In This Issue : Enter the 3-letter anchor name, which will link to the articles below. (2) TITLE GOES HERE: Enter the article's title --> SUBHEAD --> Federal Budget Issues Debt Reduction Neither Time Nor Money: Back to Deficit Politics Despite Revenue Drops, States Avoid Tax Increases Technology and Information Policy "Anti-Leaks" Provision To Be Considered in Senate Hearing Who Is the Master of My Domain? Nonprofit Sector Issues Charity Lobbying Argentina Nonprofits' Greater Participation in Public Issues Regulatory Issues Administration Pushes 'States' Rights' OMB Considers Change in Approach to Reg Accounting OSHA May Relax Enforcement with Third Party Certification GAO Warns Against Cuts in Environmental Enforcement SIDE BAR: Budget: No Recession; Toward Livable Unemployment Benefits; Income Inequality; Nontraditional Employment Options for Women; Debt Reduction Even though the surplus is shrinking, the Congressional Budget Office (CBO) report issued on August 28 projects that "under current policies" all of the national debt that is available for redemption can still be paid by 2010. This is four years later than in CBO's May projection -- because of the diminished surplus resulting from the Bush tax cut and the added debt service costs. However, the operative words are "under current policies." Current policies do not take into account adequate levels of spending. Domestic discretionary spending, which accounts for most of the government's activities excluding mandatory programs like Social Security, and funding for the military, would have to be reduced to a level well below that necessary to accomplish important domestic priorities. With the tax cut already using up two-thirds of the former surplus, reducing the national debt by a date certain may not be at the top of our priorities. Rather, like many Americans, we think that improved education and training, pre-school and health insurance for all children, prescription drug coverage, adequate environmental protection, and a host of other measures are more important. For more on these issues and OMB Watch's response, see:

• More Budget Estimates: The Surplus and the Tax Cuts
• Wise Investments for a Strong Economy

Back to Top Neither Time Nor Money: Back to Deficit Politics It appears that the surplus, or at least the surplus that is over and above Social Security and Medicare revenue, is pretty much nonexistent for fiscal year 2002, which begins in less than a month, on October 1, 2001 (see related story). The Bush tax cut was intended to limit the amount of public revenue available for public purposes, and that strategy seems to be working quite well. Many Democrats, including leadership, are suddenly arguing for "fiscal responsibility," i.e., not using the Medicare/Social Security surpluses for anything but debt reduction, even if doing so necessitates spending cuts. There is also a provision in the budget resolution that any spending cutting into the Medicare/Social Security surplus is subject to a point of order (requiring 60 or more votes in the Senate to pass). While economists are making the point that when the economy is in a slump, deficit spending is not a bad thing and can even help revive the economy if it is directed toward good social investments, there appear to be few powerful voices in Congress arguing for spending on social needs and investments in people and communities. Making the point that we are suddenly "forced" to scrimp on social investment because of the cost of the Bush tax cuts may be good politics, but it is bad social and economic policy. The House has approved nine appropriations bills and the Senate five. Each House must finish work on all thirteen of the bills, then the House and Senate versions of those bills must be reconciled, and then the President must sign or veto each bill. Serious work has not yet been done on either the Defense or the Labor-HHS-Education bill. Both will likely be vying at the end for whatever money is left over. Since the President wants to add an extra $18 billion in military spending and put money towards development of a missile defense system, and there is only one limited pot of appropriations money, it will be very difficult to adequately fund Labor-HHS-Education. Rather than orderly and considered appropriations, there will be battles over specific programs, deals around earmarks to please certain constituencies, gimmicks to increase the amount of money that can be spent (so that it at least looks like the Social Security/Medicare surpluses remain intact), and all of the usual end of the year scheming. According to recent reports, even though work is supposed to be completed by October 1, many are predicting that Congress may be in session until Thanksgiving or later, with continuing resolutions funding government until the appropriations bills are done. Besides passing the appropriations bill, Congress also faces other costly business that was not completed earlier:

• Education: Education was a centerpiece of President Bush's budget plan. The education proposal is now in House-Senate conference. Whether or not increased federal funding for education will actually be appropriated remains to be seen.
• Agriculture supplements: As always, consideration will be given to passing legislation that extends or even increases federal crop subsidies. In July, the House Agriculture Committee passed a package that costs over $160 billion over ten years.
• Energy: The House passed an energy bill along the lines of Bush's plan, while the Senate is working on an alternative that will concentrate less on corporate tax breaks and more on conservation and alternative fuels.
• Prescription drug coverage for seniors: It seems unlikely that there will be the money to pass meaningful prescription drug coverage, although there will probably be some sort of legislation.
• Minimum Wage Increase/Tax Cuts: It is likely that Republicans will insist that any minimum wage increase must also include tax cuts to small businesses. In addition, Republicans would like to see a decrease in the capital gains tax and an increase in the research and development tax credit, arguing that these changes will stimulate the economy. Again, it is unlikely that money can be found to finance more tax cuts, which may effectively thwart a raise in the minimum wage.
• Faith based charities provisions: The House approved a bill, but the Senate has not yet taken this issue up. Some of the faith-based initiatives are tax changes that will cost revenue.

In addition, a patients' bill of rights, campaign finance reform, "trade promotion authority" legislation, and funding for stem cell research all remain on the "things-to-do" list. The Senate returned today, and the House will be back tomorrow. While the warm up may be low-key, we should be prepared for a long and fractious Congressional session. Back to Top Despite Revenue Drops, States Avoid Tax Increases Echoing the very highly publicized national debate on the merits of the large Bush tax cut are other more localized debates occurring in the halls of state legislatures around the country. The National Conference of State Legislatures (NCSL) has issued a preliminary draft of its State Budget and Tax Actions 2001 report in which it noted that, across a backdrop of the first budget deficits in almost 10 years, many states have taken "extraordinary actions" to help balance their budgets -- a requirement set by many state constitutions. Among such "extraordinary actions" were both targeted and across-the-board cuts in spending, the use of "rainy day funds" and the use of tobacco suit settlement funds. Conspicuously rare, however, was the use of any kind of tax increase, as both the NCSL and an August 22 Rockefeller Institute Fiscal Studies Program State Fiscal News (Vol. 1 No. 4) show. Much of the budget pressures requiring these measures are the result of the slowed economy, as evidenced by the substantial drops in the states' collection of corporate income taxes and sales taxes. The Bush tax cuts, just enacted, however, will only exacerbate this already difficult situation. (See the August 20 Watcher for more on a recent National Education Association (NEA) report revealing the investment muzzle the repeal of the estate tax will force on all states.) Congress must also decide by October 21 what to do about an Internet tax moratorium. The current moratorium on sales and Internet access taxes, which expires next month, will affect state revenues. Many states are asking Congress to allow sales tax to be collected on out of state transactions in a manner that creates parity with brick-and-mortar stores. It is uncertain what Congress will do. Nevertheless, as both reports indicate, states are still reluctant to raise taxes, even as they look ahead to possible budget shortfalls for FY 2002. NCSL reports that in creating their budgets for FY 2002, only 5 states chose to increase their taxes or other revenue sources (such as fees for drivers' licenses). Indeed, there will be an overall decrease in state taxes -- the seventh such cut in as many years -- although, NCSL points out, this $1.8 billion reduction is markedly smaller than the $9.9 billion decrease of FY 2000. And the Fiscal Studies report indicates that the very few states that did increase taxes did so on minor taxes (such as the cigarette tax) and many simply opted to delay the start of previously enacted tax cuts. Instead, 5 states used their surpluses and/or reserve funds and 3 used their shares of the settlement of the tobacco suit. Virginia's governor, James S. Gilmore, III (R), congratulated himself and the state's legislators for their efforts to stand out among other Southern states for not raising taxes or using the state's rainy day fund to help ease the budget pressures created, in part, by his plan to phase out the state's "car tax," which operates like other property taxes. (The plan to repeal the car tax will cost Virginia $100 million this year.) But faced with a budget shortfall of at least $52 million, Gilmore did issue an executive order stopping all new building on state college campuses and, according to an August 20 Washington Post article, the state legislature is now warning of a FY 2002 budget deficit 10 times that of FY 2001. And last month, the Tennessee state legislature overrode the governor's veto of its budget that exhausted the state's tobacco settlement fund rather than creating an income tax. As reported in the New York Times, the legislature ignored the governor's warning that its budget would "cause our great state irreparable injury," and, instead, seemed to be responding to a last-minute citizen rally coordinated by a Republican legislator opposing the tax. One protester explained his opposition saying, "This state has a spending problem and the budget just keeps growing every year... We understand that you have to have taxes to operate this society, but there is a huge amount of waste." A Tennessee state senator responded, "Once people understand the implications of having an unhealthy state government -- fewer people with diplomas, with health care -- I think things will change when [the income tax] comes up again." But, without state and national policy makers who are comfortable explaining and carrying out their roles as collectors of revenue to further the social good, such optimism will likely remain only that -- optimism. Back to Top "Anti-Leaks" Provision To Be Considered in Senate Intelligence Committee Hearing In an apparent fit of pique at having had his "anti-leaks" provision vetoed last year by President Clinton, Sen. Richard Shelby (R-AL) has reportedly convinced Senate Select Committee on Intelligence Chairman Sen. Bob Graham (D-FL), to include it again in this year's Intelligence Authorization Act. Although the actual language has not been publicly circulated, Committee staff have confirmed that it is the same language as was found in last year's bill. The provision would criminalize the disclosure of any information that the executive branch says is properly classified. The determination of what to classify and what to prosecute would be left entirely to the interpretation of the executive branch. This would be an extremely broad delegation of authority from Congress. What makes the inclusion of this provision truly strange is that reportedly the Administration, including the Department of Justice and the CIA, do not support it and are not certain that any legislation is needed at this time. A dialogue is planned to begin later this month among the intelligence community and some representatives of the media to ascertain what are the parameters of the intelligence community's concerns with leaks and the best – Constitutional – ways to address those concerns. OMB Watch has again this year coordinated a coalition of organizations opposing this provision. Despite several weeks of effort by this coalition, which includes organizations concerned with government accountability and access to government information – including the library community, the history community, whistleblower organizations, media and media organizations – to get Graham to cancel a hearing planned for 3:30 pm on September 5, it appears that the hearing will go forward. The unofficial (not confirmed by staff) list is Sen. Charles Schumer (D-NY), Attorney General John Ashcroft, CIA Director George Tenet, John Sturm (Newspaper Association of America - for the publishers), Don Oberdorfer (former diplomatic correspondent, historian), Floyd Abrams (NY Times and CNN, speaking on constitutional issues), Mort Halperin (Center for National Security Studies) or Tom Blanton (National Security Archives), Phil Heyman (former Assistant Attorney General for the criminal division, Harvard Law Professor), and someone from the Congressional Research Service (CRS). None of the witnesses support the Shelby provision. These groups are also encouraging Graham not to include this provision in the Intelligence Authorization Act when it is marked-up on Thursday. Legislation of such profound implications for the First Amendment (reporters could be considered witnesses to a felony or potentially co-conspirators in a felony) and government accountability (government officials could be criminally prosecuted for any speech that referenced classified information) and that would allow the executive branch to keep hidden policy that needs to see the light of day and be held up to public scrutiny does not belong on an authorization bill. It needs to be widely and publicly discussed in multiple hearings in multiple Committees. A single hearing before a Committee vote is not adequate. For more information see:

• OMB Watch Letter to Senator Graham on the "Leaks" Provision in the Upcoming Intelligence Authorization Bill
• OMB Watch's "Official Secrets Act" Website

Back to Top Who Is the Master of My Domain? Domain names are the Internet equivalent of real estate for individuals and organizations. They help to establish an online identity consistent with that of the offline world. Just as there are limits to the amount of landed property available, there is also a limit to the namespace available, such that "first come, first-served" is a widely accepted reality. What happens, however, when entities with either no vested interest, or conflicting interests, attempt to invoke protections under intellectual property rules? NPTalk examines two recent legal decisions on nonprofit domain names, and the concepts behind them, in order to explore what constitutes identity and its potential theft online Back to Top Charity Lobbying There has been increasing discussion within the nonprofit sector about ways of increasing advocacy activities by charities, that is those organizations that qualify for tax exemption under 501(c)(3) of the tax code. OMB Watch and Tufts University have been jointly conducting a multi-year research-to-action project, called the Strengthening Nonprofit Advocacy Project (SNAP). SNAP has three research stages and one application stage. The first research stage was a survey of charities across the country about factors that affect their decision to engage in public policy matters. It was followed by interviews with selected survey respondents. The final research phase includes focus groups in different states, which is currently happening. The survey data is now being analyzed and linked with information being obtained through the interviews and focus groups. With this and other information we have been collecting, we will be launching an online policy resource center to help nonprofits better find and obtain information about nonprofit policy participation and the intersection of use of technologies and policy. Meanwhile, how many charities report that they lobby? Only 1.5% of charities that file an annual tax return (IRS Form 990) report that they have legislative lobbying expenditures. The table below shows that as an organization's' annual expenditures increases, so too does the percentage of charities that lobby. For example, less than 1% of charities with budgets of less than $500,000 reported that they lobbied. Yet, 12% of charities with annual budget of more than $17 million say they had lobbying expenditures. Nearly three out of four charities (73%) reporting Form 990 have annual expenditures of under $500,000. But only roughly one in three (35%) of those that have lobbying expenditures are organizations with annual budgets of under $500,000. Table: Lobby Expenditures of Charities: 1998 The SNAP data will complement the IRS data to provide a more comprehensive picture about nonprofit advocacy, going well beyond the IRS definitions of legislative lobbying, including advocacy at the administrative and judicial levels and public education. Back to Top Argentina Nonprofits Gearing Up for Greater Participation in Public Issues Last week OMB Watch Community Education Center Manager Kay Guinane went to Argentina at the invitation of the U.S. Department of State and the Foro del Sector Social, an association of over 1,500 Argentine nongovernmental organizations, to conduct workshops on policy advocacy and community organizing. During the week she learned about the challenges facing Argentine organizations from leaders, staff and volunteers. Some of these challenges are similar to those faced by nonprofits in the United States, such as lack of adequate resources and the need to develop a next generation of leaders. Others are unique to Argentina's economic and political situation. The Foro was formed in 1996, to provide civil society organizations (they do not define themselves as "nonprofits") with support and a collective voice. For the past five years their focus has been on strengthening internal management, and they have developed a manual for organizational leaders. Foro President Maria Rosa Martini is now pushing groups to focus on external matters that affect their mission, including greater participation in the public policy process and collaborations with government and the business sector. The advocacy workshops, conducted in four provinces and the city of Buenos Aires, are one way the Foro is promoting greater participation. The high level of turnout for these events indicates that civil society organizations in Argentina are ready to increase their presence in the public arena. Tucuman is one of the poorest of Argentina's 23 provinces, located at the foot of the Andes Mountains in the northwest of the country. In a pre-workshop meeting with Foro representatives, local business leaders and Gov. Julio Miranda, all parties agreed that civil society organizations should be encouraged to increase their voice in public affairs, and that businesses should be good corporate citizens and work cooperatively with both government and the social sector. Miranda joked that he would like Guinane to do a workshop on "Governing With No Money," a reference to threatened reductions in revenue sharing from the federal government, which is under pressure from the International Monetary Fund (IMF) to drastically reduce government spending as a condition of a recent $8 billion loan deal. The country's economic woes were evident during the workshop in LaPlata, capital of Buenos Aires province, where the buzz in conversation was about "patacons," script issued by the province to its employees in lieu of cash for a portion of their salary payment. The province did not have enough cash to make the payroll, so issued the "bonds" to its employees, suppliers and pensioners, with a promise to redeem them with 7% interest in one year. However, many vendors and utilities either refused to accept "patacons" in payment, or limited their acceptance to 30% of a transaction's value. Large demonstrations against the patacon were held in Buenos Aires and LaPlata during the week (although there was a greater police presence at a soccer stadium in LaPlata where rival teams were scheduled to play). At the LaPlata workshop participants discussed the need to resolve issues through democratic institutions, which are only now gaining a hold after the end of a military dictatorship 13 years ago. The workshop highlighted ways to translate problems into issues and establish goals for specific, achievable and measurable results. Participants worked in small groups to plot strategy on a case study involving improved access to the Internet for rural and low-income areas. The Foro was able to present the workshop to organizations in two other provinces, Mendoza and Cordoba, through a videoconference transmitted from the Buenos Aires office of CFI, the association of provincial governments. At the end of the workshop CFI announced that it would make free Internet access available to civil society organizations at their facilities in the 23 provinces. Grassroots organizing skills were emphasized at a workshop for participants in a graduate program for management and leadership of nongovernmental organizations. The program requested organizing be highlighted since many organizers were killed or "disappeared" during the military dictatorship, leaving a large gap in the skills and experience needed to successfully mobilize communities. Participants discussed the Minister of Health's proposal to close a hospital in Buenos Aires province that serves residents of six shantytowns. The government says it has run out of money to keep the hospital open, even though many doctors volunteer time, and much of the management and maintenance is provided by community volunteers. Organizing strategy tools provided in the workshop were used to identify key decision makers that are in a position to help, and mock meetings were planned and presented. Participants in a round table forum with Guinane and leaders of environmental, watchdog and direct service organizations emphasized the need for transparency in government. They also discussed the advantages and disadvantages of having elected officials in leadership positions in civil society organizations, and in having organizational leaders run for office. Argentina's laws do not prohibit any nonprofits from supporting or opposing candidates in the way that the U.S. tax code prohibits charities from taking positions in elections. Back to Top Administration Pushes 'States' Rights' The Bush administration is reportedly developing an executive order -- to be released within the month -- that seeks to limit the federal government's ability to set national standards in the name of states' rights. The order would replace the current federalism order from the Clinton administration, and build on language from President Reagan's federalism order, which took a more aggressive stance against federal action. According to the Bureau of National Affairs (BNA), the new order will instruct agencies to "refrain, to the maximum extent, from establishing uniform, national standards for programs and when possible, defer to the States to establish standards." Both the Clinton and Reagan federalism orders were more statements of policy, and went largely unenforced. To change this, the Washington Post reports that a new executive branch entity will be created to answer the concerns of states and see that the order is observed. Presumably this would be different than the White House Office on Intergovernmental Affairs, which works with state and local governments. Instead, it would likely review agency proposals and plans to determine whether they are consistent with the principles in the president's executive order. Whether the entity would be given authority to stop the agency from proceeding is unclear. The federal executive order could be a truly worrisome development. Of course, it will almost always be "possible" to defer to states. However, on many occasions it will not be appropriate. The first responsibility of the federal government should not be to protect the discretion of states, as the above quote implies, but rather to serve the broad interests of the American people. In the case of worker health and safety, environmental and consumer protections, or civil rights, this frequently means setting strong national standards. "States' rights" should not be an excuse for the federal government to abdicate its responsibility in these areas. Back to Top OMB Considers Change in Approach to Reg Accounting The Office of Management and Budget's (OMB) recent draft report to Congress on the cumulative costs and benefits of federal regulation -- which has been an annual requirement since 1997 -- indicates a possible dramatic change in approach. OMB's previous reports have been largely based on the estimates of agencies and outside experts. However, some -- including the AEI-Brookings Joint Center for Regulatory Studies and George Mason University's Mercatus Center -- have been pressuring OMB to conduct its own, independent analysis, which the draft report, as well as an OMB spokesman, confirms is now under consideration. This would be a significant departure from the original vision of the report, as pointed out in OMB Watch's comments. When the requirement was first passed (as an appropriations rider), a colloquy between Sen. Ted Stevens (R-AK) and Sen. Carl Levin (D-MI) made clear that the intent was not to generate new data or studies, but rather to pull together existing information. "The amendment does not, and this is why I am able to support it, does not require OMB to conduct new studies or analyses or develop new data or information," Levin explained at the time. "That would be a time-consuming, and expensive use of taxpayer money. Better that the OMB staff use its time and money to help make sure new regulations follow the dictates of common sense and be cost-effective regulations. No, this amendment simply directs OMB to put together the already available information that it has on existing Federal regulatory programs and use that to estimate the total annual costs and benefit of each." Whether OMB sticks to the approach outlined by Levin is still to be determined, as OMB considers advice it received from the public comment period, which closed on August 15. Back to Top OSHA May Relax Enforcement with Third Party Certification The new head of the Occupational Safety and Health Administration (OSHA), John Henshaw, hinted recently that he might install an administrative program that would allow employers to avoid OSHA enforcement actions by hiring a private consultant to offer advice on health and safety issues. Referred to as "third party certification," this idea was first proposed in legislation four years ago by Sen. Mike Enzi (R-WY). Labor unions and most Democrats have strongly opposed the Enzi proposal, arguing that it takes the teeth out of OSHA by exempting companies from penalties whether they are in compliance with standards or not (as elaborated on in this AFL-CIO fact sheet). Moreover, serious conflicts of interests would likely emerge, as consultants would have to be relied on to blow the whistle on employers who provide their paychecks. This opposition has made legislative victory almost impossible, particularly with Democrats now in the majority. However, with President Bush's de-emphasis of enforcement across government agencies, proponents of third party certification see an opportunity to implement it administratively. In particular, BNA's Daily Report for Executives reports that the American Industrial Hygiene Association (AIHA) is aggressively pushing the idea with Henshaw, who actually served as president of AIHA from 1990-91. Another top official in the Department of Labor, Chris Spear, the assistant secretary for policy (who worked on the third party certification legislation as an aide for Enzi), is reportedly already on board. Henshaw has not publicly offered a full commitment to third party certification, but he did tell BNA that he intends to seek outside experts to help improve health and safety, which points in that direction. In testimony against the idea, the AFL-CIO points out that the record of the past three decades demonstrates that strong standards and enforcement save workers' lives and prevent injury and disease. In fact, the most significant improvements in safety and health have come in those sectors that have received the most attention from OSHA. In manufacturing and construction, the industries that have been the focus of OSHA's enforcement efforts, the injury and illness rates have declined by 33 percent and 52 percent, respectively, since 1973. The mining industry, which has even stronger standards and enforcement, has seen the greatest decline in injury and illness rates -- 53 percent since 1973. Back to Top GAO Warns Against Cuts in Environmental Enforcement A new report from the General Accounting Office (GAO) offers a strong warning against a Bush proposal to cut the Environmental Protection Agency's (EPA) enforcement budget by 8 percent, while providing $25 million in new grants to states. Such a cut would eliminate a total of 270 employees from EPA's Office of Enforcement and Compliance Assistance -- 51 from the Washington headquarters and 219 from regional offices, according to EPA. GAO points out that EPA has not collected adequate information about regional enforcement activities to know whether this "devolving" of responsibility can be done without harming environmental protection. And indeed, there is mounting evidence that it would pose a threat. According to an August 22 report from EPA's Inspector General, states are doing a poor job of monitoring and punishing water polluters, and nearly 40 percent of the nation's waters are not meeting standards set for them. Another GAO report, released April 1, also advises closer EPA oversight of state inspection programs for industrial emissions, which GAO found inadequate. The findings of these reports provide support for the Senate's move to restore the $25 million in proposed cuts to EPA. Back to Top Notes and Sidebars No Recession Yet! It doesn't look like there will be an easy out to the forthcoming appropriations budget dilemma -- i.e., how to avoid spending that will cut into the Medicare and Social Security surpluses in violation of the budget resolution. The Commerce Department issued its preliminary Second Quarter report on August 29, finding that the economy grew at a piddling rate of 0.2% in the April through June period. While this is the lowest growth rate in eight years, it is not in the minus column, so it's not a recession yet! Toward Livable Unemployment Benefits (And A Higher Minimum Wage) A new report by the Economic Policy Institute (EPI) finds that unemployment benefits, provided by states to workers who have separated from their employment through no fault of their own, are too low to keep a one-parent, one-child family above the poverty line. Furthermore, since many states require specific earnings levels, many low-wage workers don't even qualify for unemployment benefits. According to EPI, raising the minimum wage by $1 would allow a 19% rise in the number of workers applying for and receiving unemployment benefits. The report also recommends raising weekly benefit rates and simplifying the regulations. More On Income Inequality American workers saw a pay increase of about 37% in the 1990's, barely ahead of inflation which rose by 32%. During the same period, the pay of chief executives rose 571%. If it had risen at the same rate, the minimum wage would now be $25.50 per hour. See the full report by the Institute for Policy Studies and United for a Fair Economy. Work Second, Train First A new report by the Institute for Women's Policy Research advocates getting women off welfare and into nontraditional employment, to avoid the result of women with little skill or training being forced into low wage, low benefit jobs with no hope of advancement.