Government Executive - Authors - Peter Cohn

GOP senator says he will not block hike in debt ceiling

Peter Cohn — Wed, 03 Nov 2010 00:00:00 -0400

Senate conservative leader Jim DeMint, R-S.C., said Wednesday he would not stand in the way of hiking the $14.3 trillion statutory debt ceiling, which Congress will have to tackle early next year to avoid default on U.S. government obligations. Republicans will extract a price for such action, however, which may include some form of down payment on spending cuts.

"You don't have much choice if you charge something on your credit card. You have to pay it, and that's effectively what this debt limit is," DeMint said in an interview with National Journal. "If Republicans have to do that on their own, they need to attach some legislation to it that forces us to move towards a balanced budget. Otherwise, I think the American people are going to look at us and say, 'The Republicans still don't get it.'"

DeMint voted against the last debt-limit increase in January, which gave the Treasury an extra $2.1 trillion in breathing room, because there were no spending control mechanisms attached to it. He told NJ that he was not in favor of shutting down the government, however, which is what blocking a debt limit hike would essentially achieve.

"If there was any way we could get around it, we need to do it. But again, we've already spent the money. The question is now, do we shut down the government, or do we fund what we've already done?" he said.

As of Monday, the official government tally of debt subject to the limit stood at $13.7 trillion. At its current pace, budget analysts say, that could easily breach the current debt ceiling by February, setting up an early game of chicken between newly empowered Republicans and President Obama.

When asked Wednesday about the looming debt limit fight, the likely House Speaker, John Boehner, R-Ohio, told reporters no decisions have been made. "We'll be working that out over the next couple months," he said.

On the campaign trail, tea party candidates and conservative groups like the Center for Individual Freedom stumped against Democrats who supported the earlier debt limit increase this year.

Treasury has several tools at its disposal to forestall hitting the limit, such as delaying the reinvestment of government securities in federal employee pension plans. Those maneuvers, while frequently used in both Democratic and Republican administrations, generally have a short shelf life. Presumably they could push a vote off until the spring, right around the time incoming House Budget Chairman Rep. Paul Ryan, R-Wis., will be writing a fiscal blueprint for the next several years.

Using the budget process, Ryan could include "reconciliation" instructions to the relevant committees to cut spending within their jurisdictions, even in entitlement programs, in exchange for signing off on a debt limit increase. In an interview, Ryan was coy about his plans but acknowledged he may have some leverage in this instance. "I'm not going to negotiate through the press," he said.

Click here to get a glimpse of National Journal's new website.

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Dems aim to send health bill to CBO Friday

Peter Cohn and Anna Edney — Thu, 14 Jan 2010 00:00:00 -0500

Healthcare overhaul negotiators have set a Friday goal to send a completed package to CBO, although they said deal-making could stretch into Saturday.

While lawmakers must iron out several issues, the White House and labor officials shored up a tentative agreement today to bring unions on board with an excise tax on high-cost insurance plans.

Sources said the tentative agreement calls for the high-cost plan tax thresholds to be raised to around $9,000 for individual coverage and $24,000 for a family plan. That is slightly more generous than the Senate version, which began to apply the tax at $8,500 and $23,000, respectively.

Collectively-bargained plans are exempt from the tax until 2017, sources said. Dental and vision coverage are also removed from the calculation of the cost of the plan.

But one key negotiating objective of labor -- increasing the annual indexing threshold so that it exceeds the core rate of inflation plus 1 percent -- was not accepted. That means more and more health plans could be hit by the tax each year and passed down to middle-class workers.

"That's still an issue," Rep. Joe Courtney, D-Conn., said. He also said he heard that "this is something the White House is sticking to, but then there's at least going to be some opportunity in 2013 to revisit that."

The White House believes this is the only way to contain costs.

Officials cautioned there was no final agreement yet and that they were working on selling it to union membership and House Democrats. House Speaker Nancy Pelosi, D-Calif., was entering a meeting with labor officials this afternoon to discuss the deal.

One labor official predicted that because the indexing rate is still unchanged from the Senate version, that provision in particular could be a bitter pill for many unions to swallow.

Rep. Earl Blumenauer, D-Ore., said unions at the negotiating table were split over whether they could support the deal.

There was "acknowledgement of progress but there was some split amongst them," he said. He added they are concerned about getting a deal when non-union workers will be hit right away with the tax.

Rep. Sander Levin, D-Mich., a vocal opponent of the tax who sits on the Ways and Means Committee and is tight with unions, appeared pleased with what he had heard of the deal, although he had not seen anything on paper yet.

He said the tax was "substantially transformed."

House members have blasted the excise tax for hitting middle-income workers, particularly those in unions, who accept lower wages in exchange for more expensive health insurance.

"I'm not about to agree to taxing middle-income healthcare plans," Rep. Shelley Berkley, D-Nev., said Wednesday. "That's just the bottom line for me."

Meanwhile, House Ways and Means Chairman Charles Rangel, D-N.Y., said negotiations are nearly complete on other revenue raisers for the overhaul. "We're close," he said Thursday.

Other outstanding areas include whether a final measure will include a national exchange in the House bill or state-based ones in the Senate version; an implementation date of 2013 like the House bill or 2014 in the Senate measure; and how much federal help people will receive to purchase insurance. Negotiators have yet to discuss federal funding of abortions or immigration issues, Rangel said.

Leaders and committee chairmen on both sides of the Capitol hope to wrap up talks Friday or Saturday. CBO would take several days, possibly a week or longer, to produce a cost estimate necessary before a vote.

Rep. Chris Van Hollen, D-Md., assistant to the speaker, said negotiators have sent scorekeepers pieces of what they have been discussing "to calibrate some of the ideas that are out there and know what the costs are."

Pelosi denied Democrats have their eye on the next day or two to complete talks because of the threat of a loss of a Democratic Senate seat in Massachusetts, where Democrat Martha Coakley and Republican Scott Brown are in a close race in Tuesday's special election.

"The fact that CBO takes so much time is more the issue," Pelosi said.

House leaders and chairmen huddled this morning to discuss overnight work following a marathon meeting Wednesday with President Obama and Senate negotiators.

Leaders will head back to the White House Thursday afternoon, and Obama is set to address House Democrats Thursday during their annual issues conference and persuade them to move ahead with the bill even if they are not pleased with the entire package.

House rank and file also have issues with other provisions in the Senate bill, particularly a commission meant to make decisions on Medicare cuts and a greater financial responsibility for a Medicaid expansion.

Berkley said Wednesday the Medicare commission "is a serious power grab" for the administration. House members do not want to give up such a large chunk of decision making, while senators feel such a move is necessary because Congress rarely makes tough decisions needed to decrease spending.

On the Medicaid expansion, Rep. Eliot Engel, D-N.Y., said Wednesday his home state receives $4 billion in the House bill, while it is forced to shell out $1 billion above its current obligation in the Senate version.

"So I would want to make sure that at least when monies are given to states, New York is treated more like the House version than the Senate version," he said.

Sen. Ben Nelson, D-Neb., has been working with Senate Democratic leadership to attempt to cover states' costs for the Medicaid expansion.

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Senator blocks Treasury nominees

Peter Cohn — Thu, 07 Jan 2010 00:00:00 -0500

Senate Minority Whip Jon Kyl, R-Ariz., is blocking pending Treasury Department nominees with jurisdiction over tax policy and international finance in response to the Obama administration's delay of new Internet gambling prohibitions, according to Senate aides.

Kyl, a longtime foe of Internet gaming, helped push through the law banning the processing of online wagers in 2006, when it was tucked into a port security bill. The final regulations were issued in late 2008, in the waning days of the Bush administration, and were to be enforced beginning Dec. 1, 2009.

But a blizzard of petitions from gaming industry groups and financial services firms charged with blocking the transactions, as well as influential lawmakers such as Senate Majority Leader Harry Reid, D-Nev., and House Financial Services Chairman Barney Frank, D-Mass., convinced the administration to delay the law's implementation. On Nov. 27, the Treasury Department and Federal Reserve jointly announced they would delay the new regulations until June 1.

Kyl was among the few arguing against a delay. "We strongly oppose this request and believe there is no justification for delaying the compliance deadline of the [gaming law] regulations," he and House Financial Services ranking member Spencer Bachus, R-Ala., wrote Nov. 3 to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

"[S]imply delaying the compliance date serves no interest except that of the Internet gambling enterprises that have long evaded American gambling laws and will continue to do so until effective enforcement is in place," they wrote.

Just before the Senate adjourned in late December, the Senate Finance Committee approved the nominations of Lael Brainard for undersecretary for international affairs; Michael Mundaca for undersecretary for tax policy; Mary John Miller for assistant secretary for financial markets, and Charles Collyns for undersecretary for international finance. Kyl was the lone "no" vote in each case.

The nominations appeared headed for smooth sailing after Finance ranking member Charles Grassley, R-Iowa, lifted his hold when the IRS agreed to lift certain small-business tax penalties. A year-end deal between the White House and Senate Republicans cleared a path for several long-stalled nominees, including Miriam Sapiro for deputy U.S. trade representative, to be confirmed.

But the Treasury nominees were still in limbo when senators went home for Christmas. A Kyl spokesman was unavailable for comment in time for publication, but other Senate officials confirmed his hold.

The fact that Sapiro got through and others did not was something of a surprise. Her nomination had been held up for months by Sen. Jim Bunning, R-Ky., due to a dispute with the Canadian Parliament over tobacco regulations that he wanted USTR to adjudicate.

Senate Minority Leader Mitch McConnell, R-Ky., was able to pry Sapiro loose in exchange for Democrats to allow fellow Kentuckian Michael Khouri to be confirmed as a Federal Maritime Commissioner. He was nominated in early December.

Bunning was absent for votes on Christmas Eve, when the nominees were confirmed. But that did not stop him from immediately slapping holds on two other USTR nominees who had just been approved by the Finance Committee: Michael Punke, to be U.S. ambassador to the World Trade Organization, and Islam Siddiqui, to be chief U.S. agricultural negotiator.

Both are important posts given the ongoing Doha round of global trade talks that remain in limbo. A Bunning spokesman could not be reached in time for publication, but other sources confirmed his hold.

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Senator seeks review of 'cash for clunkers' effort

Peter Cohn — Wed, 06 Jan 2010 00:00:00 -0500

Senate Finance Committee ranking member Charles Grassley, R-Iowa, wants to know how the money to get the $3 billion "cash for clunkers" program up and running was spent.

Citing a quick timetable that required the Transportation Department to start issuing rebate checks to consumers only a month after the program was signed into law over the summer, Grassley said Tuesday such haste could make waste.

"It seems to me that the administration chose an inherently risky approach to developing and implementing the Cash for Clunkers program and spent millions to get it up and running in record time with little regard for proper oversight and accountability, thus creating an environment ripe for waste, fraud and abuse," Grassley wrote in a letter to Transportation Secretary Ray LaHood.

Under the law, enacted in June and amended to add another $2 billion when the money ran out in early August, vehicle owners could get rebate checks for trading in older gas guzzlers to help defray the cost of buying new, more fuel-efficient vehicles.

Grassley asked LaHood for an accounting, no later than Jan. 25, of what companies and executive branch agencies received contracts from the Transportation Department to process and sign the thousands of checks that went out under the program.

Grassley said contractors could include Citibank, Arlington, Va.-based consulting firm Vangent Inc., and information technology provider Affiliated Computer Services, as well as the Federal Aviation Administration's Oklahoma City office and the Internal Revenue Service. Grassley also asked LaHood for information about vulnerabilities in the program's administration, particularly with regard to its information technology system, and what the agency was doing to address them.

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Grassley: Nominees are lax on compliance

Peter Cohn — Fri, 20 Nov 2009 00:00:00 -0500

Senate Finance Committee ranking member Charles Grassley, R-Iowa, took a swipe on Friday at White House and congressional Democrats for not taking nominees' tax troubles seriously enough.

"The bar has definitely been lowered with this administration's nominees, in regard to tax compliance," Grassley said at the outset of a hearing on Treasury Department nominees.

The panel heard testimony from three Treasury nominees at the sparsely attended hearing, including that of Lael Brainard, President Obama's pick for undersecretary of international affairs. Brainard's nomination has been held up for months by the committee's vetting of tax records, which revealed that she and her husband had been late making several payments to the tune of about $1,300.

There were also questions about documents verifying the immigration status of household employees and an in-home office deduction Brainard claimed.

Grassley did not say the issues would hold up Brainard's nomination. But he did express frustration with the pattern he has seen from the Obama administration, including with Treasury Secretary Tim Geithner and former Senate Majority Leader Tom Daschle, D-S.D., who withdrew from consideration as HHS Secretary-designate after it was disclosed he owed over $100,000 in back taxes.

"Prior to this administration, we had never seen nominees with more than $100,000 tax problems, or the inability to accurately respond to committee questionnaires multiple times, or the lack of straight answers from nominees," Grassley said.

"Anyone watching this process closely now knows that a nominee can get away with not paying taxes, or consistently pay them months late, or not follow normal procedures and still be confirmed. All they have to do is blame it on their incompetent accountant, their spouse, or computer software or hardware," he added.

Senate Budget Committee Chairman Kent Conrad, D-N.D., who presided over the hearing while Finance Committee Chairman Max Baucus, D-Mont., was home with his ailing mother in Montana, called the tax discrepancies "troubling." But he noted all taxes and penalties have been paid in full. Conrad told Brainard "no one disputes your talents" and praised her "reputation for honesty and integrity."

Lawmakers pressed the nominees on issues such as tax reform, the swelling federal debt burden and China's currency devaluation, which has fueled the country's export boom and widened the U.S. trade gap. Other Treasury nominees testifying were Mary John Miller to be assistant secretary for financial markets and Charles Collyns to be assistant secretary for international finance.

The panel was also slated to vote on four other nominees: Ellen Murray, to be assistant HHS secretary for resources and technology; Bryan Samuels for HHS commissioner on children, youth and families; Islam Siddiqui for chief agricultural negotiator at the office of the U.S. Trade Representative; and Michael Punke, for ambassador to the World Trade Organization. The holdup means Obama might be without two key trade negotiators at the Nov. 30 WTO ministerial conference in Geneva. But it could not vote on them because a quorum was not present.

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Panel: Treasury nominee made tax errors

Peter Cohn — Wed, 18 Nov 2009 00:00:00 -0500

Another Obama administration nominee is in hot water over tax issues. Senate Finance Committee leaders Wednesday announced that Lael Brainard, President Obama's nominee for Treasury undersecretary for international affairs, made several late payments and errors on her 2005-2008 tax returns.

There were late payments related to District of Columbia unemployment insurance benefits for household employees, as well as late property tax payments on real estate Brainard and her husband own in Rappahannock County, Va.

There were questions about the immigration status of some household employees, according to the report. Brainard might have improperly used a deduction for in-home office expenses, the committee said. Brainard has taken steps to bring her tax returns into compliance, they added.

"This nomination took a long time to process because it took so many rounds of questions to try to get complete answers from the nominee," Finance ranking member Charles Grassley, R-Iowa, said in a statement. "The dollar amounts involved aren't large compared to some other administration nominees this year, but the lack of candor, accuracy and timeliness in addressing the issues has been discouraging."

Baucus and Grassley said the investigation of Brainard's tax returns was bipartisan and that the vetting process was the same as for every nominee considered by the committee since 2001.

"I am satisfied Ms. Brainard has taken the steps necessary to fix the discrepancies in documents submitted to the committee. We intend to move forward as soon as possible on this nomination, to bolster the efforts at Treasury and strengthen America's recovery at home and abroad," Baucus said.

Senate Foreign Relations Chairman John Kerry, D-Mass., expressed support for Brainard and appeared a bit perturbed by the length of the process. "Eight months of a vetting process is more than enough when no questions persist. In fact, questions and questions have been answered, and answered, and answered, and they have been answered satisfactorily," Kerry said in a statement.

According to documents released by the Finance leaders, the first meeting panel staff had with the nominee and her tax preparer was on May 28, just a few days after Obama announced her selection.

Brainard is current on all Washington, D.C., unemployment taxes. The panel said several payments of real estate taxes on two plots of land in Rappahannock County were late during 2005, 2006 and 2007, but that the appropriate penalties and interest have been paid.

There were also errors in employment eligibility verification forms submitted for household employees hired since 2005. Also, the committee said Brainard deducted 16.7 percent of her household expenses in 2005-07 from her partnership income as an in-home office deduction.

The committee said it could not verify that 16.7 percent was the accurate percentage of space used in her home, and that it appeared to be closer to 21.9 percent. Since Finance investigators raised the issue, Brainard said she and her husband would reduce the size of their home office deduction in 2008 by half but would not amend their prior returns.

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Customs reauthorization bill picking up support

Peter Cohn — Fri, 14 Aug 2009 00:00:00 -0400

An effort to elevate trade facilitation as a top priority alongside security and enforcement within U.S. customs agencies for the first time since the Sept. 11, 2001, terrorist attacks, has a good shot at being enacted in the 111th Congress, stakeholders say.

A customs reauthorization bill introduced late last week by Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles Grassley, R-Iowa, could move in committee this fall, sources said. Finance has been working on a bill since 2006, and lobbyists said the staff work and resources devoted to it are unprecedented.

The measure has drawn support from industries including drug-makers, retailers and video-game developers, as well as cargo carriers, customs brokers and others involved in the global supply chain. Introduction comes "at a time when the United States desperately needs to promote free trade as an engine of economic growth," said American Association of Exporters and Importers President and CEO Marianne Rowden.

The measure would establish Customs and Border Protection and Immigration and Customs Enforcement within the Homeland Security Department as separate agencies with their budgets. It would also create a office to consolidate trade facilitation duties within CBP as well as a liaison between the agency and the private sector, while requiring consultations with other agencies and industry stakeholders before proposing regulations impacting trade.

The bill would require CBP to identify benefits for voluntary industry participants in programs such as the Customs-Trade Partnership Against Terrorism. "CBP has promised more trade benefits to participating importers, but those benefits have not come to fruition," said Stephanie Lester, vice president for international trade at the Retail Industry Leaders Association. "We welcome Congress' guidance that more should be done to encourage public-private partnerships."

The measure includes new trade enforcement provisions, including creation of an interagency working group on import safety and new training requirements for CBP port personnel. It would create an office within ICE to coordinate federal efforts to enforce intellectual property violations, while requiring CBP to dedicate port staff solely to inspections and, if necessary, seizure of counterfeit drugs, software and other products.

The measure will help the agencies "better respond to imports that put American patients at a higher risk by failing to meet U.S. health and safety requirements," said Pharmaceutical Research and Manufacturers of America senior vice president Ken Johnson.

Industry officials have generally backed the bill. But one potential sticking point is a provision that import data required under a cargo security rule scheduled to take effect Jan. 26 could also be used for commercial enforcement, such as compliance with applicable tariffs and regulations.

One fear is that commercial data could be leaked to trading partners, said Peter Friedmann, an attorney with Lindsay Hart Neil & Weigler. "If that information falls into the hands of our international competitors, it could provide them with proprietary information," he said, adding it could also be used in dumping cases against the United States. However, Friedmann said Finance aides have expressed willingness to work with the private sector on their concerns.

Timing will depend on Finance's deliberations on the healthcare bill. Senate floor time in the fall is scarce, and the customs bill could attract numerous trade-related amendments that could slow progress. But with pending free-trade agreements on hold, "there's a lot of pent-up demand" for trade legislation, an industry lobbyist said.

Some observers said elements of the customs overhaul could move as part of a broader package extending expiring duty-free benefits for developing countries and perhaps miscellaneous tariff reductions for U.S. firms. Others said movement was more likely next year, perhaps as part of a larger bill authorizing the Homeland Security Department.

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Buy America provision triggers rebuke

Peter Cohn — Wed, 22 Jul 2009 00:00:00 -0400

The amendment to the fiscal 2010 Energy and Water Appropriations bill by Rep. Larry Kissell, D-N.C., stipulates that "none of the funds made available in this Act may be used to purchase passenger motor vehicles other than those manufactured by Ford, General Motors or Chrysler."

In specifically naming the Big Three automakers, the Kissell amendment goes even further than prior legislative attempts to carve out preferences for domestic firms. The move prompted a rebuke Tuesday from European Union Ambassador John Bruton, who called it a "troubling protectionist" provision.

"To ignore other American-made passenger vehicles and passenger vehicles manufactured by automakers outside of the U.S. is simply bad environmental policy, bad appropriations policy and bad economic policy," Bruton said in a statement.

A Kissell spokesperson was not available for comment. An Appropriations aide pointed out that the language does not change current law, and that it simply restates General Services Administration policy with regard to government automotive purchases.

The Kissell amendment was wrapped into a managers' package of mostly technical provisions by Rep. Ed Pastor, D-Ariz., and approved on a 261-172 vote Wednesday. The underlying bill was approved Friday on a 320-97 vote. Pastor managed the bill on the floor on behalf of Energy and Water Appropriations Subcommittee Chairman Peter Visclosky, D-Ind., who has temporarily stepped down in the midst of an FBI investigation into dissolved lobbying firm PMA Group.

There was little debate on the provision, other than some general grumbling from Energy and Water Appropriations Subcommittee ranking member Rodney Frelinghuysen, R-N.J., that Republicans were not consulted about the managers' package. Pastor apologized, telling Frelinghuysen he thought the minority was able to review the amendment beforehand.

Kissell, a former textile worker, won his seat last year by knocking off former Rep. Robin Hayes, R-N.C., amid a wave of resentment over Bush administration trade policies. Kissell pushed through an amendment to this year's $787 billion economic stimulus requiring that Transportation Security Administration uniforms be made in the United States. North Carolina is also home to numerous auto dealerships that face hard times due to the Big Three's troubles.

In his statement, Bruton took the opportunity to pick a fight with another "Buy America"-type provision that recently passed the House: language in the energy and climate change bill directing money to U.S. automakers involved in developing and producing electric cars.

Bruton said the combined effect of the two provisions would run afoul of U.S. obligations under the World Trade Organization and contradict a stated commitment at the G-20 summit this year to oppose trade barriers. "It would send the wrong signal to all producers worldwide, which in turn could lead to similar protectionist measures adopted by other countries, hurting U.S. exports and delivering another blow to world trade at this critical juncture for the economy," he said.

The climate change bill is stalled in the Senate in part because of broader trade concerns. The House-passed bill contains provisions by Ways and Means Trade Subcommittee Chairman Sander Levin, D-Mich., requiring the president to impose border taxes beginning in 2020 on goods from China, India and other developing countries if they do not agree to similar curbs on their emissions.

The goal, according to Levin and others, is to prevent "carbon leakage" where U.S. heavy industry migrates overseas in the face of strict environmental regulations. President Obama has come out against the provisions and Senate Democrats said they would like to scale them back as well, perhaps providing the administration more flexibility in its dealings with other nations.

On Tuesday, a group of nine New Democrats, led by the group's chairman, Rep. Joseph Crowley of New York, wrote to Democratic leaders urging them to agree to changes. They noted rumblings from the French government that the European Union should impose similar border tariffs if no international agreement is reached this year.

"The U.S. must not provide a template to ignite a global trade war," the letter states. It goes on to say that tariffs should be "an option of last resort" and that the current language should be "stripped or substantially altered" in conference to give the president greater discretion.

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Private debt collection firms find supporters in Senate

Peter Cohn — Fri, 27 Feb 2009 00:00:00 -0500

An aide to Senate Finance ranking member Charles Grassley on Friday said he is weighing his options regarding the measure, which is amendable. The aide said the IRS debt-collection program is under the jurisdiction of the Finance Committee, not Appropriations, and that it is premature to end it before more thorough study. The Senate will take up the omnibus Monday.

There is bipartisan support for the program in the Senate, including from Agriculture Chairman Tom Harkin and Democratic Conference Vice Chairman Charles Schumer of New York. Joined by Grassley, they wrote Friday to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman that they believe not enough data is available to make "an informed decision ... about the program's long-term effectiveness."

The IRS said this month it would conduct an independent review, which is due out as early as next week, but the senators wrote that more time was necessary to study the issue. The timing of the report as well as the omnibus provision could impact next week's pending contract renewal for two private collection firms, CBE Group Inc. and Pioneer Credit Recovery Inc. CBE is based in Iowa, the home state of Grassley and Harkin, while Pioneer, a subsidiary of SLM Corp., or Sallie Mae, is based in Arcade, N.Y.

The senators wrote that almost 200 jobs in the two states could be lost if the program is cut. "Given the current economic crisis, such job losses should not be forced to occur before" the program is thoroughly evaluated, they added.

The U.S. Chamber of Commerce and a coalition of private collection firms also oppose the provision and are urging that it be stripped from the omnibus. In a letter to lawmakers this week, the Chamber's chief lobbyist, Bruce Josten, wrote that the IRS and private firms "have been working in partnership to collect back taxes efficiently and cost effectively, while protecting taxpayer rights, privacy, and security."

The program, in place since 2006, has come in for scathing criticism from the National Treasury Employees Union and the IRS' National Taxpayer Advocate. House Democrats have repeatedly tried to kill it. House Ways and Means Oversight Subcommittee Chairman John Lewis, D-Ga., Rep. Chris Van Hollen, D-Md., and others introduced legislation this month to repeal its authority.

Critics argue the IRS has spent about $80 million on the program while only netting $60 million in revenues. Private firms net $13 million in commissions. National Treasury Employees Union President Colleen Kelley referred to private debt collectors as "bounty hunters" who "collect taxes from vulnerable people for profit" in testimony submitted to Lewis' panel this week. "The last thing people need when they are straining under job losses ... are bounty hunters breathing down their necks," she said.

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Bond provision could give NE Amtrak trains major boost

Peter Cohn — Thu, 19 Feb 2009 00:00:00 -0500

Amtrak emerged a big winner in the $787.2 billion economic stimulus bill, despite the efforts of conservatives to slash its funding.

The government-subsidized passenger rail service got $1.3 billion in direct appropriations in the final bill -- $450 million more than the Senate version, although the excess is earmarked for security improvements.

That leaves $850 million in capital improvements for the cash-strapped rail service, and the heavily traveled Northeast corridor is in line for 60 percent of that.

Amtrak could also be in line for a slice of the $8 billion allotted for high-speed rail corridors negotiated by the Obama administration in the final bill, although Transportation Secretary Ray LaHood will determine the funding formula.

The final bill includes a separate provision that could be worth another $288 million to Amtrak service along the Washington-Boston line. That is due to an innovative bond financing method authored by Sens. John Kerry, D-Mass., and Arlen Specter, R-Pa. -- one of three Senate Republicans to vote for the bill -- that alters the definition of "high-speed rail facilities" eligible for tax-exempt bond financing. Under existing law, states can issue private-activity bonds for high-speed rail facilities that transport passengers between major metropolitan areas using vehicles that "are reasonably expected to operate at speeds in excess of 150 miles per hour between scheduled stops," according to the Joint Committee on Taxation. Under the stimulus provision, facilities with trains "capable of attaining a maximum speed in excess of 150 miles per hour" would qualify.

That definition applies to Amtrak's high-speed Acela trains, although the rail service is not specifically identified in the bill. A Kerry press release taking credit for the provision noted that "investments in high-speed rail can be used to help make necessary improvements to the Northeast corridor." Kerry used his clout on the Finance Committee to include the language in the committee-reported bill, and it stayed in the final conference report. He told the Boston Globe over the weekend that the combined effect of the stimulus provisions could cut the Acela trip from Boston to New York to 2.5 hours, and from New York to Washington to 2 hours.

Amtrak spokesman Cliff Black said Acela trains can only reach the top speed of 150 miles per hour in a segment of the route in Massachusetts and Rhode Island. The part of the route south of New York City only hits 135 miles per hour, he said. The rail service needs an overhead-wiring electrification system that is not impacted by bad weather, he said, noting that south of New York the system was largely installed in the 1930s. North of New Haven, Conn., a more modern "catenary" system for high-speed trains, such as those used in Europe and the Pacific Rim, was installed in the 1990s.

The Northeast corridor is "a very, very complex piece of railroad that could benefit by capital investments and infrastructure to improve capacity, reliability and speed," Black said. With friends like Kerry and Specter -- not to mention Amtrak's biggest booster in politics, Vice President Joseph Biden -- Amtrak could experience prolonged benefits it never enjoyed during George W. Bush's presidency.

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Negotiators agree to a leaner stimulus bill

Peter Cohn and Christian Bourge — Wed, 11 Feb 2009 00:00:00 -0500

Negotiators on Wednesday announced a deal on a slimmed-down $789.5 billion economic stimulus bill amid bipartisan disappointment.

Democrats will not get all they want, but Republicans, other than three Senate GOP moderates who helped shape the outcome, said they were excluded from the process.

"It seems as though [senators] are 100 percent held hostage ... by the whim of these three members," said House Ways and Means Chairman Charles Rangel, D-N.Y., resigned to reductions in President Obama's signature "Making Work Pay" tax credit.

"Hardly anybody's happy with having to go backward," he added. "So I guess the president is in a no-win position in terms of having to bend and amend ... based on their demands."

Negotiators shaved the price tag by $30 billion in cutting the workers' credit to $400 for individuals and $800 for families, down from $500 and $1,000, to fit within Obama's goal of providing the credit to 95 percent of tax filers. "We will do what we have to do in order to give the president something even though it may not be exactly what he's been promising," Rangel said.

But other priorities will be replenished. The bill will include a more generous child tax credit than the Senate version while boosting funds for school construction, neighborhood revitalization, energy-efficient buildings, and health insurance for the unemployed. School modernization, eliminated in the Senate bill, would get $6 billion, said Sen. Tom Harkin, D-Iowa, and states will see their education allotment increased to $44 billion, though that is still $35 billion shy of the House version. Rangel said the final conference deal will include much of what House Democrats want, but not all. Senate Finance Committee Chairman Max Baucus, D-Mont., said the tax portion of the bill would be about 35 percent of the total, or roughly $276 billion. That means some Senate tax provisions are likely to be scaled back, including a potential "haircut" to a provision extending the net operating loss carry-back period for money-losing companies. Consumer tax incentives for home and car purchases added by the Senate will also be cut back. The bill will preserve a one-year $70 billion fix for the alternative minimum tax, which Republicans insisted on.

Republicans kept up their protests on Wednesday. "The bill continues to be managed in a pretty heavy, partisan way by congressional leaders," said Senate Finance Committee ranking member Charles Grassley, R-Iowa. House Minority Leader John Boehner, R-Ohio, said Republicans have "ideas and represent about 40 percent of the American people." But Democrats said Republicans would remain opposed to the measure regardless. "Why would we have them in the room when they have no intention to back the bill?" said one senior Democratic aide.

But one hint of bipartisanship could be preserved. Conferees appear likely to adopt an agreement on Trade Adjustment Assistance legislation negotiated by the tax writing panels. More than 50 multinational firms and business associations wrote to conferees on Wednesday urging them to include the agreement, which was blocked by Senate Minority Whip Jon Kyl, R-Ariz.

Dan Friedman and Humberto Sanchez contributed to this report.

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Democrats might rewrite contractor law

Peter Cohn — Thu, 20 Nov 2008 00:00:00 -0500

A bolstered Democratic majority and the incoming Obama administration might be poised to rewrite a 30-year-old law critics say lets companies skirt billions of dollars in taxes, while depriving workers of benefits like overtime pay, family and medical leave and the right to join a union.

President-elect Obama introduced a bill last fall to crack down on companies' ability to classify workers as independent contractors rather than employees. The IRS for years has tried to claw back revenues from companies they say have "misclassified" workers as contractors, which can save employers up to 30 percent on payroll taxes. Estimates of federal revenue loss attributed to worker misclassification have ranged as high as $4.7 billion a year.

The Obama bill would amend the 1978 law that protects the tax status of companies employing independent contractors by removing an exemption for firms that designate workers as such based on long-standing practice in that industry. Critics argue that standard is too easy to meet, and a Joint Committee on Taxation report last year said the law is "construed liberally in favor of taxpayers."

The bill also would enable the IRS to determine if workers should be "reclassified" as employees; allow the agency to write regulations on how workers should be classified, and require companies to notify contractors of their right to seek a determination of whether they should be designated employees.

"Every day, millions of Americans go to work and play by the rules, teaching our children the values of hard work and responsibility," Obama said in a statement when the bill was introduced. "And most employers treat their workers fairly, paying them a decent wage and providing the benefits they deserve. But we must fix the system to stop those few employers from breaking the rules and exploiting this tax loophole at the expense of taxpayers and our workers' safety and security."

Transportation, construction and financial services firms like FedEx, D.R. Horton Inc. and Ameriprise Financial Inc. that rely heavily on contractors could take a hit, as would smaller companies in a range of industries and self-employed workers like travel agents, plumbers, nurses, bicycle couriers and freelance writers, critics say.

The bill would continue to exempt real estate agents and direct sellers of products like books and cosmetics, who are considered inherently contractors under current law.

Groups like the U.S. Chamber of Commerce and National Federation of Independent Business are leading the opposition, as are affected companies such as FedEx, which has already been sued in 20 states for its use of contract delivery drivers. FedEx employs roughly 15,000 drivers as contractors, who don't receive health, pension and other benefits and have to pay for their own trucks, but can set their own schedules and hire employees for their contracted FedEx delivery routes.

"We have always believed our independent contractors are not employees and legal review processes are addressing the fundamental question of whether it should be illegal to work for oneself. We say it should not," said FedEx spokesman Maury Lane. He said there were an estimated 10 million independent contractors across a wide range of industries, adding "these small business owners are the backbone of this country's economy and further unnecessary regulation will only lead to more nationwide economic dislocation."

Various union groups, including the Teamsters -- who have battled for years to organize FedEx drivers, as they have at rival UPS -- are urging Democrats to act early next year. "We definitely think it can happen in that kind of time frame," said AFL-CIO legislative representative Kelly Ross.

He said the existing law is prone to abuse, and the bill would only target companies that were unfairly taking advantage of a loophole. "It's really about enforcing current law, and trying to go after people who are cheating," Ross said.

Obama has powerful allies, including co-sponsors like Senate Majority Whip Dick Durbin, D-Ill., and Health, Education, Labor and Pensions Committee Chairman Edward Kennedy, D-Mass.

House Ways and Means Income Security Subcommittee Chairman Jim McDermott, D-Wash., and Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., held a joint hearing on the subject in May 2007, and introduced similar legislation this year backed by House Education and Labor Chairman George Miller.

The House bill would go even further, levying an additional $10,000 fine per misclassified worker. With the economic downturn hurting workers' paychecks, McDermott said he would try to push the measure early next year, as one of the first orders of business after a stimulus package.

"In a time of a collapsing economy, the absence of healthcare benefits for many American workers and collapsing pension programs, this issue is even more important than it was before and it will be one of my top priorities in the next Congress," McDermott said.

However, Small Business Legislative Council President John Satagaj said the legislation could crush companies' ability to hire at all. "Right now, if you're a small business, you're looking at survival tactics," he said.

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Push starts to stay contractors' tax-withholding provision

Peter Cohn — Wed, 02 Jul 2008 00:00:00 -0400

Although it does not take effect until 2011, opponents of a law requiring government agencies to withhold 3 percent of payments to private contractors and service providers are looking for a legislative vehicle to keep it at bay a while longer.

A bill introduced early last year by Reps. Kendrick Meek, D-Fla., and Wally Herger, R-Calif., to repeal the requirement has 255 House co-sponsors, while a huge coalition representing nearly every industry that provides government services has formed to oppose the requirement.

But pay/go rules have stymied any attempts to delay it. Still, Meek and Herger prevailed on the Ways and Means Committee leadership to include a one-year delay in a larger House-passed tax bill that stalled in the Senate.

A one-year delay costs $316 million, but Meek hopes it will be attached to a moving vehicle.

"It's still alive as a temporary delay. I don't know that we're going to be able to move it lock, stock, and barrel because of the cost," Meek said recently. "But the signal to leadership in both the House and Senate is clear that it is an inappropriate burden on local governments and small businesses. I've received absolutely no push-back from the Democratic leadership." Herger said some businesses do not even make a 3 percent profit, let alone have to forfeit 3 percent up front to the government.

That a delay of the provision, enacted to help offset part of the 2006 tax law that extended lower rates on capital gains and dividends, among other provisions, is even in play is an achievement. In the pay/go environment, critics assumed Democrats would move up the start date of the withholding requirement to offset the cost of new initiatives. The requirement's champion is a Republican, Senate Finance Committee ranking member Charles Grassley, R-Iowa.

Long a critic of abuses in federal contracting, Grassley inserted the provision in the waning days of conference negotiations on the $69 billion, 2006 tax-cut bill. To comply with budget reconciliation procedures, Grassley and GOP leaders had to find about $20 billion in offsets to make it fit within its cost limit. The biggest single revenue-raiser, at $7 billion, turned out to be the 3 percent withholding requirement, which Grassley argues will help narrow the "tax gap" between what is owed and paid. His spokeswoman noted a GAO report in June that found about 6 percent of Medicare providers in 2006 owed the government more than $2 billion in unpaid taxes. "Sen. Grassley will consider comments from people who want a delay, but there's clearly a long-demonstrated need for reform in this area," she said.

Herger, a senior Republican on Ways and Means, said he never agreed with the provision. "It's always easier to raise taxes, and it's even easier to raise them manana," he said. "If it's not good policy, it's not good policy; it doesn't matter if a Republican recommended it or a Democrat. We all have our good days and have our bad days. That was a bad day."

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Customs agency hit by lobbying on 'first sale' doctrine

Peter Cohn — Mon, 21 Apr 2008 00:00:00 -0400

Wednesday's deadline for comments on a controversial Customs and Border Protection rule that would increase tariffs on products ranging from hiking boots to cheese and fine china has resulted in a flurry of last-minute lobbying.

Announced Jan. 24, the proposed rule would eliminate what is known as the "first sale" doctrine, which sets tariff rates on the value of goods when they first enter the supply chain.

Instead, tariffs would be based on the value of the last sale of a product before it enters the United States, after a series of transactions involving intermediaries have boosted a product's price.

Companies from Abercrombie & Fitch to Wolverine World Wide, which markets Patagonia and Merrell footwear, have joined forces to oppose the rule. Late Friday, a bipartisan group of 17 senators led by Oregon Sens. Gordon Smith, a Republican, and Ron Wyden, a Democrat, wrote to Homeland Security Secretary Michael Chertoff urging him to revoke the rule.

"At a time when we are looking for ways to provide stimulus to our economy, we are concerned that the proposed action could undermine essential elements of that goal by potentially raising consumer prices," the senators wrote.

The Outdoor Industry Association estimates that outdoor recreation contributes almost $6 billion a year to Oregon's economy. On the House side, Rep. Kendrick Meek, D-Fla., is circulating a similar letter.

Other companies arguing against the rule include Boeing Co., Target and Best Buy, as well as major trade associations such as the National Association of Manufacturers and U.S. Chamber of Commerce. Smaller interests have weighed in as well, including the Cheese Importers Association of America and Waterford Wedgwood USA Inc., an importer of fine china and luxury glassware based in Ireland.

"Each year 350,000 American tourists travel to Waterford, Ireland, to visit the factory that formed the basis of the Irish heritage for the designs of crystal that have come to our country for over 200 years," wrote Christopher Kane, the firm's New York-based attorney, in a letter to Customs last week. He warned the new rule "could force [Waterford Wedgwood] to rethink its investment in the U.S."

Not all of the comments have been negative, however. The AFL-CIO wrote last week that current policy results in understated trade imbalances and allows U.S. importers to pay lower duties than countries such as China, South Korea and Japan, which value their duties based on the last-sale price of a product.

AFL-CIO Industrial Union Council executive director Bob Baugh wrote that the new rule would "provide meaningful relief for American workers who disproportionately suffer from this unfair practice." The American Dehydrated Onion and Garlic Association also wrote to Customs last week in support, arguing the rule would level the playing field against cheaper Chinese imports.

Because of geographic distance, language and cultural barriers, the association's counsel Irene Ringwood wrote, it is almost impossible to value the first sale of a garlic transaction in China, which has led to artificially lower duties on imported Chinese garlic and undercut domestic producers.

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Justice Department grant process gets Waxman's attention

Peter Cohn — Mon, 24 Mar 2008 00:00:00 -0400

House Oversight and Government Reform Committee Chairman Henry Waxman, D-Calif., is investigating how a Justice Department agency awarded grants in fiscal 2007, when most federal agencies operated with a freer hand under the yearlong earmark moratorium Democrats imposed.

Waxman wrote to Attorney General Michael Mukasey March 13 requesting a briefing no later than Friday -- and related documents by April 4 -- in response to reports that the Office of Juvenile Justice and Delinquency Prevention awarded noncompetitive grants in fiscal 2007 to less-qualified applicants.

Citing a recent investigation by the trade publication Youth Today, Waxman noted that in fiscal 2007 the the office awarded a $500,000 grant to the World Golf Foundation, even though its application was ranked lower than 38 other bids in a review done by career Justice Department officials.

The foundation is the parent organization of The First Tee, a popular program among lawmakers with an aim to "promote character development and life-enhancing values through the game of golf" for young people. The group received a $3 million earmark in the fiscal 2008 Defense spending bill last year, which received criticism from conservatives who argued such items demonstrate Congress should not be directing federal funds to local interests.

As the Justice grant indicates, the administration can pick similar winners and losers, and Waxman's letter is more striking because he has sworn off requesting earmarks for his district this year.

Waxman said the situation was brought to light by Rep. Tim Walz, D-Minn., a freshman who complained that a worthy applicant in his district was unfairly shut out of the grant-making process in fiscal 2007. An aide to Walz said his interest was piqued when OJJDP ignored a request to direct money to the National Child Protection Training Center at Winona State University, even though it ranked fourth out of more than 100 applicants in the agency's review.

The center trains social workers, teachers, nurses, police officers and others to detect and respond to signs of child abuse. The funding was dropped when the OJJDP administrator made the final decisions. Walz and other Minnesota lawmakers successfully restored about $1.2 million for the center in the fiscal 2008 omnibus appropriations bill, including $446,000 funded through OJJDP.

Much of the Youth Today investigation was focused on OJJDP Administrator Robert Flores, who it said decided to award grants to certain favored organizations regardless of how competitive bids ranked. To that end, Waxman has requested access to all communications to and from Flores regarding fiscal 2007 OJJDP grant awards, as well as broader access to all related documents about grant applicants, amounts awarded, and internal staff reviews ranking the bids.

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Senators urge appropriators to add $350M for science

Peter Cohn — Thu, 20 Mar 2008 00:00:00 -0400

A bipartisan group of senators this week wrote to leaders of the Senate Appropriations Committee urging them to add $350 million for science programs to the upcoming fiscal 2008 war supplemental spending bill.

The letter was spearheaded by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M., and ranking member Pete Domenici, R-N.M., who also is the ranking member on the Energy and Water Appropriations Subcommittee, which funds the Energy Department's Office of Science.

"We recognize the pressure you face to minimize the size of supplemental appropriations bills in the face of competing budgetary priorities," the senators wrote. "However, we strongly believe that it is necessary to provide critically needed research funding immediately to avoid unintended and permanent damage to our critical scientific infrastructure and our standing in the world as the leader in science."

Also signing the letter were Senate Republican Conference Chairman Lamar Alexander and GOP Sen. Bob Corker, both of Tennessee, which is home to the Energy Department's Oak Ridge National Laboratory. Senate Majority Whip Dick Durbin, D-Ill., Senate Democratic Conference Vice Chairman Charles Schumer of New York, Senate Rules Committee Chairwoman Dianne Feinstein, D-Calif., and Senate Health, Education, Labor and Pensions Committee Chairman Edward Kennedy, D-Mass., also signed it.

Their letter specifically requests that $250 million be allocated to the Energy Department's Office of Science to keep up the United States' commitment to the International Thermonuclear Experimental Reactor project, retain Fermi National Laboratory in Durbin's home state of Illinois as "the nation's premier high physics facility" and help other Energy Department laboratories around the country continue their research.

The remaining $100 million would be for the National Science Foundation. Association of American Universities President Robert Berdahl praised the senators' efforts.

"We appreciate the efforts of these senators to begin to correct a critical mistake made last year by Congress and the president. The failure of Congress and the president to provide new investments in science in fiscal 2008 that were both promised and needed is causing real harm to our nation's scientific enterprise and therefore to the nation's long-term economic competitiveness," he said in a statement.

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Incumbents playing wait and see on budget additions

Peter Cohn — Tue, 18 Mar 2008 00:00:00 -0400

Earmarking federal funds for local projects has long been an incumbent protection tactic. But following the lead of House Minority Leader John Boehner, R-Ohio, and other GOP leaders, a number of vulnerable House Republicans are getting religion and adopting "get tough on earmarks" stands. On Friday, Rep. Dave Reichert, R-Wash., fresh off a losing bid to serve on the Appropriations Committee, said he would not request any projects this year. Reichert beat Democrat Darcy Burner 51-49 percent in 2006 and faces a rematch this year.

"I want to be clear: I am in favor of member projects, and I believe in the right of the Congress to dictate where federal dollars go. But the path we are headed down in Washington is not a good one," Reichert said in a videotaped statement. Last month, Burner, a former Microsoft executive, pledged that if elected she would post on her Web site all appropriations, targeted tax benefits or other earmarks she requests. In a statement, she said the move was prompted by the infamous "Bridge to Nowhere" and the Jack Abramoff lobbying scandal.

"Unfortunately, our current representative in Congress seems eager to engage in the worst sort of pork barrel politics, putting special interests -- and his own political fortunes -- ahead of those of the American taxpayer," Burner said.

Reichert is no slouch when it comes to earmarks, ranking 73rd in fiscal 2008 in the latest congressional power rankings from Congress.org. But he went one step further than Burner in announcing he would forgo projects altogether this year. A Burner spokesman said it was hypocritical of Reichert to first seek a seat on Appropriations and then swear off earmarks; he also noted that despite Reichert's earmarking prowess, he was still ranked 401st overall out of 435 House members in the recent power rankings. A Reichert spokeswoman said his new stance on earmarks has not dented his approval ratings and local feedback has been positive.

Another closely watched race is that of Rep. Marilyn Musgrave, R-Colo., who faces a tough challenge from Betsy Markey, a former aide for Sen. Ken Salazar, D-Colo. In 2006, Musgrave narrowly defeated Democrat Angie Paccione, 46-43 percent.

At a news conference with anti-earmark crusaders like Sen. Jim DeMint, R-S.C., and Rep. Jeff Flake, R-Ariz., last week, she declared that taxpayers have become "absolutely repulsed" by earmarks. Like Reichert, Musgrave also just unsuccessfully ran for a seat on Appropriations. Also like Reichert, she has in the past been unabashed about her support for local projects in her district, citing a series of research projects at Colorado State University, such as a study of the impact of ultraviolet rays on crops, in a Feb. 19 release.

Musgrave announced a moratorium on earmarks in October, however; she explained that she had already requested the projects early in the fiscal 2008 process, and it was too late to revoke them. Earmarks for worthy projects like an abused women's shelter should not be confused with "Bridges to Nowhere," Musgrave said, but nonetheless the process needs to be re-evaluated as a result of bad actors.

Colorado State political science professor John Straayer said many candidates face a balancing act between the negative attention surrounding earmarks on the one hand and legitimate local needs on the other.

"You're damned if you do and damned if you don't," he said.

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Senate budget would boost advance appropriations by $4 billion

Peter Cohn — Mon, 10 Mar 2008 00:00:00 -0400

The Senate fiscal 2009 budget resolution envisions a roughly $4 billion boost in "advance appropriations" above President Bush's request, bringing total discretionary spending to $22 billion over his budget. That is double the increase in advance appropriations -- a time-honored budgetary gimmick utilized by both parties -- enacted last year, which quietly got through with barely a hint of protest from the White House.

The House's fiscal 2009 budget resolution is not as generous as the Senate's in that regard, limiting their advance appropriations increase to about $2 billion -- but overall that brings the House's discretionary spending allocation to more than $25 billion over Bush's request. Advance funding, by which appropriations are provided for future fiscal years, generally does not elicit much attention in part because it can be difficult to explain.

"There's no reason to do it other than to increase spending," said Jason Delisle, an education analyst at the New America Foundation. Backers "want the money by any means necessary, but the trade-off is the debate gets confused and the budget lacks transparency."

Advance funding for education grew out of a timing quirk whereby the academic year usually spans parts of two fiscal years. Beginning in fiscal 1996, Congress began using advance appropriations to increase education funding for a given school year while technically staying within that fiscal year's discretionary spending cap, according to a New America report. Since then the gimmick has become wildly popular -- what started out as $1.3 billion in advance education funding in fiscal 1996 grew to $17 billion in fiscal 2008, the report notes.

The New America report said the use of advance appropriations makes it difficult to compare actual year-over-year education funding totals. It can also cause problems in future years should budgetary circumstances change. During floor debate on the fiscal 2008 Labor-HHS spending bill in the summer, Labor-HHS Appropriations ranking member James Walsh, R-N.Y., made the latter point. "My concern is that advance funding can cause serious problems if future allocations for this bill are not as robust," Walsh said. In all, last year Congress provided a $2.4 billion boost in advance appropriations above Bush's request.

While a great deal was made of the Democratic leadership's acquiescence to Bush's overall budget demands, in fact Democrats spent a great deal more than Bush wanted. Technically, they ended up at Bush's proposed $933 billion spending limit. But after factoring in another $11 billion in emergency spending that Bush did not request, Democrats reached the midway point between their overall $22 billion. "When it was all said and done it was about a split-the-difference deal," said Senate Budget Chairman Kent Conrad, D-N.D. In fact, it was even better than that for the Democrats. After adding in the $2.4 billion in advance appropriations and another $6.4 billion Bush quietly signed into law as part of the must-pass Defense appropriations bill, Democrats in total spent nearly $20 billion over the president's requested limit.

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OMB chief threatens vetoes before Dem budgets unveiled

Peter Cohn — Mon, 03 Mar 2008 00:00:00 -0500

Office of Management and Budget Director Jim Nussle Monday sent what officials are billing as the first of its kind, a pre-emptive letter to the House and Senate Budget and Appropriations committees outlining veto threats over Democratic spending and tax policies -- before their budgets have been unveiled. The panels plan to mark up the fiscal 2009 budget resolution this week, which will provide spending and revenue targets for other committees to meet. Nussle's letter states that President Bush will veto fiscal 2009 appropriations bills that exceed his overall spending target and do not meet his mandate to cut the number and cost of earmarks in half from what was enacted for fiscal 2008.

Bush's 2001 and 2003 tax cuts do not expire until 2010, but Nussle reiterated the president will "veto any attempt to increase taxes." Democrats are under pressure because of pay/go rules to offset the cost of expanding the farm bill, preventing the alternative minimum tax from impacting more middle-income taxpayers and blocking a scheduled 10 percent cut in Medicare physician payments.

"Given the economic challenges our country faces, we need to keep taxes on families and job creators low, not increase the burden on those who fuel economic growth," he wrote. Nussle also called on Congress to approve Bush's proposals to curb entitlement programs, including Medicare, which is slated for $151 billion in five-year cuts, growing to $481 billion over 10 years, according to CBO. "The longer we put off a fix, the harder the fix will be," he wrote, adding that Democrats should use reconciliation procedures only to cut spending, not to offset new spending.

CBO released its preliminary scoring of Bush's $3 trillion fiscal 2009 budget, showing a decline in revenue of $777 billion over the next five years and $2.1 trillion over the next decade from what is assumed under current law. Bush's budget would make his tax cuts permanent. It only assumes a one-year patch for the AMT at a $55 billion cost; the full 10-year cost of annually increasing the AMT exemption is $646 billion, according to CBO. Leaving out the AMT -- which Democrats have proposed to pay for with a variety of revenue-raisers deemed unacceptable by Bush and Republicans -- anything approaching the $2 trillion in higher revenues assumed if Bush's 2001 and 2003 tax cuts were to expire will set the stage for GOP attacks.

According to CBO, Bush's budget assumes $1.1 trillion less in spending over the next decade than projected under current law -- assuming no more spending in Iraq and Afghanistan beyond fiscal 2009, cuts in domestic discretionary spending and Medicare reductions. Discretionary spending in Bush's budget, not counting another $70 billion for Iraq and Afghanistan, would total $997 billion. Most of that funding -- $538 billion -- would be for defense-related purposes. That is a 7.2 percent increase over the current year, while nondefense, non-homeland security spending would face a 0.5 percent cut.

Deficits are similar to OMB's earlier estimates, with the annual shortfall approaching $400 billion this year and next. The budget will be nearly in balance in fiscal 2012, with a slight decline the following year, according to CBO. OMB showed a slight surplus in those years when it released the budget last month.

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Chairman delays bill to prevent debt collection from service members killed in action

Peter Cohn — Fri, 15 Feb 2008 00:00:00 -0500

Efforts to "hotline" a Senate measure Thursday night to bar the Veterans Affairs Department from seeking to collect debts owed by soldiers killed in combat ran into objections from Veterans Affairs Committee Chairman Daniel Akaka, D-Hawaii,. The bill's sponsor, Military Construction-VA Appropriations Subcommittee ranking member Kay Bailey Hutchison, R-Texas, won consent from Senate leaders to bring the bill to the floor for approval by unanimous consent, but Akaka objected to bypassing the committee because he and the department had questions about the measure, including how instances of debts incurred through fraud or bad faith are handled.

"Obviously, we're disappointed that the Senate missed an opportunity to pass this common sense, VFW-endorsed legislation, but Sen. Hutchison will keep working," spokesman Matt Mackowiak said Friday.

In a letter sent Thursday, Akaka asked VA Secretary James Peake to suspend debt collections from families of soldiers either killed in combat or on active duty in training since Sept. 11, 2001, while the committee examined the bill further. In a conference call Friday, Akaka added he plans to hold a hearing soon. "He's trying to understand it at this point," an Akaka aide said, adding that the hearing would likely occur May 7, followed by a June markup. Under current law, if a soldier who is killed in combat previously owed debts, the VA is required to contact the deceased's family to collect.

It can waive the requirement in certain cases at the secretary's discretion, but the department to date has sought about $56,000 from the families of 22 soldiers, three of whom are in Texas and petitioned Hutchison for aid. Most of the money is owed from college loans under the GI bill.

"This is vital to the livelihood and honor of our troops and their families," Veterans of Foreign Wars legislative director Dennis Cullinan wrote Hutchison Monday. "We as a people should not demand repayment of debts from a person that has given everything in the name of their country." When she introduced the bill last month, Hutchison called the VA's effort to collect the sums "ludicrous."

Meanwhile, on the anniversary of the disclosure of problems at Walter Reed Army Medical Center, Senate Armed Services Chairman Carl Levin, D-Mich., Akaka and Sen. Evan Bayh, D-Ind., discussed a new effort to address shortfalls in the care of injured troops and veterans. The Wounded Warrior Assistance Act changed the disabilities ranking system that allowed some soldiers to go undiagnosed with traumatic brain injuries, which the senators considered one of the most prominent medical issues for soldiers returning from the Iraq War. In a new program, the VA will set standards for ranking the seriousness of injuries for treatment instead of the Defense Department.

"We have a moral obligation to do right by those who defend our country," Bayh said. "We far too often do not."

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Treasury looking at where rebate checks will go

Peter Cohn — Mon, 11 Feb 2008 00:00:00 -0500

According to the Treasury Department, 131.8 million individuals and families would receive tax rebates under the recently passed economic stimulus package President Bush plans to sign into law this week.

A Treasury analysis of the measure's estimated $112 billion in rebate checks shows that the largest portion of the rebates would go to individual and joint filers in California, with 14.7 million recipients at a $12.4 billion cost. Following California is another large state, Texas, with $8.3 billion of the total cost going to 9.7 million tax filers. Florida and New York follow, with 8.3 million beneficiaries each; $6.8 billion in tax rebates will flow to Florida and $6.7 billion to New York.

Illinois, Ohio, Michigan and Pennsylvania each have 5 million to 6 million beneficiaries. Nearly $5 billion worth of rebate checks will go to Illinois and Pennsylvania, while Ohio gets $4.4 billion and Michigan, $3.8 billion.

Bringing up the rear as far as rebate distribution include smaller states with lower populations such as North Dakota, South Dakota, Alaska, Delaware, Vermont and Wyoming, all of which have fewer than 500,000 beneficiaries. Those states combine for about $1.7 billion of the total rebates.

The rebate checks are the centerpiece of the economic stimulus measure, which according to the congressional Joint Committee on Taxation would add $151.7 billion to this year's deficit. Under the bill, which cleared the House and Senate last week, individuals making less than $75,000 a year will be eligible for $600 rebates, and couples filing jointly will receive $1,200 if their combined income was $150,000 or less in 2007.

Above the $75,000-$150,000 threshold, the rebate check would be phased out. Families who qualify for the rebate will also receive $300 for each child who was under the age of 17 at the end of 2007.

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Bush threatens to veto fiscal 2009 appropriations above set limit

Peter Cohn — Fri, 08 Feb 2008 00:00:00 -0500

President Bush Friday sought to renew his fight with the Democratic-controlled Congress over discretionary spending, telling an audience of conservative supporters he will veto appropriations bills if they exceed his $987.6 billion fiscal 2009 spending limit.

"For five years in a row, my budget requests have kept the growth of non-security discretionary spending below the rate of inflation. I set clear spending limits, told the Congress I was going to ... veto bills if they exceeded those spending limits. The Democratically controlled Congress, at the end of last year, cut spending plans by billions of dollars," Bush told the Conservative Political Action Conference. "And if Congress sends me appropriations bills that exceed the reasonable limits I have set, I will veto the bills."

Bush's budget includes holding non-security spending flat, despite inflation. And just as it did last year, Bush's budget calls for hefty increases in defense and foreign-aid spending at the expense of domestic programs. Although it would have slower growth than last year, the Pentagon would still see a 7.5 percent boost while the State Department and international assistance funds would rise 16.5 percent.

Just as they did last year, Democrats reacted with alarm and derision about the budget proposal. Unlike last year, however, Democrats may not give Bush the satisfaction of an unsuccessful budget fight, preferring to wait out the lame-duck president until a new administration that may be more willing to bend on domestic spending. Bush's budget has "no relevance to anything," said Senate Energy and Water Appropriations Subcommittee Chairman Byron Dorgan, D-N.D.

In his speech, Bush also reiterated his call to cut earmarks in half from levels appropriated last year, threatening to veto spending bills if they did not meet that target.

He recently issued an executive order directing federal agencies to ignore earmarks in the reports accompanying spending bills -- which are not legally binding -- if they are deemed wasteful. Today, he put the onus on the next administration to continue the same earmark scrutiny.

"This executive order will extend beyond my presidency. It will stay in effect unless revoked by a future president," he said to applause. "What that means is any president who wants to return to the old ways of unaccountable and wasteful spending will get to do so publicly. And if that happens, that president will have some explaining to do."

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Senate Budget panel grills OMB chief over budget proposal

Peter Cohn — Tue, 05 Feb 2008 00:00:00 -0500

Office of Management and Budget Director Jim Nussle's presentation of President Bush's $3.1 trillion fiscal 2009 budget before the Senate Budget Committee Tuesday quickly deteriorated into a political shoving match, making it clear that there might not be any bipartisan agreement this year beyond perhaps the current economic stimulus package. Democrats hammered Nussle on the cost of the war in Iraq, tax cuts and the growing national debt, and Nussle hammered right back, demonstrating that the nickname of "Knuckles" he acquired as a House member still has some resonance.

"I will say you're as combative a budget director as you were a member of Congress," said Sen. Robert Menendez, D-N.J., who served in the House with Nussle. "The beauty of the relationship we have now, Mr. Director, is that I get to ask the questions and you get to answer them."

Nussle shot back at his tormentors that while Bush's budget does not factor in war costs beyond a $70 billion fiscal 2009 placeholder, Democrats supplied less than half of Bush's fiscal 2008 supplemental war request.

"It's difficult to budget for two years down the line if you haven't paid your bills for this year," he said, responding to a question from Senate Budget Committee Chairman Kent Conrad, D-N.D. Sen. Bernie Sanders, I-Vt., told Nussle that Bush's tax cuts were skewed toward the wealthy and that people like him should not receive a tax cut when services are being cut for lower-income people. "Why don't I need a tax break?" said Nussle. "Because you're doing well," Sanders replied.

Sen. Sheldon Whitehouse, D-R.I., questioned why Nussle devoted equal time in his opening remarks to the question of earmarks in discretionary appropriations, which is a tiny percentage of the federal budget compared with the unfunded liabilities of as much as $70 trillion represented by looming entitlement obligations.

"What does it tell you about the culture of Washington [that the two issues] merits equal time?" asked Whitehouse. "I was only given five minutes," Nussle replied, arguing that Bush's budget proposes about $208 billion in five-year savings in the rate of growth of Medicare and Medicaid.

Conrad directed Nussle's attention to the national debt, which increases faster than annual deficits because the debt factors in off-budget costs like Social Security. The debt will grow by $704 billion this year and $761 billion next year under Bush's budget -- hitting $10 trillion for the first time in fiscal 2009 -- much more than the $400 billion-plus deficits expected or proposed over the next two years.

"I never hear the word debt leave the president's lips, ever," Conrad said. "The gross debt of the United States is going up like a scalded cat." Nussle replied that the budget was attempting to rein in the debt by also reining in mandatory programs, which account for about half the debt increase.

"If the debt is the threat, we can go further with regard to our mandatory programs," Nussle responded. "But I haven't heard anyone say we didn't go far enough."

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Bush's $3.1 trillion budget projects $400 billion deficit

Peter Cohn — Mon, 04 Feb 2008 00:00:00 -0500

President Bush delivered his final budget to Capitol Hill Monday, with total federal spending topping $3 trillion for the first time and budget deficits projected to hit $400 billion this year and next for the first time since 2004.

Bush's $3.1 trillion fiscal 2009 budget projects a surplus in fiscal 2012, as he promised last year, as the short-term effects of the economic stimulus package are erased by spending cuts and higher tax receipts as the economy recovers. The budget makes no allowance for the cost of preventing the alternative minimum tax from hitting more middle-class taxpayers beyond a temporary patch for the 2008 tax year, as well as costs associated with the wars in Iraq and Afghanistan beyond a $70 billion installment for fiscal 2009. Democrats said those omissions -- plus spending cuts they are unlikely to enact -- add up to a budget that is unrealistic and largely dead on arrival.

"This budget will be quickly forgotten," Senate Budget Committee Chairman Kent Conrad, D-N.D., said in a statement.

Bush said the two principles guiding its development were "keeping America safe and ensuring our continued prosperity." To that end, Bush would boost security-related funding, including the Defense and Homeland Security departments and international affairs by $44.9 billion over last year, an 8.2 percent increase. By contrast, nonsecurity discretionary spending would grow by 0.3 percent, with cuts proposed for six Cabinet departments and the EPA. That includes popular programs such as low-income heating assistance, which faces a 17 percent cut, and state and local law enforcement grants, slated for a 61 percent cut.

Senate Commerce-Justice-Science Appropriations Subcommittee Chairwoman Barbara Mikulski, D-Md., called that figure "staggering" at a time when violent crime is on the rise.

Bush also calls on Congress to permanently extend his 2001 and 2003 tax cuts, set to expire in 2010.

"Above all, my budget continues the pro-growth policies that have helped promote innovation and entrepreneurship. I will not jeopardize our country's continued prosperity with a tax increase," Bush said.

Extending the tax cuts would cost about $2 trillion over the next decade, although tax receipts would still grow at a healthy clip, adding nearly $1 trillion in revenues during that period. A series of reductions in mandatory programs, primarily Medicare, serve to lower deficits in the out years, although many in Congress are likely to find them politically unpalatable.

Bush is proposing about $619.4 billion in net mandatory program savings -- assuming some increases, including $50 billion more for the State Children's Health Insurance Program over 10 years. The largest reduction comes from Medicare, where Bush proposes to cut $556.4 billion from its rate of growth over the next decade. Medicaid would take a $46.7 billion hit.

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Budget office predicts growing deficit but no recession next year

Peter Cohn — Wed, 23 Jan 2008 00:00:00 -0500

The Congressional Budget Office is forecasting that, after three years of declining budget deficits, the fiscal 2008 shortfall will rise to $219 billion, up from $163 billion last year. The estimates do not factor in the costs of wars in Iraq and Afghanistan, extensions of expiring tax cuts and the economic stimulus package.

Senate Budget Chairman Kent Conrad, D-N.D., estimated that about 80 percent of the $140 billion to $150 billion impact of the stimulus will be felt in this fiscal year, along with $30 billion more in war costs, for an fiscal 2008 deficit actually exceeding $350 billion. The new forecasts "show an explosion in federal deficits and debt if we continue to follow the president's deficit-financed tax and spending policies," he said in a statement.

The report noted that if President Bush's 2001 and 2003 tax cuts were extended, if Congress continued to prevent the alternative minimum tax from hitting more taxpayers and if discretionary spending continued to grow beyond inflation, it would add $5.7 trillion to the deficit over the next 10 years when debt service is factored in. At the end of five years, instead of being in balance, the budget actually would have a deficit of $402 billion, CBO said.

The budget outlook in the next decade will be affected by the growth of Medicare and Medicaid and by more retirees eligible for Social Security.

"Attaining fiscal stability in the coming decades almost certainly will require some combination of reductions in the growth of spending and increases in taxes as a share of the economy," CBO said. "If tax revenues as a share of GDP remain at current levels (roughly 19 percent of GDP), additional spending for Medicare, Medicaid and Social Security will eventually cause future budget deficits to become unsustainable."

Senate Budget ranking member Judd Gregg, R-N.H., called it "disappointing" that Democrats last year did not act to rein in major entitlement programs but expressed hope they would this year.

With both parties scrambling to put together an economic stimulus program, CBO said the economy probably will "slacken further in 2008" but that it did not expect the slowdown to be large enough to register as a recession. Inflation-adjusted GDP growth is projected to slow from an estimated 2.2 percent last year to 1.7 percent this year, before rebounding to 2.9 percent in 2009. Employment growth will slow further and unemployment will average 5.1 percent this year, CBO said.

"Today's report provides the latest evidence that we should act quickly to strengthen the economy, and that we should do so in a way that is mindful of the long-term budget challenges that we face," House Budget Chairman John Spratt, D-S.C., said at a hearing this morning on the CBO estimates.

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