Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Monday, December 20, 2004

Last week, Bush convened a number of experts in Washington, D.C. for an Economic Summit to discuss budget and tax reform, social security, and the possibility of extending last term's tax cuts. A transcript of Bush's summit comments can be found here.

As an article in today's Washington Post points out, Bush may see significant opposition to some of his plans from Congress, academics, and economic experts and analysts. Many people have been recently vocal about some of the administration's proposed policy reforms. For example Alan S. Blinder, former Vice Chairman of the Federal Reserve and a Princeton economist, recently stated the following concerning Bush's social security policy: "Under these changes, Social Security would be neither social nor provide security. This would be a piece of a program to expose people to more and more risk…. There are millions of Americans who have no desire and no ability to gamble on the financial markets, and they shouldn't be pushed to."

The next few months should include a good deal of debate concerning issues such as tax and social security reform. To read more about the Economic Summit, click here.

Posted by Becky Lewis, 12:26:20 PM

Friday, December 17, 2004

Will Privatization Increase SS Management Fees?

As Paul Krugman noted in the New York Times this morning, social security overhaul comes with a lot of risks. He points out other countries have dabbled in privatization and is baffled at the lack of understanding of their experiences. For example, in Chile's program, privatization has caused management fees to be as high as 20 precent, whereas in the United States currently, 99 percent of social security revenues go towards benefits. This is another pitfall of privitization that is not mentioned by the Bush administration. Krugman's column is worth a read.

Also, click here to read the latest Center on Budget and Policy Priorities report about price indexing and how Bush's reform proposal could significantly reduce benefits in the years to come.

Posted by Becky Lewis, 03:52:10 PM

Thursday, December 16, 2004

Everything You Want To Know About Social Security And More

The Social Security Network, which was first launched in 1997, serves as an important resource for information and research on the Social Security program and the debate about its future. This week they released "Twelve Reasons Why Privatizing Social Security Is A Bad Idea." The report highlights the fact that the creation of personal investment accounts will have drastic consequences on federal revenue reserves, future retirees, and the people who rely on social security benefits the most. The report also includes numerous links to other studies of social security policy.

For an additional analysis of the social security safety net and the implications of reform, check out this article from tompaine.com.

Posted by Becky Lewis, 12:02:03 PM

Wednesday, December 15, 2004

The Social Security Debate, Continued

Today is the first day of President Bush's Economic Summit, which will address issues such as budget and tax reform, health care, and social security. Social security has been widely discussed recently, as this administration has made clear their intent on overhauling the program. According to this New York Times article, however, plans to reform social security may result in significant benefits cuts for retirees in the future due to many factors, including the size of transition costs. Bush recently stated that he was opposed to the idea of raising payroll taxes to offset transition costs.

Senator Lindsey Graham (R-SC), one of the original proponents of reform, very recently warned however that borrowing the entire sum of transition costs to reform the program would be irresponsible. Because of current budgetary constraints, Graham told Fox News Sunday he supports temporarily lifting the program's tax base, or pushing up the $87,900 cap on personal income subject to Social Security. He said, "I don't think you can make the tax cuts permanent, have alternative minimum tax relief, and borrow the entire transition cost--which is over $1 trillion, and have debts that we can sustain."

To read more about Graham and the social security debate, click here and here.

Posted by Becky Lewis, 04:20:01 PM

Trade Gap Grows Significantly in October

Yesterday, the government reported that America's trade deficit widened in October at a record monthly rate. BNA news services reported, "A major contributor to the October deterioration in the deficit was the oil import bill, as the price of oil rose 11 percent to a record $41.79 a barrel from $37.62 in September."

The trade gap widened a total of 9 percent from September to October. The deficit in September was $50.9 billion, and the deficit in October was $55.5 billion. The total deficit tally for the first ten months of 2004 was $500.5 billion, which is a significant increase when compared with the deficit tally for all twelve months of 2003, which was $496.5 billion. As a New York Times editorial pointed out today, the United States "is now on track for a trade deficit of more than $60 billion next June."

The continuously high trade deficit is not good news for the return on our dollar. The dollar is currently down 55 percent against the euro, and 22 percent against the yen. To read more about the dollar and the implications of the trade gap, click here. To read about President Bush's latest comments on the current strength (or weakness) of the dollar, click here.

Posted by Becky Lewis, 03:11:55 PM

Tuesday, December 14, 2004

Watcher: December 14th, 2004
Federal Budget

Posted by Becky Lewis, 12:17:07 PM

Friday, December 10, 2004

Bush Won't Raise Payroll Tax To Fund Social Security Changes

President Bush made clear yesterday his opposition to raising payroll taxes in order to fund potential changes to social security. A payroll tax is a percentage of an individual's salary that goes into social security and medicare funds. The percentage paid into those funds is matched by employers, in order to raise adequate revenue for these entitlement programs.

While this administration is seriously looking into reforming social security -- an anti-poverty program which was implemented during the New Deal -- they have yet to explain how they will pay for this overhaul, which could cost anywhere from $1 - $2 trillion in transfer costs alone. On top of this, the administration has pledged to cut the deficit in half by 2009, and keep the first term tax cuts in place. Raising payroll taxes could help pay for social security overhaul, and even though the policy appears to have bipartisan support in Congress, the President has ruled it out as an option.

The fact that this administration is unwilling to look into raising payroll taxes means that they are more likely to look into increased borrowing or non-defense discretionary budget cuts to help stabilize the economy. In an article in today's Washington Post, Congressman Robert Matsui (D-CA) is quoted as saying, "I fear this means the administration will employ sham accounting gimmicks in an attempt to hide the true costs of their privatization schemes. Ultimately, hiding the truth about benefit cuts or fleecing the public on massive borrowing would have a disastrous effect on the economy, not to mention betray the trust of the American people."

Posted by Becky Lewis, 10:07:51 AM

Thursday, December 09, 2004

Snow Will Remain As Treasury Secretary

Yesterday, December 8th, President Bush asked Treasury Secretary John Snow to remain in his position for the next two years, at least. After meeting breifly with the President, he agreed. Snow first joined the Bush administration in February 2003 after former Treasury Secretary Paul O'Neill was ousted; prior to that, he headed CSX, a large railroad company. Snow's position as Treasury Secretary puts him in one of the nation's most central economic policymaking posts.

This announcement is particularly noteworthy because of the rumors that have been circulating recently regarding whether Snow would remain on board in the second term. On Monday, the New York Times even reported that "President Bush has decided to replace John W. Snow as treasury secretary and has been looking closely at a number of possible replacements, including the White House chief of staff, Andrew H. Card Jr., Republicans with ties to the White House say."

Despite the rumors, Snow will remain to help the administration sell its second term economic agenda to the public and Congress. This decision comes at a time of considerable economic uncertainty, as we are faced with an increasingly weaker dollar, a growing deficit, and looming discussions of both tax reform and an overthrow of the social security entitlement program. Mr. Snow, as today's New York Times states, is largely seen as a "salesman for White House policies."

For more information on Snow as Treasury Secretary, click here and here.

Posted by Becky Lewis, 11:57:59 AM

Tuesday, December 07, 2004

The Spending Bill: What's Inside?

The FY 2005 spending bill includes $388 billion worth of government spending, and is over 3,000 pages long. So what’s inside? How do funding levels differ from last year? Here is a glimpse —

The Department of Housing and Urban Development's budget was cut by $618 million, reducing it by 1.6 percent, to $37.3 billion. That amount was still $521 million more than the president requested;

Earlier this year, Bush proposed cutting the Environmental Protection Agency's budget by more than 7 percent. Congress softened that blow, but nevertheless sliced the agency's funding by more than 3 percent -- about $277 million -- to approximately $8.08 billion. The bill also includes legislative language allowing the government to continue charging various fees at some national parks, to permit the slaughter of some wild horses roaming the West and to continue to allow snowmobiles at Yellowstone National Park;

Congress approved the smallest budget increase in nearly a decade for the Department of Education. The total discretionary budget of $56.6 billion is up $916 million, or 1.6 percent, on 2004 levels. Spending on several higher education programs, including the popular Pell Grants for low-income students, didn't keep pace with rising costs. The maximum Pell Grant was frozen at $4,050 for the third year in a row;

The budget funds the first deployment of a national missile defense system, at a cost of $10 billion. It also increased by $1.5 billion the administration's request for spending on ground combat systems, such as tanks, trucks and Humvees;

At the behest of Rep. David Joseph Weldon (R-Fla.), House negotiators inserted language into the bill allowing doctors, hospitals and insurers to refuse to perform abortions or offer abortion counseling. The budget for abstinence education increased by $30 million, to $105 million;

Funding for LIHEAP (Low-Income Home Energy Assistance Program) increased from $1.89 billion to $2.18 billion. While this is a sizable increase, many supporters of the program are arguing that it is not nearly enough to keep up with the projected 24 percent increase in home heating costs that we are expected to see this year;

The Justice Department gained nearly $1 billion in new funding, faring even better than it would have under Bush's request. Most of the increase -- $625 million -- will go to the FBI to improve its counterterrorism and counterintelligence programs and to revamp its antiquated technology systems. At $5.2 billion, the bureau's rapidly growing budget dwarfs other Justice agencies;

The Department of Transportation spending fell 5 percent, from $46.1 billion to $43.9 billion, in fiscal 2004. Federal highways received $35.5 billion, or $1.9 billion more than in fiscal 2004. The Federal Aviation Administration, which already took funding hits this year, will receive $13.6 billion, $219 million less than in fiscal 2004.

This information, plus much more, can be found in a very detailed article in today’s Washington Post. You can find that article here.

Posted by Becky Lewis, 11:19:22 AM

Friday, December 03, 2004

Spending Bill Highlights

Although the FY2005 spending bill won't officially be passed by Congress or signed by the President for a few more days, the bill is pretty much complete. For good highlights and assessments of the bill, check out the following two sources:

Senate Republican Policy Committee Summary
House Appropriations Committee Press Release

For the latest information on the tax return provision included in the spending bill, check out this Washington Post article.

Posted by Becky Lewis, 10:28:20 AM

Wednesday, December 01, 2004

Watcher: November 30th, 2004
Federal Budget

Posted by Becky Lewis, 12:50:18 PM

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