resources (in states that aren't discouraged from pursuing reforms altogether) that so much energy and through muse be directed towards working around the more restrictive parts of federal tax law, benefits law, and the like. State-level health care reform--with all of its potential benefits for the entire nation--needn't be so difficult or complex. That's the promise of legislation proposed by Sens. Voinovich and Bingamin. Their "Health Partnership Act" would give states that chance to attempt health care reforms that have been blocked by partisan bickering in Washington for years. States could spend more time considering the principles of their reform programs and less time applying them to the rough terrain of federal law.

Is this some risk in this approach? Michael Cannon argues that the deck would be stacked against pro-market reforms because states would just be fishing for more federal dollars, and Stuart Butler (in his first and perhaps last weblog post) responds that this is not so. But consider the list of states working on health care and named by the LA Times: Vermont, Massachusetts, Maine, Arkansas, Florida, Oklahoma, Tennessee, Kentucky, Montana, Iowa, West Virginia, Hawaii, and New Mexico. Massachusetts's approach, arguably, is pro-market. Florida is undertaking some good pro-market reforms. Most of the rest, however, are hewing closer to Maine's approach (put the government in control) or even Tennessee's former and failed Tenncare (let's get everyone on the rolls!).

With the incentives the states face today, and the hurdles that they must overcome to create level markets in insurance so that more of their citizens can afford and purchase coverage, this is no great surprise. This reality is the counterfactual to Cannon's criticisms of the Voinovich-Bingamin plan to give the states greater flexibility to see what works in health care.

Posted by Andrew Grossman at 01:38 PM in Health Care | Permalink | TrackBacks (0)

The House passed Rep. Paul Ryan’s (R-WI) line-item veto bill on Thursday, and it’s now on its way to the Senate. The President has praised the House and called on the Senate to act:

This past Thursday, the House of Representatives passed a bill granting line-item-veto authority. This was a victory for the taxpayers and for spending restraint. I call on the Senate to show a bipartisan commitment to fiscal discipline by passing the line-item veto so we can work together to cut wasteful spending, reduce the deficit, and save money for American taxpayers.

He also asked Congress to enact more budget reforms to curb earmarking:

As Members of Congress show restraint on spending bills, they also need to make reforms in the spending process. Under the current system, many lawmakers are able to insert funding for pet projects into large spending bills. This process is called earmarking, and it often results in unnecessary spending. For example, a bill to fund our military can be loaded up with unjustified earmarks and other spending that may not add to our national security.

But many are skeptical about just how much the President would cut. According to a report in the Washington Post:

Government spending was about $1.9 trillion when Bush took office in 2001 but outlays on the wars in Afghanistan and Iraq, a new government prescription drug plan, and lawmakers' pet projects have boosted the total.

Bush, who has not vetoed a single spending bill passed by Congress, has pledged to reduce the budget gap significantly by 2009.

An editorial in Sunday’s New York Times is pessimistic about any changes in Congress’s spending habits:

Dennis Hastert, the speaker of the House, promised credible reform back when the stench of illegal quid pro quo dealings between lobbyists and ethically challenged lawmakers seized public attention. But nothing close to true self-policing is emerging from Congress. And now Mr. Hastert is the latest lawmaker in the limelight for the rampant pork-barrel practice of earmarking — the swift, debate-free inclusion in mass appropriations bills of small fortunes in government favors for special pleaders.

The National Journal’s David Baumann looks into the efficacy of the veto:

Republicans in both Houses are pushing for some version of the line-item veto. Forget about whether what they're pushing for is a real line-item veto, but at least one noted budget expert has questioned whether the veto actually saves huge amounts of money when put in the context of overall spending.

"The experience with the item veto, both conceptually and in actual practice, suggests that the amounts that might be saved by a presidential item veto could be relatively small, in the range of perhaps $1 [billion] to $2 billion dollars a year," Louis Fisher of the Congressional Research Service wrote in 2005.

Conservatives see earmarks as a symptom of a bigger problem: a real addiction to spending. Rep. Jeff Flake (R-AZ) told the Wall Street Journal’s Paul Gigot:

If you accept the premise that we ought to be spending all of this money, then you might be able to make a better case that it ought to be congressionally directed and not by the administration. But conservatives believe that a lot of this money simply shouldn't be spent. I mean, should we be spending money building a swimming pool in Banning, Calif.? If you accept that we should, then the question is, Who should do it? The conservatives have always believed that that's something that's best left to local governments. That's not something the federal government ought to be involved in.

Flake also explained the indirect effects of earmarks on spending, citing the prescription-drug benefit bill as one initiative that was passed because of the earmarks plugged into it:

Once you get earmarks in a bill, you have to vote for the bill regardless of how bloated it becomes. And so you've leveraged your vote for earmarks, and so you vote for bigger bills than you would otherwise. Also, when you talk about entitlements, the Medicare prescription drug benefit that was passed, I would submit that it wouldn't have been passed were if not for earmarks in related bills or other, unrelated bills. Because members wanted to protect those earmarks, they felt obligated to go along with the leadership and vote for the prescription drug benefit. That will cost us about $11 trillion in unfunded liabilities in the next 75 years. So it very much impacts other spending as well.

Flake will be fighting a third round of earmarks with amendments to the Science-State-Justice-Commerce appropriations bill tomorrow, reports the Club for Growth’s Andy Roth. Flake is taking on:

• $500,000 for the JARI Workforce Development Program and Small Business Technology Center
  
• $200,000 for the Oil Region Alliance of Business, Industry and Tourism
  
• $1,000,000 Southern and Eastern Kentucky Tourism Development Association
  
• $750,000 for Fairplex Trade and Conference Center
  
• $250,000 for Rochester, NY, Tooling and Machining Association for a workforce development program
  
• $300,000 for the Bronx Council for marketing of local business arts initiatives
  
• $150,000 for the Arthur Avenue Retail Market for local business requirements and improvements
  
• $400,000 for Wisconsin Procurement Initiative
  
• $800,000 for JARI for a regional business incubator
  
• $900,000 for Fairmont State University for a small business initiative
  

The Peoria Journal Star notes that Flake’s attempts at deleting earmarks have been under attack by fellow House Republicans. Recently, Rep. Ray LaHood of Illinois (an appropriator) launched a vigorous defense of Speaker Dennis Hastert’s Illinois Technology Transition Center project:

LaHood said the center has aided the Peoria-based Firefly Energy, an offshoot of Caterpillar Inc., which is developing a new lightweight and longer-lasting battery that it hopes to sell the Army.

Until last January, Washington, D.C., lobbyists for Caterpillar, Firefly Energy and Memorial Healthcare served on LaHood's campaign fund-raising committee. LaHood has denied any connection between their fund raising and the earmarks he requested for their clients.

Earmark critics continue to praise Flake’s efforts:

"He's giving a voice to millions of taxpayers who are sick and tired of standard pork barrel politics in Washington," said Keith Ashdown, vice president for policy at Taxpayers for Common Sense. "His amendments, while they may not have initial political success, have been absolutely successful in that he's giving a voice to people who haven't been heard about Congress' big-spending ways."

Flake acknowledged that he didn't know that the speaker had sponsored the earmark before he offered his amendment to strike it. After he found out, he decided that if he withdrew the amendment, "I would be looked to favoring one particularly powerful member of my party," Flake told LaHood on the House floor. His amendment failed on a voice vote.

It certainly doesn’t help Hastert, especially as more stories come out “raising the heat on Hastert’s home-district earmark.” As Lawrence Kudlow comments in his Money Politics blog:

The Speaker made a $2 million profit last year on the sale of land 5 1/2 miles from a highway project that he helped to finance with targeted federal funds.

Hastert's highly lucrative land deal and the home-district earmark he orchestrated are way too close for comfort. It is yet one more reason, among oh so many, why voters have had it with Congress.

It also shows, once again, why the GOP Congress must definitively stop-once and for all-this corrupt earmarking process.

Sen. Judd Gregg (R-NH), whose Stop Over-Spending bill is getting wide support. Larry Kudlow writes:

We need more Republicans like Judd Gregg.

The Senate Budget Committee chairman’s Stop Over-Spending Act (S.O.S.) is a welcome breath of fresh fiscal air. It’s exactly the sort of thing the profligate GOP needs right now to restore confidence after losing its fiscally conservative mojo in recent years.

In the National Journal, David Baumann cited Heritage’s Brian Riedl about the effects of SOS:

"This package of budget process reforms would help lawmakers pare back spending trends that otherwise, within a decade, require tax increases of nearly $7,000 per household just to balance the budget," wrote Brian Riedl of the Heritage Foundation. "Serious budget process reform is necessary."

This morning in the Washington Post, the Institute for International Economics’s Fred Bergsten calls for implementing PAYGO and revoking tax cuts:

The United States must lead with a credible program to restore the modest budget surpluses of five years ago, perhaps by reinstituting the tough "pay-go" spending procedures of the 1990s in Congress, backed by presidential vetoes of excess appropriations, and enhancing revenue through full taxation of Social Security payments and letting some of the recent tax cuts expire as scheduled.

The PAYGO system would not control spending. “Pay-as-you-go” would make tax cuts virtually impossible, even though these tax cuts are precisely what we need. As Heritage Vice President of Government Relations Mike Franc wrote in The Hill blog:

The Congressional Budget Office reports that federal revenues are on track to grow 12.8% this year. Last year, revenues grew at an even faster clip - 15.5%…

By the end of this fiscal year, tax revenues consume 18.3% of Gross Domestic Product. Remarkably, given all the heated rhetoric about the fiscal devastation wrought by the Bush tax cuts, the tax burden will soon exceed the historical norm of 17.9% that has prevailed since World War II.

Liberals refer to this phenomenon as - “unanticipated revenues.” Conservatives simply shrug their shoulders and say “we told you so.”

Heritage's Brian Riedl has written on the consequences of PAYGO: “PAYGO will not rein in federal spending, but will likely lead to steeply higher taxes.”

The PAYGO idea has a lot of support on the Left. Baumann notes this response:

On the other hand, says the Center on Budget and Policy Priorities, "examination of the legislation indicates ... that it fails to include common-sense budget reforms that proved effective in the past, such as restoration of the Pay-As-You-Go rules on both entitlement increases and tax cuts. Instead, it proposes radical measures that could lead to massive cuts over time in Medicaid and Medicare and reductions in the vast majority of domestic programs, while shielding tax cuts from any fiscal discipline."

Last Friday, Rep. Diana DeGette (D-CL) argued in her Hill blog that “pay-go is [a] better choice than buck-pass”:

The Republicans control every branch of government, if they really wanted to control spending they could. Instead they chose to pass the buck to a President who has never vetoed a bill. The easiest way to control spending is to enforce the ‘Pay-As-You-Go’ rules. Americans live by these rules every day and Congress should too.

Rep. Jerry Lewis (R-CA) continues to draw scrutiny. The San Diego Union-Tribune reports on yet another layer of Lewis’s earmark saga:

When defense contractor Nicholas Karangelen launched a political action committee directed by the stepdaughter of the chairman of the House Appropriations Committee, he added another dimension to a tight circle of Capitol Hill relationships that is under federal investigation.

The relationships revolve around Rep. Jerry Lewis, R-Redlands, who leads the Appropriations Committee and has extraordinarily close ties to lobbyists Letitia White and Bill Lowery...

Companies that hire the two lobbyists, including Karangelen's Virginia-based Trident Systems Inc., follow a pattern that has become common Capitol Hill practice in recent years.

As Instapundit comments, perhaps the “most damning part may be this statement: ‘A Spokesman for the lobbying firm defended its work as typical of Washington advocacy in an era of explosive growth in earmarking.’”

According to the report, “federal contracts helped Trident recover handsomely from a sales slump it suffered in 2002” and the company “has gone from 11 million (in contracts and sales) in 2002 to 30 million last year… Nearly 90 percent of the company's revenue comes from federal contracts.”

The federal investigation in Lewis’s questionable ties has also impacted other lucrative California lobbying deals. According to the San Bernardino County Sun,

Since early in 2003, Yucca Valley has been paying a high-powered Washington lobbying firm $3,000 each month.

Altogether, the town of slightly more than 20,000 people has paid the firm of Copeland Lowery Jacquez Denton & White about $90,000, while also covering the firm's expenses.

In return, the town has received nearly $4.4 million in federal funds, with money going toward road improvements, better flood control and two solar projects for municipal buildings.

[…] Still, as a federal investigation digs deeper into the relationship between Copeland Lowery and Rep. Jerry Lewis, the embattled yet still influential Redlands Republican, the situation makes some of Yucca Valley's leaders a bit leery.

In other earmark news, Sen. Jim Inhofe and Rep. John Sullivan have proposed another $25 million for a project to widen a stretch of interstate highway. As the Tulsa World reports:

Crediting the efforts of Sen. Jim Inhofe and Rep. John Sullivan, both from Tulsa, on last year's massive transportation reauthorization measure, Ridley said the state could expect to receive an additional $25 million in next year's annual spending bill.

Inhofe, R-Okla., is the chairman of the Senate Environment and Public Works Committee. He played a key role in putting together the six-year reauthorization bill covering transportation projects across the country.

As a result of the efforts by Inhofe and Sullivan, Ridley said, the final bill contained about $121 million for the I-44 project.

Ridley conceded that amount would be subject to a reduction later in the funding process, but he stressed the importance of having the money earmarked in the authorization law before the appropriations process begins each year.

In the current spending bill, Sullivan, R-Okla., was able to earmark an extra $250,000 for the project as well.

Posted by J. Lawrence Scholer at 01:30 PM | Permalink | TrackBacks (0)

The House passed Rep. Paul Ryan’s (R-WI) line-item veto bill yesterday. Thirty-five Democrats voted for the bill along with most Republicans. Ed Morrissey comments on the Republican opponents of the legislation:

Voters concerned about earmarks and corruption should note those who opposed this measure. The following Republicans decided to back away from the line-item veto:

Aderholt, Buyer (there's a name for you!), Emerson, Hobson, Jones (NC), Lewis (CA), Northrup, Otter, Paul, Rogers (AL), Rogers (KY), Simmons, Simpson, Sweeney, Walsh.

The inclusion of Jerry Lewis, the head of the powerful House Appropriations Committee, comes as no surprise. After all, Lewis sent $11 million in earmarks to Trident Systems, whose president paid Lewis' stepdaughter almost a third of all the money raised by his PAC, for which she was employed. Lewis doesn't want to lose his political heft and ability to direct federal funds to the beneficiaries of his family -- which gives us more reason to cheer this vote.

The AP’s Andrew Taylor reports that the President was happy with the vote. In a statement, he said, “The line item veto is a critical tool that will help rein in wasteful spending and bring greater transparency to the budget process.”

The Club for Growth’s Andy Roth writes that Rep. Jeff Flake, who has been crusading against earmarks and who voted for the bill, is not so optimistic that the line-item veto will prove an effective tool:

“Given the huge majorities that have defeated my recent amendments to block earmarks in this year’s appropriations bills, I must admit that I’m skeptical that Congress will go along with any Presidential effort to exercise this authority,” said Flake. “It’s like saying to the President, ‘Stop us before we spend again.’”

“(H)opefully, once he’s given a line-item veto, he’ll be expected to use it. Hope springs eternal.”

Flake echoed these feelings in the Washington Post:

With the House's reluctance to cut pet projects on public display in recent weeks, the debate included significant amounts of derision. Flake's motions to strike earmarks had never gained more than 92 votes. In that light, Flake said, the line-item veto bill did not look so good.

"It's 'please, control us. We can't control ourselves,' " he said. "That's not a good message to send."

The bill now faces uncertain prospects in the Senate. According to the Washington Post, Ryan’s bill might end up conflicting with Senator Judd Gregg’s wider-ranging SOS reforms:

Senate Budget Committee Chairman Judd Gregg (R-N.H.) has vowed to block consideration of the line-item veto legislation unless it is included in a much broader, more significant package of budget controls that cleared his committee this week.

Brian Darling, Director of U.S. Senate Relations at the Heritage Foundation explains that the situation “doesn’t look good” for Ryan’s bill: “Gregg wants the whole package,” which Darling says “is better for conservatives; it’s a good big plan.” On its own, Ryan’s bill runs the risk of becoming irrelevant: “In the Senate it’s hard to pass any legislation without amendments, and the line-item veto has already been changed by the House--it would also be changed by the Senate,” Darling said.

If Ryan’s bill went to the Senate on its own “Democrats and Republicans would change it: Democrats would add PAYGO amendments to force a way to offset tax cuts, and conservatives would load it up with items that are far more important [to cutting spending] like entitlement reforms.”

It’s the SOS bill that would affect the budget process in a substantial way: “Gregg already included a modified version [of the line-item veto] with other items conservatives want to rein in spending- the Senate package is more visionary and overarching.” But Darling isn’t optimistic about the SOS bill: “There’s a feeling in the Senate that it wouldn’t pass; it’s too partisan.”

Ed Morrissey also warned about the line-item veto’s chances in the Senate:

The idea of giving the executive branch the power to deny specific funding rankles those who already view this administration as a problem in terms of power-sharing…

Supporters need to keep the pressure on their Senators to vote for the new line-item veto. We need to make clear that those who hold out for a broken and corrupt system of appropriations will not long be trusted to handle the taxpayers' money.

This morning on NRO, Ernest Christian and Gary Robbins explain that earmarks are much more expensive than the millions we see reported in the news:

Voters are still being misled and government is still taxing and spending on the false assumptions that $1 spent on a bridge-to-nowhere costs $1 in tax revenue, and that $1 in government tax revenue costs the private economy only $1. In fact, the cost to the private sector of providing the government an additional $1 in tax revenue is about $2.50, and in some circumstances much more. Even academics on the left now acknowledge that taxes adversely affect economic performance and, therefore, when taxes go up, it is not just the private sector’s after-tax income that goes down; its pre-tax income suffers as well....

By anybody’s reasonable estimate, the bottom-line results are clear. The cost of an additional $1 in taxes and spending is much more than $1 — most probably $2 to $3 — and the real burden of taxes on the American people (counting lost income) is much greater than the government admits.

If taxes were both reduced and reformed (so that the drag on economic performance per $1 of tax would be less), the economy would be larger, government would be smaller, and everyone would be better off.

Meanwhile, the Senate Appropriations Committee approved a 2007 Agriculture appropriations bill of $94.579 billion. According to BNA, the bill requests $18.2 billion in discretionary funds, almost a billion more than the $17.314 billion in discretionary funds that the President requested. The Senate bill is also almost $1 billion more expensive than the House version, which called for $93.888 billion.

The FY2007 DoD authorization bill was passed in the Senate with a 96-0 vote. The bill authorizes $517.5 billion to DoD, including $50 billion for Iraq and Afghanistan. According to BNA, the bill included several amendments that should increase accountability and efficiency:

During the final day of debate, the Senate approved language that would require the Justice Department to update Congress twice a year on its pursuit of False Claim Act (FCA) lawsuits related to reconstruction contracts in Iraq and Afghanistan.

The amendment was one of 60 agreed to en bloc. Earlier, senators voted 98-1 to invoke cloture to end debate on the bill, which has been under consideration for almost two week…

One of the amendments was from Sen. Tom Coburn, who’s fighting wasteful defense earmarks:

Also June 22, the Senate by voice vote adopted an amendment offered by Sen. Tom Coburn (R-Okla.) to reform the Pentagon's troubled Defense Travel System. The amendment would require DOD to run DTS as a "fee for use of service system," Coburn's office said…

Coburn noted in a statement that DTS, at a current total of $474 million, has cost taxpayers over $200 million more than DOD originally expected. "By requiring a 'fee for use' system, the Coburn amendment will end the reverse incentives in the current contract that allow the contractor to be paid for a product that is under-utilized and does not work properly when utilized," he said.

Coburn was happy with the outcome:

“Defense-related earmarking has severely damaged Congress’ reputation and siphoned off critical dollars from our troops and ongoing military operations. I commend my colleagues for casting more sunshine on this process.”

Posted by J. Lawrence Scholer at 03:53 PM | Permalink | TrackBacks (0)

Rep. Paul Ryan’s line-item veto bill is scheduled for vote today. The House voted on a rule earlier today, and a vote on final passage will happen around 5 p.m. Yesterday, the House Rules Committee heard amendments to the bill and adopted only one change involving the Joint Committee on Taxation.

The bill is expected to pass and has broad support from coalitions and grassroots organizations. The American Conservative Union has released an open letter of support on June 15 with a number of organizations. The letter states:

The American People are demanding that Congress and the President exercise fiscal discipline and this legislation provides an important tool in meeting that goal.

Federal spending MUST be brought under control. Along with desperately needed budget process reform, a legislative line-item veto is an essential concept which Congress should enthusiastically embrace.

The NFIB also came out with a key vote notice:

NFIB members have long been supportive of a presidential line item veto. Fiscal restraint has been and continues to be an important concern for small-business owners and their employees. In an NFIB member ballot, eighty percent of members supported giving the President this authority over individual spending items.

Americans for Prosperity wrote about the dramatic need for the bill to fight earmarks:

Last year there were an estimated 15,877 earmarks in appropriations bills, a 900% increase from 1991. This year another 10,000 have been added. It is the lack of accountability in the earmarking process, which can lead to corruption, that must be addressed. This bill provides both Congress and the President with the tools they need to control spending, as well as moving the debate over how taxpayer money is spent into the open.

In today’s Washington Times, Rep. Paul Ryan explained how the line-item veto addressed a very specific procedural problem:

[A]ll who favor greater transparency and accountability will have another chance to direct light where it is particularly needed: at the end of the congressional spending process.

As a member of Congress, there is nothing more frustrating than working to restrain unnecessary spending throughout the budget and appropriations cycle, only to see pork projects inserted into conference reports during final negotiations, when there's no opportunity to remove these boondoggles by amendment.

The main benefit, according to Ryan, is that the bill will deter congressmen from proposing outlandish earmarks:

Perhaps the greatest benefit of this exercise is preventive: if a member of Congress knows he could be called to the floor of the House or Senate to defend spending on a project, apart from the cover of larger legislation, he's likely to become more discriminating about the items he proposes in the first place.

He told the Milwaukee Journal Sentinel:

"The value will be measured less in how much pork gets taken out and more in how much pork never gets put in, in the first place," said Ryan, who also champions much broader budget reforms. "There will be this new deterrent. Members of Congress will have to potentially defend their pork . . . to their colleagues."

Portman, who was brought in to burnish the president's credentials as a fiscal conservative and for his Capitol Hill ties, knows the push to enact the measure is his first big test as budget chief.

"I hope I'll be able to make good on it," Portman said of his congressional background.

Lobbying for the measure's approval, he's trading heavily on relationships developed during 12 years in the House. He has prowled Capitol hallways in search of votes and corralled business and good-government groups to pressure his former colleagues to back the measure. He worked the issue at a White House picnic last week, as members of Congress relaxed with their families and ate taquitos.

The bill is expected to pass in the House, but some congressmen are still concerned about how it will affect the balance of power between the legislative and executive branches. In response, Ryan explains:

The current approach keeps the power of the purse in Congress -- right where it should be…

[O]ur legislative line-item veto bill (H.R. 4890) requires Congress to vote on presidential rescission requests on an expedited time frame. Under this plan, the president would have a limited time after signing a bill to request that Congress rescind a particular piece of tax pork, a specific spending item or a package of spending items within that law. After receiving the president's request, the House and Senate would be required to have a clean, up-or-down vote with no amendments within 14 legislative days on whether to rescind the funding.

Appropriators are hesitant to support the bill. According to BNA:

A Lewis spokesman said the congressmen had spoken to other appropriators at a meeting June 20, but was not actively working against the bill. The bill has been framed as a way to get rid of lawmaker earmarks, which some appropriators feel has put them unduly in the spotlight.

Freedom Works’ president and CEO Matt Kibbe wrote in an editorial for today’s New York Sun:

This legislation would give the president an important tool for pushing fiscal responsibility, similar to that which President Clinton effectively used, and which is used by 43 governors across the country.

Unfortunately, the line-item veto alone won't bring fiscal discipline to Congress, where over half of all federal spending goes to entitlement programs like Medicare, Social Security, and Medicaid, which will continue to grow. But it is a first step that is desperately needed, and would be a much-welcomed move toward controlling the congressional spending spree.

Heritage’s Brian Riedl agrees. He told the Milwaukee Journal Sentinel, “This is about shaving a billion here and a billion there…But this is not enough to significantly pare back overall federal spending.”

Spending has become increasingly important to voters, and Republicans are being pressed to reform their spending habits. The Washington Times’s Gary J. Andres called the public’s disillusionment “the spending perception deficit” or “a view that Democrats would do more than Republicans to curb the size of government.”

As Steve Chapman writes in The National Ledger, it seems spending was at its lowest when a fiscally conservative Republican opposition forced Democrats to curb spending:

In 1997, the average House member voted to actually reduce total spending by $6.2 billion, while the average senator voted for an increase of only $3.9 billion. Back then, the two parties were chasing each other in a virtuous cycle, competing to get credit for balancing the budget. That competition eventually produced what is now hard to imagine: a budget surplus. Now the opposite process is taking place. Once Republicans abandoned spending restraint, Democrats were free to follow their natural instincts, which gave Republicans even more room to shovel out dollars, which encouraged Democrats to outbid them, which leaves us with a bloated budget and a deficit that this year will exceed $300 billion.

A Washington Times editorial compared this transformation to the promises of the “Contract With America” that was supposed to have enshrined fiscal conservatism:

Last week, the Wall Street Journal reported that lawmakers stuffed more than 1,500 new earmarks totaling nearly $1 billion into a $68 billion spending bill for the Treasury, Transportation and Housing and Urban Development departments.

Clearly, this pattern of earmark explosions hardly conforms to the fiscal discipline envisioned by the "Contract With America," the first provision of which also promised a vote on a balanced budget amendment.

A transportation and housing spending bill makings its way to passage in the House — the supposedly more conservative of the two houses of Congress — contains no less than 1,500 pork-barrel earmarks. It includes such vitals to the Republic as $500,000 for a swimming pool in Columbus, Ohio, and another $500,000 for a scenic trail in California. They all add up to at least $900 million, and there’s no telling what might be piled on by shameless spenders by the time the legislation completes the process.

Meanwhile, the House Budget Committee has approved a form of line-item veto power for the president. Yet this supposed reform seems more than a tad useless, given President Bush’s failure to veto a single spending bill during his entire presidency and as Congress continues on a spending spree.

The line-item veto effort might be more credible if House leaders possessed the will to “line-item veto,” say, 1,500 pork-barrel earmarks. If Congress were serious, then GOP leaders would impose some discipline on themselves instead of asking someone else to do the hard work of controlling spending.

Other efforts to curb spending have also appeared on the horizon. AEI’s Veronique de Rugy suggests:

Congress should be forced to sign a supplemental pork-free pledge to prevent special interest projects from creeping into emergency spending bills. More importantly, it should set criteria for what constitutes an emergency and require a House Budget Committee vote to increase spending limits beyond the ones set in the budget resolution. Finally, a federal rainy day fund should be created for when an emergency occurs.”

In an effort to curb wasteful defense contracts, the House adopted Rep Mike Castle’s (R- Del) Incentive-Fee Amendment for FY2007 to prohibit the Defense Department from using funds included in its fiscal year 2007 spending bill to pay award fees to any defense contractor for performance that does meet contract requirements.

A Coburn amendment to require an annual analysis of total cost of DOD earmarks and their effectiveness is coming up at 4pm today. According to Coburn:

Earmarks are consuming a growing proportion of Defense funds Earmarks are siphoning funds away from national security priorities Earmarks are often not needed or wanted by the Defense Department Defense earmarks have been linked to corruption and ethics concerns

The bill, sponsored by Senator Tom Coburn (R-OK) and co-sponsored by colleagues John McCain (R-AZ), Barack Obama (D-IL), and Tom Carper (D-DE), would direct the Office of Management and Budget (OMB) to create a publicly-available website that would list every entity receiving federal grants or contracts and the totals awarded for the last ten fiscal years. Such a website would entail very little cost and would greatly increase transparency in the distribution of government funding. At last, those who most deserve to know about this process – the American people – would have the tool they need to conduct their own evaluations of Washington's priorities.

In the ongoing battle over earmarks, NTU’s Andrew Moylan challenges Illinois Rep. Mark Kirk to extend his defunding efforts for the “Bridge to Nowhere” to other equally important, yet less media-friendly issues:

Perhaps he should fight the hundreds of less publicity-prone fiscal abuses with the same vigor as he fought the media darling Bridge to Nowhere. For example...

Representative Jeff Flake (R-AZ), an absolute champion on fiscal issues (91% in 2005, best in the House), has been getting slaughtered on floor votes on his amendments to remove ridiculous earmarks. Representative Kirk has voted against every single one of the Flake Amendments to recent Appropriations bills.

Fortunately, fiscal abuses like these are generating more and more apathy, especially as Congressmen endorsing dishonest spending are coming under fire. According to Bloomberg:

Representative Alan Mollohan helped funnel at least $179 million in U.S. government contracts over the last six years to companies that gave to the West Virginia Democrat’s family-run charity, tax records and other documents show.

The money went to 21 companies and nonprofit groups that contributed $225,427 to the Robert H. Mollohan Family Charitable Foundation in 2004 – almost half of the charity's revenue, according to the documents. The congressman, an Appropriations Committee member whose finances are under federal investigation, is the secretary of the foundation, which is named for his father.

Posted by J. Lawrence Scholer at 03:01 PM | Permalink | TrackBacks (0)

Today the White House released a strong Statement of Administration Policy on Rep. Paul Ryan's line-item veto bill. The administration is very enthusiastic about the ability of this tool to cut down on unnecessary spending:

This legislation would give the President and Congress an important tool to reduce unjustified earmarks and wasteful spending items that are frequently incorporated into large, essential spending measures. This will improve accountability and transparency in the expenditure of taxpayer dollars. A critical feature of this legislation is the fast-track procedure that ensures an up-or-down vote without amendment on the President’s package of proposed rescissions. Forty-three governors have a line item veto to reduce spending. The President needs similar authority to help control unjustified and wasteful spending in the Federal budget.

What the line-item veto, as proposed in this bill, would do is to change the incentives and procedures that now lead to so much wasteful spending. Rep. Ryan explains in an op-ed from today's Washington Times:

If the choice is between voting "aye" or "nay" on legislation that mainly funds priorities such as equipment for our troops but includes a few questionable projects, most will grit their teeth and vote to pass the measure. The president faces the same choice when a bill arrives on his desk for signature.

That's when having an extra layer of accountability -- and a mechanism for removing wasteful projects from finished bills -- can save taxpayer dollars. The version of the line-item veto we're pushing for will achieve this, while preserving Congress' constitutional powers and responsibilities. Simply put, our proposal would enable the president to put a temporary hold on wasteful items or targeted tax pork in bills he signs into law and send these line items back to Congress for an up-or-down vote.

There is a good chance, we understand, that the bill will make it through the House, although opposition from appropriators (naturally) may be a problem. In any case, expect a close vote. As for the Senate? It seems like the votes aren't there yet, but Rep. Ryan is right that taxpayers are paying more attention to this sort of thing. That could make a difference.

National Review has a good interview with Rep. Ryan here.

Posted by Andrew Grossman at 02:19 PM in Federal Spending | Permalink | TrackBacks (0)