Climate of Change

By PAUL KRUGMAN , NY Times, Op Ed, Feb. 27, 2009

Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.

Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.

Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.

But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.

So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.

But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.

So we have good priorities and plausible projections. What’s not to like about this budget? Basically, the long run outlook remains worrying.

According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.

Furthermore, the Obama budget only tells us about the next 10 years. That’s an improvement on Bush-era budgets, which looked only 5 years ahead. But America’s really big fiscal problems lurk over that budget horizon: sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.

And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.

But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

At the Last Minute, a Raft of Rules

Bush White House Approves Regulations on Environmental, Security Matters

By R. Jeffrey Smith and Juliet Eilperin
Washington Post Staff Writers
Sunday, November 30, 2008; A04

In a burst of activity meant to leave a lasting stamp on the federal government, the Bush White House in the past month has approved 61 new regulations on environmental, security, social and commercial matters that by its own estimate will have an economic impact exceeding $1.9 billion annually.

Some of the rules benefit key industries that have long had the administration's ear, such as oil and gas companies, banks and farms. Others impose counterterrorism security requirements on importers and private aircraft owners.

The rules cover obscure as well as high-profile social and economic issues: spelling out what kinds of records must be kept by sexually explicit performers and publications, exempting hobbyists' rocket motors from federal explosives controls, expanding the collection of DNA samples from federal prisoners.

In most cases, the new regulations are meant to spell out precisely how federal employees and private citizens must comply with laws passed by Congress. But the language in those laws often had ambiguities -- reflecting lawmakers' uncertainties or disagreements -- that gave Bush's appointees broad discretion to follow their policy preferences. Similar "midnight regulations" were approved by previous presidents.

In the environmental area, the latest rules indicate that the Bush administration wants to lend a final assist to industries that feel burdened by looming pollution controls or wilderness-protection laws. A rule approved by the White House three days after the presidential election, for example, would ease constraints on environmentally damaging oil shale development throughout the West, despite objections from Colorado Gov. Bill Ritter (D) and a majority of the state's congressional delegation.

On Nov. 17, Ritter called the decision "not just premature, it's hasty and I would even argue reckless." The Interior Departmentpublished it in the Federal Register Nov. 21, and it will take legal effect in 60 days from that date, or shortly after Congress reconvenes with a larger Democratic majority.

Top officials are still finishing work on other industry-friendly measures, including a regulation inhibiting the ability of Congress to halt logging, mining, and oil and gas extraction on public lands. Another rule would allow federal agencies to proceed with development projects without undergoing independent scientific review under the Endangered Species Act.

The Bush administration's impetus for hurrying to approve and publish so many of these regulations in the Federal Register is that those deemed to have a major economic impact -- defined by the Office of Management and Budget (OMB) as more than $100 million a year -- take legal effect after 60 days.

That means Nov. 21 was an important political deadline to ensure they become effective before President-elect Barack Obama's Jan. 20 inauguration. Less significant regulations, including many still in final stages of preparation, can take effect in 30 days or less.

Once the new rules take the form of law, Democrats can undo them only by three complicated means: through a new regulatory rulemaking that would probably take years; through congressional amendments to underlying laws; or through special, fast-track resolutions of disapproval approved by the House and Senate within a few months after the start of the new congressional session on Jan. 6.

Such a quick congressional rebuke has occurred only once before, in 2001, when a Republican-controlled Congress with President Bush's backing blocked a workplace safety regulation completed in the Clinton administration's final months. But recently, spokesmen for Senate Majority Leader Harry M. Reid (Nev.) and House Speaker Nancy Pelosi (Calif.) said Democrats were prepared to use that regulatory reversal power in consultation with Obama.

The leadership "will review what oversight tools are at our disposal regarding last-minute attempts to inflict severe damage to the law in the waning moments of the Bush administration," said Pelosi spokesman Brendan Daly.

"We will do whatever it takes," said Sen. Barbara Boxer (D-Calif.), the Environment and Public Works Committee chairman. "We're all over this. We've been waiting to pass on the information" to Obama's transition team.

A spokeswoman for the OMB, who declined to be named, said "the activity of the last three weeks is expected" because the White House had ordered that draft regulations be sent to the OMB for final review by Nov. 1. She said those regulations still being completed reflect "long-standing administration priorities."

Not every draft regulation got approved. On Nov. 19, the OMB ordered the Energy Department to kill new regulations that would have forced the federal government to buy more-energy-efficient lights, appliances, and heating and cooling systems. Daniel J. Weiss, climate strategy director at the Center for American Progress Action Fund, called that retreat from a 2005 requirement "unbelievable."

The White House also ordered the Environmental Protection Agency to withdraw a new regulation mandating that truck manufacturers install equipment to monitor vehicle pollution. It blocked the Department of Veterans Affairs from issuing new promised "user-friendly" guidance on burial and survivors benefits.

Those regulations that did get the nod came from 16 agencies and departments and will have a broad impact.

A controversial new Health and Human Services rule approved in late October, for example, cuts an estimated $2 billion in state Medicaid reimbursements for outpatient services. State officials had complained that it would jeopardize dental care for children, certain lab tests and speech and occupational therapy.

"The withdrawal of this rule should be one of the first orders of business for the Obama administration," said Rep. Henry A. Waxman (D-Calif.).

A controversial Justice Department rule approved Nov. 19 orders accelerated judicial review for death sentences. Legal groups had argued that speeding up executions makes errors more likely.

Another Justice rule approved Nov. 19 spells out the personal documentation that sexually explicit performers and related publishers must make available for government inspection. The underlying 2005 law, intended to keep minors out of such performances, has been challenged in the courts as a privacy violation by sexual swingers and the magazines in which they use explicit photos to solicit partners.

Nine days after the election, the White House approved a rule allowing trucking companies to force drivers to stay on the road for 11 hours without a rest. The American Trucking Association supported the rule, but lawmakers, unions and advocacy groups have called the extended hours dangerous.

Three days after the election, the White House also approved a regulation requiring that lenders provide home buyers with a simplified summary of their financial and legal obligations. The changes, under development at the Department of Housing and Urban Development since 2002, gained impetus after lending fraud contributed to the U.S. economic meltdown.

Industry opposed the reforms, however, and as a result, HUD dropped a proposal that settlement agents read a "closing script" as they complete a transaction.

Also, loan officers won the flexibility to change some fees based on new circumstances, which critics said would bring higher costs to borrowers. Compliance was postponed until 2010.

Business groups also successfully pushed back against provisions in counterterrorism regulations proposed by the Department of Homeland Security that could have required importers and sea carriers to detail shipment information to U.S. authorities before loading.

The "10-plus-2" rule -- so named for the extra pieces of information required -- was the most significant import industry security measure since the Sept. 11, 2001, terrorist attacks, trade officials said. But the National Association of Manufacturers and others said the rule would delay shipments by two to five days and cost as much as $20 billion a year.

As a result, the OMB agreed to give importers flexibility in complying and delay some of its implementation. It was published Nov. 24 as an interim rule, rather than a final one as originally proposed.

A second counterterrorism regulation, requiring that pilots of private planes transmit crew and passenger lists before departing or entering the United States, was approved by the OMB over that industry's opposition. But a separate regulation requiring rigorous security screening for larger private planes was delayed at industry's request.

Staff writers Spenser S. Hsu, Ceci Connolly and Carol D. Leonnig contributed to this report.