Obama announces new approach to government contracts

While conservatives are having heart attacks over the prospect of the government helping sick people, Barack Obama is cleaning up the mess left over by President Bush and the Republicans.
The contracting process in Washington is a disgrace, wasting billions of dollars every year. The war-profiteering in Iraq was particularly bad, and the process for building weapons systems is completely out of control.

With that backdrop, Obama announced that the old ways of doing business in Washington are over.

President Barack Obama on Wednesday ordered an overhaul of the way the U.S. government awards contracts for private sector work, reversing a Bush administration policy that in some cases led to federal investigations of procurement practices and no-bid contracts.

Obama joined Republican Sen. John McCain, his presidential campaign rival, and other congressional figures to announce an executive memorandum that commits his administration to a new set of marching orders for awarding contracts. Obama said “the days of giving government contractors a blank check are over” and said changes could save up to $40 billion a year.

One area in particular that is targeted is no-bid contracts, which the administration is seeking to change so that there will be more competition for government-paid work.

“Even if these were the best of times, budget reform would be overdue in Washington,” Obama said.

Obama’s presidential memo changes government contracting procedures. It directs Peter Orszag, director of the White House Office of Management and Budget, to work with Cabinet and agency officials to draft new contracting rules by the end of September. Those new rules, White House aides say, will make it more difficult for contractors to bilk taxpayers and make some half-trillion dollars in federal contracts each year more accessible to independent contractors.

“We will stop outsourcing services that should be performed by the government and open up the contracting process to small businesses,” he said. “We will end unnecessary no-bid and cost-plus contracts that run up a bill that is paid by the American people. And we will strengthen oversight to maximize transparency and accountability.”

The new administration argued that its Republican predecessor’s contract spending had doubled to more than $500 billion over the last eight years.

Having McCain join Obama on this is huge. He and Obama don’t get along on many issues, and McCain recently scolded Obama over his unwillingness to take on earmarks. But McCain has been a tireless advocate of cleaning up the mess in government contracting. Hopefully this signals true bi-partisan cooperation. It is much easier to afford necessary government programs when we don’t waste money.

  

They’re just getting started

Now that the stimulus package has been approved, Fortune offers an inside look at Barack Obama’s economic team.

At this White House there’s no time to settle in. Even as their wall art sat in bubble wrap, Obama’s economic team was pushing through Congress the most expensive emergency spending package in the nation’s history. And they were helping Treasury Secretary Timothy Geithner craft his own sweeping plan to rescue the nation’s banking and housing sectors, phase two of a $700 billion effort launched by his predecessor, Hank Paulson.

That’s just the start. The team is fast at work on health-care reform, energy independence, vast changes in banking regulations, and the possibility of a “grand bargain” to curb entitlement costs that envisions historic sacrifices on both sides of the aisle: Republicans supporting tax increases and Democrats conceding to benefits cuts. “This is not a small-ball President,” says Summers, Obama’s top economic advisor and chair of the National Economic Council. “He wants to take on the large issues.”

There is a breadth and breathlessness to these under-takings, a frenzy of policymaking that will shape the contours of America’s economic future. Top Obama advisors who talked (often as they walked) with Fortune in early February put a premium on speed – speed to catch the right moment to turn around a deepening recession, speed to take advantage of this moment of crisis to put in place a Democratic vision of government’s role, speed to pass major legislation while the President is riding high in the polls. Obama’s White House has been endlessly compared to Lincoln’s team of rivals, or J.F.K.’s best and brightest. But we might also toss in the image of Sandra Bullock trying to control a runaway busload of passengers before the bomb goes off. (That scene was of course from the movie – “Speed.”)

It’s becoming clear that the upcoming budget will drive home Obama’s desire to pursue a very ambitios agenda.

The President’s first budget, expected to be unveiled by budget director Peter Orszag within weeks, will chart much of the administration’s ambitious course beyond stimulus and TARP – and it will be a document that Obama’s own shop, not Congress, produces. “In his budget the President is going to lay down markers around his seriousness on all the major issues,” notes Summers.

It’s likely that the decisions and debates on these issues – ranging from health-care reform to what government programs should be cut to ease the deficit – will keep on coming at Congress at mind-numbing speed. The President wouldn’t have it any other way.

I’m anxious to see which cuts they will be proposing. Our current budget is littered with programs that waste money, from farm subsidies, unnecessary weapons systems and much of the war on drugs. It’s also littered with tax loopholes bought by lobbyists, along with ridiculous restrictions preventing the government from negotiating bulk prices for drugs purchased by Medicare. If Obama can offer some serious cuts here, he’ll gain considerable credibility in his attempt to reorder the priorities of the nation.

  

Obama promises return to “pay-as-you-go” budgeting

When Republicans gained full control of the government during the Bush years, they abandoned the “pay-as-you-go” budget requirement that helped Bill Clinton and the GOP congress to balance the budget and ultimately create surpluses in the 1990s. The results were disastrous, as the national debt nearly doubled during the Bush years.

Many Blue-Dog Democrats have wanted a return to these policies, and Obama has pledged that all spending and tax changes enacted after the stimulus will be held to this standard.

House Democrats won a key procedural vote Tuesday on the stimulus after a last-minute promise from the Obama administration to return to “pay-as-you-go” budget rules after the stimulus is approved.

In a 224-199 vote, the House approved a resolution allowing the stimulus bill to come to the floor for debate. Twenty-seven Democrats – 24 of them members of the conservative Blue Dog Coalition – bucked their leadership and voted against the measure.

But according to Democratic leadership sources, the number was almost much higher – and could have been high enough to hand the Republicans a monumental victory – had it not been for a letter from President Obama’s budget director Peter Orszag.

The letter addressed to House Appropriations Committee Chairman David promised to return to “pay-as-you-go budgeting,” and stressed that the stimulus was an “extraordinary response to an extraordinary process” and thus subject to different rules.

“It should not be seen as an opportunity to abandon the fiscal discipline that we owe each and every taxpayer in spending their money – and that is critical to keeping the United States strong in a global, interdependent economy,” the letter stated.

Orszag also emphasized that Obama’s support for paying for any temporary tax cuts in the stimulus that he would like to make permanent. The budget director said Obama would detail those offsets in his budget.

“Moving forward, we need to return to the fiscal responsibility and pay-as-you-go budgeting that we had in the 1990’s for all non-emergency measures,” Orszag continued. “The President and his economic team look forward to working with the Congress to develop budget enforcement rules that are based on the tools that helped create the surpluses of a decade ago.

“Putting the country back on the path of fiscal responsibility will mean tough choices and difficult trade-offs, but for the long-term health of our economy, the President believes that they must be made.”

Though addressed to Obey, Democratic sources said copies of the letter were distributed in a last minute flurry to Blue Dogs, many of whom were already on the floor and ready to cast their votes. The centrist group already was ruffled by the fact the package included far more spending than Obama had called for, and were prepared to vote as a block against the resolution, Democratic sources said.

  

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