Making the Pitch – With much of Washington eagerly anticipating the debut of Stephen Strasburg on the mound tomorrow, the return of Congress this week is an afterthought to many. But Pelosi, Reid and the rest of the Congressional rotation will need to have some pretty good stuff when they take the mound on Capitol Hill and face an opposing legislative line-up. They will have to show a lot of range as they pitch both economic stimulus and fiscal responsibility.

Yes, today’s employment news from May is disappointing – even though there are some encouraging signs.

Let’s start with the bright side: the unemployment rate edged down (to 9.7% from 9.9% in April, a lot better than the 10.1% high of last October); job creation was positive for the fifth month in a row (it has been increasingly positive every month this year); and the job number was what we like to hear (+431,000). So, more people are working now.

According to a new CBO report, automatic stabilizers added about $282 billion to the federal deficit last year and are projected to add $351 billion this year and $403 billion in 2011 before settling back down at $29 billion in 2014.

Here are the highlights from this weekend’s editorials on fiscal and budget policy:

The House today passed a one-year extension of various tax breaks as well as expanded unemployment benefits until November on a 215-204 vote. In a separate 245-171 vote it approved a patch to the Medicare “doc fix” through 2011. However, the Senate adjourned without considering the legislation, meaning that the unemployment benefits, doc fix and COBRA subsidies will expire while Congress is in recess. Marking the second time this year Congress has left town without extending these provisions.

Two massive spending bills that congressional leaders wanted to dispose of before hitting the road for Memorial Day have hit potholes as lawmakers grow more uneasy about deficit spending. However, proposals to assert some degree of fiscal responsibility have yet to leave the driveway.

Larry Summers gave a very interesting and thoughtful talk in Washington recently (May 24).

But it was delivered in High Oracular Econospeak, so many people may never get it.

And reasonable people can come away with very different interpretations of Dr. Summers’ High Oracular Econospeak.

CBO recently put out its quarterly estimate of the macroeconomic effects of the American Recovery and Reinvestment Act of 2009 (ARRA). They found that ARRA created about 680,000 full-time equivalent jobs in the first quarter. Since its passage in February 2009, ARRA has raised employment by anywhere from 1.2 million to 2.8 million, raised real GDP by anywhere from 1.7% to 4.2%, and lowered the unemployment rate by anywhere from 0.7% to 1.5%. 

The extenders bill the House is considering would cost $190 billion between 2010-2020. Only $56 billion of that would be offset.

Emergency designations and PAYGO loopholes aside, we think more (like all) of the bill should be paid for, a belief that seems hard to argue against when staring at a mountain of $8.5 trillion in debt. (If you want to visualize that mountain, picture $100 bills stacked 5,695 miles high.)

So far the offsets in the House bill include:

CBO and JCT have released updated cost estimates of the most recent version of the American Jobs and Closing Tax Loopholes Act (H.R. 4213), a bill that is scheduled to be brought to the House floor tomorrow. The bill would cost about $190 billion over the 2010-2020 period, only 30% of which would be paid for (meaning the bill will increase the deficit by $134 billion).