The Washington Independent - U.S. news and politics - washingtonindependent.com: Stories by Mike Lillis

Sorry Kids, SCHIP Fails Again

Mike Lillis — Wed, 23 Jan 2008 23:46:48 GMT

To the surprise of no one, the House failed today to override Bush’s veto of SCHIP, the popular children’s health care program. Foreseeing this inevitability, last month Congress extended current levels of funding until after November’s elections (with a little extra to prevent states from running dry). But anyone who believes the issue won’t resurface in the campaign season didn’t follow last year’s debate very closely.

Indeed, the issue exposes the very heart of the (mostly) partisan ideological controversy over the role of government in providing health coverage.

Central to the administration’s opposition, the bill would have allowed some states to cover children from families with higher incomes than the original State Children’s Health Insurance Program permitted. Supporters say those expansions make sense, particularly in high cost-of-living areas like New York and New Jersey. But Bush and his congressional supporters argue the trend would allow perfectly solvent American families to access federally subsidized coverage at the expense of private insurance markets (though ironically, the insurance industry supported the legislation).

The White House also objected to the funding mechanism (necessary under the Democrats’ self-imposed pay-go rules), which would have hiked the federal per-pack cigarette tax to $1, up from 39 cents. Hoping to distance himself from his father’s reputation, Bush has said repeatedly that a tax increase is off the table.

To the tobacco companies and the strictest free marketers, the veto (and today’s vote to sustain it) constitutes good policy. But the move is a gamble, as a sinking economy, rising health care costs, and the evolution away from employer-sponsored coverage have all conspired to strain an ever-increasing number of the nation’s families in recent years. An estimated 45 million Americans are currently uninsured — about 9 million of them children. Faced with that dismal trend, a large majority of the nation’s governors, Democrats and Republicans alike, had urged the president to approve the bill.

Instead, with the blessing of most House Republicans, he vetoed it. Twice. And Rep. Chris Van Hollen (D-MD), chairman of the Democratic Congressional Campaign Committee, has long-vowed to use GOP opposition as a tool in his party’s election-year strategy. (Indeed, a high-profile link on the DCCC Web site sets “BUSH vs. THE KIDS.”)
From the House floor Wednesday, in a fit of spontaneous wishful thinking, Rep. Pete Stark (D-CA) quoted his son: “Dad,” Stark said. “If they don’t pass this health insurance [program], they may fire all the Republicans.”

To that, Stark added: “I’d hate to see that.”

Maestro, Indeed

Mike Lillis — Thu, 24 Jan 2008 23:29:21 GMT

Photo credit: Lauren Burke, WDCPix

As the mortgage-market meltdown continues to push the Iraq War from the headlines and put sweat on the brows of Washington’s policymakers, it’s heartening to learn that some folks have done well by the economic chaos. Still, did it have to be the guy who, from Washington, helped produce the lending crisis to begin with? (Yes, it did.)

Alan Greenspan, who left his post as chairman of the Federal Reserve in January 2006, just took a consulting job with Paulson & Co., a New York-based hedge-fund manager which last year made profits estimated between $12 billion and $15 billion betting that the bottom would drop out of the housing market — a trend to which many observers say Greenspan contributed by holding interest rates artificially low during his tenure.

“Greenspan will spend the rest of his life ducking and dodging responsibility for this crisis,” said Lawrence Hunter, a Jack Kemp conservative and economist at the Texas-based Institute for Policy Innovation.

Meanwhile, the 18-year Fed chairman’s gotta pay the rent somehow. Maestro, indeed.

Conservatives Blast Stimulus Deal

Mike Lillis — Fri, 25 Jan 2008 05:00:37 GMT

Photo credit: Lauren Burke, WDCPix

How seriously do Washington policymakers view current economic troubles? It has taken just days for congressional Democrats to agree with their GOP colleagues and the White House on a proposed solution.

The Bush administration and congressional leaders agreed Thursday to a $150 billion economic stimulus proposal that would give direct rebates to low- and middle-income Americans while lending significant tax breaks to businesses.

Supporters say this will rejuvenate the economy in the middle of a housing crisis that many experts fear could sour the entire economy. That concern has created an urgency among policymakers to enact a quick solution. It has also united Democratic and Republican leaders in a way rarely seen in this Congress.

“Our goals were to provide working Americans who are struggling in these difficult economic times with timely, targeted and temporary relief," House Speaker Nancy Pelosi (D-CA) said, "and to quickly give our economy a shot in the arm. We have accomplished both goals.”

Under the final proposal, individual taxpayers would be eligible for rebates up to $600 this spring, with couples eligible for as much as $1,200. Families receive $300 per child.
A number of economists argue that low- and middle-income earners are most likely to turn around quickly and spend their rebates, supplying the retail economy with the immediate boost they say it needs. As a result, individuals earning more than $75,000 — and couples making more than $150,000 — would not qualify for the rebates.

“Most of the money given to low and middle income households will get spent,” said Martin Feldstein, Harvard University’s George F. Baker professor of economics, who was chief economic adviser in the Reagan administration, responding in an e-mail.

In a deal with congressional Democrats, GOP negotiators agreed to include rebates for low-income workers earning too little to pay income tax, but who still contribute to the Medicare and Social Security programs through payroll taxes. In return, Democrats allowed a larger portion of the stimulus proposal to target businesses. About a third of the package will allow businesses that buy new equipment this year to expense an additional 50 percent of the cost.

But even as the White House and congressional leaders are claiming victory, some economists are questioning both the wisdom and timing of the chosen model.

Free-market conservatives are especially up in arms about the package. Many wondered why the White House — which has shown no reluctance to buck the Democratic Congress when it comes to stem cells, troop withdrawal timelines and children’s health — was so quick to compromise its conservative principles with direct worker rebates.

“We think it’s silly and stupid,” said Ryan Ellis, tax policy director at American’s for Tax Reform, an anti-tax advocate. “If you end up like that because the Democrats made you do it, that’s fine. But don’t come out and negotiate with yourselves.”

Brian Riedl, senior policy analyst at the conservative Heritage Foundation, echoed that sentiment, arguing, “tax rebates fail because they don’t encourage productivity or wealth creation. No one has to work, save, invest or create any new wealth to receive a rebate.”

“All this talk about the stimulus is just crap — just political crap,” said Lawrence Hunter, an economist with the Institute for Policy Innovation, a Texas-based conservative think tank. “I thought, at least among conservatives, that we’d come to understand that that doesn’t work.”

While the rebate plan has received the blessing of GOP leaders in both chambers, there are signals of dissension in the lower ranks. The Republican Study Committee, the caucus of House conservatives, has attacked the White House stimulus plan from the outset, contending that long-term tax cuts — not short-term rebates — are the better way to improve the economy.

“Conservatives know that it is never a bad time to let families keep more of their own money,” RSC Chairman Jeb Hensarling (TX) said in a statement. “However, temporary consumer tax rebates should not be confused with economic stimulus.

On Tuesday, Sen. Arlen Specter (R-PA) introduced legislation to accelerate the tax benefit of new business equipment, allowing businesses to claim 100 percent of the equipment’s value in the first year of use, rather than spreading the deduction over the current three-, five- and seven-year schedules. That, conservatives say, would produce both immediate and long-term economic results. “By allowing firms to deduct the cost of a new asset in year one, expensing spurs new investments quickly, which helps to drive immediate job creation,” Specter said from the Senate floor Tuesday.

Supporters of the stimulus package argue that such changes alone would not produce results as immediate as those gotten by targeting working class Americans with cash rebates.
But many conservative policy analysts dispute that claim, arguing that those low- and middle-class populations are also most likely to suffer from credit card or other form of debt. Instead of buying shoes and VCRs, these analysts say, rebate recipients will put their checks toward their more pressing obligations. Policymakers who think rebates will produce an economic turnaround are delusional, said Ellis, the anti-tax advocate. “They’re not going to get it.”

On Tuesday, Treasury Secretary Henry M. Paulson defended the rebate strategy to an audience at the U.S. Chamber of Commerce. He said the current housing crisis was “inevitable after years of unsustainable home price appreciation,” but the economy can be spared considerable damage if the stimulus plan is enacted quickly, affects a broad swath of the population, and remains temporary. Perhaps anticipating criticism from the right, he was quick to emphasize this is a one-time proposal.

“Our focus on short-term growth,” Paulson said, “does not supersede or minimize our commitment to the economic policies which we know to be in our country’s long-term best interest — a pro-growth tax system, entitlement reform and a balanced budget.”

Whatever the solution, most economists agree the country is headed for a tough stretch. In December, only 18,000 new jobs were created nationwide, nowhere near the 70,000 projected by industry analysts. That month, the unemployment rate jumped to 5 percent, up from 4.7 percent the month before, according to the Labor Department. Combined with oil prices flirting with $100 per barrel and a decline in retail spending — as evidenced by a lackluster holiday shopping season — there has been pressure on Washington to inject a dose of consumer confidence, with hopes that it becomes epidemic.

Aiming to avert the decline, Federal Reserve Chair Ben Bernanke announced Tuesday that the reserve board was clipping interest rates three-quarters of a point, down to 3.5 percent, the sheerest one-time drop on record. That move reversed the market’s free fall, although some critics are questioning whether a strategy of creating cheaper credit is the wisest way to address a crisis that was caused, in part, by cheap credit.

Timing has also become an issue, as a number of financial experts indicate that Congress has an unflattering history of reacting slowly to economic downturns. Michael Sampson, a professor of economics at American University, said lawmakers usually react to sharp fluctuations in the stock market, like those occurring now, but “it’s too late. By the time the checks arrive, the problem will probably have fixed itself.”

The rebate strategy has also led to charges of political pandering—for neither party wants to bear the blame for a sinking economy in the middle of a high-stakes election year. “The bad parts of the debate have November in mind,” Ellis said, referring to the direct rebates. “It’s as old as the Romans giving out free bread to the masses.”

Medicaid ID Law Backfires

Mike Lillis — Mon, 28 Jan 2008 05:12:10 GMT

Photo Credit: IStock Photo

Illustration by: Matt Mahurin

A controversial federal law designed to keep illegal immigrants out of Medicaid is still ensnaring U.S. citizens 18 months after it took effect. It has prevented tens of thousands of eligible U.S. citizens from enrolling in the program, according to Medicaid officials representing at least a dozen states.

The law, passed in 2005 as part of a sweeping effort to reduce budget deficits, requires that Americans wishing to enroll in Medicaid must provide original-copy citizenship and identification documents. Previous rules allowed applicants to self-declare their citizenship status, under penalty of perjury. The legislation was the brainchild of Georgia GOP Reps. Nathan Deal and the late Charlie Norwood, who pushed the stricter guidelines to target the illegal immigrants who they said were infiltrating the program at the taxpayers’ expense.

But the new law, which took hold in July 2006, drew immediate criticism from many state health officials, who said the tighter rules prevented participation by thousands of eligible beneficiaries who had trouble gathering their documents. A year and a half later, many officials say, this effect remains largely unchanged.

In Virginia, for example, Medicaid enrollment among children alone fell by roughly 14,000 in the eight months after the installation of the new guidelines. Rebecca Mendoza, the director of the Division of Maternal and Child Health for Virginia’s Dept. of Medical Assistance Services, said enrollment is creeping back up, but remains below what it was when the federal rules took effect. On July 1, 2006, total participation was 352,133, she said, while today the figure stands at 347,503.

Michigan officials tell a similar tale. Paul Reinhart, Michigan’s Medicaid director, said his program saw “straight linear growth” for most of the past seven years. Enrollment climbed steadily over that time, he said, from about 1 million to more than 1.5 million. But that growth stopped in the wake of the new documentation rules, he said, and enrollment has hovered at roughly 1.5 million for nearly 16 months.

“Up here in Michigan," Reinhart said, "the Canadians aren’t exactly banging down our door. What’s probably happened is that people have had a tough time getting their paperwork together.”

Michigan's economy, Reinhart added, has been suffering for years as foreign car makers have proven successful competitors for Detroit's one-time powerhouse market. For that reason, health officials expected Medicaid rolls to continue growing. The plateau effect, Reinhart said, can be attributable only to the citizenship guidelines. "There certainly hasn't been an economic turnaround," he said.

Michigan and Virginia are not alone. Medicaid enrollment in Colorado had hovered around 400,000 in 2005 and early 2006, according to state documents. In the wake of the new guidelines, however, participation figures fell fairly steadily for 12 months, bottoming out at around 380,000. Last month, enrollment remained under 381,000.

“Medicaid enrollment has stayed flat,” said Joanne Lindsay, a spokesperson for Colorado’s Dept. of Health Care Policy and Financing, “and we know anecdotally that parents who are not citizens are much less likely to get their kids signed up, even if the kids are citizens. They’re very apprehensive.”

In response to that trend, Lindsay said, Colorado is in the process of deputizing schools, non-profits and other community-based groups with the power to verify citizenship documents for purposes of Medicaid enrollment. That process, she said, should eliminate any apprehension by allowing individuals hoping to get benefits to submit their papers without having to visit a government office.

Supporters of the new law argue that the the restrictions will save the Medicaid program millions of dollars by weeding illegal immigrants from the rolls. Chris Riley, Deal’s spokesman, said late last week that that objective has never changed. Riley said the law allows for plenty of state flexibility in managing the new rules. For example, he said, state attorneys general have the right to determine which applicant documents are acceptable. If some states are having trouble enrolling eligible citizens, he added, it’s only because they have failed to exercise this flexibility.

But in June 2006, the Centers for Medicare and Medicaid Services sent states restrictive guidelines detailing which documents the agency would accept. Jeff Brenn, chief of eligibility and payment for Nevada’s Division of Welfare and Supportive Services, said there is little flexibility in that regard. “CMS has been very specific about documentation,” he said.

Other state officials were even terser in reaction to Riley’s documentation claims.

“That’s patently false," said Andrew Allison, deputy director of the Kansas Health Policy Authority, "and it illustrates that this law was crafted by those with no understanding whatsoever of the Medicaid program. It’s a one-size fits all approach to a problem that was never documented.”

Indeed, before the law was passed, Bush administration officials questioned the extent of the problem. In 2005, Mark McClellan, then head of the Centers for Medicare and Medicaid Services, responded to an internal inspector general report with the following: “While there are vulnerabilities in states’ accepting self-declaration of citizenship, states have little evidence that many non-eligible, non-citizens are receiving Medicaid as a result.”

In a further curious trend, there is evidence that the proof-of-citizenship rules are keeping more African-American and white beneficiaries out of Medicaid than Latinos. An analysis performed last spring by Virginia Medicaid officials, for example, found that enrollment among black and white kids fell by thousands in the wake of the new guidelines, while participation among Latinos continued to climb.

More recently, Kansas health officials conducted a similar ethnic study, with similar results. According to state figures, overall Medicaid enrollment between June 2006 and February 2007 fell 5.9 percent for all populations. Yet, for Latinos, participation dropped just 2.6 percent, while for whites, it dropped 6.2 percent. African-Americans fared worst of all, with enrollment dropping 8 percent.

Allison attributed much of the overall drop to the sudden increase in paperwork his office was forced to manage as a result of the new documentation requirements. “If you want to reduce enrollment, just add administrative burden,” he said.

But as for the discrepancies among the different ethnicities, Allison had a different theory, originated by Virginia officials. Latinos, he said, are accustomed to requests for their citizenship documents, and therefore have them ready. Low-income African-Americans and whites, on the other hand, may have rarely been asked for those documents, and, as a result, have difficulty producing them. In no case does that mean that these people are not eligible citizens, he added.

“You can only imagine," Allison said, "that this policy didn’t hit its target."

Iowa health officials echoed Allison's criticisms. “This program is denying service to many more citizens who should be eligible than it is denying illegal immigrants,” said Roger Munns, a spokesman for Iowa’s Dept. of Human Services. “It’s quite clear that we’ve got people coming to our door who are, in fact, citizens. But they simply can’t locate their documents.”

But not all states have seen drops in Medicaid enrollment as a result of the new guidelines. Health officials in Minnesota, for example, said that when the rules were installed they took aggressive steps, like retrieving birth records from other states. As a result, there has been no tangible effect on participation, they said.

Several other states already had proof-of-citizenship requirements in place before the federal law arrived. Arizona was one. As a result, “the transition was much easier for us,” according to Rainey Daye Holloway, spokeswoman for the Arizona Health Care Cost Containment System. “We haven’t experienced the drop that other people have.”

Still other states have yet to install the new guidelines. California, which has far and away more Medicaid participants than any other state, is still in the process of taking the rules statewide. But health officials there said they hope to use the experiences of other programs to ease the process. “We do expect that it will affect different populations differently,” said Toby Douglas, deputy director of health care policy at California’s Dept. of Health Care Services.

Of the 3.2 million beneficiaries who will be affected by the citizenship guidelines, Douglas said, state officials have already determined that about half were born in California. For those individuals, he said, identification documents will be required, but proof-of-citizenship papers will not.

Meanwhile, health officials in states that have experienced problems are hoping time will allow eligible citizens to locate their documents and sign on to the program — a process some say has taken longer than they expected.

“I thought that was going to happen,” said Michigan’s Reinhart, “but it hasn’t happened yet.”

Term Limits, Sen. Kennedy?

Mike Lillis — Mon, 28 Jan 2008 23:44:52 GMT

In a much-hyped rally announcing his endorsement of presidential hopeful Barack Obama, Sen. Edward Kennedy (D-Mass.) piled heaps of praise on the young Illinois senator Monday. Obama, Kennedy said, will be a fighter, an inspirer, a great uniter in the image of Kennedy's brother Jack, who came to power in another era of ideological bickering.

In a not-so veiled reference to the partisan rancor that Obama's chief primary rival, New York Sen. Hillary Clinton, seems to incite, Kennedy heralded Obama as the only candidate whose "extraordinary gifts of leadership and character [are] matched to the extraordinary demands of this moment in history."

That wasn't all. In backhanded slaps at Clinton, Kennedy also praised Obama for choosing public service above corporate law, opposing the Iraq War from the start, and inspiring an outpouring of support that transcends race, gender and even political party.

Kennedy then concluded his speech by imploring the (mostly student) crowd gathered at American University in Washington "to have the courage to choose change. It's time again," he said, "for a new generation of leadership."

Question: Does this apply to congressmen as well, or just the executive branch? Because it sure is a curious sentiment coming from an eight-term senator - first elected when he was 30 - who just last year celebrated his 45th year in the chamber.

Term limits, anyone?

Bush Denounces Congress for Earmark Spending

Mike Lillis — Tue, 29 Jan 2008 06:04:58 GMT

Photo by: Lauren Burke, WDCPix

The recent accord between the Bush administration and congressional leaders was dashed Monday night, as President George Bush denounced lawmakers for overspending and Democratic leaders returned the critique.

Using his final State of the Union address as the venue, Bush threatened to veto any spending bill that contains more than $9 billion in earmarks -- the funds pushed by individual lawmakers for pet projects, often benefiting their own districts.

Furthermore, Bush said he will direct all federal agencies - under an executive order he plans to issue Tuesday - to ignore any future earmark not explicitly approved by Congress. The administration contends the decree will eliminate the common practice of hiding earmarks in the reports that often accompany legislation, but don't appear in the legislation itself.
"If these items are truly worth public funding," Bush said, "Congress should debate them openly and hold them to a public vote."

Most congressional Republicans applauded the call to rein in spending. Sen. Charles Grassley (R-Iowa), the ranking Republican on the Finance Committee, said the moves would go a long way to stem lawmakers' "pork-barrel" projects. "It's time to reform the appropriations process and control other spending in Washington," Grassley said in a statement.

But Democrats were quick to remind the president of his complicity in the process.

"President Bush today said that earmarks have tripled in number over the last decade," Sen. Robert Byrd (D-W.Va), chairman of the Appropriations Committee, said in a statement Monday, "but he forgot to tell the public that he signed those earmarks into law."

Byrd, universally considered the chamber's premier constitutional scholar, also defended the earmark process as a vital legislative branch function. "The Constitution grants to the Congress the power over the purse," he said. "The operation of the government -- to enforce our laws, to serve our people, to protect our liberties -- depends upon the Congress providing the funds necessary to do so."

The annual appropriations process is often marked by conflicts between the White House and Congress. But the president has been particularly critical of congressional spending since the Democrats took control of both chambers a year ago. In a game of budgetary chicken played out last month, Bush succeeded in eliminating $22 billion in domestic spending sought by Democrats. Still, the sweeping appropriations package that was ultimately approved contained more than 11,000 earmarks totaling more than $17 billion.

Bush on Monday promised to veto any spending bill carrying half the number or cost of the earmarks in last year's bill. His statement drew hearty applause from most Republican lawmakers.

But some are skeptical of policy-makers' appetites to limit their spending. Sen. Tom Coburn (R-Okla.), a leading budget hawk, wondered why Bush would hinge his veto threat on a policy that still tolerates thousands of earmarks. Instead, in a statement, Coburn noted, Congress should "lead by example and pursue earmark reform by not seeking earmarks [at all]."

Coburn, who has often riled members of his own party with his budget-process criticisms, pointed out that the spending issue is less partisan than it is often portrayed. Bush's focus on earmark reform, Coburn said, "is an indictment of Congress and, in particular, his own party. Congress could cut earmarks in half if Republicans in Congress stopped asking for earmarks. The party of limited government and personal responsibility should not have to look to the president to save it from itself."

There are signs both sides are ready to take steps in that direction. Last week, House Republicans delivered a letter to House Speaker Nancy Pelosi (D-Calif.) urging Democrats to halt the earmark process and establish a bipartisan oversight committee.

"The earmark process in Congress has become a symbol of a broken Washington," the Republicans wrote. "Wasteful pork-barrel spending has outraged American families and eroded public confidence in our institution. Both of our parties bear responsibility for this failure."

With the approval ratings of both Congress and President Bush hovering at 30 percent, both sides are treading lightly in the first month of this election year. In a glaring break from the partisan bickering that marked most of last year, the White House and the Democratic majority Congress came together last week to announce agreement on legislation they say will pump some life into the sagging economy. Central to that plan, low- and middle-income workers would receive direct rebates of between $300 and $600.

That proposal faces an uncertain future, however, after Senate Democrats introduced a plan of their own Monday. That proposal includes a number of provisions favored by party leaders but dropped in negotiations with Republicans. For example, the Senate plan, introduced by Finance Committee Chairman Max Baucus (D-Mont.), would extend federal unemployment insurance by 13 weeks. It would also grant rebates to some seniors receiving Social Security.

Bush warned in Monday's speech, however, that such additions would either delay or derail the delicate bipartisan compromise, "and neither option is acceptable."

In an interview with FOX News Monday morning, New York Sen. Charles Schumer, the chamber's third-ranking Democrat, was optimistic that the stimulus package could usher in a new era of bipartisan cooperation. "I think the stimulus package is a good opening shot," Schumer said, "because it shows that Democrats can work together with Republicans [and] the president can work together with Congress. Neither side gets everything they want, but we get something done."

Later in the day, however, that bipartisanship fell apart when the Democrats blocked passage of a controversial wire-tapping bill. With the administration's surveillance authority set to expire Feb. 1, lawmakers must pursue a short-term extension of the existing program.

"In short," said Senate Minority Leader Mitch McConnell (R-Ky.), "the Senate faces a legislative logjam that ensures that we will let the Feb. 1 deadline come and go without making a reasonable effort to enact a law."

Democrats Divided Over Rebates for Wealthy Americans

Mike Lillis — Wed, 30 Jan 2008 05:11:29 GMT

Illustration by: Matt Mahurin

A Senate panel's plan to boost the economy with direct rebates to even the wealthiest Americans is moving forward this week. But the strategy has already raised the eyebrows of many well-placed Democrats, who contend that higher-income folks have no business receiving the benefit.

Senate Majority Leader Harry Reid (D-Nev.) said Tuesday that the proposal, introduced Monday by Senate Finance Chairman Max Baucus (D-Mont.), has caused many in the caucus to "feel that the gag reflex is coming upon everybody."

Others were less graphic, but equally piqued. North Dakota Sen. Kent Conrad (D), chairman of the Budget Committee, and David Walker, the head of the nonpartisan Government Accountability Office, argued Tuesday that any rebate strategy must target those most likely to turn around and spend the cash quickly. Upper-income earners, they said, are hardly that group.

"Though it's not to my advantage," said Walker, the U.S Comptroller General, "I don't believe that meets the definition of targeted."

Under Baucus' proposal, single Americans who claim at least $3,000 in qualifying income on their 2007 tax return will receive a $500 rebate. The rebate doubles for couples filing jointly, while families would receive an additional $300 for every child under age 17. Baucus says the plan would cost about $161 billion this year, and another $34 billion in 2009.

But in a significant departure from the $150 billion House proposal -- finalized last week with the blessing of the Bush administration - the Senate's strategy would grant rebates to even the wealthiest Americans. The House bill, by contrast, would disqualify individuals making more than $75,000, or couples earning more than $150,000. The distinction prompted an outcry from Conrad, who wondered Tuesday how $1,000 more in the pocket of Bill Gates, Barry Bonds, or even himself would stimulate the economy.

"I mean, you know, we don't need a check," Conrad said of his family, "[and] wouldn't spend it if we got it. So that doesn't stimulate the economy … I think, at some point, we would become ridiculed if we start just sending checks, regardless of whether it has any stimulative effect."

Baucus' bill contains a number of items supported by Democrats but not included in the House proposal. Federal unemployment insurance, for example, would be extended for 13 weeks beyond the current 26. The Senate version would also benefit millions of seniors by allowing Social Security benefits to count toward the minimum income requirements, dictating who gets rebates. But it's the absence of income caps that's received much of the attention--and criticism.

"To take off the caps causes me to want to gag. OK?" Reid said. "But other than that, I like it."

Reid said Baucus "heard from plenty of people in our caucus today," but he gave no indication if the Montanan is willing to alter his stance on the issue.

Baucus' office did not respond to requests for comment, but the Finance Committee plans to consider the bill Wednesday. If the panel fails to add the caps, Reid said, there would be an effort to do so on the Senate floor.
It's not the first time Baucus has bucked his party on a high-profile issue. The moderate Democrat was a central supporter of the Bush administration's successful 2003 push to install a prescription drug program under Medicare. More recently, he was the only Senate Democrat to reject efforts to grant Washington a congressional vote. He is also facing reelection this year in a state that went 59 percent for Bush in 2004.

As the Democrats bicker, the Republicans are watching for developments. On Tuesday, Senate Minority Leader Mitch McConnell (R-Ky.) declined to commit to one bill above the other. "The important thing here is to see if we can get it done quickly, [and] do it on a largely bipartisan basis," McConnell said. "And the process for going forward is there are many different options, and I'm certainly not going to characterize my members' views on various pieces of either package."

Walker, for his part, offered a suggestion in the event the legislation is approved with the high-income rebates intact. Testifying before the Budget Committee, Walker told lawmakers that, based on the federal government's future commitments - including those surrounding Medicare, Social Security and veterans' benefits - Washington's unfunded liability now totals about $53 trillion, including the current $9 trillion debt.

With that in mind, Walker proposed that any check delivered to America's wealthiest families be accompanied by a bill for their share of the nation's total fiscal burden - currently $175,000 for every man, woman and child in the country.

"That might get people's attention," Walker said.

Death of a Tyrant

Mike Lillis — Thu, 31 Jan 2008 14:30:49 GMT

Suharto, the single-named general who ruled Indonesia for the last three decades of the last century, died this week of multiple organ failure. Reading over the official U.S. reaction (which expressed our condolences and characterized his reign as a period of "remarkable economic and social development"), you'd think this guy was a regular FDR. But if history means anything to anyone in this town, we might also have mentioned that Suharto was a tyrant who oversaw the killing of hundreds of thousands of people, with our backing, using our weapons. Indeed, if by "social development" we mean genocide, he was remarkably effective.

Some history: On Dec. 7, 1975, Suharto invaded the former Portuguese colony of East Timor, which had announced its independence nine days before. The general feared the independence movement was backed by China's communist regime. Or at least that's what he said. (U.S. documents characterized the movement as "vaguely left-wing"). What he really wanted was to annex the place - and he succeeded quickly. In July 1976, Indonesia declared East Timor as its 27th province, which it remained, practically speaking, until 1999.

Trouble was, the occupation wasn't terribly popular among a people who had just declared their sovereignty. For its part, the Indonesian military didn't show much patience for recalcitrance. In the 14 years of Indonesian control, an estimated 200,000 East Timorese were killed - representing a third of the original population.

And where were we in the midst of the mess? Well, the U.N. Security Council voted in April 1976 to force Indonesian troops out of East Timor and recognize the sovereignty of the new nation. Twelve countries approved the measure; the U.S. (and Japan) abstained.

Documents declassified over the past decade paint an even grimmer tale of U.S. complicity. On Oct. 5, 1975, then-Secretary of State Henry Kissinger was told by his staff that, "It looks like the Indonesians have begun the attack on Timor." Kissinger replied: "I'm assuming you're really going to keep your mouth shut on the subject."

Part of the reason for this gag-order hinged on Kissinger's desire to keep strong ties with the anti-communist Suharto in the immediate wake of the Vietnam War. But there were economic reasons as well: We wanted to continue selling him weapons.

Indeed, an analysis conducted by the Arms Trade Resource Center found that U.S weapon sales to Indonesia jumped from $12 million to $65 million from 1974 to 1975. U.S military aid, meanwhile, leapt from $17 million to $40 million between 1974 and 1976. All the regular suspects benefited, according to the analysis: Lockheed Martin, Colt Industries, General Motors - the list goes on.

But there was a threat to this cash cow: U.S. law forbids the use of U.S. weapons in overt invasions not initiated in self-defense. "Indonesia use of US-supplied weapons in an overt occupation of the territory, however, would contravene U.S. law," Kissinger wrote to President Gerald Ford in November 1975.

No matter. An analysis put together by the National Security Council just five days after the invasion found that American-supplied ships, planes and ground weapons were all used in the initial assault.

(The National Security Archive, a research shop run out of George Washington University, has complied an exhaustive document trail detailing America's role in Suharto's reign of terror. Brad Simpson, who directs the Archive's East Timor documentation project, said recently, "[T]hese declassified documents, detailing the long record of U.S. support for one of the twentieth century's most brutal and corrupt men, will contribute to our understanding both of Suharto's rule and of the U.S. support which helped make it possible.")

Despite reports of abuses, U.S. military aid continued to pour into the country until November 1991, when western journalists filmed an attack by Indonesian troops on an unarmed crowd marching to Santa Cruz cemetery. Two journalists - Allan Nairn and Amy Goodman - were beaten. Nairn, of the New Yorker, later told the Senate Foreign Relations Committee that the killing was indiscriminate.

"They executed schoolgirls, young men, old Timorese, the street was wet with blood and the bodies were everywhere," he said. At least 271 protesters were killed, with hundreds more "disappeared."

Nairn said he was spared only when the soldiers discovered he was an American. "We were, after all, citizens of the country that supplied them with M-l6s," he told the Senate panel.
Faced with a public image disaster, we quit shipping weapons to Suharto's Indonesia in the wake of the event, although restrictions were removed in November 2005, when our weapon sales began anew.

And so this week a tyrant is dead. But for his bloody history, the strongest condemnation the U.S. could summon was this: "Though there may be some controversy over his legacy, [Suharto] was a historic figure who left a lasting imprint on Indonesia and the region of Southeast Asia." (A reward for anyone who can identify the State Dept. scribe who came up with "lasting imprint" as a euphemism for genocide).

A friend suggested a more fitting epitaph: "The devil has a new soccer ball."

Economic Disaster Looms Behind Federal Spending

Mike Lillis — Fri, 01 Feb 2008 00:17:51 GMT

Illustration by: Matt Mahurin

A quick glance around the Capitol this week reveals a Congress consumed by their temporary plan to boost the flailing economy. But even as party leaders haggled over their stimulus strategy, some of the nation's top economists warned that America's long-term spending trends present a far larger financial crisis.

With the first baby boomers already retiring, much attention has been given to the future strain on Social Security. The larger problem, however, is the rising cost of health care. As a share of the nation's gross domestic product, health spending was 8.4 percent in 1976. Three decades later, the figure had almost doubled to 16 percent -- and it's rising quickly.

Peter Orszag, director of the non-partisan Congressional Budget Office, told a Senate panel Thursday that, at current rates of increase, health spending would represent more than 40 percent of GDP by 2050. Those costs, Orszag said, are being driven by new technologies, such as pharmaceuticals and medical devices. But there are also dramatic regional cost differences that are contributing as well.

Researchers at Dartmouth College, for example, found that the cost to treat a patient in the last six months of life was about twice as much at UCLA's Medical Center versus Minnesota's Mayo Clinic -- with no notable gain from the additional expense. "Taxpayers are paying for that difference," Orszag said.

Demographics are also playing a role, as the first baby boomers will become eligible for Medicare in three years. Already, the gap between projected revenues and promised benefits -- including Medicare, Social Security and veterans' programs -- puts the country roughly $53 trillion in the red, according to U.S. Comptroller General David Walker.

"We must not be deluded to think that our main problem is in the short term," Walker said. "Because, quite frankly, we'll have much, much, much bigger economic challenges in the future if we don't deal with our real problem."

A few congressional leaders have jumped headfirst into the debate, but they remain a stark minority. Senate Budget Committee leaders Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.), for example, have proposed a bipartisan task force that would make reform recommendations to Congress, which would then have a short window to vote on the proposals. For the strategy to be effective, the Budget Committee leaders argue, all reforms must be on the table, including tax hikes and benefit cuts. Conrad said he plans to force a committee vote on the bill this year -- even in the face of some members' objections.

"I am sorry if that causes discomfort to some of my colleagues," Conrad said, "[but] this can cannot be kicked down the road again."

Much of the reluctance to act is political, for few lawmakers want to be remembered for raising taxes or cutting benefits for constituents. This is especially true in a contentious election year.

Richard Kogan, a senior fellow at the left-leaning Center on Budget and Policy Priorities, said there would be no sweeping changes to federal spending patterns until the crisis grows more tangible --- and voters are willing to sacrifice in response. "You can't do the right thing," Kogan said, "until you've got candidates who can win by doing the right thing. I think you have to wait for a new electorate."

At least part of the problem is that Congress no longer has any control over much of the federal budget. Discretionary spending, which lawmakers dictate, represents only 38 percent of the current budget, Walker said. The remaining 62 percent goes to entitlement programs and other initiatives that run on autopilot, including interest on the national debt. That trend, Walker said, has stolen much of the power -- and purpose -- of Washington policy-makers.

"If you read the Constitution of the United States," he said, "you will find that every expressed and enumerated responsibility envisioned by the founding fathers for the federal government is in discretionary spending."

The White House has entered into the spending debate as well. During his State of the Union address Monday, President George W. Bush announced a cap on the amount of earmark spending he will tolerate before vetoing appropriations bills. A day later, he issued an executive order directing all federal agencies to ignore any earmarks found in the reports that often accompany legislation, but not in the legislation itself.

Still, critics say, Bush's new-found fiscal conservatism is hypocritical, particularly in light of the trillions of dollars in new debt accumulated over his tenure.

Meanwhile, the stimulus package now working its way through Congress, some economists warn, will only exacerbate the long-term spending problem. Jagadeesh Gokhale, a senior fellow at the libertarian Cato Institute, said the stimulus strategy -- which borrows from abroad with hopes of keeping retail spending high -- is sure to backfire.

"We are borrowing against future generations' incomes," Gokhale said. "The policy shouldn't be to give money to people to consume, it should be to give money to people to invest."

Ralph Bryant, a senior fellow at the Brookings Institution, agreed with at least a part of that assessment. "It's bad for the country's long-term welfare," Bryant said about the borrowing. "I don't think there's any question about that. But insofar as it keeps the country from falling into a long-term recession, it's worth doing."

Can't We All Just Get Along?

Mike Lillis — Fri, 01 Feb 2008 17:14:48 GMT

Illustration by: Matt Mahurin

Immigration, that snaggletooth of an issue that has set the Bush administration against its conservative base, is now driving a wedge between Republican leaders in the House and Senate as well. It seems that the House economic stimulus bill -- which has White House support -- does too little, in the eyes of some GOP senators, to prevent illegal immigrants from receiving benefits.

"The simple fact of the matter is that the House bill allows illegal immigrants to get rebate checks," Sen. Charles Grassley (R-Iowa) said yesterday on the chamber floor. "Plain and simple." (Full statement here)

Grassley, the highest ranking Republican on the Finance Committee, was responding to a statement from the office of House Minority Leader John Boehner (R-Ohio) -- reported here -- that nothing in the House bill allows illegals to get rebate checks. To that, Grassley argued that nothing prevents them from getting checks either.

The debate mirrors another occurring last year, when House and Senate Republicans battled over a proposal to expand SCHIP, the popular children's health program. The difference then was that it was House Republicans -- notably Boehner -- who opposed the bill, citing none other than an absence of language preventing illegal immigrants from enrolling in the program.

"It's amazing how the standard has changed, isn't it?" Grassley asked.

With Grassley's input, the Senate has drafted an alternative stimulus bill that explicitly prevents illegals from receiving rebates. That proposal hit a wall yesterday, however, as Senate GOP leaders (minus Grassley) rallied enough opposition to block a vote on the bill. (It wasn't the immigrant language that inspired the disfavor, but several other provisions that hiked the cost of the Senate package about $12 billion above that of the House proposal).

Senate Majority Leader Harry Reid (D-Nev.) has promised to return to the issue next week, when presidential contenders Hillary Clinton and Barack Obama return to Washington following next Tuesday's primary extravaganza. Whether their return is enough to push support to the 60 votes needed, however, remains to be seen.

Not a Bad Time to be Exxon (Not a Good Time to Be Anyone Else)

Mike Lillis — Fri, 01 Feb 2008 22:02:01 GMT

It won't come as a surprise to anyone who's filled the station wagon recently, but ExxonMobil announced today that its 2007 net earnings totaled $40.6 billion -- the single largest annual profit, not only in the company's history, but in the country's. (That $40.6 billion is not income, mind you, but profits after all expenses and taxes have been paid out.)

In the fourth quarter alone, the company made $11.6 billion -- up 14 percent from 2006.

And the figures are no recent trend. U.S. oil company profits, which totaled $33.7 billion in 2002, had jumped to $119.6 billion in 2006.

In the understatement of the year, ExxonMobil Chairman Rex W. Tillerson said the latest figures reflect "strong results in all business segments." Rex failed to mention that a gallon of gas, which ran $1.46 in 2002, averaged $3.07 this month.

These profits are made possible, of course, with the help of federal subsidies, which total anywhere between $15 billion and $35 billion a year, according to independent estimates. (In 2005, President Bush -- himself a former oilman -- signed into law an energy bill which, by itself, granted more than $14 billion in tax breaks and incentives to the industry.)

Total subsidies are difficult to pin down because they take so many different forms. For example, Washington props up the industry by issuing tax-free or low interest construction bonds, assuming the legal risk for development projects, or lending money to international institutions like the World Bank, which in turn subsidize international oil production.

Aiming to reverse the trend, House Democrats last year proposed to repeal $14 billion in oil subsidies over 10 years. But the idea didn't fly with Senate Republicans, who threatened a filibuster, nor with the White House, which threatened a veto. The language was stripped from the energy bill Bush signed in December.

Environmental groups are already pushing Democrats to return to the issue this year. But with thin majorities in both chambers, and Bush still hovering with his veto pen, they have little chance of succeeding.

Meanwhile, we can all sleep well knowing that Rex Tillerson is paying the rent OK -- and probably steering Exxon to another record-breaking year.

Bush Budget Largely Irrelevant In Lame-duck Year

Mike Lillis — Tue, 05 Feb 2008 02:40:40 GMT

President George Bush kicked off the 2009 budget debate Monday, unveiling a $3.1 trillion spending wish list that calls for significant hikes in military funding while scaling back on health care, environmental and low-income assistance programs. Congressional Democrats immediately condemned the proposal, declaring it dead on arrival."This budget will be quickly forgotten," Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, said in a statement. "But, unfortunately, the president's legacy of debt will stay with us, as it is passed on to future generations. His stewardship of our budget has been an utter disaster."

Under the proposal, defense spending would increase more than 7 percent in 2009, to $537 billion, excluding the wars in Iraq and Afghanistan, which would add hundreds of billions of dollars more. By contrast, funding for non-security domestic programs would increase only 0.2 percent. White House officials say the restraint is necessary to control rising deficits and unsustainable long-term spending trends.

...defense spending would increase more than 7 percent in 2009, to $537 billion, excluding the wars in Iraq and Afghanistan, which would add hundreds of billions of dollars more...funding for non-security domestic programs would increase only 0.2 percent.

With those goals in mind, the president's proposal would trim $18 billion next year by slashing or terminating spending on 151 different discretionary programs. An initiative that helps low-income Americans pay their energy bills, for example, would be cut by $570 million (22 percent) next year under the plan.

Bush also proposed $433 million in cuts to the Centers for Disease Control and Prevention, including programs to detect infectious diseases. The Environmental Protection Agency would suffer about $330 million in reductions under the plan. Most of the EPA cuts come at the expense of state-run waste-water treatment programs, according to analysts at the Center on Budget and Policy Priorities. If Bush's proposal were to become law, 2009 EPA funding would be roughly $1 billion less than it was in 2004.

The proposal also goes after the nation's entitlement programs, trimming Medicare by about $178 billion over the next five years. That savings, largely from cuts to service providers like hospitals and physicians, represents a drop in Medicare spending growth from 7.2 percent a year down to 5 percent.

Not that anyone thinks the Bush budget has legs. Senate Finance Chairman Max Baucus (D-Mont.) says he has no interest in promoting the plan. "This administration," he said in a statement, "ought to know that five years’ worth of Medicare and Medicaid cuts, totaling $200 billion, are dead on arrival with me and with most of the Congress."

Indeed, with a lame-duck president facing approval ratings near historic lows, many experts predict the proposal will have a short shelf life -- particularly in an election year. "There're really no incentives for Democrats to move on the [president's] budget this year," said Stan Collender, a former Clinton administration budget analyst who is now a director of Qorvis, a Washington-based communications firm. "There's nothing in there for them."

with a lame-duck president facing approval ratings near historic lows, many experts predict the proposal will have a short shelf life Still, budget proposals offer a clean glimpse at the priorities of any administration. In the case of the Bush White House, much of the focus falls on making the 2001 and 2003 tax cuts -- which largely benefit the wealthiest Americans -- permanent. Without congressional action, the cuts would expire at the end of 2010.

Administration officials argue that the tax cuts are prerequisite to a healthy economy. Federal overspending -- not under-taxing -- is the true cause of Washington's long-term budget woes, they say. "The big challenge here is spending," said Jim Nussle, head of the White House Office of Management and Budget. "It's really not revenue. Spending is the problem."

But critics of the tax cuts contend that the money would be better spent on programs for needier folks. Robert Greenstein, CBPP's executive director, said that reinstalling the estate tax alone could bring in about $522 billion in the next 10 years -- almost the same amount that Bush proposed to cut from Medicare over the same span.

"This is part of a larger theme," Greenstein said. "The most well off will do extremely well [under Bush's proposal]."

Also under scrutiny is the president's claim that the spending blueprint would eliminate deficits by 2012. Critics are quick to point out that the administration not only assumes the permanent extension of the 2001 and 2003 tax cuts, but also counts on a much larger number of Americans paying the alternative minimum tax -- something Congress has vowed not to let happen.

In addition, the proposal includes only $70 billion for the wars in Iraq and Afghanistan -- far less than experts in and outside of the White House estimate the costs will be. Nussle on Monday defended the figure, saying that it represents "a bridge" that will allow the Pentagon to examine its future funding needs when those needs arise.

But the questionable number-crunching has left Democrats screaming bloody murder this week. "The president's misguided budget cuts health care for seniors and working families," House Speaker Nancy Pelosi (D-Cal.) said in a statement, "freezes lifesaving medical research, raises health care costs for veterans, and slashes energy assistance -- all at a time of rising prices and a slowing economy."

Conrad said he plans to have the Budget Committee consider the Democrats' budget alternative in the first week of March, allowing the Senate to vote on the bill before the Easter break. That will set the stage for a showdown with the White House, as Bush has already shown a recent alacrity for vetoing Democratic spending bills -- something he never did when the GOP controlled Congress.

Many critics also say that the recent call for fiscal discipline is an odd request from an administration that has presided over some of the largest real-dollar deficits in the nation's history. Fueling this criticism, the White House announced Monday that deficits are estimated to be $410 billion in 2008 and $407 billion in 2009 -- just shy of 2004's record of $412 billion.

Collender, the former Clinton budget analyst, said those estimates represent a bit of political gamesmanship, as the Bush administration has been known to inflate its deficit estimates early in the year so it can claim victory when the final numbers inevitably come in lower. The 2008 figure, he said, is almost certainly inflated. On the other hand, Collendar estimates that the 2009 figure is probably undercounted "because the next president will have to take responsibility for it."

When Is a Cut Really a Cut?

Mike Lillis — Tue, 05 Feb 2008 18:04:41 GMT

As debate begins over where Washington will spend our tax dollars next year, it's worth paying attention to the language spewing from Capitol Hill and not just to the numbers. Because perhaps no process all year is accompanied by the same partisan disingenuousness as the annual budget argument. And perhaps no phrase is so abused during the debate as that of "spending cut."

Take, for example, the recent Medicare uproar. As an entitlement program, it runs on autopilot, with spending projected to increase an average of 7.2 percent annually over the next five years if Congress does nothing at all. (By contrast, the entire economy is expected to grow at about 3 percent over the same span.) Bush has proposed to slow that growth by 2.2 percent, meaning 2009 spending would still be about 5 percent above that projected for 2008. Over five years, the difference in growth rates (5% vs. 7.2%) translates into a $178 billion spending discrepancy.

The reaction from Democrats was swift and biting: "This administration ought to know that five years' worth of Medicare and Medicaid cuts totaling $200 billion are dead on arrival with me and with most of the Congress," said Montana Sen. Max Baucus (D), who heads the Senate panel that oversees Medicare spending.

Forget, for a moment, that $178 billion magically became $200 billion in Baucus' statement (rounding is a political expediency, not a crime, on Capitol Hill). The question is: Does the figure really represent a cut if the program would still see funding increases totaling about $100 billion by 2014?

There are nuances here, of course, and the obvious question of priorities. Bush critics point out that the slower growth would target health service providers like hospitals, rather than the insurance and pharmaceutical industries, which have tallied record profits under this administration. (Indeed, the independent commission that advises the health department on Medicare payment decisions has recommended for years that the agency trim back billions in subsidies to some private insurance plans operating under the program -- an issue the Bush budget ignores, but one Baucus will take up in the Finance Committee later this week.)

A great deal of scrutiny has also been directed at Bush's tax cuts -- about a third of which would benefit the top 1 percent of earners, and which the president has proposed to make permanent. In the midst of a costly war for which few Americans have been asked to sacrifice anything at all, there's probably good reason for the criticism. (To be sure, the debate over budget semantics will soon move to address whether allowing the Bush tax breaks to expire, as scheduled in 2011, would constitute tax hikes.)

These are all arguments that must happen. But Democrats -- who happen to control Congress at the moment and are widely expected to pick up more seats in November -- have a responsibility here that transcends simple criticism of the White House in an election year. In three years, the oldest of the 70 million baby boomers will be eligible for Medicare, which is projected to go bust in 2018. No one thinks it will happen, but to avoid it will require some tough decisions -- perhaps even the types of "cuts" the Bush administration just proposed.

When Sweet Isn't Sweet Enough

Mike Lillis — Thu, 07 Feb 2008 16:50:41 GMT

Heeding the call of the White House and their conservative inklings, Senate Republicans yesterday killed a Democratic effort to pump $204 billion of borrowed cash into the ailing economy over the next two years. The move marked an enormous victory for President Bush and the GOP leadership, who support a much smaller package, but the real consequences for the party may still be eight months away. That's when Americans will head to the polls to choose the 35 Senate seats up for grabs this year, and the Republicans have the unenviable task of defending 23 of them.

With that in mind, Senate Democrats loaded their stimulus package with provisions designed to woo several of the more vulnerable GOP incumbents. The Senate bill, for example, contained language ensuring that illegal immigrants receive none of the stimulus benefits. It also contained about $1 billion in heating aid for low-income folks -- bolstering a program favored by northeastern lawmakers.

A few Republicans bit, including Sens. Norm Coleman (MN) and Susan Collins (ME). But New Hampshire's John Sununu, who had voted against a smaller bill (ie, minus the heating aid) from his new seat on the Finance Committee, remained opposed during the final vote. (It proved to be the deciding factor: Democrats came one vote shy of passing their stimulus plan.)

Whether New Hampshire voters remember that decision in November has yet to be seen. But you can be sure that someone from across the aisle will be there to remind them.

Don't Push Me on The Big Stuff

Mike Lillis — Thu, 07 Feb 2008 21:58:44 GMT

Illustration by: Matt Mahurin

At her weekly press briefing this morning, House Speaker Nancy Pelosi (D-Cal.) illustrated well how a political mind works in an election year. First, she reiterated her chamber's dedication to enacting an economic stimulus package long before November. (She took seven questions on the stimulus bill, and answered all of them at length.)

But asked about whether the House will tackle long-term spending this year (recognized by anyone watching as a problem many factors more severe than the current slowdown), she said this:

"I don't know. I have no idea. I think that it is an issue that we need to address, but I don't know if the House will get around to doing it. We haven't really engaged in that discussion yet."

Message to the electorate: The check's in the mail, and we won't remind you that America's long-term fiscal health is in the sewer. (Did we mention that your check is borrowed from Asia?)

SIDEBAR: A Question of Purpose

Mike Lillis — Sat, 09 Feb 2008 02:02:10 GMT

<< BACK TO STORY

The Food for Peace program was launched in 1954 as a consequence of a farmer-protection policy under which the federal government bought up crops when prices fell below a certain level. As the stockpiles grew, officials realized that paying to store rotting food was no good way to spend taxpayer dollars. But nor could they return the stocks to the same market where they'd just snatched them, lest they drive down prices again. The solution became to look overseas.

"The real motivator here was surplus disposal," said Christopher Barrett, a Cornell University economics professor specializing in food aid.

"Helping the poor," added Kimberly Elliot, a senior fellow at the Center for Global Development, "was almost a sidebar."

As farm policy changed, the surpluses disappeared and Washington moved to the system of buying food-aid crops on the open market that exists today. Subject to the 1954 law, however, those crops must be purchased from U.S. growers, processed through U.S. companies, and shipped using U.S.-flagged vessels.

It has evolved into a robust industry, for the United States is far and away the largest donor of food aid in the world. In fiscal 2007, Washington spent about $2.1 billion on all foreign food aid initiatives, according to U.S. AID. Roughly $1.9 billion of that went to the Food for Peace program, most of it targeting crises in Africa.

Few Friends on Hill for Bush's Food Aid Plan

Mike Lillis — Sat, 09 Feb 2008 02:03:06 GMT

Illustration by: Matt Mahurin

It arrived, almost as an afterthought, in the final minutes of last month's State of the Union Address: A call from President George W. Bush to allow the nation's largest foreign food aid program to purchase food abroad in response to humanitarian crises.

"Today, more than half the world's food aid comes from the United States," Bush said on Jan. 28. "And tonight, I ask Congress to support an innovative proposal to provide food assistance by purchasing crops directly from farmers in the developing world, so we can build up local agriculture and help break the cycle of famine."

Lawmakers responded with a hearty applause. But if their outward approval came as a surprise to the president, there is good reason. This year marks the fourth in which the White House has proposed to revamp the country's 54-year-old food aid program -- now legally obligated to purchase nearly all its crops from U.S. farmers -- to allow up to 25 percent of its budget to buy food closer to those who need it.

But for three years running, Congress has stopped the plan cold. This year, lawmakers are certain to do the same. Even a much less ambitious strategy to launch a test project allowing in-cash food aid of $25 million -- a drop in the bucket relative to the $2.1 billion the United States spent on foreign food aid last year -- has hit a brick wall in Congress, and appears destined for oblivion.

It's not for a lack of need. The United Nations estimates that about 850 million people are currently undernourished worldwide. Ten million of them die every year due to hunger or hunger-related ailments.

Supporters of the Bush proposal say it would cut into those figures by reducing food delivery times and eliminating costly shipping fees that would be better spent on more food. By its own estimates, the administration says the plan would save 50,000 lives every year.

"It's very clear that we needed to have this done a long time ago," said Andrew Natsios, the former head of the U.S. Agency for International Development, who first sold the 25-percent proposal to the White House. "The problem has been the domestic politics."

Unlike many political sagas, however, this one is not merely a rehashing of long-held partisan differences. Nor can the opposition to Bush's proposal be dismissed as evidence of a neutered president navigating the twilight of his lame-duck term. Rather, the evolution of America's largest food aid program, Food for Peace, has formed a tangled web of interests, aligning the agriculture and shipping industries with some of the world's largest aid organizations -- all of which have a vested interest in keeping things as they are.

Their pocketbooks threatened, these groups have bombarded Congress with cash, uniting farm-state lawmakers of both parties against the administration's plan Their pocketbooks threatened, these groups have bombarded Congress with cash, uniting farm-state lawmakers of both parties against the administration's plan -- or anything resembling it. When Senate Agricultural Committee Chair Tom Harkin (D-Iowa) introduced the $25 million pilot project as part of his 2007 farm bill proposal, the opposition from committee members was so immediate that he was forced to shift the funding source out of the agriculture budget, in effect killing the initiative. In the House, the concept died sooner.

The controversy has even set the White House against several administrative agencies. Natsios said that the day he left U.S. AID, officials from both the Agriculture and Commerce Departments stormed down to the Office of Management and Budget, demanding that the 25-percent cash option be removed from the president's budget. On hearing the news, Natsios said he had to call a high-level White House official to keep the provision alive. Afterward, Natsios says, Bush seemed to become more personally invested in the proposal.

Supporters of the president's plan are quick to concede that the move to cash aid is a tricky business. David Kauck, senior policy analyst at CARE, a non-profit aid group that receives Food for Peace donations, warned that simply dumping cash onto a region can spike local prices, putting commodities out of reach for native populations.

"If you do it the wrong way," he said, "you can end up inadvertently causing hunger."

Still, supporters emphasize that they aren't advocating for mandatory cash aid, only for the option to get cash in circumstances when it would prove advantageous. In regions where food is either unavailable or of poor quality, for example, in-kind donations are welcome, said Jennifer Parmalee, a spokeswoman for the U.N. World Food Program, the largest food aid distributor in the world.

In emergencies where plenty of food is already available, however, the influx of more food can crash local markets, increasing the number of folks who need assistance.

Recent economic trends have made the cash option vital, Parmalee said, as the rising cost of fuel and commodities, combined with the falling value of the dollar, have conspired to make in-kind food donations less efficient. This concerns the WFP for an obvious reason: 42 percent of the agency's $2.9 billion budget last year came from the U.S., virtually all of it arriving as in-kind aid.

Bolstering that concern, the Government Accountability Office issued a report last April revealing that rising business and shipping costs -- now consuming about 65 percent of America's emergency food aid budget -- resulted in a 52 percent decline in the amount of food delivered over the last five years.

Still, some charity groups have been less enthusiastic about the White House plan. World Vision, for example, a major recipient of Food for Peace aid, opposes the 25-percent proposal, favoring a smaller experiment along the lines of Harkin's plan. "The program should be based on evidence," said Robert Zachritz, World Vision's director of advocacy and government relations.

But Natsios, pointing to cash-aid food programs sponsored by Canada, Australia and the Europe Union, rejected that claim. "We know how to do it," he said. "It's been tested. I've watched people starve to death waiting for food to arrive."

The intensity of the argument is an indication of what's at stake. And the rolling debate has raised criticisms about the efficiency of the program, prompted questions about America's moral responsibilities to the developing world, and even brought charges of corporate welfare. But at the heart of the debate the question remains: What is the purpose of the program? (Hint: It has little to do with humanitarian intent.)

Last year, The New York Times reported that more than half of the food aid purchased in recent years has gone to just four companies and their subsidiaries: Cargill, Bunge, Cal Western Packaging and Archer Daniels Midland. None of the four would comment on their relationship with Food for Peace, but to contract with a program that spent $1.87 billion last year must have its benefits.

But that, according to the shipping and agriculture industries, is all part of the plan. Brian Schoeneman, executive director of the American Maritime Congress, said the Food for Peace program was designed to do more than feed hungry people overseas. "There is an economic stimulus side as well," he said. "It keeps the farmers growing, and it keeps the ships sailing."

A number of lawmakers -- many from farm states -- agree. Virginia Rep. Bob Goodlatte, the highest ranking Republican on the House Agriculture Committee, issued a statement this week questioning the logic of allowing America's food aid to leave U.S. shores as cash.

"The purchases from U.S. farms benefit our economy," he said, "as the expenditures circulate through the U.S. economy rather than the European economy or that of other major food exporting nations ... I believe making this type of policy change carries the great risk of undercutting congressional support for food aid programs and thereby the ability to provide aid to those in need."

From the perspective of the American economy, the U.S.-purchase stipulation is a blessing, even in the face of higher food and fuel costs. But in the eyes of a number of aid groups and academics, it's hardly the most efficient way to feed hungry people living oceans away. Indeed, from the perspective of the American economy, the U.S.-purchase stipulation is a blessing, even in the face of higher food and fuel costs. But in the eyes of a number of aid groups and academics, it's hardly the most efficient way to feed hungry people living oceans away.

"That means you're squeezing the amount of aid you can actually provide," said Kimberly Elliot, a senior fellow at the Center for Global Development. "Let's talk about subsidies for the shipping industry, if that's what this is, but don't hide them behind a program to feed poor people … It's in some sense corporate welfare."

Critics of the current system bring up another argument: The food aid budget, while significant in the eyes of aid groups and developing countries, is tiny relative to America's agriculture economy. The small family farmer, they say, wouldn't suffer a thing under the Bush proposal.

"It's a very small number of people who have an acute economic interest in this thing," said David Tschirley, an international development professor at Michigan State University, "and they're going to put their resources behind the lobbying that's needed to keep the policy as it is."

There is evidence that farm-state lawmakers see the Bush plan as an encroachment onto their turf. In their report accompanying the 2006 agricultural spending bill, House conference committee members remarked, "[We] admonish the Executive Branch to refrain from proposals which place at risk a carefully balanced coalition of interests which have served the interests of international food assistance programs well for more than fifty years."

Political donations may also play a factor. For the 2006 election cycle, agribusinesses gave $388,000 to Rep. Collin Peterson (D-Minn.), then the highest ranking Democrat on the House Agriculture Committee, according to the non-partisan contribution watchdog Open Secrets. The same industry gave another $376,000 to then-Chariman Goodlatte. Cargill alone gave $60,000 to committee members of both parties in the same cycle.

Peterson's office declined to comment on whether the congressman supports the Harkin or Bush proposals.
Still, some farm-state lawmakers have been vocal in their backing of the president's proposal. Iowa Sen. Charles Grassley (R ) told reporters last month that he supports a partial cash-aid option, even as he acknowledged that it would rile the farmers in his own state.

"Most of the commodity groups in Iowa would be opposed to that," Grassley said. "[But] it seems like too often we wait 'til too many hundreds of thousands of people have starved to death before we've gotten the food there."

Tom Lantos, 1928-2008

Mike Lillis — Mon, 11 Feb 2008 18:56:46 GMT

The morning's news of the death of Tom Lantos -- Democrat of California and the only Holocaust survivor ever to serve in Congress -- arrived as an angry slap even as we knew it was imminent. The 80-year-old was diagnosed with cancer of the esophagus last December, and had faded from public view since then. On the second day of 2008 he announced he would retire at the end of the year. It would have marked his 28th in Congress.

While the appreciations this morning (this one included) are all leading with mention of the Hungarian-born lawmaker's unique and brutal experience in Hitler's Europe, it was how he used that suffering to steer his politics that will solidify his legacy. A co-founder of the Congressional Human Rights Caucus, Lantos was a fiery defender of Democracy and human rights across the globe. Apartheid in South Africa; genocide in the Balkans; Internet policing in China; the encroachment of citizens' rights here at home under the PATRIOT Act: No abuse seemed too small; no country was too obscure.

In 2005, two years before it was fashionable, he led a march in front of the Burmese embassy in Washington to protest the house arrest of Nobel Prize winner Aung San Suu Kyi. A year later he himself was arrested in front of the Sudanese embassy for protesting the ongoing genocide in Darfur. The list goes on.

Lantos was also an ardent defender of Israel, but he was not always on the side of the angels. In 2002, as a supporter of the White House push to war with Iraq, he helped Republicans pass legislation authorizing our forces against Saddam Hussein. After the vote, Lantos said, "The train is now on its way," according to a New York Times report at the time.

Still, after his initial support, Lantos changed his tune on the war, emerging as one of the most vocal critics of last summer's surge. Democrats now are left with the unenviable task of replacing what is irreplaceable.

In announcing his retirement last month, the House Foreign Affairs Committee chairman characterized his service to his adopted country this way:

"It is only in the United States," he said, "that a penniless survivor of the Holocaust and a fighter in the anti-Nazi underground could have received an education, raised a family, and had the privilege of serving the last three decades of his life as a member of Congress. I will never be able to express fully my profoundly felt gratitude to this great country."

The biographers can begin with that, but the larger story here is overseas.

Walker's Wakeup Tour

Mike Lillis — Mon, 11 Feb 2008 22:04:36 GMT

Not that congressional lawmakers want to trumpet these things as they seek to convince voters of their merits, but David Walker, the U.S. Comptroller General, is back touring the country with his charts and indignation in tow, and he has some projections about our national finances that the public might be interested to learn.

Should it bother us, for example, that foreign investors held 44% of our public debt in 2006 -- up from 28% just 10 years earlier? Or that discretionary spending (ie, that which Congress controls) constituted 67% of the federal budget in 1966, but now represents just 38%? Or that Medicare is expected to grow three times as quickly as the rest of the economy over the next 25 years? Or that Congress is doing nothing about it?

Not that Walker's message is new. This guy's been screaming from the rafters for years about just how big a hole we're digging via promised federal spending (not to mention just how stupid it is to be claiming family values at the same time we're spending away our kids' futures.)

But he probably shouldn't hold his breath, either. Last week Congress approved an economic stimulus package containing $168 billion in tax rebates and other benefits, all of it borrowed from abroad. Bush is expected to sign the bill Wednesday.

As Peter Orszag, head of the Congressional Budget Office, told reporters recently: "The political system is not very good at dealing with gradual problems. It's good at dealing with crises."

Batten down the hatches...

No Fun to be The Minority

Mike Lillis — Tue, 12 Feb 2008 00:36:17 GMT

Arizona GOP Rep. John Shadegg became the latest casualty of Washington's changing political tides, announcing Monday that his seventh term will be his last. The decision, the statement reads, was made to allow him and his family the chance to pursue their “dreams, goals, and ambitions.” Oh yeah -- and he also wants “to seek a new challenge in a different venue to advance the cause of freedom.”

And that explanation wouldn’t be so implausible if Shadegg hadn’t sought just two years ago to become House majority leader -- a spot he ultimately lost to Ohio Rep. John Boehner. More likely, Shadegg, after 12 years in the majority, has joined a long list of his GOP colleagues who, in the face of expected Democratic gains this November, have similarly decided that this year will be their last.

At last count, 22 GOP House members have announced they will retire this year (including Shadegg). Three others are running for other offices. And one -- Louisiana Rep. Richard Baker -- left Capitol Hill last week to pursue a million-dollar opportunity on K Street.

Not that Democrats should begin rejoicing at Shadegg’s announcement. True, he’s a self-proclaimed Goldwater guy, but so are many in the gated-community-style Phoenix suburbs he represents. Bush took this turf by 58% in the last election.

The Washington Independent - U.S. news and politics - washingtonindependent.com: Stories by Mike Lillis

Sorry Kids, SCHIP Fails Again

Maestro, Indeed

Conservatives Blast Stimulus Deal

Medicaid ID Law Backfires

Term Limits, Sen. Kennedy?

Bush Denounces Congress for Earmark Spending

Democrats Divided Over Rebates for Wealthy Americans

Death of a Tyrant

Economic Disaster Looms Behind Federal Spending

Can't We All Just Get Along?

Not a Bad Time to be Exxon (Not a Good Time to Be Anyone Else)

﻿Bush Budget Largely Irrelevant In Lame-duck Year

When Is a Cut Really a Cut?

When Sweet Isn't Sweet Enough

Don't Push Me on The Big Stuff

SIDEBAR: A Question of Purpose

Few Friends on Hill for Bush's Food Aid Plan

Tom Lantos, 1928-2008

Walker's Wakeup Tour

No Fun to be The Minority

Bush Budget Largely Irrelevant In Lame-duck Year