The Stan Collender Archives

Update On Waste, Fraud, And Abuse: Kansas City To Close Half Its Schools

Stan Collender — Fri, 12 Mar 2010 11:42:18 +0000

My column from yesterday's The Fiscal Times noted that state and local governments around the country, which because of balanced budget requirements and dramatically falling revenues are facing some very tough times, are being forced to make difficult decisions.

But this story in yesterday's The New York Times about Kansas City deciding to close half its public schools and reduce the payroll by around 20 percent makes the decisions by other states to close rest stops along some highways appear to be insignificant.

The Times' story indicates that the schools and school board in Kansas City have been in terrible shape for years and, therefore, that this decision was almost inevitable. Still, the precipitating event was was the projected $50 million deficit (out of a total budget of $300 million) in the midst of the economic downturn and the prospect that it wasn't going to get any better any time soon.

Given that the number of students in the KC schools had fallen by 50 percent, closing half the schools might in some sense qualify as eliminating waste, and the failure of the school board to act before now might be considered fraud and abuse.

Still, closing half of all schools at the same time shows either that the definition of waste, fraud, and abuse might need to be expanded, or that the budget changes that are already happening and will keep occurring for a while are going to go way beyond what that phrase traditionally has implied.

Re: Earmarks

Stan Collender — Fri, 12 Mar 2010 11:16:17 +0000

I agree with Andrew: This sudden race in the House to see whose holier-than-thou on earmarks is a good thing. But there are three reasons why no one should get too excited about the recent developments:

1. As Andrew notes and I've remarked on previously, eliminating earmarks doesn't actually reduce spending; all it does is change who makes the decision from Congress to an executive branch agency. Unless the appropriation is reduced at the same time the earmark is eliminated, which no one is suggesting, the amount that will be spent will remain the same.

2. Also as Andrew points out, even if all earmarks were eliminated and appropriations were cut by a corresponding amount, the amount that spending would be reduced would be relatively small and certainly not enough to make an appreciable difference in the deficit outlook. It's not that $20 billion or so isn't a great deal of money. It's just that $20 billion a year less in discretionary spending is barely a rounding error compared to the magnitude of what will need to be done when deficit reduction is the correct fiscal policy.

3. The earmark limits are only being proposed in the House. So far there has been no corresponding effort in the Senate...and none is expected. That almost certainly means that there will be earmarks in fiscal 2011 but they'll emanate from the north rather than the south side of Capital Hill.

Spending Cuts: It Won't Be Just Waste, Fraud, And Abuse

Stan Collender — Thu, 11 Mar 2010 02:19:55 +0000

My column from yesterday's The Fiscal Times shows what's ahead when the spending reductions begin.

Reducing Spending Cuts More Than Waste, Fraud and Abuse
Mar 10, 2010

Those who have demanded and supported cuts in federal spending over the years have insisted that the reductions could be done more or less painlessly. The government operates so inefficiently, they say, that the cuts barely would be noticed.

Whether it is military spending at the Pentagon, domestic spending at the Department of Justice or the National Park Service, or an entitlement like Social Security, we repeatedly have been told that reductions in spending wouldn’t affect anything but the federal deficit. That’s possible, say the proponents of spending cuts, because the system was replete with waste, fraud and abuse — and that was the only thing that actually would be cut.

Up to now this it-won’t-hurt-a-bit federal spending-cut mantra has gone mostly unchallenged because it was largely untested. When cuts occurred at all, most that were adopted were relatively limited.

But as a story in last week’s New York Times about reductions in state jails shows, we’ve now come to the point where spending cuts are indeed having a noticeable and often very unpleasant impact.

The Times piece was just the latest in a series of recent stories about similar situations, and the protests that already have begun. Some localities plan to save money by switching to four-day school weeks and some states are closing rest areas on major roads. There’s also what appears to be a serious effort by the U.S. Postal Service to deal with its budget problems by eliminating Saturday mail delivery.

Doing away with Saturday delivery in today’s world of texts and e-mails may not strike fear into the hearts of anyone but the letter carriers who have to give up a day’s work and pay. But as the Times story shows, convicted criminals getting lighter sentences or being paroled earlier for budget reasons is not sitting very well with many people, and they are actively opposing the reductions. Similarly, those who drive with children or have weak bladders may not miss the rest stop food, but they clearly won’t appreciate having fewer toilets between here and there. Their protests have gotten some states to reopen some previously closed roadside facilities.

And parents whose children may go to school four instead of five days are already complaining about having to make considerable adjustments to their own work schedules and arrange for additional day care. Parents are also protesting other cuts, such as after-school activities like sports and band.

With the exception of the Postal Service proposal, these examples are from state and local governments. That’s not surprising: Lower revenues as a result of the recession, combined with existing spending commitments and legally binding balanced budget requirements mean that, at least for now, that’s where the most severe budget problems exist. By contrast, not only is the federal government not constrained by a balanced budget law, over the past two years its need to deal with the economic downturn virtually dictated that spending not be cut and that deficits be increased. As a result, the type of budget reductions that are being considered or imposed at other levels of government have not yet become commonplace in Washington.

But they’re coming. The "baseline" deficit (the deficit that would occur if Washington were on the fiscal equivalent of automatic pilot and all current laws remained unchanged) will be close to $1 trillion once the bailout and stimulus programs are over and spending in Iraq and Afghanistan ends. Spending reductions will have to be part of the political calculation when the federal deficit again becomes a primary focus.

And just like what’s happening today with the proposed reductions at schools, rest stops and jails, federal budget cuts are likely to be opposed at least as vehemently as people realize that it isn’t just wasteful, fraudulent and abusive spending that is being cut. That’s not to say that spending cuts won’t or shouldn’t be considered, only that the opposition will be greater than many may be expecting.

Health Care, Not Reconciliation, Is The Issue

Stan Collender — Tue, 09 Mar 2010 10:10:18 +0000

My column from this morning's Roll Call explains why reconciliation, a subpart of the congressional budget process, and a sub-subpart of the legislative process, isn't what we should be arguing about.

Can We Please Stop Talking About Reconciliation?

My fellow Roll Call columnist Norman Ornstein was one of the authors of a truly excellent chart on reconciliation that appeared in the New York Times on Sunday.

Norm, and his two co-authors, Tom Mann and Raffaela Wakeman, show in an almost full-page display that reconciliation has been used repeatedly since 1981 and is anything but the, in their words, “power grab” that some are trying to get us to believe it will be if it is used for legislation related to health care reform.

They also show that reconciliation has been used when Democrats and Republicans were in the majority; to increase and decrease the deficit; to increase and decrease spending and revenues; and to create, expand and decrease programs.

No matter how much you might prefer it to be otherwise, this is not partisan opinion, beliefs or analysis. They are indisputable facts that are neither new nor newly discovered.

So let me say this as directly as possible: Enough about reconciliation. It absolutely doesn’t deserve the attention it’s receiving.

Why is anyone talking so much about a subpart of the Congressional budget process (and a sub-subpart when you add in the Byrd Rule) when the issue that really needs to be debated in depth is health care reform?

I am a budget process wonk. I have spent much of the past three decades speaking about and analyzing the ins and outs of the Congressional Budget Act (which created reconciliation) and its successor budget laws. The more people talk about reconciliation and want information on it, the more likely they are to quote me in stories and interview me on television and radio. In other words, the fact that reconciliation is an issue is good for my business.

When someone like me, who has a personal interest in reconciliation being a big controversy, says it’s a side issue that not only doesn’t merit the attention it’s getting but shouldn’t be an issue at all, you have to understand both how painful it is to say and how seriously the point should be taken.

I had this same basic argument a year or so ago with someone who insisted that the United States should have a capital budget. He was willing to fight to the death to change the way the U.S. treated capital expenditures. To sell his point he prepared white papers, talked one on one with countless people in the House and Senate, participated in seminars and persuaded think tanks to include it as a high priority on their agendas.

I told him at the time that the real issue wasn’t the budget treatment of federal capital purchases; it was that the U.S. was underinvesting in infrastructure. But instead of spending his time talking about the benefits of the change that he wanted, for example, on what it would mean if roads could be driven more quickly and safely so that people would get home from work earlier and spend more time with their families, he focused on accrual accounting for the federal government.

Even I, a budget process aficionado who served on a presidential commission on capital budgeting, found that boring and largely beside the point. And, not surprisingly, the issue died.

The same thing is happening now with reconciliation and health care.

There are three reasons why the debate should not be whether this is an appropriate way to adopt legislation.

First, as Norm and his collaborators showed quite definitively Sunday and what we actually knew long before the chart was published, that issue was settled a long time ago.

Second, the most important question is not about the process; it’s about the changes in health care that would be put in place and, like the safer and faster ride home that might happen with better roads and rail, what it would mean for the way we live.

Third, debating the propriety of using reconciliation is a great way to turn off the interest in health care reform outside the Beltway. For most people, “reconciliation” is something you do when you get your monthly checking account statement or what you try to do when you go to a marriage counselor. Outside that it has no meaning.

Those for and against a health care bill may have made a huge mistake in focusing so much of their energies on reconciliation. Not only is it ultimate inside legislative procedure roughly akin to trying to make an issue about Section 302b allocations (Trust me, if you don’t know what these are, you don’t need to worry about them), it effectively means that a good part of the outside interest in the issue will end if the procedure is used, a bill is enacted and the world doesn’t come to an end.

Meanwhile, those who support changes in health care have been engaging on a highly technical procedural issue and, therefore, giving it unnecessary credence. They have also been missing an outstanding opportunity to talk about what the changes will mean to the average voter.

It’s hard to imagine that the average voter will support health care reform because reconciliation was or wasn’t used to put it in place.

The Definitive Word On Reconciliation

Stan Collender — Sun, 07 Mar 2010 15:48:55 +0000

This almost full-page chart (click on the multimedia box) from today's New York Times (way too big to reproduce here) by Congress experts Norm Ornstein, Tom Mann, and Raffaela Wakeman answers virtually every question there is to ask about the past uses of reconciliation.

The chart shows that, as I posted on February 28, reconciliation has been used when Democrats and Republicans were in the majority; to increase and decrease the deficit; to increase and decrease spending and revenues; and to create, expand, and decrease programs.

In other words, as far as reconciliation and health care is concerned, move along; there's nothing see here.

Does David Brooks Read Capital Gains And Games?

Stan Collender — Sat, 06 Mar 2010 12:19:59 +0000

I have to ask.

David Brooks wrote this in the Times on Thursday comparing today's radicals in the Republican Party with the hippies from the 1960s.

Two days earlier, we published this in CG&G comparing today's congressional Republicans with...wait for it...the hippies from the 1960s.

Coincidence?

Changes Coming To Capital Gains And Games

Stan Collender — Fri, 05 Mar 2010 11:22:52 +0000

March 24th will be CG&G's second anniversary.

Since Andrew, Pete, Troy, and I joined forces two years ago, the country has gone through a financial meltdown and a recession, the first African American was elected president of the United States, the budget debate has become (to put it mildly) extremely bitter, the New York Yankees won the World Series (Sorry Andrew, I had to include that), and the blogosphere has gone mainstream. CG&G has been noticed, noted, cited, and criticized, sometimes all at the same time by the same person.

There have been two big additions to the team-- Bruce Bartlett and Ed Andrews -- and both have had an immediate impact on everything from the public discourse to CG&G's numbers.

The one thing we haven't done is change CG&G's look. That's what's coming.

Troy is working on a new design that will be cleaner, more modern, and make it possible for us to accommodate the additional advertising requests we're getting. It will also make it possible for us to do more with audio and video.

The changes will also allow us to address some of the formatting and other issues readers have brought to our attention (Thanks. Please keep those cards and letters coming in).

The design changes aren't yet final and probably won't be implemented until the end of the month. But in the meantime, as far as design and features are concerned, what else would you like to see?

E.J. Dionne Jr. Follows Andrew's Lead

Stan Collender — Fri, 05 Mar 2010 10:34:44 +0000

This column by E.J. Dionne, Jr. from yesterday's Washington Post uses a word -- lie -- that Andrew didn't use when he posted on the same subject three days, but otherwise it makes the same points about the Republican hypocrisy and propaganda efforts on using reconciliation. Like Andrew's post, it's a solid and hard-hitting piece.

"Spending" Is The New "Death Tax"

Stan Collender — Thu, 04 Mar 2010 14:36:31 +0000

I used my first column for The Fiscal Times to take on all those who insist that the only way to deal with the federal deficit is by cutting spending. Contrary to those who repeat the "it's a spending problem" mantra, spending definitely is not the only issue and spending cuts are not the only possible response.

Take a look.

Are Congressional Republicans The New Hippies?

Stan Collender — Tue, 02 Mar 2010 10:32:15 +0000

My Beautiful and Talented Wife (The BTW) and I went to see the new production of the Broadway musical "Hair" in New York City last Saturday.

1969 2010

This was not my typical trip to the theater. I saw the original Broadway version of "Hair" in 1969. I went on my birthday, the same day I registered for the draft and have very strong memories of the experience. Four decades later I still remember the people I went with and that we had standing room tickets at the back of the theater. For that matter, I still remember which theater it played in and, of course, the music. In a era when the word "download" did not yet exist, I ultimately had to buy an additional copy of the album when the quality of the music got bad because I had played it so often.

So I went with a great deal of anticipation and just a few goose bumps.

But what I felt was completely different that what I had expected. As the BTW and I watched the actors playing the hippies on stage, it was hard not to conclude that one of the biggest changes from when I last saw "Hair" was that the real radicals these days are not kids on the street wearing torn jeans, wearing peace symbols, and getting high (Never mind the fact that torn jeans are now sold in the stores).

Today, the most radical behavior by far is coming from middle age congressional Republicans.

Think about it: GOP members of the House and Senate routinely reject rules, norms, and procedures and, like the hippies from the 60s, feel absolutely justified in doing it.

House and Senate Republicans also don't feel bound by precedents or culture. And, as Senator Jim Bunning's one-man filibuster shows, GOP members of Congress are more than willing to blow up the system. If anything, the now historic use of the filibuster by Senate Republicans (the modern day equivalent of going to a be-in where there's a mass burning of draft cards) shows that blowing up the system is the objective.

Only three things seem to be different.

First, congressional Republicans are not living in the park.

Second, while the travails of Mark Sanford seem to indicate that "free love" from the 60s is part of the GOP existence, John Edwards shows that it's clearly not something that is exclusively a GOP/hippie lifestyle.

Third, given how many senators are bald, it's almost impossible to sing the first line from the title song of the musical ("Give me a head with hair") with a straight face.

Reconciliation Changes Everything, Especially The Outlook For A Tax Cut

Stan Collender — Tue, 02 Mar 2010 09:53:19 +0000

Using reconciliation for health care changes the outlook for what's ahead on other issues too, especially extending the tax cuts put in place during the Bush administration. My column from this morning's Roll Call explains why.

Health Care Debate Makes New Budget More Likely This Year

March 2, 2010

It was only a few weeks ago that budget process watchers, implementers and aficionados were all saying it was going to be difficult for Congress to adopt a budget resolution this year. That’s still true, of course; even in the best of times budget resolutions are very hard to get through the House and Senate, and this is anything but the best of times.

But recent events have changed the political calculus so significantly that, today, the adoption of a budget resolution is far more likely than most imagined at the start of the year and seemed possible just a few weeks ago.

The difficulties in getting a budget resolution adopted this year are obvious. There will be a large deficit in fiscal 2011, and on general principles that will be very hard for many Representatives and Senators to go on record supporting. This will be true even if they think the fiscal policy is correct given the economy or if their state or Congressional district is benefiting directly from tax and spending policies that will contribute to the deficit. This has been the case since the first budget resolution — for fiscal 1976 — was considered, and that deficit was far less than the one projected to occur 35 years later.

But there’s more this year that complicates the situation. The obviously strong possibility that there will be few or no Republican votes in favor of any budget-related legislation proposed by the White House or Democratic Congressional leadership indicates that Democrats will have to get the majority they need to adopt a budget from their own ranks. Even though budget resolutions can’t be filibustered and only a simple majority will be needed in the Senate, the margin for error will be extremely tight, and any one issue could tip the scales against passage.

We knew all this is when the year began. What we didn’t know, and what seemed inconceivable until just a few weeks ago, was that the Democratic attitude toward using reconciliation to pass at least part of health care reform would change so dramatically and quickly. Unless there is a very unexpected change in GOP legislative strategy, using reconciliation now looks like the preferred (or at least accepted) way forward even for some Senators who previously argued vociferously against it. For example, Senate Budget Chairman Kent Conrad (D-N.D.), who expressed serious reservations earlier in the year about using reconciliation, endorsed its use on a talk show this past Sunday.

Frankly, I’ve wondered all year why Senate Democrats have been so adamantly against using reconciliation and, in the process, so willing to give up one of the major strategic advantages the budget statutes provide. (For those who don’t know, reconciliation is a provision of the Congressional Budget Act.) Some Senators genuinely seemed to prefer not to go down the reconciliation road because they thought of it as an abuse of power when it was used when they were in the minority. Others appear to have wanted to demonstrate to their GOP colleagues that, by refusing to use reconciliation, they were hoping to work with them.

But the growing GOP willingness to make reconciliation the issue has changed the calculus substantially. Sen. Lamar Alexander’s (R-Tenn.) statement at last week’s health care summit that the Republicans had nothing to discuss if the White House insisted on reconciliation appears to have convinced the leadership and, more importantly, a number of individual Democratic Senators both that the GOP fears its use and that it will be the only way to get a bill enacted this year.

This important change in attitude and strategy is what makes it more likely that a fiscal 2011 budget resolution will be adopted.

If reconciliation is used for health care reform, using it again for other priorities this year will be more obvious and less offensive to Senate Democrats. But Congress can’t consider a bill under reconciliation rules, that is, according to the procedures that prevent filibusters in the Senate, unless it first adopts a budget resolution that provides reconciliation instructions. No fiscal 2011 budget resolution means no reconciliation.

What makes reconciliation and, therefore, a budget resolution, even more likely is what it would be used for: something that will be called a tax cut. By the end of this year or, more likely, before Election Day, the White House and Congressional Democrats want to extend most of the tax cuts that are set to expire at midnight on Dec. 31. Even though the bill will reduce taxes compared with current law for most Americans, it is not hard to conceive of a situation where Senate Republicans would try to hold up its consideration. It might be because some existing tax cuts might not be extended in the bill, because other tax cuts are not included, or simply to prevent Democrats from getting any credit before the elections for extending any tax-reduction provisions. Much like the situation that occurred last week in the Senate on the jobs bill, it’s not difficult to envision a GOP filibuster if the bill is considered under anything but reconciliation procedures.

That makes reconciliation necessary for a tax cut this year. That, in turn, means that a fiscal 2011 budget resolution becomes critical.

Attention All Reconciliation Commenters

Stan Collender — Sun, 28 Feb 2010 18:47:53 +0000

It's clear from all the comments on CG&G and elsewhere that Republican and Democratic commenters are refusing to acknowledge the basic facts about reconciliation. So here are several factual statements.

Get over it. Stop denying it. Move on.

1. Reconciliation is not a rule or an attempt to get around the rules; it's a law -- Public Law 93-344 (The Congressional Budget Act of 1974) to be exact.

2. Reconciliation has been used by both Democrats and Republicans when they were in the majority.

3. When they have been in the majority, Democrats and Republicans have both argued that using reconciliation was proper. Whey they have been in the minority both parties have maintained that it was improper for the other even to think about it.

4. The fact that one party has used reconciliation more than another is interesting but not instructive in any way. The bottom line, again, is that they've both used it repeatedly.

5. Reconciliation has been used for both major and not-so-major changes. It's also been used to increase and decrease the deficit.

6. The parliamentarian plays a major role in deciding what does and doesn't qualify under the Byrd Rule and, yes, the parliamentarian is appointed by the majority.

Disagreeing With Pete On Reconciliation And Health Care Reform

Stan Collender — Sun, 28 Feb 2010 18:17:25 +0000

Pete's post below on reconciliation and healthcare reform takes a far too strict look at what could and could not be included in a health care reform bill considered under reconciliation rules.

Pete's correct that the primary consideration is whether a provision would have an impact on the federal budget. He's also absolutely, positively, no-doubt-about-it correct that the Byrd Rule was created to prevent "extraneous" (that is, having no impact on the budget whatsoever) provisions from being included. I recall one of the things that got Senator Byrd (D-WV) so exercised was the inclusion of a major change in the broadcast fairness doctrine, which had no budget implications of any kind, in a reconciliation bill.

But Pete's very strict interpretation of the rules for what qualifies as an extraneous provision is..well...far too strict.

The key is not the word "extraneous"; instead it's the word "provision," which is not defined in any way in the law. Is it a whole title of a bill, a section within a title, a paragraph within a section, a sentence within a paragraph, or all of the above?

In other words, just because a particular sentence, paragraph, or title of a bill would be extraneous if considered by itself doesn't automatically make it extraneous if it's part of a larger section that as a whole isn't extraneous.

In addition, a provision that by itself would be considered extraneous might not be if it's considered critical to the proper functioning of another provision tha's completely acceptable. For example, a purely regulatory change that is thought to be needed so that another change that reduces federal spending or increases revenues works as intended could be allowed. Definitions and administrative provisions could easily fall into this category. And if they were projected to reduce federal spending on abortions, prohibitions on those procedures might also not be deemed to violate the Byrd Rule.

As Pete quite correctly notes, it all depends on how the bill is drafted and, of course, on what the parliamentarian (and then the full Senate) decides.

But given the extraordinary skill of the people who draft legislation in the Senate, what will be a very obvious goal of using the reconciliation process to consider the bill, and the fact that so much federal spending and so many tax provisions are health care related, unlike what Pete believes it is not inconceivable that most of a major health care reform bill would make it through the reconciliation gauntlet.

White House Names Four More To Budget Commission

Stan Collender — Fri, 26 Feb 2010 18:39:41 +0000

Honeywell International Inc. Chief Executive Officer David Cote
Former Federal Reserve Vice Chairman Alice Rivlin
Andy Stern, president of the Service Employees International Union
Former Young & Rubicam Brands CEO Ann Fudge

An interesting group in many ways. Other than Rivlin, no budget people and a strong outsider feel.

We're still waiting to see which three House Democrats Nancy Pelosi names and whether House and Senate Republicans select anyone.

3 Senate Democrats Named To Budget Commission

Stan Collender — Wed, 24 Feb 2010 00:05:35 +0000

Majority Whip Dick Durbin of Illinois
Finance Committee Chairman Max Baucus of Montana
Budget Committee Chairman Kent Conrad of North Dakota

These were the logical choices.

Subaru Doesn't Know How To Do Customer Service

Stan Collender — Tue, 23 Feb 2010 11:27:21 +0000

My continuing personal search for good...or even so so...customer service goes on.

I'm a big fan of traffic cameras because it's a very efficient use of resources by state and local governments. In fact, there's no other way those governments could get as much law enforcement for the same money. And...What a concept!...You can avoid the fines simply by obeying the law.

So when a letter dated February 1 arrived on February 20 from ~~Suburu~~ Subaru Finance with a picture from a traffic camera in D.C. showing that my Beautiful and Talented Wife's (The BTW) car had been caught going through a red light and asking that I pay the fine, I got ready to write a check.

I stopped, however, when it became clear that the car in the picture was not the BTW's. In fact, the license plate number was different and the car that supposedly ran the red light had been returned to the dealer the month before the violation took place.

This was not D.C.'s fault. The car in the picture was owned by ~~Suburu~~ Subaru Finance; it just was leased to someone other than the BTW. Suburu had notified the wrong customer.

I could have ignored the letter. After all, I wasn't responsible for the car ~~Suburu~~ Subaru Finance was saying would be impounded if the fine wasn't paid. But as a courtesy, I decided to call and tell them about the error so they could notify the correct owner.

First problem: ~~Suburu~~ Subaru Finance didn't include a phone number to call on the letter it sent.

Second problem: It took 20 minutes or so to track down a number I could call.

Third problem: The first four people I spoke with kept transferring me to someone else. Each time, of course, I had to re-provide the same information I had provided to the previous person.

The fifth person was able to deal with the situation. His response: We discovered our mistake three days after we sent you the letter. Just ignore it.

Were they planning, I asked, to send me a new letter telling me to ignore their first letter because it was a mistake? No, he said. That would be too expensive.

Did he think an apology was in order? Only if I really felt it was necessary.

Did he think he should thank me for taking the initiative? Absolutely, he said, and then never said thank you.

I still like traffic cameras; what I don't think much of is ~~Suburu~~ Subaru. The question I should have asked is whether the guy on the phone could give me one good reason why the BTW should buy another Legacy from a company that doesn't care much about its customers.

Peggy Noonan Shouldn't Write About The Budget

Stan Collender — Tue, 23 Feb 2010 10:36:09 +0000

Peggy Noonan's column about the budget in last Friday's Wall Street Journal (I could probably stop here and know that I've said all that needs to be said) shows why someone who doesn't know anything about the budget or economy shouldn't write about them.

One sentence in particular caught my eye:

"People are freshly aware and concerned about the real-world implications of a $1.6 trillion dollar deficit..."

Peggy...Has anyone ever told you that you have to consider the economic context in which a deficit occurs? A deficit even half that size when the economy was growing, like the ones that happened during Bush 43, were indeed a disaster. But last year's deficit of $1.4 trillion, which occurred when monetary policy was having no effect and when businesses and consumers weren't spending, not only was the correct fiscal policy, it was a triumph. The same will be true this year if the deficit is $1.6 trillion.

In other words, the real-world implications you say people are so concerned about are actually quite positive in the current environment.

The problem is not that the deficit is high now, it's that the deficit wasn't reduced when the economy was in better shape. Peggy...Where were you then?

Dear Budget Commission

Stan Collender — Tue, 23 Feb 2010 10:00:59 +0000

My column from today's Roll Call is really a letter to the budget commission created by the president last Thursday.

Budget Commission First Needs to Answer Big-Picture Questions

Feb. 23, 2010

I told the House Rules Committee several years ago that it shouldn’t bother to come up with a new Congressional budget process until it knew what it wanted that process to accomplish. All of the other witnesses at the hearing had specific recommendations. But, much to the frustration of several Members, I testified as forcefully as I could that it wasn’t worth their time, effort or energy to propose a new budget process until there was a consensus at least in the committee about what needed to be done. Without that, even if it could be enacted (which I said I doubted), a new budget process was doomed to fail so there was no reason to bother.

I have the same basic recommendation for the budget commission that President Barack Obama created five days ago by executive order: Long before it thinks about any specifics or gets deep into the spending and revenue weeds, it first should try to develop a consensus about what should be accomplished. Without that, any plan that it recommends very likely, if not almost certainly, will be rejected out of hand.

The reason I say that is the reaction you probably had to the last paragraph. Many of those with an interest in the deficit reduction debate don’t think tax increases should be part of the discussion. If you’re one of those people, the mere fact that I mentioned “revenues” has you cursing my name. Others are equally insistent that one or more programs on the other side of the budget shouldn’t be part of the deficit reduction equation and my including the word “spending” has you using not-appropriate-for-a-family-publication language to talk about my ancestry.

The reality is that specific revenue and spending questions are actually little more than fiscal tinker toys compared with the big-picture budget issues on which the commission first needs to develop a consensus.

One option — reducing or eliminating the national debt — is off the table for now. That will be a source of fiscal agita for some, and it’s possible that the commission could decide to go beyond what the executive order that created it says. But the order’s charge that the commission propose “recommendations designed to balance the budget, excluding interest payments on the debt, by 2015” gives it some direction and a short-term goal that stops short of reducing the debt. Besides, you can’t reduce the debt without running a surplus and, given the current politics of the budget, the size of the deficit and the economy, that’s just not possible anytime soon.

The commission’s longer-term charge — “propose recommendations that meaningfully improve the long-run fiscal outlook” (the italics are mine) is what will pose the far tougher challenge because, as the debates on Capitol Hill have consistently demonstrated, there’s no consensus whatsoever about what that means.

For example, the four consecutive budget surpluses that occurred from fiscal 1998 to 2001 were thrilling to some who saw a value in reducing the size of the national debt and the annual interest payments that the federal government makes every year so that the long-term fiscal outlook and the government’s options would be significantly improved. Others saw the projected surpluses as an indication that revenues were higher than they needed to be to meet current expenses. They insisted that a tax cut was in order and that the surplus be eliminated.

Based on this history, the budget commission’s biggest and most meaningful contribution may well not be what many are expecting it to do — that is, propose specific spending and revenue changes. Instead, developing what so far has been that elusive consensus about an overall budget goal by far could be its most important accomplishment.

That’s not to say that big-picture proposals won’t be controversial. A recommendation that, assuming the economic conditions make it the appropriate fiscal policy, the budget deficit should be at a particular level rather than completely eliminated, could create a political firestorm about continued government borrowing. A controversy also will erupt if the commission recommends that, economy willing, surpluses and reductions in the national debt should be the goal. And, almost needless to say, any recommendation that specified a particular annual level of federal spending or revenues will create a serious disturbance in the budget force.

But, as I told the House Rules Committee, without an agreement on the context, any specific proposed spending and revenue changes will be even more of a problem. Without understanding the overall goal of the changes, few in Congress or outside the Beltway will appreciate what they will get in return for the spending reductions or tax increases needed to get there from here and will fight like crazy to prevent them.

The biggest of the big-picture questions that the commission will face is whether developing that much-needed budget consensus will be valued enough to make it worthwhile to try. Despite the obvious importance for a consensus to be developed, will a budget commission that only proposes long-term, overall goals be immediately labeled a failure and, therefore, have far less impact than it should have? But would the big-picture consensus get lost in the weeds if the commission recommended specific revenue and spending changes that would translate that agreement into a real plan?

RE: Another Dumb Right-Wing Idea: Default on the Debt

Stan Collender — Sat, 20 Feb 2010 22:42:48 +0000

Bruce's excellent post on Glenn Reynolds dumb idea of having the U.S. default on its debt as a way to force spending cuts began to generate a good deal of buzz in the blogosphere almost as soon as it was up for all to see. Here's Matthew Yglesias' and Mark Thoma's take, for example.

Let me add two things to Bruce's analysis.

First, interest on the national debt is paid as a result of a permanent appropriation and is the most mandatory of all mandatory parts of the federal budget. It was enacted at the insistence of Alexander Hamilton (yes, THAT Alexander Hamilton), who convinced Congress that no one would lend the new United States government money unless they were sure that they would get it back when the time came. Hamilton wanted to make it clear to the would be lenders (as I recall, it was mostly the Dutch at the time), that a future president and Congress couldn't refuse to pay because there were new priorities such as making sure that Saddam Hussein was out of Iraq, that no child was left behind, or that taxes were cut.

Because of this permanent appropriation, the only way a default could occur would be if Congress passed and the president signed legislation repealing it and making the interest payments discretionary. While that's technically possible, the political likelihood of members of Congress voting for legislation that would be characterized as the "Let The United States Default And Instantly Become A Banana Republic Act" is relatively small. This especially would be the case because of the virtually immediate increase in interest rates that would occur.

Second, there's no guarantee that spending would be cut as Reynolds is assuming if the U.S. defaulted on its current debt and found itself unable to borrow. Tax increases would be at least as likely.

I Hate To Pile On To Brian Riedl, But He Deserves It

Stan Collender — Fri, 19 Feb 2010 10:53:26 +0000

I hate to pile on to Brian Riedl after both Brad DeLong and Matthew Yglesias do a pretty good job debunking his latest in National Review Online.

But...

There's much in Brian's piece that requires criticism, but here's the graph that is the most offensive:

The idea that government spending creates jobs makes sense only if you never ask where the government got the money. It didn’t fall from the sky. The only way Congress can inject spending into the economy is by first taxing or borrowing it out of the economy. No new demand is created; it’s a zero-sum transfer of existing demand.

Brian...The goal of economic stimulus is to create activity that wouldn't otherwise occur at that time. Your statement would have been correct if the economy had been operating at close to full employment and capacity. But it wasn't. Businesses weren't spending, consumers weren't spending, and monetary policy adjustments were not doing much to change that behavior.

So the federal government used borrowed funds (Nice try, Brian, but there were no tax increases), that is, it got funds from those who were not spending the money and then spent it or gave it to others with a tax cut (about 40 percent of the stimulus was tax cuts) to create that activity. Unless there are no limits on productivity improvement, that has to result in more jobs than would have otherwise existed.