Deep Cuts to Housing Programs on the Way

Housing programs will join the list of other Federal programs subject to reductions when the president submits his FY 2012 budget Valentine’s Day. While President Barack Obama is proposing “painful” cuts to key programs in the next fiscal year in an effort to reduce the deficit, his proposal pales in comparison to the cuts proposed by House Republicans for the balance of the current fiscal year. Their proposal calls for close to $6 billion in cuts to housing programs as part of $100 billion in cuts to Federal programs.

Anticipating negative reaction to the Obama budget proposal, the president’s staff has contacted supporters of various programs to provide them with a heads up to pending cuts. In a New York Times editorial Jack Lew, Director of the Office of Management and Budget (OMB), stated the president is proposing a budget which reflects the need to reduce the deficit and the fact that hard choices will need to be made. Included in the Obama proposal will be a cut to the community development block grant (CDBG) program by seven and one half percent or $300 million. To administrators of the program, this is a significant to communities which count on these funds to provide local services but it is less than total elimination of the program as proposed by the Republican Study Committee.

According to Housing Affairs Letters, which provides daily coverage of housing and community development news, public housing will take hits to its key programs including $1.1 billion in cuts to the public housing operating fund; funding for tenant-based vouchers for the remaining seven months of FY 2011; and, a $300 million cut to the public housing capital fund. The administration seems to want to use some of the housing programs to help pay for a passenger rail plan.

While the administration will argue their proposed cuts across the board are part of the shared pain all must endure, their budget proposal is sure to set off anguish cries from the various interest groups with a claim to federal funds. It will not cause the same consternation as the cuts proposed by Republicans. In fact, Democrats and the Administration should be thankful that Republicans were offering such drastic cuts. To the general public, Obama’s FY 2012 proposal will seem modest in comparison.

The defense industry, homeland security and programs benefiting veterans have been deemed untouchable. While Social Security, Medicare and Medicaid are considered sacred cows, there will be attempts to curb spending for those programs at another point in time in the process. For now, non-entitlement domestic programs will bear the brunt of the proposed cuts this year. It is safe to assume the president’s proposed budget is the best case scenario for funding for FY2012 given the disparity between the president and Republicans on how to achieve deficit reduction.

The president’s 2012 budget proposal will come three weeks before the continuing resolution for FY2011 expires March 4. As reported in last week’s post, it is not unreasonable to expect a temporary shutdown of the government. Republicans on the House side are seeking significant cuts to Federal programs Democrats and the administration will simply not agree to. Senate Republicans are supportive of their House counterparts and can apply enough pressure to slow the appropriations process in their chamber increasing the likelihood of a temporary shutdown.

Republicans Seek Cuts Now

As the president released his FY2012 budget, Republicans were calling for deep cuts to housing programs for the remainder of FY2011 including the virtual elimination of the CDBG program, $1.5 billion in cuts to housing vouchers, $616 million in cuts to the capital fund, $340 million to HOPE VI (essentially gutting the program), and $203 million to the public housing operating fund. The Republican proposal includes $350million in cuts to the Transforming Rental Assistance initiative which is designed to replace HOPE VI.

President’s Budget Likely Dead on Arrival

Expect the president’s FY 2012 budget to be dead on arrival to Republicans when it is released on Valentine’s Day. Republicans will simply dismiss it as they pursue the more dramatic cuts for the remainder of this fiscal year. History may repeat itself. In the mid-nineties Republicans swept into office believing they had a mandate from the American people to cut spending and forced a government shutdown. The level of cuts proposed by Republicans is so deep it is difficult to see them reaching a compromise with the president before the current continuing resolution expires in early March.

Democrats should feel ecstatic about the Republican proposal. A recent poll has shown that Americans are concerned about increased federal spending but are less supportive of reducing these funds when specific programs are identified. Democrats would prefer to extend the current CR for the balance of the fiscal year. Now they can paint Republicans as being out of touch with the American people which may strengthen their hand in the ensuing negotiations. However, the Republican proposed cuts are so deep the likelihood of a government shutdown has increased.

MacArthur Foundation Announces Housing Research Grants

The John D. and Catherine T. MacArthur Foundation announced February 7 the awarding of nine grants totaling $5.6 million for research to explore the role housing plays in the long-term health and well-being of children, families, and communities.

The nine projects, selected through a competitive process from a pool of 150, were awarded as part of the Foundation's $25 million initiative on How Housing Matters to Families and Communities. The initiative is based on the premise that stable, affordable housing is an essential platform that promotes positive outcomes in education, employment, and physical health by helping to ensure a greater return from other social and public investments. The goal is to help policy makers better direct increasingly scarce public resources to enhance housing outcomes and to achieve broader goals of healthier, better educated, and more successful families and communities.

The nine grant recipients are a mix of studies on the relationship between housing and a series of social and economic concerns including education, health, and economic opportunity:

* Mayor's Fund to Advance New York City -- $1 million to study the role subsidized housing plays in the education and financial and physical health of children and families;

* Boston College -- $900,000 to study the impact of low-income families' housing decisions on children's well-being;

* New York University -- $800,000 to study the impact of housing instability due to foreclosure on school performance;

* The University of Maryland -- $700,000 to model the impact of housing subsidies on children's future participation in the labor force;

* RAND Corporation -- $600,000 to study whether social networks are a key pathway through which low-income residents realize the social and economic benefits of living in mixed-income housing or neighborhoods;

* University of Wisconsin-Madison -- $600,000 to study the effects of federal and state income support policies on homeownership stability and child maltreatment;

* Brown University -- $500,000 to support a study on the relationship between compulsory savings and homeownership in Mexico and on the effects of homeownership on formal labor market participation;

* Harvard University -- $300,000 to study the long-term social, psychological, and economic implications of eviction; and

* University of Chicago -- $200,000 for a study on the impact of childhood housing instability on long-term health and education outcomes.

Interesting Read

Fewer Want Spending to Grow but Most Cuts Remain Unpopular
Changing Views of Federal Spending
Pew Research Center for the People & the Press

Obama to propose spending cuts in budget plan aimed at countering conservatives
By Shailagh Murray and Lori Montgomery
The Washington Post

Senate Democrats, House GOP clash over shutdown threat
By Sean Lengell
The Washington Times

The fierce urgency of David Plouffe
By Glenn Thrush
Politico

Is the GOP overreaching on budget?
By David Rogers
Politico

After hard week, GOP has 'group hug'
By Jake Sherman
Politico

Obama report on Fannie, Freddie plan may boost mortgage rates
By Zachary A. Goldfarb and Brady Dennis
The Washington Post

Read more »

Brace for a Government Shutdown

The likelihood of a government shutdown increased when House Republicans passed a resolution calling for approximately $60 billion in cuts to non-defense spending for the balance of the FY 2011. Approved primarily along party lines just before the president delivered his State of the Union address, the resolution underscores the commitment of House Republicans to reduce federal spending.

The resolution (H. Res. 38) establishes the starting point for Republican negotiations with the White House and Democrats in funding the federal government for the remainder of the current fiscal year. Given the two other fiscal issues to be debated this year – increasing the federal debt limit and passage of a FY 2012 budget – how funding for FY2011 is resolved will impact the debate on the other two issues.

FY 2011

During the lame-duck session, Congress averted a shutdown of the Federal government by passing a short-term continuing resolution (CR) to keep the government functioning until March 4. The short-term CR was a victory for Republicans who wanted to pursue a strategy to reduce non-defense discretionary spending immediately. Republicans are going to insist that funding for the remainder of this fiscal must include deep cuts to programs. Analysts estimate the $60 billion cut proposed in the resolution could mean a 20 percent cut to programs.

Democrats will be hard pressed to prevent the Republicans from approving an appropriations bill with significant cuts to federal spending. Some version of House Republicans’ bill will be approved by that chamber. In the House, it is easier for the majority to approve bills it favors; therefore, a proposed budget for the balance of FY 2011 emanating from that chamber will include deep cuts. However, Senate Democrats will not allow the cuts to be approved in their chamber. They will probably prefer a continuation of the current CR. Once the Senate passes a measure they must negotiate a compromise with the House on a final spending bill for 2011.

The political maneuvering that accompanies this effort to reach a compromise will cause a likely government shutdown. There are too many activists within the Republican Party calling for an aggressive, and if necessary, protracted fight with the president. They are prepared to risk the fall out of a shutdown to leverage deep cuts. There could be another CR passed with modest reductions in funding or a hard commitment to ensure there are deeper cuts in the FY2012 budget. Given the desire to hold the line on spending, there is a real possibility the Federal government will be shut down for a short period of time

FY 2012

When the president submits his FY2012 budget next week it will be dead on arrival in the House before the last copy is submitted to Congress. While the President Barack Obama’s State of the Union speech called for “investments” in infrastructure and education to keep America competitive, Republicans believe he is simply seeking another opportunity to increase federal spending. They, in turn, are determined to prevent that from happening.

The political dynamics of the FY2011 bill will repeat itself for the FY2012 bill. Republicans in the House will simply pass a version of the FY2012 appropriations bill with cuts totaling as much as $100 billion. In that scenario, the Senate will once again need to approve a spending bill that does not include such large cuts. Expect Republicans to become more aggressive in pursuing cuts in FY2012. Another shutdown in October is not out of the question. Anger and frustration over the outcome of negotiations with the White House and Democrats over funding levels could cause Republicans to be willing to risk another shutdown.

Debt Ceiling

The debt ceiling is the biggest issue. Sandwiched between the two funding discussions will be a vote to raise the debt ceiling to allow the government to borrow to pay for its obligations. The limit has been raised every year without fanfare; however, this year Republicans hope to use it as leverage for deep spending cuts. Some Republicans are willing to risk the US defaulting on its’ obligations (which can have dramatic world-wide implications, according to some experts) and shutting down the government.

As bad as a government shut-down would be, it pales in comparison to a national default. The impact on the value of the dollar and other considerations would be spectacular. It is absolutely unthinkable that new members of Congress would play around with this issue. If they want to truly wreck the economy, not just America's but that of much of the western world, failing to increase the U.S. debt limit would do it.

The Seeds of a Shutdown Exist

The seeds of a shutdown are in place. The presidential election of 2012 is the 800 pound gorilla driving everything that goes on in Washington. The desire to win the election at all cost is strong. Each party’s strategic decisions are being weighed with the presidential election in mind. Some events, such as the situation in Egypt, complicate decision-making as it relates to the next election. However, one misstep could damage an individual’s and party’s presidential aspirations.

This group of Republicans is very different from the one which swept into office after the historic election of 1994. That group was unified by a Contract with America which was drafted by the Republican leadership. Its subsequent strategy was orchestrated by the same people. Republicans voted into office in November do not have the allegiance to the leadership but to the Tea Party activists. Some of them have pledged to shut the government down if necessary as part of their campaign and are committed to fulfilling that pledge.

These seeds could germinate and be the cause, individually or in some form of combination, of a shutdown:

1. The recession has heightened fear, anger and frustration causing people to lose faith in the prospects of a secure future. This resulted in voters lashing out at anything that appears to be the cause of these emotions. The current target is the “government”.
2. The Tea Party has created a structure to some of the voices expressing frustration and feelings of being ostracized and unappreciated. This structure is separate from the established Republican Party making it less likely Members of Congress with allegiance to this group will be easily co-opted by the party elders.
3. The Republican victories on the congressional and state levels have deepened the resolve of fiscal conservatives to draw a line in the sand on federal spending.
4. The internet has allowed people to express themselves free from filters and accountability. Coupled with the 24 hour cable news cycle, issues never die a natural death and individuals can be mobilized quickly.
5. It is naïve to think that racism doesn’t play a role in some of the discontent with President Obama. Some of it is masked, some of it is out in the open but the president has been demonized, painted as a Muslim extremist, and viewed as a socialist. The residual effects of ensuring his failure due to his race will play some role in what takes place this year.

Who to watch

As the year progresses, keep an eye on how these individuals react to budget proposals. They could decide what types of funding cuts are approved this year:

Tea Party Faithful: There are many Tea Party faithful who rely on Social Security, Medicaid and Medicare. If Republicans like Ryan are serious and proposed cuts to the benefits of these three programs, it will be interesting to see who among the Tea Party are adversely affected by the cuts and how they react to it.

The business community: Specifically, those who are dependent on government contracts and those who receive subsidies. It is hard to believe they will sit on the sideline and allow their source of money to dry up.

State and local government officials: State and local governments rely on federal funds for a variety of projects meeting a variety of needs from infrastructure to education. They will be the first to bear the brunt of any cuts and will be forced to make harder decisions within their own budgets without federal assistance.


Interesting Read

Senate Dems give in on earmark ban
By Scott Wong
Politico

Poll: GOP should listen to tea party
By Jennifer Epstein
Politico

With 2012 looming, Obama focuses on economy
By Peter Wallsten
The Washington Post

Mitch McConnell: A Senate obstructionist could turn into a man of action
By Karen Tumulty
The Washington Post

Obama challenges the nation - and Republicans
By Dan Balz
The Washington Post

Fact Checking Ryan and Bachmann: the stimulus
By Glenn Kessler
The Washington Post

Analysis: President, GOP lawmakers agree on austerity, but will it create jobs?
By Lori Montgomery
The Washington Post

Against the Grain
By Josh Kraushaar
The National Journal

The Right Direction
By Charlie Cook
The National Journal

The Senate vs. the future
By Ezra Klein
The Washington Post

Orrin Hatch plays ball with tea party
By Manu Raju
Politico

Conservatives lay out $2.5 trillion in cuts
By Richard E. Cohen & Simmi Aujla
Politico

Campaign 2012

Political Blogs Ready to Flood Campaign Trail
By Jeremy W. Peters
The New York Times

The early-state scramble: It's on!
By Molly Ball
Politico

2012 kickoff could come as early as February
By Alexander Burns
Politico

A big warning sign for Romney
By: Jonathan Martin
Politico

Obama could survive some bumps on road to 2012 reelection
By Chris Cillizza
The Washington Post

New Lines Complicate 2012 House Campaigns
By Tricia Miller
Roll Call

Housing and Community Development

Governors, unions brace for battle
By Melissa Maynard
Stateline

Health-care law: Arizona tries new approach to get by federal Medicaid rules
By N.C. Aizenman
The Washington Post

The West Wing, Season II
By John Heilemann
New York Magazine

When Talk Radio Talks, Congress Listens
By Christina Bellantoni
Roll Call

Retailers offer financial services to 'unbanked'
By Ylan Q. Mui
The Washington Post

Read more »

A New Congress, Politics, Challenges and Opportunities

When the new Congress convenes this week the bipartisanship of December’s lame duck session will be a distant memory. President Barack Obama, Republicans and Democrats will enter into a new environment without the “luxury” of a deadline to force all parties to compromise for the good of the country. While there are some from across the political spectrum who believe the deals fashioned were not in the country’s best interest; nonetheless, the deals struck offer a glimmer of hope entering the new congressional season.

Challenges will begin immediately as the incoming House Republicans initiate a series of new rules designed to make the congressional process more transparent and to regularly have the Constitution read to emphasize the fact that the growth and reach of the Federal government has exceeded that which is allowed by the Constitution.

Additionally, Republicans plan to hold oversight hearings to force administration officials to appear before Congress and explain to Members and the public (the hearings will be aired live) how policies were developed and decisions made. The intent is to expose the administration to public scrutiny and prevent it from continuing to pursue its agenda.

The real battle will be over budget. An agreement still needs to be reached on the FY 2011 budget. This debate will be merged with the request to raise the debt ceiling to allow the government to continue to function. Raising the debt ceiling has never been an issue but it will be a major issue for the fiscal conservative wing of the Republican Party.

Republicans scored a major victory during the lame duck session in ensuring a continuing resolution was extended only to March 4. This strengthened their position to pursue budget cuts; however, the ensuing debate will generate enough fireworks to rival those displayed during the annual Fourth of July celebration. Veteran Republicans understand they need to be careful not to challenge the president so aggressively and without the willingness to compromise. There are incoming Republicans freshmen itching for a showdown with the president on the budget and some have arrived with the intent to shut down the government. That approach comes with the same risks realized by the party in its last showdown with a former Democratic President. In the 90s Republicans aggressively challenged former President Bill Clinton on the budget, forced a government shutdown and paid a heavy political price for it. The same could occur this year.

During the lame duck session Obama utilized the bully pulpit of the presidency very effectively to persuade members to pass the Bush era tax cuts, enact the START treaty and repeal “don’t ask, don’t tell”. Obama demonstrated, as former presidents Bill Clinton and Ronald Reagan demonstrated after the mid-term elections of 1994 and 1982 respectively, the president is most effective when he rises above the partisan fray and promotes issues and ideas which are more important than the politics surrounding them.

The country is neither as conservative as Tea Partiers would like nor as liberal as the left would prefer. Republicans must realize the election results were not a mandate to change the Obama policies of the last two years. The public mandate is to stop the partisan bickering so both parties can work together to solve our nation’s problems.

Hispanics True Winners of 2010 Census

Hispanics will prove to be the biggest winners when the full impact of the 2010 census is evaluated. Republicans clearly gained leverage when the results were announced as Red states had the largest population growth in the last decade. However, in most states the growth is a direct result of the rise in the Hispanic population.

Hispanics accounted for over 60 percent of the growth in Texas, Florida, California, Connecticut, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Nebraska, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island and West Virginia. Of these states Texas gained four congressional seats and Florida gained two seats. Other states gaining seats included Arizona, Georgia, Nevada, South Carolina, Utah and Washington. Even in states that lost seats the Hispanic population grew, for example, Hispanics in Illinois grew 90 percent. Other states losing seats included New York and Ohio (which lost two seats each), Iowa, Louisiana, Massachusetts, Missouri, Michigan, New Jersey and Pennsylvania which lost one seat each.

Clarissa Martinez De Castro, who works for the National Council of La Raza (a Hispanic civil rights group based in Washington, DC), was quoted in The Washington Post as being concerned with the public’s perception of Hispanics. She said 90 percent of the Hispanics counted were 18 years of age or younger and are United States citizens. As that group matures, they will become a potent political force in the country regardless of their party of choice. Their political affiliation of choice will likely be formed by their parents who voted overwhelmingly Democratic in the November 2010 election.

President Obama is expected to pursue comprehensive immigration reform which will meet firm opposition from Republicans, and some Democrats, in both chambers. House Republicans will address immigration as a jobs issue so as not to appear to be anti-Hispanic. Given the growth of the Hispanic community and its tendency to vote for Democrats, Republicans will be careful to not allow their short-term gains be negated in the future by initiatives perceived as anti-Hispanic. They could shoot themselves in the foot and relinquish their gains before the end of the decade.

Interesting Read

2010 Congress

Austerity is first order for Boehner's installation as House speaker
By Philip Rucker
The Washington Post

John Boehner's leadership style is 'anti-Pelosi'
By Richard E. Cohen
Politico

Two new rules will give Constitution a starring role in GOP-controlled House
By Philip Rucker and Krissah Thompson
The Washington Post

What Republicans have done -- and what they need to do
By Ed Hornick
CNN

Tea-party activists question if rebel political movement has changed for worse
By Amy Gardner
The Washington Post

Spending showdowns will test new Congress
By Charles Babington
The Associated Press

Life of the Party
By Deborah Solomon
The New York Times

One for the Books
By Ronald Brownstein
The National Journal

'The Wussification of America': Parting Shots From Gov. Ed Rendell on the NFL and More
By Jim O'Sullivan
National Journal

The Fix's 11 big questions for 2011
By Aaron Blake
The Washington Post

Incoming Congress girds for warfare
By Jonathan Allen
Politico

Mitch McConnell's iron grip slips
By Glenn Thrush & Manu Raju
Politico

Not such a lame-duck session: What Congress passed, Obama signed in week
CNN

Daughter says Newt Gingrich's 'serious' about 2012
By Jennifer Epstein
Politico

Housing and Community Development

Obama administration steps up monitoring of banks that miss TARP payments
By Zachary A. Goldfarb
The Washington Post

How a mortgage clearinghouse became a villain in the foreclosure mess
By Ariana Eunjung Cha and Steven Mufson
The Washington Post

A Push to Privatize Pennsylvania Liquor Stores
By Katherine Q. Seelye
The New York Times

In California, Few Signs of Transition
By Jennifer Medina
The New York Times

Wisconsin State Workers Fret, as G.O.P. Takes Over
By Monica Davey
The New York Times

Entrepreneurs Ask Santa for Loans, Lower Taxes
By Sarah E. Needleman
The Wall Street Journal

Immigration

Political Battle on Illegal Immigration Shifts to States
By Julia Preston
The New York Times

Immigration Overhaul Is Unlikely Without a Shift in Public Attitudes
By Peter Brown
The Wall Street Journal

Lamar Smith avoids hard line on immigration
By Carrie Budoff Brown
Politico

The GOP's census dilemma: Embrace immigration or gerrymander
By Edward Schumacher-Matos
The Washington Post

2010 Census

Behind Census Figures Showing Boom in Nevada, a Story of Bust
By Adam Nagourney
The New York Times

With census growth, Hispanic groups target redistricting to up political clout
By Krissah Thompson
The Washington Post

Census data realigns congressional districts in key political states
By Sandhya Somashekhar and Aaron Blake
The Washington Post

Census shows slowing US growth, brings GOP gains
By Hope Yen and Charles Babington
The Associated Press

Texas Hispanics set to challenge status quo in reapportionment
By David Mildenberg and Darrell Preston
Bloomberg News

Reapportionment winners and losers
By Aaron Blake
The Washington Post

Read more »

Republicans Flex Muscle in Lame-Duck Session

The congressional lame duck session will come to a close soon now that the legislation to extend various tax cuts including the Bush tax cuts and unemployment benefits has passed the House and will be signed by the president. The next step will be to approve a FY 2011 spending measure.

A lame duck session became necessary because the outgoing Congress did not pass any of the 12 appropriations bills that fund the government. However, that earlier passed CR expires at 12:01 a.m., Sunday, December 19th. Therefore, if Congress does not act pass a new funding measure by that date the federal government will be forced to shut down.

While there were critics of the lame duck session, many members of Congress argued that besides the CR, Congress had to use the session to pass an extension of unemployment benefits. Although states pay for the first 26 weeks of unemployment benefits, the federal government funds 34 to 53 weeks of "emergency benefits" and another 13 to 20 weeks of "extended benefits," thus allowing the long-term unemployed up to 99 weeks of benefits. Now that the measure has passed Congress can move on to completing the appropriations bill. Finding a compromise on the budget may prove a trickier task because any agreement will be tied to the politics of the November elections.

Because of the length of the discussion on the tax extensions, there is less time to debate and resolve differences for FY2011 budget. Time is on the side of the deficit hawks. The less time for a FY2011 debate, the more likely a short-term CR funding the government into January or February at the latest will be passed.

Congress has three options: pass a year-ling continuing resolution (CR), pass an omnibus bill which contains all 12 appropriations bills combined into one, or pass a short-term CR until the new Congress convenes in January.

The House passed a year-long CR and now the Senate must pass a bill which must then go to conference. The House bill keeps funding at the FY2010 level which is a cut in real dollars. The Senate tried to pass an omnibus bill with a slight increase in funding and approximately $8 billion in earmarks. Republicans prefer enacting a FY2011 spending bill that will only last through the end of January after they are in control of the House of Representatives. Republicans prefer to begin their charge to reduce Federal budget with current spending versus waiting for the FY 2012 budget. When they take control, Republicans are committed to changing the way appropriation bills are voted on in their chamber. They want to decide the budgets by agency versus bills grouped by committee jurisdiction.

If Republicans establish a new appropriations process, it will make it easier for Republicans to go after agencies they typically oppose like the departments of education, housing, Health and Human Services and the Environmental Protection Agency. It will create open warfare in the House and gridlock with the Senate. Democrats have no interest in changing the way the Senate operates. As a result, negotiations to agree on appropriations bills will be contentious and time-consuming. It will also make it harder for advocates to defend the programs administered by these departments. These programs will be under greater scrutiny and become more vulnerable during a time of economic distress.

Housing, education and other programs to benefit the needy have wide, but not deep support in Congress. Consequently, it is “easier” to justify cutting these programs than it is to cut funding for defense, veterans or agriculture subsidies.

When Pork Is Not a Pig

The desire of conservative activists in Congress to place a moratorium on earmarks has resulted in some interesting measures under consideration to ensure representatives are bringing home the bacon without being accused of “pork barrel” spending. House Republicans are discussing ways to redefine earmark spending to get around the ban singled for by the conservative wing of the party. Veterans Members of Congress are concerned that local projects will not be funded as a result.

As reported by Politico there is discussion underway to possibly exempt certain projects such as transportation and water. This will allow members to demonstrate to their constituents they are addressing pressing local needs. Even Tea Party leader Michele Bachman (R-MN) is against an outright ban. It is interesting how quickly the newcomers are conforming to the Washington way of doing business. The newcomers are quickly learning political rhetoric gives way to practical reality of politics after the election. It will be interesting to monitor this development next Congress.

The Spirit of the Deficit Commission’s Final Report Will Hover over Congress Next Year

In spite of the failure of the Deficit Reduction Commission to have a super majority approve the recommendations submitted to tackle the nation’s growing debt, the spotlight is now on congressional leaders to make the politically difficult decisions in the next session of identifying program cuts and tax increase to reduce the nation’s long-term debt.

The commission was three votes short of the majority needed to force Congress to act on its final recommendations which included cuts to popular initiatives like the mortgage deduction, defense programs, reductions in entitlement benefits and targeted tax increases.

The commission’s failure to secure 14 votes does little to minimize the impact their recommendations will have on funding issues the next Congress. Republicans campaigned on the promise they would control government spending and make the tough decisions necessary to reduce the Federal debt. The report stated unequivocally that drastic measure must be taken to address the nation’s current fiscal situation.

The Commission, co-chaired by former Republican Senator Alan Simpson (WY) and Erskine Bowles, the former Chief of Staff to President Bill Clinton, submitted its report with the belief that the nation must directly confront the real issues which must be addressed. They took their charge to heart and did not spare any program or department or allow sentimentality influence their recommendations. The recommendations included:

1. Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.

2. Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.

3. Address the “Doc Fix” (a scheduled cut in Medicare payments to doctors) not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.

4. Achieve mandatory savings from farm subsidies, military and civil service retirement.

5. Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.

The panel’s emphasis on identifying a range of cuts to federal programs will draw a microscope around congressional action as it affects the deficit. For example, MSNBC’s First Read reported the irony that the cost of the agreement between Obama and Republicans - extending the tax cuts for two years, extending unemployment benefits and the other tax cuts in the agreement – will cost approximately $1 trillion which is more than the costs of the stimulus (approximately $800 billion).

It begs the question: how serious are both parties in reducing the deficit?


Interesting Read

Omnibus includes $8B in earmarks
By Scott Wong
Politico

The GOP Strategic Advantage
By Bill Connelly
Crystal Ball

2012 hopefuls challenged by tax deal
By Alexander Burns
Politico

Oversight Panel Slams Home-Rescue Efforts
By Jim Tankersley
National Journal

The Stages of Political Grief
By Charlie Cook
National Journal

Just weeks after 2010 election, Republicans lining up for 2012 Senate races
By Chris Cillizza
The Washington Post

In Entrepreneurship We Trust
By Alan McCormick
Forbes Magazine

Redistricting Reform is Tough Task Every Time
By Tricia Miller
Roll Call

Census Figures to Be Released Soon
By Kyle Trygstad
Roll Call

Wooing Joe Lieberman for 2012
By Manu Raju
Politico

Straight Talk on Immigration
By Ruben Navarrette
Real Clear Politics

Unusual methods helped ICE break deportation record, e-mails and interviews show
By Andrew Becker
Center for Investigative Reporting

Incoming GOP freshmen rapidly embracing big-money fundraisers
By Dan Eggen
The Washington Post

A Whole New Name Game
By Ianthe Jeanne Dugan
The Wall Street Journal

Pension Woes Prompt GOP Move
By Michael Corkery
The Wall Street Journal

Maybe the government would earn more of our trust if it leveled with us more and invaded our privacy less.
By Matthew Dowd
The National Journal

What the Bowles-Simpson plan left out
By Robert J. Samuelson
The Washington Post

Newt Gingrich's inner circle
By Chris Cillizza
The Washington Post

Mike Huckabee wants some respect
By Jonathan Martin & Ben Smith
Politico

House Rule
Will John Boehner control the Tea Party Congress?
by Peter J. Boyer
The New Yorker

2012 Hopefuls Gave Big to 2010 Candidates
Donation Strategies Differ for Palin, Pawlenty, Romney
By Steve Peoples
Roll Call

Tea Partyers Shredded Fundraising Playbook
By Steve Peoples
Roll Call Staff

First, Admit You Have a Problem
By Charlie Cook
The National Journal

Read more »

Deficit Reduction Reports Hovers over Lame Duck Session

Amidst all of the drama within both parties – Tea Party versus establishment Republicans, liberals versus conservative/moderate Democrats, make no mistake the 800 pound gorilla settling in Washington is the draft report issued by the bipartisan National Commission on Fiscal Responsibility and Reform. President Barack Obama creates the commission to seek recommendations on ways to reduce Federal spending and control future deficits.

The Commission, co-chaired by Former Republican Senator Alan Simpson (WY) and Erskine Bowles, the former Chief of Staff to President Bill Clinton, submitted a preliminary report with five basic recommendations:

1. Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.

2. Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.

3. Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.

4. Achieve mandatory savings from farm subsidies, military and civil service retirement.

5. Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.

In issuing the report, the co-chairs did not spare any program or department in the Federal government nor did the commission concern itself with the political ramifications of the recommendations made. For example, it calls for cuts to military, some paring down of the mortgage income deduction, some tax increases and measures to control Social Security benefits.

To no one surprise, it was met with bipartisan denunciation; however, both co-chairs stressed the importance of being honest with the measures needed to control Federal spending and future deficits. The current economic situation, the election results and this report is going to finally force the powers that be in Washington to confront the hard reality of what it will take to turn the nation’s financial situation around.

It is going to be interesting to watch the debate unfold on controlling federal spending. While Republican calls for reduced spending have been focused on domestic programs the truth is ALL federal spending must be curtailed to some degree to contain the spiraling deficits. Both parties are to blame for the deficit and both parties and now must agree to the pain required to fix it.

Housing Budget Unclear

Congress has returned for its lame duck session with a final decision on this year’s Federal budget still unclear. The debate over the future of the Bush tax cuts is generating the bulk of media attention; however, local providers of housing and community development programs still don’t know what their budget will be for next year. While there will be fireworks aplenty, expect Congress to reach an agreements on a number of issues including some type of extension of the Bush tax cuts and a temporary spending measure to keep the Federal government operating through the early part of 2011.

These programs will face an uphill fight next year securing any increases and will likely struggle to maintain current levels. Fiscal conservatives will seek cuts to domestic programs and will probably target public housing dollars. Vouchers will be affected as well; however, private landlords will carry enough sway to keep any cuts to a minimum. During downturns in the economy, landlords like participating in the voucher programs because of the certainty that the government will pay a large portion of the rent. When the economy improves some landlords may be less committed because of the higher rents they can secure in the open market.

Congressional Panel Urges Review of Factors Affecting Foreclosure Crisis

A congressional panel overlooking the mortgage irregularities in the foreclosure process is urging its colleague to review the situation closely to avoid greater damage to the financial markets. Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation states that financial institutions and securitization servicers should not proceed with foreclosures unless all of the proper documents are in order.

It has been found that banks are foreclosing properties without proper documentation casting doubts about the legitimacy of the actions. There is uncertainty over whether in some cases banks had the authority to foreclose. This has also raised questions over who has ownership of the loan and the property in question.

The panel calls on policymakers to monitor what is occurring and offered these recommendations:

• The Department of Treasury should closely monitor the impact of foreclosure irregularities.

• Treasury and the Federal Reserve should stress test banks to evaluate their ability to weather a crisis related to mortgage irregularities.

• Policymakers should evaluate system-wide consequences of documentation irregularities.

The panel is concerned that the implications of the confusion of foreclosures could reverberate to banks of all sizes. As disturbing as the potential implications of documentation irregularities may be for “too big to fail” banks, the consequences would not be limited to the largest banks in the market. Other concerns of the panel include not placing Fannie Mae and Freddie Mac at too much risk to underwrite these mortgages; homeowners losing confidence in the housing market; and, the public may lose faith in due process.

Interesting Reads

Housing and Community Development

GOP targets mortgage bailouts
By Sean Lengell
The Washington Times

Foreclosure takes toll on increasing number of children
By Dina El Boghdady
The Washington Post

Lame-Duck Game of Chicken
By David Broder
The Washington Post

Will Republicans Get Serious on Spending?
By Steve Chapman
The Chicago Tribune

Guns used to kill police officers: Where they come from and how they get in the hands of criminals
By Cheryl W. Thompson
The Washington Post

Politics

A Forecast That Obama Could Love
By Jeff Sommer
The New York Times

Obama Returns to an Unpredictable Congress
By Jackie Calmes and David M. Herszenhorn
The New York Times

Sober suggestions from Obama's debt commission
By David Broder
The Washington Post

Five myths about Sarah Palin
By Matthew Continetti
The Washington Post

The Palin Network
By Robert Draper
The New York Times Magazine

Political divide between coasts and Midwest deepening, midterm election analysis shows
By T.W. Farnam
The Washington Post

Romney, Weighing Run, Leans on State PACs
By Michael Luo
The New York Times

Murkowski victory a stinging rebuke to Palin and extreme partisans
By John P. Avlon
CNN Contributor

Junior Democrats in Senate seek to change the way chamber does business
By Shailagh Murray
The Washington Post

Truth or Consequences
By Evan Thomas
Newsweek

Read more »