Process Reform

January 6 - Today, the U.S. House of Representatives votes on the rules package that will govern House procedure for the 111^th Congress.  (Find here a section-by-section breakdown of the rules.)  Included in the rules package is an extension of pay-as-you-go rules (PAYGO) that require requires that the costs of new tax cuts or mandatory spending programs be offset with new revenue or reduced mandatory spending.  The new rule package modifies the previous PAYGO House rule by allowing offsets to occur between -  rather than only within - bills.

Another provision within the package would eliminate the Medicare trigger, a modification objected to by the Committee for a Responsible Federal Budget (CRFB). The Medicare trigger was created as part of the Medicare Modernization Act in 2003 and is enacted when for two consecutive years the program's trustees estimate that general revenue funding will exceed 45 percent of Medicare's total funding in any year within the next seven years. Said Maya MacGuineas, President of CRFB:

"Strengthening PAYGO would be a powerful sign that Congress is serious about becoming fiscally responsible - or at least preventing things from getting much worse.  Still, all budget rules can be gamed, bent, or ignored.  There are not substitutes for real political courage and a broad commitment to fiscal responsibility."

October 10 - Gene Steuerle released an opinion piece yesterday arguing that the United States is due for a new "fiscal turning," or a fundamental reorientation of the government's approach to economic policy. Steuerle identified a first fiscal turn in the period after the Revolutionary War, when the young country expanded the financial powers available to the federal government. The second fiscal turn came at the beginning of the 20th century, when the country modernized its banking system and created an income tax. Now, Steuerle declares, the country is in need of a third fiscal turning. He writes that:

"The third fiscal turning, like the first two, is about far more than fixing programs we know need to be fixed. It's about creating flexibility and slack for government. It's about making possible the resources necessary to modernize and meet new needs, many of which we cannot yet identify. It's about removing automatic and eternal built-in growth in programs - not so much because they failed or succeeded in meeting past needs, but because their constant claim for more and more automatically means less and less for other, potentially more worthwhile endeavors, both public and private."

October 6 - On Sunday, McCain's senior policy advisory Douglas Holtz-Eakin told reporters that the cost of McCain's health insurance tax credit would be offset (and achieve budget neutrality), in part, by reducing Medicare and Medicaid spending. The bulk of the $5000 per family credit would be offset by eliminating the tax exclusion for employer-provided health insurance. This would still leave a hole of roughly $90 billion in 2013 - although it would shrink over time and eventually become self-financing. While not revealing exactly where this money would come from, Holtz-Eakin pointed to eliminating fraud and reforming Medicare payment policies. We estimate savings of roughly $40 billion from the policies Senator McCain has already proposed.

September 16 - With Lehman Brothers' announcing itsbankruptcy yesterday, and Merrill Lynch agreeing to be purchased by Bank ofAmerica for $50 billion, the presidential candidates are increasingly beingasked to outline their positions on federal regulation of Wall Street.  McCain saidin a press release:

"I am glad to see that the Federal Reserve and the Treasury Department have said no to using taxpayer money to bailout Lehman Brothers...The McCain-Palin Administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street. We will rebuild confidence in our markets and restore our leadership in the financial world."

Obama also releaseda statement to the press: