A top House Democratic staffer just told me the reconciliation bill, with some surprises, and a tentative CBO score will be posted on the House Rules web site late tonight or early tomorrow morning.  Then a final CBO score will be posted Friday.  The Rules Committee will meet Friday to mark up the rule.  Then the House will vote on the rule Saturday, engage in perhaps four hours of debate, and, later Saturday, take the final vote on the reconciliation bill, which will deem the passage of the Senate bill. 

Next Monday, Senate Banking Chair Chris Dodd (D-CT) will introduce his financial reform bill without Republican support, despite pledges of Senators Richard Shelby (R-AL) and Bob Corker (R-TN) to work with him. Our recent worst financial crisis since the Depression cries out for major changes, but our broken government may fail to enact them. Absent public outcry, heavily financed industry lobbying will gun down financial reform in the Senate this spring. 

Today, the Senate turned to the Federal Aviation Administration authorization, H.R.1586. The last four-year authorization expired September 30, 2007. What caused this 2½ year delay? Congress couldn't agree on how to apportion the excise and ticket taxes to pay for a desperately needed modernization of the air traffic control system. Your car has GPS. Your phone has GPS. Commercial airliners have GPS, but the air traffic control system still relies on radar and radio position reports. That costs billions of dollars in extra miles traveled every year. The airlines correctly believe they pay more than their fair share of the costs, but private pilots (I used to be one.) have more political clout and refuse to share more costs. Then there's the problem of Memphis, TN-based Fedex's avoidance of a union for its workers, which puts it at an advantage over its main competitor, unionized United Parcel Service. The House version of H.R.1586 would apply existing labor laws equally to both companies, but that prompted Tennessee Senators Lamar Alexander (R-TN) and Bob Corker (R-TN) to hold up the bill.

Richard J. Ablin is the University of Arizona research professor who discovered the prostate-specific antigen (PSA) test in 1970. Today, in a New York Times op-ed, he decried the misuse of that test by health care monopolies to drive up profits with promises of catching prostate cancer early. First of all, the test can't detect cancer. Screening most men over age 50 costs over $3 billion a year, but has been proven in two recent studies to have little or no effect on life expectancy. Only 16% of men will ever be diagnosed with prostate cancer and only 3% will ever die of it. A European study concluded 47 men suffer grievous treatments that result in loss of sexual activity and incontinence for each life saved. Professional associations are beginning to recommend against PSA tests, but not those captive of the drug companies. Ablin concluded, "I never dreamed that my discovery four decades ago would lead to such a profit-driven public health disaster. The medical community must confront reality and stop the inappropriate use of P.S.A. screening.

"Reconciliation" is getting a lot of attention in Washington lately. Most understand a reconciliation bill can pass the Senate by majority vote after 20 hours of debate, but that's often where the understanding stops. Reconciliation originated in the Congressional Budget and Impoundment Control Act of 1974 as an optional means of changing (mostly) entitlement spending, but not Social Security, and taxes to achieve the deficit target set forth in the budget resolution. Because a reconciliation bill has a high likelihood of becoming law, it quickly became a magnet for extraneous amendments, which Senator Robert C. Byrd (D-WV) deterred in 1985 with the Byrd Rule, now Section 313 of the Budget Act, which lays out six criteria for determining what is extraneous. Implementing these rules in the Senate has become so complicated that no one can be entirely sure of what will emerge until the Senate Parliamentarian has ruled.

Congressional Budget Office Director Doug Elmendorf addressed the National Economists Club luncheon today in D.C. He started with the good news: "In the near term (FY10-FY12), we expect the economy to recover." However, his job outlook was grim: "More pain of unemployment lies ahead of us than behind us." That's because this recession has had much more permanent job loss than past recessions and because our recovery is likely to be weak, with subpar job growth. We've lost 8.5 million jobs so far, and it would take 11 million new jobs to reach the level we would have had if the recession hadn't occurred. He expects the unemployment rate to drop to 5% by FY13, but, "That's a long ways away."

 I applaud the tax reform proposal just put forth by Senators Ron Wyden (D-OR) and Judd Gregg (R-NH). Lowering the top corporate tax rate is very important for improving the competitiveness of our exports, and keeping the top individual rate at 35% while repealing the dysfunctional Alternative Minimum Tax is an achievement in itself.

Today, as promised, President Obama released his new health reform proposal three days in advance of Thursday's Blair House summit. Senate Minority Leader Mitch McConnell (R-KY) said he will attend, so at least some Republicans will be there. It's anybody's guess whether we get health reform this year. To me, it looks like we'll either get a watered down bill or nothing but more political posturing. I'll bet every Congress for the next 10 years passes another health reform bill too. I just hope we don't end up with the aimless policymaking like we've had with energy legislation since the 1973 energy crisis.

It's too early to get our hopes up for sustained Senate bipartisanship, but just before 6 p.m. tonight, five Republicans joined 57 Democrats to invoke cloture on Senator Harry Reid's (D-NV) amendment to the House jobs bill, H.R.2847. Newly elected Scott Brown (R-MA), Kit Bond (R-MO), Sue Collins (R-ME), Olympia Snow (R-ME), and George Voinovitch (R-OH) voted with the Democrats. Ben Nelson (D-NE) was the only Democrat to vote with the Republicans. Not voting were Frank Lautenberg (D-NJ), who is hospitalized for stomach cancer, and eight Republicans, who ducked the vote. So far, Reid's amendment would be limited to $12 b. FY10-FY12, and it's "paid for" over 10 years, but amendments could add to that, and it will grow larger in any compromise with the House's $65 b. FY10-FY19 bill.

Before every major Hill hearing, staff prepare a briefing book for the Chair with simulated Q&A and background information. I imagine the following for next Wednesday morning's Humphrey-Hawkins hearing with Fed Chair Ben Bernanke.

 Q. from Chair Barney Frank: "Mr. Bernanke, where are the jobs?"

 I too attended yesterday's Peterson-Pew Commission on Budget Reform Policy Forum, and I highly recommend that you watch it for several reasons:

 We certainly aren't acting like it. It's time to reflect when good people -- well liked on both sides of the aisle and certain to be reelected -- bow out. Senator Evan Bayh's (D-IN) retirement announcement today was a shocker. Read his statement. I would lift up: 

Soon, President Obama will sign H.J.Res.45 to increase the debt limit by $1.9 trillion and to restore statutory PAYGO. The exceptions to PAYGO totaling $3.157 tr. (using estimates from the President's FY11 budget) reveal what Congress expects to pass later this year:

 Washington invariably prefers the quick fix and ignores the underlying causes of whatever problem it faces. What better example than the financial crisis? At its most fundamental level, we underpriced the risk of mortgages and other financial assets. Why? President Obama and Congress have focused on the moral hazard of "too big to fail" financial institutions driven by bonus crazy CEOs making bets backed by government insurance. There's plenty of truth in that, but the deeper cause was easy money. A month ago, I defended Ben Bernanke's refutation of charges that the Fed's 2004 to 2006 easy money policy was to blame. So if, Fed monetary policy wasn't too easy, what was wrong? The corporate income tax deduction for interest produced a -6.4% tax rate on debt financed investments, while the double taxation of equity income (dividends and capital gains) produced a 36.1% tax on equity financed investments according to this 2005 Congressional Budget Office study. See Table 1.

 I could hardly believe my ears just now, watching former Reagan OMB Director Dave Stockman pronounce the end of the tax cut era on the PBS Newshour.

Stockman started by lambasting Wall Street gunslingers, of which he was one, for wrecking the financial system.  Then he cited the AIG bailout as the worst policy mistake of our era.  Then he said the deficits will have to be addressed, that the Reagan tax cuts failed to restrain government spending, and that we'll be forced to raise taxes from now on.  That's an amazing turnaround from one of the original supply side torch bearers.

 Doug Duncan told the National Economists Club at lunch today in D.C. that "We're not there yet [on stabilizing the housing market]." "So many things are going on that it's hard to sort out the effects." The most important driver of the housing market is private sector payroll. With the unemployment rate stuck above 10% for most of the rest of this year, the housing market turnaround will await stronger jobs growth.

 Bush tax cuts for the wealthy and on dividends and capital gains won't be extended.  That means 2010 is the last year for the 35% top rate for individuals and for the 15% top rate on dividends and on capital gains.  Those rates will go up to at least 39.6% and 20% respectively.

A jobs bill of roughly $150 b. will be on his desk in the next month or so.  It will include a new tax credit for jobs created by small businesses and for increased wages to existing workers.  It will extend unemployment benefits, COBRA health benefits, and provide more money to state and local governments to avoid laying off police, fire, first responders, and teachers.  Neither House nor Senate bill includes bonus depreciation yet, but he called for it for all businesses, large and small.  The House bill would be partially paid for with $75 b. of TARP.

Community banks would get $30 b. of TARP to lend to small businesses.

 This evening, the White House leaked President Obama's proposed three year freeze on non-defense discretionary spending not including certain Homeland Security, Veterans' Affairs, and International Affairs programs. That spending would be capped for the next three years at its current level of $447 billion, saving $250 billion over the next 10 years. That sounds like at lot of money, but it's not much when compared to the roughly $6 trillion of non-defense discretionary spending in the current services baseline budget. Most of that $250 billion will occur in the last five years of the next decade. With the decline of American Recovery and Reconstruction Act stimulus spending over the next few years, both OMB (Table S-3 on p.28) and CBO (Table 1-5 on p.20) show declining non-defense discretionary outlays from FY11 through FY13 already. Every little bit helps, but this is barely a budgetary fig leaf.