Yesterday, the House passed the $26 billion bill that would extend increased Medicaid matching to states and education funding to prevent teacher layoffs. The cost of the bill will be fully offset, a great move by Congress given the debacle with HR 4213.

Gone and Back – The Senate has left for its August recess, the House will return this week (for a day). Congress will be back in session after Labor Day for a frenetic month before adjourning again in October for final pre-election campaigning.

CRFB has been calling for policymakers to set fiscal targets for some time. Apparently we haven’t been clear enough on what that means.

Unfortunately, some in Congress have put a bullseye on the few legislators courageous enough to offer ideas to reduce our mounting debt. The Hill today reports on leaders within the House Democratic caucus tearing into four junior members who were naïve enough to offer a measure to moderately reduce spending.

The Wall Street Journal reports that a package of tax extenders might have a harder time getting by the PAYGO regime. Since the planned offsets were used up in the recent state aid package, Congress will need to find another way to pay for them.

Yesterday morning, Richard Berner of Morgan Stanley, Simon Johnson of MIT, and Joel Naroff of Naroff Economic Advisors testified before the Senate Budget Committee on the state of the economy in the short-term and prospects down the road. All three displayed some concern about the vitality of the economy in the next few years, but they each focused on different aspects: the housing market, financial markets, and consumer spending, respectively.

Finally, the Senate got it right: we have a deficit-neutral stimulus. In fact, the bill would even slightly reduce deficits by $1.4 billion over the coming decade, according to CBO. After months of failed attempts to pass deficit-increasing stimulus packages, Senate Democrats just cleared a hurdle this morning by successfully invoking cloture on the $26.1 billion package, and final passage in the Senate is expected shortly.

House Gone, Senate Eyeing the Exit – The House started its six-week recess Friday and the Senate will adjourn at the end of this week. Debate and a vote on the nomination of Elena Kagan to the Supreme Court is expected to take up a lot of the schedule, and oxygen, this week for senators.

Appearing at his old alma mater, the Brookings Institution, Wednesday, Peter Orszag bid adieu to public sector employment in his final public appearance as director of OMB. He will officially leave the Obama administration Friday, but the Brookings event amounted to his “Greatest Hits” as budget director. Orszag focused on three main areas in his speech: reviewing the effects of the stimulus, discussing the budgetary implications of the new health care bill, and outlining some interesting ways that OMB has worked to modernize the federal government.

If You Can’t Stand the Heat… – Washington has been experiencing a heat wave, but it can’t all be blamed on the friction between the two parties. Before members of the House can escape at the end of the week for a long break, they must complete work on the war supplemental that has bounced around more than a beach ball. The Senate will stay an extra week before its month-long recess and will try to complete a small business measure amid votes on the Elena Kagan nomination to the Supreme Court, campaign finance reform, and energy legislation.

The Senate essentially voted to pass an extension of unemployment benefits yesterday, invoking cloture on the measure with the requisite sixty votes. The bill would extend unemployment benefits through the end of November, ensuring that we won't need to witness constant bickering over the extension as we did this past spring.