OVERNIGHT MONEY: Fantasyland

One of those witnesses — David Malpass, now of Encima Global and formerly of Bear Stearns — wrote last week that the fiscal situation here is “deteriorating rapidly enough that it is a key variable in the global economic outlook” and that he was unimpressed with the response from Congress. 

For his part, Simon Johnson of the Massachusetts Institute of Technology, another scheduled witness, opined that the U.S. had no fiscal conservatives and that political elites on both sides of the ideological spectrum were living in a fantasyland. “They cannot even seriously discuss what would be required to bring our true fiscal position under control,” Johnson wrote. 

Looking forward, the budget panel is slated to hear about tax reform on Wednesday, as well as modernizing performance and upcoming economic challenges on Thursday. As for the House, its budget panel will ramp up activities next week, with hearings scheduled to feature testimony from Ben Bernanke, the chairman of the Federal Reserve, and Douglas Elmendorf, the director of the Congressional Budget Office. According to a source, Rep. Paul Ryan (R-Wisc.), the committee’s chairman, will also announce spending levels for the second half of 2011.

What Else to Watch For:

More from the Senate: While the housing market tries to regain its footing amid the recovering economy, the Senate Judiciary Committee will hold a hearing Tuesday on foreclosure mediation programs and whether bankruptcy courts can limit homeowner and investor losses. 

Foreclosures hit a record number of 1 million last year and are expected to increase by about 20 percent this year. The housing market has about two years at least before a healthy recovery will take hold, analysts predict. 

The hearing is set to include a bankruptcy judge and representatives from academia and think tanks. Anthony Sanders of George Mason University is expected to testify that it will be difficult to complete successful loan modifications until the jobless rate starts to shrink and housing prices recover. 

Political Pugilism: On the right, Newt Gingrich. On the left, Howard Dean. George Washington University is set to host a Tuesday debate on current events between the former House speaker and former chairman of the Democratic National Committee – a conversation that would presumably touch on some economic issues. 

Instead of that Matinee Movie: The Urban Institute is holding a lunchtime panel titled “What Policymakers, the Public, the Press and Parents Need to Know About Economics…in 90 Minutes or Less.”

Economic Indicators:

— The Commerce Department is set to drop December data on construction spending.

— The Labor Department is expected to release figures on business employment dynamics for 2010’s second quarter.

— The Institute for Supply Management is scheduled to circulate its January manufacturing index.

— And the American Petroleum Institute is slated to release its weekly bulletin on gasoline production and inventories. 

Breaking Monday:

Boeing Gets Boinged: The fallout from the World Trade Organization’s reported ruling that Boeing got billions in illegal assistance to develop key components for its commercial planes: The decision could eventually permit the European Union to slap tariffs on U.S. goods. 

But, with the W.T.O. having also found that Airbus received illegal loans from EU members states at below market rate, negotiations are the more likely outcome.

Congressionally speaking, the ruling is important because lawmakers have been looking to use the WTO rulings to steer the largest defense contract pending — a $100 billion toward aerial refueling tankers — to either Boeing or Airbus’s parent company, EADS. The battle pits Boeing’s congressional backers (from Kansas, Washington, and Illinois, for example) against the Alabama delegation.

What About Fannie and Freddie?: In a not unexpected turn of events, the administration has missed the deadline to unveil its plan of action for Fannie Mae and Freddie Mac. And as The Wall Street Journal reports, the somewhat biting back-and-forth between Treasury and a top House Republican on the issue suggests the mortgage market discussion could be rather partisan for awhile. 

No “Illusions of Grandeur”: So says Sens. Saxby Chambliss (R-Ga.) and Mark Warner (D-Va.) about their legislation based on the Bowles-Simpson debt recommendations. In a joint interview with Bloomberg Television, Chambliss signaled that it would be tough to scrounge up the votes on their deficit reduction measure and asserted that “if we don’t have everybody participating in the sacrifice, it won’t work.”

“Winning the Future”: If you missed it, our Erik Wasson has recapped the White House’s proposal to extend capital gains tax breaks for small businesses as part of its job creation and investment push. Republicans appeared unimpressed, calling the tax incentive too small. 

What You Might Have Missed:

On the Money’s Monday:

Senate Democrats say a major aviation measure would support 280,000 jobs.

Treasury says an under fire home loan program is picking up the pace.

Evan Bayh finds a new (professional) home.

Jeff Sessions says the upcoming budget may be president’s last chance to get it right.

The Chamber looks out for young entrepeneurs. 

Grassley and Durbin continue their push on H-1B. 

And consumer spending finished strong in 2010.

As usual, feedback welcomed at bbecker@digital-staging.thehill.com