Bankrupting America’s Spending Daily

| April 1 2013

Spending Daily | April 1, 2013

New Federal Department Unveiled Aimed Aimed At Tackling Government Waste
Slugline reports, “With the federal debt nearing $17 trillion, the White House will announce today the formation of a new federal agency to deal with the crippling spending and waste in Washington. The new Department of Spending and Management (SPAM) will have the largest combined budget of any federal department in the administration. According to one senior administration official, the size and scope of the department is unprecedented: ‘Tackling the waste in Washington is the highest priority, and so we wanted it to have a large, expansive budget to give them the tools they need to get the job done.’ He went on to explain that the department will be fully staffed with the best and brightest from across the nation. No expense shall be spared in making sure SPAM can function as a full semi-autonomous force against overspending. The department will set up a new bureaucracy with twenty-four subdivisions. Each subdivision will operate with its own budget that will increase each year, regardless of inflation.”

“Sequester Impact Remains Elusive”
According to The Wall Street Journal, “The sequester, the series of federal budget cuts that went into effect March 1, remains for many in this city a theoretical concept. A recent tour through Baltimore suggests that officials who run programs affected by Washington’s across-the-board cuts are seeking ways to pare their budgets in ways that don’t directly affect services.  Among the approaches: trimming operating hours, asking existing workers to take on new duties, or hoping volunteers or donors will step up. And since many potential cuts have yet to take place, the real-world impact so far has been blunted. Consider the approach of John Hoey, president of the Y of Central Maryland, which runs several federal programs for the region’s poor families. Mr. Hoey is preparing for a $250,000, or 5%, cut to the Y’s budget for programs in Baltimore County, including the Head Start early-education program. Rather than reducing enrollment, Mr. Hoey has cut unfilled positions and is thinking about asking teachers to help serve lunch or double as bus attendants. In the past, Baltimore County’s wealthy residents have donated funds to help fill gaps in federal funding, and he hopes that will happen again. ‘The sky won’t fall,’ Mr. Hoey said.”

“Sequestration: Cuts’ slow rollout yields no-quester for travelers”
POLITICO reports, “More than a month after Transportation Secretary Ray LaHood warned of ‘calamity’ in the skies, travelers are still flying. Airlines aren’t yet canceling flights. And there’s no sign of the long lines the Obama administration warned everyone to expect when automatic spending cuts hit March 1. What happened? The much-feared budget ax is turning out to be a slow-rolling series of snips, with effects that have been much more gradual or modest than projected. Airlines have yet to suspend or cancel flights in response to the cuts, even though LaHood predicted during a White House appearance Feb. 22 that they would do so ‘within the next 30 days.’”

State Economies Show Most Improvement Since 2006
Bloomberg reports“The economic health of 44 U.S. states improved in the fourth quarter, the most in any period since 2006, as almost all benefited from growing employment and personal income. The gains matched the total in the second quarter of 2006, more than a year before the 18-month recession began, according to the Bloomberg Economic Evaluation ofStates index. States may not continue to improve at the same pace, according to Chris Mauro, New York-based head of municipal strategy at RBC Capital Markets LLC. Growth in personal income was driven by payments such as dividends andbonuses being shifted to the fourth quarter ahead of expected tax increases, he wrote in a March 28 report. ‘The fourth quarter’s gains are likely unsustainable and we expect state revenue growth to return to its recent anemic level in coming quarters,’ Mauro wrote. The BEES index shows state economies strengthening in the past year. Twenty-nine states, led by energy producers North Dakota and Colorado as well as Michigan, showed improvements to their economies in 2012 compared with 17 in the prior year.”

Turns Out There Are Smarter Ways for Congress to Cut Spending 
The Washington Post reports, “The sequester was supposed to be something new in Washington: a budget cut you couldn’t beat. Once it hit, it hit. The money was gone, and nobody could get it back. That turned out to be true — for about three weeks. Then somebody beat it. Last week, President Obama signed a spending bill that gave the Agriculture Department’s food inspectors what everybody else wanted: a get-out-of-the-sequester card. Their program got $55 million in new money, which replaced almost all of what the sequester took. There’s a story there, about how power and lobbying can still make money appear in Washington, even in this age of austerity. It started with sharp political theater. Agriculture Secretary Tom Vilsack insisted that the sequester would force him to shut down all U.S. meat production on at least 11 days. The inspectors union didn’t believe that. Neither did many in the powerful meat lobby. But they were too worried not to help Vilsack anyway. After an extensive campaign, the Senate gave Vilsack the money. So the sequester can be hacked. Now, other interest groups are waiting: police officers, airport executives, Border Patrol agents. The question is: Can it be hacked again?”

USPS Asks Congress for Assistance While Still Pushing to End Saturday Mail
The Hill reports, “The U.S. Postal Service did itself no favors on Capitol Hill by unveiling its plan to limit Saturday delivery last month, at a time when the agency is still prodding lawmakers for assistance. Congress has long maintained that it has oversight over how frequently the Postal Service delivers the mail, and Postmaster General Patrick Donahoe’s decision to move unilaterally rubbed some lawmakers – including Senate Majority Leader Harry Reid (D-Nev.) – the wrong way. Observers both on and off Capitol Hill say the Postal Service’s approach didn’t win them any new friends at a key time, when the agency continues to push for broader postal legislation. USPS is looking for relief from billions of dollars in required healthcare payments for future retirees and other provisions. The service says the relief is necessary, in addition to the Saturday delivery changes, for its long-term fiscal health. … The Postal Service lost close to $16 billion in all in fiscal 2012, with roughly $11 billion of that coming from defaults on the healthcare prepayments.”

Momentum Growing for Fixing Broken Budget Process
The Hill reports, “There is new momentum to revamp Washington’s Groundhog Day-like budget process. The Senate’s recent vote to embrace a biennial budget, coupled with Senate Majority Leader Harry Reid’s (D-Nev.) endorsement, has significantly boosted the chances it could pass in this Congress. The budget revamp would require the president to propose a budget every other year at the beginning of each Congress. Backers say a biennial budget would give lawmakers more time to focus on oversight and policy areas instead of constantly trying to meet spending deadlines, which are often missed. Sens. Johnny Isakson (R-Ga.) and Jeanne Shaheen (D-N.H.) and Rep. Joe Wilson (R-S.C.) have introduced bills on budget reform. Isakson successfully passed an amendment on the Senate’s non-binding budget resolution on this issue earlier this month. … Wilson has said that shifting from a one-year to a two-year budget process ‘will allow Congress to devote more time and attention to the wasteful programs and policies that need reform.’ Wilson’s bill has been referred to three committees: Budget, Rules, and  Oversight and Government Reform.”

Lasting Effect Of Economic Policies Has Been “Meager”
Jeffrey Sachs editorializes in The New York Times, “The 2009 economic stimulus package has come and gone. So, too, have the temporary payroll tax cuts of 2011-12. Most of the Bush-era tax cuts, in addition, have been made permanent. Yet the lasting effects of these policies have been meager. The economy is still sluggish. Unemployment remains high, especially for lower-skilled workers. Inequality of incomes is higher still. What’s more, the fundamental structural challenges to our economy remain. Deeply disruptive forces — rapidly evolving information technology, globalization and environmental stresses — are radically reshaping the jobs market. Decent jobs for low-skilled workers have virtually disappeared. Some have been relegated to China and emerging economies, while others have been lost to robotics and computerization. …It’s time to move beyond such transitory and piecemeal policies. Our underlying economic problems are chronic, not temporary; structural, not cyclical. To solve them, we need a systematic long-term approach.”

Coming Soon: Dynamic Scoring from the CBO
The Wall Street Journal reports, “Congress has a dreadful record predicting the economic impact of its policies, in part because it relies on computer models that are as reliable as tarot cards. So it’s a good sign that before going on recess a majority of the Senate endorsed ‘dynamic scoring’ of changes in tax law. For decades the official forecasters at the Congressional Budget Office and Joint Committee on Taxation have assumed that changes in tax rates have little impact on how businesses and households behave or on the competitiveness of the U.S. economy. In this alternative universe, people work nearly as much at a 60% income tax rate as they do with a 30% rate, and investors don’t care all that much if the tax on capital gains is 15% or 30%. So it’s notable that during its recent budget debate the Senate voted 51-48 for a nonbinding resolution that would require CBO to produce a dynamic score for tax changes. All Republicans supported the measure, joined by Democrats Mark Begich of Alaska, Kay Hagan of North Carolina, Heidi Heitkamp of North Dakota, Tim Kaine of Virginia, Joe Manchin of West Virginia and Claire McCaskill of Missouri. CBO would still do its official ‘static score,’ assuming only minor behavior changes, but Congress would in the future have a second set of more realistic projections to consider.”

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