It’s an arrangement that gives State and local lawmakers the thrill of spending without the pain of actually, themselves, being responsible for taxing that much out of their residents.

It’s an arrangement that does have some downsides. The biggest is the complete lack of local control. Remember the golden rule: he who has the gold makes the rules. A local Madison neighborhood is finding that out the hard way.

The pedestrian walkway under University Avenue at Spring Harbor Drive may be old and spooky. But school and neighborhood officials say it’s necessary to keep kids and residents safe when they cross that roadway, where drivers routinely exceed the posted 35 mph speed limit.

Now they’re worried that plans for a $7 million reconstruction of 1.9 miles of the avenue — from North Segoe Road in Madison to Allen Boulevard in Middleton — next year don’t include re-building the tunnel.

… Madison officials say it would cost $1 million just to build a new tunnel because federal laws would require it to be accessible for people with physical handicaps — unlike the current walkway — and so far the money isn’t available.

City officials say they’d love to make the passage’s users happy, and staff engineer Christy Bachmann said the city has applied several times for federal money to redo the tunnel, but the project always ranks low and loses out on the grants. Ald. Mark Clear, whose 19th District includes the underpass, said the city has to do something with the passage come next spring.

“Because the reconstruction project is federally funded, they require that the pedestrian underpass at University Avenue and Spring Harbor Drive be brought into ADA compliance or removed,” Clear said, referring to the federal Americans with Disabilities Act.

Glen Yoerger, an engineer for the city of Madison, said the reconstruction of the street, 80 percent of which will be paid for with federal funds with the remainder coming from local funds, will install curb and gutters and medians where needed along University Avenue, among other improvements.

Well, better luck next time kids. Your Aldermen, County Board members, state Assemblymen, state Senators, and Governor long ago gave up the right to actually govern this state. As a result, they’re powerless to help you now.

Speaking personally, I’d love to see a State legislature and a State governor stand up to the Feds and fight to keep tax dollars. Then, take responsibility for collecting the money for local needs and spending the money in a way that will best serve local needs. The Feds are never going to be as good at knowing what your State needs as you. Quit dodging responsibility and start doing your jobs.

Even if you believe that the spending cuts and tax increases in the bill make it deficit-neutral, the legislation will still make solving the problem of the fiscal imbalance harder, because it will use up some of the easier ways to close the shortfall. The remaining options will be less attractive, making the eventual fiscal adjustment more painful.

With the President’s current budgeting trends (spend as much as you can, as fast as you can), we’re facing an $11.3 trillion deficit by 2020. By that time, the federal debt will be a staggering $20.3 trillion. (The debt was $5.8 trillion at the end of 2008.)

It’s not enough to be happy that we’re maintaining the current levels of spending or — even worse — that we’re managing to spend more in a “deficit neutral” way. It’s serious business and it’s time we stopped “kicking the can down the road to future generations”, as the President likes to say.

The gains on Wall Street have been goosed largely by government spending and guarantees, not the usual private sector–funded growth. And federal spending cannot continue indefinitely without deficits and debt service spiraling out of control. John Silvia, chief economist for Wells Fargo, says, “We have seen a recovery, but it’s driven primarily by federal spending and special federal projects. The character of this recovery is very different than we’re used to.”

Consider that 37 percent of the third-quarter GDP growth was due to motor vehicle purchases, which were stimulated almost entirely by the Cash for Clunkers program. “The third quarter was really just a lot of Cash for Clunkers spending that won’t be sustained in the foreseeable future,” Silvia says. (Final statistics for fourth quarter spending were not available at press time.)

The car scheme, an attempt to jump-start the bankrupt auto industry, offered consumers a government-funded credit of up to $4,500 if they traded in their gas guzzlers for more eco-friendly vehicles. But since most participants probably were already planning to buy a new car, the program essentially shifted future demand for automobiles to the third quarter of 2009. Instead of continuing to grow, car sales dropped 34 percent immediately after the program ended. Figure 1 shows U.S. auto sales in 2009 largely following the 10-year average month-to-month change until the Cash for Clunkers credit jolted demand, followed by a subnormal drop.

This is not real growth. It’s the national equivalent of a credit-card buying spree, with the bills—in the form of debt service and unfunded liabilities—to be paid off later. It is a faux recovery.

My wife and I enjoy our Flex Spending Account. We put in enough money each year to cover the various drugs we’ll need to buy (both prescription and non-prescription), a new pair of glasses, and money to cover any other medical expenses we anticipate. Next year, I’m planning on putting in an extra $4000 for corrective laser eye surgery, so that I can finally stop wearing glasses. We like the plan we have.

Well, under the Senate healthcare bill, we’ll no longer have that plan.

Both the House and Senate bills include a change in the definition of a “qualified medical expense” that impacts reimbursements and withdrawals under all types of health care accounts (i.e., FSAs, HRAs, HSAs, and Archer MSAs). As of 2011, expenses incurred for over-the-counter (OTC) medications and products will no longer be eligible for payment or reimbursement from any of the health care accounts. The House bill definition appears to apply to all OTC medications. However, the Senate bill would still allow OTC medicines obtained with a prescription and insulin to be reimbursed or paid tax-free from the health care accounts.

The most significant change likely to be enacted is an annual limit on contributions made by employees to flexible spending arrangements (FSAs) for health care. Both the House and Senate versions of health reform legislation would limit contributions to no more than $2,500 annually. The limit would be indexed to inflation for future years. Under the House bill, these changes would not take effect until 2013. In the Senate bill, these changes would take effect in 2011.

If the current “reform” bills, I wouldn’t be able to buy OTC drugs — Sudafed, Mucinex, ibuprofen, Tylenol — tax free. If the “reform” bills pass, I wouldn’t be able to save tax free for corrective eye surgery. I would no longer have the plan I like.

It’s just one more broken promise from a president that’s building quite a pile of them. Apparently, “yes we can” act just like any other politician.

Voters were justifiably angry about this massive increase in government largesse. In reaction, they threw out the sitting political party and vote en-masse for the candidate who promised a return to responsibility, a turn away from reckless credit card fiscal policies and a return to fiscal discipline. Voters wanted government spending reined in and they were determined to get it. Both the 2006 Congressional elections and the 2008 Presidential election were about spending, to some degree.

So why are voters now so angry at President Barack Obama? Surely they don’t blame him for the high levels of government spending? Well, why shouldn’t they? Since taking office in January, 2009, he’s proposed massive amounts of new spending: a stimulus bill, a cap and trade energy bill, a massive expansion of healthcare, a “cash for clunkers” stimulus, a housing stimulus, and more. For voters weary of out of control spending, the Obama administration’s first year has looked remarkably like a left turn into an all-you-can-eat spending buffet.

But don’t believe me. Believe the Congressional Budget Office and the Washington Post, who put together this informative little graphic.

Note the $400 billion line, that President Bush’s deficits barely managed to creep over. Note that President Obama’s deficits aren’t projected to get anywhere near this low a level over the next 10 years.

With all of the voter anger about President Bush’s deficit spending, why shouldn’t the voters be angry about President Obama’s much higher levels of spending? Voters don’t need to have a short-term memory to be first angry about President Bush’s spending and then angry about President Obama’s spending. They just need wide open eyes. Apparently, it’s President Obama and Congressional Democrats that have the short memory.

In the early 1980s, Congress changed the way Medicare paid hospitals so that payments would no longer be based on costs incurred. … The Congressional Budget Office predicted that, from 1983 to 1986, this change would slow Medicare hospital spending (which had been rising much faster than the rate of inflation) by $10 billion, and that by 1986 total spending would be $60 billion. Actual spending in 1986 was $49 billion. The savings in 1986 alone were as much as three years of estimated savings.

In the 1990s, the biggest change in Medicare came with the Balanced Budget Act of 1997, a compromise between a Republican-controlled Congress and a Democratic administration. … The actual savings turned out to be 50 percent greater in 1998 and 113 percent greater in 1999 than the budget office forecast.

In the current decade, the major legislative change to the system was the Medicare Modernization Act of 2003, which added a prescription drug benefit. In assessing how much this new program would cost, the Congressional Budget Office assumed that prices would rise as patients demanded more drugs, and estimated that spending on the drug benefit would be $206 billion.

Actual spending was nearly 40 percent less than that.

I find it interesting though that his savings numbers only extend out a few years. For instance, he talks about how much was saved in 1986, from the 1983 bill, but doesn’t talk about hospital spending trends since then. How much has the 1983 bill saved over the past 26 years? He talks about how much money was saved in 1998 and 1999 as a result of the Balanced Budget Act of 1997, but he doesn’t talk about how much has been saved in the intervening 10 years. Did the trend continue?

Then I saw this graph, of Congressional health care underestimates. (Courtesy of John Goodman, courtesy of the Joint Economic Commitee. You can read the full report.)

It looks like health care costs are underestimated far more than they’re overestimated.

CBO predicts that debt held by the public as a share of GDP, which was 40.8% in 2008, will rise to 67.8% in 2019–and then keep climbing after that. CBO says this is “unsustainable,” but even this forecast may be optimistic.

Here’s why. Many of the current budget assumptions are laughably implausible. Both the White House and CBO predict that Congress will hold federal spending at the rate of inflation over the next decade. This is the same Democratic Congress that awarded a 47% increase in domestic discretionary spending in 2009 when counting stimulus funds. And the appropriations bills now speeding through Congress for 2010 serve up an 8% increase in domestic spending after inflation.

Another doozy is that Nancy Pelosi and friends are going to allow a one-third or more reduction in liberal priorities like Head Start, food stamps and child nutrition after 2011 when the stimulus expires. CBO actually has overall spending falling between 2009 and 2012, which is less likely than an asteroid hitting the Earth.

Federal revenues, which will hit a 40-year low of 14.9% of GDP this year, are expected to rise to 19.6% of GDP by 2014 and then 20.2% by 2019–which the CBO concedes is “high by historical standards.” This implies some enormous tax increases.

CBO assumes that some 28 million middle-class tax filers will get hit by the alternative minimum tax, something Democrats say they won’t let happen. CBO also assumes that all the Bush tax cuts disappear–not merely those for the rich, but those for lower and middle income families as well. So either the deficit is going to be about $1.3 trillion higher than Washington thinks, or out goes Mr. Obama’s campaign promise of not taxing those who make less than $250,000.

What would the deficit projections look like it the CBO forecasts matched Congress’s behavior? Even more depressing. The Concord Coalition publishes a “plausible baseline” that uses more realistic assumptions. They project the 10-year deficit as $14.4 trillion.

If we continue on the spending path that we’re on, we’ll more than double the national debt in only a decade.

One more thing. These numbers are what the budget looks like before passing a healthcare bill that’s forecasted to add another $1 trillion to the deficit all by itself.

Now, Social Security is projected to go into deficit as early as fiscal 2010. And the President’s budget has increased the national debt by $6.5 trillion. That’s pretty impressive for only four months of work. What will the debt look like by 2012?

First, Senator Evan Bayh (D) wrote a Wall Street Journal op-ed critizing the omnibus spending bill that’s currently working it’s way through the Senate.

The Senate should reject this bill. If we do not, President Barack Obama should veto it.

The omnibus increases discretionary spending by 8% over last fiscal year’s levels, dwarfing the rate of inflation across a broad swath of issues including agriculture, financial services, foreign relations, energy and water programs, and legislative branch operations. Such increases might be appropriate for a nation flush with cash or unconcerned with fiscal prudence, but America is neither.

Drafted last year, the bill did not pass due to Congress’s long-standing budgetary dysfunction and the frustrating delays it yields in our appropriations work. Since then, economic and fiscal circumstances have changed dramatically, which is why the Senate should go back to the drawing board. The economic downturn requires new policies, not more of the same.

The solution going forward is to stop wasteful spending before it starts. Families and businesses are tightening their belts to make ends meet — and Washington should too.

The omnibus debate is not merely a battle over last year’s unfinished business, but the first indication of how we will shape our fiscal future. Spending should be held in check before taxes are raised, even on the wealthy. Most people are willing to do their duty by paying taxes, but they want to know that their money is going toward important priorities and won’t be wasted.

Senator Bayh voted for the “stimulus” package, so I’m not sure how seriously to take these criticisms. Still, it is refreshing to see a Democrat criticizing a spending bill.

Secondly, Senators are starting to rebel over some of Obama’s tax hikes.

The resistance from Mr. Obama’s own party — focusing on a single element of the president’s tax plans — could foreshadow broader troubles for the rest of his proposed tax increases.

Sen. Max Baucus (D., Mont.), the Senate’s top tax writer as chairman of the Finance Committee, told Mr. Geithner he was especially concerned about paying for expanded health coverage with a deductions curb that “has nothing to do with health care.” He added: “I’m wondering about the viability of that provision.”

Charitable organizations are also worried. Indiana University’s Center on Philanthropy said Wednesday that Mr. Obama’s proposals to limit deductions and raise rates, if applied in 2006, would have reduced giving by nearly $4 billion, or 2.1%.

“I’d like to think that people give out of the goodness of their heart, but that tax deduction helps to loosen up the heartstrings,” Nevada Democratic Rep. Shelley Berkley said Tuesday during a House Ways and Means Committee hearing.

And, let’s give credit to Washington Senator Maria Cantwell (D). She makes a great point:

Another Democrat, Sen. Maria Cantwell of Washington, questioned why the administration wouldn’t look for savings in the tax code through a comprehensive overhaul. “Why not look at a broader approach to tax policy, [rather] than coming in with this proposed change to marginal rates?” Ms. Cantwell said.

This is certainly an unusual post. When was the last time I praised two Democrat senators in one post? Maybe there is something to Obama’s hope & change rhetoric after all.

I’m pleased that President Obama rejected the “creative accounting” of the Bush Administration, whose budgets never included the actual costs of the wars in Iraq and Afghanistan, and never fully funded the domestic programs that we desperately need – in education, health care, infrastructure, and energy. President Obama has presented us with an honest assessment of the challenges facing our nation. He also makes the tough choices necessary to restore fiscal responsibility and begin reducing the deficit, while making critical investments to help our economy not only recover, but grow.

<Cough>.

Did she mean this kind of honesty?

The president used the word “honest.” That’s astonishing. Look, all budgets are fiction. This one is fantasia. Look, let’s start with the projections in revenue. Obama has promised to cut the deficit by the end of the first term in half. He does it by pretending that in 2011 there will be a growth in the economy of about 5.5 percent, and in the next year it will be over six. Now, these are Chinese-level numbers, and even the Chinese aren’t achieving them anymore. It is completely fictional, those numbers. Next year he says we will grow at about 3.5 percent. Next year we could still be in negative territory. And then on the cuts, he speaks about the $2 trillion in savings. And, actually, in the speech he gave to congress, he spoke of $2 trillion in savings, and now he has amended it, and he says, well, budget reduction. And that’s because half of it isn’t savings at all. It’s tax increases. And the other half is a fictional saving of a projected spending on Iraq, which would go out to ten years at the current levels, and have us spending in 2018 at a level that we are today that nobody expects and nobody even imagines. So it’s a saving of about a trillion and a half of Iraqi spending that would never have happened in the first place. And that’s how he gets his spending cuts…. And on the agricultural cuts, he announced it proudly. It is $20 million, which means that if you have a thousand of those, a thousand of those, it would be 1/10 of one percent of $2 trillion in cuts he has promised. It is a matter of scale. The cuts he’s talking about are miniscule and almost risible when you look at his promises. The big cuts are actually tax increases fictional Iraq savings.

Or possibly she meant this kind of honesty.

Well, I think this budget is politically and economically risky, and precisely because it doesn’t have enough spending reduction. If you look at what you’ve got, you’ve got about $2 trillion in deficit reduction. That comes from $1.5 trillion in Iraq and Afghanistan reductions that are largely illusory. They pretend we would have spent $170 billion a year for a long time, and we’re not. And then a $700 billion increase in revenues from a cap-and-trade program that has never even come close getting through the U.S. Congress. So that’s the deficit reduction, not obvious it’ll come to fruition. And then the rest is about $1 trillion of tax increases on high-income individuals and businesses to fund $1 trillion in tax cuts that are already on the books from the stimulus bill, with “Making Work Pay,” Earned Income Tax Credit, things like that. So you’ve got a dynamic where they’re counting on things that are either illusory and hard to make happen politically — cap-and-trade and tax increases — to fund things that are already there. They didn’t cut spending. And that makes all the deficits that are presented best-guess estimates. The risks are all the upside.

You know, I’m not sure that’s really honest after all. That looks kinda like “creative accounting” if you ask me. I wonder what kind of honesty Congresswoman Baldwin meant? For Congresswoman Baldwin is an honorable woman.