No words necessary.

Further to yesterday’s post, rather than have a vote on the U.S.-Colombia Free Trade Agreement within 90 legislative days (as set out by law), House Speaker Nancy Pelosi announced that she will change House rules to avoid having a vote on the agreement before the November elections. It’s not yet clear to me how that can be done, but such action will speak volumes about the rudderless Democratic Party.

Apparently, the leadership hasn’t decided whether supporting the agreement—supporting export opportunities, encouraging and deepening business ties, promoting investment in Colombia, supporting an ally in a hostile region, and preserving the value of U.S. credibility—is worth more votes than union money can buy.

If members of Congress don’t want to be held accountable to the electorate, they shouldn’t seek office in the first place. But as we’ve seen time and again, it’s never about good policy. It’s only about holding onto power. No wonder Americans have such contempt for Congress.

Mark Penn thought he could support the U.S.-Colombia Free Trade Agreement out of the right side of his mouth, while he opposed it out of the left. That controversy lost Mark Penn his firm’s contract with the Colombian government and his role with the Clinton campaign. Now it just may be metastasizing and moving up to Capitol Hill.

Congressional Democrats are getting hysterical over President Bush’s decision yesterday to send the U.S.-Colombia Free Trade Agreement up to the Hill for a vote. They claim that the president’s circumvention of protocol (not getting a final blessing from Congress first) now renders passage of the agreement virtually impossible.

The truth is that Congress was never going to give the administration an official green light and the president exercised the only real choice at his disposal.

But since when do Democrats cry for want of a successful trade agreement? I think there’s a little more to the story, which I address in this NRO oped today.

The long and short of it is that by sending the deal to Congress now, legislative intransigence before the November election is no longer an option. Democrats have 90 legislative days (until the end of September) to decide once and for all, in plain view of the electorate, the unions, the business community, and the international community, how they really feel about trade. The vote and the debate leading up to it could expose some deep fissures in the party, and could raise serious questions about America’s credibility and capacity to lead on matters of trade and economics.

I’ve been debating this topic with Robert Scott of the Economic Policy Institute on the Council on Foreign Relations website this week. We have very different perspectives.

Today, the Government Accountability Office (GAO) testified before Congress on the many ways that states use the Medicaid program to defraud (my word) taxpayers in other states. The following is an excerpt from GAO’s prepared testimony:

GAO has reported for more than a decade on varied financing arrangements that inappropriately increase federal Medicaid matching payments. In reports issued from 1994 through 2005, GAO found that some states had received federal matching funds by paying certain government providers, such as county-operated nursing homes, amounts that greatly exceeded established Medicaid rates. States would then bill CMS for the federal share of the payment. However, these large payments were often temporary, since some states required the providers to return most or all of the amount. States used the federal matching funds obtained in making these payments as they wished…[Such] financing arrangements effectively increase the federal Medicaid share above what is established by law…

Supplemental payments involving government providers have resulted in billions of excess federal dollars for states, yet accountability for these payments—assurances that they are retained by providers of Medicaid services to Medicaid beneficiaries—has been lacking. CMS has taken important steps in recent years to improve its financial management of Medicaid, yet more can be done.

Yes, more should be done. Congress should reform Medicaid and the State Children’s Health Insurance Program the same way it reformed welfare: eliminate the federal entitlement to benefits, and replace those programs’ matching grants with lump-sum block grants. That would eliminate many perverse incentives created by those programs, including the incentive to cheat taxpayers in other states.

Those reforms would also be a nice stepping stone toward giving the states full responsibility for maintaining those programs, and getting the federal government out of the business of providing medical care to the poor entirely.

A couple of interesting tidbits on trade:

• Here’s a great video of our friend, Rep. Jeff Flake (R, AZ), speaking about the decades-long embargo on Cuba and restrictions on the freedom of Americans to travel there. Congressman Flake spoke at a Cato event (scroll to about half way down the page) on Capitol Hill last year along with Congressman Charlie Rangel (D, NY). Cato’s Center for Trade Policy Studies has long argued for an end to the failed embargo on Cuba.
• The U.S. Department of Commerce yesterday released the 2007 trade deficit figure: $738.6 billion or 5.3 percent of GDP. It will no doubt come as a relief to the current account deficit (CAD) hawks to know that the CAD is down 9 percent on 2006, primarily due to higher export earnings (thanks, cheaper dollar) and an economic slowdown. More on the link between economic growth and the deficit here.

A further development in the cross-border supply of gambling and betting services broke today when the European Union announced they would launch a formal investigation into the selective (and retroactive) prosecution of European gaming interests by US authorities.

This is yet another twist in the saga first brought to light by Antigua’s case against the United States in the WTO. That case (summarized here and updated here, here, here, and here) sparked a slew of indirectly related skirmishes, a plethora of “David vs. Goliath” headlines, and an unprecedented reaction from the United States to pick up their ball and go home. The various twists and turns of the dispute have provided ample fodder for trade junkies in the form of commercial and systemic issues: Does the WTO dispute settlement mechanism provide effective recourse for big as well as small members? How should WTO members respond when one of their cohorts wants to change the nature of the contracts between the parties? How do members balance their rights and obligations in the context of issues of public morals?

The questions look far from answered because if the EUs investigation proceeds, a new WTO case could be on the horizon. Although the EU and the United States came to a settlement in December over the United States’ wish to withdraw its commitment to open its market to the cross-border supply of gambling and betting services, the details of that settlement are sketchy. And the December deal pertains to compensation for the withdrawal of market access going forward: unless and until that deal is ratified by all WTO members (including those who are asking for compensation of their own), the U.S. obligations stand and so does the ruling that found the United States was in breach of those obligations.

In other words, while the United States might eventually be able to get away with changing its obligations to provide WTO members access to the lucrative U.S. gambling market, in the meantime their (discriminatory?) prosecution of offshore interests leaves them vulnerable.